BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551 

DIVISION OF SUPERVISION

AND REGULATION

SR 20-2 

January 13, 2020 

Revised August 11, 2020 

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH 

FEDERAL RESERVE BANK

SUBJECT: Frequently Asked Questions on the Tailoring Rules

Applicability: This guidance applies to bank holding companies, savings and loan holding 

companies, and U.S. intermediate holding companies with $100 billion or more in total 

consolidated assets as well as to certain depository institutions. For other banking organizations 

affected by the tailoring rules, this guidance may address their questions on applicability. 

The Board of Governors of the Federal Reserve System (the Board) is issuing frequently 

asked questions (FAQs) in response to questions from institutions regarding the final rules to 

tailor certain prudential standards for large domestic and foreign banking organizations to more 

closely match their risk profiles (tailoring rules).1

 

This letter announces the initial set of FAQs on this topic, which are included in the 

attachment to this letter. The Board may periodically update the FAQs and, therefore, 

institutions are encouraged to check the Board’s public website for new FAQs or revisions to a 

previously issued FAQ. The Federal Reserve will issue a letter to announce any subsequent 

additions or changes to these FAQs. 

 

1 84 Fed. Reg. 59032 (November 1, 2019); 84 Fed. Reg. 59230 (November 1, 2019). In addition, the Board, 

together with the Federal Deposit Insurance Corporation, adopted a final rule to tailor resolution planning 

requirements in a manner consistent with the framework described in the tailoring rules. 84 Fed. Reg. 

59194 (November 1, 2019).

In August 2020, this letter was revised to provide additional frequently asked questions in

response to questions from institutions regarding the final rules to tailor certain prudential 

standards for large domestic and foreign banking organizations. The updated FAQs, together 

with the FAQs issued in January 2020, are attached to this letter.
Questions related to the implementation of the tailoring rules may be sent to the 

following inbox: tailoring@frb.gov. In addition, questions may be sent via the Board’s public 

website.2

Michael S. Gibson

Director

Attachments

• Attachment A: Frequently Asked Questions on the Tailoring Rules (Effective January 13,

2020)

• Attachment B: Frequently Asked Questions on the Tailoring Rules (Effective August 11,

2020)

2 See http://www.federalreserve.gov/apps/contactus/feedback.aspx.
Attachment A to SR Letter 20-2 

Page 1 of 2

Attachment A: Frequently Asked Questions on the Tailoring Rules

Effective January 13, 2020 

1. If an advanced approaches banking organization expects to meet the definition of a 

Category III or Category IV banking organization on December 31, 2019, and plans to 

opt-out of the requirement to recognize Accumulated Other Comprehensive Income 

(AOCI) in regulatory capital, when should the banking organization make its election 

to opt-out of the requirement to recognize AOCI in regulatory capital? 

Section 22(b)(ii) of the capital rule provides that a Category III or Category IV banking 

organization must make its AOCI opt-out election during the first reporting period after the 

banking organization meets the definition of a Category III or Category IV banking 

organization. Accordingly, a banking organization that meets the definition of a Category III 

or Category IV banking organization as of December 31, 2019, would make its election 

during the first quarter of 2020 on the applicable reporting form – the call report or FR Y-9C, 

as applicable – with a March 31, 2020, as-of date. Such a banking organization would no 

longer be required to recognize elements of AOCI in regulatory capital beginning 

January 1, 2020. A banking organization that was not eligible to make an AOCI opt-out 

election prior to the effective date of the tailoring rule must recognize elements of AOCI in 

regulatory capital in its reporting forms filed as of December 31, 2019. 

2. Under the tailoring rules, a holding company that is a Category IV banking 

organization is not subject to the Liquidity Coverage Ratio (LCR) unless it has average 

weighted short-term wholesale funding of $50 billion or more. For purposes of initial 

transitions, when may a banking organization with average weighted short-term 

wholesale funding below $50 billion discontinue complying with LCR requirements? Is 

a holding company that is a Category IV banking organization required to disclose 

information required pursuant to 12 CFR 249.90 for the fourth quarter of 2019?

A covered depository institution holding company that is subject to minimum liquidity 

standards under the LCR rule is required to publicly disclose information regarding its 

liquidity position each calendar quarter. A banking organization identified as a Category IV 

banking organization as of December 31, 2019, that has average weighted short-term 

wholesale funding of less than $50 billion will not be subject to the LCR rule. Accordingly, 

the banking organization would not be required to comply with disclosure requirements 

included in subpart J of the LCR rule. 
Attachment A to SR Letter 20-2 

Page 2 of 2

3. A foreign banking organization with average combined U.S. assets of $100 billion or 

more must determine the category of its combined U.S. operations based on the FR Y15 filed as-of June 30, 2020. Standards applicable to the combined U.S. operations of a 

foreign banking organization with combined U.S. assets of $100 billion or more include 

FR 2052a reporting requirements and liquidity risk management and buffer 

requirements. A foreign banking organization with average combined U.S. assets of 

less than $100 billion is not subject to these requirements. For purposes of initial 

transitions, when may a foreign banking organization with less than $100 billion in 

average combined U.S. assets discontinue complying with these requirements? 

The final tailoring rule provides a delay in the initial categorization of, and changes in 

requirements applied to, the combined U.S. operations of foreign banking organizations. 

This is to account for foreign banking organizations filing the FR Y-15 on behalf of their 

combined U.S. operations for the first time as-of June 30, 2020. A foreign banking 

organization with average combined U.S. assets of less than $100 billion is not subject to a 

category of standards, including FR 2052a reporting requirements and liquidity risk 

management and buffer requirements. Accordingly, a foreign banking organization with 

average combined U.S. assets of less than $100 billion as of December 31, 2019, may 

discontinue FR 2052a reporting requirements and liquidity stress testing and buffer 

requirements beginning on December 31, 2019, including the FR 2052a report with a 

December 31, 2019, as-of date. 

For purposes of this answer and the final tailoring rule, average combined U.S. assets means 

the average of combined U.S. assets for the four most recent calendar quarters or, if the 

banking organization has not reported combined U.S. assets for each of the four most recent 

calendar quarters, the combined U.S. assets for the most recent calendar quarter or average of 

the most recent calendar quarters, as applicable. Combined U.S. assets is reported on the 

FR Y-7Q.

4. Under Category IV liquidity standards, the tailoring final rule reduces the required 

frequency of internal liquidity stress testing to at least quarterly, rather than monthly. 

For purposes of this requirement, should a holding company subject to Category IV 

standards interpret “quarterly” to mean once every three months, once in a quarter, or 

as of the end of each calendar quarter? 

Banking organizations subject to Category IV standards are required to conduct an internal 

liquidity stress test at least quarterly, or at least once every three months. In any case, a 

banking organization’s internal liquidity stress test function is subject to governance 

requirements in section 252.157(a)(7), 238.124(a)(7), or 252.35(a)(7), as applicable, and its 

internal liquidity stress testing must be tailored to the risk profile of the banking organization 

(See sections 252.157(a)(6); 238.124(a)(6); and 252.35(a)(6)). 
Attachment B to SR Letter 20-2 

Page 1 of 6

Attachment B: Frequently Asked Questions on the Tailoring Final Rules 

Effective August 11, 2020 

1) How should a first-time filer of Form FR Y-15 report items that require averages 

and what is the basis for the average calculation? 

Response: The risk-based indicators – average cross-jurisdictional activity, average weighted 

short-term wholesale funding, size, average off-balance sheet exposure, and average non-bank 

assets – are calculated as the average of the amounts reported by the banking organization for the 

four most recent calendar quarters for which the banking organization has reported the indicator. 

If a banking organization has not reported a risk-based indicator for each of the four most recent 

calendar quarters, the banking organization must use either the amount from the most recent 

quarter (if the banking organization has not reported the risk-based indicator prior to that quarter) 

or the average of the most recent quarter and the previous quarters (if the banking organization 

has reported the risk-based based indicator for the previous two or three quarters), calculated 

consistent with the instructions of the applicable form. Banking organizations report information 

regarding risk-based indicators on the Form FR Y-15, Form FR Y-7Q, and Form FR Y-9LP. For 

a discussion of how to measure weighted short-term wholesale funding at a reporting date, see 

FAQ 2. 

In addition, certain line items in the Substitutability Category of Form FR Y-15 are flow 

variables with a reported value that is measured over a period of time (i.e., trading volume, 

underwriting and payments activity). The instructions to Form FR Y-15 require the use of a prorata approach for flow variables when a banking organization has less than 12 months of data. 

This approach applies a pro-rata annualized factor to each flow variable until the banking 

organization has 4 full quarters to provide an annual figure.

2.a.) Should the unweighted average amounts of elements of short-term wholesale 

funding reported for the combined U.S. operations of a foreign banking 

organization (FBO) as of June 30, 2020, be based on the average of daily or 

monthly observations across a full year (July 1, 2019 to June 30, 2020)? 

Response: The instructions for Schedule N of Form FR Y-15 provide that an FBO that reported 

Form FR 2052a daily for the last twelve months must report each unweighted average value 

using daily data for the combined U.S. operations of the FBO. All other respondents must report 

the unweighted average values using monthly data (i.e., for each reported unweighted item 

provide the average of the twelve month-end balances within the last four quarters). Therefore, 

only an FBO that has submitted Form FR 2052a on a daily basis for one year is required to report 

each unweighted value for its combined U.S. operations on Form FR Y-15 using a 12-month 

daily average. If an FBO submitted Form FR 2052a on a monthly basis for all or part of the 

prior year, it must report each unweighted average value for its combined U.S. operations on 

Form FR Y-15 using the average of the prior 12 month-end values. Similarly, if an FBO 

subsequently transitions to submitting Form FR 2052a on a daily, T+2 basis, the FBO should 
Attachment B to SR Letter 20-2 

Page 2 of 6

continue reporting the average values for Schedule N of Form FR Y-15 using the average of the 

prior 12 month-end values until the FBO has accumulated the daily Form FR 2052a observations 

for twelve months. 

2.b.) Similarly, should an FBO determine its applicable category of standards based 

on the reported wSTWF value as of June 30, 2020, or based on its history of 

previously submitted Form 2052a data? 

Response: A banking organization must determine its applicable category of standards based on 

risk-based indicators as reported on Form FR Y-15, Form FR Y-9LP, or Form FR Y-7Q. If a 

banking organization has not reported a risk-based indicator for each of the four most recent 

calendar quarters, the banking organization must use either the amount from the most recent 

quarter (if the banking organization has not reported the risk-based indicator prior to that quarter) 

or the average of the previous quarters (if the banking organization has reported the risk-based 

indicator for the previous two or three quarters), calculated consistent with the instructions of the 

applicable form. With respect to their combined U.S. operations, FBOs will begin reporting riskbased indicators on Form FR Y-15 beginning with the form submitted with an as-of date of June 

30, 2020.1 Accordingly, an FBO must determine the average wSTWF of its combined U.S. 

operations based solely on information reported on Form FR Y-15 as of June 30, 2020, 

regardless of its history of filing Form FR 2052a. A U.S. intermediate holding company 

subsidiary of an FBO (IHC) must determine its category of standards based on its risk-based 

indicators as reported on Form FR Y-15 for the four most recent calendar quarters. If the IHC or 

the FBO on behalf of its IHC has not reported risk-based indicators for the IHC for each of the 

four most recent calendar quarters, the IHC must use the average of the most recent quarter or 

quarters, as applicable. 

3) For purposes of the cross-jurisdictional indicator as applied to FBOs, does the term 

“intercompany” have the same meaning as the term “inter-affiliate”? Do the terms 

intercompany and inter-affiliate include the foreign banking organization’s 

banking and non-banking subsidiaries?

Response: The term “intercompany” has the same meaning as the term “inter-affiliate”. An 

FBO may exclude from the cross-jurisdictional activity indicator all inter-affiliate 

(intercompany) liabilities and inter-affiliate (intercompany) claims to the extent that these claims 

are secured by financial collateral. Additionally, for the combined U.S. operations of an FBO, 

the measure of cross-jurisdictional activity would exclude all claims between the FBO’s U.S. 

domiciled affiliates, branches, and agencies to the extent such items are not already eliminated in 

consolidation. For the IHC, the measure of cross-jurisdictional activity would eliminate through 

consolidation all inter-affiliate (intercompany) claims and liabilities among subsidiaries of the 

IHC. The measure of cross-jurisdictional activity for the IHC would include transactions with 

 

1 IHCs have previously been required to submit Form FR Y-15 and beginning June 30, 2020, will begin reporting 

adjusted cross-jurisdictional claims on the Form. 
Attachment B to SR Letter 20-2 

Page 3 of 6

U.S. affiliates, including subsidiaries of the foreign parent and U.S. branches and agencies,

which are not consolidated subsidiaries of the IHC. 

4) Should an FBO with no IHC file information for its non-branch assets using the 

column under Form FR Y-15 that is designated for U.S. intermediate holding 

company information? 

Response: No, an FBO should only report IHC information on Form FR Y-15 if the foreign 

banking organization has a subsidiary IHC. An FBO with $100 billion or more in combined 

U.S. assets must report information regarding its non-branch assets using the column under Form 

FR Y-15 that is designated for information regarding the FBO’s combined U.S. operations. 

5) How should an FBO determine the scope of its combined U.S. operations? 

Response: An FBO’s combined U.S. operations include its U.S. branches and agencies and the 

U.S. subsidiaries of the foreign banking organization (excluding any section 2(h)(2) company), 

and subsidiaries of such U.S. subsidiaries. An FBO’s U.S. subsidiaries include any company 

that is owned or controlled directly or indirectly by the FBO and that is incorporated in or 

organized under the laws of the United States, a state, or any territory or possession of the United 

States. See 12 CFR 252.2 and the definitions of “subsidiary” and “U.S. subsidiary” for 

additional details. In addition, a subsidiary of an IHC generally would be included in an FBO’s

combined U.S. operations even if the subsidiary was not itself incorporated in or organized under 

the laws of the United States, any state, or any territory or possession of the United States. 

An FBO should calculate and report information on Form FR Y-15 as if the FBO were a 

consolidated entity according to the netting rules applicable to IHCs, BHCs, and SLHCs for that 

line item.2 Note that an FBO may report information on Form 2052a that extends beyond its 

combined U.S. operations. If an FBO reports information on Form FR 2052a for a material 

entity outside the United States that is managed from the United States, the reporting FBO 

should only include on Form FR Y-15 Schedule N the material entity managed from the United 

States to the extent that it falls within the scope of the FBO’s combined U.S. operations. 

6) How should an FBO calculate adjusted cross-jurisdictional claims for securities 

financing and repurchase transactions under the final rule? 

Response: The instructions to Schedule L of Form FR Y-15 indicate that exposure amounts for 

claims with a foreign office reported should be calculated in accordance with the methodology 

for collateralized transactions in 12 CFR 217.37 of the capital rule and the definition of financial 

collateral in 12 CFR 217.2 of the capital rule. 

 

2 For purposes of average cross-jurisdictional activity, the FBO must apply additional adjustments. See Schedule L.
Attachment B to SR Letter 20-2 

Page 4 of 6

Specifically, with respect to a resale agreement or securities financing transaction included as a 

claim under Form FFIEC 009 and that meets the definition of a “repo-style transaction” under 

the capital rule, an FBO would calculate the adjusted value of the claim by determining the 

difference between the exposure and the collateral (E – C), and adding this amount to the product 

of the absolute value of the net position of the instrument and market price volatility haircut (Es 

× Hs), and the product of the absolute value of the net position of the instrument times the 

currency mismatch haircut (Efx × Hfx).

Permitting the reduction of certain claims on non-U.S. affiliates if the collateral meets the 

definition of financial collateral helps to ensure that the collateral is liquid, while the use of 

supervisory haircuts limits risk associated with price volatility and settlement currency 

mismatch. In addition, relying on the capital rule’s definition of financial collateral provides 

clarity regarding the types of collateral eligible to reduce the amount of cross-jurisdictional 

claims under this approach. In some cases, the value reported for an adjusted cross-jurisdictional 

claim may exceed the value reported on an FBO’s balance sheet. 

7) What are the liquidity risk management requirements under Board Regulation YY 

for firms with greater than $250 billion in global assets and less than $100B in 

CUSO assets?

Response: An FBO with average total consolidated assets of $250 billion or more and average 

combined U.S. assets of less than $100 billion must report to the Board on an annual basis the 

results of an internal liquidity stress test for either the consolidated operations of the FBO or its 

combined U.S. operations that are consistent with Basel Committee principles for liquidity risk 

management and must incorporate 30-day, 90-day and one-year stress-test horizons. See 12 

CFR 252.145(a). An FBO that does not comply with this annual requirement is subject to limits 

on the aggregate amount owed by the FBO’s non-U.S. offices and its non-U.S. affiliates to the 

combined U.S. operations of the FBO. See 12 CFR 252.145(b). 

8) Under the interagency tailoring rules, a banking organization that changes from 

one category of applicable standards to another category generally is provided a 

transition period before it must comply with the requirements of the new category 

of standards. For purposes of transitions between categories, when is a banking 

organization deemed to qualify for a new category of standards? 

Response: A banking organization’s category is determined based on risk-based indicators as 

reported on its Call Report, FR Y-9LP or FR Y-15, or on averages of such reported items. A 

banking organization meets the definition of the new category of applicable standards in the 

quarter in which the banking organization files the reporting form (e.g., Call Report, FR Y-9LP, 

or FR Y-15) demonstrating that the banking organization meets the definition of the new 

category. For example, a banking organization that is subject to Category IV standards in the 

first quarter and that subsequently files in the second quarter (as of March 31 report date) 

meeting the criteria of $75 billion or more in average weighted short-term wholesale funding 

(based on its amount of weighted short-term wholesale funding reported on the FR Y-15) would 
Attachment B to SR Letter 20-2 

Page 5 of 6

be deemed to meet the definition of a Category III banking organization in the second quarter.3 

In addition, any transition period provided under certain requirements continues to apply. 

9) Section __.30(d) of the LCR rule requires a banking organization whose outflow 

adjustment percentage increases to begin using the higher outflow adjustment 

percentage by the first day of the third calendar quarter after the increase; a 

banking organization whose outflow adjustment percentage decreases must 

continue using its previous higher outflow adjustment percentage until the first day 

of the first calendar quarter following the decrease. For purposes of these 

transition periods, when is a banking organization deemed to qualify for a new 

outflow adjustment percentage?

Response: Section __.30(c) of the LCR rule assigns outflow adjustment percentages to banking 

organizations based on their category and amount of average weighted short-term wholesale 

funding. Section __.3 of the LCR rule generally defines “average weighted short-term wholesale 

funding” as the average of the weighted short-term wholesale funding for each of the four most 

recent calendar quarters as reported on the FR Y-15. 

As described in response to question 8 above, a banking organization is deemed to change 

categories during the quarter in which the banking organization files the reporting form 

demonstrating it meets the definition of a new category. Similarly, a banking organization’s 

average weighted short-term wholesale funding is deemed to change during the quarter in which 

the banking organization files the FR Y-15 demonstrating its level of average weighted shortterm wholesale funding triggers an increased or decreased outflow adjustment percentage under 

section __.30(c) of the LCR rule. 

Accordingly, the date on which the banking organization is deemed to be subject to a new 

outflow adjustment percentage is the date on which the relevant information (used to determine 

category eligibility or level of average weighted short-term wholesale funding) is reported on the 

FR Y-15. For example, if a banking organization subject to Category III standards and an 85 

percent outflow adjustment percentage subsequently files an FR Y-15 during the first quarter of a 

calendar year (representing a December 31 as-of report date) that reports an amount of weighted 

short-term wholesale funding such that the banking organization’s average weighted short-term 

wholesale funding is $75 billion or more, the banking organization would be deemed to be 

subject to the higher outflow adjustment percentage (100 percent) as of the first quarter and be 

required to comply with a 100 percent outflow adjustment percentage no later than the first day 

of fourth quarter of that calendar year. If a Category III banking organization subject to an 85 

percent outflow adjustment percentage submits an FR Y-15 during the first quarter (representing 

a December 31 as-of date) that demonstrates the organization meets the definition of a Category 

 

3 Indicators, including average weighted short-term wholesale funding, are the average of the indicator for each of 

the four most recent calendar quarters, or, if a banking organization has not reported an indicator for each of the four 

most recent calendar quarters, the indicator for the most recent calendar quarter or average of the most recent 

calendar quarters, as applicable.
Attachment B to SR Letter 20-2 

Page 6 of 6

IV banking organization with $50 billion or more in average weighted short-term wholesale 

funding, the banking organization would be deemed to qualify for a lower outflow adjustment 

percentage (70 percent) as of the first quarter but be required to continue using the 85 percent 

adjustment percentage until the first day of the second quarter of the calendar year.