Attachment A to SR Letter 20-2

Attachment A: Frequently Asked Questions on the Tailoring Rules

Effective January 13, 2020

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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 ofAOCI 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 ofthe tailoring rule must recognize elements ofAOCI in

regulatory capital in its reporting forms filed as ofDecember 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 ofDecember 31, 2019, that has average weighted short-term

wholesale funding ofless 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 ofthe LCR rule.
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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-ofJune 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

requirementsin 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)).