Download:
pdf |
pdf
Instructions for Preparation of the
Annual Company‐Run Stress Test
Report DFAST‐14A
November 15, 2012
Page | 1
Table of Contents
1. Summary Instructions & Background ........................................................................ 4
1.1.
Background .......................................................................................................... 4
1.2.
General Administration ....................................................................................... 4
1.3.
Overall Summary Instructions ............................................................................. 5
2. Who Must Report ...................................................................................................... 11
3. Where to Submit the Reports ................................................................................... 11
4. When to Submit the Reports .................................................................................... 12
5. How to Prepare the Reports ..................................................................................... 12
6. Questions and Requests for Interpretations ............................................................ 13
7. Scenario: General Instructions ................................................................................ 13
8. Summary Schedule – Overview ................................................................................ 15
9. Income Statement, Balance Sheet & Capital ........................................................... 17
9.1.
Income Statement Worksheet: ............................................................................ 17
9.2.
Balance Sheet Worksheet:.................................................................................. 18
9.3.
Capital Worksheet: ............................................................................................ 18
9.4.
Supporting Documentation: ............................................................................... 19
10. Retail ......................................................................................................................... 20
10.1. Retail Balance & Loss Projection Worksheet: .................................................. 20
10.2. Retail Repurchase Worksheet: ........................................................................... 21
10.3. ASC 310-30 Worksheet ...................................................................................... 23
10.4. Supporting Documentation ................................................................................ 24
11. Wholesale .................................................................................................................. 24
12. Loans Held for Sale / Loans Accounted for FVO ...................................................... 26
13. AFS/HTM Securities .................................................................................................. 26
13.1. Projected OTTI for AFS Securities and HTM Securities by CUSIP.................. 26
13.2. Projected OTTI for AFS and HTM Securities by Portfolio ............................... 26
13.3. High-Level OTTI Methodology & Assumptions ................................................ 27
13.4. Post-Trading Shock Market Values for AFS Securities ..................................... 27
13.5. Actual AFS / HTM Fair Market Value Sources ................................................. 27
13.6. Supporting Documentation ................................................................................ 27
14. Trading ...................................................................................................................... 29
Page | 2
14.1. Trading Worksheet ............................................................................................. 29
15. Counterparty Credit Risk (CCR) ................................................................................ 30
15.1. Counterparty Worksheet .................................................................................... 30
15.2. Supporting Documentation ................................................................................ 32
16. Operational Risk ....................................................................................................... 37
16.1. Support for Sponsored Funds ............................................................................ 38
16.2. Legal Reserves and Provisions .......................................................................... 38
16.3. Unrelated professional Services ........................................................................ 39
16.4. Definitions .......................................................................................................... 39
16.5. Operational Risk Scenario Inputs Worksheet .................................................... 40
16.6. Operational Risk Projected Losses Worksheet .................................................. 40
16.7. Operational Risk Template ................................................................................ 41
16.8. Supporting Documentation and Independent Review ........................................ 41
17. Pre‐Provision Net Revenue (PPNR) .......................................................................... 43
17.1. General Technical Details ................................................................................. 43
17.2. Materiality Thresholds ....................................................................................... 44
17.3. NII: Primary & Supplementary Designation .................................................... 44
17.4. PPNR Projection Worksheet .............................................................................. 44
17.5. PPNR NII Worksheet ......................................................................................... 50
17.6. PPNR Metrics Worksheet .................................................................................. 51
17.7. Commonly Used Terms ...................................................................................... 51
17.8. Supporting Documentation ................................................................................ 52
18. Regulatory Capital .................................................................................................... 57
18.1. Projected Capital Actions & Balances .............................................................. 57
18.2. Capital Position Reconciliation ......................................................................... 58
19. BASEL III ..................................................................................................................... 58
19.1. General Guidance .............................................................................................. 58
19.2. Relevant Reference............................................................................................. 59
19.3. Completing the Schedule.................................................................................... 60
19.4. Capital Composition Worksheet ........................................................................ 60
19.5. Line Headings & Descriptions........................................................................... 61
Page | 3
Instructions for Preparation of the
Annual Company‐Run Stress Test
Report DFAST‐14A
The DFAST‐14A report collects detailed data on national banks’ or Federal savings
associations’ (hereafter “covered institutions” or “banks”) quantitative projections of balance
sheet assets and liabilities, income, losses, and capital across a range of macroeconomic
scenarios and qualitative information on methodologies used to develop internal projections
of capital across scenarios. One or more of the macroeconomic scenarios includes a market
risk shock that the covered institutions will assume when making trading and counterparty
loss projections. The OCC will provide details about the macroeconomic scenarios to the
covered institutions. The DFAST‐14A report includes data schedules for Summary, Macro
Scenario, Counterparty Credit Risk (CCR), Basel III and Dodd‐Frank (Basel III), and Regulatory
Capital Instruments.
1. Summary Instructions & Background
1.1. Background
1.1.1. Section 165(i) of the Dodd‐Frank Wall Street Reform and Consumer Protection
Act requires national banks and Federal savings associations with total
consolidated assets over $10 billion (defined as “covered institutions”) to
conduct annual stress tests as prescribed by the OCC in 12 CFR 46.
1.1.2. The law requires the OCC to define “stress test”, establish methodologies for the
conduct of the annual company‐run stress test, and to require at least three
different sets of conditions (baseline, adverse, and severely adverse).
1.1.3. The company‐run Dodd‐Frank Act Stress Test (DFAST) will cover a nine‐quarter
period of time and must begin with position information as of September 30.
1.1.4. The OCC will assess the processes and practices banks have to analyze and
assess capital adequacy, along with processes for risk identification,
measurement and management practices supporting this analysis.
1.2. General Administration
1.2.1. Covered institutions (hereafter, “banks”) will report on the DFAST‐14Aschedules
their quantitative projections of losses, resources available to absorb those
losses, balance sheet positions and capital composition on a quarterly basis over
the duration of the scenario and planning horizon.
1.2.2. Banks are also required to submit qualitative information supporting their
projections, including descriptions of the methodologies used to develop the
projections.
Page | 4
1.2.3. Data that is collected as part of the annual company‐run stress test requirement
is confidential. All templates, worksheets and schedules are the property of the
OCC and unauthorized disclosure is prohibited pursuant to 12 CFR 4.37.
1.2.4. Banks must submit the DFAST‐14A templates to the OCC through an FTP site
that allows documents to be managed in a secured environment.
1.2.5. Banks that have significant trading and counterparty positions may be required
to run a global market shock. The “as of” date for trading and counterparty
positions will be communicated to banks that are subject to the global market
shock component by December 1. The OCC will notify banks that are subject to
the market shock requirement.
1.2.6. All correspondence and questions regarding DFAST‐14A should be directed to a
secured mailbox (see section 3.1). Questions will be catalogued and, where
appropriate, written responses will be provided to all banks via email and
posted to the FTP site. Conference calls may be scheduled to discuss and better
understand submitted questions.
1.3. Overall Summary Instructions
In general, banks should incorporate the following into their pro forma estimates:
1.3.1. Definition of losses for loans: The losses to be estimated for loans held in
accrual portfolios in this exercise are generally credit losses due to failure to
pay obligations (cash flow losses), rather than discounts related to mark‐to‐
market (MTM) values. In some cases, banks may have loans that are being
held for sale or which are subject to purchase accounting adjustments. In
these cases, the analysis should anticipate the change in value of the
underlying asset, apply the appropriate accounting treatment, and determine
the incremental losses.
1.3.2. Loan‐loss estimates: Banks should describe the underlying models and
methods used to project loan losses, and provide background on the
derivation of estimated losses. Factors that could be cited to support the
reasonableness of estimated losses include (but are not limited to)
composition of the loan portfolios within a broad category (e.g., distribution
among Prime, Alt‐A, and subprime loans within first lien residential
mortgages) and specific characteristics of the portfolio within categories or
subcategories (e.g., vintage, credit score, loan‐to‐value ratio, regional
distribution, industry mix, ratings distribution, or collateral type).
Hypothetical behavioral responses by bank management should not be
considered as mitigating factors for the purposes of this analysis. For example,
hedges already in place should be accounted for as potential mitigating factors,
but not assumptions about potential future hedging activities.
1.3.3. Commitments and contingent and potential obligations: The analysis should
reflect expectations of customer draw‐downs on unused credit commitments
Page | 5
under each scenario, as well as any assets and exposures that might be taken
back on the balance sheet or otherwise generate losses under stressful
economic conditions (e.g., assets held in asset‐backed commercial paper
conduits and other off‐balance sheet funding vehicles to which the BHC
provides support). Unconsolidated entities to which the BHC has potential
exposure are also within the scope of this exercise and should be considered.
If it is envisioned that non‐contractual support may be provided during a
stressful environment for certain obligations or exposures of sponsored or
third‐party entities, these should be included in a bank’s analysis of
contingent or potential obligations, and all associated impacts should be
captured.
1.3.4. Losses on available‐for‐sale (AFS) and held‐to‐maturity (HTM) securities: Each
bank should provide projected other‐than‐temporary impairments (OTTI) for
AFS and HTM securities. OTTI projections should be based on September 30,
2012 positions and should be consistent with specified macroeconomic
assumptions and standard accounting treatment. If the bank bifurcates
credit losses from other losses, the method for deriving the bifurcation should
be provided in supporting documentation.
1.3.5. Allowance for loan losses: Banks should estimate the portion of the current
allowance for loan losses available to absorb credit losses on the loan portfolio
for each quarter under each scenario, while maintaining an adequate
allowance along the scenario path and at the end of the scenario horizon.
Loan‐loss reserve adequacy should be assessed against the likely size,
composition, and risk characteristics of the loan portfolio throughout the
planning horizon in a manner that is consistent with the bank’s projections of
losses over that scenario.
1.3.6. Non‐U.S. exposures: Loss, revenue, and loan‐loss reserve projections should
cover positions and businesses for the bank on a global consolidated basis. To
the extent that loss experience on foreign positions is projected to differ from
that on U.S. positions, banks should provide supporting information to
explain those differences.
1.3.7. Risk‐weighted asset (RWA) projections: Banks should provide detailed support
for all assumptions used to derive projections of RWAs, including assumptions
related to components of balance sheet projections (on‐ and off‐balance
sheet balances and mix), income statement projections, underlying risk
attributes of exposures, and any known weakness in the translation of
assumptions into RWA estimates for each scenario. For example, banks should
demonstrate how credit RWAs over the projection horizon are related to
projected loan growth under the macroeconomic scenario, increased credit
provisions or charge‐offs for loan portfolios, and changing economic
assumptions; and how market RWAs are related to market factors (e.g.,
equity index levels and bond spreads) and projected trading revenue.
Page | 6
Banks should demonstrate that these assumptions are clearly conditioned on
a given scenario and are consistent with stated internal and external business
strategies. If bank‐specific assumptions (other than broad macroeconomic
assumptions) are used, banks should also describe these assumptions and
how they relate to reported RWA projections. If the bank’s models for
projecting RWAs rely upon historical relationships, the bank should provide
the historical data and describe why these relationships are expected to be
maintained in each scenario.
1.3.8. Treatment of trading and counterparty RWA: Banks subject to the market‐risk
rule must use the following procedures to project RWAs over the planning
horizon for any positions subject to the market‐risk rule. For the first quarter
of the planning horizon, banks must use the market‐risk capital rules in effect
on December 31, 2012, for purposes of identifying positions subject to the
market‐risk rule and projecting the RWA amount of these positions. For the
second through ninth quarters of the planning horizon, banks must use the
market‐risk capital rules that were proposed to be in effective on January 1,
2013, for purposes of identifying positions subject to the market‐risk rule and
projecting the RWA amount of these positions in each quarter.
1.3.9. Balance sheet projections: Balance projections are a critical input to loss and
revenue estimates. Banks are expected to demonstrate that the approach
used to generate those projections is consistent internally, with related
processes, and externally, with implications of the macroeconomic scenario.
Balance projections should reconcile to projections for originations, pay‐
downs, draw‐downs, and losses under each scenario. In stressed
macroeconomic scenarios, care should be taken to justify major changes in
portfolio composition. Loan balance projections should be consistent with
internally generated paths of originations, pay‐ downs, draw‐downs, losses,
purchases, and sales under any scenario. The losses used in producing
balances should be the same as those produced in internal loss estimate
modeling for the stress test. Prepayment behavior should link to the relevant
economic scenario and the maturity profile of the asset portfolio.
To the extent that changes in the balance sheet are driven by a bank’s
strategic direction, please document and explain in detail the underlying
assumptions in the adverse and severely adverse economic environment.
1.3.10. Global market shock for the largest trading banks: Some banks with significant
trading and counterparty exposures m a y b e required to apply a global
market shock to their trading book, private equity positions, and
counterparty credit exposures as of a particular market close date and
estimate losses. The OCC will notify banks if they are subject to the global market
shock. The OCC will also provide to these trading banks a set of hypothetical
shocks to the risk factors most relevant to their trading, private equity and
Page | 7
counterparty positions and the date as of which the shocks should be applied
no later than December 1 of the current calendar year.
Trading banks must use the set of hypothetical risk factor shocks the OCC
provides to produce the profit and loss (P/L) estimates for their trading,
private equity, and counterparty credit, and MTM losses for fair‐value assets
not held in trading, including loans held for sale or held for investment with
the fair‐value option, and AFS securities. All estimated losses associated with
the global market shock the OCC provides as part of the supervisory scenarios
should be reported in the first quarter of the planning horizon.
In cases in which the specified shocks are not directly compatible with the
bank’s internal systems, the bank is expected to interpolate or extrapolate
around the given points to determine the appropriate shock. Supporting
documentation should include a description of the methods used to
interpolate or extrapolate. In cases where there are nonlinearities, banks
should not simply multiply their exposures by the corresponding shocks to
arrive at a purely linear P/L estimate, but should instead use full revaluation
methods to compute their loss estimates.
The result of the global market shock is to be taken as an instantaneous loss
and reduction of capital calibrated on the size of applicable trading book
positions, private equity positions, and counterparty credit exposures as of a
point in time. Banks should not assume a related decline in portfolio
positions or risk‐weighted assets as a result of these market shock losses. The
global market shock should be treated as an add‐on that is exogenous to the
macroeconomic and financial market environment specified in the adverse
and severely adverse scenarios.
1.3.11. Fair‐value loans: Banks may have loans that are held for sale or held for
investment, for which they have adopted fair‐value accounting (collectively,
fair‐value loans). For fair‐value loans not held in the trading account, trading
banks should apply the risk factor shocks for comparable assets in their
trading books, taking into account any forward sales already in place. The
shocks applied to retail and commercial real estate whole loans should be
generally consistent with the risk factor shocks provided for relevant AAA‐
rated whole loans. The corporate loan shocks should be generally consistent
with the risk factor shocks provided for corporate loans. If trading banks use
different assumptions, they should provide supporting documentation that
includes the assumptions and explanations for why the assumptions used are
more appropriate than those provided by the OCC.
All other banks should report any estimated changes in the value of fair‐value
loans in other non‐interest income under the conditions specified in the
macroeconomic scenario (i.e., baseline, adverse, severely adverse).
Page | 8
1.3.12. Pre‐provision net revenue (PPNR): PPNR estimates should be consistent with
the economic and financial environment specified in the relevant scenario.
Banks should ensure that PPNR projections are explicitly based on, and directly
tie to, balance sheet and other exposure assumptions used for related loss
estimates. In addition, banks should apply assumptions consistent with the
scenario and resulting business strategy when projecting PPNR.
1.3.13. Residential mortgage representations and warranties: As part of PPNR, banks
will estimate losses associated with requests by mortgage investors, including
both government‐sponsored enterprises and private‐label securities holders,
to repurchase loans deemed to have breached representations and
warranties, or with investor litigation that broadly seeks compensation from
banks for losses. Banks should consider not only how the macro scenarios
could affect losses from repurchased loans, but also a range of legal process
outcomes, including worse‐than‐expected resolutions of the various contract
claims or threatened or pending litigation against the bank. Banks should
provide appropriate support of the adverse outcomes considered in their
analysis.
1.3.14. Mortgage servicing rights (MSR): All revenue and expenses related to MSRs
and the associated non‐interest income and non‐interest expense line items
should be reported on the PPNR schedules. Banks should not report changes
in value of the MSR asset or hedges within the trading shock. Therefore, if
derivative or other MSR hedges are placed in the trading book for Call Report
purposes and in alignment with Generally Accepted Accounting Principles,
these hedges should not be stressed as part of the global market shock
scenario. Also, any banks that have adopted fair‐value accounting for all or
part of the MSR must not include the MSR in the global market shock
exercise.
1.3.15. Operational risk losses: Projection of losses arising from inadequate or failed
internal processes, people and systems, or from external events should be
reported by the bank as operational‐risk losses, a component of PPNR.
Examples of operational‐risk loss events include those losses related to
improper business practices (including class action lawsuits), execution errors,
and fraud. Banks should specifically consider the possibility of support for
bank‐sponsored entities, as well as potential for charges related to legal
reserves and provisions.
1.3.16. Trading revenues in PPNR: All banks are expected to project PPNR, including
trading‐related revenues, conditional on the specifications of the assumed
macroeconomic scenario (baseline, adverse, and severely adverse). In this
regard, all banks with trading activities and private equity investments,
including those banks that are not required to apply the global market shock,
should estimate any potential profit and loss impact that these positions
might experience under the macroeconomic scenario. Estimated impacts
should include those stemming from potential defaults on credit sensitive
positions held in the trading account and from counterparty credit
Page | 9
exposures, and valuation declines (and recoveries specific to those declines)
on loans, securities and other trading or MTM positions, and private equity
investments. Private equity‐related loss estimates should be broken out from
other trading or MTM loss and should include consideration of draw‐downs
against commitments.
In making these projections, banks should demonstrate that their historical
data selection and general approach is credible and applicable for the
assumed macroeconomic scenario.
For the trading banks, projections should be made without c onsideration of
any MTM losses on trading bank’s portfolios that result from the global market
shock. The MTM losses resulting from the global market shock should be
treated as separate, one‐time losses that occur in the first quarter of the
planning horizon (e.g., 4Q12, for CCAR 2013). Therefore, banks subject to the
market shock should not assume any interaction between the global market
shock and projections of PPNR in the form of management actions (such as
expense cuts) that would be taken in light of the shock to the trading portfolio
or recoveries of the losses resulting from the market shock over the scenario
time horizon.
1.3.17. Basel III: Banks are to include estimates, under the baseline scenario, of the
composition and levels of regulatory capital, risk‐weighted assets, and
leverage ratio exposures used to calculate minimum regulatory capital ratios
(including the capital conservation buffer and any SIFI surcharge that may be
required) under the Basel III framework, as set forth by the Final Market Risk
Rule and the proposed requirements of the Basel III NPR, the Advanced
Approaches NPR for applicable banks, and the Basel Committee’s SIFI
surcharge framework. Each Bank’s submission should include supporting
documentation on all material planned actions that the bank intends to
pursue in order to meet the proposed Basel III target ratios, including, but not
limited to, the run‐off or sale of existing portfolio(s), the issuance of regulatory
capital instruments and other strategic corporate actions.
1.3.18. Regulatory Capital: Banks are to provide data on the balances of regulatory
capital instruments under current U.S. capital adequacy guidelines,
aggregated by instrument type based on actual balances as of September 30
of the current calendar year and projected balances as of each quarter end
through the remaining planning horizon. Banks are to report information
both on a notional basis and on the basis of the dollar amount included in
regulatory capital.
1.3.19. Planned Capital Actions: Banks must calculate pro forma capital ratios using
their planned capital actions over the planning horizon under the baseline
scenario as well as any alternative capital actions projected under the adverse
and severely adverse scenarios. Banks should include projections of capital
actions that are realistic, consistent with its capital plan and policies, and
prudent relative to hypothetical economic and financial conditions modeled.
Page | 10
The OCC recognizes that decisions on capital actions are not static and may
change under varying economic and financial conditions. For the first quarter of
the planning horizon, the bank must take into account the actual capital actions
taken during that quarter.
2. Who Must Report
2.1. Reporting Criteria: Large banks that meet an annual threshold of $50 billion or more in
total consolidated assets, as defined by the annual stress test rule (12 CFR 46), are
required to submit the DFAST‐14A report to the OCC. The annual stress test rule defines
total consolidated assets as the average of the company’s total consolidated assets over
the four most recent consecutive quarters, as reflected on the bank’s Consolidated
Report of Condition and Income (Call Report FFIEC 041 or FFIEC 031).
2.2. Separate annual schedules must be reported for each scenario. All annual schedules
are required to be reported by all banks with the exception of the CCR schedule and
the Trading, CCR, and Operational Risk related worksheets of the Summary schedule.
2.2.1. CCR schedule and Trading and CCR worksheets: Only banks with greater
than $500 billion in total consolidated assets who are subject to the
amended market risk capital rule must submit this schedule and
worksheets.
2.2.2. Operational Risk worksheets: Only banks subject to the advanced
approaches risk‐based capital rules (12 CFR Part 3, Appendix C) must
submit these worksheets.
2.3. Certain data elements within the annual schedules are subject to materiality
thresholds. The instructions to these data schedules provide details on whether or
not bank must submit a specific data element.
2.4. Exemptions: Only banks that did not meet the reporting criteria listed in paragraph
one above are exempt from reporting.
3. Where to Submit the Reports
3.1. All banks subject to these reporting requirements must submit completed reports
electronically. Banks will be provided information on how to transmit data to the
FTP website. Please send requests for FTP website access to the following mailbox
and you will receive the website URL and individual access information:
[email protected]
3.2. The submitted DFAST templates or schedules shall be named using the following
naming conventions.
DFAST14A_SUMMARY_RSSD_BANKMNEMONIC_SCENARIO.xlsx
DFAST14A_SCENARIO_RSSD_BANKMNEMONIC.xlsx
Page | 11
DFAST14A_CONTACTS_RSSD_BANKMNEMONIC.xlsx
DFAST14A_CCR_RSSD_BANKMNEMONIC.xlsx
DFAST14A_OPSRISK_RSSD_BANKMNEMONIC.xlsx
DFAST14A_BASELIII_RSSD_BANKMNEMONIC.xlsx
DFAST14A_REGCAP_RSSD_BANKMNEMONIC.xlsx
4. When to Submit the Reports
4.1. Banks must file the DFAST‐14A report according to the appropriate time schedules
described below:
4.1.1. With the exception of the CCR schedule and the Trading and CCR worksheets
of the Summary schedule, the data collected will be reported as of September
30. The “as of” date for the CCR schedule and the Trading and CCR
worksheets of the summary schedule will be between October 1 and
December 1 of that calendar year.
4.1.2. General Timing: All schedules will be due on or before January 5 (unless that
day falls on a weekend). If the submission date falls on a weekend, the data
must be received on the first business day after the weekend. No other
extensions of time for submitting reports will be granted. The data are due by
the end of the reporting day on the submission date. Early submission aids the
OCC in reviewing and processing data and is encouraged.
5. How to Prepare the Reports
5.1. Applicability of GAAP, Consolidation Rules, and Other Instructional Guidance
5.1.1. Banks are required to prepare and file the DFAST‐14A schedules in accordance
with generally accepted accounting principles (GAAP) and these instructions.
The financial records of the banks must be maintained in such a manner and
scope to ensure the DFAST‐14A is prepared in accordance with these
instructions and reflects a fair presentation of the banks’ financial condition and
assessment of performance under stressed scenarios.
5.1.2. Rules of Consolidation: Reference the Consolidated Reports of Condition and
Income for general instructions on the rules of consolidation.
5.1.3. Banks should review the following published documents (in the order listed
below) when determining the precise definition to be used in completing the
schedules:
1) The DFAST‐14A instructions;
2) The latest available instructions to the Consolidated Reports of Condition
and Income:
http://www.fdic.gov/regulations/resources/call/index.html
Page | 12
5.2. Amended Reports: The OCC will require the filing of amended reports if previous
submissions contain significant errors. In addition, a reporting institution must file an
amended report when it or the OCC discovers significant errors or omissions
subsequent to submission of a report. Failure to file amended reports on a timely
basis may subject the institution to supervisory action.
6. Questions and Requests for Interpretations
6.1. Banks must submit any questions or requests for interpretations by email to :
[email protected]
7. Scenario: General Instructions
7.1. To conduct the stress test required, a bank may need to project additional economic
and financial variables to estimate losses or revenues for some or all of its portfolios,
or the bank may chose to report additional scenarios. In such a case, the covered
institution must complete the following worksheets as appropriate.
These instructions provide guidance for reporting the variables used in the firm‐
defined macroeconomic scenarios underlying the projections of losses, revenue,
and capital. These scenarios include the DFAST baseline scenario, DFAST adverse
scenario, the DFAST severely adverse scenario, as well as, any additional scenarios
generated by the bank or supplied by the OCC (Additional Scenario #1, Additional
Scenario #2, etc.).Additional worksheets are provided if the bank generated
additional variables for the scenarios or reported additional scenarios beyond the
baseline, adverse, and severely adverse scenarios. The worksheets in the
template are the following.
7.1.1. Scenario Variable Definitions: This worksheet must be used to list and define the
variables used beyond those provided b y the OCC in the bank’s execution of the
DFAST scenarios, and any additional scenarios the bank wishes to report.
• The worksheet provides space for the baseline scenario, adverse scenario,
and severely adverse scenario, as well as, space for an additional scenario.
The sections must be completed. If one or more additional scenarios are
provided, then a section should be created for each additional scenario and
labeled accordingly (Additional Scenario #1; Additional Scenario #2; etc.)
• For each scenario, list the variables included in the scenario in the column
titled "Variable Name."
• Variable definitions must be provided in the column titled "Variable
Definition." Variable definitions should include a description of the variable
(e.g., "Real GDP") and the denomination and/or frequency of the variable
(e.g., "Billions of 2005 dollars" or "in percent, average of monthly values").
Page | 13
•
•
•
•
For convenience, the worksheet provides space for 10 variables per scenario,
but any number of variables may be reported, depending on the variables
actually used in the scenario. Extra lines may be created as needed. The
same variables do not necessarily have to be included in each scenario.
Banks must include all economic and financial market variables that were
important in projecting results, including those that affect only a subset of
portfolios or positions. For example, if asset prices had a meaningful impact,
the assumed level of the equity market and interest rates must be included,
or if bankruptcy filings affect credit card loss estimates, then the assumed
levels of these must be reported.
Banks must also include any variables capturing regional or local economic
or asset value conditions, such as regional unemployment rates or housing
prices, if these were used in the projections.
Banks must include historical data, as well as projections, for any
macroeconomic, regional, local, or financial market variables that are not
generally available. Historical data for these variables can be included in a
separate worksheet.
7.1.2. DFAST Baseline Scenario: This worksheet must be used to report the values of
any additional variables generated for the DFAST baseline scenario.
7.1.3. DFAST Adverse Scenario: This worksheet must be used to report the values of
any additional variables generated for the DFAST adverse scenario.
7.1.4. DFAST Severely Adverse Scenario: This worksheet must be used to report the
values of the variables included in the DFAST severely adverse scenario.
7.1.5. Additional Scenario #1/#2/etc. : These worksheets should be used to report the
values of the variables included in any additional scenarios. Please create a
separate worksheet (tab) for each additional scenario. Name the worksheets
“Additional Scenario #1,” “Additional Scenario #2,” etc.
7.1.6. All Scenarios: The following applies to all of the Scenario tabs.
The variables must be the same (and have the same names) as the
variables listed in the corresponding sections of the Scenario Variable
Definitions Worksheet.
List quarterly values for the variables starting with the last realized
value (3Q 2012) through the end of the forecast horizon (4Q 2014).
Please enter all variables as levels rather than as changes or growth
rates (for instance, the dollar value of real GDP rather than the GDP
growth rate).
Page | 14
8. Summary Schedule – Overview
8.1. Overview: The DFAST‐14A Summary schedule includes data collection worksheets
related to the following:
• Income, Balance Sheet, and Equity/Capital Statements;
• Retail;
• Securities;
• Trading;
• Counterparty Credit Risk;
• Operational Risk; and
• Pre‐Provision Net Revenue (PPNR).
The covered institution (national bank, Federal savings association) must submit a
separate Summary schedule for each scenario (Use the “Save As” function of the
original Excel workbook provided to the institution.). Name the file using the following
style:
DFAST14A_SUMMARY_RSSD_BANKMNEMONIC_SCENARIO.xlsx.
In the tab labeled Summary Submission Cover Sheet, include:
• The name and Charter Number of the submitting bank;
• The Current Year, Planning Horizon Year 1, and Planning Horizon Year 2
• The date of submission to the OCC;
• Which scenario this Summary Schedule applies to (choose from the drop‐
down box); and
• A brief description of the scenario.
8.2. Technical Details: The following instructions apply to all worksheets within the
Summary schedule.
• Do not enter any information in gray highlighted cells.
• Ensure that any internal consistency checks are correct before submission.
• Report income and loss data on a quarterly basis, and not on a cumulative
or year‐to‐date basis.
• Report dollar values in millions of US dollars (unless specified otherwise).
• For worksheets that collect non‐scenario dependent data (e.g. the historical
data collection on the Retail Repurchase worksheet), report information for
the Baseline Scenario only.
• The “projection horizon” refers to nine quarters starting with the fourth
quarter of the reporting year.
• If there are no data for certain fields, then populate them with a zero (0).
8.3. Supporting Documentation on Methodology: For each part of the Summary Schedule,
submit supporting documentation that clearly describes the methodology used to
produce the bank’s projections. In the documentation, include a description of how
the bank translated the macroeconomic factors (or market shock for the Trading and
Counterparty Risk sections) associated with the scenario into the banks projections
Page | 15
and technical details of any underlying statistical methods used, including information
on model validation and independent review. Where judgment is an essential part of
the forecast, include documentation that demonstrates rationale and magnitude, as
well as the process involved to ensure consistency of projections with scenario
conditions. Furthermore, include thorough discussion of any material deviations from
the instructions and how the materiality of such deviations was decided upon.
8.4. Model Risk Management Policy: Banks must include in their submission their model
risk management policies, which should provide the bank’s framework for model
development, calibration, validation, escalation, and oversight.
8.5. Documentation of Risk Measurement Practices: Bank submissions must include
internal documentation describing the bank’s framework for development, calibration,
estimation, validation, oversight, and escalation of key risk identification and
measurement practices.
8.6. Documentation of Internal Stress Testing Methodologies: Banks must include in their
submissions documentation that describes key methodologies and assumptions for
performing stress testing on their portfolios. In particular, the design, theory, and logic
underlying the methodology should be well documented and generally supported by
published research and sound industry practice. The documentation should include:
• discussion of historical data set construction, including data sources,
adjustments to the data set;
•
rationale for portfolio segmentation and a discussion on how a particular
methodology and model captures the key characteristics;
•
an explanation of the theory, logic, and design behind each model;
•
a description of model selection and specification, variable choice, and
estimation methodology;
•
an analysis of the model output, including the congruence of inputs with the
assumed economic scenario, the justification of any qualitative adjustment;
a model inventory log specifying, at a minimum, the model’s version, the
date of model approval, the name of its model owner, the date of the
model’s last independent validation.
Documentation should also include mapping that clearly conveys the methodology used
for each DFAST‐14A product line under each stress scenario. If third‐party models are
used, the documentation should describe how the model was constructed, validated,
and any known limitations of the model. Documentation should describe assumptions
concerning new growth and changes to credit policy. Documentation should
demonstrate that senior management has provided the board of directors with
sufficient information to facilitate the board’s full understanding of the stress testing
used by the firm for capital planning purposes.
8.7. Documentation of Assumptions and Approaches: Banks must provide credible support
for all assumptions used to derive loss estimates, including assumptions related to the
•
Page | 16
components of loss, severity of loss, and any known weaknesses in the translation of
assumptions into loss estimates. Banks should demonstrate that these assumptions
are clearly conditioned on the stated macroeconomic scenario, are consistent with
stated business strategies, and reflect the competitive environment of each business
line. If firm‐specific assumptions (other than broad macroeconomic assumptions) are
used, also describe these assumptions and how they relate to reported projections. If
the bank models rely upon historical relationships, provide the historical data and
clearly describe why these relationships are expected to be maintained in each
scenario. The impact of assumptions concerning new growth or changes to credit
policy on forecasted loss estimates relative to historical performance should be clearly
documented.
While judgment is an essential part of risk measurement and risk management,
including for loss forecasting, banks should not be over‐reliant on judgment to prepare
their loss estimations without providing documentation or evidence of transparency
and discipline around the process. Banks should adequately support their judgments
and should ensure that judgments are in line with scenario conditions.
Supporting documentation also should describe internal governance around the
development of stress testing models and methodologies, and discuss how the stress
testing methodologies have been implemented in the bank’s existing firm‐wide risk
management practices. The bank should demonstrate that senior management
provided the board of directors with sufficient information to facilitate the board’s full
understanding of the stress testing used by the firm for capital planning purposes and
allow for the appropriate level of challenge of assumptions and outcomes.
8.8. Validation and Independent Review: Models employed by banks (either developed
internally or supplied by a vendor) should be independently validated or otherwise
reviewed in line with model risk management expectations presented in existing
supervisory guidance, including OCC Bulletin 2011‐12, Supervisory Guidance on Model
Risk Management.
Banks must provide their model validation policy. Institutions should provide model
validation documentation on the following elements: conceptual soundness, inputs,
transparency, implementation, reporting, model robustness and limitations, use of
expert judgment, exception reports, outcomes analysis (backtesting and/or
benchmarking) and qualitative adjustments.
9. Income Statement, Balance Sheet & Capital
9.1. Income Statement Worksheet:
The Income Statement worksheet collects projections for the main components of the
income statement. Micro Data Reference Manual (MRDM) codes are provided in the
‘Notes’ column for many of the line items. Where applicable, use the definitions for
the Call Report line items corresponding to the MDRM code. For each scenario used,
input the loan loss projections for the various line items in this worksheet. The bank
Page | 17
must include losses tied to the relevant balances reported on the Balance Sheet
worksheet. Losses associated with accrual loans (i.e., loans held for investment)
should be reported in the appropriate line items under the “Accrual Loan Losses”
section and any losses due to changes in the fair value of assets that are held for sale
or held for investment under the fair value option should be reported in the
appropriate line items under the “Losses Associated With Loans Held for Sale and
Loans Accounted for Under the Fair Value Option” section.
The Repurchase Reserve/Liability for Mortgage Reps and Warrants line items are
included to provide information on the expected evolution of any reserve or accrued
liability that has been established for losses related to sold or government‐insured
mortgage loans (first or second lien). Losses charged to this reserve can occur through
contractual repurchases, settlement agreement, or litigation loss, including losses
related to claims under securities law or fraud claims; it is likely that most losses
charged to this reserve will come through contractual repurchases or settlements.
Quarterly reserve/accrued liability levels and quarterly provisions and net charge‐offs to
the reserve/accrued liability should be reported as forecast under the applicable
scenario. To ensure consistency across the sheets of each DFAST‐14A summary
workbook, the Provisions during the quarter line is linked to the PPNR Projections
Worksheet rows where banks are expected to report any provisions to the Repurchase
Reserve/Liability for Mortgage Reps and Warrants. For the same reason, the Net
charges during the quarter line is linked to Table G.3 in the Retail Repurchase
Worksheet.
9.2. Balance Sheet Worksheet:
For each scenario used, input the loan balance projections in the various line items in
this worksheet. Balances for loans held in the accrual loan portfolio must be reported
in the appropriate wholesale line items in the “Accrual Loans” section and balances for
held for sale or held for investment under the fair value option should be reported in
the appropriate line items in the “Loans Held for Sale and Loans Accounted for Under
the Fair Value Option” section. MDRM codes are provided within the ‘Notes’ column
for many of the line items. When applicable, the definition of the bank’s projections
should correlate to the definitions outlined by the corresponding MDRM code within
the Call Report. Domestic refers to portfolios in the domestic US offices (as defined in
the Call Report), and International refers to portfolios outside of the domestic US
offices.
Explain any M&A and divestitures included and how they are funded (liabilities, asset
sales, etc.)
9.3. Capital Worksheet:
The Capital worksheet collects projections of the main drivers of equity capital and the
key components of the regulatory capital schedule. MRDM codes are provided in the
‘Notes’ column for many of the line items.
Page | 18
The schedule collects projections of components of equity capital and regulatory
capital, components of assets and liabilities, and deferred tax asset items. The
projections must follow the definitions currently used in the Call Report and found in
the OCC’s capital adequacy requirements (12 CFR Part 3) as applicable. All data
collected in the Capital worksheet should be reported on a quarterly basis.
Banks are required to provide projections of Tier 1 common capital, which is defined as
Tier 1 capital less non‐common elements, including perpetual preferred stock and
related surplus, minority interest in subsidiaries, trust preferred securities, and
mandatory convertible preferred securities.
The projections must clearly show any proposed capital distributions or other scenario‐
dependent actions that would affect the bank’s regulatory capital, including any
assumptions based on OCC’s regulations that would tend to, or otherwise restrict, such
capital distributions.
Projections of risk‐weighted assets – RWA (line item 33) must be based on the OCC’s
capital rules applicable in a given quarter. For example, for the first quarter of the
planning horizon associated with the DFAST‐14A with the September 30, 2012 as‐of
date, a bank subject to the OCC’s market risk rule must report market RWAs in a
manner consistent with the market risk capital rule in effect on December 31, 2012.
Similarly, for the second through ninth quarters of the planning horizon associated with
the DFAST‐14A with the September 30, 2012 as‐of date, a bank subject to the OCC’s
market risk rule must report market RWAs in a manner consistent with the final market
risk capital rule that becomes effective on January 1, 2013.
Banks are required to provide an additional Capital worksheet for the adverse,
baseline, and severely adverse scenarios.
9.4. Supporting Documentation:
9.4.1. Income Statement, Balance Sheet, and Capital Worksheets: Banks must submit
supporting documentation that clearly describes the methodologies used to
make the loss, reserve change, and revenue projections that underlie the pro
forma projections of equity capital. The supporting document should be titled
RSSD_BANKMNEMONIC_CAPITAL_METHODOLOGY_YYMMDD. Each bank
should include in its supporting documentation a clear description of how the
various balance sheet and income statement line items were reported.
Provide information on the specific assumptions used to calculate regulatory
capital, including a discussion of any proposed capital distributions. When
appropriate, clearly state assumptions related to the corporate tax rate and the
evolution of the deferred tax assets. In situations where the bank chooses not
to project components of the balance sheet, those components should be held
constant at the last current level and the bank should explain why the zero delta
assumption is appropriate in the given scenario.
Page | 19
Banks must submit any other information and documentation necessary to
support or understand its capital calculations. For example, a bank could show
the calculations related to the projections of the deferred tax asset or servicing
assets that may be disallowed for regulatory capital purposes. Where applicable,
banks should link the additional supporting documentation to the Summary
Memo of Capital Methodology and Assumptions and the Capital worksheet.
10. Retail
Throughout the retail‐related worksheets, Domestic refers to portfolios in the domestic
US offices (as defined in the Call Report), and International refers to portfolios outside
of the domestic US offices.
10.1. Retail Balance & Loss Projection Worksheet:
The Retail Balance and Loss Projections worksheet collects projections of business‐line
level loan balances and losses on banks’ accrual loans only (i.e., held for investment).
Balances: According to Call Report definition (end of quarter levels). Where
requested, please segment the total balances reported by vintage. Balances should
be classified according to the origination vintage of the account with which the
balance is associated.
New Originations: Total dollar amount of new originations net of sales to Agencies.
Only include originations you expect to hold in portfolio.
Paydowns: Total dollar of repayments received in the given quarter.
Asset Purchases: Total dollar of assets purchased in the given quarter.
Asset Sales: Total dollar of assets sold in the given quarter.
Loan Losses: Total dollar of loan losses recognized in the given quarter.
Cumulative Interim Loan Losses – Non‐PCI: The total unpaid principal balance that
has been charged‐off on loans in the segment through Q3 of the reporting period on
non‐PCI loans. Interim charge‐offs include all cumulative partial chargeoffs/write‐
downs for loan that have not been fully charged‐off or otherwise liquidated.
Cumulative Interim Loan Losses – PCI: The total unpaid principal balance that has
been determined to be uncollectible through Q3 of the reporting period and for
which the non‐accretable difference or ALLL has been used to absorb the
uncollectible amount. The amounts reported in this line should be consistent with
the Non‐Accretable Difference Remaining and other information reported on the
ASC 310‐30 worksheet. As above, this measure should not include liquidated loans.
Reporting of projections for credit cards must be based on all open accounts (active
+ inactive), but not charged‐off accounts.
Page | 20
10.2. Retail Repurchase Worksheet:
The Retail Repurchase worksheet collects data on loans sold by the bank that may be
subject to repurchase risk due to breaches of representations and warranties made
during the sale of the loans. It also collects data on loans insured by the US
Government for which the insurance coverage could be denied if loan defects are
identified. Information about loans sold between first quarter 2004 and third quarter
2012 must be aggregated and reported in the following categories on Tables A‐F:
Tables A—Loans Sold to Fannie Mae;
Tables B—Loans Sold to Freddie Mac;
Tables C—Loans Insured by the US Government (e.g. FHA, VA): loans
(whether on balance sheet or in a GNMA security) insured by the US
government and subject to a denial of insurance payment if certain defects
are discovered;
Tables D—Loans Securitized with Monoline Insurance: loans packaged into
a securitization and wrapped with monoline insurance. If it cannot be
identified whether a given loan is monoline insured, include the loan in this
category;
Tables E—Loans Securitized without Monoline Insurance: loans packaged
into a securitization but not wrapped with monoline insurance;
Tables F—Whole Loans Sold: loans sold as whole loans to parties other
than Fannie Mae or Freddie Mac, even if the whole loans were
subsequently sold to Fannie Mae or Freddie Mac.
Please report information aggregated by vintage for each of the data fields below. In
cases where the data may not be available by vintage, report the data in the
Unallocated column. It is expected that use of the Unallocated column will be very
limited. Any data reported in the Unallocated column will be treated with conservative
assumptions by the OCC. Loans that have been sold, repurchased and then sold again
must be reported in the most recent year of sale.
For row variables described below with the note Excluding Exempt Population, the data
submitted must exclude any loans for which the bank has no risk of repurchase liability
because of settlement or previous repurchase. Only exclude finalized settlements; any
loans subject to a pending settlement should be included on this worksheet. Also
exclude loans for which a repurchase request has been made and subsequently
rescinded. Loans paid in full are not part of the exempt population unless they satisfy
the exemption criteria defined above.
For each set of tables A‐F, please complete Table X.1 for all loans for which the
outstanding UPB and delinquency information requested in Table X.1 is available. If the
requested outstanding UPB or delinquency information is not available, please
complete Table X.2 instead. Due to the missing data associated with loans reported in
Table X.2, loans in this population will be treated with conservative assumptions. Tables
X.1 and X.2 should be mutually exclusive.
Page | 21
The row variables for each table must be filled out as follows:
•
Original UPB: The original unpaid principal balance (UPB) of all of the loans,
including closed loans;
•
Original UPB (Excluding Exempt Population): The original UPB of the loans,
including closed loans but excluding the exempt population as defined above;
•
Outstanding UPB (Excluding Exempt Population): The outstanding UPB as of
September 30 of the reporting year, excluding the exempt population as
defined above;
•
Delinquency Status as of 3Q (Excluding Exempt Population): Report the data as
of September 30 of the reporting year, excluding the exempt population as
defined above. The sum of the four delinquency categories listed below should
equal the outstanding UPB reported for that vintage.
•
Current: The UPB of loans less than 30 days past due;
•
Past due 30 to 89 days: The UPB of loans 30‐89 days past due;
•
Past due 90 to 179 days: The UPB of loans 90‐179 days past due;
•
Past due 180+ days: The UPB of all loans that are 180 days or more past
due and have not yet been fully charged‐off;
•
Net Credit Loss Realized to‐date (Excluding Exempt Population): Cumulative net
credit losses realized by investors in the loans through September 30 of the
reporting year, excluding the exempt population as defined above;
•
Repurchase Requests Outstanding (Excluding Exempt Population): The UPB of
loans for which a buyer has requested a repurchase but a resolution had not
been reached as of September 30 of the reporting year. No loans that belong in
this row will fit the definition of the exempt population, so this variable is by
definition exclusive of the exempt population as defined above;
•
Loss to‐date Due to Denied Insurance (applicable to Table C only): Losses
realized through September 30 of the reporting year due to insurance claims
denied by the US Government due to an identified defect on the loan in
question;
•
Estimated Lifetime Net Credit Losses (Excluding Exempt Population): The firm’s
estimate of lifetime net credit losses by investors in the loans (inclusive of net
credit losses realized‐to‐date) under the scenario in question, excluding from
the estimate losses on the exempt population as defined above;
•
Projected Future Losses to bank Charged to Repurchase Reserve (Excluding
Exempt Population): Lifetime future losses related to sold or government‐
insured loans under the scenario in question that the bank expects to charge
through its repurchase reserve.
In Table X.3, please distribute the projected future lifetime losses that would be
charged‐off through the repurchase reserve under each scenario, as defined above,
over the quarters displayed in the column headers. For each Table A‐F, the sum of the
Page | 22
projected future losses in Table X.3 expected to be charged off to the repurchase
reserve should equal the sum of the projected future losses expected to be charged off
through the repurchase reserve in Tables X.1 and X.2. The Projection Validity Check
cells will read “TRUE” when these projected losses are filled out correctly. Further, the
sum of the projected future losses reported in Tables A.3‐F.3 is calculated in table G.3.
The sum of losses expected to be charged to the repurchase reserve is linked to the net
charge‐off lines in the Repurchase Reserve on the Income Statement to ensure
consistency across the sheets of the Y‐14A summary workbook.
10.3. ASC 310‐30 Worksheet
Please see Accounting Standards Codification (ASC) Subtopic 310‐10, Receivables—
Loans and Debt Securities Acquired with Deteriorated Credit Quality (formerly AICPA
Statement of Position 03‐3, “Accounting for Certain Loans or Debt Securities Acquired in
a Transfer”). The Retail ASC 310‐30 worksheet collects information and projections on
the banks’ retail purchased credit impaired (PCI) portfolio. Provide actual information1
for the third quarter of the reporting period and projected information for the future
quarters.
Submit the information requested by product, as segregated on the worksheet. In the
event that a firm has ASC 310‐30 pools that include more than one of the products
provided on the worksheet, please allocate the data between the products in question
and provide documentation for the methodology you used for the allocation.
10.3.1. Carrying Value: The carrying value of the ASC 310‐30 purchased impaired loans
as reported on the balance sheet. Carrying value must not reflect any
allowance for loan losses that may be in place for the PCI loans being reported
10.3.2. Allowance: The amount of any allowance for loan losses that has been
established for the PCI loans.
10.3.3. Net Carry Value: Net Carry Value: The carry value less any allowance. This field
is automatically calculated.
10.3.4. Unpaid Principal Balance: Total contractual Unpaid Principal Balance of ASC
310‐30 (SOP 03‐3) PCI loans as of quarter‐end.
10.3.5. Initial Day 1 Non‐Accretable Difference to Absorb Cash Flow Shortfalls on PCI
Loans: The original Day 1 full non‐accretable difference to absorb amounts
determined to be uncollectible on PCI loans when the PCI portfolio was
acquired. Please specify if this includes principal only or principal and interest.
Provide only for the first quarter on the reporting schedule.
10.3.6. Quarter Ending Non Accretable Difference (NAD): The amount of the Day 1 NAD
remaining, net of the amount allocated to offset ‘Charge Offs to Date’
(provided in Line 7) and any amounts reclassified to accretable yield.
10.3.7. Cumulative “Charge‐Offs” to Date: Total cumulative contractual amounts due
on PCI loans that would have been deemed charged‐off under a non‐PCI
1
Required only in the baseline scenario.
Page | 23
charge‐off policy (i.e. losses accumulated to date that will be offset against the
non‐accretable difference (NAD) and/or the PCI Allowance). Please split
between amount planned to be applied against the NAD and the amount
planned to be applied against the Allowance. Provide only for the first quarter
on the reporting schedule.
10.3.8. Provisions to Allowance: The amount of provisions to the allowance recognized
in the income statement in the quarter due to changed expectations of lifetime
cash flows to be received for the PCI loans. Provide increases to the allowance
as a positive number and reversals of the allowance as a negative number.
10.3.9. Quarterly “Charge‐Offs”: The total contractual amount of PCI loans that would
be deemed charged off or identified as loss under a non‐PCI charge‐off policy in
the quarter (i.e. losses in the quarter that will be offset at some point against
the non‐accretable difference (NAD) and/or the PCI Allowance). Please split
between amount planned to be applied against the NAD and the amount
planned to be applied against the Allowance.
10.3.10. Accretable Yield Remaining: The accretable yield remaining as of the quarter‐
end.
10.3.11. Accretable Yield Accreted to Income: The amount of accretable yield
recognized as income in the quarter.
10.3.12. Effective Yield (%): The effective interest rate at which income is recognized
in the quarter.
10.4. Supporting Documentation
Banks must submit documentation for their Retail‐related projections. Documents
should be titled RSSD_BANKMNEMONIC_RETAIL_METHODOLOGY_YYMMDD. You may
submit separate documents for different models and/or methodologies. Please be clear
in titles and file names. Model Type refers to the type of Retail model. Documentation
should be submitted for all aspects of the retail portfolio, including purchased credit
impaired loans and mortgage repurchase risk. Mortgage repurchase documentation
should include descriptions of all important assumptions made in each scenario,
including, but not limited to, assumptions about legal process outcomes and
counterparty behavior. All retail documentation should include documentation of
assumptions, governance, validation and independent review as outlined in the
Supporting Documentation section of the Overview.
11. Wholesale
Banks must submit separate documentation for their Wholesale (Corporate and CRE) loan
balances and loss projections. The supporting document should be titled
RSSD_BANKMNEMONIC_WHOLESALE_METHODOLOGY_YYMMDD. You may submit
Page | 24
separate documents for different models and/or methodologies. Please be clear in titling
and file names. Model Type refers to the type of Wholesale model.
Banks must include supporting documentation that describes the key methodologies and
assumptions for performing stress testing on each wholesale portfolio. Documentation
should include an index of documents submitted, a general overview document providing a
broad summary of the stress testing methodologies utilized, and detailed supporting
documentation that clearly describe the model development process, the derivation of
outcomes, and validation procedures as outlined below. The methodologies’ formulaic
specification, assumptions, numerical techniques, and approximations should be explained
in detail with particular attention to both their merits and limitations. Specifically,
documentation should include:
Discussion of historical data set construction, including data sources, adjustments to
the data set, and documentation validating the use of any external data.
Time period of model calibration.
Rationale for portfolio segmentation and a discussion on how a particular
methodology and model captures the key characteristics and the unique risk drivers
of each portfolio segment.
A description of how the loss estimates appropriately capture the severity of the
macroeconomic scenario, reflecting both industry and borrower characteristics.
Documentation should include a justification for explanatory variables selected,
including coefficients from statistical models, measures of their statistical
significance, and qualitative assessments where appropriate. Where relevant,
descriptive statistics, including their mean, median, minimum, maximum, and
standard deviation should be outlined.
Step‐by‐step examples of loss calculation, including a transparent breakdown of all
components of forecasted loss (i.e., probability of default, severity of loss, exposure
at default) and how each component is adjusted for the given macroeconomic
scenario.
Discussion of how losses were distributed to each quarter in the forecasted period
as it relates to changes in the macroeconomic factors within the modeled scenario.
Qualitative or quantitative adjustment to main model output. Firms should perform
pre‐adjustment / post adjustment loss analysis and supply that analysis for material
disparity.
Where the current total balances in the wholesale line items do not tie directly to the
corresponding category on the Call Report, banks should provide a reconciliation which
accounts for all wholesale balances. To the extent that loss projection line items include the
consolidation of various loan portfolios which have different risk characteristics, supporting
documentation should break out the relevant sub‐portfolio losses. Furthermore, banks
should provide supporting documentation and forecasts for any wholesale loan portfolios
acquired after the beginning quarter of the stress scenario and/or for loans covered by loss
sharing agreements with the FDIC.
Page | 25
12. Loans Held for Sale / Loans Accounted for FVO
Banks must submit separate documentation for their Fair Value Option and Held for Sale
retail and wholesale loans. The supporting document should be titled
RSSD_BANKMNEMONIC_FVOHFS_METHODOLOGY_YYMMDD. You may submit separate
documents for different models and/or methodologies. In this case, please be clear in the
titling and file names. The documentation must include:
Total loss and outstanding fair market value balances segmented by
Commercial/Wholesale, Commercial Real Estate and Retail along with explanation
as to the main drivers of loss for each category noted above.
Please document the amount of funded and non‐funded commitments for
wholesale loans and for retail loans please include the average amount of loans that
had been rejected or were in not in conformance with agency standards.
An attestation to completeness: describe the process and governance and
oversight for ensuring the full set of positions were accounted for and included,
Documentation should clearly make note of instances where different
methodologies were used across different business lines with like assets,
Documentation should make note where judgment was used in defining and
allocating exposure,
Document approach and asset coverage under these approaches,
Describe any additional broadening or simplification of the scenario done to get the
requisite amount of granularity needed to run to scenario,
13. AFS/HTM Securities
13.1.
Projected OTTI for AFS Securities and HTM Securities by CUSIP
For each position that incurred a loss in profits and losses (P/L), please state the
identifier value (CUSIP or ISIN) and the amount of loss projected (over the entire
forecast horizon). Create a separate line item for each position. Total projected
losses should reconcile to the total sum of projected losses (across all quarters)
provided in the Securities OTTI by Portfolio tab of this schedule. Responses should
be provided in USD millions.
13.2.
Projected OTTI for AFS and HTM Securities by Portfolio
Please provide the credit loss portion and non‐credit loss portion of projected OTTI
(for relevant portfolios) for the quarters detailed in the tables provided in the
Securities OTTI by Portfolio tab. Responses must be provided in USD millions. Values
should be quarterly, not cumulative.
Page | 26
OTTI related to the security’s credit loss is recognized in earnings, whereas the OTTI
related to other factors (defined as the non‐credit loss portion) is included as part of
a separate component of other comprehensive income (OCI). For only those
securities determined to be other‐than‐temporarily impaired, banks should provide
both projected losses that would be recognized in earnings and any projected losses
that would be captured in OCI.
Only securities projected to experience an other‐than‐temporary impairment loss in
the P&L should be reported in the tables provided in the Securities OTTI by Portfolio
tab. Securities not projected to be other‐than‐temporarily impaired (for example,
any securities implicitly or explicitly guaranteed by the U.S. government or any other
securities in which no OTTI is projected) should not be reported in this tab.
13.3.
High‐Level OTTI Methodology & Assumptions
13.4.
Please complete the unshaded cells in the table provided.
Post‐Trading Shock Market Values for AFS Securities
Banks must estimate and provide fair market values of AFS securities based on a re‐
pricing of 09/30/2012 positions under the trading shock scenario.
13.5.
Actual AFS / HTM Fair Market Value Sources
Provide information on the sources of actual fair market values as of September 30
of the reporting year.
13.6.
Supporting Documentation
Document should be titled
RSSD_BANKMNEMONIC_SECURITIES_METHODOLOGY_YYMMDD. You may
submit separate documents for different models and/or methodologies. In this
case, please be clear in titling and file names. The documentation should clearly
addresses the OTTI methodologies used by banks to complete the DFAST‐14A
Summary schedule. The documentation should, at a minimum, address the
questions outlined below by major product/portfolio type (e.g., non‐agency
residential mortgage‐backed securities (RMBS), commercial mortgage‐backed
securities (CMBS), auto asset‐backed securities (ABS), corporate bonds, etc.).
13.6.1.
OTTI Methodology
Describe the model/methodology used to develop stressed OTTI losses.
Please state whether a vendor or proprietary model was used.
If a vendor model was used, please provide the name of the vendor
model. If a vendor model was used, has the bank performed an
independent review of the vendor model?
What data source(s) was used to estimate the model?
Page | 27
What were the key inputs/variables and how were these determined?
(E.g., how were default, severity, and other elements determined? What
were the key inputs in determining default, severity, and other elements?
What were the key assumptions and how were these assumptions
determined?)
If using a cash flow model, was a vendor or proprietary model used? If
using a vendor model, please provide the name of the vendor and model.
How did the model/methodology (whether vendor or proprietary)
incorporate macroeconomic assumptions?
If relevant, how were macroeconomic assumptions (as prescribed under
the DFAST stress scenarios – i.e., adverse and severely adverse) used to
determine projected collateral default and severity?
Were all securities reviewed for impairment? If not, describe the
rationale, decision rule, or filtering process.
If the threshold for determining OTTI on structured products was based
on a loss coverage multiple, describe the multiple used.
If OTTI was estimated for multiple quarters, describe the process for
determining OTTI in each period of the forecast time horizon.
Is the bank using shortcuts or rules of thumb to recognize the OTTI
charges for this analysis or going through the bank’s normal process for
recognizing OTTI charges? If using shortcuts or rules of thumb, state how
this process differs from the normal process for recognizing OTTI charges.
13.6.2.
Validation and Independent Review
Has the model undergone model validation, with results reviewed
independently of the business line?
Has any performance testing been conducted on the model? If so, what
type of performance testing has been conducted?
13.6.3.
Fair Market Value Determination
If more than one third‐party vendor is used as the principal pricing source
for a given security, what are the criteria for determining the final price?
(e.g., is a mean, median, weighting scheme or high/low price taken?) Is
there a hierarchy of sources? If appropriate, describe responses by major
product or portfolio type (e.g., non‐agency RMBS, CMBS, Consumer ABS).
If an internal model is used as the principal pricing source for a given
security, are prices (from an internally created model) compared with
third party vendor prices? If so, which vendors are used? If prices are not
compared with third party vendors, state the reason. If appropriate,
describe responses by major product/portfolio type (e.g., non‐agency
RMBS, CMBS, Consumer ABS.).
Page | 28
Describe any additional adjustments made to prices determined by
internal model(s) and/or third parties. How is the ultimate price
determined?
If an internal model is used as the principal pricing source for a given
security, what are the primary market pricing variables used for fair value
estimation?
Describe briefly the bank’s price validation and verification process.
Provide readily available documentation related to the bank’s price
validation and verification process.
13.6.4.
Post‐Trading Shock Market Values for AFS Securities
Banks should provide documentation on how trading shocks were
applied to 09/30 positions. Banks should make every effort to use the
shocks specified; however, there may be cases where a bank may
require a shock that differs from those provided. For these cases,
supplemental documentation must be submitted with the bank’s
trading shock estimates. Supplemental documentation should include,
at a minimum, the following information:
For each type of security, the rationale for using a shock other than
those provided.
The methodology and assumptions used to determine the shocked
market value.
The shocks used by the bank by type of security.
The data source(s) used by the bank to determine the shock.
14. Trading
14.1.
Trading Worksheet
The Trading worksheet collects firm‐wide trading profit and loss (P/L) results
decomposed into the various categories listed (Equities, FX, Rates) as of a date
specified by the OCC. These categories are not meant to denote lines of business or
desks, but rather bank‐wide totals by risk. The decomposition of losses into risk
areas should sum to equal the total trading mark‐to‐market (MTM) loss reported on
the income statement. On the trading tab, report total P/L for the entire scenario
horizon, not quarterly decomposition.
14.2.
Supporting Documentation: The document should be titled
RSSD_BANKMNEMONIC_TRADING_METHODOLOGY_YYMMDD. You may submit
separate documents for different models and/or methodologies. In this case,
please be clear in the titling and file name.
Page | 29
Documentation should include supporting details explaining the main drivers
and attribution of loss for the overall trading and MTM loss estimate, and for
each respective primary risk/business unit area details on the loss attribution by
the primary risk factors.
Documentation should provide a complete and technical definition of second
and risk factors (cross gamma, vanna, etc.) and describe the methods
undertaken by the firm to estimate the cross gamma and higher order effects.
o
Estimate the contribution to total losses from higher‐order risks.
Describe the evolution of risk per each risk area two weeks before and after the
submission date, i.e. make note of positions that may expire or terminate within
this time frame that significantly alters a risk profile.
Describe the process and governance and oversight for ensuring the full set of
positions were accounted for and included.
A detailed and technical description of modeling methods (including pricing
models) used,
o
Documentation should clearly make note of instances where different
methodologies were used across different business lines with like assets.
o
Document approach (e.g., full revaluation vs. grid based approach) and
asset coverage under these approaches,
o
Please identify those products or exposures where the firm used models or
systems that were outside of the normal routine and indicate if they were
reviewed or validated by an independent Model Review function.
The decision‐making used for allocating exposures according to risk area.
Documentation should make note where judgment was used in defining and
allocating exposure per each risk area.
Where shocks were used that differed from prescribed shocks.
Describe any additional broadening or simplification of the scenario done to get
the requisite amount of granularity needed to run to scenario,
15. Counterparty Credit Risk (CCR)
15.1.
Counterparty Worksheet
The OCC may require banks with significant trading activities, as determined by the
OCC, to include trading and counterparty components in its adverse and severely
adverse scenarios. Such institutions with large trading, private equity or derivative
activities may be subject to a hypothetical global financial market shock on those
positions. In such instances, the OCC will provide a set of risk factors relevant to the
trading and counterparty positions, with the projected losses associated with the
global market shock collected in the trading and counterparty risk worksheets. The
CCR worksheet collects projected counterparty credit losses as of a date specified by
the OCC. Use the following definitions for the fields in the worksheet.
Page | 30
15.1.1. Trading IDR Losses: Capture incremental default risk (IDR) of credit sensitive
assets in the trading book over the projection horizon. Trading IDR represents
the additional losses incurred from default of underlying securities (obligors)
in the trading book, beyond the MTM losses already captured by the MTM
trading book shocks. To estimate Trading IDR, firms can leverage calculations
under the Basel methodology as defined in Basel Committee on Banking
Supervision (BCBS) Guidelines for Computing Capital for Incremental Risk in
the Trading Book.2 Default risk should be consistent with the macroeconomic
scenario. Where separate methodologies are used to calculate CCR IDR and
Trading IDR, provide separate results and supporting details.
Trading IDR losses from securitized products: Trading IDR losses from
securitized products, including RMBS, CMBS, and other securitized
products.
Trading IDR losses from other credit sensitive instruments: Trading IDR
losses from all other credit sensitive instruments (i.e., all products
considered in Trading IDR losses other than securitized products), such as
sovereigns, advanced economy corporate credits, and emerging market
corporate credits.
15.1.2. CVA Losses: Total losses reported are equivalent to the bank’s calculation of
aggregate stressed CVA less unstressed CVA for each scenario. This figure should
correspond to the difference between aggregate stressed CVA and aggregate
unstressed CVA, as reported in the DFAST‐14A_CCR schedule, Worksheet 1e, for
both scenarios.
15.1.3. CCR IDR Losses: Capture incremental default risk (IDR) over the projection
horizon of over‐the‐counter (OTC) derivative counterparties in the trading
book, beyond the mark‐to‐market (MTM) losses already captured by stressing
CVA. A methodology conceptually similar to the Trading IDR book can be
applied, where instead of obligor defaults, the CCR IDR would account for
counterparty defaults. Exposure at default (EAD) calculations should capture
stressed counterparty exposures, and should deduct stressed asset‐side,
unilateral CVA. Stressed EAD should be based on the trading asset stress
scenarios (adverse scenario provided by the OCC and adverse scenario
developed by bank), while default risk should be consistent with the
macroeconomic scenario. Where separate methodologies are used to calculate
CCR IDR and Trading IDR, provide separate results and supporting details. Only
single name credit default swap (CDS) hedges of the defaulting counterparty
may be used to offset counterparty defaults in CCR IDR losses.
Impact of hedges: The decrease in CCR IDR losses due to the gains from single
name CDS hedges of defaulting counterparties.
2
Available at http://www.bis.org/publ/bcbs159.pdf.
Page | 31
15.1.4. Other CCR Losses: Other CCR losses not associated with Trading IDR, CVA, or
CCR IDR.
15.2.
Supporting Documentation
The document should be titled
RSSD_BANKMNEMONIC_CCR_METHODOLOGY_YYMMDD. You may submit
separate documents for different models and/or methodologies. In this case, please
be clear in titling and file names. Model Type refers to CVA, CCR IDR, Trading IDR,
and Other CCR Losses.
The documentation should include a detailed description of the methodologies used
to estimate Trading IDR, CVA, and CCR IDR losses under the stress scenario as well
as methodologies used to produce the data in the DFAST‐14A_CCR schedule. All
information relevant for supervisors to understand the approach should be
included.
As part of the detailed methodology document, banks should provide an Executive
Summary that gives an overview of each model and answers each of the questions
below. If one of the questions below is not fully addressed in the Executive
Summary, cite the page number(s) of the methodology document that fully
addresses the question.
In addition to the Executive Summary, there should be a section of the methodology
document devoted to any divergence from the instructions to the Counterparty Risk
Worksheet or the DFAST‐14A Schedule. Use this section to explain any data that is
missing or not provided as requested. This section should also be used to describe
where and how judgment was used to interpret an instruction.
15.2.1. Trading IDR
If different models were used for different product types (e.g., corporate credit
and securitized products), provide a response for each model type where
appropriate.
1. Data and systems
a. What product types are included and excluded? Specifically, comment
on whether equities are excluded and what types of securitized
products, if any, are excluded. Comment on the materiality of any
exclusions.
b. Are there any issuer type exclusions? Comment on the materiality of
any exclusions.
c. Are there any exposure measurement or trade capture limitations
impacting the Trading IDR loss estimate in Item 1 on the Counterparty
Risk Worksheet in the SUMMARY_SCHEDULE or the data provided in
Worksheets Corporate Credit‐Advanced, Corporate Credit‐EM,
Page | 32
2.
3.
4.
5.
6.
7.
8.
Sovereign Credit, Credit Correlation, IDR‐Corporate Credit,? If so, make
sure to elaborate in the documentation, particularly where these
limitations understate losses.
d. Are there any discrepancies in position capture between the MV and
Notionals reported in Worksheets Corporate Credit‐Advanced,
Corporate Credit‐EM, Sovereign Credit, Credit Correlation? If so,
elaborate on the discrepancies in the documentation.
e. Are any index or structured exposures decomposed/unbundled into
single name exposures on the IDR Corp Credit? If so, provide a
description of the exposures that are decomposed and the
methodology used.
PD methodology
a. How is the severity of default risk treated? Is a stressed expected PD
used, or is it an outcome in the tail of the default distribution? If an
outcome in the tail is used, what is the tail percentile?
b. How is default risk represented over the horizon of the stress test? Is a
cumulative two‐year PD or a one‐year PD used as a model input? How
is migration risk captured?
c. What data sources and related time periods are used to generate the
assumptions on stressed expected PD or the default distribution? In
the documentation, provide a breakdown of PDs (e.g., by rating, asset
category). Provide stressed PDs if a stressed PD is used, or provide PD
inputs if an outcome in the tail is used.
Correlation assumptions
a. What correlation assumptions are used in the Trading IDR models?
LGD methodology
a. Do the models assume a static LGD or a stochastic LGD with a non‐zero
recovery rate volatility?
i. If a static LGD is used, were the mean LGDs stressed? What data
sources and related time periods were used to determine the LGDs?
In the methodology documentation, provide the relevant
breakdown of LGDs used in the model (e.g., by ratings, asset
category).
ii. If a stochastic LGD is used, elaborate on the assumptions generating
the stochastic LGD in the documentation, including assumptions on
the LGD mean and volatility and rationale for modeling choices.
Liquidity horizon
a. What liquidity horizon assumptions are used?
Exposure at default (EAD)
a. What Exposure at Default (EAD) is used for Trading IDR? For example,
is the calculation based on actual issuer exposures, stressed exposures,
a mix of both, or something else? If exposures are stressed, please
explain how the exposures were stressed.
Treatment of gains
a. Are any gains being reflected in the Trading IDR calculations? If so,
elaborate in the documentation how gains are treated.
Model validation and documentation
a. For any models used to report numbers in the SUMMARY_SCHEDULE
Page | 33
or the DFAST‐14A_Trading that are also used in Business as Usual
(BAU) production, have those models been validated as used in BAU? If
so, attach model validation documents. If not, elaborate in the
documentation on any review process.
b. For any ad‐hoc models used for DFAST that would not have been
previously validated, what review if any has occurred? Elaborate in the
documentation where appropriate.
15.2.2. CVA
1. Divergence from instructions
a. In the DFAST‐14A_CCR or Summary Schedules, is liability‐side CVA (i.e.,
DVA) included in any element of the submission? If so, elaborate in the
documentation.
b. In the DFAST‐14A_CCR or Summary Schedules, is bilateral CVA included
in any element of the submission (i.e., CVA where the counterparty
default probabilities are conditional on the survival of the bank)? If so,
elaborate in the documentation.
c. Is there any place where CVA data is reported net of hedges on the
DFAST‐14A_CCR Schedule or Item 2 on the Counterparty Risk
Worksheet in the SUMMARY_SCHEDULE?
d. In calculating Stressed Net CE in Worksheets 1a, 1b, 1c, 1d, and 1e in
DFAST‐14A_CCR, are there any occasions where it is assumed
additional collateral has been collected after the shock? If so, elaborate
in the documentation.
e. Are there any counterparties for which your firm did not fully
implement the FR specification for the expected exposure (EE) profiles
on Worksheets 2a and 2b in the DFAST‐14A_CCR? If so, elaborate in
the documentation.
2. Data and systems: In the documentation, clearly identify, describe, and
comment on the materiality of any exclusions that prevent 100% capture of
counterparties or trades. At a minimum, address the questions below and
elaborate in the documentation where appropriate.
a. Are any counterparties on Worksheet 1a of DFAST‐14A_CCR excluded
from Worksheet 2a? Where specific counterparties are reported as top
200 counterparties on one Worksheet of the Schedule, but are not
listed on other top 200 Worksheets, list these counterparties in the
documentation by name and provide a reason for their exclusion.
b. Are any counterparties excluded from the unstressed or stressed
aggregate data reported in Worksheets 1e, 2b, or 3b of DFAST‐
14A_CCR or the losses reported in the SUMMARY_SCHEDULE
SUMMARY_SCHEDULE (Item 2 in the Counterparty Risk Worksheet)? In
the documentation, elaborate on the nature, materiality, and rationale
for these exclusions.
c. Do the EE profiles, CDS spreads, PDs, LGDs, discount factors, as
provided on DFAST‐14A_CCR Schedule (Worksheets 2a and 2b), come
from the same systems as that used for the calculation of CVA losses as
provided in the SUMMARY_SCHEDULE (Item 2 in the Counterparty Risk
Page | 34
Worksheet)? If not, elaborate in the documentation.
d. For unstressed and stressed CVA reported in the DFAST‐14A_CCR
Schedule, which counterparties, counterparty types, or trade types are
calculated offline or using separate methodologies? Why are they
calculated offline or with a different methodology? Elaborate in the
documentation.
e. Are any add‐ons used to calculate stressed CVA in the DFAST‐14A_CCR
Schedule? Elaborate regarding the nature and rationale for each type
of add‐on in the documentation.
f. Are there any additional/ offline CVA reserves are reported in
Worksheet 1e in the DFAST‐14A_CCR Schedule? If so, elaborate about
the nature of these reserves in the documentation. Explain what
counterparties, counterparty types, or trade types are included, why
are they calculated as reserves, and how they are stressed.
g. Are there any exposure measurement or product capture limitations
impacting the loss estimate in Item 2 on the Counterparty Risk
Worksheet in the SUMMARY_SCHEDULE? If so, make sure to
elaborate in the documentation, particularly where these limitations
understate losses.
h. Are all sensitivities/ slides provided as requested? If slides are not
provided as requested in the DFAST‐14A_CCR Schedule, elaborate in
the documentation why they are missing or not provided correctly.
i.
Are the sensitivities/ slides provided in Worksheet 4 of DFAST‐
14A_CCR sourced from the same calculation engine and systems as
used for the firm's loss estimates (Item 2 in the Counterparty Risk
Worksheet in the SUMMARY_SCHEDULE)? If not, elaborate in the
documentation.
j.
Elaborate on how sensitivities/ slides in Worksheet 4 of DFAST‐
14A_CCR were determined to be material. What qualifies a risk factor
as immaterial?
3. LGD methodology
a. For the LGD used to calculate PD, are market implied recovery rates
used? If not, elaborate on the source of the LGD assumption in the
methodology documentation.
b. Is the same recovery/LGD used in the CVA calculation as is used to
calculate PDs from the CDS spread? If not, in the documentation
provide a detailed rationale and backup data to support the use of a
different LGD, and provide the source of the LGD used to calculate
CVA.
4. Exposure at default (EAD)
a. What Margin Period of Risk (MPOR) assumptions are used for
unstressed and stressed CVA?
b. Are collateral values stressed in the numbers reported in the DFAST‐
14A_CCR Schedule or Items 2 or 3 on the Counterparty Risk
Worksheet in the SUMMARY_SCHEDULE? If so, elaborate on the
stress assumptions applied.
c. In the DFAST‐14A_CCR on Worksheets 2a and 2b, for the bank
specification, are downgrade triggers modeled in the exposure
Page | 35
profiles?
5. Application of shocks
a. Are the shocks applied to CVA (for calculating Item 2 in the
Counterparty Risk Worksheet in the SUMMARY_SCHEDULE as well as
the Stressed figures reported in DFAST‐14A_CCR) the same as those
applied to the Trading Book (Item 10 in the Trading Worksheet in the
SUMMARY_SCHEDULE)?
b. Have the models for CVA been validated? If not, elaborate on the
review process, if any.
6. Model validation and documentation
a. For any models used to report numbers in the SUMMARY_SCHEDULE
or the DFAST‐14A_CCR that are also used in Business as Usual (BAU)
production, have those models been validated as used in BAU? If so,
attach model validation documents. If not, elaborate in the
documentation on any review process.
b. For any ad‐hoc models used for DFAST that would not have been
previously validated, what review if any has occurred? Elaborate in
the documentation where appropriate.
15.2.3.
CCR IDR
1. Data and systems
a. Are there any exposure measurement or product capture limitations
impacting the loss estimate in Item 3 on the Counterparty Risk
Worksheet in the SUMMARY_SCHEDULE? If so, make sure to elaborate
in the documentation, particularly where these limitations understate
losses.
b. What types of CVA hedges are included in CCR IDR? Confirm that
hedges modeled in CCR IDR were excluded from Trading IDR.
2. PD methodology
a. How is the severity of default risk treated? Is a stressed expected PD
used, or is it an outcome in the tail of the default distribution? If an
outcome in the tail is used, what is the tail percentile?
b. How is default risk represented over the horizon of the stress test? Is a
cumulative two‐year PD or a one‐year PD used as a model input? How
is migration risk captured?
c. What data sources and related time periods are used to generate the
assumptions on stressed expected PD or the default distribution? In
the documentation, provide a breakdown of PDs (e.g., by rating,
counterparty type). Provide stressed PDs if a stressed PD is used, or
provide PD inputs if an outcome in the tail is used.
3. Correlation assumptions
a. What correlation assumptions are used in the CCR IDR models?
4. LGD methodology
a. Do the models assume a static LGD or a stochastic LGD with a non‐
zero recovery rate volatility?
b. If a static LGD is used, are the mean LGDs stressed? What data sources
Page | 36
5.
6.
7.
8.
15.2.4.
and related time periods are used to determine the LGDs? In the
methodology documentation, provide the relevant breakdown of
LGDs used in the model (e.g., by ratings, counterparty type).
c. If a stochastic LGD is used, elaborate on the assumptions generating
the stochastic LGD in the documentation, including assumptions on
the LGD mean and volatility and rationale for modeling choices.
Liquidity horizon
a. What liquidity horizon assumptions are used?
Exposure at default (EAD)
a. Provide an overview of how EAD is modeled for CCR IDR.
b. Are any downgrade triggers assumed in the CCR IDR model? If so,
elaborate in the documentation.
c. What Margin Period of Risk (MPOR) assumptions are modeled in CCR
IDR?
Treatment of gains
a. Are any gains being reflected in the CCR IDR calculations? If so,
elaborate in the documentation how gains are treated.
Model validation and documentation
a. For any models used to report numbers in the SUMMARY_SCHEDULE
or the DFAST‐14A_CCR that are also used in Business as Usual (BAU)
production, have those models been validated as used in BAU? If so,
attach model validation documents. If not, elaborate in the
documentation on any review process.
b. For any ad‐hoc models used for DFAST that would not have been
previously validated, what review if any has occurred? Elaborate in the
documentation where appropriate.
Other CCR Losses
1. Data and systems
a. What types of CCR losses are included in the "Other CCR Losses"
Counterparty Risk Worksheet of the SUMMARY_SCHEDULE? What are
the loss amounts for each major category of "Other CCR Losses"? For
any material losses, discuss the methodology and rationale in the
documentation.
16. Operational Risk
OCC’s part 3, Appendix C , Advanced Approaches Capital Regulation (Basel II) defines
operational risk as the risk of loss resulting from inadequate or failed internal processes,
people and systems, or from external events (including legal risk but excluding strategic and
reputational risk). Basel II defines operational loss as a loss (excluding insurance or tax
effects) resulting from an operational loss event; the loss includes all expenses associated
with an operational loss event except for opportunity costs, forgone revenue, and costs
related to risk management and control enhancements implemented to prevent future
operational losses. Operational losses exclude all boundary events involving credit losses;
however, retail credit card losses arising from non‐contractual, third‐party initiated fraud
are operational losses. Boundary losses involving operational and market risk are treated
Page | 37
as operational losses. Operational loss events are those that result in a loss and are
associated with any one of the seven Basel II operational loss event categories: 1) internal
fraud; 2) external fraud; 3) employment practices and workplace safety; 4) clients, products,
and business practices; 5) damage to physical assets; 6) business disruption and system
failures; and 7) execution, delivery, and process management. Operational loss projections
should be included in the PPNR Projections worksheet in line 29, Operational Risk Expense,
and should not be included as reserves. The following should be considered when
completing each operational risk schedule in the DFAST‐14A:
16.1. Support for Sponsored Funds
Stress on asset markets can jeopardize the unit value of certain sponsored funds and
asset management products, particularly those intended to maintain a constant or
stable value. Firms that offer these vehicles should anticipate this kind of duress and
factor it into their forecasts and capital planning. In doing so, firms should consider
possible outcomes such as:
a. A decision against providing support for products which have traditionally
carried constant or stable unit asset values may initiate client flight, and force
the liquidation of assets into falling and illiquid markets. Client flight may not
be confined to the product in question but may also involve withdrawal from
other profitable relationships within the bank. In addition, firms may be
exposed to client litigation based on the represented risk of these products.
b. A decision in favor of supporting the product – which could mitigate
reputational and operational/legal risk – will involve a direct cost to offset the
decline of the fund’s asset values. In addition, this choice may trigger the
consolidation of the product with the bank’s core balance sheet under
generally accepted accounting principles, which would increase risk‐weighted
assets and subsequently increase regulatory capital requirements.
In either event, the impact on the bank could be substantial. When assessing capital
adequacy under stress, management should estimate the impact conservatively,
model the exposure, and include the results in the loss projections. Recently, large
banks have provided a notable amount of non‐contractual support to affiliated funds.
Consideration should be given to the number and size of these funds, as well as how
the macroeconomic scenarios would impact the value of these funds and the firm’s
propensity to support a particular fund or set of funds. Although cash amounts paid
to support funds and/or asset management products do not clearly fit into one of the
seven Basel II operational loss event categories, such events can significantly and
directly impact the capital of the sponsoring bank and should be considered as an
operational loss event in a capital planning context.
16.2. Legal Reserves and Provisions
Banks must report operational risk loss projections that include significant amounts
paid as customer accommodations or to prevent or preclude future legal action or
Page | 38
litigation. Each of the Operational Risk loss projections in each of the required
scenarios should include all preventative make‐whole payments, an increased level
of legal and professional expense associated with elevated levels of litigation or
regulatory actions, projected settlements, payouts associated with adverse legal
rulings if they are not covered on the PPNR Projections Worksheet under lines 14N
and 30 (Provisions to Repurchase Reserve / Liability for Residential Mortgage
Representations and Warranties). If specifically linked to operational risk, please also
include all legal consultation fees, retainer fees, and provisions to the legal reserve
within the Operational Risk loss projections.
16.3. Unrelated professional Services
The cost of outside consulting, routine “business as usual” legal expenses, external
audit, and other professional services unrelated to operational risk must be included
in line 31 (Professional and Outside Services Expenses) on the PPNR Projections
Worksheet.
16.4. Definitions
Refer to the following definitions when completing the Op Risk worksheets:
1. Event Types: The event type is one of seven industry standard categories that
reflect the nature of the underlying operational loss. The seven categories are:
Internal Fraud: Losses due to an act, involving at least one internal party, of a
type intended to defraud, misappropriate property, or circumvent
regulations, the law, or company policy, excluding diversity‐ and
discrimination‐type events.
External Fraud: Losses resulting from an act by a third party of a type
intended to defraud, misappropriate property or circumvent the law
(including retail credit card losses arising from non‐contractual third‐party
initiated fraud; however, all other third‐party initiated credit losses are
treated as credit losses and not operational losses).
Employment Practices and Workplace Safety: Losses arising from an act
inconsistent with employment, health or safety laws or agreements, from
payment of personal injury claims, or payments arising from diversity‐ and
discrimination‐type events.
Clients, Products and Business Practices: Losses arising from the nature or
design of a product or from an unintentional or negligent failure to meet a
professional obligation to specific clients (including fiduciary and suitability
requirements).
Damage to Physical Assets: Losses arising from loss of, or damage to,
physical assets from natural disaster or other events.
Business Disruption and System Failure: Losses arising from disruption of
business or system failures.
Page | 39
Execution, Delivery and Process Management: Losses from failed
transaction processing or process management, or relations with trade
counterparties and vendors.
2. Type of Data:
External data: Historical operational losses occurring at other organizations.
Internal data: Historical operational losses occurring in the bank.
Operational Risk Scenario Analysis: A systematic process of obtaining expert
opinions from business managers and risk management experts to derive
reasoned assessments of the likelihood and loss impact of plausible high
severity operational losses. Scenario analysis may include the well‐reasoned
evaluation and use of external operational loss event data, adjusted as
appropriate to ensure relevance to the bank’s operational risk profile and
control structure.
Model Output: Output generated by an internal or external model.
3. Brief Description: Description of operational loss event or other factor
considered.
4. Unit of Measure: The level at which the bank’s quantification model generates a
separate distribution for estimating potential operational losses (e.g.,
organizational unit, operational loss event type or risk category).
5. Dollar Contribution to Operational Loss Estimate: For each row of operational risk
data considered in the operational loss projections, indicate the dollar amount
that was used in the operational loss projection included in PPNR in millions of
dollars.
16.5. Operational Risk Scenario Inputs Worksheet
The Op Risk Scenario Inputs worksheet collects information about the composition of
the operational risk loss projections. Each covered institution should gather data
using a number of tools, including external data, internal data, scenario analysis,
business environment and internal control factors, and risk assessment. Each data
tool produces an input to the overall loss projection. The Unit of Measure (“UOM”) is
used to capture the data from these tools in a uniform manner. Although a covered
institution can develop idiosyncratic UOMs, in general covered institutions utilize the
Basel II Event Types and Business Lines (or combinations of these) to categorize the
data into specific inputs to the loss projection models. Covered institutions,
therefore, are expected to provide the type of data, a brief description of the loss
event, how it was categorized (UOM), and the contribution the data made to the loss
projection. The sum of the OpRisk Scenario Inputs Worksheet should equal the total
of the losses projected on the OpRisk Projected Losses worksheet.
16.6. Operational Risk Projected Losses Worksheet
The sum of the quarterly data provided should equal the total of the scenarios listed
in the OpRisk Scenario Inputs worksheet.
Page | 40
16.7. Operational Risk Template
The DFAST‐14A Operational Risk Template contains two worksheets: (i) Operational
Risk Historical Capital Worksheet; and (ii) Legal Reserves Reporting Worksheet. Item
“a” on the Legal Reserves Reporting worksheet must be completed by all banks,
while item “b” (Legal Reserves Pertaining to Repurchase Litigation) is completed on a
voluntary basis. Reserves for repurchase litigation refer to reserves for legal costs
associated with mortgage‐related issues, including those legal costs related to the
repurchasing of mortgages, as of the end of the third quarter. Additionally, only
banks subject to the advanced‐approaches risk‐based capital rules (mandatory and
“opt in”) must complete Operational Risk Historical Capital worksheet under the
baseline scenario.
16.8. Supporting Documentation and Independent Review
Document should be titled
RSSD_BANKMNEMONIC_OP_METHODOLOGY_YYMMDD. Banks may submit
separate documents for different models and/or methodologies. In this case, please
provide for clear titling and file names.
16.8.1. Documentation
A bank must adequately document all material aspects of its Basel II advanced
systems. Generally, a bank should have robust internal controls governing its
operational loss projection methodology and process components, including
sufficient documentation, model validation and independent review. Supporting
documentation should cover all models, and loss and resource forecasting
methodologies and processes. Documentation should include comprehensive
and clear policies and procedures. For models, documentation should include
clear description of all key assumptions for projecting operational losses under
each scenario, a description of the underlying operational risk data used to
determine projected losses and the approach for transforming the data into loss
projections. If a budgeting based process was used, the bank should describe
the budgeting process and provide specific detail on how operational losses are
estimated. Documentation should include an articulation of the models’
vulnerability to error, and estimates of an error’s impact should parameter
specifications prove inaccurate. Documentation of all models should clearly
identify the exact statistical process employed by the bank including:
1. How the current set of explanatory factors was chosen, what variables
were tested and then discarded, and how often the set of possible
explanatory factors is reviewed and, if appropriate, revised;
2. Description of work the bank has done to assess relationships between
macroeconomic factors and operational losses, including relationships
that were found to have the highest level of dependency, a summary of
statistical results, and how these results were incorporated in the
estimates;
Page | 41
3. Discussion of how pending litigation and reserves for litigation were
incorporated into operational loss projections for all requested
scenarios;
4. Narrative describing the methodology and process for assessing and
forecasting losses associated with supporting – or not supporting –
sponsored funds;
5. Description of the methodology for allocating an operational loss
amount to a particular quarter;
6. Explanation summarizing the reasonableness of results (e.g.,
comparison to benchmarks) and the bank’s policy or procedure for
determining reasonableness;
7. Description of internal controls that ensure the integrity of reported
results and that all material changes to the process and its components
are appropriately reviewed and approved;
8. Assessment of how effective or accurate the model is (e.g., based on
out‐of‐sample testing or sensitivity analysis); and
9. Identification of possible drawbacks and limitations of the selected
approach.
16.8.2. Model Validation
Models employed by banks should be independently validated or otherwise
reviewed in accordance with the model risk management expectations
presented in OCC Bulletin 2011‐12. Specifically, management should provide
supporting documentation demonstrating that an independently executed
verification of DFAST models, whether purchased or developed in‐house, has
been implemented and that the models perform as expected and align with
design and business use. Model validation must be independent of a model’s
development, implementation, and operation, or the validation process must be
subjected to an independent review of its adequacy and effectiveness.
Validators should comprehensively evaluate inputs, processing, outputs, and
reports to ensure that models are conceptually sound and that potential
limitations have been identified and conveyed to senior management.
Management should also implement ongoing monitoring processes to track
known model limitations and to identify new ones. Furthermore, validation
must include (1) an evaluation of the conceptual soundness of a model
(including developmental evidence); (2) an ongoing monitoring process that
includes verification of processes and benchmarking; and (3) an outcomes
analysis process that includes back‐testing (e.g., back‐testing outcomes between
model forecasts and actual results. Validation should be governed by robust
policies, effective procedures, proper allocation of resources for execution, and
accurate documentation of results.
16.8.3. Independent Review
Page | 42
The bank must have an internal audit function independent of business‐line
management that at least annually assesses the effectiveness of the controls
supporting the bank’s Basel II advanced systems and reports its findings to the
bank’s board of directors (or committee thereof). Internal audit should
periodically assess and document whether the DFAST process is functioning as
intended. Beyond the detailed analysis of the performance of forecasting
models, this includes an end to end review of the entire capital planning and
forecasting process.
17. Pre‐Provision Net Revenue (PPNR)
17.1.
General Technical Details
This provides general guidance and data definitions for the three PPNR worksheets
included in the Summary Schedule: PPNR Projections worksheet, PPNR Net Interest
Income (NII) worksheet, and PPNR Metrics worksheet. The three worksheets are
described in detail below.
Certain commonly used terms and abbreviations, including PPNR, are defined at the
end of this section. Other definitions are embedded in the Schedule. Undefined
terms should be assumed to follow Call Report definitions. In cases where Call
Report guidance is unavailable, banks should use internal definitions and include
information about the definitions used in the supporting documentation for DFAST‐
14A projections.
Where specific DFAST‐14A PPNR and/or Call Report guidance exists for business line
and/or other items, provide both historical and projections data consistently
throughout time in accordance with the instructions. If a bank is unable to
consistently adhere to definitions, it can rely on internal definitions at the present
time. Note in such cases which DFAST‐14A PPNR items were affected, which
quarters were affected, describe the reasons, and note how the situation may be
remedied over time (including estimate of time required). Where banks were
instructed or allowed to rely on internal definitions in mapping internal data to
DFAST‐14A PPNR schedules (historical and/or projections), they do not need to
provide consistency across different quarters at the present time. However, identify
all quarters where major shifts in mapping have occurred historically or are
expected to occur during the projection period, describe such shifts, and provide
pertinent information in the memo supporting the DFAST‐14A submission. Such
information may include, but is not limited, to the internal business line
relationships to a) major client segments (and how those are defined e.g. sales
thresholds, asset size thresholds, etc.), b) major product categories, and c) key types
of revenues (e.g. equity investment income, brokerage commissions, etc.), as well as
the motivations behind the shifts.
All quarterly figures should be reported on a quarterly basis (not on a year‐to‐date).
Provide data for all non‐shaded cells, except where the data requested is optional.
The bank is not required to populate cells shaded gray.
Page | 43
If there are no data for certain fields, then populate the fields with a zero (0). If the
fields are optional and a bank chooses not to report data, leave the fields blank.
17.2.
Materiality Thresholds
Banks should complete all three worksheets, including the Net Interest Income
worksheet and the Net Interest Income worksheet section of the PPNR Metrics
worksheet.
Report data for all quarters for a given business segment in the PPNR Projections and
PPNR Metrics worksheets if the total revenue of that business segment (calculated as
the sum of net interest income and non‐interest income for that segment), relative
to total revenue of the bank exceeded 5 percent. Banks have the option to report
less material business segment revenue in separate line items “Optional Immaterial
Business Segments”. The reported total optional immaterial business segment
revenue relative to total revenue cannot exceed 10 percent. If the total immaterial
business segment revenue relative to total revenue would be greater than 10
percent, report data for the largest business segment among the immaterial business
segments for all quarters in the PPNR Projections and PPNR Metrics worksheets such
that the amount reported in the Optional Immaterial Business segments line items
does not exceed 10 percent.
If international revenue exceeded 5 percent of total revenue, provide regional
breakouts (PPNR Metrics worksheet, line items 46A‐46D) for all quarters in the PPNR
Metrics worksheet.
If International Retail and Small Business revenues exceeded 5 percent of Total Retail
and Small Business Segment revenue and Total Retail and Small Business Segment
revenues were material based on an applicable 5 percent threshold, provide related
metrics data for all quarters (PPNR Metrics worksheet, line item 10).
17.3.
NII: Primary & Supplementary Designation
Banks are expected to report all line items for all worksheets subject to applicable
thresholds as detailed in the instructions. In addition, for all banks that are required
to complete the PPNR Net Interest Income worksheet, the PPNR Net Interest Income
worksheet should be designated as “Primary Net Interest Income.” The PPNR
Submission worksheet for such banks will be “Supplementary Net Interest Income”
by default. For banks that are not required to complete the PPNR Net Interest
Income worksheet the PPNR Submission/Projections worksheet should be
designated as “Primary Net Interest Income.” PPNR Net Interest Income Worksheet
will be “Supplementary Net Interest Income” for such banks by default, but is
optional. Note that this designation would refer only to the net interest income
portion of the worksheets.
17.4.
PPNR Projection Worksheet
Page | 44
The PPNR Projections worksheet is based on standardized reporting of each
component of PPNR, using business segment/line views as discussed below. Data
reflecting a bank view of PPNR revenues and expenses should be provided
separately, accompanying the memo required with the DFAST‐14A Projections.
17.4.1.
Revenue Components
Revenue items are divided into net interest income and non‐interest income,
with totals expected to reconcile with what would be reported in the Call Report
when adjusted for Valuation Adjustment for firm's own debt under fair value
option (FVO), loss resulting from trading shock exercise (if applicable), and
operational risk expense adjustments required for PPNR purposes. For related
items, reference PPNR Projections worksheet and related instructions for the
line items 29, 40, and 42. In the documentation supporting the DFAST‐14A PPNR
submission, banks are encouraged to discuss operational risk losses reported as
contra‐revenues for Call Report purposes and their reallocation to Operational
Risk expense in accordance with the PPNR instructions. Do not report gains and
losses on AFS and HTM securities, including other than temporary impairments
(OTTI) estimates, as a component of PPNR.
Report all items either in the segments that generated them and/or segments
that they were allocated to through funds transfer pricing (FTP). Net interest
income allocation to the defined segments should be based on the cost of funds
applicable to those segments as determined by the bank. Supporting
documentation regarding methodology used should be provided in the memo
required with the DFAST‐14A Projections. Business segments and related sub‐
components do not have to correspond to but may include certain line items on
the Call Report. The Business segment structure of the worksheet is defined by
product/service (e.g. credit cards, investment banking) and client type (e.g.
retail, medium size businesses); it is not defined by client relationship.
Banks are encouraged to note which line items contain Debit Valuation
Adjustments (DVA) and/or Credit Valuation Adjustments (CVA) (note: these are
different from fair value adjustment on the bank’s own debt under the Fair
Value Option (FVO) which is excluded from PPNR by definition), including
amounts if available, and whether these are generated with the purpose to
generate profit.
All revenue and expenses related to mortgage servicing rights (MSRs) and the
associated non‐interest income and non‐interest expense line items should be
evolved over the nine quarter projection horizons, and reported in the pre
provision net revenue (PPNR) schedules.
17.4.2.
Business Segment Definitions
Subject to applicable thresholds, reporting of net interest income and non‐
interest income items is requested based on a business segment/line view, with
business segments/lines defined as follows:
Page | 45
Retail and Small Business Banking and Lending Services: Report in the
appropriate sub‐item all revenues related to retail and small business
banking and lending, including both ongoing as well as run‐off and
liquidating businesses.3 Exclude any revenues related to Wealth
Management/Private Banking (WM/PB) clients. Banks may include such
revenues in WM/PB line items instead. In case of WM/PB mortgage
repurchase contra‐revenues, if any, report them as outlined in the PPNR
Submission worksheet.
As general guidance, small business clients are those with annual sales
of less than $10 million. Business, government, not‐for‐profit, and other
institutional entities of medium size are those with annual sales
between $10 million and $2 billion. Large business and institutional
entities are those with annual sales of more than $2 billion. If a bank’s
internal reporting for these client segments deviates from this general
guidance, continue to report according to internal definitions and
describe how the bank defined these or similar client segments and the
scope of related business segments/lines in the memo supporting the
DFAST‐14A submission.
Business lines are defined as follows:
Domestic:
Credit Cards: Domestic credit and charge cards offered to retail
customers. Exclude other unsecured borrowing and debit cards.
May include revenue that is generated on domestic accounts
due to foreign exchange transactions.
Mortgages: Domestic residential mortgage loans offered to
retail customers.
Home Equity: Domestic Home Equity Loans and Lines of Credit
(HELOANs/HELOCs) provided to retail customers.
Retail and Small Business Deposits: Domestic branch banking
and deposit‐related products and services provided to retail and
small business customers. Include debit card revenues in this
line. May include revenue that is generated on domestic
accounts due to foreign exchange transactions.
Other Retail and Small Business Lending: Other Domestic Retail
and Small Business lending products and services. These include
but are not limited to small business loans, auto loans, student
loans, or personal unsecured credit.
International Retail and Small Business:
3
See “Commonly Used Terms and Abbreviations” for the definition.
Page | 46
Includes, but is not limited to, all revenues from credit/charge/debit
cards, mortgages, home equity, branch and deposit services, auto,
student, and small business loans generated outside of the US and
Puerto Rico.
Commercial Lending: Report revenues from lending products and
services provided to business, government, not‐for‐profit, and other
institutional entities of medium size, as well as to commercial real
estate investors and owners. Exclude treasury, deposit, and investment
banking services provided to commercial lending clients.
Investment Banking: Report in the appropriate sub‐item all revenues
generated from investment banking services provided to business and
institutional entities of both medium and large size. Include revenues
from new issue securitizations for third parties. Business lines are
defined as follows:
Advisory: Corporate strategy and financial advisory, such as
services provided for mergers and acquisitions (M&A),
restructuring, financial risk management, among others.
Equity Capital Markets: Equity investment banking services (e.g.
IPOs or secondary offerings).
Debt Capital Markets: Generally non‐loan debt investment
banking services.
Syndicated/Corporate Lending: Lending commitments to larger
corporate clients, including event or transaction‐driven lending
(e.g. to finance M&A, leveraged buyouts, bridge loans).
Generally, all syndicated lending origination activity should be
included here (not in Commercial Lending).
Merchant Banking/Private Equity: Report revenues from private equity
(PE), real estate, infrastructure, and principal investments in hedge
funds. May include principal investment related to merchant banking
activities.
Sales and Trading: Report in the appropriate sub‐item all revenues
generated from sales and trading activities. Any interest income from
carry must be included in Sales & Trading net interest income. May
include short‐term trading made for positioning or profit generation
related to the Sales & Trading activities in this line item. Business lines
are defined as follows:
Equities: Commissions, fees, dividends, and trading gains and
losses on equity products. Exclude prime brokerage services.
Fixed Income: Commissions, fees, and trading gains and losses
on rates, credit, and other fixed income products. Exclude
prime brokerage services.
Page | 47
Rates: Generally U.S. Treasury, investment grade
sovereign, U.S. agency bonds, and interest rate swaps.
Rates revenues related to trading activities outside of
the Sales & Trading division need not be included into
the Rates trading in this section, but describe where
they are allocated in the bank’s documentation
supporting the DFAST‐14A submission.
Credit: Generally corporate bonds, loans, ABS, muni,
emerging markets, CDS. If a bank classifies some of the
credit related trading (such as distressed debt) in
segments other than “Sales & Trading,” it can continue
to report it as in its internal financial reports but
indicate where they are reported in the documentation
supporting DFAST‐14A submission.
Other: e.g. FX/Currencies if not included above.
Commodities: Commissions, fees, and trading gains and losses
on commodity products. Exclude prime brokerage services.
Prime Brokerage: Securities financing, securities lending,
custody, clearing, settlement, and other services for hedge
funds and other prime brokerage clients. Include all prime
brokerage revenues in this line and not in any other business
segments/lines.
Investment Management: Report in the appropriate sub‐item all
revenues generated from investment management activities. Business
lines are defined as follows:
Asset Management: Professional management of mutual funds
and institutional accounts. Institutional clients may include
endowments, not‐for‐profit entities, governments, and others.
Wealth Management/Private Banking (WM/PB): Professional
portfolio management and advisory services for individuals.
Individual clients may be defined as mass market, affluent, and
high net worth. Activities may also include tax planning,
savings, inheritance, and wealth planning, among others. May
include deposit and lending services to WM/PB clients here.
Also include retail brokerage services. May report retail
brokerage revenues for both WM/PB and non WM/PB clients.
here
Investment Services: Report in the appropriate sub‐item all revenues
generated from investment servicing. Exclude prime brokerage
revenues. Business lines are defined as follows:
Asset Servicing: Custody, fund services, securities lending,
liquidity services, collateral management; and other asset
servicing. Include record keeping services for 401K and
Page | 48
employee benefit plans, but exclude funding or guarantee
products offered to such clients.
Issuer Services: Corporate trust, shareowner services,
depository receipts, and other issuer services.
Other Investment Services: Clearing and other investment
services.
Treasury Services: Report cash management, global payments, working
capital solutions, deposit services, and trade finance from business and
institutional entities of both medium and large size. Include wholesale
and commercial cards.
Insurance Services: Report revenues from insurance activities including,
but not limited to, individual (e.g. life, health), auto and home (property
and casualty), title insurance and surety insurance, and employee
benefits insurance.
Retirement/Corporate Benefit Products: Report premiums, fees, and
other revenues generated from retirement and corporate benefit
funding products, such as annuities, guaranteed interest products, and
separate account contracts. The fees/revenues that may be recorded
here are generally generated as a result of the bank accepting risks
related to actuarial assumptions or the estimation of market returns
where guarantees of future income streams have been made to clients.
Corporate/Other: Report revenues associated with:
Capital and asset‐liability management (ALM) activities. Among
other items, may include investment securities portfolios (but
not gains and losses on AFS and HTM securities, including OTTI,
as these are excluded from PPNR by definition). Also may
include principal investment supporting the corporate treasury
function to manage firm‐wide capital, liquidity, or structural
risks.
Run‐off or liquidating businesses4 (but exclude retail and small
business run‐off/liquidating businesses, per Retail and Small
Business segment definition)
Non‐financial businesses (e.g. publishing, travel services)
Corporate support functions (e.g. Human Resources, IT)
Other non‐core revenues not included in other segments (e.g.
intersegment eliminations).
A Bank may include public funds in the segment reporting based on the type of
the relationship that exists between the public funds and the bank. For example,
4
See “Commonly Used Terms and Abbreviations” for the definition.
Page | 49
if the bank acts in a custodial or administrative capacity, the bank may report
public funds in Investor Services. If a bank is involved in the management of
funds, the bank may report the public funds in “Investment Management.”
17.4.3. Non‐Interest Expense Components
Non‐Interest Expense figures are to be broken out as detailed on the worksheet.
The total is expected to reconcile with what would be reported in the Call
Report when adjusted for certain items. As presented on the PPNR worksheets,
the adjustments include exclusions of goodwill impairment and adjustments
related to operational risk expense required for PPNR purposes. For the related
items, reference PPNR Projections worksheet and related instructions for the
line items 29 and 41.
Expense data on the PPNR Submission worksheet are only intended to be
reported as firm‐wide bank expenses, with exception of line item 34A, i.e.
Marketing Expense for Domestic Credit Cards. This line item is for Domestic
Credit Cards business line only. See the description of the Domestic Credit Card
business line in the Business Segment Definitions section of the document.
17.5. PPNR NII Worksheet
Banks for which deposits comprise 25 percent or more of total liabilities are required
to submit the Net Interest Income worksheet. This worksheet requires banks to
provide average asset and liability balances and average yields to calculate net
interest income. The total net interest income calculated should equal the total net
interest income reported using a business segment/line view in the PPNR Projections
worksheet.
The average balances and rates are meant to reflect the average over each quarter as
best as possible. The OCC understands that because of changes in balances over the
period, the simple multiplication of average loan rates and balances may not yield
the actual interest income. In these cases, banks may report the average loan rate so
that it equals a weighted average rate over the period and the interest income total
for each quarter reflects historical results or the bank’s projection, as applicable. If
the average rates are materially impacted by large shifts in balances over the period,
highlight this in documentation supporting the DFAST‐14A submission.
17.5.1.
Average Interest‐Bearing Assets
Banks should reference Call Report and other definitions provided in the PPNR
Net Interest Income worksheet when completing this section. Align the asset
categories definitions, where no Call Reportcode is provided, with those on the
Balance Sheet worksheet of the DFAST‐14A Summary Schedule. In the case of
loans, align definitions with the “total loans” section of the Balance Sheet
Page | 50
worksheet. Note that the definitions for Large Commercial Credits and Small
Business (Graded) are too aligned with Balance Sheet definitions. However, on
the Net Interest Income worksheet, exclude from the balances reported loans
that are classified as nonaccrual. The aggregate total of all nonaccrual loans
should be reported on the PPNR Metrics worksheet instead (line item 55).
Although the metric aggregates all nonaccruals for reporting purposes, banks
are encouraged to provide details on the nonaccrual loans by Balance Sheet
worksheet definition, if available, in the documentation supporting their DFAST‐
14A submission.
17.5.2.
Average Interest‐Bearing Liabilities
For the classification of liabilities, banks should report based on internal
definitions (those deemed to best represent the behavior characteristics of
deposits).
17.6.
PPNR Metrics Worksheet
17.7.
The PPNR Metrics worksheet requests information on certain metrics relevant
for the assessment of various components of PPNR. Elements in Section C of the
PPNR Metrics worksheet (line items 55‐85B) are required only for bank’s that
must complete the Net Interest Income worksheet. All other metrics are
required of all banks, subject to applicable thresholds.
Metrics in Section A, "Metrics by Business Segment/Line," correspond to
Business Segments/Lines on PPNR Submission worksheet. This means that each
metric is reflective of revenues reported on the PPNR Submission worksheet for
a given business segment/line, unless explicitly stated otherwise (e.g. line item
2). In contrast, Sections B and C are both for firm‐wide metrics.
In providing industry market size information, banks can use third party data
and are not required to independently derive these metrics. Any supporting
information should be described in detail, including the data source, and
corresponding data should be provided in the worksheet.
Banks should use internal definitions of proprietary trading and clearly describe
the covered activities and transactions in methodology narratives.
If a bank is unable to provide a metric on PPNR Metrics worksheet, it should
offer a data series for alternative metrics that are considered by the bank in
projecting the relevant component(s) of PPNR .
Commonly Used Terms
Domestic Revenues: Revenues from the US and Puerto Rico only.
International Revenues: Revenues from regions outside the US and Puerto
Rico.
Page | 51
Pre‐provision Net Revenue (PPNR): Sum of net interest income and non‐
interest income net of non‐interest expense, with components expected to
reconcile with those reported in the Call Report when adjusted for certain
items. As presented on the PPNR schedules, the adjustments include
exclusions of Valuation Adjustment for bank’s debt under fair value option
(FVO), goodwill impairment, loss resulting from trading shock exercise (if
applicable), as well as adjustments related to operational risk expense
required for PPNR purposes. For the related items, reference the PPNR
Projections worksheet and related instructions for the line items 29, 40‐42.
Gains and losses on AFS and HTM securities, including other than temporary
impairments (OTTI) estimates, are not a component of PPNR. All revenue
and expenses related to mortgage servicing rights (MSRs) are components
of PPNR to be reported in the associated noninterest income and non‐
interest expense line items on the PPNR schedules.
Run‐Off or Liquidating Businesses: operations that do not meet an
accounting definition of “discontinued operations” but which the bank
intends to exit.
Revenues: Sum of net interest income and non‐interest income adjusted for
selected exclusions, as reported on line item 27 of the PPNR Projections
worksheet.
17.8.
Supporting Documentation
17.8.1. PPNR Document Title:
RSSD_BANKMNEMONIC_PPNR_METHODOLOGY_YYMMDD. Separate
documents may be submitted for different models and/or methodologies. In
this case, please ensure clear titles and file names. Methodological memos
should describe how a bank approached the PPNR projection process and
translated macro‐economic factors into the reported projections.
17.8.2. Projected Outcomes
1. Provide an explanation summarizing the reasonableness of projected
outcomes relative to the stated macroeconomic scenario, business profile,
as well as regulatory and competitive environment. Especially in the more
adverse scenario(s), include substantial supporting evidence for PPNR
estimates materially exceeding recently realized values.
2. Banks should discuss linkages between PPNR projections and the balance
sheet as well as other exposure assumptions used for related loss
projections.
3. Include discussion of PPNR outcomes by component (i.e. Net Interest
Income, Non Interest Income, and Non Interest Expense) and by major
source of each component (e.g. by major balance/rate category, type of
revenue/expense, and/or business activity).
Page | 52
4. Consideration should be given to how changes in regulation will impact the
bank’s revenues and expenses over the projection period. The memo should
include a section that addresses how recent or pending regulatory changes
have impacted projected figures and business strategies and in which line
items these adjustments are reflected.
17.8.3. Models & Methodology
1. The documentation should include a full list of all models and parameters
used to generate projections of PPNR components and whether these
models are also used as part of other existing processes (e.g. the business‐
as‐usual budgeting and forecasting process). Where existing processes are
leveraged, discuss how these are deemed appropriate for stress testing
purposes, including any modifications that were necessary to fit a stressful
scenario. Also discuss those items that are particularly challenging to
project and identify limitations and weaknesses in the process.
2. Thorough discussion of use of management/expert judgment, including
information about rationale and process involved in translation of
macroeconomic scenario variables into projections of various PPNR
components should be provided. Where a combination of a modeled
approach and management judgment was used to project an item, quantify
the impact of qualitative adjustments to modeled output.
3. Provide support for all key assumptions used to derive PPNR estimates, with
a focus on the link of these assumptions to projected outcomes and
whether the assumptions are consistent with the stated macroeconomic
scenario, regulatory and competitive environment as well as business
strategies for each of major business activities. Document the impact of
assumptions concerning new growth, divestitures or other substantial
changes in business profile on PPNR estimates. In cases where there is a
high degree of uncertainty surrounding assumptions, discuss and reference
sensitivity of projections to these assumptions. Also ensure that all relevant
macro‐economic factors used for PPNR projections are also reported on the
firm submitted Scenario Schedule.
4. In addition to broad macro‐economic assumptions that will guide the
exercise, it is expected that more specific assumptions will be used by
banks in projections of PPNR, including macro‐economic factors other
than those provided by the OCC as well as bank‐specific assumptions.
Such assumptions and their link to reported figures, standardized and/or
bank business segments and lines should be discussed in the
methodology memo.
5. Where historical relationships are relied upon (e.g. ratios of compensation
expense to total revenues), banks are expected to document the historical
data used and describe why these relationships are expected to hold true in
each scenario, particularly under adverse conditions.
Page | 53
6. Projecting future business outcomes inevitably relies on the identification of
key relationships between business metrics and other explanatory variables.
Key limitations and difficulties encountered by the bank in the process to
model these relationships should be identified and discussed in the memo.
17.8.4. Projections Governance & Data
1. Banks are asked to describe governance aspects for the PPNR projections
development. This includes but is not limited to a description of:
a. The roles of various business lines and management teams
involved in the process
b. How the projections are generated. Particular attention should
be given to how the bank ensures that assumptions are
consistent across different business line projections, how
assumptions are translated into projections of revenue and
expenses, and the process of aggregating and reporting the
results.
c. Senior management’s involvement of the process and the process in
which the assumptions are vetted and challenged.
i. Also note whether established policies and procedures are
in place related to this process.
2. Also include a separate section devoted to any divergence from the
instructions in completing the PPNR worksheets in the DFAST‐14A
Schedules. Use this section to explain any data that is missing or not
provided as requested. Use this section to discuss major instances where
judgment was used to interpret PPNR instructions.
3. Discuss general data validation and reconciliation practices. Banks are
encouraged to include information allowing confirmation that the data
were reported per the PPNR definition. Documentation should discuss
consistency of a given schedule with the bank’s external reporting and
internal reporting and forecasting. Provide a description of broadly‐
defined types of business models currently used (e.g. Asset/Liability,
Relationship, Business Product/Services/Activity). Provide reconciliation
between bank reporting used to manage and forecast operations and a
standardized business segment/line view required for DFAST‐14A
reporting.
17.8.5. Other
1. Other sections of the DFAST‐14A Instructions request additional
information and supporting documentation. Please ensure that these items
are also referenced and described in this memo.
Page | 54
2. Banks are encouraged to submit any other information and documentation
(including data series) that would support of the bank’s PPNR projections.
17.8.6. MSR Projections: Document should be titled
RSSD_BANKMNEMONIC_MSR_METHODOLOGY_YYMMDD. Separate
documents may be submitted for different models and/or methodologies. In
this case, please ensure clear titles and file names.
1. Models and Methodologies
Describe the models and related sub‐models that were used to
complete the submission, and please state whether the model is a third‐
party vendor or proprietary model.
If a vendor model was used, please provide the name of the vendor
model. If a vendor model was used, has the bank performed an
independent review of the vendor model?
Has the model undergone rigorous model validation, with results
reviewed independently of the business line?
Has any performance testing been conducted on the model? If so, what
type of performance testing has been conducted?
What data sources were used to calibrate each model?
What were the key inputs/variables and how were these determined?
How did the model (whether vendor or proprietary) incorporate
macroeconomic assumptions?
2. Assumptions
For each quarter, what new loan capitalizations and amortizations are
assumed in the stress scenarios?
- How were the new loan capitalization forecast assumptions
developed?
- What excess spread assumptions were made with respect to new
loan capitalizations in each scenario and how was this assumption
derived (e.g., historical buy‐up/buy‐down grids, etc.)?
- How were HARP assumptions, if any, estimated?
- What market share is assumed, and does this change within the
stress scenario?
- Does the submission include any MSR sales or purchases under the
DFAST adverse or severely adverse scenarios? If yes, please provide
detail.
What is the composition of the underlying portfolio of loans serviced for
others with respect to the following, and how does this composition
change (if at all) during the DFAST stress scenarios (i.e., adverse and
severely adverse)?
i.
Loan type
ii.
Geographical region
iii.
FICO score
How were macroeconomic assumptions as prescribed under the
baseline, adverse, and severely adverse scenarios used to determine the
Page | 55
respective projected loan prepayment, delinquency, and default
experience for each quarter?
How were macroeconomic assumptions that were not prescribed under
the supervisory baseline and stress scenarios (for example, interest rate
volatility, option adjusted spreads, primary to secondary spreads) used
to determine the respective projected loan prepayment, delinquency,
and default experience for each quarter?
What are the voluntary prepayment speeds (e.g., conditional
prepayment rates (CPRs) associated with refinancing) assumed for each
quarter in the respective baseline, adverse and severely adverse
scenarios? Do not include constant default rates (CDRs).
What are the factors that drive or explain the level and trend in
prepayment speeds through the nine quarters over the baseline,
adverse and severely scenarios?
What are the default rates assumed for each quarter in the respective
baseline, adverse and severely adverse scenarios?
What are the factors that drive or explain the level and trend in default
rates through the nine quarters?
How were the assumptions regarding cost of service with respect to all
the scenarios derived?
Was inflation incorporated into the projection?
What is the servicing cost structure on a per loan basis on a base and
incremental basis for each level of delinquency? What are the
foreclosure costs per loan?
Does the cost structure per loan stay the same throughout the nine
quarters with the number of delinquent loans changing, or do both
change?
What foreclosure time frames are used in the baseline scenario? Do
these lengthen or contract in the adverse or severely adverse scenario?
Is late fee income included in the submission?
- If so, what is the bank’s actual late fee income structure, as well
as waiver policy if applicable?
- What is the late fee income assumed in the baseline and stress
scenarios?
- Is it assumed that late fees are 100% collectable in the stress
scenario?
Are earnings on escrow and other balances included in the submission?
- If yes, how are the balances forecasted, and what is the
crediting rate?
Is cost to finance advances to investors relating to delinquent loans
incorporated in the submission?
- If yes, how is the borrowing rate determined?
3. Hedging and Rebalancing
Are MSR hedges assumed to be rebalanced or rolled‐over at any time
during the nine quarter horizon? How often are hedges assumed to be
rebalanced or rolled‐over? What is the timing of such rebalancing or
roll‐over trades?
Page | 56
What are the hedge rebalancing and/or roll‐over rules applied during
the baseline and stress scenarios?
Are the hedge rebalancing and/or roll‐over rules applied in the baseline
and stress scenarios consistent with the firm’s risk appetite statement
and Board/management approved limit structure?
To what degree does hedge effectiveness decline in the stress
scenarios? How was this estimated?
How is the impact of hedging instrument bid‐ask spreads captured in
the submission? To what degree does the bid‐ask spread widen in the
stress scenario? How was this estimated?
How does the firm account for the liquidity risk from concentrated
hedge positions?
What are the current risk tolerance limits with respect to MSR hedging?
18. Regulatory Capital
The Regulatory Capital Instruments annual DFAST‐14A schedules collect historical data and
projections of bank balances of the funded instruments that are included in regulatory
capital. The DFAST‐14A schedule collects data on the historical balances and projected
balances of funded regulatory capital instruments by instrument type, in addition to
projections for issuances and redemptions that contribute to changes in balances under the
DFAST baseline scenario.
18.1. Projected Capital Actions & Balances
This worksheet collects information on the current and projected balances of
regulatory capital instruments aggregated by instrument type over the nine quarter
horizon. Banks are to report information on both a notional basis and on the basis of
the dollar amount included in regulatory capital.
18.1.1. Quarterly Redemption / Repurchase Activity
Report the actual and projected aggregate dollar amount ($Millions) of
redemptions/repurchases to be conducted in each quarter for each type of
capital instrument. All redemptions/repurchases should be reported as
negative values. For any instrument type that the bank does not include in its
reported regulatory capital or for which there is no actual/planned
redemption/repurchase activity during a particular quarter, please enter “0”
(zero).
18.1.2. Quarterly Issuance Activity
Report the actual and projected aggregate dollar amount ($Millions) of
issuances to be conducted in each quarter for each type of capital instrument.
For any instrument type that the bank does not include in its reported
Page | 57
regulatory capital or for which there is no planned issuance activity during a
particular quarter, please enter “0” (zero).
18.1.3. Capital Balances
Input the actual and projected aggregate balances ($Millions) of each type of
capital instrument for the relevant quarter. For any instrument type the bank
does not include in its reported regulatory capital, please enter “0” (zero).
For Common Stock, please report this value as the sum of “Common Stock (par
value)” plus “Surplus” LESS “Treasury Stock in the form of Common Stock” and
LESS “Issuances associated with the U.S. Department of Treasury Capital
Purchase Program: Warrants to Purchase Common Stock”.
18.2. Capital Position Reconciliation
This worksheet combines information reported on the Projected Capital Actions &
Balances worksheet with additional data in order to reconcile the actual and
projected balances of funded capital instruments with the balances of regulatory
Tier 1, Tier 2, and Total Capital as reported on Call Report and on the DFAST‐14A
Summary schedule. Please ensure that the balances of Tier 1 Capital, Tier 2
Capital and Total Capital as calculated on this worksheet are the same as those
reported on the DFAST‐14A Summary Schedule.
19. BASEL III
19.1. General Guidance
The DFAST‐14A schedule collects projection data. All projections in the DFAST‐14A
should be based on the baseline scenario through the end of 2017. For years beyond
2015, banks should adopt assumptions necessary to make reasonable projections of
capital ratios, including forecasts of macroeconomic factors and potential earnings
through 2017. All forecasts must be well‐developed and well‐documented,
consistent with the relevant baseline scenario, and internally consistent with the
bank’s planned capital actions.
Banks should provide projections of capital composition, exceptions bucket
calculation, risk‐weighted assets, and leverage exposures through 2017 even if the
bank anticipates complying with the proposed fully phased‐in 7% Common Equity
Tier 1, 8.5% Tier 1 capital, 4% Tier 1 leverage, and 3% supplementary leverage target
ratios (inclusive the capital conservation buffer, where applicable) plus any applicable
surcharge for systemically important financial institutions (SIFI surcharge) by an
earlier date.
In November 2011, the Basel Committee on Banking Supervision (BCBS) published its
methodology for assessing an additional loss absorbency requirement for global
Page | 58
systemically important banks (SIFI surcharge) that effectively serves as an extension
of the capital conservation buffer. Each bank should include within its capital plan
management’s best estimate of the likely SIFI surcharge that would be assessed
under this methodology, along with an explanation for the determination of the
estimate. In the process of assessing a bank’s transition path toward Basel III
compliance, supervisors will evaluate the methodology and assumptions used by
bank’s in determining the SIFI surcharge, and may adjust such estimates as necessary
when evaluating the transition path. Any bank not currently designated as a global
systemically important financial institution (G‐SIFI) should include a SIFI surcharge
assessment as part of its capital plan if management expects changes to its business
model that would potentially lead to the bank’s designation as a G‐SIFI.
In June 2012, the U.S. banking agencies finalized the market risk capital rule and
released the three notices of proposed rulemaking (NPRs) to propose revisions to
risk‐based and leverage capital requirements consistent with agreements reached by
the BCBS. For purposes of completing the Basel III and Dodd‐Frank schedule, banks
are required to complete the schedule based on the methodologies outlined in the
Basel III NPR, Advanced Approaches NPR, and final market risk capital rule. However,
for exposures to central counterparties, banks should complete the Basel III and
Dodd‐Frank schedule based on the methodologies outlined in the document
“Capitalization of bank exposures to central counterparties” that was released by
BCBS in July 2012. Banks should reflect the Basel III framework on a fully phased‐in
basis (e.g., banks should apply 100% of all capital deductions, not assuming the
transitional arrangements for implementation of changes to the capital composition
as proposed in the Basel III NPR).
Advanced approaches banks, including the banks that are considered mandatory
Basel II institutions or that have opted‐in voluntarily as a Basel II institution, are
required to complete the “RWA_Advanced” worksheet. All banks, including
advanced approaches banks and non‐advanced approaches banks must complete the
“RWA_General” worksheet. For the purpose of completing the “RWA_General”
worksheet, banks are required to report credit risk‐weighted assets using the
methodologies in the current general risk‐based capital rules (Basel I). For DFAST
2013, banks are not required to complete “RWA_General” worksheet using the
methodologies in the proposed Standardized Approach NPR.
19.2. Relevant Reference
For purposes of completing the Basel III and Dodd‐Frank schedules, banks should
consult the relevant NPRs (Basel III NPR and Advanced Approaches NPR) and the final
market risk capital rule released by the U.S. banking agencies, as well as relevant
guidance by BCBS for areas where the U.S. banking agencies have not yet released
proposals:
Basel global systemically important banks: assessment methodology and the
additional loss absorbency requirement (November 2011):
http://www.bis.org/publ/bcbs227.pdf
Page | 59
Capitalization of bank exposures to central counterparties (July 2012):
http://www.bis.org/publ/bcbs227.pdf
Basel III NPR:
77 FR 52792 (August 30, 2012), available at http://www.occ.treas.gov/news‐
issuances/news‐releases/2012/nr‐ia‐2012‐88.html
Advanced Approaches Risk‐Based Capital Rule; Market Risk Capital Rule:
77 FR 52978 (August 30, 2012), available at http://www.occ.treas.gov/news‐
issuances/news‐releases/2012/nr‐ia‐2012‐88.html
Final Market Risk Rule:
77 FR 53060 (August 30, 2012), available at http://www.occ.treas.gov/news‐
issuances/news‐releases/2012/nr‐ia‐2012‐88.html
19.3. Completing the Schedule
All data should be provided in the non‐shaded cells in all worksheets; grey shaded
cells include embedded formulas and will be automatically populated.
If a bank does not have an exposure relevant to any particular line item in the
worksheets (except for the Planned Action worksheet); it should enter zero (0) in
those cells. In order for the embedded formulas to automatically populate the
shaded cells in the schedule with calculated numbers, banks must complete all
unshaded cells in the schedule with a value. In addition, banks should ensure that
the version of Microsoft Excel they use to complete the schedule is set to
automatically calculate formulas. This is achieved by setting “Calculation Options”
(under the Formulas function) to “Automatic” within Microsoft Excel.
19.4. Capital Composition Worksheet
The “Capital Composition” worksheet and the “Exceptions Bucket Calculator”
worksheet collect the data necessary to calculate the composition of capital under
the guidelines set forth by the recently released Basel III NPR. Please provide all data
on a fully phased‐in basis (i.e., not assuming any transitional or phase‐out
arrangements included in the Basel III NPR).
With regard to regulatory adjustments, please note that line 20, “Excess Expected
Credit Loss (ECL),” applies to advanced approaches banks only.
Page | 60
19.5. Line Headings & Descriptions
Line
Heading
Description
Basel III Common Equity Tier 1
1
Common Stock and Related
Surplus (Net of Treasury Stock)
Common shares and the related surplus issued by banks
that meet the criteria of the Basel III NPR. This should
be net of treasury stock and other investments in own
shares to the extent that these are already not
recognized on the balance sheet under the relevant
accounting standards. This line item should reflect the
impact of share repurchases or issuances projected in
the DFAST forecast horizon.
2
Retained Earnings
Retained earnings reported by banks. This should
reflect the impact of dividend pay‐outs projected in the
DFAST forecast horizon.
3‐11
Accumulated Other
Comprehensive Income
Accumulated other comprehensive income reported by
banks. In the non‐shaded cells, please fill out the
amount of unrealized gains and losses on a fully phased‐
in basis (i.e., without the transitional arrangements
included in the Basel III NPR). If gain, please report as
positive, and if loss, please report as negative.
12
Other Equity Capital Components All other equity capital components which fall under the
definition of Common Equity Tier 1.
(Including Unearned Employee
Stock Ownership Program Shares)
13
Total Common Equity Tier 1
Attributable to Parent Company
Common Shareholders
Formula embedded in the schedule; no input required.
14
Minority Interest Included in
Common Equity Tier 1
15
Total Group Common Equity Tier
1 Prior to Regulatory Adjustments
Total minority interest given recognition in Common
Equity Tier 1 per the Basel III NPR. Includes common
shares issued by subsidiaries (which includes all
consolidated subsidiaries of the group, regardless of
whether they are fully owned or partially owned) of the
consolidated group that are held by third parties.
Formula embedded in the schedule; no input required.
16
Formula embedded in the schedule; no input required.
Guidelines for regulatory deductions from Common
Equity Tier 1 can be found in the Basel III NPR. For each
subcomponent, reflect the full amount without the
transitional arrangements included in the Basel III NPR.
Goodwill, Net of Related Deferred Goodwill (including goodwill used in the valuation of
significant investments in the capital of banking) to be
Tax Liability
deducted from Common Equity Tier 1.
17
Deductions
Page | 61
Line
Heading
18
All other intangibles (with the exception of mortgage
servicing assets) to be deducted from the calculation of
Common Equity Tier 1. The full amount is to be
deducted net of any associated deferred tax liabilities
which would be extinguished if the intangible assets
become impaired and/or no longer recognized under
the applicable accounting rules. Please reflect the full
amount without the transitional arrangements included
in the Basel III NPR.
Deferred Tax Assets (DTA) that rely on future
Deferred Tax Assets (Excluding
profitability of the bank to be realized to be deducted
Temporary Differences Only), Net
of Related Deferred Tax Liabilities from Common Equity Tier 1. Where these DTAs relate
to temporary differences, the amount to be deducted is
set out in the Exception Bucket Calculator schedule.
DTAs may be netted with associated deferred tax
liabilities only if offsetting is permitted by the relevant
tax authority. Please reflect the full amount without the
transitional arrangements included in the Basel III NPR.
Excess Expected Credit Loss (ECL) The amount of expected credit loss that exceeds a
bank’s eligible credit reserves. This deduction applies
to advanced approaches banks only. Please reflect the
full amount without the transitional arrangements.
Cash Flow Hedge (If Gain, Report The amount of the cash flow hedges that relates to the
hedging of items which are not fair‐valued on the
as Positive; If Loss, Report as
balance sheet should be deducted from Common Equity
Negative)
Tier 1. Positive amounts should be deducted and
negative amounts should be added back. Please reflect
the full amount without the transitional arrangements
included in the NPR.
Cumulative G/L Due to Changes in All unrealized gains and losses resulting from changes in
the fair value of liabilities due to changes in the bank’s
Own Credit Risk on Fair Valued
own credit risk must be deducted from Common Equity
Liabilities (If Gain, Report as
Tier 1.
Positive; If Loss, Report as
Negative)
19
20
21
22
23
Description
Intangibles Other than Mortgage
Servicing Assets, Net of Related
Deferred Tax Liabilities
Defined Benefit Pension Fund
Assets
For each defined benefit pension fund that is an asset
on the balance sheet, the asset should be deducted in
the calculation of Common Equity Tier 1, net of any
associated deferred tax liabilities which would be
extinguished if the asset should become impaired or no
longer recognized under the applicable accounting
standards. Please reflect the full amount without the
transitional arrangements included in the Basel III NPR.
Page | 62
Line
Heading
Description
24
Securitization Gain on Sale
25
Investments in Own Shares
26
Reciprocal Cross Holdings in
Common Equity
27
Regulatory Deductions Due to
Insufficient Additional Tier 1
Any gain‐on‐sale associated with a securitization
transaction must be deducted from Common Equity Tier
1. Please reflect the full amount without the
transitional arrangements included in the Basel III NPR.
Bank’s investments in its own common shares (held
directly or indirectly), in addition to any stock the bank
is contractually obliged to purchase in the future, to be
deducted from Common Equity Tier 1. This treatment
will apply irrespective of whether the exposure is held
in the banking book or the trading book. Please reflect
the full amount without the transitional arrangements
included in the Basel III NPR.
Crossholdings of common stock that are part of a
reciprocal cross holding arrangement of financial
institutions. The Basel III NPR requires banks to deduct
investments in the capital of other financial institutions
it holds reciprocally. Please reflect the full amount
without the transitional arrangements included in the
Basel III NPR.
Formula embedded in the schedule; no input required.
28
Total Common Equity Tier 1 After
Deductions Above
Formula embedded in the schedule; no input required.
29
Non‐significant Investments in the
Common Share of Unconsolidated
Financial Entities That Exceed 10%
of Common Equity Tier 1
Investments in financial entities that are outside the
scope of regulatory consolidation and where the bank
does not own more than 10% of the financial entity’s
Common Equity Tier 1 (using Line 28 as reference).
30
Total Common Equity Tier 1 After
the Regulatory Adjustments
Above
Formula embedded in the schedule; no input required.
31
Formula embedded in the schedule; no input required.
Significant Investments in the
Common Stock of Unconsolidated
Financial Entities (Amount Above
10% Threshold)
32
Mortgage Servicing Assets
(Amount Above 10% Threshold)
Formula embedded in the schedule; no input required.
33
Deferred Tax Assets Arising from
Temporary Differences (Amount
Above 10% Threshold)
Formula embedded in the schedule; no input required.
Page | 63
Line
Heading
Description
34
Total Common Equity Tier 1
Capital After the Regulatory
Adjustments Above
Formula embedded in the schedule; no input required.
35
Deduction of Outstanding Items
Subject to 15% Threshold Due to
15% Limit
Formula embedded in the schedule; no input required.
36
Additional Mortgage Servicing
Assets Deduction Due to Fair
Value Limit
Formula embedded in the schedule, no input required.
37
Common Equity Tier 1
Formula embedded in the schedule, no input required.
Basel III Tier 1 Capital
38
39
40
Non‐common Equity Tier 1 Capital Additional Tier 1 instruments issued by parent company
of group (and any related surplus) permitted per the
Instruments (Qualifying
Basel III NPR including regulatory capital instruments
Instruments Only)
eligible for grandfathering treatment. Banks should
report all previously issued, non‐qualifying capital
instruments subject to phase‐out (including perpetual
preferred stock and trust preferred securities)
instruments in Line 54.
Instruments that meet the Additional Tier 1 criteria
Minority Interest Included in Tier
issued by subsidiaries to third parties that are given
1 Capital
recognition in group Additional Tier 1 capital. Banks
should report all previously issued, non‐qualifying tier
1 minority interest in Line 55.
Formula embedded in the schedule; no input required.
Deduction
Formula embedded in the schedule; no input required.
This captures all other adjustments banks must make to
additional Tier 1 capital.
41
Regulatory Adjustments to be
Deducted from Additional Tier 1
Capital
42
Cross holdings of Additional Tier 1 capital that are part
of a reciprocal cross holding arrangement of financial
institutions. The Basel III NPR requires banks to deduct
investments in the capital of other financial institutions
it holds reciprocally. Please reflect the full amount
without the transitional arrangements included in the
Basel III NPR.
Non‐significant Investments in the Banks must deduct all non‐significant investments, in
the form of Additional Tier 1 capital, in the capital of
Form of Additional Tier 1 Capital
unconsolidated financial institutions which exceeds 10%
of the bank’s Common Equity Tier 1 minus applicable
deductions.
43
Reciprocal Cross Holdings in the
Form of Additional Tier 1 Capital
Page | 64
Line
Heading
Description
44
Investments in Own Additional
Tier 1 Capital Instruments
45
Significant Investments in the
Form of Additional Tier 1 Capital
46
Regulatory Deductions Due to
Insufficient Tier 2 Capital
47
Tier 1 Capital
Bank’s investments in its own shares, in the form of
Additional Tier 1 capital (held directly or indirectly), in
addition to any stock the bank is contractually obliged
to purchase in the future, must be deducted.
Significant investments in the capital of an
unconsolidated financial institution, in the form of
Additional Tier 1 capital, must be deducted in full.
If the total regulatory adjustments to be made to Tier 2
capital exceed the amount of Tier 2 capital available,
the excess amount should is to be deducted from Tier 1
capital.
Formula embedded in the schedule; no input required.
Periodic Changes in Common Stock
Formula embedded in the schedule; no input required.
48
Common Stock and Related
Surplus (Net of Treasury Stock)
49
Captures the total issuance of common stock and
Issuance of Common Stock
related surplus in the reporting period. This figure
(Including Conversion of Common
should equal the “Total issuance of common stock”
Stock)
reported in the DFAST‐14A Summary Schedule for
reporting periods through 2014.
Captures the total repurchases of common stock in the
Repurchases of Common Stock
reporting period. This figure should equal the “Total
share repurchases” outlined reported in the DFAST‐14A
Summary Schedule for reporting periods through 2014.
50
Periodic Changes in Retained Earnings
51
Net Income (Loss) Attributable to
Bank
Refer to Call Report instructions and DFAST‐14A
Summary Schedule for MDRM No. RIAD 4340. Report
losses as a negative value.
52
Cash Dividends Declared on
Preferred Stock
Refer to Call Report instructions and DFAST‐14A
Summary Schedule for MDRM No. RIAD 4470.
53
Cash Dividends Declared on
Common Stock
Refer to Call Report instructions and DFAST‐14A
Summary Schedule for MDRM No. RIAD 4460.
Page | 65
Line
Heading
Description
54
Previously Issued Tier 1 Capital
Instruments (Excluding Minority
Interest) that Would No Longer
Qualify (Please Report 100%
value)
55
Previously Issued Tier 1 Minority
Interest that Would No Longer
Qualify (Please Report 100%
Value)
Report 100% of the value of previously issued Tier 1
capital instruments that will no longer qualify as Tier 1
capital as per the Basel III NPR (including perpetual
preferred stock and trust preferred securities subject to
phase‐out arrangements). Please report balances in
full, without reflecting any phase‐out arrangements
included in the NPR.
Report 100% of the value of previously issued tier 1
minority interest that will no longer qualify as Tier 1
capital as per the Basel III NPR. Please report balances
in full, without reflecting any phase‐out arrangements
included in the NPR.
Data Validation Check
56
Does Line 48, “Common Stock and
Related Surplus” 2 = Line 1 for
“Common Stock and Related
Surplus”?
Validation check to ensure Line 48 equals the value in
Line 1 within this worksheet. Formula embedded in the
schedule; no input required. Please ensure that “Yes”
appears across all cells.
Baseline Scenario Validation Check
57
Are the sums of Line 1, "Common
Stock and Related Surplus" and
Line 12, "Other Equity
Components" equal under the
Baseline Scenario
Not applicable, as only the OCC scenario results are
being collected.
Differences in Reporting
58
Does Line 1, "Common Stock and Validation check to ensure that the logic applies. If the
values are identical, input “Yes”. If the values differ,
Related Surplus" = "Common
please provide an explanation for the difference.
Stock (Par Value)" (MDRM No.
RCFD 3230) + "Surplus (Exclude All
Surplus Related to Preferred
Stock)" (MDRM No. RCFD
38293240) of Balance Sheet
Worksheet (DFAST‐14A Summary
Schedule)?
59
Does Line 2, "Retained Earnings" = Validation check to ensure that the logic applies. If the
values are identical, input “Yes”. If the values differ,
"Retained Earnings" (MDRM No.
please provide an explanation for the difference.
RCFD 3632) of Balance Sheet
Worksheet (DFAST‐14A Summary
Schedule)?
Page | 66
Line
Heading
Description
60
Does Line 12, “Other Equity
Capital Components” = “Other
Equity Capital Components”
(MDRM No. RCFD A130) of
Balance Sheet Worksheet (DFAST‐
14A Summary Schedule)?
Validation check to ensure that the logic applies. If the
values are identical, input “Yes”. If the values differ,
please provide an explanation for the difference.
61
Does Line 49, "Issuance of
common stock" = "Total issuance
of common stock" of Capital
Worksheet (DFAST‐14A Summary
Schedule)?
Validation check to ensure that the logic applies. If the
values are identical, input “Yes”. If the values differ,
please provide an explanation for the difference.
62
Does Line 50, "Repurchases of
common stock" = "Total share
repurchases" of Capital
Worksheet (DFAST‐14A Summary
Schedule)?
Validation check to ensure that the logic applies. If the
values are identical, input “Yes”. If the values differ,
please provide an explanation for the difference.
63
Does Line 51, "Net income (loss)
attributable to bank " = "Net
income (loss) attributable to bank
" (MDRM No. RIAD 4340) of
Capital Worksheet (DFAST‐14A
Summary Schedule)?
Validation check to ensure that the logic applies. If the
values are identical, input “Yes”. If the values differ,
please provide an explanation for the difference.
64
Validation check to ensure that the logic applies. If the
Does Line 52, "Cash dividends
values are identical, input “Yes”. If the values differ,
declared on preferred stock" =
please provide an explanation for the difference.
"Cash dividends declared on
preferred stock" (MDRM No. RIAD
4470) of Capital Worksheet
(DFAST‐14A Summary Schedule)?
65
Does Line 53, "Cash dividends
declared on common stock" =
"Cash dividends declared on
common stock" (MDRM No. RIAD
4460) of Capital Worksheet
(DFAST‐14A Summary Schedule)?
Validation check to ensure that the logic applies. If the
values are identical, input “Yes”. If the values differ,
please provide an explanation for the difference.
Data Completeness Check
66
If "No", please complete all non‐shaded cells until all cells to the right say "Yes." Do not leave
cells blank; enter "0" if not applicable.
Exception Bucket Calculator Worksheet Instructions
Page | 67
The “Exception Bucket Calculator” worksheet collects the data necessary to calculate the items
that may receive limited recognition in Common Equity Tier 1 (i.e., significant investments in the
common shares of unconsolidated financial institutions, mortgage servicing assets and deferred
tax assets arising from temporary difference). These items may be recognized in Common
Equity Tier 1 up to 10% of the bank’s common equity on an individual basis and 15% on an
aggregated basis after application of all regulatory adjustments.
Line
Heading
Description
1
Gross Holdings of Common Stock
Aggregate holdings of capital instruments
relevant to significant investments in the
capital of unconsolidated financial entities,
including direct, indirect and synthetic
holdings in both the banking book and
trading book.
2
Permitted Offsetting Short Positions in
Relation to the Specific Gross Holdings
Included Above
Offsetting positions in the same underlying
exposure where the maturity of the short
position either matches the maturity of the
long position or has a residual maturity of at
least one year.
3
Holdings of Common Stock Net of Short
Positions
Formula embedded in the schedule; no input
required.
4
Common Equity Tier 1 After All
Regulatory Adjustments Except
Significant Investments in Financial
Institutions, Mortgage Servicing Assets
and Deferred Tax Assets Arising from
Temporary Differences
Formula embedded in the schedule; no input
required.
5
Amount to be Deducted from Common
Equity Tier 1 due to 10% Limit
Total Mortgage Servicing Assets
Classified as Intangible
Formula embedded in the schedule; no input
required.
Mortgage servicing assets may receive
limited recognition when calculating
Common Equity Tier 1, with recognition
capped at 10% of the bank’s common equity
(after the application of all regulatory
adjustments).
6
Page | 68
Line
Heading
Description
7
Associated Deferred Tax Liabilities
Which Would be Extinguished if the
Intangible Becomes Impaired or
Derecognized Under the Relevant
Accounting Standards
8
Mortgage Servicing Assets Net of
Related Tax Liabilities
Common Equity Tier 1 after All
Regulatory Adjustments Except
Significant Investments in Financial
Institutions, Mortgage Servicing Assets
and Deferred Tax Assets Arising from
Temporary Differences
Amount to be Deducted from Common
Equity Tier 1 due to 10% Limit
The amount of mortgage servicing assets to
be deducted from Common Equity Tier 1 is
to be offset by any associated deferred tax
liabilities, with recognition capped at 10% of
the bank’s Common Equity Tier 1(after the
application of all regulatory adjustments). If
the bank chooses to net its deferred tax
liabilities associated with mortgage servicing
assets against deferred tax assets (in Line 17
of the Capital Composition worksheet),
those deferred tax liabilities should not be
deducted again here.
Formula embedded in the schedule; no input
required.
Formula embedded in the schedule; no input
required.
9
10
Formula embedded in the schedule; no input
required.
11
Deferred Tax Assets Due to Temporary
Differences, Net of Related Deferred
Tax Liabilities
Net deferred tax assets arising from
temporary differences may receive limited
recognition in Common Equity Tier 1, with
recognition capped at 10% of the bank’s
common equity (after the application of all
regulatory adjustments).
12
Common Equity Tier 1 after All
Regulatory Adjustments Except
Significant Investments in Financial
Institutions, Mortgage Servicing Assets
and Deferred Tax Assets Arising from
Temporary Differences
Formula embedded in the schedule; no input
required.
13
Amount to be deducted from Common
Equity Tier 1 Due to 10% Limit
Formula embedded in the schedule; no input
required.
14
Outstanding Significant Investments in
the Common Stock of Financial Entities
Not Deducted Due to 10% Limit
Formula embedded in the schedule; no input
required.
Page | 69
Line
Heading
Description
15
Outstanding Mortgage Servicing Assets
Not Deducted Due to 10% Limit
Formula embedded in the schedule; no input
required.
16
Outstanding Deferred Tax Assets Due to
Temporary Differences Not Deducted
Due to 10% Limit
Sum of Outstanding Significant
Investments in Financials, Mortgage
Servicing Assets and Deferred Tax
Assets Arising from Temporary
Differences Not Deducted Due to 10%
Limit
15% Common Equity Tier 1 Limit (For
Items Subject to 15% Threshold)
Formula embedded in the schedule; no input
required.
17
18
Formula embedded in the schedule; no input
required.
Formula embedded in the schedule; no input
required.
19
Deduction of Outstanding Items Subject Formula embedded in the schedule; no input
to 15% Threshold Due to 15% Limit
required.
20
Amount of 15% Limit Deduction
Attributable to Mortgage Servicing
Assets
Formula embedded in the schedule; no input
required.
21
Estimated Fair Value of Mortgage
Servicing Rights
22
Additional Deduction from Common
Equity Tier 1 Due to Statutory 10% Fair
Value Limit of Mortgage Servicing
Assets
Under section 475 of the Federal Deposit
Insurance Corporation Improvement Act of
1991 (12 U.S.C. 1828 note), the amount of
readily marketable mortgage servicing assets
recognized by a bank cannot be more than
90% of their fair market value. Please
include the fair market value of all mortgage
servicing assets classified as intangibles.
Formula embedded in the schedule; no input
required.
23
Data Completeness Check
If "No", please complete all non‐shaded cells
until all cells to the right say "Yes." Do not
leave cells blank; enter “0” if not applicable.
Page | 70
Risk‐Weighted Assets – Advanced Worksheet Instructions
Advanced approaches banks, including the banks that are considered as mandatory Basel II
institutions or that have opted‐in voluntarily as a Basel II institution, are required to complete
the “RWA_Advanced” worksheet. All banks, including advanced approaches banks and non‐
advanced approaches banks must complete the “RWA_General” worksheet.
In the “RWA_Advanced” worksheet, banks should provide risk‐weighted asset estimates
reflecting the final market risk capital rule released by the U.S. banking agencies (12 CFR 3) and
the Advanced Approaches NPR. However, for exposures to central counterparties, banks should
complete the “RWA_Advanced” worksheet based on the methodologies outlined in the
document “Capitalization of bank exposures to central counterparties” that was released by
BCBS in July 2012.
If a bank’s trading activity is below $1 billion and less than 10% of its total assets at 3Q 2012, the
bank does not need to complete the market risk‐weighted asset section within the Risk‐
Weighted Assets worksheets. However, if the bank projects to meet the trading activity
threshold during the forecast period, then the bank should complete the market risk‐weighted
asset section within the schedule, based on the final market risk capital rule released by the U.S.
banking agencies (77 Federal Register 53060, August 30, 2012).
Line
Heading
Description
Credit Risk (including Counterparty Credit Risk (CCR) and non‐trading credit risk) – Applicable to
Advanced Approaches Banking Organizations
Risk‐weighted assets should reflect the 1.06 scaling factor to the Internal Rating‐Based Approach
(IRB) credit risk‐weighted assets where relevant, unless noted otherwise.
1
Corporate
Formula embedded in the schedule; no input required.
2
Corporate (not including
receivables); Counterparty
Credit Risk Exposures (not
including credit value
adjustment (CVA) charges or
charges for exposures to
central counterparties (CCPs))
Overall risk‐weighted assets for corporate (not including
receivables) counterparty credit risk exposures, not
including credit value adjustment (CVA) capital charges
or exposures to central counterparties (CCPs), after
applying the 1.06 scaling factor to the Internal Rating‐
Based Approach (IRB) credit risk‐weighted assets.
3
Corporate (not including
Overall risk‐weighted assets for other corporate
receivables); Other Exposures exposures (not including receivables), after applying the
1.06 scaling factor to the Internal Rating‐Based
Approach (IRB) credit risk‐weighted assets.
4
Sovereign
Formula embedded in the schedule; no input required.
Page | 71
Line
Heading
Description
5
Sovereign; Counterparty
Credit Risk Exposures (not
including credit value
adjustment (CVA) charges or
charges for exposures to
central counterparties (CCPs))
Overall risk‐weighted assets for sovereign counterparty
credit risk exposures, not including credit value
adjustment (CVA) capital charges or exposures to central
counterparties (CCPs), after applying the 1.06 scaling
factor to the Internal Rating‐Based Approach (IRB) credit
risk‐weighted assets.
6
Sovereign; Other Exposures
Overall risk‐weighted assets for other sovereign
exposures, after applying the 1.06 scaling factor to the
Internal Rating‐Based Approach (IRB) credit risk‐
weighted assets.
7
Bank
Formula embedded in the schedule; no input required.
8
Bank; Counterparty Credit
Risk Exposures (not including
credit value adjustment (CVA)
charges or charges for
exposures to central
counterparties (CCPs))
Overall risk‐weighted assets for bank counterparty credit
risk exposures, not including credit value adjustment
(CVA) capital charges or exposures to central
counterparties (CCPs), after applying the 1.06 scaling
factor to the Internal Rating‐Based Approach (IRB) credit
risk‐weighted assets.
9
Bank; Other Exposures
Overall risk‐weighted assets for other bank exposures,
after applying the 1.06 scaling factor to the Internal
Rating‐Based Approach (IRB) credit risk‐weighted assets.
10
Retail
Formula embedded in the schedule; no input required.
11
Retail; Counterparty credit
risk exposures (not including
credit value adjustment (CVA)
charges or charges for
exposures to Central
counterparties (CCPs))
Overall risk‐weighted assets for retail counterparty
credit risk exposures, not including credit value
adjustment (CVA) capital charges or exposures to Central
counterparties (CCPs), after applying the 1.06 scaling
factor to IRB credit risk‐weighted assets.
12
Retail; Other Exposures
Overall risk‐weighted assets for other retail exposures,
after applying the 1.06 scaling factor to the Internal
Rating‐Based Approach (IRB) credit risk‐weighted assets.
13
Equity
Overall risk‐weighted assets for equity exposures, where
relevant after applying the 1.06 scaling factor to the
Internal Rating‐Based Approach (IRB) credit risk‐
weighted assets.
14
Securitization
Overall risk‐weighted assets for securitizations that are
held in the held‐to‐maturity or available‐for‐sale
portfolios, where relevant after applying the 1.06 scaling
factor to the Internal Rating‐Based Approach (IRB) credit
risk‐weighted assets.
Page | 72
Line
Heading
Description
15
Trading Book Counterparty
Credit Risk Exposures (if not
included in above)
Overall risk‐weighted assets for counterparty credit risk
exposures in the trading book if the bank is not able to
include them in the portfolio of the counterparty as
specified above.
16
Credit Valuation Adjustment
(CVA) Capital Charge (Risk‐
Weighted Asset Equivalent)
Formula embedded in the schedule; no input required.
17
Advanced Credit Valuation
Adjustment (CVA) Approach
Formula embedded in the schedule; no input required.
18
Credit Valuation Adjustment
(CVA) capital charge (Risk‐
Weighted Asset Equivalent);
Advanced CVA Approach;
Unstressed Value at Risk
(VaR) with Multipliers
Stand‐alone 10‐day value‐at‐risk (VaR) calculated on the
set of credit valuation adjustments (CVAs) for all Over‐
the‐counter (OTC) derivatives counterparties together
with eligible credit valuation adjustment (CVA) hedges.
The reported value‐at‐risk should consist of both general
and specific credit spread risks and is restricted to
changes in the counterparties credit spreads. The bank
must multiply the reported value‐at‐risk by three times
consistent with the approach used in calculating market
risk capital charge (three‐time multiplier). The 1.06
scaling factor does not apply.
Bank should report 0 if it does not use the advanced
credit value adjustment (CVA) approach.
19
Credit Valuation Adjustment
(CVA) Capital Charge (Risk‐
Weighted Asset Equivalent);
Advanced CVA Approach;
Stressed Value at Risk (VaR)
with multipliers
Stand‐alone 10‐day stressed value‐at‐risk (VaR)
calculated on the set of credit valuation adjustments
(CVAs) for all over‐the‐counter (OTC) derivatives
counterparties together with eligible credit valuation
adjustments (CVA) hedges. The reported value‐at‐risk
should consist of both general and specific credit spread
risks and is restricted to changes in the counterparties
credit spreads. It should reflect three‐times multiplier.
The 1.06 scaling factor does not apply.
Bank should report 0 if it does not use the advanced
credit valuation adjustments (CVA) approach
20
Credit Valuation Adjustment
(CVA) Capital Charge (Risk‐
Weighted Asset Equivalent);
Simple CVA Approach
Risk‐weighted asset (RWA) equivalent using the simple
credit valuation adjustment (CVA) approach.
21
Other Credit Risk
If the Bank is unable to assign credit risk‐weighted assets
to one of the above categories even on a best‐efforts
basis, they should be reported in this line.
Page | 73
Line
Heading
Description
22
Total Credit Risk‐Weighted
Assets (RWA)
Formula embedded in the schedule; no input required.
Market Risk
If a bank does not have a particular portfolio or no trading book at all, risk‐weighted assets should
be reported as 0.
23
Standardized Specific Risk
(excluding securitization and
correlation)
Risk‐weighted asset (RWA) equivalent for specific risk
based on the standardized measurement method as
applicable. This should not include the risk‐weighted
assets according to the standardized measurement
method for exposures included in the correlation trading
portfolio or the standardized approach for other non‐
correlation related traded securitization exposures.
24
Value at Risk (VaR) with
Multipliers (general and
specific risk)
Bank‐wide 10‐day value‐at‐risk (VaR) inclusive of all
sources of risks that are included in the value‐at‐risk
calculation. The reported value‐at‐risk should reflect
actual multipliers as of the reporting date.
25
Stressed Value‐at‐Risk (VaR)
with Multipliers (general and
specific risk)
Bank‐wide 10‐day stressed value‐at‐risk inclusive of all
sources of risk that are included in the stressed value‐at‐
risk calculation. The reported stressed value‐at‐risk
should reflect actual multipliers as of the reporting date.
26
Incremental Risk Capital
Charge (IRC)
Risk‐weighted asset (RWA) equivalent for incremental
risk in the trading book.
27
Correlation Trading
Formula embedded in the schedule; no input required.
28
Correlation Trading;
Comprehensive Risk
Measurement (CRM), Before
Application of the Surcharge
Risk‐weighted asset (RWA) equivalent for exposures in
the correlation trading portfolio which are subject to the
comprehensive risk measurement, before the
application of the 8% surcharge based on the
standardized measurement method.
29
Formula embedded in the schedule; no input required.
Correlation Trading;
Standardized Measurement
Method (100%) for Exposures
Subject to Comprehensive
Risk Measurement (CRM)
Page | 74
Line
Heading
Description
30
Correlation Trading;
Standardized Measurement
Method (100%) for Exposures
Subject to Comprehensive
Risk Measurement (CRM);
Net long
100% of the risk‐weighted asset (RWA) equivalent
according to the standardized measurement method for
net long exposures in the correlation trading portfolio
which are subject to the comprehensive risk
measurement.
31
Correlation Trading;
Standardized Measurement
Method (100%) for Exposures
Subject to Comprehensive
Risk Measurement (CRM);
Net Short
100% of the risk‐weighted asset (RWA) equivalent
according to the standardized measurement method for
net short exposures in the correlation trading portfolio
which are subject to the comprehensive risk
measurement.
32
Non‐modeled Securitization
Formula embedded in the schedule; no input required.
The capital charge (or risk‐weighted asset equivalent) for
non‐modeled traded securitization, including
securitization positions that are not correlation trading
positions and securitizations that are non‐modeled
correlation trading positions, is the larger of the net long
and net short positions.
For purposes of the DFAST submission, traded
securitization exposures subject to a 1250% risk weight
or the equivalent of a deduction should be captured
here by including values in lines 33 and 34.
33
Non‐modeled Securitization;
Net Long
Risk‐weighted asset equivalent according to the
standardized measurement method for net long non‐
modeled securitization exposures including nth‐to‐
default credit derivatives.
For purposes of the DFAST submission, traded
securitization exposures subject to a 1250% risk weight
or the equivalent of a deduction should be included
here.
34
Non‐modeled Securitization;
Net Short
Risk‐weighted asset equivalent according to the
standardized measurement method for net short non‐
modeled securitization exposures including nth‐to‐
default credit derivatives.
For purposes of the DFAST submission, traded
securitization exposures subject to a 1250% risk weight
or the equivalent of a deduction should be included
here.
Page | 75
Line
Heading
Description
35
Other Market Risk
If the bank is unable to assign market risk‐weighted
assets to one of the above categories, they should be
reported in this line.
If no such requirements exist, 0 should be entered.
36
Total Market Risk‐Weighted
Assets (RWA)
Formula embedded in the schedule; no input required.
37
Other Capital Requirements
Risk‐weighted assets (RWA) for settlement risk and other
capital requirements. If no such requirements exist, 0
should be entered.
38
Operational Risk
Risk‐weighted assets (RWA) for operational risk.
39
Change in Risk‐Weighted
Assets (RWA) Due to Impact
of Basel III Definition of
Capital
Impact on the risk‐weighted assets (RWA) due to
changes of Basel III definition of capital.
For purposes of DFAST submission, other exposures
(excluding traded securitization exposures) subject to a
1250% risk weight, including securitization exposures
held in the banking book should be included here.
40
Total Risk‐Weighted Assets
Formula embedded in the schedule, no input required.
Other
Data Completeness Check
41
If "No", please complete all
non‐shaded cells until all cells
to the right say "Yes." Do not
leave cells blank; enter "0" if
not applicable.
Check to ensure worksheet is complete. Formula
embedded in the schedule, no input required. Please
ensure that “Yes” appears across all cells.
Risk‐Weighted Assets – General Worksheet Instructions
All banks, including advanced approaches banks and non‐advanced approaches banks must
complete “RWA_General” worksheet. In addition to completing the "RWA_Advanced"
worksheet, the advanced approaches banks are required to complete “RWA_General"
worksheet due to the floor requirement per the Collins Amendment under Section 171 of the
DFA.
For the purpose of completing the “RWA_General” worksheet, banks are required to report
credit risk‐weighted assets using the methodologies in the current general risk‐based capital
rules (Basel I). For DFAST 2013, banks are not required to complete “RWA_General” worksheet
using the methodologies in the proposed Standardized Approach NPR. If a bank’s trading
activity is below $1 billion and less than 10% of its total assets at 3Q 2012, the bank does not
need to complete the market risk‐weighted asset section within the schedule. However, if the
bank projects to meet the trading activity threshold during the forecast period, then the bank
Page | 76
should complete the market risk‐weighted asset section within the schedule, based on the final
market risk capital rule released by the U.S. banking agencies (77 Federal Register 53060, August
30, 2012).
Line
Heading
Description
Basel I Credit Risk (including Counterparty Credit Risk (CCR) and non‐trading credit risk) –
Applicable to All banks
Risk‐weighted assets should reflect the 1.06 scaling factor to the Internal Rating‐Based Approach
(IRB) credit risk‐weighted assets where relevant, unless noted otherwise.
1
Counterparty Credit RWA
Overall risk‐weighted assets for counterparty credit
exposures (not including receivables) including
exposures to central counterparties (CCPs).
2
Credit RWAs excluding
Counterparty Credit RWAs
If the bank is unable to assign credit risk‐weighted assets
to the above category even on a best‐efforts basis, they
should be reported in this line.
3
Total Credit (RWA)
Formula embedded in the schedule, no input required.
Market Risk
If a bank does not have a particular portfolio or no trading book at all, risk‐weighted assets should
be reported as 0.
4
Standardized Specific Risk
(excluding securitization and
correlation)
Risk‐weighted asset (RWA) equivalent for specific risk
based on the standardized measurement method as
applicable. It should not include the risk‐weighted
assets according to the standardized measurement
method for exposures included in the correlation trading
portfolio or the standardized approach for other non‐
correlation related traded securitization exposures.
5
Value at Risk (VaR) with
Multipliers (general and
specific risk)
Bank‐wide 10‐day value‐at‐risk (VaR) inclusive of all
sources of risks that are included in the value‐at‐risk
calculation. The reported value‐at‐risk should reflect
actual multipliers as of the reporting date.
6
Stressed Value‐at‐Risk
Bank‐wide 10‐day stressed value‐at‐risk (VaR) inclusive
(VaR)with Multipliers (general of all sources of risk that are included in the stressed
and specific risk)
value‐at‐risk calculation. The reported stressed value‐at‐
risk should reflect actual multipliers as of the reporting
date.
7
Incremental Risk Capital
Charge (IRC)
Risk‐weighted asset (RWA) equivalent for incremental
risk in the trading book.
8
Correlation Trading
Formula embedded in the schedule; no input required.
Page | 77
Line
Heading
Description
9
Correlation Trading;
Comprehensive Risk
Measurement (CRM), Before
Application of the Surcharge
Risk‐weighted asset (RWA) equivalent for exposures in
the correlation trading portfolio which are subject to the
comprehensive risk measurement, before the
application of the 8% surcharge based on the
standardized measurement method.
10
Formula embedded in the schedule; no input required.
Correlation Trading;
Standardized Measurement
Method (100%) for Exposures
Subject to Comprehensive
Risk Measurement (CRM)
11
Correlation Trading;
Standardized Measurement
Method (100%) for Exposures
Subject to Comprehensive
Risk Measurement (CRM);
Net Long
100% of the risk‐weighted asset (RWA) equivalent
according to the standardized measurement method for
net long exposures in the correlation trading portfolio
which are subject to the comprehensive risk
measurement.
12
Correlation Trading;
Standardized Measurement
Method (100%) for Exposures
Subject to Comprehensive
Risk Measurement (CRM);
Net Short
100% of the risk‐weighted asset (RWA) equivalent
according to the standardized measurement method for
net short exposures in the correlation trading portfolio
which are subject to the comprehensive risk
measurement.
13
Non‐modeled Securitization
Formula embedded in the schedule; no input required.
The capital charge (or risk‐weighted asset equivalent) for
non‐modeled traded securitization, including
securitization positions that are not correlation trading
positions and securitizations that are non‐modeled
correlation trading positions, is the larger of the net long
and net short positions.
For purposes of the DFAST submission, traded
securitization exposures subject to a 1250% risk weight
or the equivalent of a deduction should be captured
here by including in lines 14 and 15.
Page | 78
Line
Heading
Description
14
Non‐modeled Securitization;
Net Long
Risk‐weighted asset equivalent according to the
standardized measurement method for net long non‐
modeled securitization exposures including nth‐to‐
default credit derivatives.
For purposes of the DFAST submission, traded
securitization exposures subject to a 1250% risk weight
or the equivalent of a deduction should be included
here.
15
Non‐modeled Securitization;
Net Short
Risk‐weighted asset equivalent according to the
standardized measurement method for net short non‐
modeled securitization exposures including nth‐to‐
default credit derivatives.
For purposes of the DFAST submission, traded
securitization exposures subject to a 1250% risk weight
or the equivalent of a deduction should be included
here.
16
Other Market Risk
If the bank is unable to assign market risk‐weighted
assets to one of the above categories, they should be
reported in this line.
If no such requirements exist, 0 should be entered.
17
Total Market RWA
Formula embedded in the schedule, no input required.
18
Other Capital Requirements
Risk‐weighted assets (RWA) for other capital
requirements. If no such requirements exist, 0 should be
entered.
19
Change in Risk‐Weighted
Assets (RWA) Due to Impact
of Basel III Definition of
Capital
Impact on the risk‐weighted assets (RWA) due to
changes of Basel III definition of capital.
For purposes of DFAST 2013 submission, other
exposures (excluding traded securitization exposures)
subject to a 1250% risk weight, including securitization
exposures held in the banking book should be included
here.
20
Total Risk‐Weighted Assets
Formula embedded in the schedule; no input required.
Other
Data Completeness Check
21
If "No", please complete all
non‐shaded cells until all cells
to the right say "Yes." Do not
leave cells blank; enter "0" if
not applicable.
Check to ensure worksheet is complete. Formula
embedded in the schedule, no input required. Please
ensure that “Yes” appears across all cells.
Page | 79
Leverage Exposure Worksheet Instructions
All banks must complete the portion of the worksheet relevant to “Leverage Exposure for Tier 1
Leverage Ratio” (lines 1 ‐ 3). Advanced approaches banks must also complete the portion of the
worksheet relevant to “Leverage Exposure for Supplementary Leverage Ratio” (lines 4 ‐ 12).
The exposure measures for both leverage ratios are based upon guidance provided in the Basel
III NPR. Banks should report leverage ratio components as calculated using the average as of
quarter end for the relevant period based upon the simple arithmetic mean of exposures
calculated on a monthly basis. Banks that are unable to calculate monthly data may report
exposures as of the quarter end.
Leverage Exposure for Tier 1 Leverage Ratio (applicable to all banks)
Line
Heading
Description
1
Average Total Assets
Average total on‐balance sheet assets as reported on the
Bank’s Call Report.
2
Amounts Deducted from Tier 1
Capital (Report as Negative)
Regulatory deductions from Tier 1 capital. Deductions
from Tier 1 capital should be calculated as per the
proposed methodologies in the Basel III NPR. Input value
as a negative number.
3
Average Total Assets for
Leverage Capital Purposes
Formula embedded in the schedule; no input required.
Leverage Exposure for Supplementary Leverage Ratio (applicable to advanced approaches banking
organizations)
Line
Heading
Description
4
On‐Balance Sheet Derivatives
Total carrying value of derivatives reported on‐balance
sheet.
5
Derivatives, Potential Future
Exposure
Potential future exposure amount for each derivative
contract to which the bank is a counterparty (or each
single‐product netting set for such transactions).
6
On‐Balance Sheet Repo‐Style
Transactions
Total carrying value of repo‐style transactions (including
repurchase agreements, securities lending and borrowing
transactions, and reverse repos) reported on‐balance
sheet.
Page | 80
Leverage Exposure for Supplementary Leverage Ratio (applicable to advanced approaches banking
organizations)
Line
Heading
Description
7
Other On‐Balance Sheet Items,
(Excluding Derivatives and
Repo‐Style Transactions)
Carrying value of all other on‐balance sheet assets.
8
Off‐Balance Sheet Items
(Excluding Derivatives and
Repo‐Style Transactions)
Formula embedded in the schedule. No input required.
9
Off‐Balance Sheet Items ‐
Unconditionally Cancellable
Commitments eligible for 10%
Credit Conversion Factor
Notional amount of unconditionally cancellable
commitments made by the bank.
10
Off‐Balance Sheet Items – All
Other
Notional amount of all other off‐balance sheet exposures
of the bank (excluding derivatives and repo‐style
transactions including securities lending, securities
borrowing and reverse repurchase transactions)
11
Amounts Deducted from Tier 1
Capital (Report as Negative)
Regulatory deductions from Tier 1 capital. Deductions
from Tier 1 capital should be calculated as per the
proposed rules in the Basel III NPR. Input value as a
negative number.
12
Total Leverage Exposure for
Supplementary Leverage Ratio
Formula embedded in the schedule. No input required.
Data Completeness Check
13
Check to ensure worksheet is complete. Please ensure that
Leverage Exposure for Tier 1
Leverage Ratio (applicable to all “Yes” appears across all cells.
banks)
Page | 81
Leverage Exposure for Supplementary Leverage Ratio (applicable to advanced approaches banking
organizations)
Line
Heading
Description
14
Leverage Exposure for
Supplementary Leverage Ratio
(applicable to advanced
approaches institutions only)
Check to ensure worksheet is complete. Please ensure that
“Yes” appears across all cells.
Planned Actions Worksheet Instructions
For the purpose of completing the Planned Actions worksheets of the Basel III and Dodd‐Frank
schedule, banks should capture all material planned actions that management intends to pursue
to address the reforms of Basel III and the Dodd‐Frank Act. Such actions might include, but are
not limited to, the roll‐off or sale of an existing portfolio; development/implementation of risk‐
weighting models; data remediation to facilitate the use of lower risk weights for existing
exposures; the issuance of regulatory capital instruments; or other strategic corporate actions.
Planned actions should be attributable to a specific strategy or portfolio; banks are not expected
to cite period‐over‐period changes in the balances of exposures as a planned action unless those
changes are attributable to a specific and identifiable strategy (e.g., citing “reduction in credit
risk‐weighted assets” would not be considered a valid planned action, but citing sale or runoff of
a particular portfolio (which would have the effect of reducing credit risk‐weighted assets)
would be a valid planned action).
For each planned action, banks should provide a brief description of the action in the relevant
field of the schedule (Column B) and a more detailed description of the action in a separate
attachment. In addition, for each reporting period, banks should report the incremental
quantitative impact of each action on:
Common equity tier 1 capital
Tier 1 capital
Risk‐weighted assets (RWA)
Average Total Assets for Leverage Capital Purposes (relevant to the tier 1 leverage
ratio; to be completed by all banks)
Total Leverage Exposure for the Supplementary Leverage Ratio (to be completed by
advanced approaches banks only); and
The bank’s balance sheet.
The quantitative impact of planned actions submitted by banks should represent the stand‐
alone, incremental immediate impact of the action relevant to the time period in which it is
planned to be executed. For example, if a planned action were forecasted to reduce the bank’s
risk‐weighted assets by $200 million as of 4Q 2013 and an additional $100 million as of 4Q 2014
(for a total reduction of $300 million), the bank should report “(200)” for 4Q 2013, “(100)” for
4Q 2014, and “0” for subsequent periods. Banks are required to factor the combined
Page | 82
quantitative impact of all planned actions into the projections reported on all other relevant
worksheets of the Basel III submission.
Banks are required to provide a detailed description of each planned action in a separate
attachment(s). The description of each planned action should include:
Discussion of how each planned action aligns with the bank’s long term business
strategy and risk appetite on a going concerns basis;
Assessment of each planned action’s impact on the bank’s capital and funding needs,
earnings, and overall risk profile;
Assessment of market conditions and market capacity around each planned action
(e.g., planned sale size and the availability and appetite of buyers and other potential
sellers);
Assessment of any potential execution risks to each planned action (e.g., contractual,
accounting or structural limitations);
Discussion of any recent transactions conducted either by the bank or by other
institutions that would demonstrate or support the bank’s ability to execute each
planned action at the level of impact projected.
Included below are examples of other supporting documentation which should be included
along with the description of each planned action:
Detailed information on planned sales such as risk profile and size of the positions,
indicative term sheets and contracts; potential buyer information; current marked to
market (MTM), support for the execution price; potential associated loans, financing, or
liquidity credit support arrangements; potential buy back commitments; and impact on
any offsetting positions. If similar recent transactions have taken place, banks should
provide information as a point of reference. Banks should also describe any challenges
that may be encountered in executing the sale.
Detailed information on planned unwinds, such as risk profile and size of the positions,
profit and loss (P&L) impact at execution or in the future; funding implications; impact
on any offsetting positions; and trigger of consolidation or on‐boarding of the
underlying assets.
Detailed information on planned run‐offs, such as risk profile and size of the positions,
impact on any offsetting positions; details on trades; and maturity dates.
Detailed information on planned hedging, such as indicative term sheets and contracts;
P&L impact at execution or during life of the hedges; and impact on counterparty credit
RWA.
Detailed information on changes to risk‐weighted assets calculation methodologies,
such as which data or parameters would be changed, whether the firm has submitted
model application to its supervisors, and remaining work to be completed and expected
completion date.
Detailed information on expanded use of clearing houses, such as types of products to
be cleared and central counterparties to be used.
Banks should also provide detailed information on any alternative Basel III and Dodd‐Frank
action plans in the event the firm falls short of the targets outlined in the Capital Plan, and
trigger events that would result in a need to pursue any alternative action plans.
Page | 83
DFAST‐14A
The DFAST‐14A Planned Action worksheet collects information on all material planned actions
that management intends to pursue to address the reforms of Basel III and the Dodd‐Frank Act.
Banks are required to factor the combined quantitative impact of all planned actions into the
projections reported on all other relevant worksheets of the Basel III submission.
Column
Heading
Description
B
Description
Brief description of the planned action.
C
Action Type
Selection from a list of available actions provided
in the schedule. Banks should select the type of
action that best describes the planned action.
D
Exposure Type
Selection from a list of available exposure types
provided in the schedule. Banks should select
the type of exposure that is most impacted by
the planned action.
E
RWA Type
Selection from a list of available RWA exposure
types provided in the schedule. For planned
actions that have an impact on RWAs, the bank
should report the type of RWA (i.e., Counterparty
Credit, Other Credit, Market, or Operational) that
is most impacted by the planned action.
F‐BA
Projected impact (for periods Q4 2012‐
2017Q42017) on: Common Equity Tier 1,
Tier 1, Risk‐Weighted Assets (RWA),
Average Total Assets for Leverage Capital
Purposes, Total Leverage Exposure for
Supplementary Leverage Ratio, and
Balance Sheet
Projected incremental impact year‐over‐year on
the bank’s common equity tier 1 capital, Tier 1
capital, risk‐weighted assets, leverage exposures
and balance sheet in $Millions as of year‐end.
For Q4 2012 only, report the incremental impact
projected quarter‐over‐quarter between Q3 and
Q4 2012.
BB
Total Impact: Common Equity Tier 1
Formula embedded in the schedule; no input
required.
BC
Total Impact: Tier 1
Formula embedded in the schedule; no input
required.
BD
Total Impact: Risk‐Weighted Assets (RWA)
Formula embedded in the schedule; no input
required.
BE
Total Impact: Average Total Assets for
Leverage Capital Purposes
Formula embedded in the schedule; no input
required.
BF
Total Impact: Total Leverage Exposure for
Supplementary Leverage Ratio
Formula embedded in the schedule; no input
required.
Page | 84
Column
Heading
Description
BG
Total Impact: Balance Sheet
Formula embedded in the schedule; no input
required.
BH
Confirm detailed description of action
provided in separate attachment
Select “Yes” to confirm that your bank has
provided supporting documentation to describe
the nature of the planned action and key
assumptions factored into the action’s projected
impact.
Page | 85
| File Type | application/pdf |
| File Title | Microsoft Word - DFAST-14A_Instructions_11-15-2012.docx |
| Author | mary.gottlieb |
| File Modified | 2012-11-15 |
| File Created | 2012-11-15 |