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Vol. 79

Tuesday,

No. 126

July 1, 2014

Part III

Federal Reserve System

emcdonald on DSK67QTVN1PROD with PROPOSALS2

12 CFR Parts 225 and 252
Amendments to the Capital Plan and Stress Test Rules; Proposed Rule

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules

FEDERAL RESERVE SYSTEM
12 CFR Parts 225 and 252
[Regulations Y and YY; Docket No. 1492]
RIN 7100–AE 20

Amendments to the Capital Plan and
Stress Test Rules
Board of Governors of the
Federal Reserve System (Board).
ACTION: Notice of proposed rulemaking
with request for comment.
AGENCY:

The Board invites comment
on a notice of proposed rulemaking that
would amend the capital plan and stress
test rules to modify, following a
transition period, the start date of the
capital plan and stress test cycles from
October 1 of a calendar year to January
1 of the following calendar year. The
proposed rule would make other
changes to the rules, including
amending the capital plan rule to limit
a bank holding company’s ability to
make capital distributions to the extent
that the bank holding company’s actual
capital issuances are less than the
amount indicated in its capital plan
under baseline conditions, measured on
a quarterly basis. The proposed rule
would clarify application of the capital
plan rule to a bank holding company
that is a subsidiary of a U.S.
intermediate holding company of a
foreign banking organization and the
characteristics of a stressed scenario to
be included in company run stress tests.
The proposed rule also would revise the
Board’s Policy Statement on the
Scenario Design Framework for Stress
Testing and the Board’s Regulation YY
to reflect the revisions to the start date
of the stress test cycle.
DATES: Comments must be received on
or before August 11, 2014.
ADDRESSES: You may submit comments,
identified by Docket No. 1492; RIN
7100–AE 20, by any of the following
methods:
Agency Web site: http://
www.federalreserve.gov. Follow the
instructions for submitting comments at
http://www.federalreserve.gov/apps/
foia/proposedregs.aspx.
Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
Email: regs.comments@
federalreserve.gov. Include docket
number in the subject line of the
message.
Facsimile: (202) 452–3819 or (202)
452–3102.
Mail: Robert deV. Frierson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and

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SUMMARY:

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Constitution Avenue NW., Washington,
DC 20551.
All public comments are available
from the Board’s Web site at http://
www.federalreserve.gov/apps/foia/
proposedregs.aspx as submitted, unless
modified for technical reasons.
Accordingly, your comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper form in Room MP–500 of the
Board’s Martin Building (20th and C
Streets NW.) between 9:00 a.m. and 5:00
p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Lisa
Ryu, Deputy Associate Director, (202)
263–4833, Constance Horsley, Assistant
Director, (202) 452–5239, Mona Touma
Elliot, Senior Supervisory Financial
Analyst, (202) 912–4688, Ann
McKeehan, Senior Supervisory
Financial Analyst, (202) 973–6903,
Holly Kirkpatrick, Senior Financial
Analyst, (202) 452–2796, or Joseph Cox,
Financial Analyst, (202) 452–3216,
Division of Banking Supervision and
Regulation; Laurie Schaffer, Associate
General Counsel, (202) 452–2272, Ben
McDonough, Senior Counsel, (202) 452–
2036, or Christine Graham, Counsel,
(202) 452–3005, Legal Division, Board of
Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue NW., Washington, DC 20551.
Users of Telecommunication Device for
Deaf (TDD) only, call (202) 263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
The Board’s capital planning and
stress testing framework for bank
holding companies with total
consolidated assets of $50 billion or
more (large bank holding companies) is
based on the Board’s capital plan rule
(section 225.8 of Regulation Y) and
stress test rules (subparts B, E, and F of
Regulation YY). The Board is seeking
comment on a proposed rule to clarify
aspects of the rules and, based in part
on industry feedback, adjust the
timeframe for the annual submissions of
capital plans and for the conduct of
company-run and supervisory stress
tests.
Pursuant to the Board’s capital plan
rule and related supervisory process, the
Comprehensive Capital Analysis and
Review (CCAR), the Federal Reserve
assesses the internal capital planning
process of each large bank holding
company and its ability to maintain
sufficient capital to continue its
operations under expected and stressful
conditions.1 Under the capital plan rule,
a large bank holding company is
1 12

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required to submit an annual capital
plan to the Federal Reserve that
includes a detailed description of the
following: The company’s internal
processes for assessing its capital
adequacy; the policies governing capital
actions such as common stock
issuances, dividends and share
repurchases; and all planned capital
actions over a nine-quarter planning
horizon (planning horizon). In addition,
the bank holding company’s capital
plan must contain estimates of its
regulatory capital ratios and its tier 1
common ratio under expected
conditions and under a range of stressed
scenarios over the planning horizon.2 A
capital plan also must include a
discussion of how a large bank holding
company will maintain regulatory
capital ratios above the regulatory
minimums and above a tier 1 common
ratio of 5 percent under expected
conditions and stressed scenarios.3
The capital plan rule is designed to
work in conjunction with the stress test
rules adopted by the Board to
implement the stress testing
requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (stress test rules).4 The stress test
rules establish a framework for the
Board to conduct supervisory stress
tests of large bank holding companies
and require these bank holding
companies to conduct annual and midcycle company-run stress tests.5 In
addition, the stress test rules require
state member banks and savings and
loan holding companies with total
consolidated assets of more than $10
billion and bank holding companies
with total consolidated assets of more
than $10 billion but less than $50
billion to conduct annual company-run
stress tests.6
In February 2014, the Board issued a
final rule implementing enhanced
prudential standards for U.S. bank
holding companies and foreign banking
organizations with total consolidated
assets of $50 billion or more (enhanced
prudential standards rule). For U.S.
2 See

generally 12 CFR 225.8.
at § 225.8(d)(2)(i)(B).
4 See 12 USC 5365(i)(1) and 12 CFR part 252.
5 The changes in this proposed rule would apply
to nonbank financial companies supervised by the
Board once they become subject to stress test
requirements and to U.S. intermediate holding
companies of foreign banking organizations in
accordance with the transition provisions of the
final rule incorporating enhanced prudential
standards for U.S. bank holding companies and
foreign banking organizations with total
consolidated assets of $50 billion or more. (79 FR
17240 (March 27, 2014)) For simplicity, this
preamble discussion of proposed amendments
generally refers only to bank holding companies.
6 77 FR 62378 (October 12, 2012) (codified at 12
CFR part 252, subparts E and F).
3 Id.

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules
bank holding companies, the enhanced
prudential standards rule incorporates
the capital plan rule as an enhanced
risk-based capital and leverage
requirement and establishes enhanced
liquidity and risk-management
requirements. For foreign banking
organizations, the enhanced prudential
standards rule implements risk-based
and leverage capital, liquidity, riskmanagement, and stress-testing
requirements. The enhanced prudential
standards rule also requires that a
foreign banking organization with U.S.
non-branch assets of $50 billion or more
establish a U.S. intermediate holding
company that is generally subject to the
same prudential standards as a U.S.
bank holding company, including
capital planning and stress testing
requirements.
Although the enhanced prudential
standards rule and capital plan rule
establish baseline requirements for all
banking organizations that are subject to
the rules, the Board has tailored its
expectations for companies of different
sizes, scope of operations, activities, and
systemic importance.7 For example, the
Board has significantly heightened
supervisory expectations for the largest
and most complex bank holding
companies in all aspects of capital
planning and expects these bank
holding companies to have capital
planning practices that incorporate
existing leading practices.8 In addition,
the Board recognizes the challenges
facing bank holding companies that are
new to CCAR and further recognizes
that these bank holding companies will
continue to develop and enhance their
capital planning systems and processes
to meet supervisory expectations.9
II. Proposed Revisions to the Capital
Plan and Stress Test Rules

emcdonald on DSK67QTVN1PROD with PROPOSALS2

a. Timing of Actions in the Capital Plan
and Stress Test Rules
i. Timing of Capital Plan and Stress Test
Cycles
Under the current capital plan and
stress test rules, the capital plan and
stress test cycles begin on October 1,
and bank holding companies are
required to submit their capital plans
and annual company-run stress test
results to the Board by January 5 of the
following calendar year using data as of
September 30 of the preceding calendar
year. This timing obligates these
companies to conduct company-run
stress tests and complete annual capital

7 Capital Planning at Large Bank Holding
Companies: Supervisory Expectations and Range of
Current Practice (August 19, 2013), p. 3, available

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plans at the end of the calendar year,
when companies are often resourceconstrained due to other financial
reporting requirements. Subject to a
transition period as described below,
the proposed rule would shift the timing
by one calendar quarter, such that the
capital plan and stress test cycles would
begin January 1 and bank holding
companies would be required to submit
their capital plans and stress test results
to the Board by April 5.
Pursuant to the proposed timing
revisions, for the stress test cycle that
begins January 1, 2016, and thereafter,
companies would conduct the annual
company-run stress tests using data as
of December 31 of the preceding
calendar year, and the Board would
provide scenarios that companies must
use in their company-run stress tests by
February 15. The Board would provide
a description of the trading and
counterparty component of supervisory
scenarios for bank holding companies
subject to that component by March 1.
Following a notice and response
procedure, the Board may require a
bank holding company to include
additional scenarios or scenario
components in its stress test, such as a
counterparty default component. The
Board would notify the bank holding
company of this requirement by
December 31 of the preceding calendar
year and provide the description of any
additional components and scenarios by
March 1.
The current rule requires bank
holding companies to disclose the
results of their annual company-run
stress tests during the period beginning
March 15 and ending March 31. Under
the proposed rule, for the stress test
cycle that begins January 1, 2016, and
for stress test cycles thereafter, large
bank holding companies and their state
member banks subsidiaries would be
required to disclose publicly the results
of their annual company-run stress tests
within 15 calendar days after the date
on which the Board discloses the results
of the bank holding company’s
supervisory stress test. Under the
proposed rule, the Board would disclose
these results no later than June 30. The
Board would notify companies of the
date on which it expects to publicly
disclose a summary of its analyses at
least two weeks before the expected
disclosure date.
As noted, large bank holding
companies are also subject to mid-cycle
stress tests, in which bank holding

at: http://www.federalreserve.gov/bankinforeg/
bcreg20130819a1.pdf.

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companies design their own stress
scenarios based on the definitions in the
Board’s stress test rules. Under the
proposed rule, for the stress test cycle
that begins January 1, 2016, and for
stress test cycles thereafter, large bank
holding companies would be required to
conduct the mid-cycle stress test using
data as of June 30 of that year.
Following a notice and response
procedure, the Board may require a
bank holding company to use one or
more additional components or
scenarios in this stress test. The Board
would notify the bank holding company
of this requirement by June 30 and
provide the description of any
additional components and scenarios by
September 1. Bank holding companies
would report the results of the midcycle stress test to the Board by October
5 and would publicly disclose the
results in the period beginning October
5 and ending October 20, unless the
date is extended by the Board.
The proposed rule would include a
transition period to incorporate the
proposed timing changes to the capital
plan and stress test cycles. As in the
current rule, the capital plan cycle
scheduled to begin on October 1, 2014,
would begin on that date without
change, and large bank holding
companies would be required to submit
a capital plan to the Board by January
5, 2015. The Board would provide the
company with a notice of non-objection
or objection by March 31, 2015. In order
to provide a transition to the proposed
timing, the Federal Reserve’s objection
or non-objection to a 2015 capital plan
would cover a five-quarter period
commencing with the second quarter of
2015 and extending through the second
quarter of 2016.
The 2015 mid-cycle stress tests would
be based on data as of March 31, 2015,
and large bank holding companies
would be required to report their results
to the Board by July 5, 2015. As
discussed in section II.a.iii of this
preamble, however, the proposed rule
would shift the disclosure timeline of
the 2015 mid-cycle stress test results to
be the period between July 5 and July
20, 2015.
Table 1 below describes the relevant
dates for stress test and capital plan
actions that would be taken by the
Board and companies during and after
the proposed transition period.

8 Id.
9 Id.

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules

TABLE 1—KEY DATES OF PROPOSED TRANSITION TIMELINE FOR ANNUAL CAPITAL PLAN AND STRESS TEST CYCLES FOR
LARGE BANK HOLDING COMPANIES (LARGE BHC) AND STATE MEMBER BANKS THAT ARE SUBSIDIARIES OF LARGE
BANK HOLDING COMPANIES

emcdonald on DSK67QTVN1PROD with PROPOSALS2

For cycle beginning
October 1, 2014

For cycle beginning
January 1, 2016, and
thereafter

Supervisory stress test
action

September 30, 2014 .....

December 31 of the
preceding calendar
year.

By September 30, 2014

By December 31 of the
preceding calendar
year.

By November 15, 2014

By February 15 ............

By December 1, 2014 ...

By March 1 ..................

......................................

By January 5, 2015 .......

By April 5 .....................

......................................

By March 31, 2015 .......

By June 30 ..................

By March 31, 2015 .......

By June 30 ..................

Board publishes summary results of the
supervisory stress
test.
......................................

By June 1, 2015 ............

By September 1 ...........

......................................

By July 5, 2015 .............

By October 5 ...............

......................................

July 5–July 20 ...............

October 5–October 20

......................................

Company-run stress test action

Capital plan action

As-of date for capital plan and stress test cycles.

......................................

Board notifies a large BHC that
it will require the company to
use one or more additional
scenarios.

Board publishes scenarios for upcoming annual cycle.
Board communicates description of any additional components or scenarios to a large
BHC.
Large BHCs submit required
regulatory report to the
Board on their stress tests.
Companies disclose summary
results of the annual company-run stress test 10.

Large BHCs submit capital plan
(including results of bank
holding company-run stress
tests).
Board responds to a large
BHC’s capital plan and publicly discloses the results.

Board notifies a large BHC that
it will require the company to
use one or more additional
scenarios in the mid-cycle
stress test.
Board communicates description of any additional components or scenarios to a large
BHC in the mid-cycle stress
test.
Large BHCs submit required
regulatory report to the
Board on their mid-cycle
stress test.
Large BHCs disclose results of
their mid-cycle stress test.

The proposal would make
corresponding timing changes to the
stress testing requirements for other
bank holding companies, savings and
loan holding companies, and state

member banks.11 For the stress testing
cycle that would begin on January 1,
2016, these entities would be required
to submit the results of their companyrun stress tests to the Board by July 31

and publicly disclose those results in
the period beginning October 15 and
ending October 31.12 Table 2 below
describes these proposed changes.

10 As discussed in section III.a.ii of this preamble,
companies would disclose summary results within
15 calendar days after the Board discloses the
summary results of its supervisory stress test.
11 Under the current stress test rules, savings and
loan holding companies are subject to the stress test
requirements beginning with the stress test cycle
that commences in the year after the year in which
the company becomes subject to the Board’s
minimum regulatory capital requirements, unless
the Board accelerates or extends that date. Savings

and loan holding companies (other than those
substantially engaged in commercial activities or
insurance underwriting activities) are subject to the
Board’s capital requirements in the Board’s
Regulation Q beginning on January 1, 2015. The
Board has not applied capital requirements to
savings and loan holding companies that are
substantially engaged in commercial activities or
insurance underwriting activities to date. The Board
is currently working on developing an appropriate
capital regime for those institutions.

12 As compared to the current rule, the proposed
rule would provide bank holding companies and
savings and loan holding companies with total
consolidated assets of more than $10 billion but less
than $50 billion and state member banks that are
not covered company subsidiaries with an
additional 30 days to report the results of their
stress tests to the Board. This change is intended
to further tailor the rule for these companies by
providing them an additional month to conduct
stress tests.

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TABLE 2—KEY DATES OF PROPOSED TRANSITION TIMELINE FOR ANNUAL STRESS TEST CYCLE FOR BANK HOLDING COMPANIES AND SAVINGS AND LOAN HOLDING COMPANIES WITH TOTAL CONSOLIDATED ASSETS BETWEEN $10–$50 BILLION AND STATE MEMBER BANKS THAT ARE NOT SUBSIDIARIES OF LARGE BANK HOLDING COMPANIES
For cycle beginning October 1,
2014

For cycle beginning January 1,
2016, and thereafter

Company-run stress test action

By September 30, 2014 ..................
By November 15, 2014 ...................
By December 1, 2014 .....................

By December 31 of the preceding
calendar year.
By February 15 ..............................
By March 1 ....................................

By March 31, 2015 ..........................

By July 31 ......................................

June 15, 2015 through June 30 ......

October 15 through October 31 ....

Board notifies a company that it will require the company to use one
or more additional scenarios.
Board publishes scenarios for upcoming annual cycle.
Board communicates description of any additional components or
scenarios to company.
Companies submit required regulatory report to the Board on their
stress tests.13
Companies disclose summary results of the annual company-run
stress test.

ii. Transition Provisions for Capital Plan
and Stress Test Rules
The proposal would clarify and revise
the transition provisions of the capital
plan and stress test rules to take into
account the proposed timing changes.

if the Board determines that the
requirement is appropriate based on the
company’s risk profile, scope of
operation, or financial condition and
provides prior notice to the company of
the determination.

Transition Provisions in the Capital
Plan Rule
Under the current capital plan rule, a
bank holding company that meets the
$50 billion asset threshold (based on the
as of date for its last FR Y–9C filing) for
the first time after January 5 of a given
calendar year will not be subject to the
requirements to file a capital plan with
the Board, resubmit its capital plan, or
seek approval for certain distributions
until the following year. Accordingly, a
bank holding company that met the
asset threshold on December 31, 2014,
would be required to submit a capital
plan on January 5, 2015, even though it
would not have filed its FR Y–9C until
after that date. The proposed rule would
revise the transition period to provide
that a bank holding company is subject
to the capital plan rule beginning on the
first day of the first capital plan cycle
that begins after the bank holding
company meets or exceeds the $50
billion asset threshold for the first time.
Accordingly, a bank holding company
that crosses the asset threshold after
October 1, 2014, would not be required
to file a capital plan on January 5, 2015.
The first capital plan cycle it would be
subject to would be the one starting on
October 1, 2015 (modified to be January
1, 2016, under the proposed rule). The
Board or the appropriate Reserve Bank
with the concurrence of the Board,
could require a bank holding company
to submit a capital plan and be subject
to the Board’s approval and limitations
on capital distributions at an earlier date

Transition Provisions in the Stress Test
Rules for Nonbank Financial Companies

13 Savings and loan holding companies with total
consolidated assets of $50 billion or more would be
required to submit the required regulatory report to
the Board in accordance with the schedule outlined
above for large bank holding companies.

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Under the current stress test rules,
nonbank financial companies
supervised by the Board are subject to
stress test requirements in the year after
those firms become subject to minimum
regulatory capital requirements. To
provide additional flexibility for the
Board to tailor the stress test rules to
nonbank financial companies, the
proposed rule would require the Board
to notify a nonbank financial company
prior to application of the stress test
rules to the nonbank financial company.
In general, nonbank financial companies
would have between 9 and 18 months
to comply with the stress test rules after
they receive notice from the Board.
Transition Provisions in the Stress Test
Rules for Bank Holding Companies,
State Member Banks, and Savings and
Loan Holding Companies
Under the current stress test rules, a
firm is subject to the stress testing
requirements in the year following the
year in which it crosses the asset
threshold. In light of a stress test cycle
start date of October 1, these transition
provisions provide a firm no less than
three and no more than six quarters to
come into compliance with the rules.
The proposal would maintain this
length of transition period, given the
proposed January 1 cycle start date.
Under the proposal, a company that
crosses the relevant asset threshold on
or before March 31 of a given year is
subject to the stress test rules beginning
on January 1 of the following year. If a
company crosses the threshold after
March 31, it is subject to the stress test

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rules beginning January 1 of the second
year following the given year.
The proposal would also revise the
timing of the stress test rules applicable
to bank holding companies that grow to
have total consolidated assets of $50
billion or more. Under the stress test
rules for large bank holding companies,
a large bank holding company must
report and disclose the results of its
stress tests on an accelerated timeframe,
as compared to a bank holding company
with more than $10 billion but less than
$50 billion in total consolidated assets.
The current applicability provisions
provide a bank holding company that
becomes subject to the large bank
holding company stress test
requirements with a several month
transition period to comply with the
accelerated stress test reporting and
disclosure requirements. However,
during that transition period, the large
bank holding company would be
required to submit a capital plan to the
Board on the accelerated timeframe, and
if the large bank holding company has
a subsidiary state member bank, that
subsidiary bank would be required to
report and disclose the results of its
stress tests on the accelerated
timeframe.14
The proposed rule would provide
that, if a bank holding company has
more than $10 billion but less than $50
billion in total consolidated assets, and
grows so that its total consolidated
assets are equal to or greater than $50
billion, the bank holding company
would be subject to the company-run
stress test requirements for bank holding
companies with total consolidated
assets of $50 billion or more (subpart F)
on the first day of the first stress test
cycle following the date on which its
average total consolidated assets
equaled or exceeded $50 billion. This
14 Similar requirements apply to national banks
and state nonmember banks under rules adopted by
the OCC and FDIC. 12 CFR 46.8 (OCC); 12 CFR
325.207 (FDIC).

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules

would align the reporting of stress test
results with the submission of the
capital plan and with the reporting and
disclosure timeframe for state member
banks, national banks, and state
nonmember banks.

emcdonald on DSK67QTVN1PROD with PROPOSALS2

Transition Provisions in the Capital
Plan and Stress Test Rules for
Companies Subject to the Advanced
Approaches
The capital plan rule requires a bank
holding company to use the advanced
approaches to estimate its regulatory
capital for purposes of its capital plan
submission if the Board notifies the
bank holding company before the first
day of the capital plan cycle that the
bank holding company is required to
use the advanced approaches to
determine its risk-based capital
requirements. The stress test rules
contain a parallel provision. As a result
of the proposed change to the capital
plan and stress tests cycle start date, a
bank holding company, state member
bank, and savings and loan holding
company will be required to use the
advanced approaches to estimate its
regulatory capital in a given capital plan
and stress test cycle if it receives notice
that it is subject to the advanced
approaches rule by December 31 of the
prior year.
Question 1: What if any unintended
consequences would the proposed
revisions to the applicability sections
create?
iii. Disclosure Date for Company-Run
Annual Stress Tests
The public disclosures of the results
of the CCAR, company-run stress tests,
and supervisory stress tests are designed
to complement one another. Under the
Board’s stress test rules, companies are
required to publicly disclose the same
types of information that the Federal
Reserve discloses regarding the results
of CCAR and its supervisory stress tests.
This coordinated approach to public
disclosure of the stress test and CCAR
results promotes market discipline by
facilitating a comparative understanding
of this information, including the
financial conditions and risks of the
companies subject to the stress tests.
Under the current capital plan rule, a
large bank holding company is required
to conduct annual company run stress
tests by January 5 and publicly disclose
the results of those stress tests under the
severely adverse scenario between
March 15 and March 31. Each year, the
Board discloses results of its
supervisory stress test by March 31. In
conducting its company-run stress test,
a bank holding company uses the same
scenarios and assumptions that the

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Board uses in the supervisory stress
scenario, but the bank holding company
uses its internal models to project the
effects of those scenarios on its financial
condition.
For the stress test cycle beginning
October 1, 2014 and thereafter, the
proposed rule would require bank
holding companies to publicly disclose
the results of their company-run stress
tests within 15 days after the Board
discloses the results of that bank
holding company’s supervisory stress
test, unless that time is extended by the
Board. If, for example, the Board
publicly disclosed supervisory stress
test results on March 30, the bank
holding company would have until
April 14 to publicly disclose its
company-run stress test results. Under
the proposed rule, the Board would
announce the expected date of public
disclosure of the supervisory stress test
results at least two weeks in advance.
The Board does not expect to disclose
the results of the supervisory stress test
results before March 1 in 2015 or before
June 1 in subsequent stress test cycles.
Question 2: The Board solicits
comment on the proposed timing
changes to the stress test disclosure
requirements. In particular, how much
advance notice do companies require to
prepare their stress test results?
iv. Disclosure Date for Company-Run
Mid-Cycle Stress Tests
Under the current stress test rules, a
large bank holding company is required
to conduct mid-cycle stress tests by July
5 and publicly disclose the results of
those stress tests between September 15
and September 30. Because the midcycle stress tests are conducted by bank
holding companies based on scenarios
that are appropriate for their own risk
profile and operations, the public
disclosure should reflect a bank holding
company’s own views of its capital
adequacy under the scenarios that it
develops and employs. Unlike the
annual stress tests, the Board does not
engage in a CCAR-like, in-depth review
of the mid-cycle stress test results.
The proposed rule would accelerate
the public disclosure of the mid-cycle
stress test results. Under the proposal, a
large bank holding company would be
required to publicly disclose the results
of its mid-cycle stress test within fifteen
days after it submits the results of its
mid-cycle stress test to the Board, unless
that time period was extended by the
Board. This change would help to
clarify that the Board does not play a
direct role in the mid-cycle stress test
process. It would also ensure that the
results of the stress tests are more
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promoting market discipline and a
public understanding of the financial
conditions and risks of the bank holding
company.
Under the proposed rule, for purposes
of the stress test cycle beginning
October 1, 2014, a bank holding
company would submit the results of its
mid-cycle stress test by July 5 and
would be required to publicly disclose
the results of its stress test in the period
between July 5 and July 20. For
purposes of the stress test cycle
beginning January 1, 2016, a bank
holding company would submit the
results of its mid-cycle stress test by
October 5 and would be required to
publicly disclose the results of its stress
test in the period between October 5 and
October 20.
b. Definition of a ‘‘BHC Stress Scenario’’
A central goal of the capital plan rule
is to ensure that large bank holding
companies have robust internal
practices and policies to determine their
adequate amount and composition of
capital, given the bank holding
company’s risk exposures and corporate
strategies as well as supervisory
expectations and regulatory standards.
While the stress scenarios designed by
the Federal Reserve for use in companyrun and supervisory stress testing are
helpful in showing the comparative
effects of a downturn in the economy
across companies, these scenarios are
created with the overall banking
industry in mind, rather than a focus on
an individual company’s risk profile. To
mitigate this natural limitation and gain
a deeper understanding of an individual
company’s vulnerabilities, the capital
plan rule requires each large bank
holding company to design its own
stress scenario that is appropriate to the
company’s business model and
portfolios. An evaluation of the
appropriateness of this scenario is a key
part of the qualitative assessment
carried out by supervisors in CCAR.
Because a company’s ability to design
appropriate stress scenarios that take
into consideration the company’s
specific vulnerabilities and operations
has become a key area of focus in the
Federal Reserve’s assessment of capital
plans, the proposed rule would add a
new defined term, ‘‘BHC stress
scenario’’ to describe the Federal
Reserve’s expectations regarding
scenario design. ‘‘BHC stress scenario’’
would be defined in section 225.8(c) of
the proposal as a scenario designed by
the bank holding company that stresses
the specific vulnerabilities of the bank
holding company’s risk profile and
operations.

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In addition, an appropriately tailored
scenario is generally expected to result
in an impact to projected pre-tax net
income that is at least as severe as the
results of the bank holding company’s
company run stress test under the
Board’s severely adverse scenario.
While the BHC stress scenario is
expected to be severe enough to result
in a substantial negative impact on
capital, a stress scenario that produces
regulatory capital and tier 1 capital
ratios that are lower than those
produced under the Board’s severely
adverse scenario would not, by itself,
demonstrate that the BHC has
developed an appropriate BHC stress
scenario. It is equally critical that the
stress scenario be designed to capture
potential risks stemming from a bank
holding company’s idiosyncratic
positions and activities.
Question 3: Under what
circumstances, if any, should the
definition of ‘‘BHC stress scenario’’
include, as a supplement, other types of
stress scenarios?
c. Modifications to Capital Plan
Resubmission Requirements Under the
Capital Plan Rule
Currently, the capital plan rule
requires a large bank holding company
to resubmit its capital plan within 30
calendar days if the Board objects to the
capital plan. In certain instances, a bank
holding company may not be able to
remediate the underlying issues with
the original capital plan before the end
of the 30-day period for resubmission.
This may occur if, for example, the
Board has identified material
outstanding supervisory issues or
material deficiencies in the company’s
risk measurement and management
practices or internal controls. In such
cases when the deficiencies cannot be
addressed in a 30-day timeframe,
automatic resubmission requirements
may be counterproductive by drawing a
bank holding company’s focus away
from efforts to remediate the issues that
gave rise to the Board’s objection.
The proposed rule would provide
flexibility in the event that the Board
objects to a capital plan by permitting,
rather than requiring, a large bank
holding company to resubmit its capital
plan. If the Board objects to a bank
holding company’s capital plan, the
bank holding company may choose to
resubmit its plan if it wishes to seek the
Board’s non-objection to its capital plan
prior to the next capital plan cycle. As
under the existing capital plan rule, the
bank holding company would be
limited to capital distributions approved
by the Board or the appropriate Reserve
Bank until the Board provides a non-

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objection to the bank holding company’s
resubmitted capital plan. The proposed
rule would continue to require a bank
holding company to resubmit its capital
plan within 30 days if it determines
there has been or will likely be a
material change in the bank holding
company’s risk profile (including a
material change in its business strategy
or any risk exposure), financial
condition, or corporate structure.
The proposed rule would not change
the existing provisions in the capital
plan rule whereby the Board may direct
a large bank holding company to revise
and resubmit its capital plan under the
following circumstances: (1) The capital
plan is incomplete or the capital plan,
or the bank holding company’s internal
capital adequacy process, contains
material weaknesses; (2) there has been
or will likely be a material change in the
bank holding company’s risk profile
(including a material change in its
business strategy or any risk exposure),
financial condition, or corporate
structure; (3) the stress scenario(s)
developed by the bank holding
company are not appropriate to its
business model and portfolios, or
changes in financial markets or the
macro-economic outlook that could
have a material impact on a bank
holding company’s risk profile and
financial condition require the use of
updated scenarios; or (4) the capital
plan or the condition of the bank
holding company raise any of the issues
that serve as a basis for the Board to
object to a bank holding company’s
capital plan.15 In determining whether
there has been a material change in the
bank holding company’s risk profile, the
Board may consider, among other
factors, changes to a company’s balance
sheet and liquidity position or changes
to market or financial conditions more
generally.
d. Consequences for Failure To Execute
Planned Actions, Including Capital
Issuances, Under the Capital Plan Rule
When reviewing a capital plan, the
Board considers the bank holding
company’s description of all planned
capital actions over the planning
horizon, including both capital
issuances and capital distributions, and
relies on these descriptions of the
planned capital actions as a basis for its
action on a capital plan. The proposed
rule would limit a large bank holding
company’s ability to make capital
distributions to the extent that the bank
holding company does not execute
planned capital issuances during the
capital plan cycle. This proposed
15 12

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change would address behavior
observed in previous capital plan
cycles, when some large bank holding
companies included issuances of capital
instruments in their capital plans, but
did not execute these planned
issuances.
This behavior has the potential to
undermine the Board’s assessment in
CCAR of a large bank holding
company’s capital adequacy. The
Board’s quantitative assessment of
capital adequacy in CCAR takes into
account all planned capital issuances
over the planning horizon. If a large
bank holding company does not execute
its planned capital issuances, the large
bank holding company will have a
lower amount of capital, all other things
being equal. To mitigate the effects of
this behavior, it has been the Board’s
practice to approve repurchases of
common stock on both a net basis and
a gross basis so that a company is
required to reduce repurchases to the
extent that it does not issue as much
common stock as it had planned.
However, this practice does not limit
net capital distributions in cases where
a bank holding company is paying a
common stock dividend, but is not
repurchasing its common stock, or
where a bank holding company issues
an amount of other forms of regulatory
capital that is less than the amount
projected in its capital plan.
The proposed rule would memorialize
in the capital plan rule the Board’s
existing practice of approving
repurchases of common stock on both a
net basis and a gross basis and address
other cases where a large bank holding
company fails to execute the planned
amount of capital issuances in its
capital plan. Under the proposed rule, if
the Federal Reserve does not object to a
bank holding company’s capital plan
and the company raises a dollar amount
of regulatory capital in a calendar
quarter that is less than the amount that
the bank holding company projected it
would issue under baseline conditions
in its capital plan, the bank holding
company would be required to reduce
the amount of its capital distributions
on regulatory capital instruments with
greater or equal ability to absorb losses,
increase the amount of its capital
issuances by issuing regulatory capital
instruments that have greater or equal
ability to absorb losses, or take any
combination of the foregoing actions so
that the net dollar amounts of the
company’s actual capital issuances and
capital distributions in that calendar
quarter are no less than the amounts
projected in the bank holding
company’s capital plan for the calendar
quarter. The proposed rule would

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identify common equity tier 1 capital as
having the greatest ability to absorb
losses, followed by additional tier 1
capital, and tier 2 capital, each as
defined in the Board’s Regulation Q (12
CFR 217.2).
As a result of this provision, the net
amounts of the company’s actual capital
issuances and capital distributions must
be at least as great as the net amounts
of capital issuances and capital
distributions projected in the bank
holding company’s capital plan, in each
case for a given calendar quarter.
Example 1: A large bank holding
company’s most recent capital plan
included, for a given quarter, common
stock issuance of $50 million, dividends
on common stock of $50 million, and
common stock repurchases of $50
million (for a total of $100 million in
common stock distributions), but the
bank holding company executed only
$25 million of its planned $50 million
in common issuances for that quarter.
The proposed rule would require the
bank holding company to reduce the
amount of its distributions on common
stock (i.e., the total of its planned
common stock dividends and
repurchases) for the quarter from $100
million to $75 million.
Example 2: A large bank holding
company’s most recent capital plan
included, for a given quarter, common
stock issuance of $50 million, dividends
on common stock of $50 million, and
preferred stock repurchases of $50
million, but the bank holding company
executed only $25 million of its planned
$50 million in common issuances for
that quarter. The proposed rule would
require the bank holding company to
offset the reduction in the issuance of
common stock by a decrease in the
dividends on common stock. The
proposed rule would not allow the bank
holding company to offset the reduction
in common stock issuances with a
reduction in preferred stock repurchases
or with an increase in preferred stock
issuance, because common stock has
greater capacity to absorb losses than
preferred stock.
Example 3: A large bank holding
company’s most recent capital plan
included, for a given quarter, a common
stock issuance of $25 million, a
subordinated debt issuance of $50
million, common stock dividends of $50
million, and subordinated debt
repurchases of $50 million for a given
quarter, but the bank holding company
failed to execute any of its projected
subordinated debt issuance for that
quarter. In this case, the proposed rule
would require the bank holding
company to reduce the amount of its
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subordinated debt or common stock, or
a combination of both, for the quarter by
$50 million. The bank holding company
also could increase its common stock or
preferred stock issuances to offset the
lack of subordinated debt issuance.
If a large bank holding company had
contemplated a capital issuance to
support a merger or acquisition but did
not consummate the merger or
acquisition, it would be appropriate for
the bank holding company to maintain
the gross amount of its capital
distributions. In this case, the proposal
would provide that the bank holding
company is not subject to limitations on
its common stock capital distributions
to the extent that a planned, but not
executed, capital issuance, was
associated with the planned merger or
acquisition.
Under the proposed rule, as under the
current capital plan rule, the Board may
object to a large bank holding
company’s capital plan if the
assumptions and analysis underlying
the bank holding company’s capital
plan, or the bank holding company’s
methodologies for reviewing the
robustness of its capital adequacy
process, are not reasonable or
appropriate. In the Board’s view, a bank
holding company’s consistent failure to
execute planned capital issuances may
be indicative of shortcomings in its
capital planning processes and may
indicate that the assumptions and
analysis underlying the bank holding
company’s capital plan, or the bank
holding company’s methodologies for
reviewing the robustness of its capital
adequacy process, are not reasonable or
appropriate. Accordingly, the failure to
execute capital issuances as indicated in
its capital plan may form the basis for
objection if the bank holding company
is unable to explain the discrepancy
between its planned and executed
capital issuances.
Similarly, the Board has observed a
practice whereby some large bank
holding companies have included
markedly reduced distributions in the
final three quarters of the planning
horizon (i.e., the quarters that are not
subject to objection in the current
capital plan cycle, sometimes referred to
as ‘‘out-quarters’’) relative to the
distributions in the preceding four
quarters of the capital plan (i.e., the
distributions that are subject to possible
objection in the current cycle). In the
next capital plan cycle, when the
previous capital plan cycle’s ‘‘out
quarters’’ become subject to possible
objection, the bank holding companies
submit a capital plan with significantly
increased distributions relative to the
previous capital plan cycle’s ‘‘out-

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quarters,’’ while again submitting
reduced distributions for the ‘‘outquarters’’ of the new capital plan cycle.
This practice erodes the credibility of
large bank holding companies’ capital
plans. A bank holding company should
project its distributions in the final three
quarters of their capital plans based on
realistic assumptions about the future
and in a manner broadly consistent
with, or higher than, previous quarters,
unless it is in fact planning to reduce its
distributions. In the Board’s view, the
practice of widely varying planned
capital distributions based on whether
they occur in an ‘‘out-quarter’’ as
compared to a quarter that is subject to
a possible objection, may be indicative
of shortcomings in a bank holding
company’s capital planning processes
and may indicate that ‘‘the assumptions
and analysis underlying the bank
holding company’s capital plan, or the
bank holding company’s methodologies
for reviewing the robustness of its
capital adequacy process, are not
reasonable or appropriate.’’ 16
Under the capital plan rule, the
Federal Reserve may object to a capital
plan on this basis, and the practice of
widely varying planned capital
distributions therefore may form the
basis for objection to a bank holding
company’s capital plan. In reviewing
this type of practice, the Federal Reserve
would consider whether the bank
holding company is able to provide
support for wide quarter-to-quarter
variations or for significantly revising its
planned distributions for the same
period of time from one capital plan
cycle to the next capital plan cycle.
Question 4: What, if any, unexpected
consequences might result from the
proposed treatment of a failure to
execute planned capital issuances? Are
there circumstances other than a merger
or acquisition under which it would be
appropriate for a large bank holding
company to maintain the gross amount
of its capital distributions, even where
the bank holding company has not
executed the planned capital issuance?
If so, describe those circumstances and
explain why a bank holding company
should be permitted to maintain the
gross amount of capital distributions.
e. Clarification of CCAR Process for
Bank Holding Company Subsidiaries of
Foreign Banking Organizations
As discussed above, the Board issued
the enhanced prudential standards rule
in February 2014 implementing
enhanced prudential standards for U.S.
bank holding companies and foreign
banking organizations with total
16 12

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consolidated assets of $50 billion or
more. A foreign banking organization
with U.S. non-branch assets of $50
billion or more is required to establish
a U.S. intermediate holding company.
This U.S. intermediate holding
company is generally subject to the
same prudential standards as a U.S.
bank holding company, including
capital planning and stress test
requirements included in the Board’s
capital plan and stress test rules.
The enhanced prudential standards
rule requires a foreign banking
organization that has U.S. non-branch
assets of $50 billion or more as of July
1, 2015, to establish its U.S.
intermediate holding company by July
1, 2016. The U.S. intermediate holding
company is required to comply with
risk-based capital requirements on July
1, 2016, and must submit its first capital
plan on January 5, 2017 (which would
be modified to April 5, 2017 under the
proposed rule). The IHC must conduct
its first stress test under the stress test
rules beginning with the following
stress test cycle (which would be
modified to January 1, 2018, under the
proposed rule).
The enhanced prudential standards
rule provides that each subsidiary bank
holding company and insured
depository institution of a foreign
banking organization is subject to
applicable stress testing requirements
until October 1, 2017 (modified to
January 1, 2018 in the proposal, at
which point it is expected that the U.S.
intermediate holding company will be
subject to the full CCAR process.17
However, the enhanced prudential
standards rule is silent on how the
capital plan rule will apply to a
subsidiary bank holding company with
total consolidated assets of $50 billion
or more prior to application of the stress
test rules to the U.S. intermediate
holding company.
The proposed rule would clarify that
a bank holding company that was
subject to the capital plan rule as of
September 30, 2015 and is a subsidiary
of a U.S. intermediate holding company
would continue to be subject to the
capital plan rule until January 1, 2018.18
17 If the foreign banking organization designated
an existing bank holding company as its U.S.
intermediate holding company, that bank holding
company would continue to be subject to capital
requirements under 12 CFR Part 217 until
December 31, 2017, and stress test requirements
under subparts F, G, or H of Regulation YY until
September 30, 2017. In this event, the intermediate
holding company would be required to submit a
capital plan for the capital plan cycle beginning
January 1, 2017, and the U.S. intermediate holding
company would be subject to the CCAR process for
that capital plan cycle.
18 With the mutual consent of the company and
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The Federal Reserve would continue to
evaluate the subsidiary bank holding
company through the CCAR process
through the cycle ending on December
31, 2017. Such bank holding company
subsidiary would be subject to the
limitations on capital distributions and
prior approval and notice requirements
for capital distributions until the Board
acts on the capital plan of the U.S.
intermediate holding company.
As noted above, the U.S. intermediate
holding company will not be subject to
supervisory or company-run stress tests
under the stress test rules during the
stress test cycle that begins on January
1, 2017. Accordingly, for a U.S.
intermediate holding company’s initial
capital plan cycle, the Federal Reserve’s
assessment of the U.S. intermediate
holding company’s capital plan will not
be based on a supervisory stress test
estimates conducted under those stress
test rules.19 Instead, the Federal Reserve
would conduct a more limited
quantitative assessment of the U.S.
intermediate holding company’s capital
plan based on its own stress scenario
and any scenarios provided by the
Board and a qualitative assessment of its
capital planning processes and
supporting practices.
Pursuant to the capital plan rule, the
U.S. intermediate holding company will
be required to conduct stress tests in
connection with its capital plan due
April 5, 2017. Specifically, the Board
expects that, in connection with the
capital plans for the 2017 cycle, a U.S.
intermediate holding company would
be required to conduct stress tests using
a baseline and a stress scenario that it
had designed and the severely adverse
scenario designed by the Board.20
Beginning with the following capital
plan cycle, in which a capital plan
would be due to the Board by April 5,
2018, the Board anticipates that it will
evaluate each U.S. intermediate holding
company using the full CCAR
supervisory process, including poststress capital analysis based on the
supervisory stress test. During this same
time period, the U.S. intermediate
holding company will be subject to the
stress test requirements of the stress test
rules, including company-run stress
tests under three scenarios provided by
the Board.
owned by the foreign banking organization could
comply with the requirements of the capital plan
rule in lieu of the subsidiary bank holding
company.
19 See 12 CFR part 252, subpart E.
20 The U.S. intermediate holding company would
also be required to complete the relevant aspects of
the FR Y–14A in connection with these stress tests.
However, a U.S. intermediate holding company
would not be required to publicly disclose the
results of its stress tests.

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For the capital plan cycle in which
both the U.S. intermediate holding
company and its subsidiary bank
holding company are subject to the
capital plan rule, the Board expects that
companies could submit certain aspects
of the capital plan jointly or in a single
capital plan that clearly sets out and
explains how the capital plan for the
U.S. intermediate holding company
builds on the capital plan for the bank
holding company. For example, if the
U.S. intermediate holding company and
the bank holding company subsidiary
rely on common stress testing models
and practices, both companies could
submit the same supporting
documentation for these models,
provided that the each company’s
submissions met all of the requirements
of the capital plan rule.
f. Clarification Under the Capital Plan
Rule of Capital Actions Not Requiring
Approval
The capital plan rule provides that a
large bank holding company must
request prior approval or provide prior
notice of a capital distribution if the
‘‘dollar amount of the capital
distribution will exceed the amount
described in the capital plan for which
a non-objection was issued.’’ 21 This
provision applies to all capital
distributions, including those associated
with regulatory capital instruments.
Accordingly, large bank holding
companies that have issued accretive
capital instruments with fixed
dividends have been required to seek
the Board’s approval or provide notice
to the Board in order to issue these
instruments. The Board has approved
these requests, and would anticipate
approving similar requests in the future,
provided that the proposed capital
issuance would result in net capital
accretion.
In order to relieve burden on the bank
holding companies going forward, the
proposed rule would remove prior
approval and prior notice requirements
for distributions involving incremental
issuances of instruments that would
qualify for inclusion in the numerator of
regulatory capital ratios (i.e., common
equity tier 1, additional tier 1, and tier
2 capital). The Board believes that
removing the requirement will reduce
unnecessary efforts by a bank holding
company to submit requests for
distributions outside of the capital plan
that are associated with issuances of
regulatory capital.
The proposed rule would also clarify
that, in measuring whether the dollar
21 See section 225.8(f) of the capital plan rule (12
CFR 225.8(f)).

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amount of the capital distribution will
exceed the amount described in the
capital plan for which a non-objection
was issued, the bank holding company
should look at the distributions for each
quarter.
Question 5: What, if any, limitations
should be imposed on this proposed
exception? For instance, would an
aggregate dollar limit in the range of 10
to 100 basis points of a bank holding
company’s tier 1 capital be appropriate?
g. Clarification of Assumptions
Regarding Capital Actions Under the
Stress Test Rules

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The Board requires a consistent
approach for incorporating assumed
capital actions into the stress tests for all
bank holding companies, savings and
loan holding companies and state
member banks. The prescribed capital
actions help ensure that the publicly
disclosed results of supervisory and
company-run stress tests are comparable
across companies. The Board is
proposing to clarify these assumptions
to further enhance the comparability
across companies and account for
certain contractual obligations.
Specifically, the proposed rule would
clarify that, for the second through
ninth quarters of the planning horizon,
companies should assume no new
issuances of capital instruments eligible
for inclusion in the numerator of a
regulatory capital ratio, except for
issuances related to expensed employee
compensation. This change is in
keeping with the Board’s current
practices and the existing requirement
that companies assume no repurchase or
redemption of capital instruments
eligible for inclusion in the numerator
of a regulatory capital ratio so that
capital actions that are subject to future
adjustment, market conditions, or
regulatory approvals are not reflected in
a company’s projected regulatory
capital.
Question 6: What, if any, additional
exceptions to the general assumption of
no issuances of capital instruments
should the Board consider? Should
issuances relating to an employee stock
ownership plan also be treated as an
exception, and if so, what would be the
rationale for this exception?
h. Other Modifications to the Capital
Plan Rule and Related Requirements
The proposal would revise the
Board’s Policy Statement on the
Scenario Design Framework for Stress
Testing and provisions governing
applicability of the stress test
requirements to U.S. intermediate
holding companies of foreign banking

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organizations to reflect the changes in
the cycle shift.
The proposal would revise the scope
of the capital plan rule to include any
U.S. intermediate holding company and
any nonbank financial company
supervised by the Board that is made
subject to this section pursuant to a rule
or order of the Board and make
clarifying changes to the applicability
section. As discussed above in section
II.a.iii of this preamble, the proposed
rule would revise the applicability of
the stress test rules to a nonbank
financial company supervised by the
Board to provide that the Board will
notify a nonbank financial company
prior to it being subject to the stress test
rules.
The proposal would revise the
hearing procedures provided for in the
capital plan rule. The capital plan rule
provides that a large bank holding
company may request a formal hearing
after the Board objects to its capital plan
or disapproves of a capital distribution.
A formal hearing could take several
months and up to a year, and during the
pendency of final action by the Board,
there would be uncertainty as to
whether a bank holding company could
continue to make capital distributions.
The proposed rule would replace the
formal hearing procedures with
informal procedures modeled on those
used in reviewing notices of
appointments of directors and senior
executive officers under Regulation Y.
Under the proposal, a large bank
holding company would have 15 days to
request an informal hearing, and the
hearing would be held within 30 days
of the request. The Board would provide
written notice of its final decision to the
bank holding company within 60 days
of the conclusion of any informal
hearing.
The proposed rule also would require
that a bank holding company be capable
of providing to the Board its loss,
revenue, and expense estimation models
used by the bank holding company for
stress scenario analysis, including
supporting documentation regarding
each model’s development and
validation status. This information is
needed by supervisors in order to
properly assess a bank holding
company’s capital adequacy and capital
planning processes. In this regard, the
information helps facilitate cross-firm
comparisons of bank holding
companies’ loss, revenue, and expense
estimation models and their approaches
to model validation.

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III. Administrative Law Matters
a. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act (PRA) of 1995 (44 U.S.C.
3506; 5 CFR part 1320, Appendix A.1),
the Board reviewed the proposed rule
under the authority delegated to the
Board by Office of Management and
Budget (OMB). The Board may not
conduct or sponsor, and a respondent is
not required to respond to, an
information collection unless it displays
a currently valid OMB control number.
The OMB control for this information
collection is 7100–0342. In addition, as
permitted by the PRA, the Board
proposes to extend for three years, with
revision, the Recordkeeping and
Reporting Requirements Associated
with Regulation Y (Capital Plans) (Reg
Y–13; OMB No. 7100–0342).
The proposed rule contains
requirements subject to the PRA. The
collection of information that would be
revised by this proposed rule is found
in section 225.8 of Regulation Y (12 CFR
part 225). Proposed section
225.8(d)(3)(iv) would require that a bank
holding company be capable of
providing to the Board its loss, revenue,
and expense estimation models used by
the bank holding company for stress
scenario analysis, including supporting
documentation regarding each model’s
development and validation status. This
information is needed by supervisors in
order to properly assess a bank holding
company’s capital adequacy and capital
planning processes. In this regard, the
information helps facilitate cross-firm
comparisons of bank holding
companies’ loss, revenue, and expense
estimation models and their approaches
to model validation. As mentioned in
the preamble, the amendments to the
qualitative standards in the proposed
rule would amend the rule to include
considerations that have been
previously communicated to large bank
holding companies individually and
publicly. To reinforce the Board’s focus
on qualitative elements of the capital
plan and enhance the bank holding
companies’ understanding of the capital
planning assessment process, the
proposed rule would enumerate certain
elements of the qualitative
considerations and bases for objection
in the capital plan rule. The Board
expects that respondents would
encounter no additional burden
associated with proposed section
225.8(d)(3)(vi).
Proposed section 225.8(f)(1) would
remove prior approval and prior notice
requirements for distributions involving
incremental issuances of instruments
that would qualify for inclusion in the

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numerator of regulatory capital ratios
(i.e., common equity tier 1, additional
tier 1, and tier 2 capital). As mentioned
in the preamble, the Board believes that
removing the requirement would reduce
unnecessary efforts by a bank holding
company to submit requests for
distributions outside of the capital plan
that are associated with issuances of
regulatory capital. The Board estimates
that respondent burden associated with
proposed section 225.8(f)(1) would be
reduced by approximately 50 percent.
Title of Information Collection:
Recordkeeping and Reporting
Requirements Associated with
Regulation Y (Capital Plans) (Reg Y–13).
Frequency of Response:
Recordkeeping requirements, annually.
Reporting requirements, varied—the
capital plan exercise would be done at
least annually, capital plan
resubmissions and prior approval
requirements would be event-generated.
Affected Public: This information
collection applies to every top-tier bank
holding company domiciled in the
United States that has $50 billion or
more in total consolidated assets (large
U.S. bank holding companies) and U.S.
intermediate holding companies with
total consolidated assets of $50 billion
or more.
General Description of Information
Collection: This information collection
is mandatory and the recordkeeping
requirement to maintain the Capital
Plan is in effect until either a bank
holding company is no longer
operational or until further notice by the
Board. Section 616(a) of the Dodd-Frank
Act amended section 5(b) of the Bank
Holding Company Act (BHC Act) (12
U.S.C. 1844(b)) to specifically authorize
the Board to issue regulations and
orders relating to capital requirements
for bank holding companies. The Board
is also authorized to collect and require
reports from bank holding companies
pursuant to section 5(c) of the BHC Act
(12 U.S.C. 1844(c)). Additionally, the
Board’s rulemaking authority for the
information collection requirements
associated with Reg Y–13 is found in
sections 908 and 910 of the
International Lending Supervision Act,
as amended (12 U.S.C. 3907 and 3909).
Additional support for Reg Y–13 is
found in sections 165 and 166 of the
Dodd-Frank Act (12 U.S.C. 5365 and
5366). The capital plan information
submitted by the covered bank holding
company would consist of confidential
and proprietary modeling information
and highly sensitive business plans,
such as acquisition plans submitted to
the Federal Reserve for approval.
Therefore, it appears the information
would be subject to withholding under

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exemption 4 of the Freedom of
Information Act (5 U.S.C. 552(b)(4)).
Estimated Burden:
Number of Respondents: 52.
Estimated Burden per Response:
—.8(d)(1)(i) and (ii) Recordkeeping and
Reporting, 12,000 hours
—.8(d)(1)(iii) Recordkeeping, 100 hours
—.8(d)(3)(i)–(vii) 1,000 hours
—.8(d)(4) Reporting, 100 hours
—.8(e)(3)(i) Reporting, 16 hours
—.8(f)(1), (2) and (3) Reporting, 3,400
hours
—.8(f)(5) Reporting, 16 hours
Total Estimated Annual Burden:
670,864 hours.
Comments are invited on: (1) Whether
the proposed collection of information
is necessary for the proper performance
of the Board’s functions; including
whether the information has practical
utility; (2) the accuracy of the Board’s
estimate of the burden of the proposed
information collection, including the
cost of compliance; (3) ways to enhance
the quality, utility, and clarity of the
information to be collected; and (4)
ways to minimize the burden of
information collection on respondents,
including through the use of automated
collection techniques or other forms of
information technology. Secretary,
Board of Governors of the Federal
Reserve System, Washington, DC 20551;
and to the Office of Management and
Budget, Paperwork Reduction Project
(7100–0342), Washington, DC 20503.
b. Regulatory Flexibility Act Analysis
The Board has considered the
potential impact of the proposed rule on
small companies in accordance with the
Regulatory Flexibility Act (5 U.S.C.
603(b)). Based on its analysis and for the
reasons stated below, the Board believes
that the proposed rule will not have a
significant economic impact on a
substantial number of small entities.
Nevertheless, the Board is publishing a
final regulatory flexibility analysis.
Under regulations issued by the Small
Business Administration (‘‘SBA’’), a
small entity includes a depository
institution, bank holding company, or
savings and loan holding company with
total assets of $500 million or less (a
small banking organization). The
proposed rule would apply to bank
holding companies, savings and loan
holding companies, and state member
banks with total consolidated asset of
$10 billion or more and nonbank
financial companies supervised by the
Board. Companies that would be subject
to the proposed rule therefore
substantially exceed the $500 million
total asset threshold at which a
company is considered a small company
under SBA regulations.

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In light of the foregoing, the Board
does not believe that the proposed rule
would have a significant economic
impact on a substantial number of small
entities.
c. Solicitation of Comments on the Use
of Plain Language
Section 722 of the Gramm-LeachBliley Act (Pub. L. 106–102, 113 Stat.
1338, 1471, 12 U.S.C. 4809) requires the
federal banking agencies to use plain
language in all proposed and final rules
published after January 1, 2000. The
Board has sought to present the
proposed rule in a simple and
straightforward manner, and invites
comment on the use of plain language.
For example:
• Have we organized the material to
suit your needs? If not, how could the
rule be more clearly stated?
• Are the requirements in the rule
clearly stated? If not, how could the rule
be more clearly stated?
• Do the regulations contain technical
language or jargon that is not clear? If
so, which language requires
clarification?
• Would a different format (grouping
and order of sections, use of headings,
paragraphing) make the regulation
easier to understand? If so, what
changes would make the regulation
easier to understand?
• Would more, but shorter, sections
be better? If so, which sections should
be changed?
• What else could we do to make the
regulation easier to understand?
List of Subjects
12 CFR Part 225
Administrative practice and
procedure, Banks, Banking, Capital
planning, Holding companies, Reporting
and recordkeeping requirements
Securities, Stress testing.
12 CFR Part 252
Administrative practice and
procedure, Banks, Banking, Capital
planning, Federal Reserve System,
Holding companies, Reporting and
recordkeeping requirements, Securities,
Stress testing.
Authority and Issuance
For the reasons stated in the
Supplementary Information, the Board
of Governors of the Federal Reserve
System proposes to amend 12 CFR
chapter II as follows:
PART 225—BANK HOLDING
COMPANIES AND CHANGE IN BANK
CONTROL (REGULATION Y)
1. The authority citation for part 225
is revised to read as follows:

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Authority: 12 U.S.C. 1817(j)(13), 1818,
1828(o), 1831i, 1831p–1, 1843(c)(8), 1844(b),
1972(1), 3106, 3108, 3310, 3331–3351, 3906,
3907, and 3909; 15 U.S.C. 1681s, 1681w,
6801 and 6805.

Subpart A—General Provisions
■

2. Revise § 225.8 to read as follows:

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§ 225.8

Capital planning.

(a) Purpose. This section establishes
capital planning and prior notice and
approval requirements for capital
distributions by certain bank holding
companies.
(b) Scope and reservation of
authority—(1) Applicability. Except as
provided in paragraph (c) of this
section, this section applies to:
(i) Any top-tier bank holding
company domiciled in the United States
with average total consolidated assets of
$50 billion or more ($50 billion asset
threshold);
(ii) Any other bank holding company
domiciled in the United States that is
made subject to this section, in whole or
in part, by order of the Board;
(iii) Any U.S. intermediate holding
company subject to this section
pursuant to § 252.153; and
(iv) Any nonbank financial company
supervised by the Board that is made
subject to this section pursuant to a rule
or order of the Board.
(2) Average total consolidated assets.
For purposes of this section, average
total consolidated assets means the
average of the total consolidated assets
as reported by a bank holding company
on its Consolidated Financial
Statements for Bank Holding Companies
(FR Y–9C) for the four most recent
consecutive quarters. If the bank
holding company has not filed the FR
Y–9C for each of the four most recent
consecutive quarters, average total
consolidated assets means the average of
the company’s total consolidated assets,
as reported on the company’s FR Y–9C,
for the most recent quarter or
consecutive quarters up to the most
recent four consecutive quarters.
Average total consolidated assets are
measured on the as-of date of the most
recent FR Y–9C used in the calculation
of the average.
(3) Ongoing applicability. A bank
holding company (including any
successor bank holding company) that is
subject to any requirement in section
shall remain subject to the requirement
unless and until its total consolidated
assets fall below $50 billion for each of
four consecutive quarters, as reported
on the FR Y–9C and effective on the asof date of the fourth consecutive FR Y–
9C.

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(4) Reservation of authority. Nothing
in this section shall limit the authority
of the Federal Reserve to issue a capital
directive or take any other supervisory
or enforcement action, including an
action to address unsafe or unsound
practices or conditions or violations of
law.
(5) Rule of construction. Unless the
context otherwise requires, any
reference to bank holding company in
this section shall include a U.S.
intermediate holding company and shall
include a nonbank financial company
supervised by the Board to the extent
this section is made applicable pursuant
to a rule or order of the Board.
(c) Transitional arrangements—(1)
Transition periods for certain bank
holding companies. (i) A bank holding
company is subject to this section
beginning on the first day of the first
capital plan cycle that begins after the
bank holding company meets or exceeds
the $50 billion asset threshold (as
measured under paragraph (b)(1) of this
section) for the first time, unless that
time is extended by the Board in
writing.
(ii) The Board or the appropriate
Reserve Bank with the concurrence of
the Board, may require a bank holding
company described in paragraph
(c)(1)(i) of this section to comply with
any or all of the requirements in
paragraphs (e)(1), (e)(3), (f), or (g) of this
section if the Board or appropriate
Reserve Bank with concurrence of the
Board, determines that the requirement
is appropriate on a different date based
on the company’s risk profile, scope of
operation, or financial condition and
provides prior notice to the company of
the determination.
(2) Transition periods for subsidiaries
of certain foreign banking
organizations—(i) Bank holding
companies that rely on SR Letter 01–01.
(A) A bank holding company that meets
the $50 billion asset threshold (as
measured under paragraph (b)(1) of this
section) and is relying as of July 20,
2015, on Supervision and Regulation
Letter SR 01–01 issued by the Board (as
in effect on May 19, 2010) is subject to
this section beginning on January 1,
2016, unless that time is extended by
the Board in writing.
(B) The Board or the appropriate
Reserve Bank with the concurrence of
the Board, may require a bank holding
company described in paragraph
(c)(2)(i)(A) of this section to comply
with any or all of the requirements in
paragraphs (e)(1), (e)(3), (f), or (g) of this
section if the Board or appropriate
Reserve Bank with concurrence of the
Board, determines that the requirement
is appropriate on a different date based

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on the company’s risk profile, scope of
operation, or financial condition and
provides prior notice to the company of
the determination.
(ii) U.S. intermediate holding
companies. (A) A U.S. intermediate
holding company is subject to this
section beginning on the first day of the
next capital plan cycle after the date
that the U.S. intermediate holding
company is required to be established
pursuant to § 252.153, unless that time
is extended by the Board in writing.
(B) The Board or the appropriate
Reserve Bank with the concurrence of
the Board, may require a U.S.
intermediate holding company
described in paragraph (c)(2)(ii)(A) of
this section to comply with any or all
of the requirements in paragraphs (e)(1),
(e)(3), (f), or (g) of this section if the
Board or appropriate Reserve Bank with
concurrence of the Board, determines
that the requirement is appropriate on a
different date based on the company’s
risk profile, scope of operation, or
financial condition and provides prior
notice to the company of the
determination.
(iii) Bank holding company
subsidiaries of U.S. intermediate
holding companies required to be
established by July 1, 2016. (A)
Notwithstanding any other requirement
in this section, a bank holding company
that is a subsidiary of a U.S.
intermediate holding company and is
subject to this section on January 1,
2016 (or, with the mutual consent of the
company and Board, another bank
holding company domiciled in the
United States), shall remain subject to
paragraph (e) of this section until
December 31, 2017, and shall remain
subject to the requirements of
paragraphs (f) and (g) of this section
until the Board issues an objection or
non-objection to the capital plan of the
relevant U.S. intermediate holding
company.
(B) After the time periods set forth in
paragraph (c)(iii)(A) of this section, this
section will cease to apply to a bank
holding company that is a subsidiary of
a U.S. intermediate holding company,
unless otherwise determined by the
Board in writing.
(3) Transition periods for bank
holding companies subject to the
advanced approaches. (i)
Notwithstanding any other requirement
in this section, a bank holding company
must use 12 CFR part 225, appendices
A and E (as applicable), and 12 CFR part
252, subpart D and E, as applicable, to
estimate its pro forma regulatory capital
ratios and its pro forma tier 1 common
ratio for the capital plan cycle beginning
October 1, 2014, and the bank holding

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company may not use the advanced
approaches to estimate its pro forma
regulatory capital ratios and its pro
forma tier 1 common ratio until January
1, 2016.
(ii) Beginning January 1, 2016, a bank
holding company must use the
advanced approaches to estimate its pro
forma regulatory capital ratios and its
pro forma tier 1 common ratio for
purposes of its capital plan submission
under paragraph (e) of this section if the
Board notifies the bank holding
company before the first day of the
capital plan cycle that the bank holding
company is required to use the
advanced approaches to determine its
risk-based capital requirements.
(d) Definitions. For purposes of this
section, the following definitions apply:
(1) Advanced approaches means the
risk-weighted assets calculation
methodologies at 12 CFR part 217,
subpart E, as applicable, and any
successor regulation.
(2) BHC stress scenario means a
scenario designed by a bank holding
company that stresses the specific
vulnerabilities of the bank holding
company’s risk profile and operations,
including those related to the
company’s capital adequacy and
financial condition.
(3) Capital action means any issuance
or redemption of a debt or equity capital
instrument, any capital distribution, and
any similar action that the Federal
Reserve determines could impact a bank
holding company’s consolidated capital.
(4) Capital distribution means a
redemption or repurchase of any debt or
equity capital instrument, a payment of
common or preferred stock dividends, a
payment that may be temporarily or
permanently suspended by the issuer on
any instrument that is eligible for
inclusion in the numerator of any
minimum regulatory capital ratio, and
any similar transaction that the Federal
Reserve determines to be in substance a
distribution of capital.
(5) Capital plan means a written
presentation of a bank holding
company’s capital planning strategies
and capital adequacy process that
includes the mandatory elements set
forth in paragraph (e)(2) of this section.
(6) Capital plan cycle means:
(i) Until September 30, 2015, the
period beginning October 1 of a
calendar year and ending on September
30 of the following calendar year, and
(ii) Beginning October 1, 2015, the
period beginning January 1 of a calendar
year and ending on December 31 of that
year.
(7) Capital policy means a bank
holding company’s written assessment
of the principles and guidelines used for

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capital planning, capital issuance,
capital usage and distributions,
including internal capital goals; the
quantitative or qualitative guidelines for
capital distributions; the strategies for
addressing potential capital shortfalls;
and the internal governance procedures
around capital policy principles and
guidelines.
(8) Minimum regulatory capital ratio
means any minimum regulatory capital
ratio that the Federal Reserve may
require of a bank holding company, by
regulation or order, including, as
applicable, the bank holding company’s
tier 1 and supplementary leverage ratios
and common equity tier 1, tier 1, and
total risk-based capital ratios as
calculated under appendices A, D, and
E to this part (12 CFR part 225) and 12
CFR part 217, as applicable, including
the transition provisions at 12 CFR
217.1(f)(4) and 12 CFR 217.300, or any
successor regulation.
(9) Nonbank financial company
supervised by the Board means a
company that the Council has
determined under section 113 of the
Dodd-Frank Act (12 U.S.C. 5323) shall
be supervised by the Board and for
which such determination is still in
effect.
(10) Planning horizon means the
period of at least nine consecutive
quarters, beginning with the quarter
preceding the quarter in which the bank
holding company submits its capital
plan, over which the relevant
projections extend.
(11) Tier 1 capital has the same
meaning as under appendix A to this
part or under 12 CFR part 217, as
applicable, or any successor regulation.
(12) Tier 1 common capital means tier
1 capital as defined under appendix A
to this part less the non-common
elements of tier 1 capital, including
perpetual preferred stock and related
surplus, minority interest in
subsidiaries, trust preferred securities
and mandatory convertible preferred
securities.
(13) Tier 1 common ratio means the
ratio of a bank holding company’s tier
1 common capital to total risk-weighted
assets as defined under appendices A
and E to this part.
(14) U.S. intermediate holding
company means the top-tier U.S.
company that is required to be
established pursuant to § 252.153.
(e) General requirements—(1) Annual
capital planning. (i) A bank holding
company must develop and maintain a
capital plan.
(ii) A bank holding company must
submit its complete capital plan to the
Board and the appropriate Reserve Bank
each year. For the capital plan cycle

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beginning October 1, 2014, the capital
plan must be submitted by January 5,
2015, or such later date as directed by
the Board or by the appropriate Reserve
Bank with concurrence of the Board. For
each capital plan cycle beginning
thereafter, the capital plan must be
submitted by April 5, or such later date
as directed by the Board or by the
appropriate Reserve Bank with
concurrence of the Board.
(iii) The bank holding company’s
board of directors or a designated
committee thereof must at least
annually and prior to submission of the
capital plan under paragraph (e)(1)(ii) of
this section:
(A) Review the robustness of the bank
holding company’s process for assessing
capital adequacy,
(B) Ensure that any deficiencies in the
bank holding company’s process for
assessing capital adequacy are
appropriately remedied; and
(C) Approve the bank holding
company’s capital plan.
(2) Mandatory elements of capital
plan. A capital plan must contain at
least the following elements:
(i) An assessment of the expected uses
and sources of capital over the planning
horizon that reflects the bank holding
company’s size, complexity, risk profile,
and scope of operations, assuming both
expected and stressful conditions,
including:
(A) Estimates of projected revenues,
losses, reserves, and pro forma capital
levels, including any minimum
regulatory capital ratios (for example,
leverage, tier 1 risk-based, and total riskbased capital ratios) and any additional
capital measures deemed relevant by the
bank holding company, over the
planning horizon under expected
conditions and under a range of
scenarios, including any scenarios
provided by the Federal Reserve and at
least one BHC stress scenario;
(B) A calculation of the pro forma tier
1 common ratio over the planning
horizon under expected conditions and
under a range of stressed scenarios and
discussion of how the company will
maintain a pro forma tier 1 common
ratio above 5 percent under expected
conditions and the stressed scenarios
required under paragraphs (e)(2)(i)(A)
and (e)(2)(ii) of this section;
(C) A discussion of the results of any
stress test required by law or regulation,
and an explanation of how the capital
plan takes these results into account;
and
(D) A description of all planned
capital actions over the planning
horizon.

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(ii) A detailed description of the bank
holding company’s process for assessing
capital adequacy, including:
(A) A discussion of how the bank
holding company will, under expected
and stressful conditions, maintain
capital commensurate with its risks,
maintain capital above the minimum
regulatory capital ratios and above a tier
1 common ratio of 5 percent, and serve
as a source of strength to its subsidiary
depository institutions;
(B) A discussion of how the bank
holding company will, under expected
and stressful conditions, maintain
sufficient capital to continue its
operations by maintaining ready access
to funding, meeting its obligations to
creditors and other counterparties, and
continuing to serve as a credit
intermediary;
(iii) The bank holding company’s
capital policy; and
(iv) A discussion of any expected
changes to the bank holding company’s
business plan that are likely to have a
material impact on the bank holding
company’s capital adequacy or
liquidity.
(3) Data collection. Upon the request
of the Board or appropriate Reserve
Bank, the bank holding company shall
provide the Federal Reserve with
information regarding:
(i) The bank holding company’s
financial condition, including its
capital;
(ii) The bank holding company’s
structure;
(iii) Amount and risk characteristics
of the bank holding company’s on- and
off-balance sheet exposures, including
exposures within the bank holding
company’s trading account, other
trading-related exposures (such as
counterparty-credit risk exposures) or
other items sensitive to changes in
market factors, including, as
appropriate, information about the
sensitivity of positions to changes in
market rates and prices;
(iv) The bank holding company’s
relevant policies and procedures,
including risk management policies and
procedures;
(v) The bank holding company’s
liquidity profile and management;
(vi) The loss, revenue, and expense
estimation models used by the bank
holding company for stress scenario
analysis, including supporting
documentation regarding each model’s
development and validation; and
(vii) Any other relevant qualitative or
quantitative information requested by
the Board or by the appropriate Reserve
Bank to facilitate review of the bank
holding company’s capital plan under
this section.

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(4) Re-submission of a capital plan. (i)
A bank holding company must update
and re-submit its capital plan to the
appropriate Reserve Bank within 30
calendar days of the occurrence of one
of the following events:
(A) The bank holding company
determines there has been or will be a
material change in the bank holding
company’s risk profile, financial
condition, or corporate structure since
the bank holding company last
submitted the capital plan to the Board
and the appropriate Reserve Bank under
this section; or
(B) The Board or the appropriate
Reserve Bank with concurrence of the
Board, directs the bank holding
company in writing to revise and
resubmit its capital plan for any of the
following reasons:
(1) The capital plan is incomplete or
the capital plan, or the bank holding
company’s internal capital adequacy
process, contains material weaknesses;
(2) There has been, or will likely be,
a material change in the bank holding
company’s risk profile (including a
material change in its business strategy
or any risk exposure), financial
condition, or corporate structure;
(3) The BHC stress scenario(s) are not
appropriate to the bank holding
company’s business model and
portfolios, or changes in financial
markets or the macro-economic outlook
that could have a material impact on a
bank holding company’s risk profile and
financial condition require the use of
updated scenarios; or
(4) The capital plan or the condition
of the bank holding company raise any
of the issues described in paragraph
(e)(2)(ii) of this section.
(ii) A bank holding company may
resubmit its capital plan to the Federal
Reserve if the Board or the appropriate
Reserve Bank objects to the capital plan.
(iii) The Board or the appropriate
Reserve Bank with concurrence of the
Board, may extend the 30-day period in
paragraph (e)(4)(i) of this section for up
to an additional 60 calendar days, or
such longer period as the Board or the
appropriate Reserve Bank, with
concurrence of the Board, determines in
its discretion appropriate.
(iv) Any updated capital plan must
satisfy all the requirements of this
section; however, a bank holding
company may continue to rely on
information submitted as part of a
previously submitted capital plan to the
extent that the information remains
accurate and appropriate.
(5) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Board under this section and

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related materials shall be determined in
accordance with applicable exemptions
under the Freedom of Information Act
(5 U.S.C. 552(b)) and the Board’s Rules
Regarding Availability of Information
(12 CFR part 261).
(f) Review of capital plans by the
Federal Reserve; publication of
summary results—(1) Considerations
and inputs. (i) The Board or the
appropriate Reserve Bank with
concurrence of the Board, will consider
the following factors in reviewing a
bank holding company’s capital plan:
(A) The comprehensiveness of the
capital plan, including the extent to
which the analysis underlying the
capital plan captures and addresses
potential risks stemming from activities
across the firm and the company’s
capital policy;
(B) The reasonableness of the bank
holding company’s capital plan, the
assumptions and analysis underlying
the capital plan, and the robustness of
its capital adequacy process; and
(C) The bank holding company’s
ability to maintain capital above each
minimum regulatory capital ratio and
above a tier 1 common ratio of 5 percent
on a pro forma basis under expected and
stressful conditions throughout the
planning horizon, including but not
limited to any scenarios required under
paragraphs (e)(2)(i)(A) and (e)(2)(ii) of
this section.
(ii) The Board or the appropriate
Reserve Bank with concurrence of the
Board, will also consider the following
information in reviewing a bank holding
company’s capital plan:
(A) Relevant supervisory information
about the bank holding company and its
subsidiaries;
(B) The bank holding company’s
regulatory and financial reports, as well
as supporting data that would allow for
an analysis of the bank holding
company’s loss, revenue, and reserve
projections;
(C) As applicable, the Federal
Reserve’s own pro forma estimates of
the firm’s potential losses, revenues,
reserves, and resulting capital adequacy
under expected and stressful conditions,
including but not limited to any
scenarios required under paragraphs
(e)(2)(i)(A) and (e)(2)(ii) of this section,
as well as the results of any stress tests
conducted by the bank holding
company or the Federal Reserve; and
(D) Other information requested or
required by the Board or the appropriate
Reserve Bank, as well as any other
information relevant, or related, to the
bank holding company’s capital
adequacy.
(2) Federal Reserve action on a capital
plan. (i) The Board or the appropriate

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Reserve Bank with concurrence of the
Board, will object, in whole or in part,
to the capital plan or provide the bank
holding company with a notice of nonobjection to the capital plan:
(A) For the capital plan cycle
beginning October 1, 2014, by March 31,
2015;
(B) For each capital plan cycle
beginning thereafter, by June 30 of the
calendar year in which a capital plan
was submitted pursuant to paragraph
(e)(1)(ii) of this section; and
(C) For a capital plan resubmitted
pursuant to paragraph (e)(4) of this
section, within 75 calendar days after
the date on which a capital plan is
resubmitted, unless the Board provides
notice to the company that it is
extending the time period.
(ii) The Board or the appropriate
Reserve Bank with concurrence of the
Board, may object to a capital plan if it
determines that:
(A) The bank holding company has
material unresolved supervisory issues,
including but not limited to issues
associated with its capital adequacy
process;
(B) The assumptions and analysis
underlying the bank holding company’s
capital plan, or the bank holding
company’s methodologies for reviewing
the robustness of its capital adequacy
process, are not reasonable or
appropriate;
(C) The bank holding company has
not demonstrated an ability to maintain
capital above each minimum regulatory
capital ratio and above a tier 1 common
ratio of 5 percent, on a pro forma basis
under expected and stressful conditions
throughout the planning horizon; or
(D) The bank holding company’s
capital planning process or proposed
capital distributions otherwise
constitute an unsafe or unsound
practice, or would violate any law,
regulation, Board order, directive, or
condition imposed by, or written
agreement with, the Board. In
determining whether a capital plan or
any proposed capital distribution would
constitute an unsafe or unsound
practice, the Board or the appropriate
Reserve Bank would consider whether
the bank holding company is and would
remain in sound financial condition
after giving effect to the capital plan and
all proposed capital distributions.
(iii) The Board or the appropriate
Reserve Bank will notify the bank
holding company in writing of the
reasons for a decision to object to a
capital plan.
(iv) If the Board or the appropriate
Reserve Bank objects to a capital plan
and until such time as the Board or the
appropriate Reserve Bank with

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concurrence of the Board, issues a nonobjection to the bank holding company’s
capital plan, the bank holding company
may not make any capital distribution,
other than those capital distributions
associated with a new issuance of
instruments eligible for inclusion in the
numerator of a minimum regulatory
capital ratio or capital distributions with
respect to which the Board or the
appropriate Reserve Bank has indicated
in writing its non-objection.
(v)(A) If the Federal Reserve does not
object to a bank holding company’s
capital plan and the company raises a
smaller dollar amount of regulatory
capital in a calendar quarter than the
bank holding company projected that it
would issue under baseline conditions
in its capital plan, the bank holding
company must reduce the dollar amount
of its capital distributions on regulatory
capital instruments with greater or equal
ability to absorb losses, increase the
dollar amount of its capital issuances by
issuing regulatory capital instruments
that have greater or equal ability to
absorb losses, or take any combination
of the foregoing actions such that the net
dollar amounts of the company’s actual
capital issuances and capital
distributions in that calendar quarter are
no less than the amounts projected in
the bank holding company’s capital
plan for the calendar quarter.
(B) For purposes of paragraph
(f)(2)(v)(A) of this section and in
decreasing order of their ability to
absorb losses, the applicable categories
of regulatory capital instruments are
common equity tier 1 capital, additional
tier 1 capital, and tier 2 capital, each as
defined in 12 CFR 217.2.
(C) Paragraph (f)(2)(v)(A) of this
section shall not apply to a capital
issuance to the extent that a planned but
unexecuted issuance of a capital
instrument relates to a planned merger
or acquisition that is no longer expected
to be consummated.
(vi) The Board may disclose publicly
its decision to object or not object to a
bank holding company’s capital plan
under this section, along with a
summary of the Board’s analyses of that
company. Any disclosure under this
paragraph will occur by March 31 (for
the capital plan cycle beginning October
1, 2014) or June 30 (for each capital plan
cycle beginning thereafter), unless the
Board determines that a later disclosure
date is appropriate.
(3) Request for reconsideration or
hearing—(i) General. Within 10
calendar days of receipt of a notice of
objection to a capital plan by the Board
or the appropriate Reserve Bank:
(A) A bank holding company may
submit a written request to the Board

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37433

requesting reconsideration of the
objection, including an explanation of
why reconsideration should be granted.
Within 10 calendar days of receipt of
the bank holding company’s request, the
Board will notify the company of its
decision to affirm or withdraw the
objection to the bank holding company’s
capital plan or a specific capital
distribution; or
(B) As an alternative to paragraph
(f)(3)(i)(A) of this section, a bank
holding company may request an
informal hearing on the objection.
(ii) Request for an informal hearing.
(A) A request for an informal hearing
shall be in writing and shall be
submitted within 15 days of a notice of
an objection. The Board may, in its sole
discretion, order an informal hearing if
the Board finds that a hearing is
appropriate or necessary to resolve
disputes regarding material issues of
fact.
(B) An informal hearing shall be held
within 30 days of a request, if granted,
provided that the Board may extend this
period upon notice to the requesting
party.
(C) Written notice of the final decision
of the Board shall be given to the bank
holding company within 60 days of the
conclusion of any informal hearing
ordered by the Board, provided that the
Board may extend this period upon
notice to the requesting party.
(D) While the Board’s final decision is
pending and until such time as the
Board or the appropriate Reserve Bank
with concurrence of the Board, issues a
non-objection to the bank holding
company’s capital plan, the bank
holding company may not make any
capital distribution, other than those
capital distributions with respect to
which the Board or the appropriate
Reserve Bank has indicated in writing
its non-objection.
(4) Application of this section to other
bank holding companies. The Board
may apply this section, in whole or in
part, to any other bank holding
company by order based on the
institution’s size, level of complexity,
risk profile, scope of operations, or
financial condition.
(g) Approval requirements for certain
capital actions—(1) Circumstances
requiring approval. Notwithstanding a
notice of non-objection under paragraph
(e)(2)(i) of this section, a bank holding
company may not make a capital
distribution (excluding any capital
distribution arising from the issuance of
a debt or equity capital instrument that
is eligible for inclusion in the numerator
of a minimum regulatory capital ratio)
under the following circumstances,
unless it receives prior approval from

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the Board or appropriate Reserve Bank
pursuant to paragraph (g)(4) of this
section:
(i) After giving effect to the capital
distribution, the bank holding company
would not meet a minimum regulatory
capital ratio or a tier 1 common ratio of
at least 5 percent;
(ii) The Board or the appropriate
Reserve Bank with concurrence of the
Board, notifies the company in writing
that the Federal Reserve has determined
that the capital distribution would
result in a material adverse change to
the organization’s capital or liquidity
structure or that the company’s earnings
were materially underperforming
projections;
(iii) Except as provided in paragraph
(g)(2) of this section, the dollar amount
of the capital distribution in a given
calendar quarter, will exceed the
amount described in the capital plan for
that quarter for which a non-objection
was issued under this section; or
(iv) The capital distribution would
occur after the occurrence of an event
requiring resubmission under
paragraphs (g)(4)(i)(A) or (B) of this
section and before the Federal Reserve
has acted on the resubmitted capital
plan.
(2) Exception for well capitalized
bank holding companies. (i) A bank
holding company may make a capital
distribution for which the dollar amount
exceeds the amount described in the
capital plan for which a non-objection
was issued under this section if the
following conditions are satisfied:
(A) The bank holding company is, and
after the capital distribution would
remain, well capitalized as defined in
§ 225.2(r) of Regulation Y (12 CFR
225.2(r));
(B) The bank holding company’s
performance and capital levels are, and
after the capital distribution would
remain, consistent with its projections
under expected conditions as set forth
in its capital plan under paragraph
(e)(2)(i) of this section;
(C) The annual aggregate dollar
amount of all capital distributions (for
purposes of the capital plan cycle
beginning October 1, 2014, in the period
beginning April 1, 2015 and ending on
March 31, 2016, and for purposes of
each capital plan cycle beginning
thereafter, in the period beginning July
1 of a calendar year and ending on June
30 of the following calendar year) would
not exceed the total amounts described
in the company’s capital plan for which
the bank holding company received a
notice of non-objection by more than
1.00 percent multiplied by the bank
holding company’s tier 1 capital, as
reported to the Federal Reserve on the

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bank holding company’s first quarter FR
Y–9C;
(D) The bank holding company
provides the appropriate Reserve Bank
with notice 15 calendar days prior to a
capital distribution that includes the
elements described in paragraph (g)(3)
of this section; and
(E) The Board or the appropriate
Reserve Bank with concurrence of the
Board, does not object to the transaction
proposed in the notice. In determining
whether to object to the proposed
transaction, the Board or the appropriate
Reserve Bank shall apply the criteria
described in paragraph (g)(4)(iv) of this
section.
(ii) The exception in this paragraph
(g)(2) shall not apply if the Board or the
appropriate Reserve Bank notifies the
bank holding company in writing that it
may not take advantage of this
exception.
(3) Contents of request. (i) A request
for a capital distribution under this
section shall be filed with the
appropriate Reserve Bank and the Board
and shall contain the following
information:
(A) The bank holding company’s
current capital plan or an attestation
that there have been no changes to the
capital plan since it was last submitted
to the Federal Reserve;
(B) The purpose of the transaction;
(C) A description of the capital
distribution, including for redemptions
or repurchases of securities, the gross
consideration to be paid and the terms
and sources of funding for the
transaction, and for dividends, the
amount of the dividend(s); and
(D) Any additional information
requested by the Board or the
appropriate Reserve Bank (which may
include, among other things, an
assessment of the bank holding
company’s capital adequacy under a
revised stress scenario provided by the
Federal Reserve, a revised capital plan,
and supporting data).
(ii) Any request submitted with
respect to a capital distribution
described in paragraph (g)(1)(i) of this
section shall also include a plan for
restoring the bank holding company’s
capital to an amount above a minimum
level within 30 days and a rationale for
why the capital distribution would be
appropriate.
(4) Approval of certain capital
distributions. (i) The Board or the
appropriate Reserve Bank with
concurrence of the Board, will act on a
request under this paragraph (g)(4)
within 30 calendar days after the receipt
of all the information required under
paragraph (g)(3) of this section.

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(ii) In acting on a request under this
paragraph, the Board or appropriate
Reserve Bank will apply the
considerations and principles in
paragraph (f) of this section. In addition,
the Board or the appropriate Reserve
Bank may disapprove the transaction if
the bank holding company does not
provide all of the information required
to be submitted under paragraph (g)(3)
of this section.
(5) Disapproval and hearing. (i) The
Board or the appropriate Reserve Bank
will notify the bank holding company in
writing of the reasons for a decision to
disapprove any proposed capital
distribution. Within 15 calendar days
after receipt of a disapproval by the
Board, the bank holding company may
submit a written request for a hearing.
(A) The Board may, in its sole
discretion, order an informal hearing if
the Board finds that a hearing is
appropriate or necessary to resolve
disputes regarding material issues of
fact.
(B) An informal hearing shall be held
within 30 days of a request, if granted,
provided that the Board may extend this
period upon notice to the requesting
party.
(C) Written notice of the final decision
of the Board shall be given to the bank
holding company within 60 days of the
conclusion of any informal hearing
ordered by the Board, provided that the
Board may extend this period upon
notice to the requesting party.
(D) While the Board’s final decision is
pending and until such time as the
Board or the appropriate Reserve Bank
with concurrence of the Board, approves
the capital distribution at issue, the
bank holding company may not make
such capital distribution.
■ 3. The removal of appendix A to part
225 at 78 FR 62017 (October 11, 2013)
is withdrawn.
PART 252—ENHANCED PRUDENTIAL
STANDARDS (REGULATION YY)
4. The authority citation for part 252
is revised to read as follows:

■

Authority: 12 U.S.C. 321–338a, 1467a(g),
1818, 1831p–1, 1844(b), 1844(c), 5361, 5365,
5366.

5. Subpart B is revised to read as
follows:

■

Subpart B—Company-Run Stress Test
Requirements for Certain U.S. Banking
Organizations With Total Consolidated
Assets Over $10 Billion and Less Than $50
Billion
Sec.
252.10 [Reserved]
252.11 Authority and purpose.
252.12 Definitions.
252.13 Applicability.

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules
252.14
252.15
252.16
252.17

Annual stress test.
Methodologies and practices.
Reports of stress test results.
Disclosure of stress test results.

§ 252.10

[Reserved]

§ 252.11

Authority and purpose.

(a) Authority. 12 U.S.C. 321–338a,
1467a(g), 1818, 1831o, 1831p-1, 1844(b),
1844(c), 3906–3909, 5365.
(b) Purpose. This subpart implements
section 165(i)(2) of the Dodd-Frank Act
(12 U.S.C. 5365(i)(2)), which requires a
bank holding company with total
consolidated assets of greater than $10
billion but less than $50 billion and
savings and loan holding companies
and state member banks with total
consolidated assets of greater than $10
billion to conduct annual stress tests.
This subpart also establishes definitions
of stress test and related terms,
methodologies for conducting stress
tests, and reporting and disclosure
requirements.

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§ 252.12

Definitions.

For purposes of this subpart, the
following definitions apply:
(a) Advanced approaches means the
regulatory capital requirements at 12
CFR part 217, subpart E, as applicable,
and any successor regulation.
(b) Adverse scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a bank
holding company, savings and loan
holding company, or state member bank
that are more adverse than those
associated with the baseline scenario
and may include trading or other
additional components.
(c) Asset threshold means:
(1) For a bank holding company,
average total consolidated assets of
greater than $10 billion but less than
$50 billion, and
(2) For a savings and loan holding
company or state member bank, average
total consolidated assets of greater than
$10 billion.
(d) Average total consolidated assets
means the average of the total
consolidated assets as reported by a
bank holding company, savings and
loan holding company, or state member
bank on its Consolidated Financial
Statements for Bank Holding Companies
(FR Y–9C) or Consolidated Report of
Condition and Income (Call Report), as
applicable, for the four most recent
consecutive quarters. If the bank
holding company, savings and loan
holding company, or state member bank
has not filed the FR Y–9C or Call
Report, as applicable, for each of the
four most recent consecutive quarters,
average total consolidated assets means
the average of the company’s total

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consolidated assets, as reported on the
company’s FR Y–9C or Call Report, as
applicable, for the most recent quarter
or consecutive quarters. Average total
consolidated assets are measured on the
as-of date of the most recent FR Y–9C
or Call Report, as applicable, used in the
calculation of the average.
(e) Bank holding company has the
same meaning as in § 225.2(c) of the
Board’s Regulation Y (12 CFR 225.2(c)).
(f) Baseline scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a bank
holding company, savings and loan
holding company, or state member
bank, and that reflect the consensus
views of the economic and financial
outlook.
(g) Capital action has the same
meaning as in § 225.8(c)(2) of the
Board’s Regulation Y (12 CFR
225.8(c)(2)).
(h) Covered company subsidiary
means a state member bank that is a
subsidiary of a covered company as
defined in subpart F of this part.
(i) Depository institution has the same
meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C.
1813(c)).
(j) Foreign banking organization has
the same meaning as in § 211.21(o) of
the Board’s Regulation K (12 CFR
211.21(o)).
(k) Planning horizon means the period
of at least nine consecutive quarters,
beginning on the first day of a stress test
cycle over which the relevant
projections extend.
(l) Pre-provision net revenue means
the sum of net interest income and noninterest income less expenses before
adjusting for loss provisions.
(m) Provision for loan and lease losses
means the provision for loan and lease
losses as reported by the bank holding
company, savings and loan holding
company, or state member bank on the
FR Y–9C or Call Report, as appropriate.
(n) Regulatory capital ratio means a
capital ratio for which the Board
established minimum requirements for
the company by regulation or order,
including, as applicable, a company’s
tier 1 and supplementary leverage ratio
and common equity tier 1, tier 1, and
total risk-based capital ratios as
calculated under the Board’s
regulations, including appendices A, D,
and E to 12 CFR part 225, appendices
A, B, and E to 12 CFR part 208, and 12
CFR part 217, as applicable, including
the transition provisions at 12 CFR
217.1(f)(4) and 12 CFR 217.300, or any
successor regulation. For state member
banks other than covered company
subsidiaries and for all bank holding
companies, for the stress test cycle that

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commences on October 1, 2013,
regulatory capital ratios must be
calculated pursuant to the regulatory
capital framework set forth in 12 CFR
part 225, appendix A, and not the
regulatory capital framework set forth in
12 CFR part 217.
(o) Savings and loan holding
company has the same meaning as in
§ 238.2(m) of the Board’s Regulation LL
(12 CFR 238.2(m)).
(p) Scenarios are those sets of
conditions that affect the U.S. economy
or the financial condition of a bank
holding company, savings and loan
holding company, or state member bank
that the Board annually determines are
appropriate for use in the company-run
stress tests, including, but not limited
to, baseline, adverse, and severely
adverse scenarios.
(q) Severely adverse scenario means a
set of conditions that affect the U.S.
economy or the financial condition of a
bank holding company, savings and
loan holding company, or state member
bank and that overall are more severe
than those associated with the adverse
scenario and may include trading or
other additional components.
(r) State member bank has the same
meaning as in § 208.2(g) of the Board’s
Regulation H (12 CFR 208.2(g)).
(s) Stress test means a process to
assess the potential impact of scenarios
on the consolidated earnings, losses,
and capital of a bank holding company,
savings and loan holding company, or
state member bank over the planning
horizon, taking into account the current
condition, risks, exposures, strategies,
and activities.
(t) Stress test cycle means:
(i) Until September 30, 2015, the
period beginning October 1 of a
calendar year and ending on September
30 of the following calendar year, and
(ii) Beginning October 1, 2015, the
period beginning January 1 of a calendar
year and ending on December 31 of that
year.
(u) Subsidiary has the same meaning
as in § 225.2(o) the Board’s Regulation Y
(12 CFR 225.2(o)).
§ 252.13

Applicability.

(a) Scope—(1) Applicability. Except as
provided in paragraph (b) of this
section, this subpart applies to:
(i) Any bank holding company with
average total consolidated assets (as
defined in § 252.12(d)) of greater than
$10 billion but less than $50 billion;
(ii) Any savings and loan holding
company with average total
consolidated assets (as defined in
§ 252.12(d)) of greater than $10 billion;
and
(iii) Any state member bank with
average total consolidated assets (as

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defined in § 252.12(d)) of greater than
$10 billion.
(2) Ongoing applicability. (i) A bank
holding company, savings and loan
holding company, or state member bank
(including any successor company) that
is subject to any requirement in subpart
shall remain subject to the requirement
unless and until its total consolidated
assets fall below $10 billion for each of
four consecutive quarters, as reported
on the FR Y–9C or Call Report, as
applicable and effective on the as-of
date of the fourth consecutive FR Y–9C
or Call Report, as applicable.
(ii) A bank holding company or
savings and loan holding company that
becomes a covered company as defined
in subpart F of this part and conducts
a stress test pursuant to that subpart is
not subject to the requirements of this
subpart.
(b) Transitional arrangements—(1)
Transition periods for bank holding
companies and state member banks. (i)
A bank holding company or state
member bank that exceeds the asset
threshold for the first time after October
1, 2014, but on or before March 31 of
a given year, must comply with the
requirements of this subpart beginning
on January 1 of the following year,
unless that time is extended by the
Board in writing.
(ii) A bank holding company or state
member bank that exceeds the asset
threshold for the first time after October
1, 2014, and after March 31 of a given
year must comply with the requirements
of this subpart beginning on January 1
of the second year following that given
year, unless that time is extended by the
Board in writing.
(iii) Bank holding companies that rely
on SR Letter 01–01. Notwithstanding
paragraphs (b)(1)(i) or (ii), a bank
holding company that meets the asset
threshold (as defined in § 252.12(c)) and
that is relying as of July 20, 2015, on
Supervision and Regulation Letter SR
01–01 issued by the Board (as in effect
on May 19, 2010) must comply with the
requirements of this subpart beginning
on January 1, 2016, unless that time is
extended by the Board in writing.
(2) Transition period for savings and
loan holding companies. (i) A savings
and loan holding company that is
subject to minimum regulatory capital
requirements and exceeds the asset
threshold for the first time after October
1, 2014, but on or before March 31 of
a given year, must comply with the
requirements of this subpart beginning
on January 1 of the following year,
unless that time is extended by the
Board in writing.
(ii) A savings and loan holding
company that is subject to minimum

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regulatory capital requirements and
exceeds the asset threshold for the first
time after October 1, 2014, and after
March 31 of a given year must comply
with the requirements of this subpart
beginning on January 1 of the second
year following that given year, unless
that time is extended by the Board in
writing.
(3) Transition periods for companies
subject to the advanced approaches.
Notwithstanding any other requirement
in this section:
(i) A bank holding company, savings
and loan holding company, or state
member bank must use 12 CFR part 225,
appendices A and E (as applicable), and
12 CFR part 252, subpart D and E, as
applicable, to estimate its pro forma
regulatory capital ratios and its pro
forma tier 1 common ratio for the stress
test cycle beginning October 1, 2014,
and may not use the advanced
approaches until January 1, 2016; and
(ii) Beginning January 1, 2016, a bank
holding company, savings and loan
holding company, or state member bank
must use the advanced approaches to
estimate its pro forma regulatory capital
ratios and its pro forma tier 1 common
ratio for purposes of its stress test under
§ 252.14 if the Board notifies the
company before the first day of the
stress test cycle that the company is
required to use the advanced
approaches to determine its risk-based
capital requirements.
§ 252.14

Annual stress test.

(a) General requirements—(1)
General. A savings and loan holding
company, bank holding company, and
state member bank must conduct an
annual stress test in accordance with
paragraphs (a)(2) through (3) of this
section.
(2) Timing for the stress test cycle
beginning October 1, 2014. For the stress
test cycle beginning October 1, 2014:
(i) A state member bank that is a
covered company subsidiary must
conduct its stress test by January 5,
2015, based on data as of September 30,
2014, unless the time or the as-of date
is extended by the Board in writing; and
(ii) A state member bank that is not
a covered company subsidiary and a
bank holding company must conduct its
stress test by March 31, 2015 based on
data as of September 30, 2014, unless
the time or the as-of date is extended by
the Board in writing.
(2) Timing for each stress test cycle
beginning after October 1, 2014. For
each stress test cycle beginning after
October 1, 2014:
(i) A state member bank that is a
covered company subsidiary and a
savings and loan holding company with

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average total consolidated assets of $50
billion or more must conduct its stress
test by April 5 of each calendar year
based on data as of December 31 of the
preceding calendar year, unless the time
or the as-of date is extended by the
Board in writing; and
(ii) 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 conduct its stress test by
July 31 of each calendar year using
financial statement data as of December
31 of the preceding calendar year,
unless the time or the as-of date is
extended by the Board in writing.
(b) Scenarios provided by the Board—
(1) In general. In conducting a stress test
under this section, a bank holding
company, savings and loan holding
company, or state member bank must, at
a minimum, use the scenarios provided
by the Board. Except as provided in
paragraphs (b)(2) and (3) of this section,
the Board will provide a description of
the scenarios to each bank holding
company, savings and loan holding
company, or state member bank no later
than November 15, 2014 (for the stress
test cycle beginning October 1, 2014)
and no later than February 15 of that
calendar year (for each stress test cycle
beginning thereafter).
(2) Additional components. (i) The
Board may require a bank holding
company, savings and loan holding
company, or state member bank with
significant trading activity, as
determined by the Board and specified
in the Capital Assessments and Stress
Testing report (FR Y–14), to include a
trading and counterparty component in
its adverse and severely adverse
scenarios in the stress test required by
this section. The Board may also require
a state member bank that is subject to
12 CFR part 208, appendix E (or,
beginning January 1, 2015, 12 CFR 217,
subpart F) or that is a subsidiary of a
bank holding company that is subject to
either this paragraph or § 252.54(b)(2)(i)
to include a trading and counterparty
component in the state member bank’s
adverse and severely adverse scenarios
in the stress test required by this
section. For the stress test cycle
beginning October 1, 2014, the data
used in this component must be as of a
date between October 1 and December
1 of 2014 selected by the Board, and the
Board will communicate the as-of date
and a description of the component to
the company no later than December 1
of the calendar year. For each stress test
cycle beginning thereafter, the data used
in this component must be as of a date
between January 1 and March 1 of that

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules
calendar year selected by the Board, and
the Board will communicate the as-of
date and a description of the component
to the company no later than March 1
of that calendar year.
(ii) The Board may require a bank
holding company, savings and loan
holding company, or state member bank
to include one or more additional
components in its adverse and severely
adverse scenarios in the stress test
required by this section based on the
company’s financial condition, size,
complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(3) Additional scenarios. The Board
may require a bank holding company,
savings and loan holding company, or
state member bank to include one or
more additional scenarios in the stress
test required by this section based on
the company’s financial condition, size,
complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(4) Notice and response—(i)
Notification of additional component. If
the Board requires a bank holding
company, savings and loan holding
company, or state member bank to
include one or more additional
components in its adverse and severely
adverse scenarios under paragraph (b)(2)
of this section or to use one or more
additional scenarios under paragraph
(b)(3) of this section, the Board will
notify the company in writing by
September 30, 2014 (for the stress test
cycle beginning October 1, 2014) and by
December 31 (for each stress test cycle
beginning thereafter).
(ii) Request for reconsideration and
Board response. Within 14 calendar
days of receipt of a notification under
this paragraph, the bank holding
company, savings and loan holding
company, or state member bank may
request in writing that the Board
reconsider the requirement that the
company include the additional
component(s) or additional scenario(s),
including an explanation as to why the
reconsideration should be granted. The
Board will respond in writing within 14
calendar days of receipt of the
company’s request.
(iii) Description of component. The
Board will provide the bank holding
company, savings and loan holding
company, or state member bank with a
description of any additional
component(s) or additional scenario(s)
by December 1, 2014 (for the stress test
cycle beginning October 1, 2014) and by
March 1 (for each stress test cycle
beginning thereafter).

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§ 252.15

Methodologies and practices.

(a) Potential impact on capital. In
conducting a stress test under § 252.14,
for each quarter of the planning horizon,
a bank holding company, savings and
loan holding company, or state member
bank must estimate the following for
each scenario required to be used:
(1) Losses, pre-provision net revenue,
provision for loan and lease losses, and
net income; and
(2) The potential impact on pro forma
regulatory capital levels and pro forma
capital ratios (including regulatory
capital ratios and any other capital
ratios specified by the Board),
incorporating the effects of any capital
actions over the planning horizon and
maintenance of an allowance for loan
losses appropriate for credit exposures
throughout the planning horizon.
(b) Assumptions regarding capital
actions. In conducting a stress test
under § 252.14, a bank holding company
or savings and loan holding company is
required to make the following
assumptions regarding its capital
actions over the planning horizon:
(1) For the first quarter of the
planning horizon, the bank holding
company or savings and loan holding
company must take into account its
actual capital actions as of the end of
that quarter; and
(2) For each of the second through
ninth quarters of the planning horizon,
the bank holding company or savings
and loan holding company must include
in the projections of capital:
(i) Common stock dividends equal to
the quarterly average dollar amount of
common stock dividends that the
company paid in the previous year (that
is, the first quarter of the planning
horizon and the preceding three
calendar quarters);
(ii) Payments on any other instrument
that is eligible for inclusion in the
numerator of a regulatory capital ratio
equal to the stated dividend, interest, or
principal due on such instrument
during the quarter;
(iii) An assumption of no redemption
or repurchase of any capital instrument
that is eligible for inclusion in the
numerator of a regulatory capital ratio;
and
(iv) An assumption of no issuances of
common stock or preferred stock, except
for issuances related to expensed
employee compensation.
(c) Controls and oversight of stress
testing processes—(1) In general. The
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

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37437

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.
(2) Oversight of stress testing
processes. The board of directors, or a
committee thereof, of a bank holding
company, savings and loan holding
company, or state member bank must
review and approve the policies and
procedures of the stress testing
processes as frequently as economic
conditions or the condition of the
company may warrant, but no less than
annually. The board of directors and
senior management of the bank holding
company, savings and loan holding
company, or state member bank must
receive a summary of the results of the
stress test conducted under this section.
(3) Role of stress testing results. The
board of directors and senior
management of a bank holding
company, savings and loan holding
company, or state member bank must
consider the results of the stress test in
the normal course of business, including
but not limited to, the banking
organization’s capital planning,
assessment of capital adequacy, and risk
management practices.
§ 252.16

Reports of stress test results.

(a) Reports to the Board of stress test
results—(1) General. A savings and loan
holding company, bank holding
company, and state member bank must
report the results of the stress test to the
Board in the manner and form
prescribed by the Board, in accordance
with paragraphs (a)(2) and (3) of this
section.
(2) Timing for the stress test cycle
beginning October 1, 2014. For the stress
test cycle beginning October 1, 2014:
(i) A state member bank that is a
covered company subsidiary must
report the results of its stress test to the
Board by January 5, 2015, unless that
time is extended by the Board in
writing; and
(ii) A state member bank that is not
a covered company subsidiary and a
bank holding company must report the
results of its stress test to the Board by
March 31, 2015, unless that time is
extended by the Board in writing.
(3) Timing for each stress test cycle
beginning after October 1, 2014. For
each stress test cycle beginning after
October 1, 2014:

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules

(i) 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 must report the
results of the stress test to the Board by
April 5, unless that time is extended by
the Board in writing; and
(ii) 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.
(b) Contents of reports. The report
required under paragraph (a) of this
section must include the following
information for the baseline scenario,
adverse scenario, severely adverse
scenario, and any other scenario
required under § 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;
and
(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.
(c) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Board under this subpart and
related materials shall be determined in
accordance with applicable exemptions
under the Freedom of Information Act
(5 U.S.C. 552(b)) and the Board’s Rules
Regarding Availability of Information
(12 CFR part 261).

emcdonald on DSK67QTVN1PROD with PROPOSALS2

§ 252.17

Disclosure of stress test results.

(a) Public disclosure of results—(1)
General. (i) A bank holding company,
savings and loan holding company, and
state member bank must publicly
disclose a summary of the results of the
stress test required under this subpart.
(2) Timing for the stress test cycle
beginning October 1, 2014. For the stress
test cycle beginning October 1, 2014:
(i) A state member bank that is a
covered company subsidiary must
publicly disclose a summary of the
results of the stress test within 15 days
after the Board discloses the results of
its supervisory stress test of the covered
company pursuant to § 252.46(c), unless
that time is extended by the Board in
writing; and

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(ii) A state member bank that is not
a covered company subsidiary and a
bank holding company must publicly
disclose a summary of the results of the
stress test in the period beginning June
15 and ending June 30, 2015, unless that
time is extended by the Board in
writing.
(3) Timing for each stress test cycle
beginning after October 1, 2014. For
each stress test cycle beginning after
October 1, 2014:
(i) A state member bank that is a
covered company subsidiary must
publicly disclose a summary of the
results of the stress test within 15 days
after the Board discloses the results of
its supervisory stress test of the covered
company pursuant to § 252.46(c), unless
that time is extended by the Board in
writing;
(ii) A savings and loan holding
company with average total
consolidated assets of $50 billion or
more must publicly disclose a summary
of the results of the stress test in the
period beginning June 15 and ending
June 30, unless that time is extended by
the Board in writing; and
(iii) 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 publicly disclose a
summary of the results of the stress test
in the period beginning October 15 and
ending October 31, unless that time is
extended by the Board in writing.
(3) Disclosure method. The summary
required under this section may be
disclosed on the Web site of a bank
holding company, savings and loan
holding company, or state member
bank, or in any other forum that is
reasonably accessible to the public.
(b) Summary of results—(1) Bank
holding companies and savings and
loan holding companies. The summary
of the results of a bank holding
company or savings and loan holding
company must, at a minimum, contain
the following information regarding the
severely adverse scenario:
(i) A description of the types of risks
included in the stress test;
(ii) A summary description of the
methodologies used in the stress test;
(iii) Estimates of—
(A) Aggregate losses;
(B) Pre-provision net revenue;
(C) Provision for loan and lease losses;
(D) Net income; and
(E) Pro forma regulatory capital ratios
and any other capital ratios specified by
the Board;
(iv) An explanation of the most
significant causes for the changes in
regulatory capital ratios; and

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(v) 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
this subpart, 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.
(2) State member banks that are
subsidiaries of bank holding companies.
A state member bank that is a subsidiary
of a bank holding company satisfies the
public disclosure requirements under
this subpart if the bank holding
company publicly discloses summary
results of its stress test pursuant to this
section or § 252.58, unless the Board
determines that the disclosures at the
holding company level do not
adequately capture the potential impact
of the scenarios on the capital of the
state member bank and requires the
state member bank to make public
disclosures.
(3) State member banks that are not
subsidiaries of bank holding companies.
A state member bank that is not a
subsidiary of a bank holding company
or that is required to make disclosures
under paragraph (b)(2) of this section
must publicly disclose, at a minimum,
the following information regarding the
severely adverse scenario:
(i) A description of the types of risks
being included in the stress test;
(ii) A summary description of the
methodologies used in the stress test;
(iii) Estimates of—
(A) Aggregate losses;
(B) Pre-provision net revenue
(C) Provision for loan and lease losses;
(D) Net income; and
(E) Pro forma regulatory capital ratios
and any other capital ratios specified by
the Board; and
(iv) An explanation of the most
significant causes for the changes in
regulatory capital ratios.
(c) Content of results. (1) The
disclosure of aggregate losses, preprovision net revenue, provision for
loan and lease losses, and net income
that is required under paragraph (b) of
this section must be on a cumulative
basis over the planning horizon.
(2) The disclosure of pro forma
regulatory capital ratios and any other
capital ratios specified by the Board that
is required under paragraph (b) of this
section must include the beginning
value, ending value and minimum value
of each ratio over the planning horizon.
6. Subpart E is revised to read as
follows:

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules
Subpart E—Supervisory Stress Test
Requirements for U.S. Bank Holding
Companies With $50 Billion or More in
Total Consolidated Assets and
Nonbank Financial Companies
Supervised by the Board.
Sec.
252.40 [Reserved]
252.41 Authority and purpose.
252.42 Definitions.
252.43 Applicability.
252.44 Annual analysis conducted by the
Board.
252.45 Data and information required to be
submitted in support of the Board’s
analyses.
252.46 Review of the Board’s analysis;
publication of summary results.
252.47 Corporate use of stress test results.
§ 252.40

[Reserved]

§ 252.41

Authority and purpose.

(a) Authority. 12 U.S.C. 321–338a,
1467a(g), 1818, 1831p–1, 1844(b),
1844(c), 5361, 5365, 5366.
(b) Purpose. This subpart implements
section 165(i)(1) of the Dodd-Frank Act
(12 U.S.C. 5365(i)(1)), which requires
the Board to conduct annual analyses of
nonbank financial companies
supervised by the Board and bank
holding companies with $50 billion or
more in total consolidated assets to
evaluate whether such companies have
the capital, on a total consolidated basis,
necessary to absorb losses as a result of
adverse economic conditions.

emcdonald on DSK67QTVN1PROD with PROPOSALS2

§ 252.42

Definitions.

For purposes of this subpart F, the
following definitions apply:
(a) Advanced approaches means the
risk-weighted assets calculation
methodologies at 12 CFR part 217,
subpart E, as applicable, and any
successor regulation.
(b) Adverse scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
company that are more adverse than
those associated with the baseline
scenario and may include trading or
other additional components.
(c) Average total consolidated assets
means the average of the total
consolidated assets as reported by a
bank holding company on its
Consolidated Financial Statements for
Bank Holding Companies (FR Y–9C) for
the four most recent consecutive
quarters. If the bank holding company
has not filed the FR Y–9C for each of the
four most recent consecutive quarters,
average total consolidated assets means
the average of the company’s total
consolidated assets, as reported on the
company’s FR Y–9C, for the most recent
quarter or consecutive quarters. Average

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total consolidated assets are measured
on the as-of date of the most recent FR
Y–9C used in the calculation of the
average.
(d) Bank holding company has the
same meaning as in § 225.2(c) of the
Board’s Regulation Y (12 CFR 225.2(c)).
(e) Baseline scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
company and that reflect the consensus
views of the economic and financial
outlook.
(f) Covered company means:
(1) A bank holding company (other
than a foreign banking organization)
with average total consolidated assets of
$50 billion or more;
(2) A U.S. intermediate holding
company subject to this section
pursuant to § 252.153; and
(3) A nonbank financial company
supervised by the Board.
(g) Depository institution has the same
meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C.
1813(c)).
(h) Foreign banking organization has
the same meaning as in § 211.21(o) of
the Board’s Regulation K (12 CFR
211.21(o)).
(i) Nonbank financial company
supervised by the Board means a
nonbank financial company that the
Financial Stability Oversight Council
has determined under section 113 of the
Dodd-Frank Act (12 U.S.C. 5323) shall
be supervised by the Board and for
which such determination is still in
effect.
(j) Planning horizon means the period
of at least nine consecutive quarters,
beginning on the first day of a stress test
cycle over which the relevant
projections extend.
(k) Pre-provision net revenue means
the sum of net interest income and noninterest income less expenses before
adjusting for loss provisions.
(l) Provision for loan and lease losses
means the provision for loan and lease
losses as reported by the covered
company on the FR Y–9C.
(m) Regulatory capital ratio means a
capital ratio for which the Board
established minimum requirements for
the company by regulation or order,
including, as applicable, the company’s
tier 1 and supplementary leverage ratios
and common equity tier 1, tier 1, and
total risk-based capital ratios as
calculated under appendices A, D, and
E to this part (12 CFR part 225) and 12
CFR part 217, as applicable, including
the transition provisions at 12 CFR
217.1(f)(4) and 12 CFR 217.300, or any
successor regulation.
(n) Scenarios are those sets of
conditions that affect the U.S. economy

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37439

or the financial condition of a covered
company that the Board annually
determines are appropriate for use in
the supervisory stress tests, including,
but not limited to, baseline, adverse,
and severely adverse scenarios.
(o) Severely adverse scenario means a
set of conditions that affect the U.S.
economy or the financial condition of a
covered company and that overall are
more severe than those associated with
the adverse scenario and may include
trading or other additional components.
(p) Stress test cycle means:
(i) Until September 30, 2015, the
period beginning October 1 of a
calendar year and ending on September
30 of the following calendar year, and
(ii) Beginning October 1, 2015, the
period beginning January 1 of a calendar
year and ending on December 31 of that
year.
(q) Subsidiary has the same meaning
as in § 225.2(o) the Board’s Regulation Y
(12 CFR 225.2).
(r) Tier 1 common ratio has the same
meaning as in the Board’s Regulation Y
(12 CFR 225.8).
§ 252.43

Applicability.

(a) Scope—(1) Applicability. Except as
provided in paragraph (b) of this
section, this subpart applies to any
covered company, which includes:
(i) Any bank holding company with
average total consolidated assets (as
defined in § 252.42(c)) of $50 billion or
more;
(ii) Any U.S. intermediate holding
company subject to this section
pursuant to § 252.153; and
(iii) Any nonbank financial company
supervised by the Board that is made
subject to this section pursuant to a rule
or order of the Board.
(2) Ongoing applicability. A bank
holding company (including any
successor company) that is subject to
any requirement in subpart shall remain
subject to the requirement unless and
until its total consolidated assets fall
below $50 billion for each of four
consecutive quarters, as reported on the
FR Y–9C and effective on the as-of date
of the fourth consecutive FR Y–9C.
(b) Transitional arrangements—(1)
Transition periods for bank holding
companies that become covered
companies after October 1, 2014. (i) A
bank holding company that becomes a
covered company after October 1, 2014,
but on or before March 31 of a given
year must comply with the requirements
of this subpart beginning on January 1
of the following year, unless that time
is extended by the Board in writing.
(ii) A bank holding company that
becomes a covered company after
October 1, 2014, and after March 31 of

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules

a given year must comply with the
requirements of this subpart beginning
on January 1 of the second year
following that given year, unless that
time is extended by the Board in
writing.
(2) Bank holding companies that rely
on SR Letter 01–01. A covered company
that is relying as of July 20, 2015, on
Supervision and Regulation Letter SR
01–01 issued by the Board (as in effect
on May 19, 2010) must comply with the
requirements of this subpart beginning
January 1, 2016, unless that time is
extended by the Board in writing.
(3) Nonbank financial companies
supervised by the Board. (i) The Board
will apply this subpart to a nonbank
financial company by rule or order.
(ii) If the Board issues the rule or
order described in paragraph (b)(3)(i) of
this section on or before March 31 of a
given year, the nonbank financial
company supervised by the Board will
be required to comply with the
requirements of this subpart on January
1 of the following year, unless that time
is accelerated or extended by the Board
in writing.
(iii) If the Board issues the rule or
order described in paragraph (b)(3)(i) of
this section after March 31 of a given
year, the nonbank financial company
supervised by the Board will be
required to comply with the
requirements of this subpart on January
1 of the second year following that given
year, unless that time is accelerated or
extended by the Board in writing.
(c) Transition periods for covered
companies subject to the advanced
approaches. Notwithstanding any other
requirement in this section, for a given
stress test cycle:
(1) The Board will use 12 CFR part
225, appendices A and E (as applicable),
and 12 CFR part 252, subpart D and E,
as applicable, to estimate a covered
company’s pro forma regulatory capital
ratios and its pro forma tier 1 common
ratio for the stress test cycle beginning
October 1, 2014 and will not use the
advanced approaches until January 1,
2016; and
(2) Beginning January 1, 2016, the
Board will use the advanced approaches
to estimate a covered company’s pro
forma regulatory capital ratios and pro
forma tier 1 common ratio if the Board
notified the covered company before the
first day of the stress test cycle that the
covered company is required to use the
advanced approaches to determine its
risk-based capital requirements.
§ 252.44
Board.

Annual analysis conducted by the

(a) In general. (1) On an annual basis,
the Board will conduct an analysis of

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each covered company’s capital, on a
total consolidated basis, taking into
account all relevant exposures and
activities of that covered company, to
evaluate the ability of the covered
company to absorb losses in specified
economic and financial conditions.
(2) The analysis will include an
assessment of the projected losses, net
income, and pro forma capital levels
and regulatory capital ratios, tier 1
common ratio, and other capital ratios
for the covered company and use such
analytical techniques that the Board
determines are appropriate to identify,
measure, and monitor risks of the
covered company that may affect the
financial stability of the United States.
(3) In conducting the analyses, the
Board will coordinate with the
appropriate primary financial regulatory
agencies and the Federal Insurance
Office, as appropriate.
(b) Economic and financial scenarios
related to the Board’s analysis. The
Board will conduct its analysis under
this section using a minimum of three
different scenarios, including a baseline
scenario, adverse scenario, and severely
adverse scenario. For the stress test
cycle beginning October 1, 2014, the
Board will notify covered companies of
the scenarios that the Board will apply
to conduct the analysis for each stress
test cycle by no later than November 15,
2014, except with respect to trading or
any other components of the scenarios
and any additional scenarios that the
Board will apply to conduct the
analysis, which will be communicated
by no later than December 1, 2014. For
each stress test cycle beginning
thereafter, the Board will notify covered
companies of the scenarios that the
Board will apply to conduct the analysis
for each stress test cycle by no later than
February 15 of each year, except with
respect to trading or any other
components of the scenarios and any
additional scenarios that the Board will
apply to conduct the analysis, which
will be communicated by no later than
March 1 of that year.
§ 252.45 Data and information required to
be submitted in support of the Board’s
analyses.

(a) Regular submissions. Each covered
company must submit to the Board such
data, on a consolidated basis, that the
Board determines is necessary in order
for the Board to derive the relevant pro
forma estimates of the covered company
over the planning horizon under the
scenarios described in § 252.44(b).
(b) Additional submissions required
by the Board. The Board may require a
covered company to submit any other

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information on a consolidated basis that
the Board deems necessary in order to:
(1) Ensure that the Board has
sufficient information to conduct its
analysis under this subpart; and
(2) Project a company’s pre-provision
net revenue, losses, provision for loan
and lease losses, and net income; and,
pro forma capital levels, regulatory
capital ratios, tier 1 common ratio, and
any other capital ratio specified by the
Board under the scenarios described in
§ 252.44(b).
(c) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Board under this subpart and
related materials shall be determined in
accordance with the Freedom of
Information Act (5 U.S.C. 552(b)) and
the Board’s Rules Regarding Availability
of Information (12 CFR part 261).
§ 252.46 Review of the Board’s analysis;
publication of summary results.

(a) Review of results. Based on the
results of the analysis conducted under
this subpart, the Board will conduct an
evaluation to determine whether the
covered company has the capital, on a
total consolidated basis, necessary to
absorb losses and continue its operation
by maintaining ready access to funding,
meeting its obligations to creditors and
other counterparties, and continuing to
serve as a credit intermediary under
baseline, adverse and severely adverse
scenarios, and any additional scenarios.
(b) Publication of results by the Board.
(1) The Board will publicly disclose a
summary of the results of the Board’s
analyses of a covered company by
March 31, 2015 (for the stress test cycle
beginning October 1, 2014) and by June
30 (for each stress test cycle beginning
thereafter).
(2) The Board will notify companies
of the date on which it expects to
publicly disclose a summary of the
Board’s analyses pursuant to paragraph
(b)(1) of this section at least 14 calendar
days prior to the expected disclosure
date.
§ 252.47
results.

Corporate use of stress test

(a) In general. The board of directors
and senior management of each covered
company must consider the results of
the analysis conducted by the Board
under this subpart, as appropriate:
(1) As part of the covered company’s
capital plan and capital planning
process, including when making
changes to the covered company’s
capital structure (including the level
and composition of capital);
(2) When assessing the covered
company’s exposures, concentrations,
and risk positions; and

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(3) In the development or
implementation of any plans of the
covered company for recovery or
resolution.
(b) Resolution plan updates. Each
covered company must update its
resolution plan as the Board determines
appropriate, based on the results of the
Board’s analyses of the covered
company under this subpart.
■ 7. Subpart F is revised to read as
follows:
Subpart F—Company-Run Stress Test
Requirements for U.S. Bank Holding
Companies With $50 Billion or More in Total
Consolidated Assets and Nonbank
Financial Companies Supervised by the
Board.
Sec.
252.50 [Reserved]
252.51 Authority and purpose.
252.52 Definitions.
252.53 Applicability.
252.54 Annual stress test.
252.55 Mid-cycle stress test.
252.56 Methodologies and practices.
252.57 Reports of stress test results.
252.58 Disclosure of stress test results.
§ 252.50

[Reserved]

§ 252.51

Authority and purpose.

(a) Authority. 12 U.S.C. 321–338a,
1467a(g), 1818, 1831p–1, 1844(b),
1844(c), 5361, 5365, 5366.
(b) Purpose. This subpart implements
section 165(i)(2) of the Dodd-Frank Act
(12 U.S.C. 5365(i)(2)), which requires a
covered company to conduct annual
and semi-annual stress tests. This
subpart also establishes definitions of
stress test and related terms,
methodologies for conducting stress
tests, and reporting and disclosure
requirements.

emcdonald on DSK67QTVN1PROD with PROPOSALS2

§ 252.52

Definitions.

For purposes of this subpart, the
following definitions apply:
(a) Advanced approaches means the
risk-weighted assets calculation
methodologies at 12 CFR part 217,
subpart E, as applicable, and any
successor regulation.
(b) Adverse scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
company that are more adverse than
those associated with the baseline
scenario and may include trading or
other additional components.
(c) Average total consolidated assets
means the average of the total
consolidated assets as reported by a
bank holding company on its
Consolidated Financial Statements for
Bank Holding Companies (FR Y–9C) for
the four most recent consecutive
quarters. If the bank holding company

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has not filed the FR Y–9C for each of the
four most recent consecutive quarters,
average total consolidated assets means
the average of the company’s total
consolidated assets, as reported on the
company’s FR Y–9C, for the most recent
quarter or consecutive quarters. Average
total consolidated assets are measured
on the as-of date of the most recent FR
Y–9C used in the calculation of the
average.
(d) Bank holding company has the
same meaning as in § 225.2(c) of the
Board’s Regulation Y (12 CFR 225.2(c)).
(e) Baseline scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
company and that reflect the consensus
views of the economic and financial
outlook.
(f) Capital action has the same
meaning as in § 225.8(c)(2) of the
Board’s Regulation Y (12 CFR
225.8(c)(2)).
(g) Covered company means:
(1) A bank holding company (other
than a foreign banking organization)
with average total consolidated assets of
$50 billion or more;
(2) A U.S. intermediate holding
company subject to this section
pursuant to § 252.153; and
(3) A nonbank financial company
supervised by the Board.
(h) Depository institution has the
same meaning as in section 3 of the
Federal Deposit Insurance Act (12
U.S.C. 1813(c)).
(i) Foreign banking organization has
the same meaning as in § 211.21(o) of
the Board’s Regulation K (12 CFR
211.21(o)).
(j) Nonbank financial company
supervised by the Board means a
nonbank financial company that the
Financial Stability Oversight Council
has determined under section 113 of the
Dodd-Frank Act (12 U.S.C. 5323) shall
be supervised by the Board and for
which such determination is still in
effect.
(k) Planning horizon means the period
of at least nine consecutive quarters,
beginning on the first day of a stress test
cycle (on October 1 or April 1, as
appropriate) over which the relevant
projections extend.
(l) Pre-provision net revenue means
the sum of net interest income and noninterest income less expenses before
adjusting for loss provisions.
(m) Provision for loan and lease losses
means the provision for loan and lease
losses as reported by the covered
company on the FR Y–9C.
(n) Regulatory capital ratio means a
capital ratio for which the Board
established minimum requirements for
the company by regulation or order,

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37441

including, as applicable, the company’s
tier 1 and supplementary leverage ratios
and common equity tier 1, tier 1, and
total risk-based capital ratios as
calculated under appendices A, D, and
E to this part (12 CFR part 225) and 12
CFR part 217, as applicable, including
the transition provisions at 12 CFR
217.1(f)(4) and 12 CFR 217.300, or any
successor regulation.
(o) Scenarios are those sets of
conditions that affect the U.S. economy
or the financial condition of a covered
company that the Board, or with respect
to the mid-cycle stress test required
under § 252.55, the covered company,
annually determines are appropriate for
use in the company-run stress tests,
including, but not limited to, baseline,
adverse, and severely adverse scenarios.
(p) Severely adverse scenario means a
set of conditions that affect the U.S.
economy or the financial condition of a
covered company and that overall are
more severe than those associated with
the adverse scenario and may include
trading or other additional components.
(q) Stress test means a process to
assess the potential impact of scenarios
on the consolidated earnings, losses,
and capital of a covered company over
the planning horizon, taking into
account its current condition, risks,
exposures, strategies, and activities.
(r) Stress test cycle means:
(i) Until September 30, 2015, the
period beginning October 1 of a
calendar year and ending on September
30 of the following calendar year, and
(ii) Beginning October 1, 2015, the
period beginning January 1 of a calendar
year and ending on December 31 of that
year.
(s) Subsidiary has the same meaning
as in § 225.2(o) the Board’s Regulation Y
(12 CFR 225.2).
(t) Tier 1 common ratio has the same
meaning as in § 225.8 of the Board’s
Regulation Y (12 CFR 225.8).
§ 252.53

Applicability.

(a) Scope—(1) Applicability. Except as
provided in paragraph (b) of this
section, this subpart applies to any
covered company, which includes:
(i) Any bank holding company with
average total consolidated assets (as
defined in § 252.42(c)) of $50 billion or
more;
(ii) Any U.S. intermediate holding
company subject to this section
pursuant to § 252.153; and
(iii) Any nonbank financial company
supervised by the Board that is made
subject to this section pursuant to a rule
or order of the Board.
(2) Ongoing applicability. A bank
holding company (including any
successor company) that is subject to

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any requirement in subpart shall remain
subject to the requirement unless and
until its total consolidated assets fall
below $50 billion for each of four
consecutive quarters, as reported on the
FR Y–9C and effective on the as-of date
of the fourth consecutive FR Y–9C.
(b) Transitional arrangements—(1)
Transition periods for bank holding
companies that become covered
companies after October 1, 2014. (i) A
bank holding company that becomes a
covered company after October 1, 2014,
but on or before March 31 of a given
year must comply with the requirements
of this subpart beginning on January 1
of the following year, unless that time
is extended by the Board in writing.
(ii) A bank holding company that
becomes a covered company after
October 1, 2014, and after March 31 of
a given year must comply with the
requirements of this subpart beginning
on January 1 of the second year
following that given year, unless that
time is extended by the Board in
writing.
(2) Bank holding companies that rely
on SR Letter 01–01. A covered company
that is relying as of July 20, 2015, on
Supervision and Regulation Letter SR
01–01 issued by the Board (as in effect
on May 19, 2010) must comply with the
requirements of this subpart beginning
January 1, 2016, unless that time is
extended by the Board in writing.
(3) Nonbank financial companies
supervised by the Board. (i) The Board
will apply this subpart to a nonbank
financial company supervised by the
Board by rule or order.
(ii) If the Board issues the rule or
order described in paragraph (b)(3)(i) of
this section on or before March 31 of a
given year, the nonbank financial
company supervised by the Board will
be required to comply with the
requirements of this subpart on January
1 of the following year, unless that time
is accelerated or extended by the Board
in writing.
(iii) If the Board issues the rule or
order described in paragraph (b)(3)(i) of
this section after March 31 of a given
year, the nonbank financial company
supervised by the Board will be
required to comply with the
requirements of this subpart on January
1 of the second year following that given
year, unless that time is accelerated or
extended by the Board in writing.
(3) Transition periods for covered
companies subject to the advanced
approaches. Notwithstanding any other
requirement in this section:
(i) A covered company must use 12
CFR part 225, appendices A and E (as
applicable), and 12 CFR part 252,
subpart D and E, as applicable, to

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estimate its pro forma regulatory capital
ratios and its pro forma tier 1 common
ratio for the stress test cycle beginning
October 1, 2014, and may not use the
advanced approaches until January 1,
2016; and
(ii) Beginning January 1, 2016, a
covered company must use the
advanced approaches to estimate its pro
forma regulatory capital ratios and its
pro forma tier 1 common ratio for
purposes of its stress test under § 252.54
if the Board notifies the company before
the first day of the stress test cycle that
the company is required to use the
advanced approaches to determine its
risk-based capital requirements.
§ 252.54

Annual stress test.

(a) In general. A covered company
must conduct an annual stress test. For
the stress test cycle beginning October 1,
2014, the stress test must be conducted
by January 5, 2015, based on data as of
September 30, 2014, unless the time or
the as-of date is extended by the Board
in writing. For each stress test cycle
beginning thereafter, the stress test must
be conducted by April 5 of each
calendar year based on data as of
December 31 of the preceding calendar
year, unless the time or the as-of date is
extended by the Board in writing.
(b) Scenarios provided by the Board—
(1) In general. In conducting a stress test
under this section, a covered company
must, at a minimum, use the scenarios
provided by the Board. Except as
provided in paragraphs (b)(2) and (3) of
this section, for the stress test cycle
beginning October 1, 2014, the Board
will provide a description of the
scenarios to each covered company no
later than November 15, 2014. Except as
provided in paragraphs (b)(2) and (3) of
this section, for each stress test cycle
beginning thereafter, the Board will
provide a description of the scenarios to
each covered company no later than
February 15 of that calendar year.
(2) Additional components. (i) The
Board may require a covered company
with significant trading activity, as
determined by the Board and specified
in the Capital Assessments and Stress
Testing report (FR Y–14), to include a
trading and counterparty component in
its adverse and severely adverse
scenarios in the stress test required by
this section. For the stress test cycle
beginning October 1, 2014, the data
used in this component must be as of a
date between October 1 and December
1, 2014, as selected by the Board, and
the Board will communicate the as-of
date and a description of the component
to the company no later than December
1, 2014. For the stress test cycle
beginning January 1, 2016, and for each

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stress test cycle beginning thereafter, the
data used in this component must be as
of a date between January 1 and March
1 of that calendar year selected by the
Board, and the Board will communicate
the as-of date and a description of the
component to the company no later than
March 1 of the relevant calendar year.
(ii) The Board may require a covered
company to include one or more
additional components in its adverse
and severely adverse scenarios in the
stress test required by this section based
on the company’s financial condition,
size, complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(3) Additional scenarios. The Board
may require a covered company to use
one or more additional scenarios in the
stress test required by this section based
on the company’s financial condition,
size, complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(4) Notice and response—(i)
Notification of additional component. If
the Board requires a covered company
to include one or more additional
components in its adverse and severely
adverse scenarios under paragraph (b)(2)
of this section or to use one or more
additional scenarios under paragraph
(b)(3) of this section, the Board will
notify the company in writing. For the
stress test cycle beginning October 1,
2014, the Board will provide such
notification no later than September 30,
2014, and for each stress test cycle
beginning thereafter, the Board will
provide such notification no later than
December 31 of the preceding calendar
year. The notification will include a
general description of the additional
component(s) or additional scenario(s)
and the basis for requiring the company
to include the additional component(s)
or additional scenario(s).
(ii) Request for reconsideration and
Board response. Within 14 calendar
days of receipt of a notification under
this paragraph, the covered company
may request in writing that the Board
reconsider the requirement that the
company include the additional
component(s) or additional scenario(s),
including an explanation as to why the
reconsideration should be granted.
(iii) Description of component. The
Board will respond in writing within 14
calendar days of receipt of the
company’s request. The Board will
provide the covered company with a
description of any additional
component(s) or additional scenario(s)
by December 1, 2014 (for the stress test
cycle beginning October 1, 2014) and by
March 1 (for each stress test cycle
beginning thereafter).

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§ 252.55

Mid-cycle stress test.

(a) Mid-cycle stress test requirement.
In addition to the stress test required
under § 252.54, a covered company
must conduct a mid-cycle stress test.
For the stress test cycle beginning
October 1, 2014, the mid-cycle stress
test must be conducted by July 5 based
on data as of March 31 of that calendar
year, unless the time or the as-of date is
extended by the Board in writing. For
each stress test cycle beginning
thereafter, the stress test must be
conducted by September 30 of each
calendar year based on data as of June
30 of that calendar year, unless the time
or the as-of date is extended by the
Board in writing.
(b) Scenarios related to mid-cycle
stress tests—(1) In general. A covered
company must develop and employ a
minimum of three scenarios, including
a baseline scenario, adverse scenario,
and severely adverse scenario, that are
appropriate for its own risk profile and
operations, in conducting the stress test
required by this section.
(2) Additional components. The
Board may require a covered company
to include one or more additional
components in its adverse and severely
adverse scenarios in the stress test
required by this section based on the
company’s financial condition, size,
complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(3) Additional scenarios. The Board
may require a covered company to use
one or more additional scenarios in the
stress test required by this section based
on the company’s financial condition,
size, complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(4) Notice and response—(i)
Notification of additional component. If
the Board requires a covered company
to include one or more additional
components in its adverse and severely
adverse scenarios under paragraph (b)(2)
of this section or one or more additional
scenarios under paragraph (b)(3) of this
section, the Board will notify the
company in writing. For the stress test
cycle beginning October 1, 2014, the
Board will provide such notification no
later than March 31, and for each stress
test cycle beginning thereafter, the
Board will provide such notification no
later than June 30. The notification will
include a general description of the
additional component(s) or additional
scenario(s) and the basis for requiring
the company to include the additional
component(s) or additional scenario(s).
(ii) Request for reconsideration and
Board response. Within 14 calendar
days of receipt of a notification under

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this paragraph, the covered company
may request in writing that the Board
reconsider the requirement that the
company include the additional
component(s) or additional scenario(s),
including an explanation as to why the
reconsideration should be granted. The
Board will respond in writing within 14
calendar days of receipt of the
company’s request.
(iii) Description of component. The
Board will provide the covered
company with a description of any
additional component(s) or additional
scenario(s) by June 1 (for the stress test
cycle beginning October 1, 2014) and by
September 1 (for each stress test cycle
beginning thereafter).
§ 252.56

Methodologies and practices.

(a) Potential impact on capital. In
conducting a stress test under §§ 252.54
and 252.55, for each quarter of the
planning horizon, a covered company
must estimate the following for each
scenario required to be used:
(1) Losses, pre-provision net revenue,
provision for loan and lease losses, and
net income; and
(2) The potential impact on pro forma
regulatory capital levels and pro forma
capital ratios (including regulatory
capital ratios, the tier 1 common ratio,
and any other capital ratios specified by
the Board), incorporating the effects of
any capital actions over the planning
horizon and maintenance of an
allowance for loan losses appropriate for
credit exposures throughout the
planning horizon.
(b) Assumptions regarding capital
actions. In conducting a stress test
under §§ 252.54 and 252.55, a covered
company is required to make the
following assumptions regarding its
capital actions over the planning
horizon:
(1) For the first quarter of the
planning horizon, the covered company
must take into account its actual capital
actions as of the end of that quarter; and
(2) For each of the second through
ninth quarters of the planning horizon,
the covered company must include in
the projections of capital:
(i) Common stock dividends equal to
the quarterly average dollar amount of
common stock dividends that the
company paid in the previous year (that
is, the first quarter of the planning
horizon and the preceding three
calendar quarters);
(ii) Payments on any other instrument
that is eligible for inclusion in the
numerator of a regulatory capital ratio
equal to the stated dividend, interest, or
principal due on such instrument
during the quarter;

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(iii) An assumption of no redemption
or repurchase of any capital instrument
that is eligible for inclusion in the
numerator of a regulatory capital ratio;
and
(iv) An assumption of no issuances of
common stock or preferred stock, except
for issuances related to expensed
employee compensation.
(c) Controls and oversight of stress
testing processes—(1) In general. The
senior management of a covered
company must establish and maintain a
system of controls, oversight, and
documentation, including policies and
procedures, that are designed to ensure
that its stress testing processes are
effective in meeting the requirements in
this subpart. 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 company’s stress test
practices and methodologies consistent
with applicable laws, regulations, and
supervisory guidance. Policies of
covered companies must also describe
processes for scenario development for
the mid-cycle stress test required under
§ 252.55.
(2) Oversight of stress testing
processes. The board of directors, or a
committee thereof, of a covered
company must review and approve the
policies and procedures of the stress
testing processes as frequently as
economic conditions or the condition of
the covered company may warrant, but
no less than annually. The board of
directors and senior management of the
covered company must receive a
summary of the results of any stress test
conducted under this subpart.
(3) Role of stress testing results. The
board of directors and senior
management of each covered company
must consider the results of the analysis
it conducts under this subpart, as
appropriate:
(i) As part of the covered company’s
capital plan and capital planning
process, including when making
changes to the covered company’s
capital structure (including the level
and composition of capital);
(ii) When assessing the covered
company’s exposures, concentrations,
and risk positions; and
(iii) In the development or
implementation of any plans of the
covered company for recovery or
resolution.
§ 252.57

Reports of stress test results.

(a) Reports to the Board of stress test
results. (1) A covered company must
report the results of the stress test
required under § 252.54 to the Board in

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the manner and form prescribed by the
Board. For the stress test cycle
beginning October 1, 2014, such results
must be submitted by January 5, unless
that time is extended by the Board in
writing. For each stress test cycle
beginning thereafter, such results must
be submitted by April 5, unless that
time is extended by the Board in
writing.
(2) A covered company must report
the results of the stress test required
under § 252.55 to the Board in the
manner and form prescribed by the
Board. For the stress test cycle
beginning October 1, 2014, such results
must be submitted by July 5, unless that
time is extended by the Board in
writing. For each stress test cycle
beginning thereafter, such results must
be submitted by October 5, unless that
time is extended by the Board in
writing.
(b) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Board under this subpart and
related materials shall be determined in
accordance with applicable exemptions
under the Freedom of Information Act
(5 U.S.C. 552(b)) and the Board’s Rules
Regarding Availability of Information
(12 CFR part 261).

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§ 252.58

Disclosure of stress test results.

(a) Public disclosure of results—(1) In
general. (i) A covered company must
publicly disclose a summary of the
results of the stress test required under
§ 252.54 within the period that is 15
days after the Board publicly discloses
the results of its supervisory stress test
of the covered company pursuant to
§ 252.46(c), unless that time is extended
by the Board in writing.
(ii) A covered company must publicly
disclose a summary of the results of the
stress test required under § 252.55. For
the stress test cycle beginning October 1,
2014, this disclosure must occur in the
period beginning July 5 and ending July
20, unless that time is extended by the
Board in writing. For all stress test
cycles beginning thereafter, this
disclosure must occur in the period
beginning October 5 and ending October
20, unless that time is extended by the
Board in writing.
(2) Disclosure method. The summary
required under this section may be
disclosed on the Web site of a covered
company, or in any other forum that is
reasonably accessible to the public.
(b) Summary of results. 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;

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(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—
(i) Pre-provision net revenue and
other revenue;
(ii) Provision 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;
(iii) Net income before taxes;
(iv) 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
(v) Pro forma regulatory capital ratios
and the tier 1 common ratio 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 the tier 1
common ratio; 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.
(c) Content of results. (1) The
following disclosures required under
paragraph (b) of this section must be on
a cumulative basis over the planning
horizon:
(i) Pre-provision net revenue and
other revenue;
(ii) Provision for loan and lease losses,
realized losses/gains on available-forsale and held-to-maturity securities,
trading and counterparty losses, and
other losses or gains;
(iii) Net income before taxes; and
(iv) Loan losses in the aggregate and
by subportfolio.
(2) The disclosure of pro forma
regulatory capital ratios, the tier 1
common ratio, and any other capital
ratios specified by the Board that is
required under paragraph (b) of this
section must include the beginning
value, ending value, and minimum
value of each ratio over the planning
horizon.

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Subpart O—Enhanced Prudential
Standards for Foreign Banking
Organizations With Total Consolidated
Assets of $50 Billion or More and
Combined U.S. Assets of $50 Billion or
More
8. In § 252.153, revise paragraph (e) to
read as follows:

■

§ 252.153 U.S. intermediate holding
company requirement for foreign banking
organizations with U.S. non-branch assets
of $50 billion or more.

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(e) Enhanced prudential standards for
U.S. intermediate holding companies—
(1) Applicability—(i) Ongoing
application. Subject to the initial
applicability provisions in paragraph
(e)(1)(ii) of this section, a U.S.
intermediate holding company must
comply with the capital, risk
management, and liquidity
requirements set forth in paragraphs
(e)(2)(i), (e)(3), and (e)(4) of this section
beginning on the date it is required to
be established, comply with the capital
plan requirements set forth in paragraph
(e)(2)(ii) of this section in accordance
with § 225.8(c)(2), and comply with the
stress test requirements set forth in
paragraph (e)(5) beginning with the
stress test cycle the calendar year
following that in which it becomes
subject to regulatory capital
requirements.
(ii) Initial applicability—(A) General.
A U.S. intermediate holding company
required to be established by July 1,
2016 must comply with the risk-based
capital, risk management, and liquidity
requirements set forth in paragraphs
(e)(2)(i), (e)(3), and (e)(4) of this section
beginning on July 1, 2016, and comply
with the capital planning requirements
set forth in (e)(2)(ii) of this section in
accordance with § 225.8(c)(2).
(B) Transition provisions for leverage.
(1) A U.S. intermediate holding
company required to be established by
July 1, 2016 must comply with the
leverage capital requirements set forth
in paragraph (e)(2)(i) of this section
beginning on January 1, 2018, provided
that each subsidiary bank holding
company and insured depository
institution controlled by the foreign
banking organization immediately prior
to the establishment or designation of
the U.S. intermediate holding company,
and each bank holding company and
insured depository institution acquired
by the foreign banking organization after
establishment of the intermediate
holding company, is subject to leverage
capital requirements under 12 CFR part
217 until December 31, 2017.
(2) The Board may accelerate the
application of the leverage ratio to a

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Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 / Proposed Rules
U.S. intermediate holding company if it
determines that the foreign banking
organization has taken actions to evade
the application of this subpart.
(C) Transition provisions for stress
testing. (1) A U.S. intermediate holding
company required to be established by
July 1, 2016 must comply with the stress
test requirements set forth in paragraph
(e)(5) of this section beginning on
January 1, 2018, provided that each
subsidiary bank holding company and
insured depository institution
controlled by the foreign banking
organization immediately prior to the
establishment or designation of the U.S.
intermediate holding company, and
each bank holding company and
insured depository institution acquired
by the foreign banking organization after
establishment of the intermediate
holding company, must comply with
the stress test requirements in subparts
B, E, or F of this subpart, as applicable,
until December 31, 2017.
■ 9. Appendix A to part 252 is amended
by:
■ a. Redesignating footnotes 21 through
40 as footnotes 1 through 20.
■ b. Revising Footnotes 1, 2, 9, 19, and
20; and
■ c. Revising paragraphs 1.b, 2.a, and
7.a
The revisions read as follows:
Appendix A to Part 252—Policy
Statement on the Scenario Design
Framework for Stress Testing
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1. Background
1 12 U.S.C. 5365(i)(1), 12 CFR part 252,
subpart E.
2 12 U.S.C. 5365(i)(2); 12 CFR part 252,
subparts B and F.

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9 12 CFR 252.14(b), 12 CFR 252.44(b), 12
CFR 252.54(b).

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19 12

CFR 252.55.
20 12 CFR 252.55.
b. The stress test rules provide that, for the
stress test cycle beginning October 1, 2014,
the Board will notify covered companies by
no later than November 15, 2014 of the
scenarios it will use to conduct its annual
supervisory stress tests and the scenarios that
covered companies must use to conduct their
annual company-run stress tests.4 For each
stress test cycle beginning thereafter, the
Board will provide a description of these
scenarios to covered companies by no later
than February 15 of that calendar year. Under
the stress test rules, the Board may require
certain companies to use additional
components in the adverse or severely
adverse scenario or additional scenarios.5 For
example, the Board expects to require large
banking organizations with significant
trading activities to include a trading and
counterparty component (market shock,
described in the following sections) in their
adverse and severely adverse scenarios. The
Board will provide any additional
components or scenario by no later than
December 1 of each year.6 The Board expects
that the scenarios it will require the
companies to use will be the same as those
the Board will use to conduct its supervisory
stress tests (together, stress test scenarios).

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2. Overview and Scope
a. This policy statement provides more
detail on the characteristics of the stress test
scenarios and explains the considerations
and procedures that underlie the approach
for formulating these scenarios. The
considerations and procedures described in
4 12 CFR 252.44(b), 12 CFR 252.54(b). For the
stress test cycle beginning October 1, 2014, the
annual company-run stress tests use data as of
September 30 of each calendar year. For each stress
test cycle beginning thereafter, the annual
company-run stress tests use data as of December
31 of each calendar year.
5 Id.
6 Id.

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this policy statement apply to the Board’s
stress testing framework, including to the
stress tests required under 12 CFR part 252,
subparts E, F, and G, as well as the Board’s
capital plan rule (12 CFR 225.8).8

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7. Timeline for Scenario Publication
a. The Board will provide a description of
the macroeconomic scenarios by no later
than November 15, 2014 (for the stress test
cycle beginning October 1, 2014) and no later
than February 15 (for each stress test cycle
beginning thereafter). During the period
immediately preceding the publication of the
scenarios, the Board will collect and consider
information from academics, professional
forecasters, international organizations,
domestic and foreign supervisors, and other
private-sector analysts that regularly conduct
stress tests based on U.S. and global
economic and financial scenarios, including
analysts at the covered companies. In
addition, the Board will consult with the
FDIC and the OCC on the salient risks to be
considered in the scenarios. For the stress
test cycle beginning October 1, 2014, the
Board expects to conduct this process in July
and August of 2014 and to update the
scenarios based on incoming macroeconomic
data releases and other information through
the end of October. For each stress test cycle
beginning thereafter, the Board expects to
conduct this process in October and
November of each year and to update the
scenarios based on incoming macroeconomic
data releases and other information through
the end of January.

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By order of the Board of Governors of the
Federal Reserve System, June 12, 2014.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014–14357 Filed 6–30–14; 8:45 am]
BILLING CODE 6210–01–P
8 The Board may determine that modifications to
the approach are appropriate, for instance, to
address a broader range of risks, such as,
operational risk.

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