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pdfSupporting Statement for the
Reporting, Recordkeeping, and Disclosure Requirements Associated with
Enhanced Prudential Standards (Regulation YY)
(Reg YY; OMB No. 7100-0350)
Enhanced Prudential Standards for Bank Holding Companies and
Foreign Banking Organizations
(Docket No. R-1438) (RIN 7100-AD86)
Summary
The Board of Governors of the Federal Reserve System, under delegated authority from
the Office of Management and Budget (OMB), proposes to extend for three years, with revision,
the Reporting, Recordkeeping, and Disclosure Requirements Associated with Enhanced
Prudential Standards (Regulation YY) (Reg YY; OMB No. 7100-0350). Section 165 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the
Board to implement enhanced prudential standards for bank holding companies and foreign
banking organizations with total consolidated assets of $50 billion or more. The enhanced
prudential standards include risk-based and leverage capital requirements, liquidity standards,
requirements for overall risk management (including establishing a risk committee), stress test
requirements, and debt-to-equity limits for companies that the Financial Stability Oversight
Council has determined pose a grave threat to financial stability. On March 27, 2014, the
Federal Reserve published a notice of final rulemaking in the Federal Register (79 FR 17240).
The final rule is effective on June 1, 2014.
The reporting requirements are found in sections 252.122(b)(1)(iii); 252.132(a), (b), and
(d); 252.143(a), (b), and (c); 252.144(a), (b), and (d); 252.145(a); 252.146(c)(1)(iii);
252.153(a)(3); 252.153(c)(3); 252.153(d); 252.154(a), (b), and (c); 252.157(b); 252.158(c)(1);
252.158(c)(2); and 252.158(d)(1)(ii).157 The recordkeeping requirements are found in sections
252.34(e)(3), 252.34(f), 252.34(h), 252.35(a)(7), 252.153(e)(5), 252.156(e), 252.156(g), and
252.157(a)(7). The disclosure requirements are found in section 252.153(e)(5). The annual
burden for this information collection is estimated to be 118,546 hours, an increase of 59,226
hours from the current burden of 59,320 hours. There are no required reporting forms associated
with this information collection.
Background and Justification
Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act or the Act)1 directs the Board of Governors of the Federal Reserve System (Board) to
establish prudential standards for bank holding companies with total consolidated assets of
$50 billion or more and for nonbank financial companies that the Financial Stability Oversight
Council (Council) has determined will be supervised by the Board (nonbank financial companies
supervised by the Board) in order to prevent or mitigate risks to U.S. financial stability that could
arise from the material financial distress or failure, or ongoing activities of, large, interconnected
1
Public Law 111-203, 124 Stat 1376 (2010).
financial institutions. The Dodd-Frank Act requires the enhanced prudential standards
established by the Board under section 165 of the Act to be more stringent than those standards
applicable to other bank holding companies and to nonbank financial companies that do not
present similar risks to U.S. financial stability.2 The standards must also increase in stringency
based on several factors, including the size and risk characteristics of a company subject to the
rule, and the Board must take into account the difference among bank holding companies and
nonbank financial companies based on the same factors.3 Generally, the Board has authority
under section 165 of the Act to tailor the application of the standards, including differentiating
among companies subject to section 165 on an individual basis or by category. In applying
section 165 to foreign banking organizations, the Dodd-Frank Act also directs the Board to give
due regard to the principle of national treatment and equality of competitive opportunity, and to
take into account the extent to which the foreign banking organization is subject, on a
consolidated basis, to home country standards that are comparable to those applied to financial
companies in the United States.4
The prudential standards must include enhanced risk-based and leverage capital
requirements, liquidity requirements, risk-management and risk-committee requirements,
resolution-planning requirements, single counterparty credit limits, stress-test requirements, and
a debt-to-equity limit for companies that the Council has determined pose a grave threat to the
financial stability of the United States. Section 165 also permits the Board to establish other
prudential standards in addition to the mandatory standards, including three enumerated
standards—a contingent capital requirement, enhanced public disclosures, and short-term debt
limits—and any “other prudential standards” that the Board determines are “appropriate.”
In addition, section 165(i)(1) of the Dodd-Frank Act requires the Federal Reserve to
conduct an annual stress test of each covered company to evaluate whether the covered company
has sufficient capital, on a total consolidated basis, to absorb losses as a result of adverse
economic conditions (supervisory stress tests). Section 165(i)(2) of the Dodd-Frank Act requires
the Federal Reserve to issue regulations that require covered companies to conduct stress tests
semiannually and require financial companies with total consolidated assets of more than $10
billion that are not covered companies and for which the Federal Reserve is the primary federal
financial regulatory agency to conduct stress tests on an annual basis (collectively, company-run
stress tests).
On October 12, 2012, the Federal Reserve published a notice of final rulemaking
implementing the stress testing requirements imposed by section 165(i). Under the final rules,
the Federal Reserve would conduct an annual supervisory stress test of covered companies under
three sets of scenarios, using data as of September 30 of each year as reported by covered
companies, and publish a summary of the results of the supervisory stress tests in early April of
the following year. In addition, the final rule required each covered company to conduct two
company-run stress tests each year: (1) an “annual” company-run stress test using data as of
September 30 of each year and the three scenarios provided by the Federal Reserve and (2) an
2
See 12 U.S.C. 5365(a)(1)(A).
See 12 U.S.C. 5365(a)(1)(B). Under section 165(a)(1)(B) of the Dodd-Frank Act, the enhanced prudential
standards must increase in stringency based on the considerations listed in section 165(b)(3).
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12 U.S.C. 5365(a)(2).
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additional company-run stress test using data as of March 31 of each year and three scenarios
developed by the company. The final rule required each covered company to publish the
summary of the results of its company-run stress tests within 90 days of submitting the results to
the Federal Reserve.
On February 18, 2014, the Board published a notice of final rulemaking implementing
risk management and liquidity standards for U.S. bank holding companies with total
consolidated assets of $50 billion or more and risk-based and leverage capital requirements,
liquidity standards, risk management, and stress-test requirements for foreign banking
organizations with total consolidated assets of $50 billion or more, in accordance with section
165. The final rule also established a 15-to-1 debt-to-equity limit for companies that the
Financial Stability Oversight Council has determined pose a grave threat to financial stability.
The amendments also establish risk-committee requirements and capital stress-testing
requirements for certain bank holding companies and foreign banking organizations with total
consolidated assets of $10 billion or more.
Description of Information Collection
The reporting requirements are found in section 252.156 (revised to section 252.16). The
recordkeeping requirements are found in sections 252.146(c)(1) and 252.155(c) (revised to
section 252.56(c)(1) and 252.15(c)). The disclosure requirements are found in sections 252.148
(revised to section 252.58). The Federal Reserve adopted these requirements to implement the
stress test requirements for covered companies established in the Dodd-Frank Act. Compliance
with the information collection is mandatory. No other federal law mandates these
recordkeeping and disclosure requirements.
Reporting Requirements
Section 252.156 (revised to 252.16) requires state member banks with $50 billion or
more in total consolidated assets to report the results of the stress test to the Board by March 31
of each calendar year, unless that time is extended by the Board in writing. The report must
include, under the baseline scenario, adverse scenario, and severely adverse scenario, a
description of the types of risks being included in the stress test, a summary description of the
methodologies used in the stress test, for each quarter of the planning horizon, estimates of
aggregate losses, pre-provision net revenue, provision for loan and lease losses, net income, and
regulatory capital ratios; an explanation of the most significant causes for the changes in
regulatory capital ratios; and any other information required by the Board. This requirement will
remain applicable until such time as the Board issues a reporting form to collect the results of the
stress test required under section 252.14.
Recordkeeping Requirements
Section 252.146(c)(1) (revised to section 252.56(c)(1)) requires that each covered
company must establish and maintain a system of controls, oversight, and documentation,
including policies and procedures, that are designed to ensure that its stress testing processes are
effective in meeting the requirements in Subpart F. These policies and procedures must, at a
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minimum, describe the covered company’s stress testing practices and methodologies, and
processes for validating and updating the covered institution’s stress test practices and
methodologies consistent with applicable laws, regulations, and supervisory guidance. Policies
of covered companies must describe processes for scenario development for the mid-cycle stress
test required under section 252.55.
Section 252.155(c) (revised to section 252.15(c)) requires that each bank holding
company, savings and loan holding company, or state member bank must establish and maintain
a system of controls, oversight, and documentation, including policies and procedures, that are
designed to ensure that its stress testing processes are effective in meeting the requirements in
Subpart B. These policies and procedures must, at a minimum, describe the company’s stress
testing practices and methodologies, and processes for validating and updating the company’s
stress test practices and methodologies consistent with applicable laws, regulations, and
supervisory guidance.
Disclosure Requirements
Section 252.148 (revised to section 252.58) requires a covered company to publish a
summary of the results of the stress test required under section 252.54 in the period beginning on
March 15 and ending on March 31, unless that time is extended by the Federal Reserve in
writing. A covered company must also publish a summary of the results of the stress test
required under section 252.55 in the period beginning on September 15 and ending on September
30, unless that time is extended by the Federal Reserve in writing. The information disclosed by
each covered company, at a minimum, include the following information regarding the severely
adverse scenario: (1) a description of the types of risks being included in the stress test; (2) a
general description of the methodologies used in the stress test, including those employed to
estimate losses, revenues, provision for loan and lease losses, and changes in capital positions
over the planning horizon; (3) estimates of pre-provision net revenue and other revenue;
provisions for loan and lease losses, realized losses/gains on available-for-sale and held-tomaturity securities, trading and counterparty losses, and other losses or gains; net income before
taxes; loan losses (dollar amount and as a percentage of average portfolio balance) in the
aggregate and by subportfolio, including: domestic first-lien mortgages; domestic junior lien and
home equity lines of credit; commercial and industrial loans; commercial real estate loans; credit
cards; other consumer loans; and all other loans; and regulatory capital ratios and the tier 1
common ratio; (4) an explanation of the most significant causes for the changes in regulatory
capital ratios and tier 1 common ratio; and (5) with respect to a stress test conducted by an
insured depository institution subsidiary of the covered company pursuant to subpart B of this
part 252, changes in regulatory capital ratios of the depository institution subsidiary over the
planning horizon, including an explanation of the most significant causes for the changes in
regulatory capital ratios.
Proposed Revisions
The final rule contains requirements subject to the PRA. There are no required reporting
forms associated with the information collection. Compliance with the information collection is
mandatory, and no other federal law mandates the reporting, recordkeeping, and disclosure
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requirements. The reporting requirements are found in sections 252.122(b)(1)(iii); 252.132(a),
(b), and (d); 252.143(a), (b), and (c); 252.144(a), (b), and (d); 252.145(a); 252.146(c)(1)(iii);
252.153(a)(3); 252.153(c)(3); 252.153(d); 252.154(a), (b), and (c); 252.157(b); 252.158(c)(1);
252.158(c)(2); and 252.158(d)(1)(ii). The recordkeeping requirements are found in sections
252.34(e)(3), 252.34(f), 252.34(h), 252.35(a)(7), 252.153(e)(5), 252.156(e), 252.156(g), and
252.157(a)(7).5 The disclosure requirements are found in section 252.153(e)(5). The reporting
requirements in sections 252.153(b)(2) and 252.153(e)(5) will be addressed in a separate Federal
Register notice at a later date.
Reporting Requirements
Section 252.122(b)(1)(iii) would require a foreign banking organization with total
consolidated assets of more than $10 billion but less than $50 billion or a foreign savings and
loan holding company with total consolidated assets of $10 billion or more to conduct a stress
test of its U.S. subsidiaries and report a summary of the results of the stress test to the Federal
Reserve if it does not meet does not meet the home-country stress testing standards set forth in
the rule.
Section 252.132(a) would require a foreign banking organization with a class of stock (or
similar interest) that is publicly traded and total consolidated assets of at least $10 billion but less
than $50 billion, to, on an annual basis, certify to the Federal Reserve that it maintains a
committee of its global Federal Reserve of directors (or equivalent thereof), on a standalone
basis or as part of its enterprise-wide risk committee (or equivalent thereof) that (1) oversees the
risk management policies of the combined U.S. operations of the foreign banking organization
and (2) includes at least one member having experience in identifying, assessing, and managing
risk exposures of large, complex firms.
Section 252.132(b) would require the certification to be filed on an annual basis with the
Federal Reserve concurrently with the Annual Report of Foreign Banking Organizations (FR Y7; OMB No. 7100-0297).
Section 252.132(d) would require that if a foreign banking organization subject to section
252.132(a) does not satisfy the U.S. risk committee requirements of the section, the Federal
Reserve may impose requirements, conditions, or restrictions relating to the activities or business
operations of the combined U.S. operations of the foreign banking organization. If the Federal
Reserve determines to impose one or more requirements, conditions, or restrictions, the Federal
Reserve will notify the company before it applies any requirement, condition or restriction, and
describe the basis for imposing such requirement, condition, or restriction. Within 14 calendar
days of receipt of a notification under this paragraph, the company may request in writing that
the Federal Reserve reconsider the requirement, condition, or restriction. The Federal Reserve
will respond in writing to the company’s request for reconsideration prior to applying the
requirement, condition, or restriction.
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Most of the recordkeeping requirements for Subpart D pertaining to the Liquidity Requirements have been
addressed in the Funding and Liquidity Risk Management Guidance (FR 4198; OMB No. 7100-0326). Only new
recordkeeping requirements are being addressed with the final rule.
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Section 252.143(a) would require a foreign banking organization with total consolidated
assets of $50 billion or more and combined U.S. assets of less than $50 billion to certify to the
Federal Reserve that it meets capital adequacy standards on a consolidated basis established by
its home-country supervisor that are consistent with the regulatory capital framework published
by the Basel Committee on Banking Supervision, as amended from time to time (Basel Capital
Framework). In the event that a home-country supervisor has not established capital adequacy
standards that are consistent with the Basel Capital Framework, the foreign banking organization
must demonstrate to the satisfaction of the Federal Reserve that it would meet or exceed capital
adequacy standards on a consolidated basis that are consistent with the Basel Capital Framework
were it subject to such standards.
Section 252.143(b) would require a foreign banking organization with total consolidated
assets of $50 billion or more to provide to the Federal Reserve reports relating to its compliance
with the capital adequacy measures concurrently with filing the Capital and Asset Report for
Foreign Banking Organizations (FR Y-7Q; OMB No. 7100-0125).
Section 252.143(c) would require that, if a foreign banking organization subject to
section 252.143(a) does not satisfy the home country capital requirements of the section, the
Federal Reserve may impose requirements, conditions, or restrictions, including risk-based or
leverage capital requirements, relating to the activities or business operations of the U.S.
operations of the foreign banking organization. If the Federal Reserve determines to impose one
or more requirements, conditions, or restrictions, the Federal Reserve will notify the company
before it applies any requirement, condition or restriction, and describe the basis for imposing
such requirement, condition, or restriction. Within 14 calendar days of receipt of a notification
under this paragraph, the company may request in writing that the Federal Reserve reconsider the
requirement, condition, or restriction. The Federal Reserve will respond in writing to the
company’s request for reconsideration prior to applying the requirement, condition, or
restriction.
Section 252.144(a) would require a foreign banking organization with total consolidated
assets of $50 billion or more and combined U.S. assets of less than $50 billion to, on an annual
basis, certify to the Federal Reserve that it maintains a committee of its global Federal Reserve
of directors (or equivalent thereof), on a standalone basis or as part of its enterprise-wide risk
committee (or equivalent thereof) that (1) oversees the risk management policies of the
combined U.S. operations of the foreign banking organization and (2) includes at least one
member having experience in identifying, assessing, and managing risk exposures of large,
complex firms.
Section 252.144(b) would require the certification to be filed on an annual basis with the
Federal Reserve concurrently with its FR Y-7.
Section 252.144(d) would require that if a foreign banking organization subject to
252.144(a) does not satisfy the risk committee requirements of the section, the Federal Reserve
may impose requirements, conditions, or restrictions relating to the activities or business
operations of the combined U.S. operations of the foreign banking organization. If the Federal
Reserve determines to impose one or more requirements, conditions, or restrictions under this
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paragraph, the Federal Reserve would notify the company before it applies any requirement,
condition, or restriction, and describe the basis for imposing such requirement, condition, or
restriction. Within 14 calendar days of receipt of a notification under this paragraph, the
company may request in writing that the Federal Reserve reconsider the requirement, condition,
or restriction. The Federal Reserve would respond in writing to the company’s request for
reconsideration prior to applying the requirement, condition, or restriction.
Section 252.145(a) would require a foreign banking organization with total consolidated
assets of $50 billion or more and combined U.S. assets of less than $50 billion to report to the
Federal Reserve on an annual basis the results of an internal liquidity stress test for either the
consolidated operations of the foreign banking organization or the combined U.S. operations of
the foreign banking organization.
Section 252.146(c)(1)(iii) would require a foreign banking organization with total
consolidated assets of more than $50 billion but combined U.S. assets of less than $50 billion to
conduct a stress test of its U.S. subsidiaries and report a summary of the results of the stress test
to the Federal Reserve if it does not meet does not meet the home-country stress testing standards
set forth in the rule.
Section 252.153(a)(3) would require that within 30 days of establishing or designating a
U.S. intermediate holding company, a foreign banking organization with U.S. non-branch assets
of $50 billion or more would provide to the Federal Reserve (1) a description of the U.S.
intermediate holding company, including its name, location, corporate form, and organizational
structure; (2) a certification that the U.S. intermediate holding company meets the requirements
of this subpart; and (3) any other information that the Federal Reserve determines is appropriate.
Section 252.153(c)(3) would require a foreign banking organization with U.S. nonbranch assets of $50 billion or more that seeks to use an alternative organizational structure
submit a request to the Federal Reserve 180 days before the foreign banking organization forms
a U.S. intermediate holding company. The request must include a description of why the request
should be granted and any other information the Federal Reserve may require.
Section 252.153(d)6 would require a foreign banking organization that, as of June 30,
2014, has U.S. non-branch assets of $50 billion or more, as calculated according to section
252.152(b), to, by January 1, 2015, submit to the Federal Reserve an implementation plan, unless
that time is accelerated or extended by the Federal Reserve. An implementation plan must
contain (1) a list of all U.S. subsidiaries controlled by the foreign banking organization setting
forth the ownership interest in each subsidiary and an organizational chart showing the
ownership hierarchy; (2) for each U.S. subsidiary that is a section 2(h)(2) company or a debts
previously contracted in good faith (DPC) branch subsidiary, the name, asset size, and a
description of why the U.S. subsidiary qualifies as a section 2(h)(2) or a DPC branch subsidiary;
(3) for each U.S. subsidiary for which the foreign banking organization expects to request an
exemption from the requirement to transfer all or a portion of its ownership interest in the
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This reporting requirement was added in response to a public comment received asking for further clarity on the
requirements and process for foreign banking organizations to re-organize its U.S. legal entities under one
intermediate holding company.
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subsidiary to the U.S. intermediate holding company, the name, asset size, and a description of
the reasons why the foreign banking organization intends to request that the Federal Reserve
grant it an exemption from the U.S. intermediate holding company requirement; (4) a projected
timeline for the transfer by the foreign banking organization of its ownership interest in U.S.
subsidiaries to the U.S. intermediate holding company, and quarterly pro forma financial
statements for the U.S. intermediate holding company, including pro forma regulatory capital
ratios, beginning December 31, 2015, to January 1, 2018; (5) a projected timeline for, and
description of, all planned capital actions or strategies for capital accretion that will facilitate the
U.S. intermediate holding company’s compliance with the risk-based and leverage capital
requirements set forth in paragraph (e)(2) of this section; (6) a description of the riskmanagement practices of the combined U.S. operations of the foreign banking organization and a
description of how the foreign banking organization and U.S. intermediate holding company will
come into compliance with the final rule’s requirements; and (7) a description of the current
liquidity stress testing practices of the U.S. operations of the foreign banking organization and a
description of how the foreign banking organization and U.S. intermediate holding company will
come into compliance with the final rule’s requirements. If a foreign banking organization plans
to reduce its U.S. non-branch assets below $50 billion for four consecutive quarters prior to July
1, 2016, the foreign banking organization may submit a plan that describes how it intends to
reduce its U.S. non-branch assets below $50 billion and any other information the Federal
Reserve determines is appropriate. The Federal Reserve may require a foreign banking
organization that meets or exceeds the threshold for application of this section after June 30,
2014, to submit an implementation plan containing the information described above if the
Federal Reserve determines that an implementation plan is appropriate.
Section 252.154(a) would require a foreign banking organization with total consolidated
assets of $50 billion or more and combined U.S. assets of $50 billion or more to certify to the
Federal Reserve that it meets capital adequacy standards on a consolidated basis established by
its home-country supervisor that are consistent with the regulatory capital framework published
by the Basel Committee on Banking Supervision, as amended from time to time (Basel Capital
Framework). Home country capital adequacy standards that are consistent with the Basel Capital
Framework include all minimum risk-based capital ratios, any minimum leverage ratio, and all
restrictions based on any applicable capital buffers set forth in “Basel III: A global regulatory
framework for more resilient banks and banking systems” (2010) (Basel III Accord), each as
applicable and as implemented in accordance with the Basel III Accord, including any
transitional provisions set forth therein. In the event that a home-country supervisor has not
established capital adequacy standards that are consistent with the Basel Capital Framework, the
foreign banking organization must demonstrate to the satisfaction of the Federal Reserve that it
would meet or exceed capital adequacy standards at the consolidated level that are consistent
with the Basel Capital Framework were it subject to such standards.
Section 252.154(b) would require a foreign banking organization with total consolidated
assets of $50 billion or more to provide to the Federal Reserve reports relating to its compliance
with the capital adequacy measures concurrently with filing the FR Y-7Q.
Section 252.154(c) would require that if a foreign banking organization does not satisfy
the requirements of the section, the Federal Reserve may impose requirements, conditions, or
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restrictions relating to the activities or business operations of the U.S. operations of the foreign
banking organization. If the Federal Reserve determines to impose one or more requirements,
conditions, or restrictions, the Federal Reserve would notify the company before it applies any
requirement, condition or restriction, and describe the basis for imposing such requirement,
condition, or restriction. Within 14 calendar days of receipt of a notification under this
paragraph, the company may request in writing that the Federal Reserve reconsider the
requirement, condition, or restriction. The Federal Reserve would respond in writing to the
company’s request for reconsideration prior to applying the requirement, condition, or
restriction.
Section 252.157(b) would require a foreign banking organization with combined U.S.
assets of $50 billion or more to make available to the Federal Reserve, in a timely manner, the
results of any liquidity internal stress tests and establishment of liquidity buffers required by
regulators in its home jurisdiction. The report required under this paragraph must include the
results of its liquidity stress test and liquidity buffer, if required by the laws or regulations
implemented in the home jurisdiction, or expected under supervisory guidance.
Section 252.158(c)(1) would require a foreign banking organization with combined U.S.
assets of $50 billion or more to report to the Federal Reserve by January 5 of each calendar year
summary information about its stress-testing activities and results, including the following
quantitative and qualitative information (1) a description of the types of risks included in the
stress test; (2) a description of the conditions or scenarios used in the stress test; (3) a summary
description of the methodologies used in the stress test; (4) estimates of (a) aggregate losses, (b)
pre-provision net revenue, (c) total loan loss provisions, (d) net income before taxes, and (e) pro
forma regulatory capital ratios required to be computed by the home-country supervisor of the
foreign banking organization and any other relevant capital ratios; and (5) an explanation of the
most significant causes for any changes in regulatory capital ratios.
Section 252.158(c)(2) would require that if, on a net basis, the U.S. branches and
agencies of a foreign banking organization with combined U.S. assets of $50 billion or more
provide funding to the foreign banking organization’s non-U.S. offices and non-U.S. affiliates,
calculated as the average daily position over a stress test cycle for a given year, the foreign
banking organization must report the following information to the Federal Reserve by January 5
of each calendar year: (1) a detailed description of the methodologies used in the stress test,
including those employed to estimate losses, revenues, and changes in capital positions; (2)
estimates of realized losses or gains on available-for-sale and held-to-maturity securities, trading
and counterparty losses, if applicable; and loan losses (dollar amount and as a percentage of
average portfolio balance) in the aggregate and by material sub-portfolio; and (3) any additional
information that the Federal Reserve requests.
Section 252.158(d)(1)(ii) would require a foreign banking organization with combined
U.S. assets of $50 billion or more that has not formed an IHC and that does not meet the homecountry stress testing standards set forth in the rule to conduct an annual stress test of its U.S.
subsidiaries to determine whether those subsidiaries have the capital necessary to absorb losses
as a result of adverse economic conditions and report on an annual basis a summary of the results
of that stress test of this section to the Federal Reserve that includes the qualitative and
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quantitative information required for home country supervisory stress and any other information
specified by the Federal Reserve.
Recordkeeping Requirements
Section 252.34(e)(3) would require a bank holding company with total consolidated
assets of $50 billion or more to adequately document its methodology for making cash flow
projections and the included assumptions and submit such documentation to the risk committee.
Section 252.34(f) would require a bank holding company with total consolidated assets of
$50 billion or more to establish and maintain a contingency funding plan that sets out the
company’s strategies for addressing liquidity needs during liquidity stress events. The
contingency funding plan must be commensurate with the company’s capital structure, risk
profile, complexity, activities, size, and established liquidity risk tolerance. The company must
update the contingency funding plan at least annually, and when changes to market and
idiosyncratic conditions warrant. The contingency funding plan must include specified
quantitative elements, an event management process that sets out the bank holding company’s
procedures for managing liquidity during identified liquidity stress events, and procedures for
monitoring emerging liquidity stress events. The procedures must identify early warning
indicators that are tailored to the company’s capital structure, risk profile, complexity, activities,
and size.
Section 252.34(h)(1) would require a bank holding company with total consolidated
assets of $50 billion or more to establish and maintain policies and procedures to monitor assets
that have been, or are available to be, pledged as collateral in connection with transactions to
which it or its affiliates are counterparties and sets forth minimum standards for those
procedures.
Section 252.34(h)(2) would require a bank holding company with total consolidated
assets of $50 billion or more to establish and maintain procedures for monitoring and controlling
liquidity risk exposures and funding needs within and across significant legal entities, currencies,
and business lines, taking into account legal and regulatory restrictions on the transfer of
liquidity between legal entities.
Section 252.34(h)(3) would require a bank holding company with total consolidated
assets of $50 billion or more to establish and maintain procedures for monitoring intraday
liquidity risk exposure. These procedures must address how the management of the bank
holding company will (1) monitor and measure expected daily gross liquidity inflows and
outflows, (2) manage and transfer collateral to obtain intraday credit, (3) identify and prioritize
time-specific obligations so that the bank holding company can meet these obligations as
expected and settle less critical obligations as soon as possible, (4) control the issuance of credit
to customers where necessary, and (5) consider the amounts of collateral and liquidity needed to
meet payment systems obligations when assessing the bank holding company’s overall liquidity
needs.
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Section 252.35(a)(7) would require a bank holding company with total consolidated
assets of $50 billion or more to establish and maintain policies and procedures governing its
liquidity stress testing practices, methodologies, and assumptions that provide for the
incorporation of the results of liquidity stress tests in future stress testing and for the
enhancement of stress testing practices over time. The bank holding company would establish
and maintain a system of controls and oversight that is designed to ensure that its liquidity stress
testing processes are effective in meeting the final rule’s stress testing requirements. The bank
holding company would maintain management information systems and data processes sufficient
to enable it to effectively and reliably collect, sort, and aggregate data and other information
related to liquidity stress testing.
Section 252.156(e) would require a foreign banking organization with combined U.S.
assets of $50 billion or more to establish and maintain a contingency funding plan for its
combined U.S. operations that sets out the foreign banking organization’s strategies for
addressing liquidity needs during liquidity stress events. The contingency funding plan must be
commensurate with the capital structure, risk profile, complexity, activities, size, and the
established liquidity risk tolerance for the combined U.S. operations. The foreign banking
organization must update the contingency funding plan for its combined U.S. operations at least
annually, and when changes to market and idiosyncratic conditions warrant. The contingency
funding plan must include specified quantitative elements. The contingency funding plan for a
foreign banking organization’s combined U.S. operations must include an event management
process that sets out the foreign banking organization’s procedures for managing liquidity during
identified liquidity stress events for the combined U.S. operations as set forth in the final rule.
The contingency funding plan must include procedures for monitoring emerging liquidity stress
events. The procedures must identify early warning indicators that are tailored to the capital
structure, risk profile, complexity, activities, and size of the foreign banking organization and its
combined U.S. operations.
Section 252.156(g)(1) would require a foreign banking organization with combined U.S.
assets of $50 billion or more to establish and maintain policies and procedures to monitor assets
that have been or are available to be pledged as collateral in connection with transactions to
which entities in its U.S. operations are counterparties. These policies and procedures must
provide that the foreign banking organization (1) calculates all of the collateral positions for its
combined U.S. operations on a weekly basis (or more frequently, as directed by the Federal
Reserve), specifying the value of pledged assets relative to the amount of security required under
the relevant contracts and the value of unencumbered assets available to be pledged, (2) monitors
the levels of unencumbered assets available to be pledged by legal entity, jurisdiction, and
currency exposure, (3) monitors shifts in the foreign banking organization’s funding patterns,
including shifts between intraday, overnight, and term pledging of collateral, and (4) tracks
operational and timing requirements associated with accessing collateral at its physical location
(for example, the custodian or securities settlement system that holds the collateral).
Section 252.156(g)(2) would require a foreign banking organization with combined U.S.
assets of $50 billion or more to establish and maintain procedures for monitoring and controlling
liquidity risk exposures and funding needs within and across significant legal entities, currencies,
11
and business lines for its combined U.S. operations, taking into account legal and regulatory
restrictions on the transfer of liquidity between legal entities.
Section 252.156(g)(3) would require a foreign banking organization with combined U.S.
assets of $50 billion or more to establish and maintain procedures for monitoring intraday
liquidity risk exposure for its combined U.S. operations. These procedures must address how the
management of the combined U.S. operations will (1) monitor and measure expected daily
inflows and outflows, (2) maintain, manage and transfer collateral to obtain intraday credit, (3)
identify and prioritize time-specific obligations so that the foreign banking organizations can
meet these obligations as expected and settle less critical obligations as soon as possible, (4)
control the issuance of credit to customers where necessary, and (5) consider the amounts of
collateral and liquidity needed to meet payment systems obligations when assessing the overall
liquidity needs of the combined U.S. operations.
Section 252.157(a)(7) would require a foreign banking organization with combined U.S.
assets of $50 billion or more, within its combined U.S. operations and its enterprise-wide risk
management, to establish and maintain policies and procedures governing its liquidity stress
testing practices, methodologies, and assumptions that provide for the incorporation of the results
of liquidity stress tests in future stress testing and for the enhancement of stress testing practices
over time. The foreign banking organization must establish and maintain a system of controls
and oversight that is designed to ensure that its liquidity stress testing processes are effective in
meeting the requirements of this section. The foreign banking organization must maintain
management information systems and data processes sufficient to enable it to effectively and
reliably collect, sort, and aggregate data and other information related to the liquidity stress
testing of its combined U.S. operations.
Recordkeeping and Disclosure Requirements
Section 252.153(e)(5) would require a U.S. intermediate holding company to comply
with the requirements of subparts E and F of 12 CFR part 252 and any successor regulation in
the same manner as a bank holding company.
Other Changes
The following subparts have been renumbered, no content has been changed. “Subpart F
– Supervisory Stress Test Requirements for Covered Companies” is now “Subpart E –
Supervisory Stress Test Requirements for U.S. Bank Holding Companies with $50 Billion or
More in Total Consolidated Assets and Nonbank Financial Companies Supervised by the
Board.” “Subpart G – Company-Run Stress Test Requirements for Covered Companies” is now
“Subpart F – Company-Run Stress Test Requirements for U.S. Bank Holding Companies with
$50 Billion or More in Total Consolidated Assets and Nonbank Financial Companies Supervised
by the Board.” “Subpart H – Company-Run Stress Test Requirements for Banking
Organizations With Total Consolidated Assets Over $10 Billion That Are Not Covered
Companies” is now “Subpart B – Company-Run Stress Test Requirements for Certain U.S.
Banking Organizations with Total Consolidated Assets Over $10 Billion and less than $50
Billion.”
12
Time Schedule for Information Collection
The information collection pursuant to the reporting requirements mandates that a state
member banks with $50 billion or more in total consolidated assets report the results of the stress
test to the Board by March 31 of each calendar year. The information collection pursuant to the
recordkeeping requirements is event-generated and must be maintained on sight. The
information collection pursuant to the disclosure requirements mandates that a covered company
publish a summary of the results of the stress test (1) in the period beginning on March 15 and
ending on March 31 and (2) in the period beginning on September 15 and ending on September
30.
Legal Status
The Board’s Legal Division has determined that this information collection is required by
sections 162, 165, 167, and 168 of the Dodd-Frank Act (12 U.S.C. § 5362, 5365, 5367, and
5368), section 9 of the Federal Reserve Act (12 U.S.C. § 321 - 338a), section 5(b) of the Bank
Holding Company Act (12 U.S.C. § 1844(b)), section 10(g) of the Home Owners’ Loan Act
(12 U.S.C. § 1467a(g)), sections 8 and 39 of the Federal Deposit Insurance Act (12 U.S.C. §
1818(b) and 1831p–1), the International Banking Act (12 U.S.C. § 3101), and the Foreign Bank
Supervision Enhancement Act (12 U.S.C. § 3101 note). The data are regarded as confidential
under the Freedom of Information Act until the institution discloses certain information to the
public (5 U.S.C. §§ 552(b)(4) and (b)(8)).
Consultation Outside the Agency
The Federal Reserve invited comment on two separate proposals to implement the
enhanced prudential standards included in the final rule. On January 5, 2012, the Federal
Reserve invited comment on its domestic proposal (77 FR 594), and on December 28, 2012, the
Federal Reserve invited comment its foreign proposal (77 FR 76628). The Federal Reserve
received over 100 public comments on the domestic proposal, and over 60 public comments on
the foreign proposal, from U.S. and foreign firms, public officials (including members of
Congress), public interest groups, private individuals, and other interested parties. While many
commenters expressed support for the broad goals of the proposed rules, some commenters
criticized specific aspects of the proposals. The final rule makes adjustments to the proposed
rules that respond to commenters’ concerns. Major changes from the proposals are discussed in
detail in the final rule. The Federal Reserve did not receive any specific comments on the PRA
in response to the proposals; however, a number of commenters expressed general concern about
the amount of burden. On March 27, 2014, the Federal Reserve published a notice of final
rulemaking in the Federal Register (79 FR 17240) with a request for public comment on PRA
estimates only. The comment period expired on May 27, 2014, and the final rule became
effective on June 1, 2014. The Federal Reserve did not receive any comments on the PRA
estimates in the final rule.
The Federal Reserve consulted with all Council members and member agencies,
including those that primarily supervise a functionally regulated subsidiary or depository
institution subsidiary of a bank holding company or foreign banking organization subject to the
13
proposals by providing periodic updates to agencies represented on the Council and their staff on
the development of the final rule. The final rule reflects comments provided to the Federal
Reserve as a part of this consultation process. The Council has not made any formal
recommendations under section 115 of the Dodd-Frank Act to date.
Estimate of Respondent Burden
The current annual burden for Reg YY is estimated to be 59,320 hours. The proposed
reporting, recordkeeping, and disclosure requirements would increase the estimated annual
burden hours by 59,226 hours as shown in the tables below. The Reg YY reporting,
recordkeeping, and disclosure requirements represent less than 1 percent of the total Federal
Reserve System paperwork burden.
Number of
respondents
Reg YY
Current
Initial Set-Up
Subpart G - Section 252.146c1
Recordkeeping
Subpart G - Section 252.148
Disclosure
Subpart H- Section 252.155c
Recordkeeping
Subpart H - Section 252.156
Reporting
Total Initial Set-Up
Ongoing
Subpart G - Section 252.146c1
Recordkeeping
Subpart G - Section 252.148
Disclosure
Subpart H- Section 252.155c
Recordkeeping
Subpart H - Section 252.156
Reporting
Total Ongoing
Annual
frequency
Estimated
average hours
per response
Estimated
annual burden
hours
34
1
280
9,520
34
2
200
13,600
99
1
240
23,760
6
1
200
1,200
48,080
34
1
40
1,360
34
2
80
5,440
99
1
40
3,960
6
1
80
480
11,240
Total
59,320
14
Reg YY
Proposed
Initial Set-Up
Subpart B - Section 252.15c
Recordkeeping
Subpart B - Section 252.16
Reporting
Subpart D - Sections 252.34e3,
.34f, .34h, and .35a7
Recordkeeping
Subpart F - Section 252.56c1
Recordkeeping
Subpart F - Section 252.58
Disclosure
Subpart O - Section 252.153d
Reporting
Subpart O - Section 252.153e5
Recordkeeping
Subpart O - Section 252.153e5
Disclosure
Subpart O - Section 252.156e,
.156g, and .157a7
Recordkeeping
Total Initial Set-Up
Ongoing
Subpart B - Section 252.15c
Recordkeeping
Subpart B - Section 252.16
Reporting
Subpart D- Sections 252.34e3,
.34f, .34h, and .35a7
Recordkeeping
Subpart F - Section 252.56c1
Recordkeeping
Subpart F - Section 252.58
Disclosure
Subpart L - Section 252.122b1iii
Reporting
Number of
respondents7
Annual
frequency
Estimated
average
hours
per response
Estimated
annual burden
hours
99
1
240
23,760
6
1
200
1,200
24
1
160
3,840
34
1
280
9,520
34
2
200
13,600
17
1
750
12,750
17
1
280
4,760
17
2
200
6,800
24
1
160
3,840
80,070
99
1
40
3,960
6
1
80
480
24
1
200
4,800
34
1
40
1,360
34
2
80
5,440
2
1
80
160
7
Of these respondents, none are small entities as defined by the Small Business Administration (i.e., entities with
less than $550 million in total assets) www.sba.gov/content/table-small-business-size-standards.
15
Subpart M - Section 252.132a, b
Reporting
Subpart M - Section 252.132d
Reporting
Subpart N - Section 252.143a, b
Reporting
Subpart N - Section 252.143c
Reporting
Subpart N - Section 252.144a, b
Reporting
Subpart N - Section 252.144d
Reporting
Subpart N - Section 252.145a
Reporting
Subpart N - Section 252.146c1iii
Reporting
Subpart O - Section 252.153a3
Reporting
Subpart O - Section 252.153c3
Reporting
Subpart O - Section 252.153e5
Recordkeeping
Subpart O - Section 252.153e5
Disclosure
Subpart O - Section 252.154a, b
Reporting
Subpart O - Section 252.154c
Reporting
Subpart O - Section 252.156e,
.156g, and .157a7
Recordkeeping
Subpart O - Section 252.157b
Reporting
Subpart O - Section 252.158c1
Reporting
Subpart O - Section 252.158c2
Reporting
Subpart O - Section 252.158d1iii
Reporting
Total Ongoing
8
1
1
8
2
1
10
20
102
1
1
102
2
1
10
20
102
1
1
102
2
1
10
20
102
1
50
5,100
5
1
80
400
17
1
20
340
15
1
160
2,400
17
1
40
680
17
2
80
2,720
24
1
1
24
2
1
10
20
24
1
200
4,800
24
4
40
3,840
24
1
40
960
10
1
40
400
4
1
80
320
38,476
Total
118,546
Change
59,226
16
The total cost to the public is estimated to increase from the current level of $3,069,810 to
$6,134,756 for the revised Reg YY.8
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 is negligible.
8
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 $17, 45% Financial Managers at
$63, 15% Lawyers at $64, and 10% Chief Executives at $87). 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 2014, published March 25, 2015, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.
17
| File Type | application/pdf |
| File Modified | 2015-11-25 |
| File Created | 2015-11-25 |