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pdfSupporting Statement for the
Reporting, Recordkeeping, and Disclosure Requirements Associated with Regulation YY
(FR YY; OMB No. 7100-0350)
Total Loss-Absorbing Capacity, Long-Term Debt, and Clean Holding Company Requirements
for Systemically Important U.S. Bank Holding Companies and
Intermediate Holding Companies of Systemically Important Foreign Banking Organizations
(Docket No. R-1523) (RIN 7100-AE37)
Summary
The Board of Governors of the Federal Reserve System (Board), 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
Regulation YY (FR 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
Regulation YY - 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.
The Board is proposing to revise FR YY by requiring new reporting and disclosure
requirements for systemically important U.S. bank holding companies and intermediate holding
companies of systemically important foreign banking organizations. The annual burden for this
information collection is estimated to be 118,842 hours, an increase of 296 hours from the
current burden of 118,546 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 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 financial institutions. The DoddFrank 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
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2
Public Law 111-203, 124 Stat 1376 (2010).
See 12 U.S.C. 5365(a)(1)(A).
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 Board 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 Board
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 Board 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 Board published a final rule implementing the stress testing
requirements imposed by section 165(i). Under the final rules, the Board 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 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 Board.
On March 27, 2014, the Board published a final rule 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
3
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).
4
See 12 U.S.C. 5365(a)(2).
2
$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 252.16; 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
252.15(c); 252.34(e)(3), 252.34(f), 252.34(h), and 252.35(a)(7); 252.56(c)(1); 252.153(e)(5); and
252.156(e), 252.156(g), and 252.157(a)(7). The disclosure requirements are found in sections
252.58 and 252.153(e)(5). No other federal law mandates these reporting, recordkeeping, and
disclosure requirements.
Reporting Requirements
Section 252.16 requires a state member bank that is a covered company subsidiary and a
savings and loan holding company that has average total consolidated assets of $50 billion or
more to report the results of the stress test to the Board by April 5, unless that time is extended
by the Board in writing and a state member bank that is not a covered company subsidiary, a
bank holding company, and a savings and loan holding company with average total consolidated
assets of less than $50 billion must report the results of the stress test to the Board by July 31,
unless that time is extended by the Board in writing. The report must include the following
information for the baseline scenario, adverse scenario, severely adverse scenario, and any other
scenario (1) a description of the types of risks being included in the stress test, (2) a summary
description of the methodologies used in the stress test, (3) 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, (4) an explanation of the most significant causes
for the changes in regulatory capital ratios, and (5) any other information required by the Board.
Section 252.122(b)(1)(iii) requires a foreign banking organization with total consolidated
assets of more than $10 billion but less than $50 billion and a foreign savings and loan holding
company with total consolidated assets of more than $10 billion to conduct a stress test of its
U.S. subsidiaries and report a summary of the results of the stress test to the Board if it does not
meet does not meet the home-country stress testing standards set forth in the rule.
Section 252.132(a) requires 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 Board that it maintains a committee of its
global board of directors (or equivalent thereof), on a standalone basis or as part of its enterprisewide 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
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member having experience in identifying, assessing, and managing risk exposures of large,
complex firms.
Section 252.132(b) requires the certification to be filed on an annual basis with the Board
concurrently with the Annual Report of Foreign Banking Organizations (FR Y-7; OMB No.
7100-0297).
Section 252.132(d) requires that if a foreign banking organization does not satisfy the
U.S. risk committee certification, the Board may impose requirements, conditions, or restrictions
relating to the activities or business operations of the combined U.S. operations of the foreign
banking organization. The Board will coordinate with any relevant State or Federal regulator in
the implementation of such requirements, conditions, or restrictions. If the Board determines to
impose one or more requirements, conditions, or restrictions, the Board 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 Board reconsider the
requirement, condition, or restriction. The Board will respond in writing to the company’s
request for reconsideration prior to applying the requirement, condition, or restriction.
Section 252.143(a) requires 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 Board
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 Framework 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 Board 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) requires a foreign banking organization with total consolidated assets
of $50 billion or more and combined U.S. assets of less than $50 billion to provide to the Board
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) requires that if a foreign banking organization does not satisfy the
home country capital requirements, the Board 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 Board
determines to impose one or more requirements, conditions, or restrictions, the Board will notify
the company before it applies any requirement, condition, or restriction, and describe the basis
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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 Board reconsider
the requirement, condition, or restriction. The Board will respond in writing to the company’s
request for reconsideration prior to applying the requirement, condition, or restriction.
Section 252.144(a) requires 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 Board that it maintains a committee of its global board 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) requires the certification to be filed on an annual basis with the Board
concurrently with its FR Y-7.
Section 252.144(d) requires that if a foreign banking organization does not satisfy the
U.S. risk committee certification, the Board may impose requirements, conditions, or restrictions
relating to the activities or business operations of the combined U.S. operations of the foreign
banking organization. The Board will coordinate with any relevant State or Federal regulator in
the implementation of such requirements, conditions, or restrictions. If the Board determines to
impose one or more requirements, conditions, or restrictions under this paragraph, the Board 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 Board
reconsider the requirement, condition, or restriction. The Board will respond in writing to the
company’s request for reconsideration prior to applying the requirement, condition, or
restriction.
Section 252.145(a) requires 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 Board 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. Such liquidity stress test must be conducted consistently with the Basel Committee
principles for liquidity risk management and must incorporate 30-day, 90-day, and one-year
stress-test horizons. The “Basel Committee principles for liquidity risk management” means the
document titled “Principles for Sound Liquidity Risk Management and Supervision” (September
2008) as published by the Basel Committee on Banking Supervision, as supplemented and
revised from time to time.
Section 252.146(c)(1)(iii) requires a foreign banking organization with total consolidated
assets of more than $50 billion and 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
Board if it does not meet does not meet the home-country stress testing standards set forth in the
rule.
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Section 252.153(a)(3) requires 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 to provide to the Board (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 Board determines is appropriate.
Section 252.153(c)(3) requires that a request to establish or designate multiple U.S.
intermediate holding companies must be submitted to the Board 180 days before the foreign
banking organization must form a U.S. intermediate holding company. A request not to transfer
any ownership interest in a subsidiary must be submitted to the Board either 180 days before the
foreign banking organization acquires the ownership interest in such U.S. subsidiary, or in a
shorter period of time if permitted by the Board. The request must include a description of why
the request should be granted and any other information the Board may require.
Section 252.153(d) requires a foreign banking organization to submit by January 1, 2015,
an implementation plan to the Board, if the sum of the total consolidated assets of the U.S.
subsidiaries of the foreign banking organization, in aggregate, exceed $50 billion as of June 30,
2014 (excluding any section 2(h)(2) company and debt previously contracted (DPC) branch
subsidiary and reduced by amounts corresponding to balances and transactions between a top-tier
U.S. subsidiary and any other top-tier U.S. subsidiary (excluding any 2(h)(2) company or DPC
branch subsidiary) to the extent such items are not already eliminated in consolidation). The
Board may accelerate or extend the date by which the implementation plan must be filed. 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 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 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 Board 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 risk-management 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-
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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. nonbranch assets below $50 billion and any other information the Board determines is appropriate.
The Board 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 Board determines that an implementation plan is appropriate.
Section 252.154(a) requires a foreign banking organization with combined U.S. assets of
$50 billion or more to certify to the Board 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 Board 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) requires a foreign banking organization with combined U.S. assets of
$50 billion or more to provide to the Board reports relating to its compliance with the capital
adequacy measures concurrently with filing the FR Y-7Q.
Section 252.154(c) requires that if a foreign banking organization does not satisfy the
requirements of the section, the Board may impose requirements, conditions, or restrictions
relating to the activities or business operations of the U.S. operations of the foreign banking
organization. The Board will coordinate with any relevant State or Federal regulator in the
implementation of such requirements, conditions, or restrictions. If the Board determines to
impose one or more requirements, conditions, or restrictions, the Board 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 Board reconsider the
requirement, condition, or restriction. The Board will respond in writing to the company’s
request for reconsideration prior to applying the requirement, condition, or restriction.
Section 252.157(b) requires a foreign banking organization with combined U.S. assets of
$50 billion or more to make available to the Board, 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.
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Section 252.158(c)(1) requires a foreign banking organization with combined U.S. assets
of $50 billion or more to report to the Board by January 5 of each calendar year, unless such date
is extended by the Board, 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 homecountry 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) requires 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 Board by January 5 of each calendar year, unless
such date is extended by the Board, (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 Board requests.
Section 252.158(d)(1)(ii) requires a foreign banking organization with combined U.S.
assets of $50 billion or more that has not established a U.S. IHC and that does not meet the
home-country 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 Board that includes the qualitative and quantitative
information required for home country supervisory stress and any other information specified by
the Board.
Recordkeeping Requirements
Section 252.15(c) requires that senior management of a 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.
Section 252.34(e)(3) requires 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.
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Section 252.34(f) requires 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) requires 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) requires 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) requires 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) manage 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.
Section 252.35(a)(7) requires 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. A bank holding company 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 final rule’s stress testing requirements. A bank holding company 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 liquidity stress testing.
Section 252.56(c)(1) requires senior management of a covered company to 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
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requirements in Subpart F. These policies and procedures must, at a 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 252.153(e)(5) requires a U.S. intermediate holding company to comply with the
requirements of subparts E and F of 12 CFR part 252 in the same manner as a bank holding
company.
Section 252.156(e) requires 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. 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) requires 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 Board), 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) requires 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 of its combined U.S. operations, 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.
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Section 252.156(g)(3) requires 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) requires 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.
Disclosure Requirements
Section 252.58 requires a covered company to publicly disclose a summary of the results
of the stress test required under section 252.54 within the period that is 15 calendar days after the
Board discloses the results of its supervisory stress test of the covered company, unless that time
is extended by the Board in writing. A covered company must publicly disclose a summary of
the results of the stress test required under section 252.55. This disclosure must occur in the
period beginning on October 5 and ending on November 4 of the calendar year in which the
stress test is performed, unless that time is extended by the Board in writing. The summary may
be disclosed on the website of a covered company, or in any other forum that is reasonably
accessible to the public. The summary results must, at a minimum, contain the following
information regarding the severely adverse scenario (1) a description of the types of risks
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 or gains on available-forsale and held-to-maturity 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 closed-end first-lien
mortgages; domestic junior lien mortgages and home equity lines of credit; commercial and
industrial loans; commercial real estate loans; credit card exposures; other consumer loans; and
all other loans; and pro forma regulatory capital ratios and any other capital ratios specified by
the Board; (4) an explanation of the most significant causes for the changes in regulatory capital
11
ratios; and (5) with respect to any depository institution subsidiary that is subject to stress testing
requirements pursuant to 12 U.S.C. 5365(i)(2), as implemented by subpart B of this part, 12 CFR
part 46 (OCC), or 12 CFR part 325, subpart C (FDIC), changes over the planning horizon in
regulatory capital ratios and any other capital ratios specified by the Board and an explanation of
the most significant causes for the changes in regulatory capital ratios.
Section 252.153(e)(5) requires a U.S. intermediate holding company to comply with the
requirements of subparts E and F of 12 CFR part 252 in the same manner as a bank holding
company.
Proposed Revisions
Section 165 of the Dodd-Frank Act requires the Board to implement enhanced prudential
standards for bank holding companies with total consolidated assets of $50 billion or more,
including global systemically important foreign banking organizations with $50 billion or more
in U.S. non-branch assets. Section 165 of the Dodd-Frank Act also permits the Board to establish
such other prudential standards for such banking organizations as the Board determines are
appropriate.
On January 24, 2017, the Board published a final rule (82 FR 8266). The final rule
became effective on March 27, 2017. The final rule established that a U.S. top-tier bank holding
company identified under the Board’s rules as a global systemically important bank holding
company (covered BHC) to maintain outstanding a minimum amount of loss-absorbing
instruments, including a minimum amount of unsecured long-term debt. In addition, the final
rule prescribed certain additional buffers, the breach of which resulted in limitations on the
capital distributions and discretionary bonus payments of a covered BHC. The final rule applied
similar requirements to the top-tier U.S. intermediate holding company of a global systemically
important foreign banking organization with $50 billion or more in U.S. nonbranch assets
(covered IHC). The final rule also imposed restrictions on other liabilities that a covered BHC or
covered IHC may have outstanding in order to improve their resolvability and resiliency; these
restrictions are referred to in the final rule as “clean holding company requirements.” The final
rule contains requirements subject to the Paperwork Reduction Act (PRA). The reporting
requirements are found in sections 252.153(b)(5) and 252.164 and the disclosure requirements
are found in sections 252.65 and 252.167.
Reporting Requirements
Section 252.153(b)(5) requires each top-tier foreign banking organization that controls a
U.S. intermediate holding company to submit to the Board by January 1 of each calendar year
through the U.S. intermediate holding company (1) notice of whether the home country
supervisor (or other appropriate home country regulatory authority) of the top-tier foreign
banking organization of the U.S. intermediate holding company has adopted standards consistent
with the global methodology and (2) notice of whether the top-tier foreign banking organization
prepares or reports the indicators used by the global methodology to identify a banking
organization as a global systemically important banking organization and, if it does, whether the
12
top-tier foreign banking organization has determined that it has the characteristics of a global
systemically important banking organization under the global methodology.
Section 252.164 requires each top-tier global systemically important foreign banking
organization with U.S. non-branch assets that equal or exceed $50 billion to submit to the Board
a certification indicating whether the planned resolution strategy of the top-tier foreign banking
organization involves the U.S. intermediate holding company or its subsidiaries entering
resolution, receivership, insolvency, or similar proceedings in the United States. The rule
requires the top-tier foreign banking organization to update this certification when its resolution
strategy changes.
Disclosure Requirements
Section 252.65 requires a U.S. global systemically important BHC to publicly disclose a
description of the financial consequences to unsecured debtholders of the global systemically
important BHC entering into a resolution proceeding in which the global systemically important
BHC is the only entity that would be subject to the resolution proceeding. A global systemically
important BHC must provide the disclosure required of this section (1) in the offering documents
for all of its eligible debt securities and (2) either on the global systemically important BHC’s
website or in more than one public financial report or other regulatory reports, provided that the
global systemically important BHC publicly provides a summary table specifically indicating the
location(s) of this disclosure. Section 252.167 imposes these requirements on certain
intermediate holding companies of non-U.S. global systemically important BHC that issue long
term debt to third parties.
Time Schedule for Information Collection
The information collection pursuant to the reporting requirements mandates that a state
member bank that is a covered company subsidiary and a savings and loan holding company that
has average total consolidated assets of $50 billion or more to report the results of the stress test
to the Board by April 5, unless that time is extended by the Board in writing and a state member
bank that is not a covered company subsidiary, a bank holding company, and a savings and loan
holding company with average total consolidated assets of less than $50 billion must report the
results of the stress test to the Board by July 31, unless that time is extended by the Board in
writing. Foreign banking organizations with combined U.S. assets of $50 billion or more and
foreign banking organizations that have U.S. branches and agencies of a foreign banking
organizations 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, report summary information about its stresstesting activities and results to the Board by January 5 of each calendar year, unless such date is
extended by the Board. Foreign banking organizations with combined U.S. assets of $50 billion
or more report quarterly to the Board the results of any liquidity internal stress tests and
establishment of liquidity buffers required by regulators in its home jurisdiction.
The information collection pursuant to the recordkeeping requirements is event-generated
and must be maintained on sight. The information collection pursuant to the disclosure
13
requirements mandates that a covered company publicly disclose a summary of the results of the
stress test under section 252.54 within the period that is 15 calendar days after the Board
discloses the results of its supervisory stress test of the covered company, unless that time is
extended by the Board in writing. A covered company must publicly disclose a summary of the
results of the stress test required under section 252.55. This disclosure must occur in the period
beginning on October 5 and ending on November 4 of the calendar year in which the stress test is
performed, unless that time is extended by the Board in writing.
Legal Status
The Board’s Legal Division has determined that this information collection with respect
to domestic BHCs are authorized under section 5(c)(1)(A) of the Bank Holding Company Act
(BHC Act) (12 U.S.C. § 1844(c)(1)(A)). Under section 8(a) of the International Banking Act (12
U.S.C. § 3106(a)), the foreign banking organizations to which Regulation YY applies are treated
as bank holding companies subject to section 5 of the BHC Act, so these information collections
are authorized with respect to foreign banking organizations as well. Section 161 of the DoddFrank Act (12 U.S.C. § 5361), authorizes the Board to require reports from Council-designated
nonbank financial companies supervised by the Board. Finally, both section 165 of the DoddFrank Act and section 5(c) of the BHC Act authorize the Board to require reports from IHCs.
Generally, the obligation to respond is mandatory. With respect to aspects of the rule that
permit an FBO to request that the Board reconsider its decision to impose restrictions,
conditions, or limitations for noncompliance with the enhanced prudential standards, the
obligation to respond may be characterized as required in order to obtain the benefit of
modifications to the restrictions, etc., initially imposed.
The information collection provisions of Regulation YY are summarized in the table
below. In addition to the sections noted there, the regulation requires that covered companies
retain certain records which are not normally provided to the Board. To the extent these records
are collected as part of an examination or inspection of the company, they may be accorded
confidential treatment under exemption 8 of the Freedom of Information Act (FOIA) (5 U.S.C.
§ 552(b)(8)). Certain other items will be disclosed publicly.
With respect to items reported to the Board and not disclosed publicly, the table below
identifies the confidentiality treatment and basis for each regulatory provision. Certain reporting
requirements reflected on the table may call for reporting of confidential commercial and
financial information that may be withheld under exemption 4 of FOIA (5 U.S.C. § 552(b)(4)).
As required information, these items may be withheld under exemption 4 if the submitter
establishes that public disclosure could result in substantial competitive harm to the submitting
institution, under National Parks and Conservation Association v. Morton, 498 F.2d 765 (D.C.
Cir. 1974). This determination will be made on a case-by-case basis upon the submitter’s request
for confidential treatment. Public disclosure of the remaining information required under
Regulation YY would likely cause substantial competitive harm to the submitter. This
information will be withheld on the basis of exemption 4 without the requirement of a request for
confidentiality.
14
Information Collection
Type
Report a summary of stress
test results to the Board
Citations
Section
252.122(b)(1)(iii);
Section
252.146(c)(1)(iii);
Section 252.158(c)(1);
Section 252.158(c)(2);
Section 252.158(d)(1)(ii)
Seeking relief from additional
commitments imposed by the
Board for organizations that
fail to satisfy requirements
regarding risk management
and risk-based and leverage
capital requirements.
Section 252.132(d);
Section 252.143(c);
Section 252.144(d);
Section 252.154(c)
Certify to the Board that
entity meets capital adequacy
standards on a consolidated
basis established by its homecountry supervisor that are
consistent with the Basel
regulatory capital framework
Section 252.143(a);
Section 252.154(a)
15
Reasons for
Confidentiality
Disclosure of stress
test results would
inform competitors
of areas of
vulnerability,
resulting in
substantial
competitive harm.
Information is also
collected as part of
the supervisory
process.
This information
may be confidential
on a case-by-case
basis. Release of
information relating
to additional
restrictions imposed
for failure to meet
risk management
and capital
requirements could
cause substantial
competitive harm.
Information also
may be collected as
part of the
supervisory process.
This information
may be confidential
on a case-by-case
basis. This
information may or
may not be made
public according to
applicable homecountry laws; in
cases where home
country regulator
provides for
confidential
treatment, disclosure
could cause
FOIA
Exemption
4 and 8 in
all cases
4 and 8
4
Information Collection
Type
Citations
Provide to the Boad reports
relating to its compliance
with capital adequacy
measures
Section 252.143(b);
Section 252.154(b)
Report the results of internal
liquidity stress test to the
Board
Section 252.145(a)
Requests to use alternative
organizational structure in
lieu of forming US
intermediate holding
company
Section 252.153(c)(3)
IHC implementation plans
Section 252.153(d)
16
Reasons for
Confidentiality
substantial
competitive harm.
This information
may be confidential
on a case-by-case
basis. This
information may or
may not be made
public according to
applicable homecountry laws.
As with other stress
test results, release
could cause
substantial
competitive harm.
Information is also
collected as part of
the supervisory
process.
These exemption
requests may
include nonpublic
information about
potential business
plans, disclosure of
which could cause
substantial
competitive harm.
This information
may be confidential
on a case-by-case
basis.
These
implementation
plans include
nonpublic
information about
potential business
plans and nonpublic
information about
subsidiaries
controlled by
foreign banking
FOIA
Exemption
4
4 and 8 in
all cases
4
4 and 8 in
all cases
Information Collection
Type
Citations
Make available to the Board
the results of any liquidity
internal stress tests and
establishment of liquidity
buffers required by regulators
in its home jurisdiction
Section 252.157(b)
Report pro forma regulatory
capital ratios required to be
computed by the homecountry supervisor
Section 252.158(c)(1)
17
Reasons for
FOIA
Confidentiality
Exemption
organizations.
Release of this
information could
cause substantial
competitive harm.
The information is
also used in the
supervisory process.
This information
4/8
may be confidential
on a case-by-case
basis. This
information may or
may not be made
public according to
applicable homecountry laws, and in
cases where home
country regulator
provides for
confidential
treatment, disclosure
could cause
substantial
competitive harm
and reveal
supervisory
assessments.
These regulatory
4
capital ratios
required by the
home country
regulators may not
be public and may
reflect the home
country regulator’s
supervisory
assessment of the
FBO. Release of this
information could
cause substantial
competitive harm
under exemption 4:
no additional action
Information Collection
Type
Certify to the Board that it
maintains a U.S. risk
committee
Certification upon
designating its IHC
Citations
Section 252.132(a);
Section 252.132(b);
Section 252.144(a);
Section 252.144(b)
Section 252.153(a)(3)
Reasons for
Confidentiality
by submitter
necessary.
Not confidential.
FOIA
Exemption
Not confidential.
Consultation Outside the Agency
On November 30, 2015, the Board published a notice of proposed rulemaking in the
Federal Register (80 FR 74926) for public comment. The comment period for this notice expired
on February 19, 2016. The Board received no comments on the PRA. On January 24, 2017, the
Board published a final rule in the Federal Register (82 FR 8266). The final rule is effective on
March 27, 2017.
Estimate of Respondent Burden
The current annual burden for FR YY is estimated to be 118,546 hours. The proposed
reporting and disclosure requirements would increase the estimated annual burden hours by 296
hours. The FR YY reporting, recordkeeping, and disclosure requirements represent less than 1
percent of the total Federal Reserve System paperwork burden.
18
FR YY
Current
Initial Setup
Reporting
Subpart B, section 252.16
Subpart O, section 252.153d
Recordkeeping
Subpart B, section 252.15c
Subpart D, sections 252.34e3,
.34f, .34h, and .35a7
Subpart F, section 252.56c1
Subpart O, section 252.153e5
Subpart O, sections 252.156e,
.156g, and .157a7
Annual
frequency
Estimated
average hours
per response
Estimated
annual burden
hours
6
17
1
1
200
750
1,200
12,750
13,950
99
1
240
23,760
24
1
160
3,840
34
17
1
1
280
280
9,520
4,760
24
1
160
3,840
Number of
respondents
45,720
Disclosure
Subpart F, section 252.58
Subpart O, section 252.153e5
34
17
2
2
200
200
Current Total Initial Setup
Ongoing
Reporting
Subpart B, section 252.16
Subpart L, section 252.122b1iii
Subpart M, sections 252.132a
and b
Subpart M, section 252.132d
Subpart N, sections 252.143a
and b
Subpart N, section 252.143c
Subpart N, sections 252.144a
and b
Subpart N, section 252.144d
Subpart N, section 252.145a
Subpart N, section 252.146c1iii
Subpart O, section 252.153a3
Subpart O, section 252.153c3
Subpart O, section 252.154a, b
Subpart O, section 252.154c
13,600
6,800
20,400
80,070
6
2
1
1
80
80
480
160
8
1
1
8
2
1
10
20
102
1
1
102
2
1
10
20
102
1
1
102
2
102
5
17
15
24
2
1
1
1
1
1
1
1
10
50
80
20
160
1
10
20
5,100
400
340
2,400
24
20
19
Subpart O, section 252.157b
Subpart O, section 252.158c1
Subpart O, section 252.158c2
Subpart O, section 252.158d1ii
Recordkeeping
Subpart B, section 252.15c
Subpart D, sections 252.34e3,
.34f, .34h, and .35a7
Subpart F, section 252.56c1
Subpart O, section 252.153e5
Subpart O, sections 252.156e,
.156g, and .157a7
24
24
10
4
4
1
1
1
40
40
40
80
3,840
960
400
320
14,716
99
1
40
3,960
24
1
200
4,800
34
17
1
1
40
40
1,360
680
24
1
200
4,800
15,600
Disclosure
Subpart F, section 252.58
Subpart O, section 252.153e5
34
17
2
2
80
80
5,440
2,720
8,160
Current Total Ongoing Setup
38,476
Current Total
118,546
20
FR YY
Proposed
Initial Setup
Reporting
Subpart B, section 252.16
Subpart O, section 252.153d
Recordkeeping
Subpart B, section 252.15c
Subpart D, sections 252.34e3,
.34f, .34h, and .35a7
Subpart F, section 252.56c1
Subpart O, section 252.153e5
Subpart O, sections 252.156e,
.156g, and .157a7
Annual
frequency
Estimated
average hours
per response
Estimated
annual burden
hours
6
17
1
1
200
750
1,200
12,750
13,950
99
1
240
23,760
24
1
160
3,840
34
17
1
1
280
280
9,520
4,760
24
1
160
3,840
Number of
respondents5
45,720
Disclosure
Subpart F, section 252.58
Subpart G, section 252.65
Subpart O, section 252.153e5
Subpart P, section 252.167
34
8
17
3
2
1
2
1
200
5
200
5
Proposed Total Initial Setup
Ongoing
Reporting
Subpart B, section 252.16
Subpart L, section 252.122b1iii
Subpart M, sections 252.132a
and b
Subpart M, section 252.132d
Subpart N, sections 252.143a
and b
Subpart N, section 252.143c
Subpart N, sections 252.144a
and b
Subpart N, section 252.144d
Subpart N, section 252.145a
13,600
40
6,800
15
20,455
80,125
6
2
1
1
80
80
480
160
8
1
1
8
2
1
10
20
102
1
1
102
2
1
10
20
102
1
1
102
2
102
1
1
10
50
20
5,100
5
Of these respondents, none are considered small entities as defined by the Small Business Administration (i.e.,
entities with less than $550 million in total assets) www.sba.gov/contracting/getting-started-contractor/make-sureyou-meet-sba-size-standards/table-small-business-size-standards.
21
Subpart N, section 252.146c1iii
Subpart O, section 252.153a3
Subpart O, section 252.153b5
Subpart O, section 252.153c3
Subpart O, sections 252.154a
and b
Subpart O, section 252.154c
Subpart O, section 252.157b
Subpart O, section 252.158c1
Subpart O, section 252.158c2
Subpart O, section 252.158d1ii
Subpart P, section 252.164
Recordkeeping
Subpart B, section 252.15c
Subpart D, sections 252.34e3,
.34f, .34h, and .35a7
Subpart F, section 252.56c1
Subpart O, section 252.153e5
Subpart O, sections 252.156e,
.156g, and .157a7
5
17
15
15
1
1
1
1
80
20
10
160
400
340
150
2,400
24
1
1
24
2
24
24
10
4
8
1
4
1
1
1
1
10
40
40
40
80
10
20
3,840
960
400
320
80
14,946
99
1
40
3,960
24
1
200
4,800
34
17
1
1
40
40
1,360
680
24
1
200
4,800
15,600
Disclosure
Subpart F, section 252.58
Subpart G, section 252.65
Subpart O, section 252.153e5
Subpart P, section 252.167
34
8
17
3
2
1
2
1
80
1
80
1
5,440
8
2,720
3
8,171
Proposed Total Ongoing Setup
38,717
Proposed Total
118,842
Change
296
The total cost to the public is estimated to increase from the current level of $6,508,175 to
$6,524,426 for the revised FR YY.6
6
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
$67, 15% Lawyers at $67, and 10% Chief Executives at $93). 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 2016, published March 31, 2017, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/
22
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.
23
| File Type | application/pdf |
| File Modified | 2017-08-22 |
| File Created | 2017-08-22 |