[Federal Register Volume 79, Number 207 (Monday, October 27, 2014)]
[Rules and Regulations]
[Pages 64026-64056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25170]



[[Page 64025]]

Vol. 79

Monday,

No. 207

October 27, 2014

Part II





 Federal Reserve System





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12 CFR Parts 225 and 252





Capital Plan and Stress Test Rules; Final Rule

Federal Register / Vol. 79 , No. 207 / Monday, October 27, 2014 / 
Rules and Regulations

[[Page 64026]]


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FEDERAL RESERVE SYSTEM

12 CFR Parts 225 and 252

[Regulations Y and YY; Docket No. 1492]
RIN 7100-AE 20


Capital Plan and Stress Test Rules

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Final rule.

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SUMMARY: The Board is amending the capital plan and stress test rules 
applicable to bank holding companies with $50 billion or more in total 
consolidated assets and the company-run stress test rules applicable to 
bank holding companies with more than $10 billion but less than $50 
billion in total consolidated assets and savings and loan holding 
companies and state member banks with more than $10 billion in total 
consolidated assets to modify, following a transition period, the start 
date of the capital plan and stress test cycles from October 1 of a 
calendar year to January 1 of the following calendar year. The final 
rule makes other changes to the rules, including limiting the ability 
of a bank holding company with $50 billion or more in total 
consolidated assets to make capital distributions under the capital 
plan rule if the bank holding company's net capital issuances are less 
than the amount indicated in its capital plan. The final rule clarifies 
the application of the capital plan rule to a bank holding company that 
is a subsidiary of a U.S. intermediate holding company of a foreign 
banking organization and the characteristics of a stressed scenario to 
be included in company run stress tests.

DATES: Effective November 26, 2014, except the amendment to Sec.  
225.8(g)(3) (establishing a limitation on net capital distributions), 
which will be effective on April 1, 2015.

FOR FURTHER INFORMATION CONTACT: Lisa Ryu, Deputy Associate Director, 
(202) 263-4833, Constance Horsley, Assistant Director, (202) 452-5239, 
Mona Touma Elliot, Senior Supervisory Financial Analyst, (202) 912-
4688, Holly Kirkpatrick, Supervisory Financial Analyst, (202) 452-2796, 
Joseph Cox, Financial Analyst, (202) 452-3216, or Hillel Kipnis, 
Financial Analyst, (202) 452-2924, Division of Banking Supervision and 
Regulation; Laurie Schaffer, Associate General Counsel, (202) 452-2272, 
Christine Graham, Counsel, (202) 452-3005, or Julie Anthony, Senior 
Attorney, (202) 475-6682, Legal Division, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551. Users of Telecommunication Device for Deaf (TDD) 
only, call (202) 263-4869.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Capital Plan and Stress Test Rules
    B. Intermediate Holding Company Rule
II. Proposed Revisions to the Capital Plan and Stress Test Rules and 
Comments Received
    A. Timing of Actions in the Capital Plan and Stress Test Rules
    i. Timing of Capital Plan and Stress Test Cycles for Large Bank 
Holding Companies
    ii. Disclosure Dates for Company-Run Stress Tests by Large Bank 
Holding Companies
    iii. Transition Provisions for Capital Plan and Stress Test 
Rules for Large Bank Holding Companies
    iv. Timing of Stress Test Cycle and Disclosure Requirements for 
Bank Holding Companies With Total Consolidated Assets of More Than 
$10 Billion But Less Than $50 Billion and Savings and Loan Holding 
Companies and State Member Banks With Total Consolidated Assets of 
More Than $10 billion
    B. Definition of a ``BHC Stress Scenario''
    C. Modifications to Capital Plan Resubmission Requirements Under 
the Capital Plan Rule
    D. Consequences for Failure To Execute Planned Actions
    E. Practice of Large Discrepancies in Planned Capital 
Distributions in the Out Quarters
    F. Application of CCAR Process to Bank Holding Company 
Subsidiaries of Foreign Banking Organizations
    i. Formation of a New U.S. Intermediate Holding Company
    ii. Designation of Existing Bank Holding Company
    iii. Guidance for 2017 Cycle
    G. Modification of the Capital Plan Rule Regarding Capital 
Actions Not Requiring Approval
    H. Clarification of Assumptions Regarding Capital Actions Under 
the Stress Test Rules
    I. Other Modifications to the Capital Plan Rule and Related 
Requirements
    i. Hearing Procedures
    ii. Submission of Loss, Revenue, and Expense Estimation Models 
to the Board in Connection With Capital Plan
    J. Comments on the Tier 1 Common Ratio and Capital Plan Capital 
Action Assumptions
III. Administrative Law Matters
    A. Paperwork Reduction Act
    B. Regulatory Flexibility Act Analysis
    C. Solicitation of Comments on the Use of Plain Language

I. Background

    On June 12, 2014, the Board invited comment on a proposed rule to 
modify and clarify aspects of the Board's capital plan rule (section 
225.8 of Regulation Y) and stress test rules (subparts B, E, and F of 
Regulation YY) and the Board's enhanced prudential standards rule 
applicable to foreign banking organizations (subpart O of Regulation 
YY).

A. Capital Plan and Stress Test Rules

    Pursuant to the Board's capital plan rule and related supervisory 
process, the Comprehensive Capital Analysis and Review (CCAR), the 
Federal Reserve assesses the internal capital planning process of each 
bank holding company with total consolidated assets of $50 billion or 
more (large bank holding company) and its ability to maintain 
sufficient capital to continue its operations under expected and 
stressful conditions.\1\ Under the capital plan rule, a large bank 
holding company is required to submit an annual capital plan to the 
Federal Reserve that includes a detailed description of the following: 
The company's internal processes for assessing its capital adequacy; 
the policies governing capital actions such as common stock issuances, 
dividends and share repurchases; and all planned capital actions over a 
nine-quarter planning horizon (planning horizon). In addition, the bank 
holding company's capital plan must contain estimates of its regulatory 
capital ratios and its tier 1 common ratio under expected conditions 
and under a range of stressed scenarios over the planning horizon.\2\ A 
capital plan also must include a discussion of how a large bank holding 
company will maintain regulatory capital ratios above the regulatory 
minimums and above a tier 1 common ratio of 5 percent under expected 
conditions and stressed scenarios.\3\
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    \1\ 12 CFR 225.8.
    \2\ See generally 12 CFR 225.8.
    \3\ Id. at Sec.  225.8(d)(2)(i)(B).
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    The capital plan rule works in conjunction with the stress test 
rules adopted by the Board to implement the stress testing requirements 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
(stress test rules).\4\ The stress test rules establish a framework for 
the Board to conduct supervisory stress tests of large bank holding 
companies and require these bank holding companies to conduct annual 
and mid-cycle company-run stress tests.\5\ In addition, the stress test 
rules

[[Page 64027]]

require state member banks and savings and loan holding companies with 
total consolidated assets of more than $10 billion and bank holding 
companies with total consolidated assets of more than $10 billion but 
less than $50 billion to conduct annual company-run stress tests.\6\
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    \4\ See 12 USC 5365(i)(1) and 12 CFR part 252.
    \5\ The changes in this final rule will apply to nonbank 
financial companies supervised by the Board once they become subject 
to stress test requirements and to U.S. intermediate holding 
companies of foreign banking organizations in accordance with the 
transition provisions of the final rule incorporating enhanced 
prudential standards for U.S. bank holding companies and foreign 
banking organizations with total consolidated assets of $50 billion 
or more. (79 FR 17240 (March 27, 2014)). For simplicity, this 
preamble discussion of amendments generally refers only to bank 
holding companies.
    \6\ 77 FR 62378 (October 12, 2012) (codified at 12 CFR part 252, 
subparts E and F).
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    The capital plan and stress test rules establish baseline 
requirements for all banking organizations that are subject to the 
rules; the Board has tailored its expectations regarding application of 
these requirements for companies based on their sizes, scopes of 
operations, activities, and systemic importance.\7\ For example, the 
Board has significantly heightened supervisory expectations for the 
largest and most complex bank holding companies in all aspects of 
capital planning and expects these bank holding companies to have 
capital planning practices that are commensurate with their size and 
complexity.\8\
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    \7\ Capital Planning at Large Bank Holding Companies: 
Supervisory Expectations and Range of Current Practice (August 19, 
2013), p. 3, available at: http://www.federalreserve.gov/bankinforeg/bcreg20130819a1.pdf.
    \8\ Id.
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B. Intermediate Holding Company Rule

    In February 2014, the Board issued a final rule requiring foreign 
banking organizations with U.S. non-branch assets of $50 billion or 
more establish U.S. intermediate holding companies (``IHC rule'').\9\ 
The U.S. intermediate holding company is generally subject to the same 
prudential standards as a U.S. bank holding company, including capital 
planning and stress testing requirements.
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    \9\ 79 FR 17240 (March 27, 2014).
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II. Proposed Revisions to the Capital Plan and Stress Test Rules and 
Comments Received

    The Board received 18 comments in response to the proposal. 
Commenters included individuals, bank holding companies with total 
consolidated assets of more than $10 billion but less than $50 billion, 
large bank holding companies, and trade organizations. Commenters 
expressed support for certain aspects of the proposal, particularly the 
proposed shift to the timing of the start of the capital planning and 
stress test cycles. Commenters also recommended revisions to provisions 
of the proposed rule, including the proposed limitation on net 
distributions, and provided comments on the preamble to the proposal, 
particularly regarding expectations for the bank holding company stress 
scenario. The following discussion provides a summary of comments 
received on the proposal and the Board's responses to those comments.

A. Timing of Actions in the Capital Plan and Stress Test Rules

i. Timing of Capital Plan and Stress Test Cycles for Large Bank Holding 
Companies
    The current capital plan and stress test cycles for large bank 
holding companies begin on October 1, and large bank holding companies 
are required to submit their capital plans and annual company-run 
stress test results to the Board by January 5 of the following calendar 
year using data as of September 30 of the preceding calendar year. The 
proposed rule would have shifted the start of the capital planning and 
stress test cycles, as well as the related deadline for submission of 
results, by one calendar quarter. As a result of the proposed shift, 
the capital plan and stress test cycles would have started January 1, 
and large bank holding companies would have been required to submit 
their capital plans and stress test results to the Board by April 5. 
The proposed rule would have included a transition period to 
incorporate the proposed timing changes to the capital plan and stress 
test cycles. The capital plan cycle scheduled to begin on October 1, 
2014, would have started on that date without change, and large bank 
holding companies would have been required to submit a capital plan to 
the Board by January 5, 2015. In order to provide a transition to the 
proposed timing, the Federal Reserve's objection or non-objection to a 
2015 capital plan would have covered a five-quarter period commencing 
with the second quarter of 2015 and extending through the second 
quarter of 2016.\10\
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    \10\ The proposal would have revised the Board's Policy 
Statement on the Scenario Design Framework for Stress Testing and 
provisions governing applicability of the stress test requirements 
to U.S. intermediate holding companies of foreign banking 
organizations to reflect the changes in the cycle shift. The final 
rule adopts these revisions without change.
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    Table 1 sets forth the proposed revisions to the relevant dates for 
actions in the annual capital plan and stress test cycles for large 
bank holding companies and state member banks that are subsidiaries of 
large bank holding companies, along with the proposed transition 
timeline.

  Table 1--Key Dates of Revised Timeline for Annual Capital Plan and Stress Test Cycles for Large Bank Holding
       Companies (Large BHC) and State Member Banks That Are Subsidiaries of Large Bank Holding Companies
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                                       For cycle
 For cycle beginning  October 1,  beginning  January  Supervisory stress  Company-run stress     Capital plan
              2014                   1, 2016, and        test  action         test action           action
                                      thereafter
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September 30, 2014..............  December 31 of the      As-of date for capital plan and stress test cycles.
                                   preceding
                                   calendar year.
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By September 30, 2014...........  By December 31 of   ..................  Board notifies a
                                   the preceding                           large BHC that it
                                   calendar year.                          will require the
                                                                           company to use
                                                                           one or more
                                                                           additional
                                                                           scenarios.
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By November 15, 2014............  By February 15....     Board publishes scenarios for upcoming annual cycle.
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[[Page 64028]]

 
By December 1, 2014.............  By March 1........  ..................  Board communicates
                                                                           description of
                                                                           any additional
                                                                           components or
                                                                           scenarios to a
                                                                           large BHC.
By January 5, 2015..............  By April 5........  ..................  Large BHCs submit   Large BHCs submit
                                                                           required            capital plan
                                                                           regulatory report   (including
                                                                           to the Board on     results of bank
                                                                           their stress        holding company-
                                                                           tests.              run stress
                                                                                               tests).
By March 31, 2015...............  By June 30........  Board publishes     Companies disclose  Board responds to
                                                       summary results     summary results     a large BHC's
                                                       of the              of the annual       capital plan and
                                                       supervisory         company-run         publicly
                                                       stress test.        stress test.\11\.   discloses the
                                                                                               results.
By March 31, 2015...............  By June 30........  ..................  Board notifies a
                                                                           large BHC that it
                                                                           will require the
                                                                           company to use
                                                                           one or more
                                                                           additional
                                                                           scenarios in the
                                                                           mid-cycle stress
                                                                           test.
By June 1, 2015.................  By September 1....  ..................  Board communicates
                                                                           description of
                                                                           any additional
                                                                           components or
                                                                           scenarios to a
                                                                           large BHC in the
                                                                           mid-cycle stress
                                                                           test.
By July 5, 2015.................  By October 5......  ..................  Large BHCs submit
                                                                           required
                                                                           regulatory report
                                                                           to the Board on
                                                                           their mid-cycle
                                                                           stress test.
July 5-July 20 (revised to July   October 5-October   ..................  Large BHCs
 5-August 4 in the final rule).    20 (revised to                          disclose results
                                   October 5-                              of their mid-
                                   November 4 in the                       cycle stress test.
                                   final rule).
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    Commenters generally expressed support for the proposed transition 
timeline, and some commenters requested that the Board accelerate the 
implementation of the proposed timeframe to apply to the capital 
planning cycle beginning October 1, 2014. The final rule adopts the 
proposed revisions to the start of the stress test and capital planning 
cycles and related dates, including the five-quarter objection or non-
objection period for CCAR 2015 capital plans, but does not accelerate 
the implementation. The transition period is necessary to permit the 
Federal Reserve and banking organizations sufficient time to revise 
reporting schedules and change internal systems. As such, the new 
timeline will become effective for the capital planning cycle that 
begins on January 1, 2016.
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    \11\ As discussed in section II.A.ii of this preamble, companies 
must disclose summary results within 15 calendar days after the 
Board discloses the summary results of its supervisory stress test.
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    Commenters also requested that the Board provide macroeconomic 
scenarios by January 1 and global market shock components by January 15 
of a given calendar year under the revised timeline to provide 
companies with additional time to conduct their company-run stress 
tests. In developing the scenarios, the Board aims to provide companies 
with as much time as possible to conduct the company-run stress tests, 
while ensuring that the scenarios reflect timely data on economic and 
financial conditions. The Board notes that in the capital plan cycle 
that started October 1, 2013, it released the macroeconomic scenarios 
in advance of the November 15, 2013 deadline provided in the rules. 
Under the revised timeline, the Board expects to continue to work to 
provide the macroeconomic scenarios as soon as possible. Accordingly, 
the Board has adopted this aspect of the proposal without change.
    Commenters additionally requested that the length of the planning 
horizon be reduced from nine quarters to eight quarters. These 
commenters argued that the ninth quarter does not provide additional 
meaningful information given the incremental uncertainty as projections 
move further into the future, and that eight quarters would still 
represent two full years of capital planning. In addition, commenters 
noted that an eight-quarter horizon would allow the companies to better 
utilize the transition arrangements in the revised regulatory capital 
framework, which would make their capital planning less operationally 
complex.
    The proposal would have shifted the stress testing and capital 
planning timeline by one quarter, but would have maintained the nine-
quarter planning horizon. The nine-quarter planning horizon results, in 
general, in actual capital planning for eight quarters, as the first 
quarter of planning horizon is contemporaneous with the quarter in 
which the company formulates its plan. As such, in order to maintain 
two full years of capital planning, the final rule maintains the nine-
quarter planning horizon.
    A commenter expressed the view that the proposal was unclear with 
respect to when many of the planned rule changes

[[Page 64029]]

would be effective. The Board clarifies that the cycle shift will take 
effect beginning on January 1, 2016, the limitation on net 
distributions described in section II.D will take effect on April 1, 
2015, and all other changes will take effect beginning on November 26, 
2014.
    Another commenter expressed the view that the Board consider the 
impact of the requirements on non-financial firms. The changes included 
in the final rule generally are intended to relieve burden or to 
formalize existing requirements and expectations, and therefore, should 
not have a significant impact on non-financial firms.
ii. Disclosure Ddates for Company-Run Stress Tests by Large Bank 
Holding Companies
    The proposed rule would have revised the disclosure periods for a 
large bank holding company to publicly disclose the results of its 
annual and mid-cycle company-run stress test. For the annual company-
run stress test, a bank holding company would be required to disclose 
the results within 15 calendar days after the Board disclosed the 
results of that bank holding company's supervisory stress test, unless 
that time was extended by the Board. For example, if the Board publicly 
disclosed supervisory stress test results on March 30, the bank holding 
company would have had until April 14 to publicly disclose its company-
run stress test results.\12\ The Board did not receive comments on the 
proposed changes to the disclosure dates for company-run annual stress 
tests, and is adopting this aspect of the proposal without change.
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    \12\ As discussed in the proposal, the Board does not expect to 
disclose the results of the supervisory stress test results before 
March 1 for the 2015 stress test cycle or before June 1 in 
subsequent stress test cycles.
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    For the mid-cycle company-run stress tests, the proposed rule would 
have required a large bank holding company to publicly disclose the 
results of its mid-cycle stress test within 15 calendar days after it 
submitted the results of its mid-cycle stress test to the Board, unless 
that time period was extended by the Board. A commenter noted that a 
15-day period to provide disclosures proposed by the Board would 
provide bank holding companies insufficient time to prepare thorough 
and meaningful disclosures and may adversely impact the amount of time 
bank holding companies allocate for scenario design and testing. The 
commenter proposed that the Board provide firms with 45 days to prepare 
the disclosure.
    In response to the commenter's request, the final rule requires a 
bank holding company to disclose results of its mid-cycle stress test 
within 30 calendar days after the bank holding company submits the 
results of its mid-cycle stress test to the Board, unless that time 
period is extended by the Board. This extended time period will allow 
bank holding companies to focus on the multiple priorities of scenario 
design and testing, as well as publication of meaningful results.
iii. Transition Provisions for Capital Plan and Stress Test Rules for 
Large Bank Holding Companies
Transition Provisions in the Stress Test and Capital Plan Rules for 
Bank Holding Companies That Meet the $50 Billion Total Consolidated 
Asset Threshold
    The proposal would have revised the transition provisions for the 
capital plan and the stress test rules to align application of the 
rules to a bank holding company that initially exceeds the $50 billion 
threshold. For a bank holding company with total consolidated assets of 
$50 billion or more,\13\ the proposal would have provided that the bank 
holding company would become subject to the capital plan rule and the 
large bank holding company stress test rules beginning on the first day 
of the first capital plan and stress test cycle following the date on 
which the bank holding company meets that threshold.\14\ The Board did 
not receive any comments on this provision, and the final rule adopts 
the provision without change.
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    \13\ Average total consolidated assets means the average of the 
total consolidated assets as reported by a bank holding company on 
its Consolidated Financial Statements for Bank Holding Companies (FR 
Y-9C) for the four most recent consecutive quarters.
    \14\ Accordingly, a bank holding company that meets the $50 
billion threshold as of December 31, 2015 would be required to 
submit a capital plan on April 5, 2016.
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Transition Provisions in the Stress Test Rules for Nonbank Financial 
Companies Designated for Board Supervision
    The proposed rule would have provided that the Board would apply 
stress test requirements to a nonbank financial company supervised by 
the Board by rule or order and would have established timing for 
application of the stress test rules. If the Board issued the rule or 
order on or before March of the previous year, the stress test 
requirements would have been effective on January 1 of a given year, 
unless the time was accelerated or extended by the Board in writing. 
Commenters requested that the Board ensure that insurance nonbank 
financial companies have sufficient time to transition into the stress 
tests and capital planning regimes, and consider the lower risk profile 
and higher risk diversification of insurance companies in tailoring the 
stress test regime to insurance companies.
    In response to comments, the final rule does not establish the 
timing for application of the stress test rules to nonbank financial 
companies. Instead, following designation of a nonbank financial 
company, the Board will consider the business model, capital structure, 
and risk profile of the designated company to determine how, and under 
what transition schedule, the stress test and capital planning 
standards should applied to that nonbank financial company.
Transition Provisions in the Capital Plan and Stress Test Rules 
Resulting From the Cycle Shift
    The proposal would have revised the transition provisions in the 
capital plan and stress test rules for initial application of the 
stress test rules and incorporation of the risk-based capital advanced 
approaches to account for the change in the cycle start date. Under the 
proposal, a bank holding company that had total consolidated assets of 
$50 billion or more on or before March 31 of a given year would have 
been subject to the supervisory stress test rules beginning on January 
1 of the following year. In addition, beginning January 1, 2016, a 
large bank holding company that received notification that it must use 
the advanced approaches methodology in addition to the standardized 
approach to determine its risk-based capital requirements on or before 
December 31 of a given year would have been required to use the 
advanced approaches to estimate its risk-based capital ratios in the 
stress test cycle beginning on January 1 of the following year.
    While the Board did not receive comments on the revisions to the 
transition periods to account for the change in the cycle start date, 
some commenters urged the Board to reconsider the use of the advanced 
approaches in its capital planning and stress testing frameworks 
because use of the advanced approaches would require significant 
resources and would introduce complexity and opaqueness into the stress 
test framework. Certain bank holding companies are required to use the 
advanced approaches to determine their minimum capital requirements, 
and the capital plan and stress test rules require a bank holding 
company to estimate its regulatory capital ratios calculated under the

[[Page 64030]]

regulatory capital rules. The proposed transition provisions were 
intended to align the timing of, but not otherwise impact, these 
requirements. Accordingly, the final rule adopts the proposed 
transition provisions to the stress test and capital planning cycles 
for firms subject to the advanced approaches without change.
iv. Timing of Stress Test Cycle and Disclosure Requirements for Bank 
Holding Companies With Total Consolidated Assets of More Than $10 
Billion But Less Than $50 Billion and Savings and Loan Holding 
Companies and State Member Banks With Total Consolidated Assets of More 
Than $10 Billion
    The proposed rule would have shifted the start of the stress test 
cycle by one calendar quarter, and the related deadline for submission 
of results by four months, for bank holding companies with total 
consolidated assets of more than $10 billion but less than $50 billion 
and savings and loan holding companies and state member banks with 
total consolidated assets of more than $10 billion.\15\ For the stress 
testing cycle that would begin on January 1, 2016, these companies 
would have been required to submit the results of their company-run 
stress tests to the Board by July 31 and would have been required to 
publicly disclose those results in the period beginning on October 15 
and ending on October 31.\16\ Table 2 below describes the proposed 
changes to the stress test cycle timeline for bank holding companies 
with greater than $10 billion but less than $50 billion in total 
consolidated assets and savings and loan holding companies and state 
member banks with total consolidated assets of $10 billion or more, 
along with the proposed transition timeline. If such a company crossed 
the $10 billion asset threshold on or before March 31 of a given year, 
it would have been subject to the company-run stress test rules 
beginning on January 1 of the following year.
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    \15\ Savings and loan holding companies are subject to the 
stress test requirements beginning with the stress test cycle that 
commences in the year after the year in which the company becomes 
subject to the Board's minimum regulatory capital requirements, 
unless the Board accelerates or extends that date. Savings and loan 
holding companies (other than those substantially engaged in 
commercial activities or insurance underwriting activities) are 
subject to the Board's capital requirements in the Board's 
Regulation Q beginning on January 1, 2015. The Board has not applied 
capital requirements to savings and loan holding companies that are 
substantially engaged in commercial activities or insurance 
underwriting activities to date. The Board is currently working on 
developing an appropriate capital regime for those institutions.
    \16\ As compared to the current rule, the proposed rule would 
have provided bank holding companies and savings and loan holding 
companies with total consolidated assets of more than $10 billion 
but less than $50 billion and state member banks that are not 
covered company subsidiaries with an additional 30 calendar days to 
report the results of their stress tests to the Board. This change 
is intended to further tailor the rule for these companies by 
providing an additional month to conduct stress tests. This aspect 
of the rule is being finalized as proposed.

 Table 2--Key Dates of Revised Timeline for Annual Stress Test Cycle for
  Bank Holding Companies With Total Consolidated Assets Between $10-$50
  Billion and Savings and Loan Holding Companies and State Member Banks
   With Total Consolidated Assets of $10 Billion or More That Are Not
              Subsidiaries of Large Bank Holding Companies
------------------------------------------------------------------------
                                      For cycle
 For cycle beginning October 1,   beginning January   Company-run stress
              2014                  1, 2016, and         test action
                                     thereafter
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September 30, 2014.............  December 31 of the  As-of date for
                                  preceding           stress test cycle.
                                  calendar year.
By September 30, 2014..........  By December 31 of   Board notifies a
                                  the preceding       company that it
                                  calendar year.      will require the
                                                      company to use one
                                                      or more additional
                                                      scenarios.
By November 15, 2014...........  By February 15....  Board publishes
                                                      scenarios for
                                                      upcoming annual
                                                      cycle.
By December 1, 2014............  By March 1........  Board communicates
                                                      description of any
                                                      additional
                                                      components or
                                                      scenarios to
                                                      company.
By March 31, 2015..............  By July 31........  Companies submit
                                                      required
                                                      regulatory report
                                                      to the Board on
                                                      their stress
                                                      tests.
June 15, 2015 through June 30..  October 15 through  Companies disclose
                                  October 31.         summary results of
                                                      the annual company-
                                                      run stress test.
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    A commenter argued that the Board should provide a flexible 
submission date for bank holding companies with more than $10 billion 
but less than $50 billion in total consolidated assets so that such 
companies can implement their stress tests during their unique capital 
planning periods, which occur at different times of the year. The 
commenter also expressed concerns with the disclosure requirements, 
suggesting that the Board make an aggregate disclosure on behalf of all 
bank holding companies with more than $10 billion but less than $50 
billion in total consolidated assets to avoid misinterpretation of the 
results or comparisons of the results to the results of stress tests 
conducted by large bank holding companies.\17\ In the alternative, 
commenters requested additional clarification on the substance of the 
disclosure by bank holding companies with between $10 and $50 billion 
in assets and the basis of evaluation of their disclosure.
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    \17\ The commenter also expressed concern that the timing of the 
disclosure (October 15 through October 31) would overlap with the 
disclosure of mid-cycle stress test results by large bank holding 
companies (proposed to be October 5 through October 20), and would 
invite comparison between the results of the two sets of stress 
tests.
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    Generally, the Board has sought to tailor its requirements and 
expectations for bank holding companies with more than $10 billion but 
less than $50 billion in total consolidated assets. With regards to 
timing, the Board notes that the proposal already provides bank holding 
companies with more than $10 billion but less than $50 billion in total 
consolidated assets an additional month to conduct their company-run 
stress tests as compared to the previous deadline, and an additional 
four months as compared to the requirements for large bank holding 
companies. Introducing a rolling year submission date, or further 
delaying the submission date, may cause the stress test to become stale 
by the time a company reports the

[[Page 64031]]

results to the Board. Accordingly, the final rule would adopt the 
timing as proposed.
    With regards to disclosure, section 165(i)(2) of the Dodd-Frank Act 
requires the Board to adopt rules that require companies subject to the 
stress test requirement to publish a summary of the results of the 
required stress tests.\18\ An aggregate disclosure by the Board would 
arguably not satisfy this statutory requirement, and would also lessen 
the extent to which the disclosure provides information to market 
participants and enhances market discipline. The Board's stress test 
rules set forth the minimum information that must be included in a 
company's disclosure of its stress test results, but do not prescribe 
the form that the disclosure must take. This flexibility permits 
companies to design their disclosures as appropriate for their 
institutions. In addition, the Board has tailored the disclosure 
requirements for companies with more than $10 billion but less than $50 
billion in total consolidated assets compared to larger companies, 
specifically by requiring fewer items to be disclosed. While the Board 
may review a company's disclosure of its stress test results to ensure 
that it contains the required information set forth in the rule, it 
does not intend to conduct a formal supervisory evaluation of 
disclosures by a company prior to that public disclosure.
---------------------------------------------------------------------------

    \18\ 12 U.S.C. 5365(i)(2)(C)(iv).
---------------------------------------------------------------------------

    The Board carefully considers how its regulations affect bank 
holding companies with more than $10 billion but less than $50 billion 
in total consolidated assets, and has taken significant steps to tailor 
the regulatory stress testing requirements and its supervisory 
expectations applicable to these firms beyond the reporting and 
disclosure requirements noted above. For example, expectations for data 
sources, data segmentation, sophistication of estimation practices 
approaches, reporting and public disclosure are elevated for larger and 
more complex organizations than for bank holding companies with more 
than $10 billion but less than $50 billion in total consolidated 
assets.\19\ The Board continues to consider ways to reduce burden on 
these institutions.
---------------------------------------------------------------------------

    \19\ See, e.g., Supervisory Guidance on Implementing Dodd-Frank 
Act Company-Run Stress Tests for Banking Organizations With Total 
Consolidated Assets of More Than $10 Billion but Less Than $50 
Billion, 79 FR 14153 (March 13, 2014).
---------------------------------------------------------------------------

    One commenter noted that the proposed rule lacks any analysis that 
fulfills the Board's obligations under the Riegle Community Development 
and Regulatory Improvement Act (``Riegle Act''). The Riegle Act 
requires a federal banking agency to consider administrative burdens 
and benefits in determining the effective date and administrative 
compliance requirements for new regulations that impose additional 
reporting, disclosure, or other requirements on a depository 
institution.\20\ The proposed regulation does not impose additional 
reporting, disclosure, or other requirements on a depository 
institution. Rather, it generally reduces burden on state member banks 
by modifying the stress test cycle date and providing certain state 
member banks with an additional month to complete public disclosure of 
their stress test results.
---------------------------------------------------------------------------

    \20\ 12 U.S.C. 4802.
---------------------------------------------------------------------------

B. Definition of a ``BHC Stress Scenario''

    The capital plan rule requires each large bank holding company to 
design its own stress scenario that is appropriate for the company's 
business model and portfolios. The proposed rule would have defined the 
term ``BHC stress scenario'' as a scenario designed by the bank holding 
company that stresses the specific vulnerabilities of the bank holding 
company's risk profile and operations. Commenters were generally 
supportive of the BHC stress scenario definition, and commenters 
representing insurance companies viewed the definition as consistent 
with the Board's commitment to tailor stress testing and capital 
planning requirements to the specific risks faced by firms. The final 
rule would finalize the definition as proposed.
    The preamble to the proposal explained the Board's expectations 
regarding the BHC stress scenario. As described in the preamble to the 
proposal, an appropriately tailored scenario would likely result in an 
impact to projected pre-tax net income that is at least as severe as 
the results of the bank holding company's company run stress test under 
the Board's severely adverse scenario. The preamble to the proposal 
further clarified that, while the Board expected a BHC stress scenario 
to be severe enough to result in a substantial negative impact on 
capital, a stress scenario that produced regulatory capital and tier 1 
common capital ratios that were lower than those produced under the 
Board's severely adverse scenario would not, by itself, have 
demonstrated that the bank holding company had developed an appropriate 
BHC stress scenario. In the Board's view, it would be equally critical 
that the stress scenario be designed to capture potential risks 
stemming from a bank holding company's idiosyncratic positions and 
activities.
    Many commenters expressed concerns with the statement that the BHC 
stress scenario generally would result in projected pre-tax net income 
that is ``at least as severe as'' the company run stress test of the 
Board's severely adverse scenario. Many commenters interpreted this 
expectation to mean that a BHC stress scenario would be qualitatively 
deficient if the quantitative results of the BHC stress scenario did 
not reflect higher losses than the results of the company-run stress 
tests under the severely adverse scenario. Commenters argued that this 
expectation could compel a large bank holding company to tailor its BHC 
stress scenario as an add-on to the supervisory severely adverse 
scenario, rather than basing the BHC stress scenario on an evaluation 
of the bank holding company's idiosyncratic risks. The commenters also 
cited timing issues, as bank holding companies would be required to 
wait for the release of the supervisory scenarios in order to calibrate 
the severity of their BHC stress scenario.
    Bank holding companies should not view the Board's general 
expectation for the severity of the BHC stress scenario as a rigid 
benchmark against the particular supervisory severely adverse scenario 
from a single stress test cycle. Rather, the Board expects a bank 
holding company to develop scenarios of severity generally comparable 
to the usual severity in the Board's severely adverse scenario.\21\ The 
Board also notes that if a particular cycle's severely adverse scenario 
was notably more severe for a particular company than in previous 
exercises, for example, if a particular company was required to include 
an additional component in its severely adverse scenario for the first 
time, then the Board would take that into account when assessing the 
appropriateness of the company's BHC stress scenario.
---------------------------------------------------------------------------

    \21\ For guidance on the usual severity of the severely adverse 
scenario, a bank holding company should review the Board's ``Policy 
Statement on the Scenario Design Framework for Stress Testing,'' 
which sets forth the Board's approach to designing the severely 
adverse scenario. 12 CFR 252, Appendix A. Additionally, bank holding 
companies could review the severely adverse scenarios used in 
previous cycles to guide the severity of the BHC stress scenario.
---------------------------------------------------------------------------

    Clarifying the Board's general expectation for the severity of the 
BHC stress scenario should mitigate concerns expressed by commenters 
that a bank holding company would be driven to base its BHC stress 
scenario as an add-on to the supervisory severely adverse

[[Page 64032]]

scenario or wait for the release of the supervisory scenarios in order 
to calibrate the severity of their BHC stress scenario. The Board 
emphasizes that the proposed rule requires bank holding companies to 
incorporate the specific vulnerabilities of their risk profiles and 
operations into their BHC stress scenarios. The Board expects each 
large bank holding company to develop a BHC stress scenario that is 
both appropriately severe and that is relevant to its idiosyncratic 
risks.
    Some commenters suggested that the Board recognize elements other 
than net income that may have a material impact on capital ratios when 
measuring the severity of a BHC stress scenario, such as the impact of 
other comprehensive income or the changes in the value of mortgage 
servicing rights. The Board agrees with the commenter that the severity 
of the BHC stress scenario should be evaluated based on factors in 
addition to net income, such as other comprehensive income. If a bank 
holding company can demonstrate that the combined effect of the BHC 
stress scenario on net income and other elements that affect capital 
results in a BHC stress scenario of greater severity than the severely 
adverse scenario, then the Board's expectations for the severity of the 
BHC stress scenario would be satisfied.
    A central goal of the capital plan rule is to ensure that large 
bank holding companies have robust internal practices and policies to 
determine their adequate amount and composition of capital, given the 
bank holding company's risk exposures and corporate strategies as well 
as supervisory expectations and regulatory standards. While the stress 
scenarios designed by the Federal Reserve for use in company-run and 
supervisory stress testing are helpful in showing the comparative 
effects of a downturn in the economy across companies, these scenarios 
are created with the overall banking industry in mind, rather than a 
focus on an individual company's risk profile. For these reasons, the 
BHC stress scenario is a key element of a firm's capital plan that 
assists the Federal Reserve and the firm in gaining a deeper 
understanding of an individual company's vulnerabilities. The Board 
will continue to evaluate each BHC stress scenario on a qualitative 
basis to ensure that the scenario is appropriately severe and captures 
the bank holding company's idiosyncratic risks.

C. Modifications to Capital Plan Resubmission Requirements Under the 
Capital Plan Rule

    The proposed rule would have provided flexibility by permitting, 
rather than requiring, a large bank holding company to resubmit its 
capital plan in the event that the Board objected to the capital plan. 
This proposed change targeted circumstances in which the automatic 
resubmission requirements may have been counterproductive by drawing a 
bank holding company's focus away from efforts to remediate the issues 
that gave rise to the Board's objection, and cases in which the 
remediation of such issues may have required more than the allotted 30 
calendar days (the period within which companies previously had been 
required to resubmit their capital plans).
    Commenters were supportive of this change, as it would provide 
firms with flexibility in their decision to resubmit capital plans and 
give them time to remediate issues that led to the objection of the 
capital plan. The final rule adopts the changes to the capital plan 
resubmission requirements as proposed.

D. Consequences for Failure To Execute Planned Capital Actions

    The proposed rule would have limited a large bank holding company's 
ability to make capital distributions to the extent that the bank 
holding company did not execute planned capital issuances during the 
capital plan cycle. Under the proposed rule, if a large bank holding 
company were to raise less capital than the amount it projected in its 
capital plan for a given quarter, the bank holding company would have 
been required to address that shortfall by reducing capital 
distributions (e.g., reducing dividends or repurchases) on instruments 
with greater or equal ability to absorb losses (quarterly net 
distribution limit).\22\ The proposal would have provided an exception 
from the quarterly net distribution limit where a large bank holding 
company had contemplated a capital issuance to support a merger or 
acquisition, but did not consummate such merger or acquisition.
---------------------------------------------------------------------------

    \22\ The proposed rule would have identified common equity tier 
1 capital as having the greatest ability to absorb losses, followed 
by additional tier 1 capital, and tier 2 capital, each as defined in 
the Board's Regulation Q (12 CFR 217.2).
---------------------------------------------------------------------------

    Commenters requested that the Board not finalize the proposed 
quarterly net distribution limit, but instead use its authority to 
object to capital plans on qualitative grounds if a bank holding 
company does not adequately explain a failure to execute planned 
issuances. Commenters expressed the concern that the proposed 
limitation was too severe and would hinder a firm's ability to conduct 
optimal capital management. Commenters expressed the view that tying 
capital distributions to planned capital actions on a quarter-by-
quarter basis would be impractical, as companies are not able to 
predict market conditions with precision in developing their capital 
plans. Commenters noted that, to the extent that a bank holding company 
had planned to declare preferred stock dividends and issue additional 
preferred stock but market conditions turned poor, the proposal would 
force firms to either undertake issuances in the poor market 
conditions, or cancel planned dividends on preferred stock, which would 
lead investors to question the bank holding company's credibility and 
financial condition. Commenters also contended that large bank holding 
companies would be less likely to include capital issuances in their 
capital plan in order to avoid adverse consequences under the proposed 
rule, rather than reflecting their actual capital issuance plans.
    In the alternative, commenters proposed modifications to increase 
the flexibility of the limit. For instance, one commenter proposed that 
a firm should be allowed to proceed with planned distributions in a 
given quarter as long as the firm maintained applicable minimum 
regulatory capital ratios under the supervisory severely adverse 
scenario. Another commenter proposed that capital actions should be 
assessed on an annual cumulative basis, so that issuances in excess of 
those included in the capital plan in a given quarter or distributions 
less than those proposed in the capital plan in a given quarter are 
carried over to the next quarter to allow for fluctuations in actual 
issuances or distributions. Also, some commenters recommended that the 
Board include a buffer for small deviations from the capital plan. For 
example, a commenter asserted that a $10 million shortfall in planned 
capital issuance for a firm with $1 billion in capital should qualify 
for an exception to the quarterly net distribution limit.
    Commenters also provided additional examples of circumstances in 
which they believed the quarterly net distribution limit would not be 
appropriate. For example, commenters argued that the quarterly net 
distribution limit should not be triggered by employee-directed 
issuance activity, which is at the discretion of the employee and may 
deviate from the

[[Page 64033]]

bank holding company's estimates due to employee turnover or changes in 
stock price. With regard to the exception for mergers and acquisitions, 
a commenter also argued that the Board should expand the exception for 
mergers and acquisitions where a bank holding company issued less stock 
due to changes in the merger price.
    The Federal Reserve evaluates the bank holding company's post-
stress capital position based on the assumption that the bank holding 
company actually executes the issuances contained in its plan. Relying 
on the Board's authority to object to a capital plan on qualitative 
grounds, as suggested by commenters, would not permit the Board to 
address behavior that deviates from that which is contemplated in a 
bank holding company's capital plan in a timely manner. It would also 
result in less transparency into the capital plan review process. In 
contrast, the proposed rule would have increased transparency in the 
operation of the capital plan rule by formalizing the Board's current 
practice of approving repurchases net of capital issuances. For these 
reasons, the final rule adopts the requirement that a bank holding 
company reduce its distributions to the extent it does not execute 
planned capital issuances.
    The final rule reflects several significant changes from the 
proposal in order to address commenters' concerns. As noted by 
commenters, a bank holding company may suffer significant market 
consequences if it does not make scheduled payments on non-common 
equity instruments that qualify as additional tier 1 and tier 2 capital 
instruments. Accordingly, the final rule would not require a large bank 
holding company to reduce its scheduled payments on non-common equity 
instruments that qualify as additional tier 1 and tier 2 capital 
instruments (e.g., dividends on preferred stock) if it did not issue 
the additional tier 1 and tier 2 capital instruments included in its 
capital plan.\23\ In addition, the final rule does not require a bank 
holding company to reduce distributions on instruments with greater 
ability to absorb losses in the event that a bank holding company does 
not execute a planned issuance of a capital instrument with less 
ability to absorb losses (i.e., non-common equity instruments that 
qualify as additional tier 1 or tier 2 capital instruments), if it had 
no planned redemptions or repurchases of additional tier 1 or tier 2 
capital instruments, respectively, in that quarter.
---------------------------------------------------------------------------

    \23\ The final rule would continue to require a bank holding 
company to offset a failure to execute planned regulatory capital 
issuances in common equity tier 1 capital instruments issuances by 
reducing its common equity tier 1 regulatory capital distributions.
---------------------------------------------------------------------------

    As suggested by commenters, the final rule measures issuances and 
distributions beginning with the third quarter of the planning horizon 
(cumulative net distribution limit), which provides bank holding 
companies with flexibility to credit excess issuances or lower 
distributions of capital, in each case relative to the amounts included 
in the company's capital plan for a given class of regulatory capital 
instrument.\24\ Under the cumulative net distribution limit, a bank 
holding company that has reduced the dollar amount of its capital 
distributions on a given class of regulatory capital instrument, 
increased the dollar amount of its issuances of that class of 
regulatory capital instrument, or taken any combination of the 
foregoing actions beginning in the third quarter of the planning 
horizon would be permitted to recognize this net increase in that class 
of regulatory capital relative to planned amounts in a quarter in which 
the company does not make its issuances as planned.\25\
---------------------------------------------------------------------------

    \24\ The classes of regulatory capital instruments are common 
equity tier 1, additional tier 1, and tier 2 capital instruments, as 
defined in 12 CFR 217.2. The final rule does not contemplate that a 
bank holding company would raise capital with a greater ability to 
absorb losses to compensate for lower issuances of capital with less 
ability to absorb losses. However, as noted below, if a bank holding 
company believes that a distribution would be appropriate even if it 
would not be allowed under the cumulative net distribution limit, 
the bank holding company may seek a non-objection from the Board to 
make a planned capital distribution.
    \25\ The final rule would also permit a bank holding company to 
calculate the gross maximum amount of its distributions on a 
cumulative basis so that a company may credit reduced distributions 
beginning in the third quarter of the planning horizon to increase 
the maximum permitted distributions in a later quarter up to the 
cumulative gross amount of its planned distributions (cumulative 
gross distribution limit). For the purposes of the cumulative gross 
distribution limit, a company may not carry reduced distributions 
forward beyond the end of the sixth quarter of the planning horizon 
to the next capital plan cycle.
---------------------------------------------------------------------------

    In addition, the final rule includes exceptions to address specific 
circumstances raised by commenters. In particular, the final rule 
provides that the cumulative net distribution limit does not apply to 
the extent that the bank holding company raised a smaller dollar amount 
of capital due to employee-driven issuance activities or issuances 
related to mergers and acquisitions for which the purchase price is 
lower than the price projected in a bank holding company's capital 
plan. The final rule also provides that the cumulative net distribution 
limit does not apply to a capital distribution to the extent that the 
excess net distributions is de minimis (the excess net distributions 
are less than one percent of the bank holding company's tier 1 capital, 
as reported on the bank holding company's first quarter FR Y-9C), and 
the bank holding company notifies the appropriate Reserve Bank at least 
15 calendar days in advance of any such capital distribution.
    The final rule also provides bank holding companies with a means 
for seeking a non-objection from the Board for planned distributions 
when market conditions or other circumstances have prevented the 
company from making planned issuances. This provision would provide 
some flexibility for cases in which, for example, a bank holding 
company issued capital with greater ability to absorb losses than it 
had included in its capital plan, and desired to execute its planned 
capital distributions as included in its capital plan. Consistent with 
other requests for approval or non-objection to execute distributions 
under the capital plan rule, the request for non-objection to make a 
planned capital distribution must contain the information set forth in 
section 225.8(g)(4) of the final rule. The Board expects a bank holding 
company to reflect its change in planned capital issuances and any 
other relevant changes in the capital plan is submits under section 
225.8(g)(4), and may require a bank holding company to submit 
supporting information, including the bank holding company's forward-
looking assessment of the bank holding company's capital adequacy under 
revised scenarios, any supporting information, and a description of any 
quantitative methods used that are different than those used in their 
original capital plan.\26\
---------------------------------------------------------------------------

    \26\ 12 CFR 225.8(g)(4)(i)(D).
---------------------------------------------------------------------------

    Below are two examples that illustrate the operation of the 
cumulative net distribution limit in the final rule.

    Example 1: Table 3 sets forth a large bank holding company's 
planned regulatory capital issuances and distributions included in 
its capital plan for the third through sixth quarters of the 
planning horizon. Table 4 sets forth the large bank holding 
company's actual regulatory capital issuances and distributions for 
the third through sixth quarters of the planning horizon.

[[Page 64034]]



                                  Table 3--Planned Issuances and Distributions
----------------------------------------------------------------------------------------------------------------
                                                             Planning horizon quarter
                                 -------------------------------------------------------------------------------
                                          Q3                  Q4                  Q5                  Q6
----------------------------------------------------------------------------------------------------------------
Issuance........................  $125 m (common      $125 m (common      $125 m (common      $125 m (common
                                   stock).             stock).             stock).             stock).
Distribution....................  $100 m (common      $100 m (common      $100 m (common      $100 m (common
                                   stock repurchase).  stock dividend).    stock repurchase).  stock dividend).
----------------------------------------------------------------------------------------------------------------


                                   Table 4--Actual Issuances and Distributions
----------------------------------------------------------------------------------------------------------------
                                                             Planning horizon quarter
                                 -------------------------------------------------------------------------------
                                          Q3                  Q4                  Q5                  Q6
----------------------------------------------------------------------------------------------------------------
Issuance........................  $250 m (common      $0................  $125 m (preferred   $250 m (common
                                   stock).                                 stock).             stock).
Distribution....................  $100 m (common      $100 m (common      $0................  $100 m (common
                                   stock repurchase).  stock dividend).                        stock dividend)
                                                                                               $100 m (common
                                                                                               stock
                                                                                               repurchase).
----------------------------------------------------------------------------------------------------------------

    Market conditions for issuances were more favorable than 
anticipated in the third quarter, so the firm issued $250 million of 
common stock, the entire amount of common stock issuances planned in 
quarters three and four. In the fourth quarter, market conditions were 
unfavorable, and the company executed none of its planned common stock 
issuance. In the fifth quarter, instead of issuing common stock as 
planned, the company issued $125 million of preferred stock (qualifying 
as additional tier 1 capital). Early in the sixth quarter, the company 
issued $250 million of common stock, $125 million in excess of the 
amount it had planned for the quarter.
    Under the final rule, the bank holding company would be permitted 
to make its planned $100 million common stock distributions in the 
third quarter because it issued an amount of common stock at least as 
large as planned for that quarter. In the fourth quarter, in which the 
company did not issue any common stock included in its plan, the 
cumulative net distribution limit under the rule permits the company to 
credit its over-issuance from the previous quarter. As a result, the 
company could make the distributions it planned in the fourth quarter 
($100 million common stock dividend). Because the bank holding company 
did not issue common stock but instead issued $100 million in preferred 
stock in the fifth quarter, the cumulative net distribution limit would 
prohibit the company from making its planned common stock dividend in 
that quarter.\27\ After the common stock issuance in the sixth quarter, 
the net distribution limitation under the final rule permits the 
company to make the distributions it planned but did not execute in the 
fifth quarter, as well as those planned in the sixth quarter ($100 
million common stock repurchase and $100 million common stock 
dividend).

    \27\ The final rule would not permit the bank holding company to 
substitute a preferred stock issuance for a common stock issuance. 
In the fifth quarter, the company could have sought a non-objection 
from the Board to make its planned distributions.

    Example 2: Table 5 sets forth a large bank holding company's 
regulatory capital issuances and distributions included in its 
capital plan for the third through sixth quarters of the planning 
horizon. Table 6 sets forth the large bank holding company's actual 
regulatory capital issuances and distributions for the third through 
sixth quarters of the planning horizon.

                                  Table 5--Planned Issuances and Distributions
----------------------------------------------------------------------------------------------------------------
                                                             Planning horizon quarter
                                 -------------------------------------------------------------------------------
                                          Q3                  Q4                  Q5                  Q6
----------------------------------------------------------------------------------------------------------------
Issuance........................  $125 m (preferred   $125 m (preferred   $125 m (preferred   $125 m (preferred
                                   stock).             stock).             stock).             stock).
Distribution....................  $100 m (preferred   $100 m (preferred   $100 m (preferred   $100 m (preferred
                                   stock dividend).    stock repurchase).  stock repurchase).  stock dividend).
----------------------------------------------------------------------------------------------------------------


                                   Table 6--Actual Issuances and Distributions
----------------------------------------------------------------------------------------------------------------
                                                             Planning horizon quarter
                                 -------------------------------------------------------------------------------
                                          Q3                  Q4                  Q5                  Q6
----------------------------------------------------------------------------------------------------------------
Issuance........................  $75 m (preferred    $125 m (preferred   $175 m (preferred   $0.
                                   stock).             stock).             stock).
Distribution....................  $100 m (preferred   $50 m (preferred    $150 m (preferred   $100 m (preferred
                                   stock dividend).    stock repurchase).  stock repurchase).  stock dividend).
----------------------------------------------------------------------------------------------------------------

    In the third quarter of the planning horizon, the company issued 
$75 million of the $125 million preferred stock included in its plan 
for that quarter. In the fourth quarter, the company issued the full 
$125 million of preferred stock included in its capital plan for that 
quarter. Early in the fifth quarter, market conditions were

[[Page 64035]]

particularly favorable, and the company issued $175 million of 
preferred stock instead of the $125 million included in its capital 
plan for that quarter. In the sixth quarter, the company issued none of 
the $125 million of preferred stock it had planned for that quarter.
    Although the company issued less preferred stock than it included 
in its plan for the third quarter, the rule permits the company to make 
the full $100 million of its planned preferred stock dividend for that 
quarter because the rule permits the company to make scheduled payments 
on an additional tier 1 capital instrument. In the fourth quarter, the 
cumulative net distribution limit requires the bank holding company to 
reduce its preferred stock repurchases to $50 million of the planned 
$100 million for that quarter. This is because the rule requires the 
company to reduce its planned repurchases of preferred stock to the 
extent that it failed to make planned issuances in that class of 
regulatory capital instrument. (The $50 million reduction in preferred 
stock repurchases reflects the $50 million shortfall in issuances of 
preferred stock in the third quarter.)\28\ After the preferred stock 
issuance in the fifth quarter, the cumulative net distribution limit in 
the final rule permits the company to make the full $100 million of its 
planned preferred stock repurchases and an additional $50 million of 
the planned preferred stock repurchases that the bank holding company 
was required to reduce in the fourth quarter, for a total of $150 
million in preferred stock repurchases. This is because the company can 
credit the excess preferred stock issuance it made in the fifth quarter 
to make the remaining preferred stock repurchase originally planned for 
the fourth quarter. In the sixth quarter, as in the third quarter, the 
rule permits the company to make the full $100 million of preferred 
stock dividends as it is a scheduled payment on an additional tier 1 
capital instrument, even though the company did not issue the preferred 
stock included in its plan.
---------------------------------------------------------------------------

    \28\ If the company wished to make the full $100 in preferred 
repurchases in the fourth quarter, the company could seek a non-
objection from the Board.
---------------------------------------------------------------------------

    Under the final rule, as under the proposed rule, the Board may 
object to a large bank holding company's capital plan in the following 
cycle, or require resubmission of its capital plan in the current 
cycle, if the assumptions and analysis underlying the bank holding 
company's capital plan, or the bank holding company's methodologies for 
reviewing the robustness of its capital adequacy process, are not 
reasonable or appropriate. The Board generally expects that a bank 
holding company will undertake the capital actions included in its 
capital plan and be able to justify discrepancies between its planned 
and executed capital issuances. A bank holding company's consistent 
failure to do so may be indicative of shortcomings in its capital 
planning processes and may indicate that the assumptions and analysis 
underlying the bank holding company's capital plan, or the bank holding 
company's methodologies for reviewing the robustness of its capital 
adequacy process, are not reasonable or appropriate. Accordingly, a 
bank holding company's consistent failure to execute capital issuances 
in its capital plan may form the basis for objection if it is unable to 
explain the discrepancies between its planned and executed capital 
issuances.

E. Practice of Large Discrepancies in Planned Capital Distributions in 
the Out Quarters

    The preamble to the proposal described a practice whereby some 
large bank holding companies have included markedly reduced 
distributions in the final three quarters of the planning horizon 
(i.e., the quarters that are not subject to objection in the current 
capital plan cycle, sometimes referred to as ``out-quarters'') relative 
to the distributions in the preceding four quarters of the capital plan 
(i.e., the distributions that are subject to possible objection in the 
current cycle). In the next capital plan cycle, when the previous 
capital plan cycle's ``out quarters'' become subject to possible 
objection, the bank holding companies submit a capital plan with 
significantly increased distributions relative to the previous capital 
plan cycle's ``out-quarters,'' while again submitting reduced 
distributions for the ``out-quarters'' of the new capital plan cycle.
    The proposal explained that, in the Board's view, the practice of 
widely varying planned capital distributions based on whether they 
occur in an ``out-quarter'' as compared to a quarter that is subject to 
a possible objection may be indicative of shortcomings in a bank 
holding company's capital planning processes and may indicate that 
``the assumptions and analysis underlying the bank holding company's 
capital plan, or the bank holding company's methodologies for reviewing 
the robustness of its capital adequacy process, are not reasonable or 
appropriate.'' \29\ This may form the basis for objection to a bank 
holding company's capital plan. The proposal further clarified that, in 
reviewing this type of practice, the Federal Reserve would consider 
whether the bank holding company can adequately explain why the bank 
holding company revised its planned distributions for the same period 
of time from one capital plan cycle to the next capital plan cycle.
---------------------------------------------------------------------------

    \29\ 12 CFR 225.8(e)(2)(ii)(B).
---------------------------------------------------------------------------

    Commenters noted that there are legitimate reasons bank holding 
companies would raise their capital distributions from year to year to 
reflect new expectations and business conditions. Commenters also 
argued that if a bank holding company projected a decline in net 
income, it should be allowed to plan for lower capital distributions. 
Some commenters noted that bank holding companies do not have 
sufficient predictive insight into out quarters to support realistic 
assumptions around capital distributions.
    The Board uses CCAR as an assessment of a bank holding company's 
capital planning processes, and it generally expects that a firm will 
project its distributions in the final three quarters of their capital 
plans based on realistic assumptions about the future and in a manner 
broadly consistent with previous quarters, unless the bank holding 
company is in fact planning to reduce its distributions. The Board 
understands that circumstances may arise, such as changes in market 
conditions, the profitability of the company, or the risk profile of 
the company, that may cause a bank holding company to revise its out-
quarter capital distributions in a capital plan cycle as compared to 
the treatment of the same quarters in the next capital plan cycle. 
However, the Board will continue to closely monitor this behavior, and 
if bank holding companies are unable to provide sufficient explanation 
for changes in planned capital actions, the Board may see that as an 
indication of poor capital planning.

F. Application of CCAR Process to Bank Holding Company Subsidiaries of 
Foreign Banking Organizations

    Under the Board's IHC rule, a foreign banking organization with 
U.S. non-branch assets of $50 billion or more is required to establish 
a U.S. intermediate holding company by July 1, 2016. The foreign 
banking organization may do so either by designating an existing bank 
holding company, designating an existing nonbank company, or forming a 
new holding company. The U.S. intermediate holding company is subject 
to enhanced prudential

[[Page 64036]]

standards following the transition periods set forth in the IHC rule.
i. Formation of a New U.S. Intermediate Holding Company
    Under the transition provisions in the IHC rule, a company that is 
formed or designated as an intermediate holding company that was not 
previously subject to prudential standards would not be subject to 
prudential standards until the effective date of the IHC rule's 
requirements.\30\ An intermediate holding company that is formed in 
anticipation of the IHC rule would not be subject to risk-based 
capital, liquidity, and risk management standards until July 1, 2016, 
the capital plan rule until the 2017 cycle, and the stress testing rule 
and the CCAR process until the 2018 cycle. This transition period was 
designed to provide foreign banking organizations with a reasonable 
transition period during which to prepare for the compliance with the 
IHC rule, including the required structural reorganization.\31\ This 
transition period applies notwithstanding that, upon its formation, the 
intermediate holding company may become a bank holding company.
---------------------------------------------------------------------------

    \30\ See 12 CFR 252.152(c)(1); 12 CFR 252.153(e)(1)(ii).
    \31\ 79 FR 17240, 17244 (March 27, 2014).
---------------------------------------------------------------------------

    However, the IHC rule does not relieve existing subsidiary bank 
holding companies of foreign banking organizations that were not formed 
to comply with the IHC rule and that were previously subject to 
prudential standards from compliance with the regulatory requirements 
that apply to U.S. bank holding companies. The Board notes that these 
bank holding companies may be designated by a foreign banking 
organization as an intermediate holding company or moved under a 
foreign banking organization's intermediate holding company in order to 
comply with the intermediate holding company requirement. In either 
case, these existing bank holding companies are required to continue 
complying with all applicable prudential requirements that applied to 
them prior to their designation as an intermediate holding company or 
the transfer of their ownership to an intermediate holding company, 
including with respect to any assets transferred to the existing bank 
holding company before the IHC requirements become effective.\32\ To 
ensure that bank holding company subsidiaries of foreign banking 
organizations remain subject to stress testing requirements during this 
transition period, the Board proposed that any bank holding company 
subsidiary of a foreign banking organization must comply with any 
applicable stress test requirements through the 2017 stress test cycle. 
Similarly, the Board proposed that any bank holding company subsidiary 
of a foreign banking organization must comply with the capital plan 
rule through the 2017 capital planning cycle.\33\
---------------------------------------------------------------------------

    \32\ As discussed below, for the 2015 capital planning cycle, 
the Board will not require a bank holding company subsidiary of a 
foreign banking organization to reflect the reorganization required 
by the IHC rule in its capital plan and stress test results.
    \33\ With the mutual consent of the company and the Board, 
another U.S. bank holding company owned by the foreign banking 
organization could comply with the requirements of the capital plan 
rule in lieu of the subsidiary bank holding company. 12 CFR 
225.8(c)(2)(iii)(A).
---------------------------------------------------------------------------

    One commenter argued that, by continuing to apply the various 
enhanced prudential standards to bank holding company subsidiaries of 
foreign banking organizations while providing some transition relief 
for newly formed U.S. intermediate holding companies, the proposal 
provides an incentive for a foreign banking organization to establish a 
new company to serve as the U.S. intermediate holding company rather 
than to designate an existing subsidiary bank holding company. To 
remove this incentive and provide foreign banking organizations with 
more options for organizing their U.S. operations, commenters requested 
that the Board provide the transition period to an existing bank 
holding company subsidiary of a foreign banking organization. 
Commenters also suggested that the Board temporarily exclude from the 
stress test and capital planning frameworks subsidiaries that have been 
transferred into a bank holding company subsidiary of a foreign banking 
organization in order to provide additional time for foreign banking 
organizations to comply with the stress test and capital plan rules.
    In developing the transition provisions in the IHC rule, the Board 
intended to prevent foreign-owned bank holding companies from weakening 
their capital or risk management during the transition period under the 
IHC rule and to ensure that existing U.S. subsidiary bank holding 
companies of foreign banking organizations would continue to be held to 
consistent prudential standards that maintain a level playing field 
between U.S. and foreign-owned bank holding companies. The approaches 
suggested by commenters would be inconsistent with these principles. 
The commenter's suggestion of excluding assets that have been 
transferred to the bank holding company in compliance with the IHC rule 
from capital planning and stress testing would not address the fact 
that the bank holding company is exposed to the risks of the assets it 
holds and, therefore, should be holding capital commensurate with those 
risks. Generally, the Board expects that foreign banking organizations 
will determine whether to designate an existing bank holding company 
and when to transfer assets to an existing bank holding company 
depending on a variety of facts and circumstances, including the effect 
of the transition periods in the IHC rule. For these reasons, the Board 
reaffirms that existing U.S. subsidiary bank holding companies of 
foreign banking organizations remain subject to prudential standards 
during the transition provisions in the IHC rule.
ii. Designation of Existing Bank Holding Company
    Commenters noted that certain foreign banking organizations intend 
to designate existing bank holding company subsidiaries as their U.S. 
intermediate holding companies, and requested that the Board clarify 
that such a bank holding company subsidiary would not be required to 
project the formation of a U.S. intermediate holding company in its 
capital plan for 2015 and 2016. Commenters expressed the view that this 
approach would introduce uncertainty into the organization's 2015 
capital plan and would effectively prohibit the organization from 
giving effect to any additional capital that would be contributed or 
otherwise raised in connection with the designation as a U.S. 
intermediate holding company unless the capital was contributed prior 
to December 31, 2014. To address these concerns, a commenter suggested 
that, for purposes of their capital plans and stress test results 
submitted January 5, 2015, and April 5, 2016, the Board permit a bank 
holding company owned by a foreign banking organization to exclude any 
effect on the capital plans that could arise from the formation of the 
U.S. intermediate holding company.
    The capital plan rule requires a bank holding company to include in 
its capital plan an assessment of its expected uses and sources of 
capital, including estimates of projected revenues, losses, reserves, 
and pro forma capital levels over the planning horizon.\34\ To the 
extent that a foreign banking organization controls nonbank

[[Page 64037]]

subsidiaries outside of a bank holding company, those nonbank 
subsidiaries would not likely have the systems and models in place to 
make the necessary projections to comply with the capital plan rule. As 
such, subsidiary bank holding companies may not have sufficient time to 
adjust their management information and accounting systems to take into 
account exposures of those nonbank subsidiaries for the 2015 capital 
planning cycle. Thus, for the 2015 capital planning cycle, the Board 
will not require a bank holding company subsidiary of a foreign banking 
organization to reflect the reorganization required by the IHC rule in 
its capital plan and stress test results. For the 2016 capital planning 
cycle, the Board expects a bank holding company subsidiary of a foreign 
banking organization to reflect the effects of any transfers associated 
with the IHC rule in the bank holding company's capital plan due April 
5, 2016.\35\ By April 2016 foreign banking organizations should have 
completed any necessary adjustments to their management information and 
accounting systems in order to comply with the IHC rule on July 1, 
2016, which would be less than three months after the capital plan 
submission. In the April 5, 2016 capital plan submission, a bank 
holding company should reflect any capital issuances or contributions 
planned during the planning horizon that are related to the 
capitalization of the intermediate holding company.\36\
---------------------------------------------------------------------------

    \34\ 12 CFR 225.8.
    \35\ The Board has moved the date for the capital plan 
submission for 2016 to April 2016. 12 CFR 225.8(e)(1)(ii).
    \36\ If the bank holding company did not execute its planned 
issuances, the final rule generally would require the bank holding 
company to reduce its planned capital distributions, as described in 
section II.D of this preamble.
---------------------------------------------------------------------------

    If a bank holding company that will be designated as the U.S. 
intermediate holding company elects to avail itself of this relief for 
the 2015 capital planning cycle, the Board expects that, generally, the 
U.S. bank holding company will have a capital plan that includes 
planned capital distributions (net of capital issuance) that are no 
greater than those included in the bank holding company's capital plan 
for the previous cycle (or, if the bank holding company has not 
previously submitted a capital plan, the amount of capital 
distributions (net of capital issuance) actually made in the previous 
year). In the Board's view, this limitation is appropriate because the 
Board would expect such a bank holding company to retain capital as 
compared to its previous capital plan in preparation for compliance 
with the U.S. intermediate holding company requirement. For a bank 
holding company that avails itself of this relief, neither the assets 
of subsidiaries that will be transferred under the bank holding company 
as part of IHC formation, nor the projections of earnings from those 
subsidiaries, would be included in the bank holding company's capital 
plan.
iii. Guidance for 2017 Cycle
    Commenters requested further information for U.S. intermediate 
holding companies that will be subject for the first time to the stress 
test and capital plan processes in the 2017 capital planning cycle. 
Commenters suggested that requirements and details be provided as soon 
as possible to allow U.S. intermediate holding companies the 
opportunity to prepare for the Board's requests. In addition, 
commenters suggested that the initial assessment of an intermediate 
holding company's capital plan by the Board be similar to the process 
used for bank holding companies entering CCAR that had not previously 
been subject to the Supervisory Capital Assessment Program.\37\ 
Commenters also suggested that public disclosures for the new 
participants be limited, similar to the CapPR process.
---------------------------------------------------------------------------

    \37\ These firms were not immediately required to participate in 
the full CCAR process, and were given a two-year transition period 
under the Board's CapPR process.
---------------------------------------------------------------------------

    As noted above, for the 2017 capital planning cycle, U.S. 
intermediate holding companies (unless the U.S. intermediate holding 
company was a bank holding company subject to the CCAR process prior to 
its designation) will not be subject to the stress test rules. 
Accordingly, for the 2017 cycle, the Federal Reserve's assessment of 
the U.S. intermediate holding company's capital plan will not be based 
on a supervisory stress test estimates conducted under those rules.\38\ 
Instead, the Federal Reserve intends to conduct a more limited 
quantitative assessment of the U.S. intermediate holding company's 
capital plan based on the company's own stress scenario and any 
scenarios provided by the Board and a qualitative assessment of its 
capital planning processes and supporting practices. The Board expects 
that this assessment will be similar to the Board's CapPR process, and 
that the disclosures will also be limited. Beginning with the 2018 
cycle, the Board anticipates that a U.S. intermediate holding company 
will be subject to the full CCAR process. The Board recognizes the 
challenges that will face the U.S. intermediate holding companies that 
are new to the CCAR process, and expects that these bank holding 
companies will continue to work to enhance their capital planning 
systems and processes to meet supervisory expectations.\39\
---------------------------------------------------------------------------

    \38\ See 12 CFR part 252, subpart E.
    \39\ Commenters also requested that bank holding companies 
subject to the Board's SR Letter 01-01 be granted an extension 
before becoming subject to the ``Capital Assessments and Stress 
Testing'' (FR Y-14) regulatory report, arguing that the bank holding 
companies were not given sufficient prior notice of their inclusion 
in the proposal. Those comments are addressed in the final reporting 
collection. 79 FR 59264 (October 1, 2014).
---------------------------------------------------------------------------

    Commenters requested further detail on how U.S. intermediate 
holding companies and their subsidiary bank holding companies can 
jointly submit their capital plans during the cycle when they are both 
subject to the capital plan rule. As noted in the proposal, companies 
may jointly submit a capital plan that clearly explains how certain 
aspects of the capital plan for the U.S. intermediate holding company 
build upon the bank holding company's capital plan. For example, if the 
U.S. intermediate holding company and the bank holding company 
subsidiary rely on common stress testing models and practices, both 
companies could submit the same supporting documentation for these 
models, provided that each company's submission meets all of the 
requirements of the capital plan rule. The Board intends to provide 
additional information regarding this submission in the future.

G. Modification of the Capital Plan Rule Regarding Capital Actions Not 
Requiring Approval

    The proposed rule would have modified a provision of the capital 
plan rule that required a large bank holding company to request prior 
approval or provide prior notice of a capital distribution if the 
``dollar amount of the capital distribution will exceed the amount 
described in the capital plan for which a non-objection was issued.'' 
\40\ This provision applied to all capital distributions, including 
those associated with new issuances of regulatory capital instruments. 
Accordingly, large bank holding companies that issued accretive capital 
instruments with fixed dividends were required to seek the Board's 
approval or provide notice to the Board in order to issue these 
instruments. The Board approved the prior requests, and would 
anticipate approving similar requests in the future, provided that the 
proposed capital issuance would result in net capital accretion. In 
order to relieve the burden on the bank holding companies going 
forward, the proposed rule would have

[[Page 64038]]

removed prior approval and prior notice requirements for distributions 
involving incremental issuances of instruments that would qualify for 
inclusion in the numerator of regulatory capital ratios (i.e., common 
equity tier 1, additional tier 1, and tier 2 capital). Commenters were 
generally supportive of this proposed change, and the final rule adopts 
it without change.
---------------------------------------------------------------------------

    \40\ See section 225.8(f) of the capital plan rule (12 CFR 
225.8(f)).
---------------------------------------------------------------------------

H. Clarification of Assumptions Regarding Capital Actions Under the 
Stress Test Rules

    The stress test rules require companies to assume, as part of 
company-run stress tests, that they issue no capital and redeem no 
capital instruments in the second through ninth quarters of the 
planning horizon. The proposal would have provided an exception to this 
assumption for issuances related to expensed employee compensation.
    While the Board received no comments on this proposed exception, 
one commenter expressed the view that the Board should allow the 
inclusion of new capital issuances in stress testing if the issuance is 
related to a discretely defined strategic initiative that could not 
take place without the capital issuance.
    The stress test rule requires companies to make consistent 
assumptions about their capital actions in order to enhance the 
comparability of the stress test across companies. An exception for 
expensed employee compensation does not undermine this comparability 
because all companies subject to stress testing generally have 
outstanding employee compensation programs, and have little to no 
discretion to direct issuances relating to employee compensation. In 
contrast, strategic initiatives vary across firms, and may be halted in 
times of stress. As such, the Board is finalizing the change to the 
stress testing capital action assumptions as proposed.

I. Other Modifications to the Capital Plan Rule and Related 
Requirements

i. Hearing procedures
    The proposal would have revised the hearing procedures in the 
capital plan rule. Under the proposal, a large bank holding company 
would have had 15 calendar days to request an informal hearing, and the 
hearing would have been held within 30 calendar days of the request. 
The Board would have provided written notice of its final decision to 
the bank holding company within 60 calendar days of the conclusion of 
any informal hearing. Commenters were supportive of the flexibility 
provided to firms under the informal hearing procedures, and the final 
rule adopts the proposed revisions without change.
ii. Submission of Loss, Revenue, and Expense Estimation Models to the 
Board in Connection With Capital Plan
    The proposed rule also would have required a bank holding company 
to be capable of providing to the Board its loss, revenue, and expense 
estimation models used by the bank holding company for stress scenario 
analysis, including supporting documentation regarding each model's 
development and validation status.
    Commenters argued that they would have difficulty presenting the 
Board with certain models as they may be housed on third party servers 
or for other reasons. Commenters requested that the Board provide 
flexibility to firms to meet this requirement given the wide variety of 
loss, revenue and expense estimation models employed by firms and the 
contractual obligations firms may have with third party vendors 
regarding the dissemination of proprietary models.
    In response, the Board clarifies that it will require companies to 
provide an inventory and description of models and methodologies, not 
the models themselves. This information is needed by supervisors in 
order to properly assess a bank holding company's capital adequacy and 
capital planning processes. In this regard, the information helps 
facilitate cross-firm comparisons of bank holding companies' loss, 
revenue, and expense estimation models and their approaches to model 
validation. The Board is finalizing the additional required 
documentation supporting a capital plan as proposed.

J. Comments on the Tier 1 Common Ratio and Capital Plan Capital Action 
Assumptions

    While the Board did not propose to change the role of the tier 1 
common ratio or the capital plan's capital action assumptions in the 
proposal, commenters provided views on these aspects of the rules.
    Regarding the tier 1 common ratio, commenters noted that the 
components of the tier 1 common ratio will no longer be calculated as 
part of the regulatory capital calculations, and projecting the ratio 
for purposes of the capital plan and stress test rules imposes an 
additional burden on bank holding companies. The Board notes that the 
common equity tier 1 ratio will not be fully phased in until January 1, 
2018. During the transition period, the Board expects that, for certain 
firms, the common equity tier 1 ratio will require less capital than 
the tier 1 common ratio under the supervisory severely adverse 
scenario. Consistent with the principle articulated in other aspects of 
the final rule where transition periods are relevant (see, for example, 
the discussion regard the clarification of the CCAR process for bank 
holding company subsidiaries of foreign banking organizations), the 
Board aims to ensure that bank holding companies are not held to lower 
standards during transition periods than they were prior to the 
adoption of the relevant rule. Accordingly, the final rule retains the 
tier 1 common ratio. However, the Board intends to monitor the common 
equity tier 1 ratio as it is phased in under the revised risk-based 
capital framework and implemented in stress testing and capital 
planning, and expects to revisit the issue as additional relevant data 
becomes available.
    Commenters also provided views regarding the requirement that 
companies assume that they continue to execute capital actions planned 
in baseline conditions throughout the adverse and severely adverse 
supervisory scenarios for purposes of the capital plan rule. Commenters 
argue that this assumption does not reflect the fact that bank holding 
companies operate subject to internal capital management policies, and 
that the Board has supervisory authority to force banks to preserve 
capital in times of stress distributions in CCAR. In addition, 
commenters noted that the use of planned capital distributions in times 
of stress will be inconsistent with the soon-to-be-implemented capital 
conservation buffer requirements under the revised risk-based capital 
rules.\41\
---------------------------------------------------------------------------

    \41\ See 12 CFR 217.11.
---------------------------------------------------------------------------

    The Board notes that CCAR makes conservative assumptions in order 
to provide a rigorous assessment of the capital adequacy of large bank 
holding companies. By assuming that distributions continue even during 
a stress period, CCAR is designed to approximate the tendency of losses 
in a crisis to occur suddenly, with capital continuing to be 
distributed until losses are realized or unavoidable. In this way, it 
helps to ensure that a bank holding company would remain sufficiently 
capitalized even if the timing of the losses were different or more 
sudden than that projected in the severely adverse scenario. Thus, the 
Board is not modifying its assumptions regarding baseline capital 
actions. With respect to the capital conservation buffer, the Board 
notes that the effects of the

[[Page 64039]]

capital conservation buffer distribution limitations are likely to be 
limited for the stress testing and capital planning cycle that begins 
on October 1, 2014, given the small portion of the buffer that will be 
effective during the planning horizon (0.625 percent of risk-weighted 
assets, only one quarter the size of the fully phased-in capital 
conservation buffer). Therefore, as noted in the CCAR 2015 
instructions, the Board will not consider the limitation effects of the 
capital conservation buffer in the last four quarters of the CCAR 2015 
planning horizon when performing its post-stress capital analysis of a 
bank holding company's planned capital distributions and bank holding 
companies should not assume the operation of distribution limitations 
of the capital conservation buffer when conducting their stress 
tests.\42\ The Board is considering the appropriate treatment of the 
capital conservation buffer distribution limitations in stress testing 
and capital planning for future capital planning cycles and intends to 
address this issue in due course.
---------------------------------------------------------------------------

    \42\ See Comprehensive Capital Analysis and Review 2015 Summary 
Instructions and Guidance (October 17, 2014).
---------------------------------------------------------------------------

III. Administrative Law Matters

A. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3506; 5 CFR 1320, Appendix A.1), the Board reviewed the final 
rule under the authority delegated to the Board by Office of Management 
and Budget (OMB). The Board may not conduct or sponsor, and a 
respondent is not required to respond to, an information collection 
unless it displays a currently valid OMB control number. The OMB 
control for this information collection is 7100-0342. In addition, as 
permitted by the PRA, the Board is extending for three years, with 
revision, the Recordkeeping and Reporting Requirements Associated with 
Regulation Y (Capital Plans) (Reg Y-13; OMB No. 7100-0342).
    As mentioned in the preamble, the Board received 18 comment 
letters, however, none specifically addressed the PRA analysis. One 
commenter, however, did express general concerns regarding their 
ability to provide supporting documentation, due to third party legal 
and physical impediments, required by section 225.8(e)(3)(vi). In 
response to this comment, the Board adjusted its PRA burden estimate 
associated with this requirement.
    The final rule contains requirements subject to the PRA. The 
collection of information revised by this final rule is found in 
section 225.8 of Regulation Y (12 CFR part 225). Section 
225.8(e)(3)(vi) requires a bank holding company to be capable of 
providing to the Board its loss, revenue, and expense estimation models 
used by the bank holding company for stress scenario analysis, 
including supporting documentation regarding each model's development 
and validation status. This information is needed by supervisors in 
order to properly assess a bank holding company's capital adequacy and 
capital planning processes. In this regard, the information helps 
facilitate cross-firm comparisons of bank holding companies' loss, 
revenue, and expense estimation models and their approaches to model 
validation. The Board estimates that, on average, respondents take an 
additional 5 hours to comply with the requirements in section 
225.8(e)(3)(vi).
    Section 225.8(g)(1) removes prior approval and prior notice 
requirements for distributions involving incremental issuances of 
instruments that would qualify for inclusion in the numerator of 
regulatory capital ratios (i.e., common equity tier 1, additional tier 
1, and tier 2 capital). As mentioned in the preamble, the Board 
believes that removing the requirement would reduce unnecessary efforts 
by a bank holding company to submit requests for distributions outside 
of the capital plan that are associated with issuances of regulatory 
capital. The Board estimates that respondent burden associated with 
section 225.8(g)(1) would be reduced by approximately 50 percent.
    Section 225.8(g)(3)(iii)(A)--Net distribution limitation 
exceptions--To the extent that the Board or the appropriate Reserve 
Bank indicates in writing its non-objection pursuant to section 
225.8(g)(5), following a request for non-objection from the bank 
holding company that includes all of the information required to be 
submitted under section 225.8(g)(4). The Board estimates that, on 
average, respondents take 16 hours to comply with the requirement in 
section 225.8(g)(3)(iii)(A).
    Title of Information Collection: Recordkeeping and Reporting 
Requirements Associated with Regulation Y (Capital Plans) (Reg Y-13).
    Frequency of Response: Recordkeeping requirements, annually. 
Reporting requirements, varied--the capital plan exercise would be done 
at least annually, capital plan resubmissions and prior approval 
requirements would be event-generated.
    Affected Public: This information collection applies to every top-
tier bank holding company domiciled in the United States that has $50 
billion or more in total consolidated assets (large U.S. bank holding 
companies) and U.S. intermediate holding companies with total 
consolidated assets of $50 billion or more.
    General Description of Information Collection: This information 
collection is mandatory and the recordkeeping requirement to maintain 
the Capital Plan is in effect until either a bank holding company is no 
longer operational or until further notice by the Board. Section 616(a) 
of the Dodd-Frank Act amended section 5(b) of the Bank Holding Company 
Act (BHC Act) (12 U.S.C. Sec.  1844(b)) to specifically authorize the 
Board to issue regulations and orders relating to capital requirements 
for bank holding companies. The Board is also authorized to collect and 
require reports from bank holding companies pursuant to section 5(c) of 
the BHC Act (12 U.S.C. Sec.  1844(c)). Additionally, the Board's 
rulemaking authority for the information collection requirements 
associated with Reg Y-13 is found in sections 908 and 910 of the 
International Lending Supervision Act, as amended (12 U.S.C. 3907 and 
3909). Additional support for Reg Y-13 is found in sections 165 and 166 
of the Dodd-Frank Act (12 U.S.C. 5365 and 5366). The capital plan 
information submitted by the covered bank holding company would consist 
of confidential and proprietary modeling information and highly 
sensitive business plans, such as acquisition plans submitted to the 
Federal Reserve for approval. Therefore, it appears the information 
would be subject to withholding under exemption 4 of the Freedom of 
Information Act (5 U.S.C. 552(b)(4)).
Estimated Burden
    Number of Respondents: 52
    Estimated Burden per Response:

_.8(e)(1)(i) and (ii) Recordkeeping and Reporting, 12,000 hours
_.8(e)(1)(iii) Recordkeeping, 100 hours
_.8(e)(3)(i)-(vii) Reporting, 1,005 hours
_.8(e)(4) Reporting, 100 hours
_.8(f)(3)(i) Reporting, 16 hours
_.8(g)(1), (3) and (4) Reporting, 100 hours
_.8(g)(3)(iii)(A) Reporting, 16 hours
_.8(g)(6) Reporting, 16 hours

    Total Estimated Annual Burden: 685,156 hours.
    The Board has a continuing interest in the public's opinions of 
collections of information. At any time, comments regarding the burden 
estimate, or any other aspect of this collection of information, 
including suggestions for reducing the burden, may be sent to:

[[Page 64040]]

Secretary, Board of Governors of the Federal Reserve System, 20th and C 
Streets NW., Washington, DC 20551; and to the Office of Management and 
Budget, Paperwork Reduction Project (7100-0342), Washington, DC 20503.

B. Regulatory Flexibility Act Analysis

    The Board has considered the potential impact of the final rule on 
small companies in accordance with the Regulatory Flexibility Act (5 
U.S.C. 603(b)). Based on its analysis and for the reasons stated below, 
the Board believes that the final rule will not have a significant 
economic impact on a substantial number of small entities. 
Nevertheless, the Board is publishing a final regulatory flexibility 
analysis.
    Under regulations issued by the Small Business Administration 
(``SBA''), a small entity includes a depository institution, bank 
holding company, or savings and loan holding company with total assets 
of $550 million or less (a small banking organization).\43\ The final 
rule will apply to bank holding companies, savings and loan holding 
companies, and state member banks with total consolidated asset of $10 
billion or more and nonbank financial companies supervised by the 
Board. Companies that will be subject to the final rule therefore 
substantially exceed the $550 million total asset threshold at which a 
company is considered a small company under SBA regulations.
---------------------------------------------------------------------------

    \43\ See 13 CFR 121.201. Effective July 14, 2014, the SBA 
revised the size standards for banking organizations to $550 million 
in assets from $500 million in assets. 79 FR 33647 (June 12, 2014).
---------------------------------------------------------------------------

    In light of the foregoing, the Board does not believe that the 
final rule will have a significant economic impact on a substantial 
number of small entities.

C. Solicitation of Comments on the Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471, 12 U.S.C. 4809) requires the federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The Board sought to present the proposed rule in a 
simple and straightforward manner and solicited comment on how to make 
the proposed rule easier to understand. No comments were received on 
the use of plain language.

List of Subjects

12 CFR Part 225

    Administrative practice and procedure, Banks, banking, Capital 
planning, Holding companies, Reporting and recordkeeping requirements, 
Securities, Stress testing.

12 CFR Part 252

    Administrative practice and procedure, Banks, Banking, Capital 
planning, Federal Reserve System, Holding companies, Reporting and 
recordkeeping requirements, Securities, Stress testing.

Authority and Issuance

    For the reasons stated in the Supplementary Information, the Board 
of Governors of the Federal Reserve System amends 12 CFR chapter II as 
follows:

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

0
1. The authority citation for part 225 is revised to read as follows:

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

Subpart A--General Provisions

0
2. Section 225.8 is revised to read as follows:


Sec.  225.8  Capital planning.

    (a) Purpose. This section establishes capital planning and prior 
notice and approval requirements for capital distributions by certain 
bank holding companies.
    (b) Scope and reservation of authority--(1) Applicability. Except 
as provided in paragraph (c) of this section, this section applies to:
    (i) Any top-tier bank holding company domiciled in the United 
States with average total consolidated assets of $50 billion or more 
($50 billion asset threshold);
    (ii) Any other bank holding company domiciled in the United States 
that is made subject to this section, in whole or in part, by order of 
the Board;
    (iii) Any U.S. intermediate holding company subject to this section 
pursuant to 12 CFR 252.153; and
    (iv) Any nonbank financial company supervised by the Board that is 
made subject to this section pursuant to a rule or order of the Board.
    (2) Average total consolidated assets. For purposes of this 
section, average total consolidated assets means the average of the 
total consolidated assets as reported by a bank holding company on its 
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) 
for the four most recent consecutive quarters. If the bank holding 
company has not filed the FR Y-9C for each of the four most recent 
consecutive quarters, average total consolidated assets means the 
average of the company's total consolidated assets, as reported on the 
company's FR Y-9C, for the most recent quarter or consecutive quarters, 
as applicable. Average total consolidated assets are measured on the 
as-of date of the most recent FR Y-9C used in the calculation of the 
average.
    (3) Ongoing applicability. A bank holding company (including any 
successor bank holding company) that is subject to any requirement in 
this section shall remain subject to any such requirement unless and 
until its total consolidated assets fall below $50 billion for each of 
four consecutive quarters, as reported on the FR Y-9C and effective on 
the as-of date of the fourth consecutive FR Y-9C.
    (4) Reservation of authority. Nothing in this section shall limit 
the authority of the Federal Reserve to issue a capital directive or 
take any other supervisory or enforcement action, including an action 
to address unsafe or unsound practices or conditions or violations of 
law.
    (5) Rule of construction. Unless the context otherwise requires, 
any reference to bank holding company in this section shall include a 
U.S. intermediate holding company and shall include a nonbank financial 
company supervised by the Board to the extent this section is made 
applicable pursuant to a rule or order of the Board.
    (c) Transitional arrangements--(1) Transition periods for certain 
bank holding companies. (i) A bank holding company is subject to this 
section beginning on the first day of the first capital plan cycle that 
begins after the bank holding company meets or exceeds the $50 billion 
asset threshold (as measured under paragraph (b) of this section), 
unless that time is extended by the Board in writing.
    (ii) The Board or the appropriate Reserve Bank with the concurrence 
of the Board, may require a bank holding company described in paragraph 
(c)(1)(i) of this section to comply with any or all of the requirements 
in paragraphs (e)(1), (e)(3), (f), or (g) of this section if the Board 
or appropriate Reserve Bank with concurrence of the Board, determines 
that the requirement is appropriate on a different date based on the 
company's risk profile, scope of operation, or financial condition and 
provides prior notice to the company of the determination.
    (2) Transition periods for subsidiaries of certain foreign banking 
organizations--(i) Bank holding companies that rely on SR Letter 01-01. 
(A) A bank holding company that meets

[[Page 64041]]

the $50 billion asset threshold (as measured under paragraph (b) of 
this section) and is relying as of July 20, 2015, on Supervision and 
Regulation Letter SR 01-01 issued by the Board (as in effect on May 19, 
2010) is subject to this section beginning on January 1, 2016, unless 
that time is extended by the Board in writing.
    (B) The Board or the appropriate Reserve Bank with the concurrence 
of the Board, may require a bank holding company described in paragraph 
(c)(2)(i)(A) of this section to comply with any or all of the 
requirements in paragraphs (e)(1), (e)(3), (f), or (g) of this section 
if the Board or appropriate Reserve Bank with concurrence of the Board, 
determines that the requirement is appropriate on a different date 
based on the company's risk profile, scope of operation, or financial 
condition and provides prior notice to the company of the 
determination.
    (ii) U.S. intermediate holding companies. (A) A U.S. intermediate 
holding company is subject to this section beginning on the first day 
of the first capital plan cycle after the date that the U.S. 
intermediate holding company is required to be established pursuant to 
12 CFR 252.153, unless that time is extended by the Board in writing.
    (B) The Board or the appropriate Reserve Bank with the concurrence 
of the Board, may require a U.S. intermediate holding company described 
in paragraph (c)(2)(ii)(A) of this section to comply with any or all of 
the requirements in paragraphs (e)(1), (e)(3), (f), or (g) of this 
section if the Board or appropriate Reserve Bank with concurrence of 
the Board, determines that the requirement is appropriate on a 
different date based on the company's risk profile, scope of operation, 
or financial condition and provides prior notice to the company of the 
determination.
    (iii) Bank holding company subsidiaries of U.S. intermediate 
holding companies required to be established by July 1, 2016. (A) 
Notwithstanding any other requirement in this section, a bank holding 
company that is a subsidiary of a U.S. intermediate holding company 
(or, with the mutual consent of the company and Board, another bank 
holding company domiciled in the United States) shall remain subject to 
paragraph (e) of this section until December 31, 2017 and shall remain 
subject to the requirements of paragraphs (f) and (g) of this section 
until the Board issues an objection or non-objection to the capital 
plan of the relevant U.S. intermediate holding company.
    (B) After the time periods set forth in paragraph (c)(iii)(A) of 
this section, this section will cease to apply to a bank holding 
company that is a subsidiary of a U.S. intermediate holding company, 
unless otherwise determined by the Board in writing.
    (3) Transition periods for bank holding companies subject to the 
advanced approaches. (i) Notwithstanding any other requirement in this 
section, a bank holding company must use 12 CFR part 225, appendices A 
and E (as applicable), and 12 CFR part 217, subpart D and F, as 
applicable, to estimate its pro forma regulatory capital ratios and its 
pro forma tier 1 common ratio for the capital plan cycle beginning on 
October 1, 2014, and the bank holding company may not use the advanced 
approaches to estimate its pro forma regulatory capital ratios and its 
pro forma tier 1 common ratio until January 1, 2016.
    (ii) Beginning January 1, 2016, a bank holding company must use the 
advanced approaches to estimate its pro forma regulatory capital ratios 
and its pro forma tier 1 common ratio for purposes of its capital plan 
submission under paragraph (e) of this section if the Board notifies 
the bank holding company before the first day of the capital plan cycle 
that the bank holding company is required to use the advanced 
approaches to determine its risk-based capital requirements.
    (d) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Advanced approaches means the risk-weighted assets calculation 
methodologies at 12 CFR part 217, subpart E, as applicable, and any 
successor regulation.
    (2) BHC stress scenario means a scenario designed by a bank holding 
company that stresses the specific vulnerabilities of the bank holding 
company's risk profile and operations, including those related to the 
company's capital adequacy and financial condition.
    (3) Capital action means any issuance or redemption of a debt or 
equity capital instrument, any capital distribution, and any similar 
action that the Federal Reserve determines could impact a bank holding 
company's consolidated capital.
    (4) Capital distribution means a redemption or repurchase of any 
debt or equity capital instrument, a payment of common or preferred 
stock dividends, a payment that may be temporarily or permanently 
suspended by the issuer on any instrument that is eligible for 
inclusion in the numerator of any minimum regulatory capital ratio, and 
any similar transaction that the Federal Reserve determines to be in 
substance a distribution of capital.
    (5) Capital plan means a written presentation of a bank holding 
company's capital planning strategies and capital adequacy process that 
includes the mandatory elements set forth in paragraph (e)(2) of this 
section.
    (6) Capital plan cycle means:
    (i) Until September 30, 2015, the period beginning on October 1 of 
a calendar year and ending on September 30 of the following calendar 
year, and
    (ii) Beginning October 1, 2015, the period beginning on January 1 
of a calendar year and ending on December 31 of that year.
    (7) Capital policy means a bank holding company's written 
assessment of the principles and guidelines used for capital planning, 
capital issuance, capital usage and distributions, including internal 
capital goals; the quantitative or qualitative guidelines for capital 
distributions; the strategies for addressing potential capital 
shortfalls; and the internal governance procedures around capital 
policy principles and guidelines.
    (8) Minimum regulatory capital ratio means any minimum regulatory 
capital ratio that the Federal Reserve may require of a bank holding 
company, by regulation or order, including, as applicable, the bank 
holding company's tier 1 and supplementary leverage ratios and common 
equity tier 1, tier 1, and total risk-based capital ratios as 
calculated under appendices A, D, and E to this part (12 CFR part 225) 
and 12 CFR part 217, as applicable, including the transition provisions 
at 12 CFR 217.1(f)(4) and 12 CFR 217.300, or any successor regulation.
    (9) Nonbank financial company supervised by the Board means a 
company that the Financial Stability Oversight Council has determined 
under section 113 of the Dodd-Frank Act (12 U.S.C. 5323) shall be 
supervised by the Board and for which such determination is still in 
effect.
    (10) Planning horizon means the period of at least nine consecutive 
quarters, beginning with the quarter preceding the quarter in which the 
bank holding company submits its capital plan, over which the relevant 
projections extend.
    (11) Tier 1 capital has the same meaning as under appendix A to 
this part or under 12 CFR part 217, as applicable, or any successor 
regulation.
    (12) Tier 1 common capital means tier 1 capital as defined under 
appendix A to this part less the non-common elements of tier 1 capital, 
including perpetual preferred stock and related surplus, minority 
interest in

[[Page 64042]]

subsidiaries, trust preferred securities and mandatory convertible 
preferred securities.
    (13) Tier 1 common ratio means the ratio of a bank holding 
company's tier 1 common capital to total risk-weighted assets as 
defined under appendices A and E to this part.
    (14) U.S. intermediate holding company means the top-tier U.S. 
company that is required to be established pursuant to 12 CFR 252.153.
    (e) General requirements--(1) Annual capital planning. (i) A bank 
holding company must develop and maintain a capital plan.
    (ii) A bank holding company must submit its complete capital plan 
to the Board and the appropriate Reserve Bank each year. For the 
capital plan cycle beginning on October 1, 2014, the capital plan must 
be submitted by January 5, 2015, or such later date as directed by the 
Board or by the appropriate Reserve Bank with concurrence of the Board. 
For each capital plan cycle beginning thereafter, the capital plan must 
be submitted by April 5, or such later date as directed by the Board or 
by the appropriate Reserve Bank with concurrence of the Board.
    (iii) The bank holding company's board of directors or a designated 
committee thereof must at least annually and prior to submission of the 
capital plan under paragraph (e)(1)(ii) of this section:
    (A) Review the robustness of the bank holding company's process for 
assessing capital adequacy,
    (B) Ensure that any deficiencies in the bank holding company's 
process for assessing capital adequacy are appropriately remedied; and
    (C) Approve the bank holding company's capital plan.
    (2) Mandatory elements of capital plan. A capital plan must contain 
at least the following elements:
    (i) An assessment of the expected uses and sources of capital over 
the planning horizon that reflects the bank holding company's size, 
complexity, risk profile, and scope of operations, assuming both 
expected and stressful conditions, including:
    (A) Estimates of projected revenues, losses, reserves, and pro 
forma capital levels, including any minimum regulatory capital ratios 
(for example, leverage, tier 1 risk-based, and total risk-based capital 
ratios) and any additional capital measures deemed relevant by the bank 
holding company, over the planning horizon under expected conditions 
and under a range of scenarios, including any scenarios provided by the 
Federal Reserve and at least one BHC stress scenario;
    (B) A calculation of the pro forma tier 1 common ratio over the 
planning horizon under expected conditions and under a range of 
stressed scenarios and discussion of how the company will maintain a 
pro forma tier 1 common ratio above 5 percent under expected conditions 
and the stressed scenarios required under paragraphs (e)(2)(i)(A) and 
(e)(2)(ii) of this section;
    (C) A discussion of the results of any stress test required by law 
or regulation, and an explanation of how the capital plan takes these 
results into account; and
    (D) A description of all planned capital actions over the planning 
horizon.
    (ii) A detailed description of the bank holding company's process 
for assessing capital adequacy, including:
    (A) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain capital commensurate with 
its risks, maintain capital above the minimum regulatory capital ratios 
and above a tier 1 common ratio of 5 percent, and serve as a source of 
strength to its subsidiary depository institutions;
    (B) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain sufficient capital to 
continue its operations by maintaining ready access to funding, meeting 
its obligations to creditors and other counterparties, and continuing 
to serve as a credit intermediary;
    (iii) The bank holding company's capital policy; and
    (iv) A discussion of any expected changes to the bank holding 
company's business plan that are likely to have a material impact on 
the bank holding company's capital adequacy or liquidity.
    (3) Data collection. Upon the request of the Board or appropriate 
Reserve Bank, the bank holding company shall provide the Federal 
Reserve with information regarding:
    (i) The bank holding company's financial condition, including its 
capital;
    (ii) The bank holding company's structure;
    (iii) Amount and risk characteristics of the bank holding company's 
on- and off-balance sheet exposures, including exposures within the 
bank holding company's trading account, other trading-related exposures 
(such as counterparty-credit risk exposures) or other items sensitive 
to changes in market factors, including, as appropriate, information 
about the sensitivity of positions to changes in market rates and 
prices;
    (iv) The bank holding company's relevant policies and procedures, 
including risk management policies and procedures;
    (v) The bank holding company's liquidity profile and management;
    (vi) The loss, revenue, and expense estimation models used by the 
bank holding company for stress scenario analysis, including supporting 
documentation regarding each model's development and validation; and
    (vii) Any other relevant qualitative or quantitative information 
requested by the Board or by the appropriate Reserve Bank to facilitate 
review of the bank holding company's capital plan under this section.
    (4) Re-submission of a capital plan. (i) A bank holding company 
must update and re-submit its capital plan to the appropriate Reserve 
Bank within 30 calendar days of the occurrence of one of the following 
events:
    (A) The bank holding company determines there has been or will be a 
material change in the bank holding company's risk profile, financial 
condition, or corporate structure since the bank holding company last 
submitted the capital plan to the Board and the appropriate Reserve 
Bank under this section; or
    (B) The Board or the appropriate Reserve Bank with concurrence of 
the Board, directs the bank holding company in writing to revise and 
resubmit its capital plan for any of the following reasons:
    (1) The capital plan is incomplete or the capital plan, or the bank 
holding company's internal capital adequacy process, contains material 
weaknesses;
    (2) There has been, or will likely be, a material change in the 
bank holding company's risk profile (including a material change in its 
business strategy or any risk exposure), financial condition, or 
corporate structure;
    (3) The BHC stress scenario(s) are not appropriate for the bank 
holding company's business model and portfolios, or changes in 
financial markets or the macro-economic outlook that could have a 
material impact on a bank holding company's risk profile and financial 
condition require the use of updated scenarios; or
    (4) The capital plan or the condition of the bank holding company 
raise any of the issues described in paragraph (f)(2)(ii) of this 
section.
    (ii) A bank holding company may resubmit its capital plan to the 
Federal Reserve if the Board or the appropriate Reserve Bank objects to 
the capital plan.
    (iii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, may extend the 30-day period in

[[Page 64043]]

paragraph (e)(4)(i) of this section for up to an additional 60 calendar 
days, or such longer period as the Board or the appropriate Reserve 
Bank, with concurrence of the Board, determines, in its discretion, 
appropriate.
    (iv) Any updated capital plan must satisfy all the requirements of 
this section; however, a bank holding company may continue to rely on 
information submitted as part of a previously submitted capital plan to 
the extent that the information remains accurate and appropriate.
    (5) Confidential treatment of information submitted. The 
confidentiality of information submitted to the Board under this 
section and related materials shall be determined in accordance with 
applicable exemptions under the Freedom of Information Act (5 U.S.C. 
552(b)) and the Board's Rules Regarding Availability of Information (12 
CFR part 261).
    (f) Review of capital plans by the Federal Reserve; publication of 
summary results--(1) Considerations and inputs. (i) The Board or the 
appropriate Reserve Bank with concurrence of the Board, will consider 
the following factors in reviewing a bank holding company's capital 
plan:
    (A) The comprehensiveness of the capital plan, including the extent 
to which the analysis underlying the capital plan captures and 
addresses potential risks stemming from activities across the firm and 
the company's capital policy;
    (B) The reasonableness of the bank holding company's capital plan, 
the assumptions and analysis underlying the capital plan, and the 
robustness of its capital adequacy process; and
    (C) The bank holding company's ability to maintain capital above 
each minimum regulatory capital ratio and above a tier 1 common ratio 
of 5 percent on a pro forma basis under expected and stressful 
conditions throughout the planning horizon, including but not limited 
to any scenarios required under paragraphs (e)(2)(i)(A) and (e)(2)(ii) 
of this section.
    (ii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, will also consider the following information in reviewing a 
bank holding company's capital plan:
    (A) Relevant supervisory information about the bank holding company 
and its subsidiaries;
    (B) The bank holding company's regulatory and financial reports, as 
well as supporting data that would allow for an analysis of the bank 
holding company's loss, revenue, and reserve projections;
    (C) As applicable, the Federal Reserve's own pro forma estimates of 
the firm's potential losses, revenues, reserves, and resulting capital 
adequacy under expected and stressful conditions, including but not 
limited to any scenarios required under paragraphs (e)(2)(i)(A) and 
(e)(2)(ii) of this section, as well as the results of any stress tests 
conducted by the bank holding company or the Federal Reserve; and
    (D) Other information requested or required by the Board or the 
appropriate Reserve Bank, as well as any other information relevant, or 
related, to the bank holding company's capital adequacy.
    (2) Federal Reserve action on a capital plan. (i) The Board or the 
appropriate Reserve Bank with concurrence of the Board, will object, in 
whole or in part, to the capital plan or provide the bank holding 
company with a notice of non-objection to the capital plan:
    (A) For the capital plan cycle beginning on October 1, 2014, by 
March 31, 2015;
    (B) For each capital plan cycle beginning thereafter, by June 30 of 
the calendar year in which a capital plan was submitted pursuant to 
paragraph (e)(1)(ii) of this section; and
    (C) For a capital plan resubmitted pursuant to paragraph (e)(4) of 
this section, within 75 calendar days after the date on which a capital 
plan is resubmitted, unless the Board provides notice to the company 
that it is extending the time period.
    (ii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, may object to a capital plan if it determines that:
    (A) The bank holding company has material unresolved supervisory 
issues, including but not limited to issues associated with its capital 
adequacy process;
    (B) The assumptions and analysis underlying the bank holding 
company's capital plan, or the bank holding company's methodologies for 
reviewing the robustness of its capital adequacy process, are not 
reasonable or appropriate;
    (C) The bank holding company has not demonstrated an ability to 
maintain capital above each minimum regulatory capital ratio and above 
a tier 1 common ratio of 5 percent, on a pro forma basis under expected 
and stressful conditions throughout the planning horizon; or
    (D) The bank holding company's capital planning process or proposed 
capital distributions otherwise constitute an unsafe or unsound 
practice, or would violate any law, regulation, Board order, directive, 
or condition imposed by, or written agreement with, the Board or the 
appropriate Reserve Bank. In determining whether a capital plan or any 
proposed capital distribution would constitute an unsafe or unsound 
practice, the Board or the appropriate Reserve Bank would consider 
whether the bank holding company is and would remain in sound financial 
condition after giving effect to the capital plan and all proposed 
capital distributions.
    (iii) The Board or the appropriate Reserve Bank will notify the 
bank holding company in writing of the reasons for a decision to object 
to a capital plan.
    (iv) If the Board or the appropriate Reserve Bank objects to a 
capital plan and until such time as the Board or the appropriate 
Reserve Bank with concurrence of the Board, issues a non-objection to 
the bank holding company's capital plan, the bank holding company may 
not make any capital distribution, other than capital distributions 
arising from the issuance of a regulatory capital instrument eligible 
for inclusion in the numerator of a minimum regulatory capital ratio or 
capital distributions with respect to which the Board or the 
appropriate Reserve Bank has indicated in writing its non-objection.
    (v) The Board may disclose publicly its decision to object or not 
object to a bank holding company's capital plan under this section, 
along with a summary of the Board's analyses of that company. Any 
disclosure under this paragraph will occur by March 31 (for the capital 
plan cycle beginning on October 1, 2014) or June 30 (for each capital 
plan cycle beginning thereafter), unless the Board determines that a 
later disclosure date is appropriate.
    (3) Request for reconsideration or hearing--(i) General. Within 15 
calendar days of receipt of a notice of objection to a capital plan by 
the Board or the appropriate Reserve Bank:
    (A) A bank holding company may submit a written request to the 
Board requesting reconsideration of the objection, including an 
explanation of why reconsideration should be granted. Within 15 
calendar days of receipt of the bank holding company's request, the 
Board will notify the company of its decision to affirm or withdraw the 
objection to the bank holding company's capital plan or a specific 
capital distribution; or
    (B) As an alternative to paragraph (f)(3)(i)(A) of this section, a 
bank holding company may request an informal hearing on the objection.
    (ii) Request for an informal hearing. (A) A request for an informal 
hearing shall be in writing and shall be submitted within 15 calendar 
days of a

[[Page 64044]]

notice of an objection. The Board may, in its sole discretion, order an 
informal hearing if the Board finds that a hearing is appropriate or 
necessary to resolve disputes regarding material issues of fact.
    (B) An informal hearing shall be held within 30 calendar days of a 
request, if granted, provided that the Board may extend this period 
upon notice to the requesting party.
    (C) Written notice of the final decision of the Board shall be 
given to the bank holding company within 60 calendar days of the 
conclusion of any informal hearing ordered by the Board, provided that 
the Board may extend this period upon notice to the requesting party.
    (D) While the Board's final decision is pending and until such time 
as the Board or the appropriate Reserve Bank with concurrence of the 
Board issues a non-objection to the bank holding company's capital 
plan, the bank holding company may not make any capital distribution, 
other than those capital distributions with respect to which the Board 
or the appropriate Reserve Bank has indicated in writing its non-
objection.
    (4) Application of this section to other bank holding companies. 
The Board may apply this section, in whole or in part, to any other 
bank holding company by order based on the institution's size, level of 
complexity, risk profile, scope of operations, or financial condition.
    (g) Approval requirements for certain capital actions--(1) 
Circumstances requiring approval. Notwithstanding a notice of non-
objection under paragraph (f)(2)(i) of this section, a bank holding 
company may not make a capital distribution (excluding any capital 
distribution arising from the issuance of a regulatory capital 
instrument eligible for inclusion in the numerator of a minimum 
regulatory capital ratio) under the following circumstances, unless it 
receives prior approval from the Board or appropriate Reserve Bank 
pursuant to paragraph (g)(5) of this section:
    (i) After giving effect to the capital distribution, the bank 
holding company would not meet a minimum regulatory capital ratio or a 
tier 1 common ratio of at least 5 percent;
    (ii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, notifies the company in writing that the Federal Reserve has 
determined that the capital distribution would result in a material 
adverse change to the organization's capital or liquidity structure or 
that the company's earnings were materially underperforming 
projections;
    (iii) Except as provided in paragraph (g)(2) of this section, the 
dollar amount of the capital distribution will exceed the amount 
described in the capital plan for which a non-objection was issued 
under this section, as measured on an aggregate basis beginning in the 
third quarter of the planning horizon through the quarter at issue; or
    (iv) The capital distribution would occur after the occurrence of 
an event requiring resubmission under paragraphs (e)(4)(i)(A) or (B) of 
this section and before the Federal Reserve has acted on the 
resubmitted capital plan.
    (2) Exception for well capitalized bank holding companies. (i) A 
bank holding company may make a capital distribution for which the 
dollar amount exceeds the amount described in the capital plan for 
which a non-objection was issued under paragraph (f)(2)(i) of this 
section if the following conditions are satisfied:
    (A) The bank holding company is, and after the capital distribution 
would remain, well capitalized as defined in Sec.  225.2(r) of 
Regulation Y (12 CFR 225.2(r));
    (B) The bank holding company's performance and capital levels are, 
and after the capital distribution would remain, consistent with its 
projections under expected conditions as set forth in its capital plan 
under paragraph (f)(2)(i) of this section;
    (C) The annual aggregate dollar amount of all capital distributions 
(for purposes of the capital plan cycle beginning on October 1, 2014, 
in the period beginning on April 1, 2015 and ending on March 31, 2016, 
and for purposes of each capital plan cycle beginning thereafter, in 
the period beginning on July 1 of a calendar year and ending on June 30 
of the following calendar year) would not exceed the total amounts 
described in the company's capital plan for which the bank holding 
company received a notice of non-objection by more than 1.00 percent 
multiplied by the bank holding company's tier 1 capital, as reported to 
the Federal Reserve on the bank holding company's first quarter FR Y-
9C;
    (D) The bank holding company provides the appropriate Reserve Bank 
with notice 15 calendar days prior to a capital distribution that 
includes the elements described in paragraph (g)(4) of this section; 
and
    (E) The Board or the appropriate Reserve Bank with concurrence of 
the Board, does not object to the transaction proposed in the notice. 
In determining whether to object to the proposed transaction, the Board 
or the appropriate Reserve Bank shall apply the criteria described in 
paragraph (g)(5)(ii) of this section.
    (ii) The exception in this paragraph (g)(2) shall not apply if the 
Board or the appropriate Reserve Bank notifies the bank holding company 
in writing that it may not take advantage of this exception.
    (3) Net distribution limitation--(i) General. Notwithstanding a 
notice of non-objection under paragraph (f)(2)(i) of this section, a 
bank holding company must reduce its capital distributions in 
accordance with paragraph (g)(3)(ii) of this section if the bank 
holding company raises a smaller dollar amount of capital of a given 
category of regulatory capital instruments than it had included in its 
capital plan, as measured on an aggregate basis beginning in the third 
quarter of the planning horizon through the end of the current quarter.
    (ii) Reduction of distributions--(A) Common equity tier 1 capital. 
If the bank holding company raises a smaller dollar amount of common 
equity tier 1 capital (as defined in 12 CFR 217.2), the bank holding 
company must reduce its capital distributions relating to common equity 
tier 1 capital such that the dollar amount of the bank holding 
company's capital distributions, net of the dollar amount of its 
capital raises, (``net distributions'') relating to common equity tier 
1 capital is no greater than the dollar amount of net distributions 
relating to common equity tier 1 capital included in its capital plan, 
as measured on an aggregate basis beginning in the third quarter of the 
planning horizon through the end of the current quarter.
    (B) Additional tier 1 capital. If the bank holding company raises a 
smaller dollar amount of additional tier 1 capital (as defined in 12 
CFR 217.2), the bank holding company must reduce its capital 
distributions relating to additional tier 1 capital (other than 
scheduled payments on additional tier 1 capital instruments) such that 
the dollar amount of the bank holding company's net distributions 
relating to additional tier 1 capital is no greater than the dollar 
amount of net distributions relating to additional tier 1 capital 
included in its capital plan, as measured on an aggregate basis 
beginning in the third quarter of the planning horizon through the end 
of the current quarter.
    (C) Tier 2 capital. If the bank holding company raises a smaller 
dollar amount of tier 2 capital (as defined in 12 CFR 217.2), the bank 
holding company must reduce its capital distributions relating to tier 
2 capital (other than scheduled payments on tier 2 capital instruments) 
such that the dollar amount of the bank holding company's net 
distributions

[[Page 64045]]

relating to tier 2 capital is no greater than the dollar amount of net 
distributions relating to tier 2 capital included in its capital plan, 
as measured on an aggregate basis beginning in the third quarter of the 
planning horizon through the end of the current quarter.
    (iii) Exceptions. Paragraphs (g)(3)(i) and (ii) of this section 
shall not apply:
    (A) To the extent that the Board or appropriate Reserve Bank 
indicates in writing its non-objection pursuant to paragraph (g)(5) of 
this section, following a request for non-objection from the bank 
holding company that includes all of the information required to be 
submitted under paragraph (g)(4) of this section;
    (B) To capital distributions arising from the issuance of a 
regulatory capital instrument eligible for inclusion in the numerator 
of a minimum regulatory capital ratio that the bank holding company had 
not included in its capital plan;
    (C) To the extent that the bank holding company raised a smaller 
dollar amount of capital in the category of regulatory capital 
instruments described in paragraph (g)(3)(i) of this section due to 
employee-directed capital issuances related to an employee stock 
ownership plan;
    (D) To the extent that the bank holding company raised a smaller 
dollar amount of capital in the category of regulatory capital 
instruments described in paragraph (g)(3)(i) of this section due to a 
planned merger or acquisition that is no longer expected to be 
consummated or for which the consideration paid is lower than the 
projected price in the capital plan; or
    (E) To the extent that the dollar amount by which the bank holding 
company's net distributions exceed the dollar amount of net 
distributions included in its capital plan in the category of 
regulatory capital instruments described in paragraph (g)(3)(i) of this 
section, as measured on an aggregate basis beginning in the third 
quarter of the planning horizon through the end of the current quarter, 
is less than 1.00 percent of the bank holding company's tier 1 capital, 
as reported to the Federal Reserve on the bank holding company's first 
quarter FR Y-9C, and the bank holding company notifies the appropriate 
Reserve Bank at least 15 calendar days in advance of any capital 
distribution in that category of regulatory capital instruments.
    (4) Contents of request. (i) A request for a capital distribution 
under this section shall be filed with the appropriate Reserve Bank and 
the Board and shall contain the following information:
    (A) The bank holding company's current capital plan or an 
attestation that there have been no changes to the capital plan since 
it was last submitted to the Federal Reserve;
    (B) The purpose of the transaction;
    (C) A description of the capital distribution, including for 
redemptions or repurchases of securities, the gross consideration to be 
paid and the terms and sources of funding for the transaction, and for 
dividends, the amount of the dividend(s); and
    (D) Any additional information requested by the Board or the 
appropriate Reserve Bank (which may include, among other things, an 
assessment of the bank holding company's capital adequacy under a 
revised stress scenario provided by the Federal Reserve, a revised 
capital plan, and supporting data).
    (ii) Any request submitted with respect to a capital distribution 
described in paragraph (g)(1)(i) of this section shall also include a 
plan for restoring the bank holding company's capital to an amount 
above a minimum level within 30 calendar days and a rationale for why 
the capital distribution would be appropriate.
    (5) Approval of certain capital distributions. (i) The Board or the 
appropriate Reserve Bank with concurrence of the Board, will act on a 
request under this paragraph (g)(5) within 30 calendar days after the 
receipt of all the information required under paragraph (g)(4) of this 
section.
    (ii) In acting on a request under this paragraph, the Board or 
appropriate Reserve Bank will apply the considerations and principles 
in paragraph (f) of this section. In addition, the Board or the 
appropriate Reserve Bank may disapprove the transaction if the bank 
holding company does not provide all of the information required to be 
submitted under paragraph (g)(4) of this section.
    (6) Disapproval and hearing. (i) The Board or the appropriate 
Reserve Bank will notify the bank holding company in writing of the 
reasons for a decision to disapprove any proposed capital distribution. 
Within 15 calendar days after receipt of a disapproval by the Board, 
the bank holding company may submit a written request for a hearing.
    (A) The Board may, in its sole discretion, order an informal 
hearing if the Board finds that a hearing is appropriate or necessary 
to resolve disputes regarding material issues of fact.
    (B) An informal hearing shall be held within 30 calendar days of a 
request, if granted, provided that the Board may extend this period 
upon notice to the requesting party.
    (C) Written notice of the final decision of the Board shall be 
given to the bank holding company within 60 calendar days of the 
conclusion of any informal hearing ordered by the Board, provided that 
the Board may extend this period upon notice to the requesting party.
    (D) While the Board's final decision is pending and until such time 
as the Board or the appropriate Reserve Bank with concurrence of the 
Board, approves the capital distribution at issue, the bank holding 
company may not make such capital distribution.

Appendix A to Part 225 [Removal Withdrawn]

0
3. The removal of appendix A to part 225 published October 11, 2013, at 
78 FR 62291, and effective January 1, 2019, is withdrawn.

PART 252--ENHANCED PRUDENTIAL STANDARDS (REGULATION YY)


0
4. The authority citation for part 252 is revised to read as follows:

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


0
5. Subpart B is revised to read as follows:
Subpart B--Company-Run Stress Test Requirements for Certain U.S. 
Banking Organizations With Total Consolidated Assets Over $10 Billion 
and Less Than $50 Billion
Sec.
252.10 [Reserved]
252.11 Authority and purpose.
252.12 Definitions.
252.13 Applicability.
252.14 Annual stress test.
252.15 Methodologies and practices.
252.16 Reports of stress test results.
252.17 Disclosure of stress test results.


Sec.  252.10  [Reserved]


Sec.  252.11  Authority and purpose.

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

[[Page 64046]]

Sec.  252.12  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Advanced approaches means the regulatory capital requirements 
at 12 CFR part 217, subpart E, as applicable, and any successor 
regulation.
    (b) Adverse scenario means a set of conditions that affect the U.S. 
economy or the financial condition of a bank holding company, savings 
and loan holding company, or state member bank that are more adverse 
than those associated with the baseline scenario and may include 
trading or other additional components.
    (c) Asset threshold means:
    (1) For a bank holding company, average total consolidated assets 
of greater than $10 billion but less than $50 billion, and
    (2) For a savings and loan holding company or state member bank, 
average total consolidated assets of greater than $10 billion.
    (d) Average total consolidated assets means the average of the 
total consolidated assets as reported by a bank holding company, 
savings and loan holding company, or state member bank on its 
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) 
or Consolidated Report of Condition and Income (Call Report), as 
applicable, for the four most recent consecutive quarters. If the bank 
holding company, savings and loan holding company, or state member bank 
has not filed the FR Y-9C or Call Report, as applicable, for each of 
the four most recent consecutive quarters, average total consolidated 
assets means the average of the company's total consolidated assets, as 
reported on the company's FR Y-9C or Call Report, as applicable, for 
the most recent quarter or consecutive quarters. Average total 
consolidated assets are measured on the as-of date of the most recent 
FR Y-9C or Call Report, as applicable, used in the calculation of the 
average.
    (e) Bank holding company has the same meaning as in Sec.  225.2(c) 
of the Board's Regulation Y (12 CFR 225.2(c)).
    (f) Baseline scenario means a set of conditions that affect the 
U.S. economy or the financial condition of a bank holding company, 
savings and loan holding company, or state member bank, and that 
reflect the consensus views of the economic and financial outlook.
    (g) Capital action has the same meaning as in Sec.  225.8(c)(2) of 
the Board's Regulation Y (12 CFR 225.8(c)(2)).
    (h) Covered company subsidiary means a state member bank that is a 
subsidiary of a covered company as defined in subpart F of this part.
    (i) Depository institution has the same meaning as in section 3 of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
    (j) Foreign banking organization has the same meaning as in Sec.  
211.21(o) of the Board's Regulation K (12 CFR 211.21(o)).
    (k) Planning horizon means the period of at least nine consecutive 
quarters, beginning on the first day of a stress test cycle over which 
the relevant projections extend.
    (l) Pre-provision net revenue means the sum of net interest income 
and non-interest income less expenses before adjusting for loss 
provisions.
    (m) Provision for loan and lease losses means the provision for 
loan and lease losses as reported by the bank holding company, savings 
and loan holding company, or state member bank on the FR Y-9C or Call 
Report, as appropriate.
    (n) Regulatory capital ratio means a capital ratio for which the 
Board established minimum requirements for the company by regulation or 
order, including, as applicable, a company's tier 1 and supplementary 
leverage ratio and common equity tier 1, tier 1, and total risk-based 
capital ratios as calculated under the Board's regulations, including 
appendices A, D, and E to 12 CFR part 225, appendices A, B, and E to 12 
CFR part 208, and 12 CFR part 217, as applicable, including the 
transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, or any 
successor regulation. For state member banks other than covered company 
subsidiaries and for all bank holding companies, for the stress test 
cycle that commences on October 1, 2013, regulatory capital ratios must 
be calculated pursuant to the regulatory capital framework set forth in 
12 CFR part 225, appendix A, and not the regulatory capital framework 
set forth in 12 CFR part 217.
    (o) Savings and loan holding company has the same meaning as in 
Sec.  238.2(m) of the Board's Regulation LL (12 CFR 238.2(m)).
    (p) Scenarios are those sets of conditions that affect the U.S. 
economy or the financial condition of a bank holding company, savings 
and loan holding company, or state member bank that the Board annually 
determines are appropriate for use in the company-run stress tests, 
including, but not limited to, baseline, adverse, and severely adverse 
scenarios.
    (q) Severely adverse scenario means a set of conditions that affect 
the U.S. economy or the financial condition of a bank holding company, 
savings and loan holding company, or state member bank and that overall 
are more severe than those associated with the adverse scenario and may 
include trading or other additional components.
    (r) State member bank has the same meaning as in Sec.  208.2(g) of 
the Board's Regulation H (12 CFR 208.2(g)).
    (s) Stress test means a process to assess the potential impact of 
scenarios on the consolidated earnings, losses, and capital of a bank 
holding company, savings and loan holding company, or state member bank 
over the planning horizon, taking into account the current condition, 
risks, exposures, strategies, and activities.
    (t) Stress test cycle means:
    (1) Until September 30, 2015, the period beginning on October 1 of 
a calendar year and ending on September 30 of the following calendar 
year, and
    (2) Beginning October 1, 2015, the period beginning on January 1 of 
a calendar year and ending on December 31 of that year.
    (u) Subsidiary has the same meaning as in Sec.  225.2(o) the 
Board's Regulation Y (12 CFR 225.2(o)).


Sec.  252.13  Applicability.

    (a) Scope--(1) Applicability. Except as provided in paragraph (b) 
of this section, this subpart applies to:
    (i) Any bank holding company with average total consolidated assets 
(as defined in Sec.  252.12(d)) of greater than $10 billion but less 
than $50 billion;
    (ii) Any savings and loan holding company with average total 
consolidated assets (as defined in Sec.  252.12(d)) of greater than $10 
billion; and
    (iii) Any state member bank with average total consolidated assets 
(as defined in Sec.  252.12(d)) of greater than $10 billion.
    (2) Ongoing applicability. (i) A bank holding company, savings and 
loan holding company, or state member bank (including any successor 
company) that is subject to any requirement in this subpart shall 
remain subject to any such requirement unless and until its total 
consolidated assets fall below $10 billion for each of four consecutive 
quarters, as reported on the FR Y-9C or Call Report, as applicable and 
effective on the as-of date of the fourth consecutive FR Y-9C or Call 
Report, as applicable.
    (ii) A bank holding company or savings and loan holding company 
that becomes a covered company as defined in subpart F of this part and 
conducts a stress test pursuant to that subpart is not subject to the 
requirements of this subpart.
    (b) Transitional arrangements--(1) Transition periods for bank 
holding

[[Page 64047]]

companies and state member banks. (i) A bank holding company or state 
member bank that exceeds the asset threshold for the first time on or 
before March 31 of a given year, must comply with the requirements of 
this subpart beginning on January 1 of the following year, unless that 
time is extended by the Board in writing.
    (ii) A bank holding company or state member bank that exceeds the 
asset threshold for the first time after March 31 of a given year must 
comply with the requirements of this subpart beginning on January 1 of 
the second year following that given year, unless that time is extended 
by the Board in writing.
    (iii) Notwithstanding paragraphs (b)(1)(i) or (ii) of this section, 
a bank holding company that meets the asset threshold (as defined in 
Sec.  252.12(c)) and that is relying as of July 20, 2015, on 
Supervision and Regulation Letter SR 01-01 issued by the Board (as in 
effect on May 19, 2010) must comply with the requirements of this 
subpart beginning on January 1, 2016, unless that time is extended by 
the Board in writing.
    (2) Transition period for savings and loan holding companies. (i) A 
savings and loan holding company that is subject to minimum regulatory 
capital requirements and exceeds the asset threshold for the first time 
on or before March 31 of a given year, must comply with the 
requirements of this subpart beginning on January 1 of the following 
year, unless that time is extended by the Board in writing.
    (ii) A savings and loan holding company that is subject to minimum 
regulatory capital requirements and exceeds the asset threshold for the 
first time after March 31 of a given year must comply with the 
requirements of this subpart beginning on January 1 of the second year 
following that given year, unless that time is extended by the Board in 
writing.
    (3) Transition periods for companies subject to the advanced 
approaches. Notwithstanding any other requirement in this section:
    (i) A bank holding company, savings and loan holding company, or 
state member bank must use 12 CFR part 225, appendices A and E (as 
applicable), and 12 CFR part 217, subpart D and F, as applicable, to 
estimate its pro forma regulatory capital ratios and its pro forma tier 
1 common ratio for the stress test cycle beginning on October 1, 2014, 
and may not use the advanced approaches until January 1, 2016; and
    (ii) Beginning January 1, 2016, a bank holding company, savings and 
loan holding company, or state member bank must use the advanced 
approaches to estimate its pro forma regulatory capital ratios if the 
Board notifies the company before the first day of the stress test 
cycle that the company is required to use the advanced approaches to 
determine its risk-based capital requirements.


Sec.  252.14  Annual stress test.

    (a) General requirements--(1) General. A bank holding company, 
savings and loan holding company, and state member bank must conduct an 
annual stress test in accordance with paragraphs (a)(2) and (3) of this 
section.
    (2) Timing for the stress test cycle beginning on October 1, 2014. 
For the stress test cycle beginning on October 1, 2014:
    (i) A state member bank that is a covered company subsidiary must 
conduct its stress test by January 5, 2015, based on data as of 
September 30, 2014, unless the time or the as-of date is extended by 
the Board in writing; and
    (ii) A state member bank that is not a covered company subsidiary 
and a bank holding company must conduct its stress test by March 31, 
2015 based on data as of September 30, 2014, unless the time or the as-
of date is extended by the Board in writing.
    (3) Timing for each stress test cycle beginning after October 1, 
2014. For each stress test cycle beginning after October 1, 2014:
    (i) A state member bank that is a covered company subsidiary and a 
savings and loan holding company with average total consolidated assets 
of $50 billion or more must conduct its stress test by April 5 of each 
calendar year based on data as of December 31 of the preceding calendar 
year, unless the time or the as-of date is extended by the Board in 
writing; and
    (ii) A state member bank that is not a covered company subsidiary, 
a bank holding company, and a savings and loan holding company with 
average total consolidated assets of less than $50 billion must conduct 
its stress test by July 31 of each calendar year using financial 
statement data as of December 31 of the preceding calendar year, unless 
the time or the as-of date is extended by the Board in writing.
    (b) Scenarios provided by the Board--(1) In general. In conducting 
a stress test under this section, a bank holding company, savings and 
loan holding company, or state member bank must, at a minimum, use the 
scenarios provided by the Board. Except as provided in paragraphs 
(b)(2) and (3) of this section, the Board will provide a description of 
the scenarios to each bank holding company, savings and loan holding 
company, or state member bank no later than November 15, 2014 (for the 
stress test cycle beginning on October 1, 2014) and no later than 
February 15 of that calendar year (for each stress test cycle beginning 
thereafter).
    (2) Additional components. (i) The Board may require a bank holding 
company, savings and loan holding company, or state member bank with 
significant trading activity, as determined by the Board and specified 
in the Capital Assessments and Stress Testing report (FR Y-14), to 
include a trading and counterparty component in its adverse and 
severely adverse scenarios in the stress test required by this section. 
The Board may also require a state member bank that is subject to 12 
CFR part 208, appendix E (or, beginning on January 1, 2015, 12 CFR 217, 
subpart F) or that is a subsidiary of a bank holding company that is 
subject to either this paragraph or Sec.  252.54(b)(2)(i) of this part 
to include a trading and counterparty component in the state member 
bank's adverse and severely adverse scenarios in the stress test 
required by this section. For the stress test cycle beginning on 
October 1, 2014, the data used in this component must be as of a date 
between October 1 and December 1 of 2014 selected by the Board, and the 
Board will communicate the as-of date and a description of the 
component to the company no later than December 1 of the calendar year. 
For each stress test cycle beginning thereafter, the data used in this 
component must be as of a date between January 1 and March 1 of that 
calendar year selected by the Board, and the Board will communicate the 
as-of date and a description of the component to the company no later 
than March 1 of that calendar year.
    (ii) The Board may require a bank holding company, savings and loan 
holding company, or state member bank to include one or more additional 
components in its adverse and severely adverse scenarios in the stress 
test required by this section based on the company's financial 
condition, size, complexity, risk profile, scope of operations, or 
activities, or risks to the U.S. economy.
    (3) Additional scenarios. The Board may require a bank holding 
company, savings and loan holding company, or state member bank to 
include one or more additional scenarios in the stress test required by 
this section based on the company's financial condition, size, 
complexity, risk profile, scope of operations, or activities, or risks 
to the U.S. economy.
    (4) Notice and response--(i) Notification of additional component. 
If the Board requires a bank holding

[[Page 64048]]

company, savings and loan holding company, or state member bank to 
include one or more additional components in its adverse and severely 
adverse scenarios under paragraph (b)(2) of this section or to use one 
or more additional scenarios under paragraph (b)(3) of this section, 
the Board will notify the company in writing by September 30, 2014 (for 
the stress test cycle beginning on October 1, 2014) and by December 31 
(for each stress test cycle beginning thereafter).
    (ii) Request for reconsideration and Board response. Within 14 
calendar days of receipt of a notification under this paragraph, the 
bank holding company, savings and loan holding company, or state member 
bank may request in writing that the Board reconsider the requirement 
that the company include the additional component(s) or additional 
scenario(s), including an explanation as to why the reconsideration 
should be granted. The Board will respond in writing within 14 calendar 
days of receipt of the company's request.
    (iii) Description of component. The Board will provide the bank 
holding company, savings and loan holding company, or state member bank 
with a description of any additional component(s) or additional 
scenario(s) by December 1, 2014 (for the stress test cycle beginning on 
October 1, 2014) and by March 1 (for each stress test cycle beginning 
thereafter).


Sec.  252.15  Methodologies and practices.

    (a) Potential impact on capital. In conducting a stress test under 
Sec.  252.14, for each quarter of the planning horizon, a bank holding 
company, savings and loan holding company, or state member bank must 
estimate the following for each scenario required to be used:
    (1) Losses, pre-provision net revenue, provision for loan and lease 
losses, and net income; and
    (2) The potential impact on pro forma regulatory capital levels and 
pro forma capital ratios (including regulatory capital ratios and any 
other capital ratios specified by the Board), incorporating the effects 
of any capital actions over the planning horizon and maintenance of an 
allowance for loan losses appropriate for credit exposures throughout 
the planning horizon.
    (b) Assumptions regarding capital actions. In conducting a stress 
test under Sec.  252.14, a bank holding company or savings and loan 
holding company is required to make the following assumptions regarding 
its capital actions over the planning horizon:
    (1) For the first quarter of the planning horizon, the bank holding 
company or savings and loan holding company must take into account its 
actual capital actions as of the end of that quarter; and
    (2) For each of the second through ninth quarters of the planning 
horizon, the bank holding company or savings and loan holding company 
must include in the projections of capital:
    (i) Common stock dividends equal to the quarterly average dollar 
amount of common stock dividends that the company paid in the previous 
year (that is, the first quarter of the planning horizon and the 
preceding three calendar quarters);
    (ii) Payments on any other instrument that is eligible for 
inclusion in the numerator of a regulatory capital ratio equal to the 
stated dividend, interest, or principal due on such instrument during 
the quarter;
    (iii) An assumption of no redemption or repurchase of any capital 
instrument that is eligible for inclusion in the numerator of a 
regulatory capital ratio; and
    (iv) An assumption of no issuances of common stock or preferred 
stock, except for issuances related to expensed employee compensation.
    (c) Controls and oversight of stress testing processes--(1) In 
general. The senior management of a bank holding company, savings and 
loan holding company, or state member bank must establish and maintain 
a system of controls, oversight, and documentation, including policies 
and procedures, that are designed to ensure that its stress testing 
processes are effective in meeting the requirements in this subpart. 
These policies and procedures must, at a minimum, describe the 
company's stress testing practices and methodologies, and processes for 
validating and updating the company's stress test practices and 
methodologies consistent with applicable laws, regulations, and 
supervisory guidance.
    (2) Oversight of stress testing processes. The board of directors, 
or a committee thereof, of a bank holding company, savings and loan 
holding company, or state member bank must review and approve the 
policies and procedures of the stress testing processes as frequently 
as economic conditions or the condition of the company may warrant, but 
no less than annually. The board of directors and senior management of 
the bank holding company, savings and loan holding company, or state 
member bank must receive a summary of the results of the stress test 
conducted under this section.
    (3) Role of stress testing results. The board of directors and 
senior management of a bank holding company, savings and loan holding 
company, or state member bank must consider the results of the stress 
test in the normal course of business, including but not limited to, 
the banking organization's capital planning, assessment of capital 
adequacy, and risk management practices.


Sec.  252.16  Reports of stress test results.

    (a) Reports to the Board of stress test results--(1) General. A 
bank holding company, savings and loan holding company, and state 
member bank must report the results of the stress test to the Board in 
the manner and form prescribed by the Board, in accordance with 
paragraphs (a)(2) and (3) of this section.
    (2) Timing for the stress test cycle beginning on October 1, 2014. 
For the stress test cycle beginning on October 1, 2014:
    (i) A state member bank that is a covered company subsidiary must 
report the results of its stress test to the Board by January 5, 2015, 
unless that time is extended by the Board in writing; and
    (ii) A state member bank that is not a covered company subsidiary 
and a bank holding company must report the results of its stress test 
to the Board by March 31, 2015, unless that time is extended by the 
Board in writing.
    (3) Timing for each stress test cycle beginning after October 1, 
2014. For each stress test cycle beginning after October 1, 2014:
    (i) A state member bank that is a covered company subsidiary and a 
savings and loan holding company that has average total consolidated 
assets of $50 billion or more must report the results of the stress 
test to the Board by April 5, unless that time is extended by the Board 
in writing; and
    (ii) A state member bank that is not a covered company subsidiary, 
a bank holding company, and a savings and loan holding company with 
average total consolidated assets of less than $50 billion must report 
the results of the stress test to the Board by July 31, unless that 
time is extended by the Board in writing.
    (b) Contents of reports. The report required under paragraph (a) of 
this section must include the following information for the baseline 
scenario, adverse scenario, severely adverse scenario, and any other 
scenario required under Sec.  252.14(b)(3):
    (1) A description of the types of risks being included in the 
stress test;
    (2) A summary description of the methodologies used in the stress 
test; and

[[Page 64049]]

    (3) For each quarter of the planning horizon, estimates of 
aggregate losses, pre-provision net revenue, provision for loan and 
lease losses, net income, and regulatory capital ratios;
    (4) An explanation of the most significant causes for the changes 
in regulatory capital ratios; and
    (5) Any other information required by the Board.
    (c) Confidential treatment of information submitted. The 
confidentiality of information submitted to the Board under this 
subpart and related materials shall be determined in accordance with 
applicable exemptions under the Freedom of Information Act (5 U.S.C. 
552(b)) and the Board's Rules Regarding Availability of Information (12 
CFR part 261).


Sec.  252.17  Disclosure of stress test results.

    (a) Public disclosure of results--(1) General. (i) A bank holding 
company, savings and loan holding company, and state member bank must 
publicly disclose a summary of the results of the stress test required 
under this subpart.
    (2) Timing for the stress test cycle beginning on October 1, 2014. 
For the stress test cycle beginning on October 1, 2014:
    (i) A state member bank that is a covered company subsidiary must 
publicly disclose a summary of the results of the stress test within 15 
calendar days after the Board discloses the results of its supervisory 
stress test of the covered company pursuant to Sec.  252.46(c) of this 
part, unless that time is extended by the Board in writing; and
    (ii) A state member bank that is not a covered company subsidiary 
and a bank holding company must publicly disclose a summary of the 
results of the stress test in the period beginning on June 15 and 
ending on June 30, 2015, unless that time is extended by the Board in 
writing.
    (3) Timing for each stress test cycle beginning after October 1, 
2014. For each stress test cycle beginning after October 1, 2014:
    (i) A state member bank that is a covered company subsidiary must 
publicly disclose a summary of the results of the stress test within 15 
calendar days after the Board discloses the results of its supervisory 
stress test of the covered company pursuant to Sec.  252.46(c) of this 
part, unless that time is extended by the Board in writing;
    (ii) A savings and loan holding company with average total 
consolidated assets of $50 billion or more must publicly disclose a 
summary of the results of the stress test in the period beginning on 
June 15 and ending on June 30, unless that time is extended by the 
Board in writing; and
    (iii) A state member bank that is not a covered company subsidiary, 
a bank holding company, and a savings and loan holding company with 
average total consolidated assets of less than $50 billion must 
publicly disclose a summary of the results of the stress test in the 
period beginning on October 15 and ending on October 31, unless that 
time is extended by the Board in writing.
    (3) Disclosure method. The summary required under this section may 
be disclosed on the Web site of a bank holding company, savings and 
loan holding company, or state member bank, or in any other forum that 
is reasonably accessible to the public.
    (b) Summary of results--(1) Bank holding companies and savings and 
loan holding companies. The summary of the results of a bank holding 
company or savings and loan holding company must, at a minimum, contain 
the following information regarding the severely adverse scenario:
    (i) A description of the types of risks included in the stress 
test;
    (ii) A summary description of the methodologies used in the stress 
test;
    (iii) Estimates of--
    (A) Aggregate losses;
    (B) Pre-provision net revenue;
    (C) Provision for loan and lease losses;
    (D) Net income; and
    (E) Pro forma regulatory capital ratios and any other capital 
ratios specified by the Board;
    (iv) An explanation of the most significant causes for the changes 
in regulatory capital ratios; and
    (v) With respect to any depository institution subsidiary that is 
subject to stress testing requirements pursuant to 12 U.S.C. 
5365(i)(2), as implemented by this subpart, 12 CFR part 46 (OCC), or 12 
CFR part 325, subpart C (FDIC), changes over the planning horizon in 
regulatory capital ratios and any other capital ratios specified by the 
Board and an explanation of the most significant causes for the changes 
in regulatory capital ratios.
    (2) State member banks that are subsidiaries of bank holding 
companies. A state member bank that is a subsidiary of a bank holding 
company satisfies the public disclosure requirements under this subpart 
if the bank holding company publicly discloses summary results of its 
stress test pursuant to this section or Sec.  252.58 of this part, 
unless the Board determines that the disclosures at the holding company 
level do not adequately capture the potential impact of the scenarios 
on the capital of the state member bank and requires the state member 
bank to make public disclosures.
    (3) State member banks that are not subsidiaries of bank holding 
companies. A state member bank that is not a subsidiary of a bank 
holding company or that is required to make disclosures under paragraph 
(b)(2) of this section must publicly disclose, at a minimum, the 
following information regarding the severely adverse scenario:
    (i) A description of the types of risks being included in the 
stress test;
    (ii) A summary description of the methodologies used in the stress 
test;
    (iii) Estimates of--
    (A) Aggregate losses;
    (B) Pre-provision net revenue
    (C) Provision for loan and lease losses;
    (D) Net income; and
    (E) Pro forma regulatory capital ratios and any other capital 
ratios specified by the Board; and
    (iv) An explanation of the most significant causes for the changes 
in regulatory capital ratios.
    (c) Content of results. (1) The disclosure of aggregate losses, 
pre-provision net revenue, provision for loan and lease losses, and net 
income that is required under paragraph (b) of this section must be on 
a cumulative basis over the planning horizon.
    (2) The disclosure of pro forma regulatory capital ratios and any 
other capital ratios specified by the Board that is required under 
paragraph (b) of this section must include the beginning value, ending 
value and minimum value of each ratio over the planning horizon.

0
6. Subpart E is revised to read as follows:
Subpart E--Supervisory Stress Test Requirements for U.S. Bank Holding 
Companies With $50 Billion or More in Total Consolidated Assets and 
Nonbank Financial Companies Supervised by the Board
Sec.
252.40 [Reserved].
252.41 Authority and purpose.
252.42 Definitions.
252.43 Applicability.
252.44 Annual analysis conducted by the Board.
252.45 Data and information required to be submitted in support of 
the Board's analyses.
252.46 Review of the Board's analysis; publication of summary 
results.
252.47 Corporate use of stress test results.


Sec.  252.40  [Reserved].


Sec.  252.41  Authority and purpose.

    (a) Authority. 12 U.S.C. 321-338a, 1467a(g), 1818, 1831p-1, 
1844(b), 1844(c), 5361, 5365, 5366.
    (b) Purpose. This subpart implements section 165(i)(1) of the Dodd-
Frank Act

[[Page 64050]]

(12 U.S.C. 5365(i)(1)), which requires the Board to conduct annual 
analyses of nonbank financial companies supervised by the Board and 
bank holding companies with $50 billion or more in total consolidated 
assets to evaluate whether such companies have the capital, on a total 
consolidated basis, necessary to absorb losses as a result of adverse 
economic conditions.


Sec.  252.42  Definitions.

    For purposes of this subpart F, the following definitions apply:
    (a) Advanced approaches means the risk-weighted assets calculation 
methodologies at 12 CFR part 217, subpart E, as applicable, and any 
successor regulation.
    (b) Adverse scenario means a set of conditions that affect the U.S. 
economy or the financial condition of a covered company that are more 
adverse than those associated with the baseline scenario and may 
include trading or other additional components.
    (c) Average total consolidated assets means the average of the 
total consolidated assets as reported by a bank holding company on its 
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) 
for the four most recent consecutive quarters. If the bank holding 
company has not filed the FR Y-9C for each of the four most recent 
consecutive quarters, average total consolidated assets means the 
average of the company's total consolidated assets, as reported on the 
company's FR Y-9C, for the most recent quarter or consecutive quarters. 
Average total consolidated assets are measured on the as-of date of the 
most recent FR Y-9C used in the calculation of the average.
    (d) Bank holding company has the same meaning as in Sec.  225.2(c) 
of the Board's Regulation Y (12 CFR 225.2(c)).
    (e) Baseline scenario means a set of conditions that affect the 
U.S. economy or the financial condition of a covered company and that 
reflect the consensus views of the economic and financial outlook.
    (f) Covered company means:
    (1) A bank holding company (other than a foreign banking 
organization) with average total consolidated assets of $50 billion or 
more;
    (2) A U.S. intermediate holding company subject to this section 
pursuant to Sec.  252.153 of this part; and
    (3) A nonbank financial company supervised by the Board.
    (g) Depository institution has the same meaning as in section 3 of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
    (h) Foreign banking organization has the same meaning as in Sec.  
211.21(o) of the Board's Regulation K (12 CFR 211.21(o)).
    (i) Nonbank financial company supervised by the Board means a 
nonbank financial company that the Financial Stability Oversight 
Council has determined under section 113 of the Dodd-Frank Act (12 
U.S.C. 5323) shall be supervised by the Board and for which such 
determination is still in effect.
    (j) Planning horizon means the period of at least nine consecutive 
quarters, beginning on the first day of a stress test cycle over which 
the relevant projections extend.
    (k) Pre-provision net revenue means the sum of net interest income 
and non-interest income less expenses before adjusting for loss 
provisions.
    (l) Provision for loan and lease losses means the provision for 
loan and lease losses as reported by the covered company on the FR Y-
9C.
    (m) Regulatory capital ratio means a capital ratio for which the 
Board established minimum requirements for the company by regulation or 
order, including, as applicable, the company's tier 1 and supplementary 
leverage ratios and common equity tier 1, tier 1, and total risk-based 
capital ratios as calculated under appendices A, D, and E to this part 
(12 CFR part 225) and 12 CFR part 217, as applicable, including the 
transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, or any 
successor regulation.
    (n) Scenarios are those sets of conditions that affect the U.S. 
economy or the financial condition of a covered company that the Board 
annually determines are appropriate for use in the supervisory stress 
tests, including, but not limited to, baseline, adverse, and severely 
adverse scenarios.
    (o) Severely adverse scenario means a set of conditions that affect 
the U.S. economy or the financial condition of a covered company and 
that overall are more severe than those associated with the adverse 
scenario and may include trading or other additional components.
    (p) Stress test cycle means:
    (1) Until September 30, 2015, the period beginning on October 1 of 
a calendar year and ending on September 30 of the following calendar 
year, and
    (2) Beginning October 1, 2015, the period beginning on January 1 of 
a calendar year and ending on December 31 of that year.
    (q) Subsidiary has the same meaning as in Sec.  225.2(o) the 
Board's Regulation Y (12 CFR 225.2).
    (r) Tier 1 common ratio has the same meaning as in the Board's 
Regulation Y (12 CFR 225.8).


Sec.  252.43  Applicability.

    (a) Scope--(1) Applicability. Except as provided in paragraph (b) 
of this section, this subpart applies to any covered company, which 
includes:
    (i) Any bank holding company with average total consolidated assets 
(as defined in Sec.  252.42(c)) of $50 billion or more;
    (ii) Any U.S. intermediate holding company subject to this section 
pursuant to Sec.  252.153 of this part; and
    (iii) Any nonbank financial company supervised by the Board that is 
made subject to this section pursuant to a rule or order of the Board.
    (2) Ongoing applicability. A bank holding company (including any 
successor company) that is subject to any requirement in this subpart 
shall remain subject to any such requirement unless and until its total 
consolidated assets fall below $50 billion for each of four consecutive 
quarters, as reported on the FR Y-9C and effective on the as-of date of 
the fourth consecutive FR Y-9C.
    (b) Transitional arrangements--(1) Transition periods for bank 
holding companies that become covered companies after October 1, 2014. 
(i) A bank holding company that becomes a covered company on or before 
March 31 of a given year must comply with the requirements of this 
subpart beginning on January 1 of the following year, unless that time 
is extended by the Board in writing.
    (ii) A bank holding company that becomes a covered company after 
March 31 of a given year must comply with the requirements of this 
subpart beginning on January 1 of the second year following that given 
year, unless that time is extended by the Board in writing.
    (2) Bank holding companies that rely on SR Letter 01-01. A covered 
company that is relying as of July 20, 2015, on Supervision and 
Regulation Letter SR 01-01 issued by the Board (as in effect on May 19, 
2010) must comply with the requirements of this subpart beginning on 
January 1, 2016, unless that time is extended by the Board in writing.
    (c) Transition periods for covered companies subject to the 
advanced approaches. Notwithstanding any other requirement in this 
section, for a given stress test cycle:
    (1) The Board will use 12 CFR part 225, appendices A and E (as 
applicable), and 12 CFR part 217, subpart D and F, as applicable, to 
estimate a covered company's pro forma regulatory capital

[[Page 64051]]

ratios and its pro forma tier 1 common ratio for the stress test cycle 
beginning on October 1, 2014 and will not use the advanced approaches 
until January 1, 2016; and
    (2) Beginning January 1, 2016, the Board will use the advanced 
approaches to estimate a covered company's pro forma regulatory capital 
ratios and pro forma tier 1 common ratio if the Board notified the 
covered company before the first day of the stress test cycle that the 
covered company is required to use the advanced approaches to determine 
its risk-based capital requirements.


Sec.  252.44  Annual analysis conducted by the Board.

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


Sec.  252.45  Data and information required to be submitted in support 
of the Board's analyses.

    (a) Regular submissions. Each covered company must submit to the 
Board such data, on a consolidated basis, that the Board determines is 
necessary in order for the Board to derive the relevant pro forma 
estimates of the covered company over the planning horizon under the 
scenarios described in Sec.  252.44(b).
    (b) Additional submissions required by the Board. The Board may 
require a covered company to submit any other information on a 
consolidated basis that the Board deems necessary in order to:
    (1) Ensure that the Board has sufficient information to conduct its 
analysis under this subpart; and
    (2) Project a company's pre-provision net revenue, losses, 
provision for loan and lease losses, and net income; and, pro forma 
capital levels, regulatory capital ratios, tier 1 common ratio, and any 
other capital ratio specified by the Board under the scenarios 
described in Sec.  252.44(b).
    (c) Confidential treatment of information submitted. The 
confidentiality of information submitted to the Board under this 
subpart and related materials shall be determined in accordance with 
the Freedom of Information Act (5 U.S.C. 552(b)) and the Board's Rules 
Regarding Availability of Information (12 CFR part 261).


Sec.  252.46  Review of the Board's analysis; publication of summary 
results.

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


Sec.  252.47  Corporate use of stress test results.

    (a) In general. The board of directors and senior management of 
each covered company must consider the results of the analysis 
conducted by the Board under this subpart, as appropriate:
    (1) As part of the covered company's capital plan and capital 
planning process, including when making changes to the covered 
company's capital structure (including the level and composition of 
capital);
    (2) When assessing the covered company's exposures, concentrations, 
and risk positions; and
    (3) In the development or implementation of any plans of the 
covered company for recovery or resolution.
    (b) Resolution plan updates. Each covered company must update its 
resolution plan as the Board determines appropriate, based on the 
results of the Board's analyses of the covered company under this 
subpart.

0
8. Subpart F is revised to read as follows:
Subpart F--Company-Run Stress Test Requirements for U.S. Bank Holding 
Companies With $50 Billion or More in Total Consolidated Assets and 
Nonbank Financial Companies Supervised by the Board
Sec.
252.50 [Reserved].
252.51 Authority and purpose.
252.52 Definitions.
252.53 Applicability.
252.54 Annual stress test.
252.55 Mid-cycle stress test.
252.56 Methodologies and practices.
252.57 Reports of stress test results.
252.58 Disclosure of stress test results.

Sec.  252.50  [Reserved].


Sec.  252.51  Authority and purpose.

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


Sec.  252.52  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Advanced approaches means the risk-weighted assets calculation

[[Page 64052]]

methodologies at 12 CFR part 217, subpart E, as applicable, and any 
successor regulation.
    (b) Adverse scenario means a set of conditions that affect the U.S. 
economy or the financial condition of a covered company that are more 
adverse than those associated with the baseline scenario and may 
include trading or other additional components.
    (c) Average total consolidated assets means the average of the 
total consolidated assets as reported by a bank holding company on its 
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) 
for the four most recent consecutive quarters. If the bank holding 
company has not filed the FR Y-9C for each of the four most recent 
consecutive quarters, average total consolidated assets means the 
average of the company's total consolidated assets, as reported on the 
company's FR Y-9C, for the most recent quarter or consecutive quarters. 
Average total consolidated assets are measured on the as-of date of the 
most recent FR Y-9C used in the calculation of the average.
    (d) Bank holding company has the same meaning as in Sec.  225.2(c) 
of the Board's Regulation Y (12 CFR 225.2(c)).
    (e) Baseline scenario means a set of conditions that affect the 
U.S. economy or the financial condition of a covered company and that 
reflect the consensus views of the economic and financial outlook.
    (f) Capital action has the same meaning as in Sec.  225.8(c)(2) of 
the Board's Regulation Y (12 CFR 225.8(c)(2)).
    (g) Covered company means:
    (1) A bank holding company (other than a foreign banking 
organization) with average total consolidated assets of $50 billion or 
more;
    (2) A U.S. intermediate holding company subject to this section 
pursuant to Sec.  252.153 of this part; and
    (3) A nonbank financial company supervised by the Board.
    (h) Depository institution has the same meaning as in section 3 of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
    (i) Foreign banking organization has the same meaning as in Sec.  
211.21(o) of the Board's Regulation K (12 CFR 211.21(o)).
    (j) Nonbank financial company supervised by the Board means a 
nonbank financial company that the Financial Stability Oversight 
Council has determined under section 113 of the Dodd-Frank Act (12 
U.S.C. 5323) shall be supervised by the Board and for which such 
determination is still in effect.
    (k) Planning horizon means the period of at least nine consecutive 
quarters, beginning on the first day of a stress test cycle (on October 
1 or April 1, as appropriate) over which the relevant projections 
extend.
    (l) Pre-provision net revenue means the sum of net interest income 
and non-interest income less expenses before adjusting for loss 
provisions.
    (m) Provision for loan and lease losses means the provision for 
loan and lease losses as reported by the covered company on the FR Y-
9C.
    (n) Regulatory capital ratio means a capital ratio for which the 
Board established minimum requirements for the company by regulation or 
order, including, as applicable, the company's tier 1 and supplementary 
leverage ratios and common equity tier 1, tier 1, and total risk-based 
capital ratios as calculated under appendices A, D, and E to this part 
(12 CFR part 225) and 12 CFR part 217, as applicable, including the 
transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, or any 
successor regulation.
    (o) Scenarios are those sets of conditions that affect the U.S. 
economy or the financial condition of a covered company that the Board, 
or with respect to the mid-cycle stress test required under Sec.  
252.55, the covered company, annually determines are appropriate for 
use in the company-run stress tests, including, but not limited to, 
baseline, adverse, and severely adverse scenarios.
    (p) Severely adverse scenario means a set of conditions that affect 
the U.S. economy or the financial condition of a covered company and 
that overall are more severe than those associated with the adverse 
scenario and may include trading or other additional components.
    (q) Stress test means a process to assess the potential impact of 
scenarios on the consolidated earnings, losses, and capital of a 
covered company over the planning horizon, taking into account its 
current condition, risks, exposures, strategies, and activities.
    (r) Stress test cycle means:
    (1) Until September 30, 2015, the period beginning on October 1 of 
a calendar year and ending on September 30 of the following calendar 
year, and
    (2) Beginning October 1, 2015, the period beginning on January 1 of 
a calendar year and ending on December 31 of that year.
    (s) Subsidiary has the same meaning as in Sec.  225.2(o) the 
Board's Regulation Y (12 CFR 225.2).
    (t) Tier 1 common ratio has the same meaning as in Sec.  225.8 of 
the Board's Regulation Y (12 CFR 225.8).


Sec.  252.53  Applicability.

    (a) Scope--(1) Applicability. Except as provided in paragraph (b) 
of this section, this subpart applies to any covered company, which 
includes:
    (i) Any bank holding company with average total consolidated assets 
(as defined in Sec.  252.42(c) of this part) of $50 billion or more;
    (ii) Any U.S. intermediate holding company subject to this section 
pursuant to Sec.  252.153 of this part; and
    (iii) Any nonbank financial company supervised by the Board that is 
made subject to this section pursuant to a rule or order of the Board.
    (2) Ongoing applicability. A bank holding company (including any 
successor company) that is subject to any requirement in this subpart 
shall remain subject to any such requirement unless and until its total 
consolidated assets fall below $50 billion for each of four consecutive 
quarters, as reported on the FR Y-9C and effective on the as-of date of 
the fourth consecutive FR Y-9C.
    (b) Transitional arrangements--(1) Transition periods for bank 
holding companies that become covered companies after October 1, 2014. 
(i) A bank holding company that becomes a covered company on or before 
March 31 of a given year must comply with the requirements of this 
subpart beginning on January 1 of the following year, unless that time 
is extended by the Board in writing.
    (ii) A bank holding company that becomes a covered company after 
March 31 of a given year must comply with the requirements of this 
subpart beginning on January 1 of the second year following that given 
year, unless that time is extended by the Board in writing.
    (2) Bank holding companies that rely on SR Letter 01-01. A covered 
company that is relying as of July 20, 2015, on Supervision and 
Regulation Letter SR 01-01 issued by the Board (as in effect on May 19, 
2010) must comply with the requirements of this subpart beginning on 
January 1, 2016, unless that time is extended by the Board in writing.
    (3) Transition periods for covered companies subject to the 
advanced approaches. Notwithstanding any other requirement in this 
section:
    (i) A covered company must use 12 CFR part 225, appendices A and E 
(as applicable), and 12 CFR part 217, subpart D and F, as applicable, 
to estimate its pro forma regulatory capital ratios and its pro forma 
tier 1 common ratio for the stress test cycle beginning on October 1, 
2014, and may not use the advanced approaches until January 1, 2016; 
and

[[Page 64053]]

    (ii) Beginning January 1, 2016, a covered company must use the 
advanced approaches to estimate its pro forma regulatory capital ratios 
and its pro forma tier 1 common ratio for purposes of its stress test 
under Sec.  252.54 if the Board notifies the company before the first 
day of the stress test cycle that the company is required to use the 
advanced approaches to determine its risk-based capital requirements.


Sec.  252.54  Annual stress test.

    (a) In general. A covered company must conduct an annual stress 
test. For the stress test cycle beginning on October 1, 2014, the 
stress test must be conducted by January 5, 2015, based on data as of 
September 30, 2014, unless the time or the as-of date is extended by 
the Board in writing. For each stress test cycle beginning thereafter, 
the stress test must be conducted by April 5 of each calendar year 
based on data as of December 31 of the preceding calendar year, unless 
the time or the as-of date is extended by the Board in writing.
    (b) Scenarios provided by the Board--(1) In general. In conducting 
a stress test under this section, a covered company must, at a minimum, 
use the scenarios provided by the Board. Except as provided in 
paragraphs (b)(2) and (3) of this section, for the stress test cycle 
beginning on October 1, 2014, the Board will provide a description of 
the scenarios to each covered company no later than November 15, 2014. 
Except as provided in paragraphs (b)(2) and (3) of this section, for 
each stress test cycle beginning thereafter, the Board will provide a 
description of the scenarios to each covered company no later than 
February 15 of that calendar year.
    (2) Additional components. (i) The Board may require a covered 
company with significant trading activity, as determined by the Board 
and specified in the Capital Assessments and Stress Testing report (FR 
Y-14), to include a trading and counterparty component in its adverse 
and severely adverse scenarios in the stress test required by this 
section. For the stress test cycle beginning on October 1, 2014, the 
data used in this component must be as of a date between October 1 and 
December 1, 2014, as selected by the Board, and the Board will 
communicate the as-of date and a description of the component to the 
company no later than December 1, 2014. For the stress test cycle 
beginning on January 1, 2016, and for each stress test cycle beginning 
thereafter, the data used in this component must be as of a date 
between January 1 and March 1 of that calendar year selected by the 
Board, and the Board will communicate the as-of date and a description 
of the component to the company no later than March 1 of the relevant 
calendar year.
    (ii) The Board may require a covered company to include one or more 
additional components in its adverse and severely adverse scenarios in 
the stress test required by this section based on the company's 
financial condition, size, complexity, risk profile, scope of 
operations, or activities, or risks to the U.S. economy.
    (3) Additional scenarios. The Board may require a covered company 
to use one or more additional scenarios in the stress test required by 
this section based on the company's financial condition, size, 
complexity, risk profile, scope of operations, or activities, or risks 
to the U.S. economy.
    (4) Notice and response--(i) Notification of additional component. 
If the Board requires a covered company to include one or more 
additional components in its adverse and severely adverse scenarios 
under paragraph (b)(2) of this section or to use one or more additional 
scenarios under paragraph (b)(3) of this section, the Board will notify 
the company in writing. For the stress test cycle beginning on October 
1, 2014, the Board will provide such notification no later than 
September 30, 2014, and for each stress test cycle beginning 
thereafter, the Board will provide such notification no later than 
December 31 of the preceding calendar year. The notification will 
include a general description of the additional component(s) or 
additional scenario(s) and the basis for requiring the company to 
include the additional component(s) or additional scenario(s).
    (ii) Request for reconsideration and Board response. Within 14 
calendar days of receipt of a notification under this paragraph, the 
covered company may request in writing that the Board reconsider the 
requirement that the company include the additional component(s) or 
additional scenario(s), including an explanation as to why the 
reconsideration should be granted.
    (iii) Description of component. The Board will respond in writing 
within 14 calendar days of receipt of the company's request. The Board 
will provide the covered company with a description of any additional 
component(s) or additional scenario(s) by December 1, 2014 (for the 
stress test cycle beginning on October 1, 2014) and by March 1 (for 
each stress test cycle beginning thereafter).


Sec.  252.55  Mid-cycle stress test.

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

[[Page 64054]]

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


Sec.  252.56  Methodologies and practices.

    (a) Potential impact on capital. In conducting a stress test under 
Sec. Sec.  252.54 and 252.55, for each quarter of the planning horizon, 
a covered company must estimate the following for each scenario 
required to be used:
    (1) Losses, pre-provision net revenue, provision for loan and lease 
losses, and net income; and
    (2) The potential impact on pro forma regulatory capital levels and 
pro forma capital ratios (including regulatory capital ratios, the tier 
1 common ratio, and any other capital ratios specified by the Board), 
incorporating the effects of any capital actions over the planning 
horizon and maintenance of an allowance for loan losses appropriate for 
credit exposures throughout the planning horizon.
    (b) Assumptions regarding capital actions. In conducting a stress 
test under Sec. Sec.  252.54 and 252.55, a covered company is required 
to make the following assumptions regarding its capital actions over 
the planning horizon:
    (1) For the first quarter of the planning horizon, the covered 
company must take into account its actual capital actions as of the end 
of that quarter; and
    (2) For each of the second through ninth quarters of the planning 
horizon, the covered company must include in the projections of 
capital:
    (i) Common stock dividends equal to the quarterly average dollar 
amount of common stock dividends that the company paid in the previous 
year (that is, the first quarter of the planning horizon and the 
preceding three calendar quarters);
    (ii) Payments on any other instrument that is eligible for 
inclusion in the numerator of a regulatory capital ratio equal to the 
stated dividend, interest, or principal due on such instrument during 
the quarter;
    (iii) An assumption of no redemption or repurchase of any capital 
instrument that is eligible for inclusion in the numerator of a 
regulatory capital ratio; and
    (iv) An assumption of no issuances of common stock or preferred 
stock, except for issuances related to expensed employee compensation.
    (c) Controls and oversight of stress testing processes--(1) In 
general. The senior management of a covered company must establish and 
maintain a system of controls, oversight, and documentation, including 
policies and procedures, that are designed to ensure that its stress 
testing processes are effective in meeting the requirements in this 
subpart. These policies and procedures must, at a minimum, describe the 
covered company's stress testing practices and methodologies, and 
processes for validating and updating the company's stress test 
practices and methodologies consistent with applicable laws, 
regulations, and supervisory guidance. Policies of covered companies 
must also describe processes for scenario development for the mid-cycle 
stress test required under Sec.  252.55.
    (2) Oversight of stress testing processes. The board of directors, 
or a committee thereof, of a covered company must review and approve 
the policies and procedures of the stress testing processes as 
frequently as economic conditions or the condition of the covered 
company may warrant, but no less than annually. The board of directors 
and senior management of the covered company must receive a summary of 
the results of any stress test conducted under this subpart.
    (3) Role of stress testing results. The board of directors and 
senior management of each covered company must consider the results of 
the analysis it conducts under this subpart, as appropriate:
    (i) As part of the covered company's capital plan and capital 
planning process, including when making changes to the covered 
company's capital structure (including the level and composition of 
capital);
    (ii) When assessing the covered company's exposures, 
concentrations, and risk positions; and
    (iii) In the development or implementation of any plans of the 
covered company for recovery or resolution.


Sec.  252.57  Reports of stress test results.

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


Sec.  252.58  Disclosure of stress test results.

    (a) Public disclosure of results--(1) In general. (i) A covered 
company must publicly disclose a summary of the results of the stress 
test required under Sec.  252.54 within the period that is 15 calendar 
days after the Board publicly discloses the results of its supervisory 
stress test of the covered company pursuant to Sec.  252.46(c) of this 
part, unless that time is extended by the Board in writing.
    (ii) A covered company must publicly disclose a summary of the 
results of the stress test required under Sec.  252.55. For the stress 
test cycle beginning on October 1, 2014, this disclosure must occur in 
the period beginning on July 5 and ending on August 4, unless that time 
is extended by the Board in writing. For all stress test cycles 
beginning thereafter, this disclosure must occur in the period 
beginning on October 5 and ending on November 4, unless that time is 
extended by the Board in writing.
    (2) Disclosure method. The summary required under this section may 
be disclosed on the Web site of a covered company, or in any other 
forum that is reasonably accessible to the public.
    (b) Summary of results. The summary results must, at a minimum, 
contain the following information regarding the severely adverse 
scenario:
    (1) A description of the types of risks included in the stress 
test;
    (2) A general description of the methodologies used in the stress 
test, including those employed to estimate

[[Page 64055]]

losses, revenues, provision for loan and lease losses, and changes in 
capital positions over the planning horizon;
    (3) Estimates of--
    (i) Pre-provision net revenue and other revenue;
    (ii) Provision for loan and lease losses, realized losses or gains 
on available-for-sale and held-to-maturity securities, trading and 
counterparty losses, and other losses or gains;
    (iii) Net income before taxes;
    (iv) Loan losses (dollar amount and as a percentage of average 
portfolio balance) in the aggregate and by subportfolio, including: 
Domestic closed-end first-lien mortgages; domestic junior lien 
mortgages and home equity lines of credit; commercial and industrial 
loans; commercial real estate loans; credit card exposures; other 
consumer loans; and all other loans; and
    (v) Pro forma regulatory capital ratios and the tier 1 common ratio 
and any other capital ratios specified by the Board;
    (4) An explanation of the most significant causes for the changes 
in regulatory capital ratios and the tier 1 common ratio; and
    (5) With respect to any depository institution subsidiary that is 
subject to stress testing requirements pursuant to 12 U.S.C. 
5365(i)(2), as implemented by subpart B of this part, 12 CFR part 46 
(OCC), or 12 CFR part 325, subpart C (FDIC), changes over the planning 
horizon in regulatory capital ratios and any other capital ratios 
specified by the Board and an explanation of the most significant 
causes for the changes in regulatory capital ratios.
    (c) Content of results. (1) The following disclosures required 
under paragraph (b) of this section must be on a cumulative basis over 
the planning horizon:
    (i) Pre-provision net revenue and other revenue;
    (ii) Provision for loan and lease losses, realized losses/gains on 
available-for-sale and held-to-maturity securities, trading and 
counterparty losses, and other losses or gains;
    (iii) Net income before taxes; and
    (iv) Loan losses in the aggregate and by subportfolio.
    (2) The disclosure of pro forma regulatory capital ratios, the tier 
1 common ratio, and any other capital ratios specified by the Board 
that is required under paragraph (b) of this section must include the 
beginning value, ending value, and minimum value of each ratio over the 
planning horizon.

Subpart O--Enhanced Prudential Standards for Foreign Banking 
Organizations With Total Consolidated Assets of $50 Billion or More 
and Combined U.S. Assets of $50 Billion or More

0
8. In Sec.  252.153, revise paragraph (e) to read as follows:


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

* * * * *
    (e) Enhanced prudential standards for U.S. intermediate holding 
companies--(1) Applicability--(i) Ongoing application. Subject to the 
initial applicability provisions in paragraph (e)(1)(ii) of this 
section, a U.S. intermediate holding company must comply with the 
capital, risk management, and liquidity requirements set forth in 
paragraphs (e)(2)(i), (e)(3), and (e)(4) of this section beginning on 
the date it is required to be established, comply with the capital plan 
requirements set forth in paragraph (e)(2)(ii) of this section in 
accordance with Sec.  225.8(c)(2) of the Board's Regulation Y (12 CFR 
225.8(c)(2)), and comply with the stress test requirements set forth in 
paragraph (e)(5) beginning with the stress test cycle the calendar year 
following that in which it becomes subject to regulatory capital 
requirements.
    (ii) Initial applicability--(A) General. A U.S. intermediate 
holding company required to be established by July 1, 2016 must comply 
with the risk-based capital, risk management, and liquidity 
requirements set forth in paragraphs (e)(2)(i), (e)(3), and (e)(4) of 
this section beginning on July 1, 2016, and comply with the capital 
planning requirements set forth in (e)(2)(ii) of this section in 
accordance with Sec.  225.8(c)(2) of the Board's Regulation Y (12 CFR 
225.8(c)(2)).
    (B) Transition provisions for leverage. (1) A U.S. intermediate 
holding company required to be established by July 1, 2016 must comply 
with the leverage capital requirements set forth in paragraph (e)(2)(i) 
of this section beginning on January 1, 2018, provided that each 
subsidiary bank holding company and insured depository institution 
controlled by the foreign banking organization immediately prior to the 
establishment or designation of the U.S. intermediate holding company, 
and each bank holding company and insured depository institution 
acquired by the foreign banking organization after establishment of the 
intermediate holding company, is subject to leverage capital 
requirements under 12 CFR part 217 until December 31, 2017.
    (2) The Board may accelerate the application of the leverage ratio 
to a U.S. intermediate holding company if it determines that the 
foreign banking organization has taken actions to evade the application 
of this subpart.
    (C) Transition provisions for stress testing. A U.S. intermediate 
holding company required to be established by July 1, 2016 must comply 
with the stress test requirements set forth in paragraph (e)(5) of this 
section beginning on January 1, 2018, provided that each subsidiary 
bank holding company and insured depository institution controlled by 
the foreign banking organization immediately prior to the establishment 
or designation of the U.S. intermediate holding company, and each bank 
holding company and insured depository institution acquired by the 
foreign banking organization after establishment of the intermediate 
holding company, must comply with the stress test requirements in 
subparts B, E, or F of this subpart, as applicable, until December 31, 
2017.
0
8. Appendix A to part 252 is amended by:
0
a. Redesignating footnotes 21 through 40 as footnotes 1 through 20.
0
b. Revising newly redesignated footnotes 1, 2, 9, 19, and 20; and
0
c. Revising paragraphs 1.b, 2.a, and 7.a
    The revisions read as follows:

Appendix A to Part 252--Policy Statement on the Scenario Design 
Framework for Stress Testing

1. Background

    \1\ 12 U.S.C. 5365(i)(1); 12 CFR part 252, subpart E.
* * * * *
    \2\ 12 U.S.C. 5365(i)(2); 12 CFR part 252, subparts B and F.
* * * * *
    \9\ 12 CFR 252.14(b), 12 CFR 252.44(b), 12 CFR 252.54(b).
* * * * *
    \19\ 12 CFR 252.55.
* * * * *
    \20\ 12 CFR 252.55.
* * * * *
    b. The stress test rules provide that, for the stress test cycle 
beginning on October 1, 2014, the Board will notify covered 
companies by no later than November 15, 2014 of the scenarios it 
will use to conduct its annual supervisory stress tests and the 
scenarios that covered companies must use to conduct their annual 
company-run stress tests.\4\ For each stress test cycle beginning

[[Page 64056]]

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

    \4\ 12 CFR 252.44(b), 12 CFR 252.54(b). For the stress test 
cycle beginning on October 1, 2014, the annual company-run stress 
tests use data as of September 30 of each calendar year. For each 
stress test cycle beginning thereafter, the annual company-run 
stress tests use data as of December 31 of each calendar year.
    \5\ Id.
    \6\ Id.
---------------------------------------------------------------------------

* * * * *

2. Overview and Scope

    a. This policy statement provides more detail on the 
characteristics of the stress test scenarios and explains the 
considerations and procedures that underlie the approach for 
formulating these scenarios. The considerations and procedures 
described in this policy statement apply to the Board's stress 
testing framework, including to the stress tests required under 12 
CFR part 252, subparts E, F, and G, as well as the Board's capital 
plan rule (12 CFR 225.8).\8\
---------------------------------------------------------------------------

    \8\12 CFR 252.44(b), 12 CFR 252.54(b). For the stress test cycle 
beginning on October 1, 2014, the annual company-run stress tests 
use data as of September 30 of each calendar year. For each stress 
test cycle beginning thereafter, the annual company-run stress tests 
use data as of December 31 of each calendar year.
---------------------------------------------------------------------------

* * * * *

7. Timeline for Scenario Publication

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


    By order of the Board of Governors of the Federal Reserve 
System, October 17, 2014.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
[FR Doc. 2014-25170 Filed 10-24-14; 8:45 am]
BILLING CODE 6210-01-P