FFIEC102_20150225_omb

Supporting Statement for the
Market Risk Regulatory Report for Institutions Subject to the Market Risk Capital Rule
(FFIEC 102; OMB No. to be assigned)
Summary
The Board of Governors of the Federal Reserve System (Federal Reserve) requests
approval from the Office of Management and Budget (OMB) to implement the proposed
mandatory quarterly Federal Financial Institutions Examination Council (FFIEC) Market Risk
Regulatory Report for Institutions Subject to the Market Risk Capital Rule (FFIEC 102; OMB
No. to be assigned). The FFIEC, of which the Federal Reserve, the Federal Deposit Insurance
Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) (the agencies) are
members, adopted revised regulatory capital rules in July 2013 (revised regulatory capital rules).1
The proposed FFIEC 102 reflects those rules and would collect key information from
respondents on how they measure and calculate market risk under the agencies’ revised
regulatory capital rules. The proposed FFIEC 102 reporting requirements would take effect as of
March 31, 2015, for institutions subject to the market risk capital rule as incorporated into
Subpart F of the revised regulatory capital rules (market risk capital rule).2 The FDIC and the
OCC also are submitting a similar request for OMB review for institutions under their
supervision.
Each market risk institution would be required to file the FFIEC 102 for the agencies’ use
in assessing the reasonableness and accuracy of the institution’s calculation of its minimum
capital requirements under the market risk capital rule and in evaluating the institution’s capital
in relation to its risks. Additionally, the market risk information collected in the FFIEC 102
would (1) permit the agencies to monitor the market risk profile of and evaluate the impact and
competitive implications of the market risk capital rule on individual market risk institutions and
the industry as a whole; (2) provide the most current statistical data available to identify areas of
market risk on which to focus for onsite and offsite examinations; (3) allow the agencies to
assess and monitor the levels and components of each reporting institution’s risk-based capital
requirements for market risk and the adequacy of the institution’s capital under the market risk
capital rule; and (4) assist market risk institutions to implement and validate the market risk
framework. In the Federal Reserve’s case, state member banks (SMBs), bank holding companies
(BHCs), and savings and loan holding companies (SLHCs) subject to the market risk rules would
be required to file the FFIEC 102.

1

The agencies approved and issued the revised regulatory capital rules in July 2013. The Federal Reserve and the
OCC published the revised regulatory capital rules in the Federal Register on October 11, 2013. See 78 FR 62018.
The FDIC published a revised regulatory capital interim final rule and a final rule with no substantive changes in the
Federal Register on September 10, 2013, and April 14, 2014, respectively. See 78 FR 55340 and 79 FR 20754.
2
See 12 C.F.R. § 3.201 (OCC); 12 C.F.R. § 217.201 (Federal Reserve); and 12 C.F.R. § 324.201 (FDIC). The
market risk capital rule generally applies to any banking institution with aggregate trading assets and trading
liabilities equal to (a) 10 percent or more of quarter-end total assets or (b) $1 billion or more. The statutory
provisions that grant the agencies the authority to impose capital requirements are 12 U.S.C. § 161 (national banks),
12 U.S.C. § 324 (state member banks), 12 U.S.C. § 1844(c) (bank holding companies), 12 U.S.C. § 1467a(b)
(savings and loan holding companies), 12 U.S.C. § 1817 (insured state nonmember commercial and savings banks),
and 12 U.S.C. § 1464 (savings associations).

The Federal Reserve’s total annual burden for this information collection is estimated to
be 1,296 hours for the 27 Federal Reserve regulated respondents that meet the reporting criteria.
Copies of the draft reporting forms and instructions are available on the FFIEC website at
www.ffiec.gov/ffiec_report_forms.htm.
Background and Justification
In July 2013, the agencies adopted amendments to their capital rules, including the
market risk capital rule. The revised market risk capital rule took effect on January 1, 2015, and
contains requirements for the public disclosure of certain information at the consolidated banking
organization level as well as certain additional regulatory reporting by insured depository
institutions (IDIs), BHCs, and SLHCs (BHCs and SLHCs are collectively referred to as “holding
companies” (HCs)).
Those IDIs and HCs that were subject to the agencies’ prior market risk capital rule have
provided the amount of their market risk equivalent assets in reports, such as the Consolidated
Reports of Condition and Income (Call Report) (FFIEC 031 and FFIEC 041; OMB No. 71000036) or the Consolidated Financial Statements for Holding Companies (FR Y-9C; OMB No.
7100-0128), as applicable. These regulatory reporting requirements reveal the end result of the
market risk calculations but do not include the key components of the measurement of market
risk. The agencies are proposing the expanded uniform regulatory reporting requirements in
order to assess the reasonableness and accuracy of a market risk institution’s calculation of its
minimum capital requirements under the market risk capital rule and to evaluate a market risk
institution’s capital in relation to its risks. Importantly, the FFIEC 102 would allow the agencies
to better track growth in more credit-risk related, less liquid, and less actively traded products
subject to the market risk capital rule. Historically, the risks of these products have been difficult
to capture and measure. These reports are designed to help the agencies in ensuring that these
risks are adequately identified and their impact appropriately reflected in assessments of the
safety and soundness of market risk institutions.
In this regard, the reported data would improve the agencies’ ability to monitor the levels
of, and trends in, the components that comprise the market risk measure under the market risk
capital rule within and across market risk institutions. Such component reporting would allow
supervisors to better understand on an ongoing basis model-implied diversification benefits for
individual market risk institutions. The data would also enhance the agencies’ ability to perform
institution-to-institution comparisons of the drivers underlying market risk institutions’ measures
for market risk, identify potential outliers through market risk institution-to-peer comparisons,
track these drivers over time relative to trends in other risk indicators at market risk institutions,
and focus onsite examination efforts.
Description of Information Collection
The FFIEC 102 regulatory reporting requirements would apply on a consolidated basis to
each HC and each IDI that is required to calculate its risk-based capital using the market risk
capital rule. Reporting HCs and IDIs would submit reports quarterly in line with efforts to
monitor market risk institutions’ progress toward, and actions under, the market risk capital rule,

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which requires regular and consistent reports from all market risk institutions. The FFIEC 102
shows the data elements within the market risk exposure class that would be reported under the
market risk capital rule.
The FFIEC 102 is subdivided into several sections and memoranda. The sum of the data
reported in each of the sections would be used to calculate a market risk institution’s riskweighted assets (RWAs) for market risk. The first section contains data elements relating to a
market risk institution’s approved regulatory market risk models, including details of value-atrisk (VaR)-based measures (for the previous day’s VaR measure and the average over the
preceding 60 business days). The second section is similar in structure to the first section except
that it includes information on a market risk institution’s stressed VaR-based measures. The
third section contains data elements relating to specific risk add-ons based on a market risk
institution’s debt, equity and non-modeled securitization positions. Securitization positions
would be broken out for all market risk institutions and for advanced approaches institutions that
are also market risk institutions, resulting in the separate reporting of a standardized measure and
an advanced measure for specific risk. The fourth section sets forth the data for the incremental
risk capital requirement. The fifth section contains data on the comprehensive risk capital
measurement including the specific risk add-ons for net long and net short correlation trading
positions used in determining a market risk institution’s standardized comprehensive risk
measure, and as applicable, its advanced comprehensive risk measure. The remaining section
contains data elements for de minimis positions. Data elements from these sections combine to
produce standardized market RWAs, and as applicable, advanced approaches market RWAs.
The FFIEC 102 also has a Memoranda section that is comprised of 22 line items.
Because these line items do not directly contribute to the determination of market RWAs, they
would be reported in the separate Memoranda section. The agencies believe that these items
would provide additional insight into the risk profile of a market risk institution’s trading
activity. For example, the first twelve lines of the Memoranda section would contribute to the
agencies’ understanding of the degree to which diversification effects across the principal market
risk drivers are material.
The agencies considered several tradeoffs between the reporting burden on market risk
institutions and the information needs of bank supervisors. One issue that the agencies identified
was that market risk institutions have exposures in certain products that might fit into more than
one of the specified risk categories (e.g., interest rate, equity, foreign exchange, commodities,
and credit). For example, convertible securities will mostly be subject to interest rate risk unless
their value converges with that of the underlying equity. Similarly, foreign exchange swaps are
primarily interest rate positions, but it is possible that a market risk institution might classify
some as subject to foreign exchange risk. Accordingly, for purposes of reporting the VaR- or
stressed VaR-based measures on the FFIEC 102, market risk institutions may classify their
exposures in the same risk categories in which they are reported internally. Similarly, for
purposes of reporting on the proposed FFIEC 102, the agencies have defined diversification
benefit as any adjustment to VaR- or stressed VaR-based measures that a market risk institution
makes to reflect the absence of a perfect statistical correlation between the values of the
underlying positions. The agencies also recognize that some market risk institutions may not
adjust for diversification benefits in their VaR- or stressed VaR-based estimates, and in that case

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a market risk institution would not be required to estimate such benefits for purposes of reporting
on the FFIEC 102.
Time Schedule for Information Collection and Publication
The FFIEC 102 would be collected on a quarterly basis as of the last calendar day of
March, June, September, and December. The report due dates would coincide with the report
due dates currently required of IDIs and HCs when filing their respective Call Reports or FR Y9C reports, as applicable. Market risk institutions would begin reporting effective with the
March 31, 2015, report date. The data submitted on the FFIEC 102 would be shared among the
three agencies and made available to the public.
Legal Status
With respect to BHCs, Section 5(c) of the Bank Holding Company Act, 12 U.S.C. §
1844(c), authorizes the Federal Reserve to require a BHC and any subsidiary “to keep the
Federal Reserve informed as to (i) its financial condition, [and] systems for monitoring and
controlling financial and operating risks … .” Section 9(6) of the Federal Reserve Act, 12
U.S.C. § 324, requires SMBs to make reports of condition to their supervising Reserve Bank in
such form and containing such information as the Federal Reserve may require. Finally, with
respect to SLHCs, under Section 312 of the Dodd-Frank Act, 12 U.S.C. § 5412, the Federal
Reserve succeeded to all powers and authorities of the U.S. Treasury Department’s Office of
Thrift Supervision and its Director, including the authority to require SLHCs to “file … such
reports as may be required … in such form and for such periods as the [agency] may prescribe.”
12 U.S.C. § 1467a(b)(2). The Federal Reserve is therefore authorized to collect this information.
The obligation to respond to this information request is mandatory.
The market risk data collected would be publicly available and so subject to public
disclosure under the Freedom of Information Act (FOIA), 5 U.S.C. § 552(b). Reporting
institutions could request confidential treatment for such data under FOIA exemption 4, 5 U.S.C.
§ 552(b)(4). As required information, the data may be withheld under Exemption 4 only if the
public disclosure could result in substantial competitive harm to the submitting institution, under
National Parks & Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974).
Confidential treatment may be accorded such information under this standard, on a case-by-case
basis, and in response to specific requests.
Consultation Outside the Agency and Discussion of Public Comments
On September 2, 2014, the agencies published an initial Federal Register notice (79 FR
52108) and requested public comment for 60 days on the implementation of the FFIEC 102. The
comment period expired on November 3, 2014. The agencies received one comment requesting
clarification of the calculation of items pertaining to the comprehensive risk capital requirement.
The agencies have updated the relevant items on the reporting form and instructions to align with
the calculation methodology for the comprehensive risk capital requirement in the market risk
capital rule.

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On February 18, 2015, the agencies published a final Federal Register notice (80 FR
8760) with an additional 30-day comment period. The comment period expires on March 20,
2015.
Estimate of Respondent Burden
The total annual burden for FFIEC 102 is estimated to be 1,296 hours. The Federal
Reserve estimates that, on average, it would take each respondent 12 hours to provide the data
each quarter. This reporting burden represents less than 1 percent of the total Federal Reserve
System paperwork burden.

FFIEC 102

Number of
respondents3

Annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

27

4

12 hours

1,296

The estimated cost to the public for this information collection is $65,966.4
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The cost to the Federal Reserve System for collecting and processing the FFIEC 102 is
estimated to be $100,000 per year. The one-time cost to implement the report is estimated to be
$300,000.

3

Of these respondents, none are considered a small entity as defined by the Small Business Administration (i.e.,
entities with $550 million or less in total assets). www.sba.gov/content/small-business-size-standards.
4
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $18, 45% Financial Managers at
$61, 15% Lawyers at $63, and 10% Chief Executives at $86). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2013, published April 1, 2014, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using the
BLS Occupational Classification System, www.bls.gov/soc/.

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