1557-0323 LCR-Liquidity Risk Measurement - Supporting Statement Final (Submitted to OMB)

Office of the Comptroller of the Currency

Supporting Statement

Reporting and Recordkeeping Requirements Associated with

Liquidity Coverage Ratio: Liquidity Risk Measurement, Standards, and Monitoring

OMB Control No. 1557-0323

A. Justification.

1. Circumstances that make the collection necessary:

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (the Board), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) propose to extend for three years, with revision, the “Reporting and Recordkeeping Requirements Associated with Liquidity Coverage Ratio: Liquidity Risk Measurement, Standards, and Monitoring” (OMB No. 1557-0323) information collection. The agencies implemented a quantitative liquidity requirement, known as the liquidity coverage ratio (LCR), and a stable funding requirement, known as the net stable funding ratio (NSFR), that apply to certain large banking organizations. For the OCC, these standards are implemented through 12 CFR part 50, Liquidity Risk Measurement Standards. The LCR is designed to promote the short-term resilience of the liquidity risk profile of covered banking organizations and promote improvements in the measurement and management of liquidity risk. The NSFR is designed to reduce the likelihood that disruptions to a banking organization’s regular sources of funding will compromise its liquidity position, promote effective liquidity risk management, and support the ability of banking organizations to provide financial intermediation to businesses and households across a range of market conditions.

Twelve CFR part 50 applies to large national banks and Federal savings associations. Banks that must comply with part 50 (covered banks) generally include GSIB depository institutions (i.e., depository institutions of global systemically important bank holding companies) supervised by the OCC; Category II national banks and Federal savings associations; Category III national banks and Federal savings associations; and any national bank or Federal savings association for which the OCC has determined that application of part 50 is appropriate in light of certain risk factors. The reporting and recordkeeping requirements contained in this collection are used to monitor covered banks’ compliance with the LCR and NSFR.

The OCC is proposing revisions in connection with this extension to account for three recordkeeping requirements in part 50, contained in sections 50.4(a), 50.22(a)(1) and (a)(4), that had not been previously cleared by the OCC under the Paperwork Reduction Act (PRA).

2. Use of the information:

Section-by-Section Analysis

The reporting and recordkeeping requirements are found in sections 50.4, 50.22, 50.40, 50.109,¹ and 50.110.

Reporting Requirements

Section 50.40(a) requires a covered bank to notify the OCC on any business day when its calculated LCR is less than the minimum requirement set by section 50.10.

Section 50.40(b) provides that if a covered bank is required to calculate its LCR on the last business day of each calendar month and its LCR is below the minimum requirement in section 50.10 on the last business day of the applicable calendar month, or if the OCC has determined that the covered bank is otherwise materially noncompliant, then the covered bank must promptly consult with the OCC to determine whether the covered bank must provide to the OCC a plan for achieving compliance with the minimum liquidity requirement in section 50.10 and all other requirements of part 50. Section 50.40(b) further provides that if a covered bank is required to calculate its LCR each business day and its LCR is below the minimum requirement in section 50.10 for three consecutive business days, or if the OCC has determined that the covered bank is otherwise materially noncompliant, the covered bank must promptly provide to the OCC a plan for achieving compliance with the minimum liquidity requirement in section 50.10 and all other requirements of part 50.

The liquidity plan must include, as applicable, (1) an assessment of the covered bank's liquidity position; (2) the actions the covered bank has taken and will take to achieve full compliance, including a plan for adjusting the covered bank’s risk profile, risk management, and funding sources in order to achieve full compliance and a plan for remediating any operational or management issues that contributed to noncompliance; (3) an estimated time frame for achieving full compliance; and (4) a commitment to provide a progress report to the OCC at least weekly until full compliance is achieved.

Section 50.110 requires a covered company to take certain actions following any NSFR shortfall. Section 50.110(a) requires a covered bank to notify the OCC of the shortfall no later than 10 business days (or such other period as the OCC may otherwise require by written notice) following the date that any event has occurred that would cause or has caused the covered bank’s NSFR to be less than 1.0.

Section 50.110(b) requires a covered bank to submit to the OCC, within 10 business days of certain triggering events (or such other period as the OCC may otherwise require by written notice), its plan for remediation of its NSFR to at least 1.0. This submission is required if the covered bank has or should have provided notice to the OCC that its NSFR is or will become less than 1.0, the covered bank’s reports or disclosures to the OCC indicate that the NSFR is less than 1.0, or the OCC notifies the covered bank that a plan is required and provides a reason for requiring such a plan. Section 50.110(b) also requires a covered bank that has submitted such a plan to report to the OCC at least monthly, or at such other frequency as required by the OCC, its progress to achieve compliance.

The NSFR remediation plan must include, as applicable, (1) an assessment of the covered bank's liquidity profile; (2) the actions the covered bank has taken and will take to achieve a net stable funding ratio equal to or greater than 1.0 as required under section 50.100, including (a) a plan for adjusting the covered bank's liquidity profile; and (b) a plan for remediating any operational or management issues that contributed to noncompliance with the NSFR requirement; and (3) an estimated time frame for achieving full compliance with section 50.100.

Recordkeeping Requirements

Section 50.4(a)(1) provides that in order for a covered bank to recognize an agreement as a qualifying master netting agreement for the purpose of section 50.3, the covered bank must conduct a sufficient legal review to conclude with a well-founded basis (and maintain sufficient written documentation of that legal review) that: (i) the agreement meets the requirements of the definition of qualifying master netting agreement in section 50.3, and (ii) in the event of a legal challenge, the relevant judicial and administrative authorities would find the agreement to be legal, valid, binding, and enforceable under the law of the relevant jurisdictions.

Section 50.4(a)(2) also requires a covered bank to establish and maintain written procedures to monitor possible changes in relevant law and to ensure that the agreement continues to satisfy the requirements of the definition of qualifying master netting agreement in section 50.3.

Section 50.22(a)(1) requires a covered bank to demonstrate the operational capability to monetize the bank’s HQLA (i.e., high-quality liquid assets) by implementing and maintaining procedures and systems to monetize any HQLA at any time in accordance with relevant standard settlement periods and procedures and periodically monetizing a sample of the HQLA that reflects the composition of the covered bank’s eligible HQLA.

Section 50.22(a)(2) requires a covered bank to implement policies that require the eligible HQLA to be under the control of the management function in the covered bank that is charged with managing liquidity risk. The management function must evidence its control over the HQLA by segregating the HQLA from other assets, with the sole intent to use the HQLA as a source of liquidity, or by demonstrating the ability to monetize the assets and making the proceeds available to the liquidity management function without conflicting with a business or risk management strategy of the covered bank.

Section 50.22(a)(4) requires a covered bank to implement and maintain policies and procedures that determine the composition of its eligible HQLA on each calculation date, by identifying, determining, and ensuring certain required steps.

Section 50.22(a)(5) requires a covered bank to have a documented methodology that results in a consistent treatment for determining that the covered bank’s eligible HQLA meet the requirements of section 50.22.

Section 50.109(b) provides that if a covered bank includes an ASF (i.e., available stable funding) amount in excess of the RSF (i.e., required stable funding) amount of the consolidated subsidiary, it must implement and maintain written procedures to identify and monitor applicable statutory, regulatory, contractual, supervisory, or other restrictions on transferring assets from the consolidated subsidiaries. These procedures must document which types of transactions the institution could use to transfer assets from a consolidated subsidiary to the institution and how these types of transactions comply with applicable statutory, regulatory, contractual, supervisory, or other restrictions.

3. Consideration of the use of improved information technology:

The use of improved technology is permitted to meet the requirements of the information collection.

4. Efforts to identify duplication:

The information collected is not duplicated elsewhere.

5. If the collection of information impacts small businesses or other small entities, describe any methods used to minimize burden.

The information collection does not impact small institutions.

6. Consequences to the federal program if the collection were conducted less frequently:

Less frequent collection would present safety and soundness concerns.

7. Special circumstances necessitating collection inconsistent with 5 CFR part 1320:

The information collection is conducted in accordance with OMB guidelines in 5 CFR part 1320.

8. Efforts to consult with persons outside the agency:

The OCC issued a 60-day Federal Register notice on April 16, 2024, 89 FR 27001. No comments were received.

9. Payment to respondents:

None.

10. Any assurance of confidentiality:

The information will be kept private to the extent permitted by law.

11. Justification for questions of a sensitive nature:

There are no questions of a sensitive nature.

12. Burden estimate:

Section	Requirement	Type of Burden	Respondents	Burden per Response	Number of Responses	Total
§ 50.40(a) § 50.110(a)	Notification of shortfall.	Reporting (On Occasion)	15	0.5	12	90
§ 50.40(b) § 50.110(b)2	Liquidity plan.	Reporting (On Occasion)	15	0.5	1	7.5
§ 50.40(b)(3)(iv) § 50.110(b)(3)	Progress reports (submit progress reports).	Reporting (On Occasion)	15	0.5	4	30
§ 50.4(a)	Maintain sufficient written documentation of legal review. Establish and maintain written procedures to monitor possible changes in relevant law and to ensure that the agreement continues to satisfy the requirements of the definition of qualifying master netting agreement.	Recordkeeping (Annual)	15	0.50	1	7.5
§ 50.22(a) § 50.109(b)	Written procedures to identify/monitor restrictions on transferring assets. Documented methodology providing consistent treatment for determining whether eligible HQLA meets operational requirements. Document types of transactions that could be used to transfer assets and how they comply.	Recordkeeping (Annual)	15	40	1	600
Totals			15			735

Cost of Hour Burden:

735 hours x $129.40 = $ 95,109.00

To estimate wages the OCC reviewed May 2023 data for wages (by industry and occupation) from the U.S. Bureau of Labor Statistics (BLS) for credit intermediation and related activities (NAICS 5220A1).  To estimate compensation costs associated with the rule, the OCC uses $129.40 per hour, which is based on the average of the 90th percentile for six occupations adjusted for inflation (4.3 percent as of Q1 2024), plus an additional 34.6 percent for benefits (based on the percent of total compensation allocated to benefits as of Q4 2023 for NAICS 522: credit intermediation and related activities).

13. Estimate of annualized costs to respondents:

There are no capital or start-up costs associated with this collection. In addition, there are no system and technology acquisition or operation and maintenance costs.

14. Estimate of annualized costs to the government:

None.

15. Changes in burden:

Current Burden: 3,231 hours.

Proposed Burden: 735 hours.

Difference: -2,496 hours.

The decrease in burden is due to completion of the initial preparation of liquidity plan.

16. Information regarding collections whose results are planned to be published for statistical

use:

No publication for statistical use is contemplated.

17. Display of expiration date:

Not applicable.

18. Exceptions to certification statement:

Not applicable.

B. Collections of Information Employing Statistical Methods.

Not applicable.

1 The previous filing of this Supporting Statement erroneously referred to 12 CFR 50.108(b), when it should have referenced 12 CFR 50.109(b). This error has been corrected in this updated filing. The substance of the requirements described is unchanged.

2 The agency determined that the recordkeeping burden previously associated with sections 50.40(b) and 50.110(b) was a reporting burden and has recategorized it as such in the burden table.

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