This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

33615 

Vol. 87, No. 107 

Friday, June 3, 2022 

1 86 FR 73187 (Dec. 27, 2021). 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1240 

RIN 2590–AB16 

Capital Planning and Stress Capital 

Buffer Determination 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Final rule. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA or the Agency) is 

adopting a final rule (final rule) that 

supplements the FHFA Enterprise 

Regulatory Capital Framework (ERCF) 

rule by requiring the Federal National 

Mortgage Association (Fannie Mae) and 

the Federal Home Loan Mortgage 

Corporation (Freddie Mac, and with 

Fannie Mae, each an Enterprise) to 

submit annual capital plans to FHFA 

and provide prior notice for certain 

capital actions. The final rule 

incorporates the stress capital buffer 

determination from the ERCF into the 

capital planning process. The 

requirements in the final rule are 

consistent with the regulatory 

framework for capital planning for large 

bank holding companies. 

DATES: This rule is effective August 2, 

2022. 

FOR FURTHER INFORMATION CONTACT: 

Andrew Varrieur, Acting Senior 

Associate Director, Office of Capital 

Policy, (202) 649–3141, 

Andrew.Varrieur@fhfa.gov; Ron 

Sugarman, Principal Policy Analyst, 

Office of Capital Policy, (202) 649–3208, 

Ron.Sugarman@fhfa.gov; or Mark 

Laponsky, Deputy General Counsel, 

Office of General Counsel, (202) 649– 

3054, Mark.Laponsky@fhfa.gov (these 

are not toll-free numbers); Federal 

Housing Finance Agency, 400 Seventh 

St. SW, Washington, DC 20219. For 

TTY/TRS users with hearing and speech 

disabilities, dial 711 and ask to be 

connected to any of the contact numbers 

above. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Overview of the Final Rule 

III. General Comments on the Proposed Rule 

A. Stress Capital Buffer 

B. Board’s Duties 

C. Compliance Date 

IV. Paperwork Reduction Act 

V. Regulatory Flexibility Act 

VI. Congressional Review Act 

I. Introduction 

On December 27, 2021, FHFA 

published in the Federal Register a 

notice of proposed rulemaking (the 

proposal or proposed rule) seeking 

comments on FHFA’s proposal to 

require each Enterprise to submit 

annual capital plans to FHFA and 

provide prior notice for certain capital 

actions. The proposal incorporated the 

determination of the stress capital buffer 

from the ERCF 1 into the capital 

planning process. The requirements in 

the proposal were consistent with the 

regulatory framework for capital 

planning for large bank holding 

companies. FHFA is now adopting this 

final rule as proposed. 

The final rule’s requirement to 

develop capital plans will allow the 

Enterprises to identify the amount of 

capital they need to raise to meet the 

ERCF’s requirements, and to consider 

the timing of when to raise capital, and 

what types of capital to raise. The final 

rule, like the ERCF, is intended to 

provide a stable regulatory framework 

for the Enterprises for an extended 

period, including after they achieve 

adequate capitalization under the ERCF. 

II. Overview of the Final Rule 

After carefully considering the 

comments on the proposed rule, and as 

described in this preamble, FHFA is 

adopting the capital planning 

requirements and stress capital buffer 

determination as proposed. FHFA 

continues to believe that the Enterprises 

should have robust systems and 

processes in place that incorporate 

forward-looking projections of revenue 

and losses to monitor and maintain their 

internal capital adequacy. Furthermore, 

each Enterprise should operate with an 

amount of capital that is commensurate 

with each Enterprise’s risk profile. 

FHFA also believes that the stress 

capital buffer determination should be 

part of the capital planning process. 

Specifically, the final rule will require 

an Enterprise to develop and maintain 

a capital plan, which the Enterprise 

must generally submit to FHFA by May 

20 of each year, after it has been 

reviewed by the Enterprise’s board of 

directors or a designated committee 

thereof. The plan must contain certain 

mandatory elements, including an 

assessment of the expected sources and 

uses of capital over a planning horizon 

that reflects the Enterprise’s size and 

complexity, assuming both expected 

and stressful conditions. This includes 

the Enterprise’s internal baseline 

scenario and internal stress scenario, as 

well as additional scenarios that may be 

provided by FHFA. The planning 

horizon is at least five years for the 

Enterprise’s scenarios and at least nine 

consecutive quarters for the FHFA 

scenarios. The capital plans also must 

include any planned capital actions and 

consider the regulatory capital buffers. 

The final rule includes the factors that 

FHFA will consider in reviewing a plan, 

including its comprehensiveness and 

reasonableness given the assumptions 

and analysis underlying the plan and 

the robustness of the Enterprise’s capital 

adequacy process. A plan must be 

resubmitted if there is a material change 

in the Enterprise’s risk profile, financial 

condition, or corporate structure. FHFA 

also may require an Enterprise to 

resubmit its capital plan if the plan is 

incomplete or FHFA determines 

resubmission is necessary to monitor 

risks to capital adequacy. In general, an 

Enterprise must receive prior approval 

from FHFA to make a capital 

distribution, if the distribution would 

occur after an event that requires a 

resubmission. There is also a post-notice 

requirement for certain capital 

distributions. 

In addition to requiring a capital plan, 

the rule incorporates the stress capital 

buffer from the ERCF into the capital 

planning process and makes the 

necessary conforming amendments to 

the ERCF. After FHFA notifies the 

Enterprise of its stress capital buffer 

each year, the Enterprise must adjust its 

planned capital distributions to be 

consistent with the capital distribution 

limitations effective under the new 

stress capital buffer. The final rule 


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2See comments on Capital Planning and Stress 

Capital Buffer Determination Proposed Rule, 

available at https://www.fhfa.gov/Supervision

Regulation/Rules/Pages/Comment-List.aspx?

RuleID=714. The comment period for the proposed 

rule closed on February 25, 2022. 

changes the stress capital buffer’s 

calculation method slightly by 

considering an Enterprise’s planned 

common stock dividends for the fourth 

through seventh quarters of the 

planning horizon rather than the ERCF 

direction to use each of the nine 

quarters of the planning horizon. 

III. General Comments on the Proposed 

Rule 

FHFA received public comment 

letters on the proposed rule from a total 

of 12 different commenters. These 

commenters represented a variety of 

interested parties including one 

Enterprise (Freddie Mac), two trade 

associations, one corporation, and eight 

private individuals.2 Three of the 

private individuals submitted multiple 

comment letters each, resulting in FHFA 

receiving a total of 21 comment letters 

on the proposed rule. 

Freddie Mac was very supportive of 

the capital planning and stress capital 

buffer processes that would be required 

by the proposal but offered specific 

suggestions for modifying the stress 

capital buffer determination, the board 

duty provisions, and the compliance 

date for submission of the capital plans 

in the rule. 

Of the 20 other letters, 19 were on 

conservatorship issues, while one 

expressed concern about FHFA’s Duty 

to Serve program that was unrelated to 

capital planning or the stress capital 

buffer. Some of the conservatorship 

related letters dealt with the U.S. 

Department of the Treasury’s (Treasury) 

investment in the Enterprises through 

the Preferred Stock Purchase 

Agreements and common stock 

warrants, prospect of future exits from 

the conservatorships, and how that may 

affect capital planning. Other letters 

dealt with aspects of the 

conservatorships that were unrelated to 

capital planning or the stress capital 

buffer. Most of the conservatorship 

letters were from private individuals 

and some of these individuals 

mentioned they were Enterprise 

shareholders. One conservatorship letter 

was from a trade association and one 

was from a corporation. The trade 

association commenter, while offering 

general support for the proposal’s 

objective of making certain the 

Enterprises are operating with capital 

positions that reflect their risk profile, 

also expressed concern about Treasury’s 

investment and desired clarity about 

exits from the conservatorships. The 

corporation commenter was similarly 

concerned about Treasury’s investment 

as an impediment to raising capital. 

FHFA has determined not to make 

changes to the rule in response to the 

comments on the Duty to Serve program 

or conservatorship issues. As FHFA 

stated in the preamble to its proposal, 

the rule is a framework for ongoing 

capital planning consistent with the 

regulatory requirements for large banks. 

The final rule, like the ERCF, is 

intended to provide a stable regulatory 

framework for the Enterprises for an 

extended period, including after they 

achieve adequate capitalization under 

the ERCF. 

FHFA did not receive any comments 

regarding the mandatory elements of a 

capital plan, FHFA’s review of a capital 

plan, an Enterprise’s potential 

resubmission of a capital plan, FHFA’s 

approval requirements for certain 

capital actions, or post notice 

requirements. FHFA is adopting those 

portions of the rule as proposed. 

Freddie Mac’s comments on the stress 

capital buffer, board’s duties, and 

compliance date are discussed below: 

A. Stress Capital Buffer 

The proposal included a minor 

change to the stress capital buffer 

calculation compared to the finalized 

ERCF to align with a recent amendment 

to the regulatory banking framework. In 

addition, the proposal incorporated the 

stress capital buffer from the ERCF into 

the capital planning process. 

Under both the ERCF and proposal, 

the buffer would be determined by 

FHFA, with the calculation based on the 

results of a supervisory stress test, 

subject to a floor of 0.75 percent of the 

Enterprise’s adjusted total assets as of 

the last day of the previous calendar 

quarter. However, until such time as 

FHFA develops its supervisory stress 

test, or in any year that FHFA does not 

determine the stress capital buffer, the 

buffer would be equal to 0.75 percent of 

an Enterprise’s adjusted total assets. 

Consistent with recent amendments to 

the Federal Reserve Board’s banking 

rule, the proposal’s calculation method 

prefunds an Enterprise’s planned 

common stock dividends for the fourth 

through seventh quarters of the 

planning horizon rather than using the 

existing ERCF instruction to use each of 

the nine quarters of the planning 

horizon. 

The proposal incorporated the stress 

capital buffer into the capital planning 

process by requiring an Enterprise, 

within two business days of receiving 

its stress capital buffer from FHFA, to 

adjust its planned capital distributions 

for the fourth through seventh quarters 

of the planning horizon to be consistent 

with effective capital distribution 

limitations assuming the stress capital 

buffer provided by FHFA, in place of 

any stress capital buffer currently in 

effect. 

Freddie Mac proposed to eliminate 

the 0.75 percent floor, supervisory stress 

test, and inclusion of planned dividends 

in the stress capital buffer calculation. 

Freddie Mac preferred to use capital 

depletion in Freddie Mac’s Dodd-Frank 

Act Stress Test (DFAST) instead of a 

new supervisory stress test to be 

developed by FHFA. Freddie Mac 

proposed to apply the severely adverse 

scenario without a deferred tax asset 

write off or prefunding common stock 

dividends, holding the balance sheet 

constant over the stress horizon, and 

observing the quarter with the largest 

cumulative losses, all without applying 

the 0.75 percent floor. 

Freddie Mac said the floor of 0.75 

percent of adjusted total assets is 

inappropriate for the Enterprises. 

Freddie Mac stated that for banks, the 

static floor was intended to address 

concerns that larger institutions could 

use a dynamic stress capital buffer 

based on stress testing to lower their 

capital requirements relative to smaller 

peers. However, they noted the 

Enterprises do not have a subset of 

smaller competitors. They said the 

Federal Reserve Board noted in its rule 

that about half of the bank population 

would be above the floor making the 

buffer risk sensitive. Freddie Mac 

believes their buffer would be below the 

floor, blunting risk sensitivity and 

increasing risk-taking if they managed 

toward the floor. 

Freddie Mac also proposed to remove 

the add-on for planned common stock 

dividends for the fourth through 

seventh quarters, given that they are not 

forecasted to pay dividends in the near 

term due to their current capital 

position. 

Consistent with the banking 

approach, FHFA believes that the 

development of a supervisory stress test 

is important for the stress capital buffer 

determination, and preferrable to 

reliance on the Enterprise’s DFAST 

model. The 0.75 percent buffer floor and 

consideration of common stock 

dividends already were a part of the 

ERCF as published by FHFA on 

December 17, 2020. FHFA’s only change 

from the ERCF regarding common stock 

dividends was a reduction from using 

the full nine quarter stress horizon to 

using four quarters to be consistent with 

the banking framework. While the 

Enterprises are not currently able to pay 

dividends, it is important to keep the 


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Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Rules and Regulations 33617 

dividend provision forward looking 

since the Enterprises are working 

toward building capital to meet the 

standards in the ERCF. Therefore, FHFA 

is keeping the stress capital buffer 

determination unchanged in the final 

rule. 

B. Board Duties 

Freddie Mac asked that FHFA clarify 

the role of its board of directors in the 

final rule. The proposed rule stated that 

the Enterprise’s board of directors, or a 

designated committee thereof, must at 

least annually and prior to submission 

of the capital plan: (1) Review the 

robustness of the Enterprise’s process 

for assessing capital adequacy: (2) 

Ensure that any deficiencies in the 

Enterprise’s process for assessing capital 

adequacy are appropriately remedied; 

and (3) approve the Enterprise’s capital 

plan. The Enterprise wanted the term 

‘‘ensure’’ changed to ‘‘oversee’’ or 

‘‘review’’ since the board plays an 

oversight role. FHFA believes that while 

an Enterprise’s management is 

responsible for remedying any 

deficiencies in the process for assessing 

capital adequacy, the board, as part of 

its oversight role, is ultimately 

responsible for ensuring that it gets 

done. FHFA’s language on the board’s 

duties is also consistent with the 

banking framework. Therefore, FHFA is 

keeping the language on the board’s 

duties unchanged in the final rule. 

C. Compliance Date 

Freddie Mac asked FHFA to clarify 

that the annual May 20 capital plan 

submission dates will start in 2023, in 

the event that the final rule becomes 

effective before May 20, 2022, so that 

they will have sufficient time to prepare 

their first plan submission. FHFA agrees 

that the first plan submission under the 

final rule will be May 20, 2023. Given 

the final rule’s publication date and 

effective date, no changes are necessary 

to the rule. 

IV. Paperwork Reduction Act 

The Paperwork Reduction Act (PRA) 

(44 U.S.C. 3501 et seq.) requires that 

regulations involving the collection of 

information receive clearance from the 

Office of Management and Budget 

(OMB). The final rule contains no such 

collection of information requiring OMB 

approval under the PRA. Therefore, no 

information has been submitted to OMB 

for review. 

V. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires that a 

regulation that has a significant 

economic impact on a substantial 

number of small entities, small 

businesses, or small organizations must 

include an initial regulatory flexibility 

analysis describing the regulation’s 

impact on small entities. FHFA need not 

undertake such an analysis if the agency 

has certified that the regulation will not 

have a significant economic impact on 

a substantial number of small entities. 5 

U.S.C. 605(b). FHFA has considered the 

impact of the final rule under the 

Regulatory Flexibility Act and FHFA 

certifies that the final rule will not have 

a significant economic impact on a 

substantial number of small entities 

because the final rule is applicable only 

to the Enterprises, which are not small 

entities for purposes of the Regulatory 

Flexibility Act. 

VI. Congressional Review Act 

In accordance with the Congressional 

Review Act (5 U.S.C. 801 et seq.), FHFA 

has determined that this final rule is a 

major rule and has verified this 

determination with the Office of 

Information and Regulatory Affairs of 

OMB. 

List of Subjects for 12 CFR Part 1240 

Capital, Credit, Enterprise, 

Investments, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

For the reasons stated in the 

preamble, under the authority of 12 

U.S.C. 4511, 4513, 4513b, 4514, 4515– 

17, 4526, 4611–12, 4631–36, FHFA 

amends part 1240 of title 12 of the Code 

of Federal Regulations as follows: 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

SUBCHAPTER C—ENTERPRISES 

PART 1240—CAPITAL ADEQUACY OF 

ENTERPRISES 

■ 1. The authority citation for part 1240 

continues to read as follows: 

Authority: 12 U.S.C. 4511, 4513, 4513b, 

4514, 4515, 4517, 4526, 4611–12, 4631–36. 

■ 2. In § 1240.11, revise paragraph (a)(7) 

to read as follows: 

§ 1240.11 Capital conservation buffer and 

leverage buffer. 

(a) * * * 

(7) Stress capital buffer. (i) The stress 

capital buffer for an Enterprise is the 

stress capital buffer determined under 

§ 1240.500 except as provided in 

paragraph (a)(7)(ii) of this section. 

(ii) If an Enterprise has not yet 

received a stress capital buffer 

requirement, its stress capital buffer for 

purposes of this part is 0.75 percent of 

the Enterprise’s adjusted total assets, as 

of the last day of the previous calendar 

quarter. 

* * * * * 

■ 3. Add subpart H, consisting of 

§§ 1240.500 through 1240.502, to read 

as follows: 

Subpart H—Capital Planning and 

Stress Capital Buffer Determination 

§ 1240.500 Capital planning and stress 

capital buffer determination. 

(a) Purpose. This section establishes 

capital planning and prior notice and 

approval requirements for capital 

distributions by the Enterprises. This 

section also establishes FHFA’s process 

for determining the stress capital buffer 

applicable to the Enterprises. 

(b) Scope and reservation of 

authority—(1) Applicability. This 

section applies to the Enterprises. 

(2) Reservation of authority. Nothing 

in this section shall limit the authority 

of FHFA to issue or enforce 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. 

(c) Definitions. For purposes of this 

section, the following definitions apply: 

Adjusted total assets has the same 

meaning as under subpart A of this part. 

Advanced approaches means the riskweighted assets calculation 

methodologies as set forth in subpart E 

of this part. 

Capital action means any issuance of 

a debt or equity capital instrument, any 

capital distribution, and any similar 

action that FHFA determines could 

impact an Enterprise’s consolidated 

capital. 

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 FHFA 

determines to be in substance a 

distribution of capital. 

Capital plan means a written 

presentation of an Enterprise’s capital 

planning strategies and capital adequacy 

process that includes the mandatory 

elements set forth in paragraph (d)(2) of 

this section. 

Capital plan cycle means the period 

beginning on January 1 of a calendar 

year and ending on December 31 of that 

year. 

Capital policy means an Enterprise’s 

written principles and guidelines used 

for capital planning, capital issuance, 


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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. 

Common equity tier 1 capital has the 

same meaning as under subpart C of this 

part. 

Effective capital distribution 

limitations means any limitations on 

capital distributions established by 

FHFA by order or regulation, provided 

that, for any limitations based on riskweighted assets, such limitations must 

be calculated using the standardized 

approach, as set forth in subpart D of 

this part. 

Final planned capital distributions 

means the planned capital distributions 

included in a capital plan that include 

the adjustments made pursuant to 

paragraph (g) of this section, if any. 

Internal baseline scenario means a 

scenario that reflects the Enterprise’s 

expectation of the economic and 

financial outlook, including 

expectations related to the Enterprise’s 

capital adequacy and financial 

condition. 

Internal stress scenario means a 

scenario designed by an Enterprise that 

stresses the specific vulnerabilities of 

the Enterprise’s risk profile and 

operations, including those related to 

the Enterprise’s capital adequacy and 

financial condition. 

Planning horizon means the period of 

at least nine consecutive quarters for the 

FHFA scenarios and at least five years 

for the Internal scenarios, beginning 

with the quarter preceding the quarter 

in which the Enterprise submits its 

capital plan, over which the relevant 

projections extend, unless otherwise 

directed by FHFA. 

Regulatory capital ratio means a 

capital ratio for which FHFA has 

established minimum requirements for 

the Enterprise by regulation or order, 

including, as applicable, the 

Enterprise’s regulatory capital ratios 

calculated under subpart B of this part; 

except that the Enterprise shall not use 

the advanced approaches to calculate its 

regulatory capital ratios. 

Severely adverse scenario has the 

same meaning as under 12 CFR part 

1238. 

Stability capital buffer has the same 

meaning as under subpart G of this part. 

Stress capital buffer means the 

amount calculated under paragraph (e) 

of this section. 

Supervisory stress test means a stress 

test conducted by FHFA using a 

severely adverse scenario and the 

assumptions contained in 12 CFR part 

1238. 

(d) Capital planning requirements and 

procedures—(1) Annual capital 

planning. (i) An Enterprise must 

develop and maintain a capital plan. 

(ii) An Enterprise must submit its 

complete capital plan to FHFA by May 

20 of each calendar year, or such later 

date as directed by FHFA. 

(iii) The Enterprise’s board of 

directors or a designated committee 

thereof must at least annually and prior 

to submission of the capital plan under 

paragraph (d)(1)(ii) of this section: 

(A) Review the robustness of the 

Enterprise’s process for assessing capital 

adequacy; 

(B) Ensure that any deficiencies in the 

Enterprise’s process for assessing capital 

adequacy are appropriately remedied; 

and 

(C) Approve the Enterprise’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 Enterprise’s 

size, complexity, risk profile, and scope 

of operations, assuming both expected 

and stressful conditions, including: 

(A) Estimates of projected revenues, 

expenses, losses, reserves, and pro 

forma capital levels, including 

regulatory capital ratios, and any 

additional capital measures deemed 

relevant by the Enterprise, over the 

planning horizon under a range of 

scenarios, including the Internal 

baseline scenario and at least one 

Internal stress scenario, as well as any 

additional scenarios that FHFA may 

provide the Enterprise after giving 

notice to the Enterprise; 

(B) 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 

(C) A description of all planned 

capital actions over the planning 

horizon. Planned capital actions must 

be consistent with any effective capital 

distribution limitations, except as may 

be adjusted pursuant to paragraph (g) of 

this section. In determining whether an 

Enterprise’s planned capital 

distributions are consistent with 

effective capital distribution limitations, 

an Enterprise must assume that: 

(1) Any countercyclical capital buffer 

amount currently applicable to the 

Enterprise remains at the same level, 

except that the Enterprise must reflect 

any increases or decreases in the 

countercyclical capital buffer amount 

that have been announced by FHFA at 

the times indicated by FHFA’s 

announcement for when such increases 

or decreases will take effect; and 

(2) Any stability capital buffer 

currently applicable to the Enterprise 

when the capital plan is submitted 

remains at the same level, except that 

the Enterprise must reflect any increase 

in its stability capital buffer pursuant to 

§ 1240.400(c)(1), beginning in the fifth 

quarter of the planning horizon. 

(ii) A detailed description of the 

Enterprise’s process for assessing capital 

adequacy, including: 

(A) A discussion of how the 

Enterprise will, under expected and 

stressful conditions, maintain capital 

commensurate with its risks, and 

maintain capital above the regulatory 

capital ratios; 

(B) A discussion of how the 

Enterprise 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 Enterprise’s capital policy; 

and 

(iv) A discussion of any expected 

changes to the Enterprise’s business 

plan that are likely to have a material 

impact on the Enterprise’s capital 

adequacy or liquidity. 

(3) Data collection. Upon the request 

of FHFA, the Enterprise shall provide 

FHFA with information regarding: 

(i) The Enterprise’s financial 

condition, including its capital; 

(ii) The Enterprise’s structure; 

(iii) Amount and risk characteristics 

of the Enterprise’s on- and off-balance 

sheet exposures, including exposures 

within the Enterprise’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 Enterprise’s relevant policies 

and procedures, including risk 

management policies and procedures; 

(v) The Enterprise’s liquidity profile 

and management; 

(vi) The loss, revenue, and expense 

estimation models used by the 

Enterprise 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 

FHFA to facilitate review of the 

Enterprise’s capital plan under this 

section. 


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(4) Resubmission of a capital plan. (i) 

An Enterprise must update and 

resubmit its capital plan to FHFA 

within 30 calendar days of the 

occurrence of one of the following 

events: 

(A) The Enterprise determines there 

has been or will be a material change in 

the Enterprise’s risk profile, financial 

condition, or corporate structure since 

the Enterprise last submitted the capital 

plan to FHFA; or 

(B) FHFA instructs the Enterprise in 

writing to revise and resubmit its capital 

plan, as necessary to monitor risks to 

capital adequacy, for reasons including, 

but not limited to: 

(1) The capital plan is incomplete or 

the capital plan, or the Enterprise’s 

internal capital adequacy process, 

contains material weaknesses; 

(2) There has been, or will likely be, 

a material change in the Enterprise’s 

risk profile (including a material change 

in its business strategy or any risk 

exposure), financial condition, or 

corporate structure; 

(3) The Internal stress scenario(s) are 

not appropriate for the Enterprise’s 

business model and portfolios, or 

changes in financial markets or the 

macro-economic outlook that could 

have a material impact on an 

Enterprise’s risk profile and financial 

condition require the use of updated 

scenarios; or 

(ii) FHFA may extend the 30-day 

period in paragraph (d)(4)(i) of this 

section for up to an additional 60 

calendar days, or such longer period as 

FHFA determines appropriate. 

(iii) Any updated capital plan must 

satisfy all the requirements of this 

section; however, an Enterprise 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 FHFA under this section and related 

materials shall be determined in 

accordance with applicable exemptions 

under the Freedom of Information Act 

(5 U.S.C. 552(b)) and FHFA’s rule in 12 

CFR part 1214—Availability of NonPublic Information. 

(e) Calculation of the stress capital 

buffer—(1) General. FHFA will 

determine the stress capital buffer that 

applies under § 1240.11 pursuant to this 

paragraph (e). FHFA will calculate the 

Enterprise’s stress capital buffer 

requirement annually. 

(2) Stress capital buffer calculation. 

An Enterprise’s stress capital buffer is 

equal to the Enterprise’s adjusted total 

assets, as of the last day of the previous 

calendar quarter, multiplied by the 

greater of: 

(i) The following calculation: 

(A) The ratio of an Enterprise’s 

common equity tier 1 capital to adjusted 

total assets, as of the final quarter of the 

previous capital plan cycle, unless 

otherwise determined by FHFA; minus 

(B) The lowest projected ratio of the 

Enterprise’s common equity tier 1 

capital to adjusted total assets, in any 

quarter of the planning horizon under a 

supervisory stress test; plus 

(C) The ratio of: 

(1) The sum of the Enterprise’s 

planned common stock dividends 

(expressed as a dollar amount) for each 

of the fourth through seventh quarters of 

the planning horizon; to 

(2) The adjusted total assets of the 

Enterprise in the quarter in which the 

Enterprise had its lowest projected ratio 

of common equity tier 1 capital to 

adjusted total assets, in any quarter of 

the planning horizon under a 

supervisory stress test; and (ii) 0.75 

percent. 

(3) Recalculation of stress capital 

buffer. If an Enterprise resubmits its 

capital plan pursuant to paragraph (d)(4) 

of this section, FHFA may recalculate 

the Enterprise’s stress capital buffer. 

FHFA will provide notice of whether 

the Enterprise’s stress capital buffer will 

be recalculated within 75 calendar days 

after the date on which the capital plan 

is resubmitted, unless FHFA provides 

notice to the Enterprise that it is 

extending the time period. 

(f) Review of capital plans by FHFA. 

FHFA will consider the following 

factors in reviewing an Enterprise’s 

capital plan: 

(1) 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 Enterprise and the 

Enterprise’s capital policy; 

(2) The reasonableness of the 

Enterprise’s capital plan, the 

assumptions and analysis underlying 

the capital plan, and the robustness of 

its capital adequacy process; 

(3) Relevant supervisory information 

about the Enterprise and its 

subsidiaries; 

(4) The Enterprise’s regulatory and 

financial reports, as well as supporting 

data that would allow for an analysis of 

the Enterprise’s loss, revenue, and 

reserve projections; 

(5) The results of any stress tests 

conducted by the Enterprise or FHFA; 

and 

(6) Other information requested or 

required by FHFA, as well as any other 

information relevant, or related, to the 

Enterprise’s capital adequacy. 

(g) FHFA notice of stress capital 

buffer; final planned capital 

distributions—(1) Notice. FHFA will 

provide an Enterprise with notice of its 

stress capital buffer and an explanation 

of the results of the supervisory stress 

test. Unless otherwise determined by 

FHFA, notice will be provided by 

August 15 of the calendar year in which 

the capital plan was submitted pursuant 

to paragraph (d)(1)(ii) of this section or 

within 90 calendar days of receiving 

notice that FHFA will recalculate the 

Enterprise’s stress capital buffer 

pursuant to paragraph (e)(3) of this 

section. 

(2) Response to notice—(i) Request for 

reconsideration of stress capital buffer. 

An Enterprise may request 

reconsideration of a stress capital buffer 

provided under paragraph (g)(1) of this 

section. To request reconsideration of a 

stress capital buffer, an Enterprise must 

submit to FHFA a request pursuant to 

paragraph (h) of this section. 

(ii) Adjustments to planned capital 

distributions. Within two business days 

of receipt of notice of a stress capital 

buffer under paragraph (g)(1) or (h)(5) of 

this section, as applicable, an Enterprise 

must: 

(A) Determine whether the planned 

capital distributions for the fourth 

through seventh quarters of the 

planning horizon under the Internal 

baseline scenario would be consistent 

with effective capital distribution 

limitations assuming the stress capital 

buffer provided by FHFA under 

paragraph (g)(1) or (h)(5) of this section, 

as applicable, in place of any stress 

capital buffer in effect; and 

(1) If the planned capital distributions 

for the fourth through seventh quarters 

of the planning horizon under the 

Internal baseline scenario would not be 

consistent with effective capital 

distribution limitations assuming the 

stress capital buffer provided by FHFA 

under paragraph (g)(1) or (h)(5) of this 

section, as applicable, in place of any 

stress capital buffer in effect, the 

Enterprise must adjust its planned 

capital distributions such that its 

planned capital distributions would be 

consistent with effective capital 

distribution limitations assuming the 

stress capital buffer provided by FHFA 

under paragraph (g)(1) or (h)(5) of this 

section, as applicable, in place of any 

stress capital buffer in effect; or 

(2) If the planned capital distributions 

for the fourth through seventh quarters 

of the planning horizon under the 

Internal baseline scenario would be 

consistent with effective capital 

distribution limitations assuming the 


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stress capital buffer provided by FHFA 

under paragraph (g)(1) or (h)(5) of this 

section, as applicable, in place of any 

stress capital buffer in effect, the 

Enterprise may adjust its planned 

capital distributions. An Enterprise may 

not adjust its planned capital 

distributions to be inconsistent with the 

effective capital distribution limitations 

assuming the stress capital buffer 

provided by FHFA under paragraph 

(g)(1) or (h)(5) of this section, as 

applicable; and 

(B) Notify FHFA of any adjustments 

made to planned capital distributions 

for the fourth through seventh quarters 

of the planning horizon under the 

Internal baseline scenario. 

(3) Final planned capital 

distributions. FHFA will consider the 

planned capital distributions, including 

any adjustments made pursuant to 

paragraph (g)(2)(ii) of this section, to be 

the Enterprise’s final planned capital 

distributions on the later of: 

(i) The expiration of the time for 

requesting reconsideration under 

paragraph (i) of this section; and 

(ii) The expiration of the time for 

adjusting planned capital distributions 

pursuant to paragraph (g)(2)(ii) of this 

section. 

(4) Effective date of final stress capital 

buffer. (i) FHFA will provide an 

Enterprise with its final stress capital 

buffer and confirmation of the 

Enterprise’s final planned capital 

distributions by August 31 of the 

calendar year that a capital plan was 

submitted pursuant to paragraph 

(d)(1)(ii) of this section, unless 

otherwise determined by FHFA. A stress 

capital buffer will not be considered 

final so as to be agency action subject 

to judicial review under 5 U.S.C. 704 

during the pendency of a request for 

reconsideration made pursuant to 

paragraph (h) of this section or before 

the time for requesting reconsideration 

has expired. 

(ii) Unless otherwise determined by 

FHFA, an Enterprise’s final planned 

capital distributions and final stress 

capital buffer shall: 

(A) Be effective on October 1 of the 

calendar year in which a capital plan 

was submitted pursuant to paragraph 

(d)(1)(ii) of this section; and 

(B) Remain in effect until superseded. 

(5) Publication. With respect to an 

Enterprise subject to this section, FHFA 

may disclose publicly any or all of the 

following: 

(i) The stress capital buffer provided 

to an Enterprise under paragraph (g)(1) 

or (h)(5) of this section; 

(ii) Adjustments made pursuant to 

paragraph (g)(2)(ii) of this section; 

(iii) A summary of the results of the 

supervisory stress test; and 

(iv) Other information. 

(h) Administrative remedies; request 

for reconsideration. The following 

requirements and procedures apply to 

any request under this paragraph (h): 

(1) General. To request 

reconsideration of a stress capital buffer, 

provided under paragraph (g) of this 

section, an Enterprise must submit a 

written request for reconsideration. 

(2) Timing of request. A request for 

reconsideration of a stress capital buffer, 

provided under paragraph (g) of this 

section, must be received within 15 

calendar days of receipt of a notice of 

an Enterprise’s stress capital buffer. 

(3) Contents of request. (i) A request 

for reconsideration must include a 

detailed explanation of why 

reconsideration should be granted (that 

is, why a stress capital buffer should be 

reconsidered). With respect to any 

information that was not previously 

provided to FHFA in the Enterprise’s 

capital plan, the request should include 

an explanation of why the information 

should be considered. 

(ii) A request for reconsideration may 

include a request for an informal 

hearing on the Enterprise’s request for 

reconsideration. 

(4) Hearing. (i) FHFA may, in its sole 

discretion, order an informal hearing if 

FHFA finds that a hearing is appropriate 

or necessary to resolve disputes 

regarding material issues of fact. 

(ii) An informal hearing shall be held 

within 30 calendar days of a request, if 

granted, provided that FHFA may 

extend this period upon notice to the 

requesting party. 

(5) Response to request. Within 30 

calendar days of receipt of the 

Enterprise’s request for reconsideration 

of its stress capital buffer submitted 

under paragraph (h)(2) of this section or 

within 30 days of the conclusion of an 

informal hearing conducted under 

paragraph (h)(4) of this section, FHFA 

will notify the Enterprise of its decision 

to affirm or modify the Enterprise’s 

stress capital buffer, provided that 

FHFA may extend this period upon 

notice to the Enterprise. 

(6) Distributions during the pendency 

of a request for reconsideration. 

During the pendency of FHFA’s 

decision under paragraph (h)(5) of this 

section, the Enterprise may make capital 

distributions that are consistent with 

effective distribution limitations, unless 

prior approval is required under 

paragraph (i)(1) of this section. 

(i) Approval requirements for certain 

capital actions—(1) Circumstances 

requiring approval—resubmission of a 

capital plan. Unless it receives prior 

approval pursuant to paragraph (i)(3) of 

this section, an Enterprise may not make 

a capital distribution (excluding any 

capital distribution arising from the 

issuance of a capital instrument eligible 

for inclusion in the numerator of a 

regulatory capital ratio) if the capital 

distribution would occur after the 

occurrence of an event requiring 

resubmission under paragraph 

(d)(4)(i)(A) or (B) of this section. 

(2) Contents of request. A request for 

a capital distribution under this section 

must contain the following information: 

(i) The Enterprise’s capital plan or a 

discussion of changes to the Enterprise’s 

capital plan since it was last submitted 

to FHFA; 

(ii) The purpose of the transaction; 

(iii) 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 

(iv) Any additional information 

requested by FHFA (which may include, 

among other things, an assessment of 

the Enterprise’s capital adequacy under 

a severely adverse scenario, a revised 

capital plan, and supporting data). 

(3) Approval of certain capital 

distributions. (i) FHFA will act on a 

request for prior approval of a capital 

distribution within 30 calendar days 

after the receipt of all the information 

required under paragraph (i)(2) of this 

section. 

(ii) In acting on a request for prior 

approval of a capital distribution, FHFA 

will apply the considerations and 

principles in paragraph (f) of this 

section, as appropriate. In addition, 

FHFA may disapprove the transaction if 

the Enterprise does not provide all of 

the information required to be 

submitted under paragraph (i)(2) of this 

section. 

(4) Disapproval and hearing. (i) FHFA 

will notify the Enterprise in writing of 

the reasons for a decision to disapprove 

any proposed capital distribution. 

Within 15 calendar days after receipt of 

a disapproval by FHFA, the Enterprise 

may submit a written request for a 

hearing. 

(ii) FHFA may, in its sole discretion, 

order an informal hearing if FHFA finds 

that a hearing is appropriate or 

necessary to resolve disputes regarding 

material issues of fact. An informal 

hearing shall be held within 30 calendar 

days of a request, if granted, provided 

that FHFA may extend this period upon 

notice to the requesting party. 

(iii) Written notice of the final 

decision of FHFA shall be given to the 

Enterprise within 60 calendar days of 


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Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Rules and Regulations 33621 

the conclusion of any informal hearing 

ordered by FHFA, provided that FHFA 

may extend this period upon notice to 

the requesting party. 

(iv) While FHFA’s decision is pending 

and until such time as FHFA approves 

the capital distribution at issue, the 

Enterprise may not make such capital 

distribution. 

(j) Post notice requirement. An 

Enterprise must notify FHFA within 15 

days of making a capital distribution if: 

(1) The capital distribution was 

approved pursuant to paragraph (i)(3) of 

this section; or 

(2) The dollar amount of the capital 

distribution will exceed the dollar 

amount of the Enterprise’s final planned 

capital distributions, as measured on an 

aggregate basis beginning in the fourth 

quarter of the planning horizon through 

the quarter at issue. 

§ § 1240.501–1240.502 [Reserved] 

Sandra L. Thompson, 

Acting Director, Federal Housing Finance 

Agency. 

[FR Doc. 2022–11928 Filed 6–2–22; 8:45 am] 

BILLING CODE 8070–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2022–0094; Project 

Identifier AD–2021–01251–E; Amendment 

39–22052; AD 2022–11–02] 

RIN 2120–AA64 

Airworthiness Directives; CFM 

International, S.A. Turbofan Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for all CFM 

International, S.A. (CFM) LEAP–1B21, 

LEAP–1B23, LEAP–1B25, LEAP–1B27, 

LEAP–1B28, LEAP–1B28B1, LEAP– 

1B28B2, LEAP–1B28B2C, LEAP– 

1B28B3, LEAP–1B28BBJ1, and LEAP– 

1B28BBJ2 model turbofan engines. This 

AD was prompted by the detection of 

melt-related freckles in the billet, which 

may reduce the life of certain 

compressor rotor stages 6–10 spools, 

high pressure turbine (HPT) rotor mid 

seals, HPT rotor stage 2 disks, low 

pressure turbine (LPT) stage 2 disks, and 

LPT stage 3 disks. This AD requires 

revising the airworthiness limitations 

section (ALS) of the applicable CFM 

LEAP–1B Engine Shop Manual (ESM), 

and the operator’s existing approved 

maintenance or inspection program, as 

applicable, to incorporate reduced life 

limits for these parts. The FAA is 

issuing this AD to address the unsafe 

condition on these products. 

DATES: This AD is effective July 8, 2022. 

The Director of the Federal Register 

approved the incorporation by reference 

of certain publications listed in this AD 

as of July 8, 2022. 

ADDRESSES: For service information 

identified in this final rule, contact CFM 

International, S.A., Aviation Operations 

Center, 1 Neumann Way, M/D Room 

285, Cincinnati, OH 45125; phone: (877) 

432–3272; email: fleetsupport@ge.com. 

You may view this service information 

at the FAA, Airworthiness Products 

Section, Operational Safety Branch, 

1200 District Avenue, Burlington, MA 

01803. For information on the 

availability of this material at the FAA, 

call (817) 222–5110. It is also available 

at https://www.regulations.gov by 

searching for and locating Docket No. 

FAA–2022–0094. 

Examining the AD Docket 

You may examine the AD docket at 

https://www.regulations.gov by 

searching for and locating Docket No. 

FAA–2022–0094; or in person at Docket 

Operations between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. The AD docket contains this 

final rule, any comments received, and 

other information. The address for 

Docket Operations is U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

FOR FURTHER INFORMATION CONTACT: 

Mehdi Lamnyi, Aviation Safety 

Engineer, ECO Branch, FAA, 1200 

District Avenue, Burlington, MA 01803; 

phone: (781) 238–7743; email: 

Mehdi.Lamnyi@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

The FAA issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 by adding an AD that would 

apply to all CFM LEAP–1B21, LEAP– 

1B23, LEAP–1B25, LEAP–1B27, LEAP– 

1B28, LEAP–1B28B1, LEAP–1B28B2, 

LEAP–1B28B2C, LEAP–1B28B3, LEAP– 

1B28BBJ1, and LEAP–1B28BBJ2 model 

turbofan engines. The NPRM published 

in the Federal Register on February 15, 

2022 (87 FR 8434). The NPRM was 

prompted by the engine manufacturer 

notifying the FAA of the detection of 

melt-related freckles in the billet, which 

may reduce the life of certain 

compressor rotor stages 6–10 spools, 

HPT rotor mid seals, HPT rotor stage 2 

disks, LPT stage 2 disks, and LPT stage 

3 disks (life-limited parts (LLPs)). The 

manufacturer’s investigation determined 

that, as a result of such freckles forming 

in the billet, these LLPs may have 

undetected subsurface anomalies that 

developed during the manufacturing 

process, resulting in reduced material 

properties and a lower fatigue life 

capability. Reduced material properties 

may cause premature LLP fracture, 

which could result in uncontained 

debris release. As a result of its 

investigation, the manufacturer 

determined the need to reduce the life 

limits of these LLPs. To reflect these 

reduced life limits, the manufacturer 

revised the CFM ALS, Chapter 05 of 

LEAP–1B ESM. Additionally, the 

manufacturer published service 

information that specifies procedures 

for the removal and replacement of 

these LLPs before reaching their new 

life limits. In the NPRM, the FAA 

proposed to require revising the ALS of 

the CFM LEAP–1B ESM, as applicable 

to each affected engine model, and the 

operator’s existing approved 

maintenance or inspection program, as 

applicable, to incorporate reduced life 

limits for certain LLPs. The FAA is 

issuing this AD to address the unsafe 

condition on these products. 

Discussion of Final Airworthiness 

Directive 

Comments 

The FAA received comments from 

four commenters. The commenters were 

Air Line Pilots Association, 

International (ALPA), American 

Airlines (AA), CFM, and United 

Airlines (UAL). The following presents 

the comments received on the NPRM 

and the FAA’s response to each 

comment. 

Request To Update Service Information 

Revisions 

CFM requested that the FAA update 

the service information issue numbers 

and dates to reflect the current 

revisions. 

The FAA agrees and updated the 

service information issue numbers and 

dates throughout this AD. The FAA also 

added a Credit For Previous Actions 

paragraph to this AD, allowing operators 

to take credit for required actions if 

accomplished prior to the effective date 

of this AD using prior versions of the 

service information. This change 

imposes no additional burden on 

operators who are required to comply 

with this AD. 


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