Download:
pdf |
pdfSupporting Statement for the
Reporting, Recordkeeping, and Disclosure Requirements Associated with Regulation YY
(FR YY; OMB No. 7100-0350)
Capital Planning and Stress Testing Requirements for Large Bank Holding Companies,
Intermediate Holding Companies and Savings and Loan Holding Companies
(Docket No. R-1724; RIN 7100-AF95)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), has extended 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 (12 CFR Part 252) for bank holding companies
(BHCs) and foreign banking organizations (FBOs) 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 (FSOC) has determined pose a grave threat to
financial stability.
On February 3, 2021, 1 the Board adopted a final rule to tailor the requirements in the
Board’s capital plan rule (capital plan rule) based on risk. As part of the final rule, the Board
added a new reporting requirement to the FR YY.
The current estimated total annual burden for the FR YY is 27,751 hours, and would
increase to 27,752 hours. The revision would result in an increase of 1 hour. There are no
required reporting forms associated with this information collection.
Background and Justification
Section 165 of the Dodd-Frank Act2 directs the Board to establish prudential standards
for BHCs with total consolidated assets of $50 billion or more and for nonbank financial
companies that the FSOC 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 Dodd-Frank Act requires the enhanced prudential
standards established by the Board under section 165 to be more stringent than those standards
applicable to other BHCs and to nonbank financial companies that do not present similar risks to
U.S. financial stability. 3 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
1
See 86 FR 7927 (February 3, 2021).
Public Law 111-203, 124 Stat 1376 (2010).
3
See 12 U.S.C. § 5365(a)(1)(A).
2
take into account the difference among BHCs and nonbank financial companies based on the
same factors.4 Generally, the Board has authority under section 165 to tailor the application of
the standards, including differentiating among companies subject to section 165 on an ind ividual
basis or by category. In applying section 165 to FBOs, 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 FBO is subject, on a consolidated
basis, to home-country standards that are comparable to those applied to financial companies in
the United States. 5
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 FSOC 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 summa ry 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. BHCs with total consolidated assets of $50 billion or more and riskbased and leverage capital requirements, liquidity standards, risk management, and stress-test
requirements for FBOs with total consolidated assets of $50 billion or more, in accordance with
4
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).
5
See 12 U.S.C. § 5365(a)(2).
2
section 165. The final rule also established a 15-to-1 debt-to-equity limit for companies that the
FSOC has determined pose a grave threat to financial stability. The amendments also establish
risk-committee requirements and capital stress-testing requirements for certain BHCs and FBOs
with total consolidated assets of $10 billion or more.
Description of Information Collection
The reporting requirements are found in sections 252.16; 252.85(b); 252.87(b);
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(b)(5); 252.153(c)(3); 252.154(a), (b), and (c);
252.157(b); 252.158(c)(1); 252.158(c)(2); 252.158(d)(1)(ii); and 252.164 of Regulation YY. The
recordkeeping requirements are found in sections 252.15(c); 252.34(e)(3); 252.34(f); 252.34(h);
252.35(a)(7); 252.56(c)(1); 252.153(e)(5); 252.156(e); 252.156(g); and 252.157(a)(7) of
Regulation YY. The disclosure requirements are found in sections 252.58; 252.65;
252.153(e)(5); and 252.167 of Regulation YY. No other federal law mandates these reporting,
recordkeeping, and disclosure requirements.
Reporting Requirements
Section 252.16 requires a state member bank (SMB) that is a covered company
subsidiary and a savings and loan holding company (SLHC) 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 an SMB that is not a covered company
subsidiary, a BHC, and an SLHC with average total consolidated assets of less than $50 billion
to 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 required under section
252.14(b)(3): (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 252.85(b) requires a covered entity (a bank holding company that is ide ntified as
a global systemically important BHC; a subsidiary of a bank holding company that is identified
as a global systemically important BHC; and a U.S. subsidiary, U.S. branch, or U.S. agency of a
global systemically important FBO other than a U.S. subsidiary, U.S. branch, or U.S. agency) to
request the Board to approve as compliant with the requirements of sections 252.83 and 252.84
provisions of one or more forms of covered qualified financial contracts (QFCs), or proposed
amendments to one or more forms of covered QFCs, with enhanced creditor protection
conditions. Enhanced creditor protection conditions means a set of limited exemptions to the
requirements of section 252.84(b) that are different than those of paragraphs (d), (f), and (h) of
section 252.84. A covered entity making a request must provide (1) an analysis of the proposal
under each consideration of paragraph 252.85(d), (2) a written legal opinion verifying that
proposed provisions or amendments would be valid and enforceable under applicable law of the
3
relevant jurisdictions, including, in the case of proposed amendments, the validity and
enforceability of the proposal to amend the covered QFCs, and (3) any additional relevant
information that the Board requests.
Section 252.87(b) requires each top-tier FBO that determines that it has the
characteristics of a global systemically important banking organization (GSIB) under the global
methodology to notify the Board of the determination by January 1 of each calendar year. 6
Section 252.132(a) requires an FBO 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 enterprise-wide risk committee (or
equivalent thereof) that (1) oversees the risk management policies of the combined U.S.
operations of the FBO and (2) includes at least one 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 an FBO 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 FBO. 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, 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 an FBO 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 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
6
Global methodology means the assessment methodology and the higher loss absorbency requirement for global
systemically important banks issued by the Basel Committee on Banking Supervision, as updated from time to time.
See 12 CFR 252.2(o).
4
standards that are consistent with the Basel Capital Framework, the FBO 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 an FBO 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 an FBO does not satisfy the home-country capital
adequacy standards, 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 FBO. 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, 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 an FBO 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 FBO 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 the FR Y-7.
Section 252.144(d) requires that if an FBO 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 FBO. 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, 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.
5
Section 252.145(a) requires an FBO 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 FBO or the
combined U.S. operations of the FBO. 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 an FBO with total consolidated assets of more than
$50 billion and combined U.S. assets of less than $50 billion 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 the stress test to the Board that includes a description of the types of risks included in
the stress test, a description of the conditions or scenarios used in the stress test, a summary
description of the methodologies used in the stress test, estimates of aggregate losses, pre provision net revenue, total loan loss provisions, net income before taxes and pro forma
regulatory capital ratios required to be computed by the home-country supervisor of the FBO and
any other relevant capital ratios, and an explanation of the most significant causes for any
changes in regulatory capital ratios.
Section 252.153(a)(3) requires that within 30 days of establishing or designating a U.S.
intermediate holding company (IHC), an FBO with U.S. non-branch assets of $50 billion or
more to provide to the Board (1) a description of the U.S. IHC, including its name, location,
corporate form, and organizational structure, (2) a certification that the U.S. IHC meets the
requirements of this subpart, and (3) any other information that the Board determines is
appropriate.
Section 252.153(b)(5) requires each top-tier FBO that controls a U.S. IHC to submit to
the Board by January 1 of each calendar year through the U.S. IHC (1) notice of whether the
home-country supervisor (or other appropriate home-country regulatory authority) of the top-tier
FBO of the U.S. IHC has adopted standards consistent with the global methodology and (2)
notice of whether the top-tier FBO prepares or reports the indicators used by the global
methodology to identify a banking organization as a GSIB and, if it does, whether the top-tier
FBO has determined that it has the characteristics of a GSIB under the global methodology.
Section 252.153(c)(3) requires that a request to establish or designate multiple U.S. IHCs
must be submitted to the Board 180 days before the FBO must form a U.S. IHC. A request not to
transfer any ownership interest in a subsidiary must be submitted to the Board either 180 days
before the FBO 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 252.154(a) requires an FBO 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
6
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
FBO 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 an FBO 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 an FBO does not satisfy the home-country capital
adequacy standards, the Board may impose requirements, conditions, or restrictions relating to
the activities or business operations of the U.S. operations of the FBO. 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, 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 an FBO 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
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) requires an FBO 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 home-country
supervisor of the FBO and any other relevant capital ratios, and (5) an explanation of the most
significant causes for any changes in regulatory capital ratios.
7
Section 252.158(c)(2) requires that if, on a net basis, the U.S. branches and agencies of an
FBO with combined U.S. assets of $50 billion or more provide funding to the FBO’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 FBO 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 subportfolio, and (3) any additional information that the Board requests.
Section 252.158(d)(1)(ii) requires an FBO with combined U.S. assets of $50 billion or
more that has not established a U.S. IHC, 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 to the Board on an annual basis a summary of the results
of the stress test that includes the qualitative and quantitative information required for home country supervisory stress and any other information specified by the Board.
Section 252.164 requires each top-tier global systemically important FBO with U.S. nonbranch assets that equal or exceed $50 billion to submit to the Board a certification indicating
whether the planned resolution strategy of the top-tier FBO involves the U.S. IHC or its
subsidiaries entering resolution, receivership, insolvency, or similar proceedings in the United
States. The rule requires the top-tier FBO to update this certification when its resolution strategy
changes.
Recordkeeping Requirements
Section 252.15(c) requires that senior management of a BHC, SLHC, or SMB 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 requirements in this subpart. 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 BHC 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) requires a BHC 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
8
process that sets out the BHC’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 BHC 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. These policies and procedures must provide that the BHC (1) calculates all of
its collateral positions 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 BHC’s funding patterns, such as 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 252.34(h)(2) requires a BHC 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 BHC 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 BHC 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 BHC 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 BHC’s overall
liquidity needs.
Section 252.35(a)(7) requires a BHC 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
BHC 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 BHC 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
9
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. IHC to comply with the requirements of subparts E
and F of 12 CFR Part 252 in the same manner as a BHC.
Section 252.156(e) requires an FBO 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 FBO’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 combine d U.S.
operations. The FBO 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 an FBO’s combined U.S. operations must include an event management process that sets
out the FBO’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 FBO and its combined U.S. operations.
Section 252.156(g)(1) requires an FBO 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 FBO (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 FBO’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 an FBO 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.
Section 252.156(g)(3) requires an FBO with combined U.S. assets of $50 billion or more
to establish and maintain procedures for monitoring intraday liquidity risk exposure for its
10
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 FBOs 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 an FBO 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 FBO 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
FBO 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 (a BHC other than an FBO with average total
consolidated assets of $50 billion or more, a U.S. IHC subject to this section pursuant to section
252.153, and a nonbank financial company supervised by the Board) 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 pursuant to section 252.46(c), 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 pursuant to
section 252.55, 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
ratios, and (5) with respect to any depository institution subsidiary that is subject to stress testing
11
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 252.65 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 public regulatory reports, provided
that the global systemically important BHC publicly provides a summary table specifically
indicating the location(s) of this disclosure.
Section 252.153(e)(5) requires a U.S. IHC to comply with the requirements of subparts E
and F of 12 CFR Part 252 in the same manner as a BHC.
Section 252.167 requires a resolution covered IHC that has any outstanding eligible
external debt securities to publicly disclose a description of the financial consequences to
unsecured debtholders of the resolution covered IHC entering into a resolution proceeding in
which the resolution covered IHC is the only entity in the U.S. that would be subject to the
resolution proceeding. A resolution covered IHC 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
resolution covered IHC’s website or in more than one public financial report or other public
regulatory reports, provided that the resolution covered IHC publicly provides a summary table
specifically indicating the location(s) of this disclosure.
Respondent Panel
The FR YY panel comprises SMBs, U.S. BHCs, nonbank financial companies, FBOs,
U.S. IHCs, foreign SLHCs, and foreign nonbank financial companies supervised by the Board.
Revisions to the FR YY
The Board has amended Regulation YY to allow a firm subject to Category IV standards
to elect to participate in the supervisory stress test in a year in which the firm would not normally
be subject to the supervisory stress test. To ensure the Board is provided sufficient notice that the
firm is participating in the supervisory stress test, the firm would need to make its election by
January 15 of the year in which it seeks to opt in to the supervisory stress test by providing
written notice to the Board and appropriate Federal Reserve Bank. For purposes of calculating
the stress capital buffer requirement in 2021 for a firm subject to Category IV standards that
elects to participate in the 2021 supervisory stress test, the final rule includes transitional
procedures such that the firm could notify the Board by April 5, 2021. This new reporting
requirement is found in section 252.44(d)(2)(ii).
12
Time Schedule for Information Collection
The information collection pursuant to the reporting requirements mandates that an SMB
that is a covered company subsidiary and an SLHC 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 an SMB that is not a covered company subsidiary, a
BHC, and an SLHC 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. FBOs with combined U.S. assets of $50 billion or more and FBOs that have U.S.
branches and agencies of an FBOs with combined U.S. assets of $50 billion or more provide
funding to the FBO’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. FBOs 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
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
This information collection with respect to domestic BHCs are authorized under section
5(c)(1)(A) of the Bank Holding Company Act of 1956 (BHC Act) (12 U.S.C. § 1844(c)(1)(A)).
Under section 8(a) of the International Banking Act of 1978 (12 U.S.C. § 3106(a)), the FBOs to
which Regulation YY applies are treated as BHCs subject to section 5 of the BHC Act, so these
information collections are authorized with respect to FBOs as well. Section 161 of the DoddFrank Act (12 U.S.C. § 5361) authorizes the Board to require reports from FSOC -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
13
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.
Information Collection
Type
Report a summary of stress
test results to the Board
Citations
Reasons for
Confidentiality
Section
Disclosure of stress
252.146(c)(1)(iii);
test results would
Section 252.158(c)(1);
inform competitors
Section 252.158(c)(2);
of areas of
Section 252.158(d)(1)(ii) vulnerability,
resulting in
substantial
competitive harm.
Information is also
collected as part of
the supervisory
process.
Seeking relief from additional Section 252.132(d);
This information
commitments imposed by the Section 252.143(c);
may be confidential
Board for organizations that
Section 252.144(d);
on a case-by-case
fail to satisfy requirements
Section 252.154(c)
basis. Release of
regarding risk management
information relating
and risk-based and leverage
to additional
capital requirements.
restrictions imposed
for failure to meet
risk management
and capital
requirements could
cause substantial
competitive harm.
Information also
14
FOIA
Exemption
4 and 8 in
all cases
4 and 8
Information Collection
Type
Citations
Certify to the Board that
Section 252.143(a);
entity meets capital adequacy Section 252.154(a)
standards on a consolidated
basis established by its homecountry supervisor that are
consistent with the Basel
regulatory capital framework
Provide to the Board 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 IHC
Section 252.153(c)(3)
15
Reasons for
Confidentiality
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 homecountry regulator
provides for
confidential
treatment, disclosure
could cause
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
FOIA
Exemption
4
4
4 and 8 in
all cases
4
Information Collection
Type
Citations
Make available to the Board
Section 252.157(b)
the results of any liquidity
internal stress tests and
establishment of liquidity
buffers required by regulators
in its home jurisdiction
Report pro forma regulatory
capital ratios required to be
computed by the homecountry supervisor
Section 252.158(c)(1)
16
Reasons for
FOIA
Confidentiality
Exemption
which could cause
substantial
competitive harm.
This information
may be confidential
on a case-by-case
basis.
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 homecountry 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
There has been no consultation outside the Federal Reserve System.
Public Comments
On October 7, 2020, the Board published a notice of proposed rulemaking in the Federal
Register (85 FR 63222) for public comment on the extension, with revision, of the FR YY. The
comment period for this notice expired on November 20, 2020. The Board did not receive any
specific comments related to the Paperwork Reduction Act analysis. On February 3, 2021, the
Board published a final rule in the Federal Register (86 FR 7927). The final rule is effective on
April 5, 2021.
Estimate of Respondent Burden
As shown in the table below, the estimated total annual burden for the FR YY is 27,751
hours, and would increase to 27,752 hours with the revisions. The Board estimates that the
average hours per response for the new reporting requirements in section 252.44(d)(2)(ii) is 0.25
hours. These reporting, recordkeeping, and disclosure requirements represent less than 1 percent
of the Board’s total paperwork burden.
17
FR YY
Current
Initial Setup
Reporting
Section 252.16
Recordkeeping
Section 252.15(c)
Sections 252.34(e)(3),
252.34(f), 252.34(h), and
252.35(a)(7)
Section 252.56(c)(1)
Section 252.153(e)(5)
Sections 252.156(e),
252.156(g), and 252.157(a)(7)
Disclosure
Section 252.58
Section 252.65
Section 252.153(e)(5)
Section 252.167
Current Initial Setup
Ongoing Compliance
Reporting
Section 252.16
Section 252.85(b)
Section 252.87(b)
Sections 252.132(a) and (b)
Section 252.132(d)
Sections 252.143(a) and (b)
Section 252.143(c)
Sections 252.144(a) and (b)
Section 252.144(d)
Section 252.145(a)
Section 252.146(c)(1)(iii)
Annual stress testing
Biennial stress testing
Section 252.153(a)(3)
Section 252.153(b)(5)
Section 252.153(c)(3)
Sections 252.154(a) and (b)
Section 252.154(c)
Section 252.157(b)
Section 252.158(c)(1)
Estimated
number of
respondents7
Annual
frequency
Estimated
Estimated
average hours annual burden
per response
hours
1
1
150
150
1
1
240
240
1
1
1
1
1
1
160
280
280
160
280
280
1
1
160
160
1
1
1
1
1
1
1
1
200
5
200
5
200
5
200
5
1,680
1
10
22
24
2
43
2
63
2
43
1
1
1
1
1
1
1
1
1
1
60
40
1
1
10
1
10
1
10
50
60
400
22
24
20
43
20
63
20
2,150
3
2
17
15
15
18
2
18
18
1
0.5
1
1
1
1
1
4
1
80
80
20
10
160
1
10
40
40
240
80
340
150
2,400
18
20
2,880
720
7
Of these respondents, none are considered small entities as defined by the Small Business Administration (i.e.,
entities with less than $600 million in total assets), https://www.sba.gov/document/support--table-size-standards.
18
Section 252.158(c)(2)
Section 252.158(d)(1)(ii)
Section 252.164
Recordkeeping
Section 252.15(c)
Sections 252.34(e)(3),
252.34(f), 252.34(h), and
252.35(a)(7)
Category I-III firms
Category IV firms
Section 252.56(c)(1)
Section 252.153(e)(5)
Sections 252.156(e),
252.156(g), and 252.157(a)(7)
Category II-III FBOs
Category IV FBOs
Disclosure
Section 252.58
Section 252.65
Section 252.153e5
Section 252.167
Current Ongoing Compliance
Current Total
Proposed
Initial Setup
Reporting
Section 252.16
Recordkeeping
Section 252.15(c)
Sections 252.34(e)(3),
252.34(f), 252.34(h), and
252.35(a)(7)
Section 252.56(c)(1)
Section 252.153(e)(5)
Sections 252.156(e),
252.156(g), and 252.157(a)(7)
Disclosure
Section 252.58
Section 252.65
Section 252.153(e)(5)
Section 252.167
Proposed Initial Setup
Ongoing Compliance
Reporting
Section 252.16
10
4
8
1
1
1
40
80
10
400
320
80
33
1
40
1,320
12
11
23
11
1
1
1
1
200
190
40
40
2,400
2,090
920
440
10
6
1
1
200
190
2,000
1,140
23
8
10
3
2
1
2
1
80
1
80
1
3,680
8
1,600
3
26,071
27,751
1
1
150
150
1
1
240
240
1
1
1
1
1
1
160
280
280
160
280
280
1
1
160
160
1
1
1
1
1
1
1
1
200
5
200
5
200
5
200
5
1,680
1
1
60
60
19
Section 252.44(d)(2)(ii)
Section 252.85(b)
Section 252.87(b)
Sections 252.132(a) and (b)
Section 252.132(d)
Sections 252.143(a) and (b)
Section 252.143(c)
Sections 252.144(a) and (b)
Section 252.144(d)
Section 252.145(a)
Section 252.146(c)(1)(iii)
Annual stress testing
Biennial stress testing
Section 252.153(a)(3)
Section 252.153(b)(5)
Section 252.153(c)(3)
Sections 252.154(a) and (b)
Section 252.154(c)
Section 252.157(b)
Section 252.158(c)(1)
Section 252.158(c)(2)
Section 252.158(d)(1)(ii)
Section 252.164
Recordkeeping
Section 252.15(c)
Sections 252.34(e)(3),
252.34(f), 252.34(h), and
252.35(a)(7)
Category I-III firms
Category IV firms
Section 252.56(c)(1)
Section 252.153(e)(5)
Sections 252.156(e),
252.156(g), and 252.157(a)(7)
Category II-III FBOs
Category IV FBOs
Disclosure
Section 252.58
Section 252.65
Section 252.153e5
Section 252.167
Proposed Ongoing Compliance
5
10
22
24
2
43
2
63
2
43
1
1
1
1
1
1
1
1
1
1
0.25
40
1
1
10
1
10
1
10
50
1
400
22
24
20
43
20
63
20
2,150
3
2
17
15
15
18
2
18
18
10
4
8
1
0.5
1
1
1
1
1
4
1
1
1
1
80
80
20
10
160
1
10
40
40
40
80
10
240
80
340
150
2,400
18
20
2,880
720
400
320
80
33
1
40
1,320
12
11
23
11
1
1
1
1
200
190
40
40
2,400
2,090
920
440
10
6
1
1
200
190
2,000
1,140
23
8
10
3
2
1
2
1
80
1
80
1
3,680
8
1,600
3
26,072
Proposed Total
27,752
Change
1
20
The estimated total annual cost to the public for the FR YY is $1,641,472, and would
increase to $1,641,531 with the revisions.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 $20, 45% Financial Managers at
$73, 15% Lawyers at $72, and 10% Chief Executives at $95). 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 2020, published March 31, 2021, https://www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined
using the BLS Standard Occupational Classification System, https://www.bls.gov/soc/.
21
| File Type | application/pdf |
| File Modified | 2021-12-30 |
| File Created | 2021-12-30 |