Attachment B to SR Letter 20-2

Attachment B: Frequently Asked Questions on the Tailoring Final Rules

Effective August 11, 2020

Page 1 of 6

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 ofshort-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 ofForm 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 ofthe FBO. All other respondents must report

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

provide the average ofthe 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 ofthe

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

Form FR Y-15 using the average ofthe 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 [continuing on to the next page]
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 ofstandards 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 ofthe four most recent

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

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

or the average ofthe previous quarters (ifthe banking organization has reported the risk-based

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

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 ofJune

30, 2020. [Footnote 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. End of Footnote 1.]

Accordingly, an FBO must determine the average wSTWF ofits combined U.S.

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

regardless ofits history offiling Form FR 2052a. A U.S. intermediate holding company

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

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

the FBO on behalf ofits IHC has not reported risk-based indicators for the IHC for each ofthe

four most recent calendar quarters, the IHC must use the average ofthe 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 ofan FBO,

the measure ofcross-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 ofcross-jurisdictional activity would eliminate through

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

IHC. The measure ofcross-jurisdictional activity for the IHC would include transactions with [continuing on to the next page
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 ifthe 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 ofthe 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 ofthe United States, a state, or any territory or possession ofthe 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 ifthe subsidiary was not itselfincorporated in or organized under

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

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

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

line item. [Footnote 2

- For purposes of average cross-jurisdictional activity, the FBO must apply additional adjustments. See Schedule L. End of Footnote 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 ofthe 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 ofForm 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 ofthe capital rule and the definition offinancial

collateral in 12 CFR 217.2 ofthe capital rule.
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 ofthe claim by determining the

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

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

x Hs), and the product ofthe absolute value ofthe net position ofthe instrument times the

currency mismatch haircut (Efx x Hfx).

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

definition offinancial 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 offinancial 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 ofless 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 ofthe 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 ofthe 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 ofsuch reported items. A

banking organization meets the definition ofthe 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 ofthe 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 ofMarch 31 report date)

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

(based on its amount ofweighted short-term wholesale funding reported on the FR Y-15) would [continuing on to the next p
Page 5 of 6

be deemed to meet the definition ofa Category III banking organization in the second quarter. [Footnote 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. End of Footnote 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) ofthe LCR rule assigns outflow adjustment percentages to banking

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

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

funding” as the average ofthe weighted short-term wholesale funding for each ofthe 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 ofa 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 ofaverage weighted shortterm wholesale funding triggers an increased or decreased outflow adjustment percentage under

section __.30(c) ofthe 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 ofaverage weighted short-term wholesale funding) is reported on the

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

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

calendar year (representing a December 31 as-ofreport date) that reports an amount ofweighted

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 ofthe first quarter and be

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

offourth quarter ofthat calendar year. Ifa 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-ofdate) that demonstrates the organization meets the definition ofa Category [continuing on to the next p
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 ofthe first quarter but be required to continue using the 85 percent

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