71768 Federal Register / Vol. 79, No. 232 / Wednesday, December 3, 2014 / Notices 

prepaid cards, the volume and value of 

settled purchase transactions, and the 

volume and value of ATM withdrawals. 

As discussed in the IFR, the Federal 

Reserve believes that eliminating FR 

3063b would significantly reduce 

reporting burden on the public. For this 

reason, and because the Federal Reserve 

did not receive any comments on the 

potential impact of eliminating FR 

3063b, the Federal Reserve plans not to 

conduct this survey in calendar year 

2015. Nevertheless, the Federal Reserve 

will maintain the authority to conduct 

FR 3063b through the 2015–2018 datacollection cycle. During this period, the 

Federal Reserve will determine whether 

the alternative prevalence-of-use metrics 

derived from FR 3063a are reasonable 

for satisfying the reporting requirements 

of the Dodd-Frank Act. Should the 

Federal Reserve make this 

determination, a notice would be 

published in the Federal Register 

requesting public comment on the 

discontinuance of the FR 3063b 

information collection for future datacollection cycles. 

Board of Governors of the Federal Reserve 

System, November 28, 2014. 

Margaret McCloskey Shanks, 

Deputy Secretary of the Board. 

[FR Doc. 2014–28432 Filed 12–2–14; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

[Docket No. R–1503] 

Application of Enhanced Prudential 

Standards and Reporting 

Requirements to General Electric 

Capital Corporation 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Request for public comment on 

the application of enhanced prudential 

standards and reporting requirements to 

General Electric Capital Corporation. 

SUMMARY: Pursuant to section 165 of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act, the Board of 

Governors of the Federal Reserve 

System (Board) is inviting public 

comment on the proposed application of 

enhanced prudential standards to 

General Electric Capital Corporation 

(GECC), a nonbank financial company 

that the Financial Stability Oversight 

Council has determined should be 

supervised by the Board. The Board has 

assessed the business model, capital 

structure, risk profile, and systemic 

footprint of GECC to determine how the 

enhanced prudential standards should 

apply, including how to tailor 

application of the standards to the 

company. In light of the substantial 

similarity of GECC’s activities and risk 

profile to that of a similarly-sized bank 

holding company, the Board is 

proposing to apply enhanced prudential 

standards to GECC that are similar to 

those that apply to large bank holding 

companies, including: (1) Capital 

requirements; (2) capital-planning and 

stress-testing requirements; (3) liquidity 

requirements; and (4) risk-management 

and risk-committee requirements. The 

Board also is proposing to apply certain 

additional enhanced prudential 

standards to GECC in light of certain 

unique aspects related to GECC’s 

activities, risk profile, and structure, 

including additional independence 

requirements for GECC’s board of 

directors, restrictions on intercompany 

transactions between GECC and General 

Electric Company, and leverage capital 

requirements that are comparable to the 

standards that apply to the largest, most 

systemic banking organizations. In 

addition, the Board is proposing to 

require GECC to file certain reports with 

the Board that are similar to the reports 

required of bank holding companies. 

DATES: Comments must be submitted by 

February 2, 2015. 

ADDRESSES: You may submit comments, 

identified by Docket No. R–1503, by any 

of the following methods: 

Agency Web site: http://

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/apps/

foia/proposedregs.aspx. 

Federal eRulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

Email: regs.comments@

federalreserve.gov. Include docket 

number R–1503 in the subject line of the 

message. 

FAX: (202) 452–3819 or (202) 452– 

3102. 

Mail: Robert deV. Frierson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at http://

www.federalreserve.gov/generalinfo/

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper form in Room MP–500 of the 

Board’s Martin Building (20th and C 

Streets NW.; Washington, DC 20551) 

between 9:00 a.m. and 5:00 p.m. on 

weekdays. 

FOR FURTHER INFORMATION CONTACT: Ann 

Misback, Associate Director, (202) 452– 

3799, Jyoti Kohli, Senior Supervisory 

Financial Analyst, (202) 452–2539, or 

Elizabeth MacDonald, Senior 

Supervisory Financial Analyst, (202) 

475–6316, Division of Banking 

Supervision and Regulation; or Laurie 

Schaffer, Associate General Counsel, 

(202) 452–2277 or Jahad Atieh, 

Attorney, (202) 452–3900, Legal 

Division. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Overview of GECC 

III. Statutory Requirements for the 

Application of Enhanced Prudential 

Standards to Nonbank Financial 

Companies Supervised by the Board 

A. Overview 

B. GECC 

IV. Proposed Enhanced Prudential Standards 

to Apply to GECC 

A. Capital Requirements 

B. Capital Planning Requirements 

C. Stress-Testing requirements 

D. Liquidity Requirements 

E. Risk-Management and Risk-Committee 

Requirements 

F. Other Prudential Standards: Restrictions 

on Intercompany Transactions 

G. Future Standards 

V. Proposed Reporting Requirements 

A. FR Y–6 Report 

B. FR Y–10 Report 

C. FR Y–9C and FR Y–9LP Reports 

D. FR Y–11 and FR Y–11S Reports 

E. FR 2314 and FR 2314S Reports 

F. FR Y–14A, FR Y–14M, and FR Y–14Q 

Reports 

G. FR Y–15 Report 

H. FFIEC 009 and FFIEC 009a Reports 

I. FFIEC 102 

VI. Timing of Application 

VII. Paperwork Reduction Act 

VIII. Proposed Order 

I. Introduction 

Section 165 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (Dodd-Frank Act) directs the Board 

of Governors of the Federal Reserve 

System (Board) to establish enhanced 

prudential standards for bank holding 

companies with total consolidated 

assets of $50 billion or more and 

nonbank financial companies that the 

Financial Stability Oversight Council 

(Council) has determined should be 

supervised by the Board (nonbank 

financial companies supervised by the 

Board) in order to prevent or mitigate 

risks to U.S. financial stability that 

could arise from the material financial 

distress or failure, or ongoing activities 

of, these companies. The enhanced 

prudential standards must include 

enhanced risk-based and leverage 

capital requirements, liquidity 

requirements, risk-management and 


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Federal Register / Vol. 79, No. 232 / Wednesday, December 3, 2014 / Notices 71769 

1 12 CFR 225.8. 

2See 12 CFR part 252. 

3 12 CFR part 243. The Board’s resolution plan 

rule applies by its terms to all nonbank financial 

companies supervised by the Board. 12 CFR part 

243. Under these rules, nonbank financial 

companies, such as GECC, are required to submit 

their first resolution plan by July 1 following the 

date the company is designated by the Council 

(provided the following July 1 occurs no earlier 

than 270 days after the date on which the company 

is designated). GECC submitted its first resolution 

plan on July 1, 2014. The public portion of GECC’s 

resolution plan can be found on the Board’s Web 

site. See Board, General Electric Capital 

Corporation Resolution Plan Public Section, 

available at: http://www.federalreserve.gov/bankin

foreg/resolution-plans/ge-capital-1g-20140701.pdf. 

4See 79 FR 17240 (March 27, 2014). 

5 12 CFR part 249. 

6 12 CFR 217.10(a)(5), 217.11(c). 

7See 79 FR 17240, 17245 (March 27, 2014). 

8At the time the Board issued its proposal to 

apply enhanced prudential standards to bank 

holding companies and foreign banking 

organizations with total consolidated assets of $50 

billion or more, the Council had not made any final 

determinations regarding designation of a nonbank 

financial company. After the close of the comment 

period for the proposed rules, the Council made a 

final determination that material financial distress 

at GECC could pose a threat to U.S. financial 

stability and that the company should be subject to 

Board supervision and enhanced prudential 

standards. Financial Stability Oversight Council, 

Basis of the Financial Stability Oversight Council’s 

Final Determination Regarding General Electric 

Capital Corporation, Inc. (GECC Determination) 

(July 8, 2013), available at: http://

www.treasury.gov/initiatives/fsoc/designations/

Documents/Basis%20of%20Final%20

Determination%20Regarding%20General%20

Electric%20Capital%20Corporation,%20Inc.pdf. 

9 GECC contributed approximately 51 percent of 

GE’s net earnings in 2013. 

10 GECC is a grandfathered unitary savings and 

loan holding company under section 10(c)(9)(A) of 

HOLA and is therefore exempt from the activity and 

investment restrictions under HOLA. 12 U.S.C. 

1467a(c)(9)(A). 

risk-committee requirements, 

resolution-planning requirements, 

single-counterparty credit limits, stresstest requirements, and a debt-to-equity 

limit for companies that the Council has 

determined pose a grave threat to the 

financial stability of the United States. 

Section 165 also permits the Board to 

establish additional enhanced 

prudential standards that may include 

three enumerated standards—a 

contingent capital requirement, an 

enhanced public disclosure 

requirement, a short-term debt limit— 

and any ‘‘other prudential standards’’ 

that the Board determines are 

‘‘appropriate.’’ 

For bank holding companies and 

certain foreign banking organizations, 

the Board has issued an integrated set of 

enhanced prudential standards through 

a series of rulemakings, including the 

Board’s capital plan rule,1 stress testing 

rules,2 resolution plan rule,3 and the 

Board’s enhanced prudential standards 

rule under Regulation YY.4 As part of 

the integrated enhanced prudential 

standards applicable to the largest, most 

complex bank holding companies, the 

Board also adopted enhanced liquidity 

requirements through the liquidity 

coverage ratio (LCR) rule 5 and adopted 

enhanced leverage capital requirements 

through a supplementary leverage ratio. 

Further, the Board issued an enhanced 

supplementary leverage ratio for the 

most systemic bank holding 

companies.6 This integrated set of 

standards is designed to result in a more 

stringent regulatory regime for these 

companies to increase their resiliency 

and to mitigate the risk that their failure 

or material financial distress could pose 

to U.S. financial stability. The Board 

expects to issue additional standards 

through future rulemakings. 

In considering the application of 

enhanced prudential standards to 

nonbank financial companies 

supervised by the Board, the Board 

intends to thoroughly assess the 

business model, capital structure, risk 

profile, and systemic footprint of a 

designated company to determine how 

the enhanced prudential standards 

would apply.7 Consistent with this 

approach, the Board is considering the 

application of enhanced prudential 

standards to General Electric Capital 

Corporation (GECC), a company that has 

been designated by the Council for 

Board supervision.8 In light of the 

substantial similarity of GECC’s 

activities and risk profile to that of a 

similarly-sized bank holding company, 

the Board is proposing to apply 

enhanced prudential standards to GECC 

that are similar to those that apply to 

large bank holding companies. As 

described in greater detail below, the 

Board is proposing to apply: (1) Capital 

requirements; (2) capital-planning and 

stress-testing requirements; (3) liquidity 

requirements; and (4) risk-management 

and risk-committee requirements. The 

Board is also proposing to apply certain 

additional enhanced prudential 

standards to GECC in light of certain 

unique aspects related to GECC’s 

activities, risk profile, and structure, 

including additional independence 

requirements for GECC’s board of 

directors, restrictions on intercompany 

transactions between GECC and General 

Electric Company (GE), and leverage 

capital requirements that are 

comparable to the standards that apply 

to the largest, most systemic banking 

organizations. In addition, the Board is 

proposing to require GECC to file certain 

reports with the Board that are similar 

to the reports required of bank holding 

companies. 

The Board is inviting public comment 

on the appropriateness of the proposed 

enhanced prudential standards that 

would apply to GECC and on the 

Board’s proposed tailoring of the 

enhanced prudential standards. The 

Board believes that it is appropriate to 

seek public comment on the application 

of enhanced prudential standards to 

nonbank financial companies 

supervised by the Board in order to 

provide transparency regarding the 

regulation and supervision of these 

companies. The public comment 

process will provide nonbank financial 

companies supervised by the Board and 

interested members of the public with 

the opportunity to comment, and will 

help guide the Board in future 

application of enhanced prudential 

standards to other nonbank financial 

companies. 

II. Overview of GECC 

On July 8, 2013, the Council 

determined that GECC should be 

supervised by the Board and subject to 

enhanced prudential standards. As 

required by section 113(d) of the DoddFrank Act, the Council conducted an 

annual evaluation of its determination 

to designate GECC for Board supervision 

and determined not to rescind that 

determination on July 31, 2014. 

GECC, a wholly owned subsidiary of 

GE, is one of the largest depository 

institution holding companies in the 

United States by assets, with 

approximately $514 billion in total 

assets as of September 30, 2014.9 GECC 

engages primarily in collateralized 

lending to middle-market commercial 

firms and consumers. Approximately 82 

percent of GECC’s net income in 2013 

was derived from its commercial and 

consumer lending businesses. In its 

commercial lending operations, GECC 

focuses primarily on lending and 

leasing to middle market companies and 

offers secured commercial loans, 

equipment financing, and other 

financial services to companies across a 

wide range of industries. In its 

consumer operations, GECC offers 

European mortgages, auto loans, debt 

consolidation, private mortgage 

insurance, and credit cards. GECC is 

also the largest provider of private label 

credit cards in the United States. GECC 

is taking steps to reduce its consumer 

lending business and focus on 

businesses that align more closely with 

GE’s commercial and industrial 

operations. GECC engages in some 

activities that are not permitted for a 

bank holding company or a savings and 

loan holding company.10 These 

activities comprise less than 10 percent 

of GECC’s balance sheet and consist of 


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11 In July 2014, GECC commenced a public 

offering of approximately 15 percent of the shares 

of Synchrony Financial, a company that conducts 

GECC’s consumer financing activities and that 

controls Synchrony Bank. GECC has indicated that 

it will divest the remaining 85 percent of 

Synchrony Financial in the near future. 

12Under section 2(c)(2) of the Bank Holding 

Company Act (BHC Act), certain industrial loan 

companies, such as GE Capital Bank, are not 

included within the definition of ‘‘bank’’ under the 

BHC Act. Therefore, any company controlling such 

an industrial loan company is not a bank holding 

company subject to the BHC Act. See 12 U.S.C. 

1841(c)(2)(H). 

13The Board has examination, reporting, and 

enforcement authority over nonbank financial 

companies that includes takings actions to ensure 

the safety and soundness of the nonbank financial 

company. 12 U.S.C. 5361(b), 5362. 

14 12 U.S.C. 5365(a)(2). 

15See 12 U.S.C. 5365(b)(3). 

16 12 U.S.C. 5365(b)(3)(A). 

17 12 U.S.C. 5365(b)(3)(D). 

18 12 U.S.C. 5365(b)(3)(B). 

19 12 U.S.C. 5365(b)(3)(C). 

20With respect to a domestic nonbank financial 

company supervised by the Board, the factors 

include: (A) The extent of the leverage of the 

company; (B) the extent and nature of the offbalance-sheet exposures of the company; (C) the 

extent and nature of the transactions and 

relationships of the company with other significant 

nonbank financial companies and significant bank 

holding companies; (D) the importance of the 

company as a source of credit for households, 

businesses, and State and local governments and as 

a source of liquidity for the United States financial 

system; (E) the importance of the company as a 

source of credit for low-income, minority, or 

underserved communities, and the impact that the 

failure of such company would have on the 

availability of credit in such communities; (F) the 

extent to which assets are managed rather than 

owned by the company, and the extent to which 

ownership of assets under management is diffuse; 

(G) the nature, scope, size, scale, concentration, 

interconnectedness, and mix of the activities of the 

company; (H) the degree to which the company is 

already regulated by one or more primary financial 

regulatory agencies; (I) the amount and nature of the 

financial assets of the company; (J) the amount and 

types of the liabilities of the company, including 

the degree of reliance on short-term funding; and 

(K) any other risk-related factors that the Council 

deems appropriate. 

equity investments in nonfinancial 

companies, such as power companies. 

Like many large bank holding 

companies, GECC borrows in the 

wholesale funding markets. For 

example, GECC is a large issuer of 

commercial paper and long-term debt to 

wholesale counterparties, and uses 

securitizations of loans and finance 

receivables as a significant source of 

funding. Moreover, GECC holds a large 

portfolio of on-balance sheet financial 

assets that is comparable to those of the 

largest bank holding companies, 

including a large portfolio of investment 

securities and commercial and 

consumer loans. Likewise, similar to the 

largest, most complex banking 

organizations, GECC makes significant 

use of derivatives to hedge interest rate 

risk, foreign exchange risk, and other 

financial risks. 

GE and GECC are savings and loan 

holding companies by virtue of their 

control of Synchrony Bank, a federal 

savings association, and are subject to 

consolidated supervision by the Board. 

Synchrony Bank, GECC’s largest insured 

depository institution subsidiary, had 

approximately $46 billion in total assets 

and $33 billion in total deposits as of 

September 30, 2014. Synchrony Bank 

specializes in consumer lending and 

consumer deposit products.11 GECC 

also has an insured Utah-chartered 

industrial loan company, GE Capital 

Bank, which had approximately $20 

billion in total assets and $16 billion in 

total deposits as of September 30, 2014, 

and specializes in commercial lending 

and consumer deposit products (other 

than demand deposit products).12

III. Statutory Requirements for the 

Application of Enhanced Prudential 

Standards to Nonbank Financial 

Companies Supervised by the Board 

A. Overview 

As the prudential regulator for 

nonbank financial companies 

designated by the Council, the Board is 

charged with establishing enhanced 

prudential standards to prevent or 

mitigate risks to the financial stability of 

the United States that may arise from 

the material financial distress or failure 

of such companies. These obligations 

include helping to ensure the safe and 

sound operations of the company.13 In 

prescribing enhanced prudential 

standards required by section 165 of the 

Dodd-Frank Act, section 165(a)(2) 

permits the Board to tailor the enhanced 

prudential standards among companies 

on an individual basis, taking into 

consideration their ‘‘capital structure, 

riskiness, complexity, financial 

activities (including the financial 

activities of their subsidiaries), size, and 

any other risk-related factors that the 

Board . . . deems appropriate.’’ 14 In 

addition, under section 165(b)(1), the 

Board is required to take into account 

differences among bank holding 

companies covered by section 165 and 

nonbank financial companies 

supervised by the Board, based on 

statutory considerations.15

The factors the Board must consider 

include: (i) The factors described in 

sections 113(a) and (b) of the DoddFrank Act (12 U.S.C. 5313(a) and (b)); 

(ii) whether the company owns an 

insured depository institution; (iii) 

nonfinancial activities and affiliations of 

the company; and (iv) any other riskrelated factors that the Board determines 

appropriate.16 The Board must, as 

appropriate, adapt the required 

standards in light of any predominant 

line of business of a nonbank financial 

company, including activities for which 

particular standards may not be 

appropriate.17 Section 165(b)(3) also 

requires the Board, to the extent 

possible, to ensure that small changes in 

the factors listed in sections 113(a) and 

113(b) of the Dodd-Frank Act would not 

result in sharp, discontinuous changes 

in the enhanced prudential standards 

established by the Board under section 

165(b)(1).18 The statute also directs the 

Board to take into account any 

recommendations made by the Council 

pursuant to its authority under section 

115 of the Dodd-Frank Act.19

B. GECC 

The Board has thoroughly assessed 

the business model, capital structure, 

risk profile, and systemic footprint of 

GECC and has considered the factors set 

forth in sections 165(a)(2) and 165(b)(3) 

of the Dodd-Frank Act in proposing the 

enhanced prudential standards that 

would apply to GECC. This assessment 

indicates that GECC’s activities and risk 

profile are similar to those of large bank 

holding companies, and that enhanced 

prudential standards similar to those 

that apply to large bank holding 

companies would be appropriate. 

1. Factors Described in Sections 113(a) 

and (b) of the Dodd-Frank Act 

Section 113(a) provides a list of ten 

factors 20 that the Council is required to 

consider in determining whether a 

nonbank financial company should be 

supervised by the Board, in addition to 

any other risk-related factor the Council 

deems appropriate. The factors include 

leverage, off-balance sheet exposures, 

interconnectedness with significant 

financial counterparties, the nature, 

scope, size, scale and mix of activities, 

degree of regulation, and liabilities. In 

considering these factors the Board 

notes that, similar to the largest bank 

holding companies, GECC is a 

significant participant in the global 

economy and financial markets, is 

interconnected to financial 

intermediaries through its financing 

activities and its funding model, and is 

a significant source of credit in the 

United States. Moreover, GECC’s 

leverage; off-balance sheet exposures; 

funding and risk profile; asset 

composition; and the nature, scope, 

size, scale, concentration, 

interconnectedness, and mix of its 

activities are substantially similar to 

those of many large bank holding 

companies. As noted above, like many 

of the largest bank holding companies, 

GECC’s activities focus primarily on 


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Federal Register / Vol. 79, No. 232 / Wednesday, December 3, 2014 / Notices 71771 

21As discussed above, GECC is in the process of 

divesting Synchrony Bank. Nevertheless, following 

this divestiture, GECC will continue to control GE 

Capital Bank. 

22 GECC is a grandfathered unitary savings and 

loan holding company under section 10(c)(9)(A) of 

HOLA and is therefore exempt from the activity and 

investment restrictions under HOLA. 12 U.S.C. 

1467a(c)(9)(A). 

lending and leasing to commercial 

companies and on consumer financing 

and deposit products. Moreover, similar 

to many large bank holding companies, 

GECC borrows in the wholesale funding 

markets by issuing commercial paper 

and long-term debt to wholesale 

counterparties, and makes significant 

use of derivatives to hedge interest rate 

risk, foreign exchange risk, and other 

financial risks. GECC also holds a large 

portfolio of on-balance sheet financial 

assets, such as investment securities and 

commercial and consumer loans, which 

is comparable to those of the largest 

bank holding companies. In terms of the 

degree to which a company is already 

regulated, the Board notes that GECC is 

a savings and loan holding company 

subject to prudential supervision by the 

Board, but that sections 165 and 166 do 

not apply by their terms to savings and 

loan holding companies with $50 

billion or more in total consolidated 

assets, such as GECC, as they apply to 

bank holding companies. 

Due to the substantial similarity 

between the activities and risk profile of 

the largest bank holding companies and 

GECC as described above, the Board is 

proposing to apply enhanced prudential 

standards to GECC that are similar to 

those that would apply to a large bank 

holding company. Similar to the 

standards imposed on the largest bank 

holding companies, the proposed 

standards are designed to ensure the 

continued resiliency of GECC during 

periods of material financial distress, so 

that the company would be in a position 

to continue to meet its obligations to its 

creditors and counterparties, as well as 

to continue to serve as a financial 

intermediary during a period of 

financial and economic stress. 

2. Control of an Insured Depository 

Institution 

GECC controls two insured depository 

institutions that offer traditional 

banking products to both consumer and 

commercial customers.21 Similar to the 

insured depository institutions of large 

bank holding companies, GECC’s 

subsidiary insured depository 

institutions serve as a source of funding 

and as a source of credit for a portion 

of its lending activities. As such, GECC’s 

control of subsidiary insured depository 

institutions supports application of the 

enhanced prudential standards to the 

company in a manner that is similar to 

how those standards apply to large bank 

holding companies. 

3. Nonfinancial Activities and 

Affiliations of the Company 

The vast majority (approximately 82 

percent) of GECC’s activities, such as 

lending and leasing activities, are those 

that a bank holding company may 

engage in under sections 4(c) and 4(k) 

of the BHC Act, and are similar to those 

in which the largest bank holding 

companies engage. The remaining 

portion of GECC’s activities are 

generally limited to those that are 

permissible for savings and loan holding 

companies under the Home Owners’ 

Loan Act (HOLA).22 As noted, only a 

small portion of GECC’s activities (less 

than 10 percent) are those that would be 

impermissible for a bank holding 

company under the BHC Act or for a 

savings and loan holding company 

under HOLA. These activities are 

typically limited to equity investments 

in certain nonfinancial companies. 

Accordingly, as the large majority of 

GECC’s activities are similar to those of 

a bank holding company, the Board 

believes that it is appropriate to apply 

prudential standards to GECC that are 

comparable to those that would apply to 

a large bank holding company. 

4. Any Other Risk-Related Factors That 

the Board Determines Appropriate 

In addition to the factors required 

under sections 113 and 165 of the DoddFrank Act, the Board is permitted to 

take any other risk-related factors into 

consideration in the development of the 

proposed enhanced prudential 

standards for GECC. As noted, GECC is 

a wholly owned subsidiary of GE. The 

Board believes that the enhanced 

prudential standards applied to GECC 

should take into account GECC’s 

particular circumstances as a lower-tier 

designated nonbank financial company. 

The Council, in making the 

determination to designate GECC, 

focused on the adverse effect on the 

financial stability of the United States 

that could arise from material financial 

distress at GECC. The Council found 

that GECC itself is an entity 

predominantly engaged in financial 

activities, is a significant participant in 

the global economy and financial 

markets, and is interconnected to 

financial intermediaries through its 

financing activities and its funding 

model. Because the Board’s regulation 

of GECC as a nonbank financial 

company designated for its supervision 

must focus on the financial stability 

implications of potential financial 

distress at GECC, it is prudent to 

address the effect of any conflicts of 

interest that may arise in interactions 

with GE and its affiliates, including the 

possibility that such conflicts could 

have an adverse effect on the financial 

condition of GECC. Accordingly, the 

Board is proposing to require GECC to 

meet certain enhanced prudential 

standards designed to ensure the safe 

and sound operations of GECC and to 

address the potential for conflict with 

GE and its affiliates. As further 

discussed below, the Board’s proposed 

enhanced prudential standards would 

require GECC to have 25 percent or two 

members, whichever is greater, of its 

board of directors to be independent of 

GE’s and GECC’s management and GE’s 

board of directors. The Board is also 

proposing to impose a requirement that 

transactions between GECC and GE be 

conducted on market terms. 

Due to the substantial similarity in the 

business model, capital structure, and 

risk profile between GECC and large 

bank holding companies, the Board is 

not proposing to consider other riskrelated factors in the adoption of 

enhanced prudential standards for 

GECC. Nevertheless, consistent with its 

authority as the prudential supervisor of 

designated nonbank financial 

companies, the Board expects to 

continue to monitor and assess GECC’s 

activities and risk profile, and, in 

accordance with the requirements of 

sections 113 and 165 of the Dodd-Frank 

Act, to take into account any additional 

factors or considerations, as necessary, 

in the adoption of future standards, or 

in the future tailoring of any imposed 

standards. 

1. What other factors, if any, should the 

Board take into consideration when 

proposing to apply enhanced prudential 

standards to GECC, or in tailoring the 

standards to GECC? 

5. Tailoring of Proposed Prudential 

Standards 

As noted, section 165 permits the 

Board to tailor the application of 

enhanced prudential standards to 

companies covered under section 165 

based on certain unique characteristics 

of the company. Although the majority 

of the enhanced prudential standards 

the Board is proposing to adopt are 

identical to those that apply to large 

bank holding companies, the Board is 

proposing to tailor certain of the 

proposed standards, in light of certain 

characteristics unique to GECC. For 

example, in developing the proposed 

capital requirements, the Board has 

taken into consideration the fact that 


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71772 Federal Register / Vol. 79, No. 232 / Wednesday, December 3, 2014 / Notices 

23See Supervision and Regulation Letter 12–17, 

Consolidated Supervision Framework for Large 

Financial Institutions (December 12, 2012), 

available at: http://www.federalreserve.gov/

bankinforeg/srletters/sr1217.htm; 12 CFR part 217; 

12 CFR 225.8; Supervision and Regulation Letter 

99–18, Assessing Capital Adequacy in Relation to 

Risk at Large Banking Organizations and Others 

with Complex Risk Profiles (July 1, 1999), available 

at: http://www.federalreserve.gov/boarddocs/

srletters/1999/SR9918.HTM. 

24Basel III was published in December 2010 and 

revised in June 2011. See Basel Committee, Basel 

III: A global framework for more resilient banks and 

banking systems (December 2010), available at: 

http://www.bis.org/publ/bcbs189.pdf. 

25See 78 FR 62018 (October 11, 2013). The 

revised capital framework also reorganized the 

Board’s capital adequacy guidelines into a 

harmonized, codified set of rules, located at 12 CFR 

part 217. The requirements of 12 CFR part 217 came 

into effect on January 1, 2014, for bank holding 

companies subject to the advanced approaches rule, 

and as of January 1, 2015 for all other bank holding 

companies. 

26 12 CFR 217.2. 

27 12 U.S.C. 5365. 

28See 79 FR 24528 (May 1, 2014). 

GECC has not previously been subject to 

regulatory capital requirements and has 

not developed the infrastructure and 

systems required to begin calculating its 

capital ratios under the Board’s 

advanced approaches risk-based capital 

requirements (advanced approaches 

rule). Thus, although GECC would meet 

the relevant asset threshold for 

application of the advanced approaches 

rule, the Board is not proposing to 

require GECC to calculate its capital 

ratios using the advanced approaches 

rule. In addition, in light of the 

Council’s determination that material 

financial distress at GECC could pose a 

threat to U.S. financial stability, the 

Board is proposing to impose leverage 

capital requirements on GECC that are 

comparable to the standards that apply 

to the largest, most systemic banking 

organizations. 

Finally, the Board notes that many of 

the proposed standards, including the 

risk-management requirements, 

liquidity risk-management, and 

liquidity stress-testing requirements of 

Regulation YY; and capital-planning 

and stress-testing requirements require 

the covered company to tailor its 

compliance framework based on the 

size, complexity, structure, risk profile, 

and activities of the organization. Thus, 

the Board would expect that, in 

implementing the enhanced prudential 

standards, GECC would tailor its 

compliance framework to suit the 

company’s complexity, structure, risk 

profile, and activities. Accordingly, the 

Board believes that the proposed 

enhanced prudential standards 

discussed below adequately reflect these 

unique characteristics of GECC. 

2. Should the Board consider tailoring 

any of the other proposed enhanced 

prudential standards in light of GECC’s 

business model, capital structure, and 

risk profile? 

IV. Proposed Enhanced Prudential 

Standards To Apply to GECC 

A. Capital Requirements 

The Board has long held the view that 

a bank holding company generally 

should hold capital that is 

commensurate with its risk profile and 

activities, so that the firm can meet its 

obligations to creditors and other 

counterparties, as well as continue to 

serve as a financial intermediary 

through periods of financial and 

economic stress.23 In July 2013, the 

Board issued a final rule implementing 

regulatory capital reforms reflecting 

agreements reached by the Basel 

Committee on Banking Supervision 

(Basel Committee) in ‘‘Basel III: A 

Global Regulatory Framework for More 

Resilient Banks and Banking Systems’’ 

(Basel III) 24 and certain changes 

required by the Dodd-Frank Act (revised 

capital framework).25 The revised 

capital framework introduced a new 

minimum common equity tier 1 riskbased capital ratio of 4.5 percent, raised 

the minimum tier 1 risk-based capital 

ratio from 4 percent to 6 percent, 

introduced a common equity tier 1 

capital conservation buffer of 2.5 

percent of risk-weighted assets, required 

all banking organizations to meet a 4 

percent minimum leverage ratio (the 

generally-applicable leverage ratio), 

implemented stricter eligibility criteria 

for regulatory capital instruments, and 

introduced a new standardized 

methodology for calculating riskweighted assets. Because these 

regulatory capital reforms only apply 

generally to top-tier savings and loan 

holding companies, GECC is not subject 

to the revised capital framework.26 In 

addition, the revised capital framework 

would not apply to GE because it 

substantially engages in commercial 

activities. 

As noted above, the Council has 

determined that GECC’s material 

financial distress could pose a threat to 

U.S. financial stability. Section 165 

provides that the enhanced prudential 

standards for nonbank financial 

companies must include risk-based 

capital requirements and leverage limits 

that ‘‘are more stringent than the 

standards and requirements applicable 

to nonbank financial companies and 

bank holding companies that do not 

present similar risks to the financial 

stability of the United States’’ unless the 

Board, in consultation with the Council, 

‘‘determines that such requirements are 

not appropriate for a company subject to 

more stringent prudential standards 

because of the activities of such 

company . . . or structure.’’ 27 Because 

GECC’s activities and balance sheet are 

substantially similar to those of a large 

bank holding company, the Board’s 

revised capital framework is appropriate 

for GECC and will appropriately reflect 

risks from GECC’s activities, balance 

sheet, and funding profile. Accordingly, 

other than as described below, the 

Board is proposing to require GECC to 

comply with the regulatory capital 

framework applicable to a large bank 

holding company including the 

minimum common equity tier 1, tier 1, 

and total risk-based capital ratios, the 

minimum generally-applicable leverage 

ratio, and any restrictions on 

distributions or discretionary bonus 

payments associated with the capital 

conservation buffer, beginning July 1, 

2015, consistent with any transition 

periods in the revised capital 

framework. 

In addition to the generally applicable 

capital adequacy requirements 

described above, the Board’s revised 

capital framework contains measures 

applicable to the largest, most 

interconnected bank holding 

companies. For bank holding companies 

with $250 billion or more in total 

consolidated assets or $10 billion or 

more in on-balance-sheet foreign 

exposures (advanced approaches 

banking organizations), these include 

the advanced approaches rule, a 

supplementary leverage ratio of tier 1 

capital to total leverage exposure of 3 

percent, a requirement to include 

accumulated other comprehensive 

income (AOCI) in tier 1 capital, and 

restrictions on distributions and 

discretionary bonus payments 

associated with the countercyclical 

capital buffer. A bank holding company 

with more than $700 billion in total 

consolidated assets or $10 trillion in 

assets under custody also is required to 

maintain a buffer of at least 2 percent 

above the minimum supplementary 

leverage capital requirement of 3 

percent, an enhanced supplementary 

leverage ratio (eSLR), in order to avoid 

restrictions on capital distributions and 

discretionary bonus payments to 

executive officers.28

The Board is not proposing to require 

GECC to calculate its capital ratios using 

the advanced approaches rule. The 

advanced approaches rule requires the 

development of models for calculating 

advanced approaches risk-weighted 

assets, and can require a lengthy parallel 

run period of no less than four 


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29The restrictions that apply to insured 

depository institution subsidiaries of companies 

covered under the eSLR would not apply to GECC’s 

depository institution subsidiaries without action 

by the appropriate Federal banking agency 

supervising Synchrony Bank and GE Capital Bank. 

30 12 U.S.C. 5365. 

31Financial Stability Board, Reducing the moral 

hazard posed by systemically important financial 

institutions, FSB Recommendations and Time Lines 

(October 20, 2010), available at: http://

www.financialstabilityboard.org/publications/r_

101111a.pdf; Financial Stability Board, Extending 

the G–SIFI Framework to domestic systemically 

important banks (April 16, 2012), available at: 

http://www.financialstabilityboard.org/

publications/r_120420b.pdf. 

32Basel Committee, Global systemically 

important banks: updated assessment methodology 

and the higher loss absorbency requirement (July 

2013), available at: http://www.bis.org/publ/

bcbs255.pdf; Basel Committee, A framework for 

dealing with domestic systemically important banks 

(October 2012), available at: https://www.bis.org/

publ/bcbs233.pdf. 

consecutive calendar quarters during 

which the institution must submit its 

models for supervisory approval. While 

GECC exceeds the threshold for 

application of the requirements that 

apply to advanced approaches banking 

organizations, GECC has not previously 

been subject to regulatory capital 

requirements and has not developed the 

infrastructure and systems required to 

begin calculating its capital ratios under 

the advanced approaches rule. 

Moreover, because GECC will need time 

to build and implement the internal 

systems and infrastructure required to 

comply with other requirements of the 

Board’s order imposing enhanced 

prudential standards, the Board is not 

proposing to require GECC to develop 

the models required to comply with the 

advanced approaches rule. Rather, the 

Board is proposing to apply the 

standardized risk-based capital rules, 

leverage rules, and capital planning and 

supervisory stress-testing requirements 

to GECC. 

However, the Board is proposing to 

require GECC to comply with other 

requirements that apply to advanced 

approaches banking organizations, 

including restrictions on distributions 

and discretionary bonus payments 

associated with the countercyclical 

capital buffer, a minimum 

supplementary leverage ratio of 3 

percent, and the requirement to include 

AOCI in regulatory capital. These are 

aspects of the revised capital framework 

that are appropriate for the largest, most 

interconnected banking organizations 

and therefore apply to advanced 

approaches banking organizations, but 

are not part of the advanced approaches 

rule. The proposed application of these 

requirements to GECC will ensure that 

GECC holds sufficient capital to 

withstand financial stress, mitigating its 

risk to U.S. financial stability. 

Application of these requirements to 

GECC would not require GECC to 

develop models for complying with the 

advanced approaches rule, would not 

require completion of a successful 

parallel run as contemplated in the 

advanced approaches rule, and would 

not require the allocation of significant 

additional operational resources. 

As noted above, the Board, as the 

prudential regulator of nonbank 

financial companies designated by the 

Council, is obligated to impose 

standards that are designed to maintain 

the safety and soundness of GECC in 

order to mitigate the risk of material 

financial distress at GECC. The Board is 

also proposing to require GECC to 

comply with the eSLR, which is 

designed to minimize leverage at 

banking organizations that pose 

substantial systemic risk, thereby 

strengthening the ability of such 

organizations to remain a going concern 

during times of economic stress and 

minimizing the likelihood that problems 

at these organizations would contribute 

to financial instability. The Board 

believes that the maintenance of a 

strong base of capital by the most 

systemic U.S. banking organizations and 

GECC is particularly important because 

capital shortfalls at these institutions 

have the potential to result in significant 

adverse economic consequences and to 

contribute to systemic distress. While 

GECC’s total consolidated assets are 

below the asset thresholds for bank 

holding companies that are subject to 

the eSLR ($700 billion in total 

consolidated assets or $10 trillion in 

assets under custody), the Board has 

analyzed GECC’s size, scope of 

operations, activities, and systemic 

importance, and, in light of the 

Council’s determination that material 

financial distress at GECC could pose a 

threat to U.S. financial stability, is 

proposing to require GECC to comply 

with the restrictions on distributions 

and discretionary bonuses associated 

with the eSLR.29

The Board is required under section 

165 to establish enhanced risk-based 

and leverage capital requirements for 

nonbank financial companies 

supervised by the Board and large bank 

holding companies that ‘‘are more 

stringent than the standards applicable 

to nonbank financial companies and 

bank holding companies that do not 

present similar risks to the financial 

stability of the United States.’’ 30 For the 

largest banking organizations, the Board 

notes that the Financial Stability Board 

has established a framework to identify 

global and domestic systemically 

important banks 31 (G–SIBs and D–SIBs, 

respectively) that are subject to the 

Basel Committee’s enhanced 

supervisory framework, which includes 

enhanced capital surcharges.32 At this 

time, the Board is not proposing to 

categorize GECC as a G–SIB or a D–SIB, 

or proposing to automatically subject 

GECC to all of the same standards that 

apply to the largest, most systemic U.S. 

banking organizations. With respect to 

any future requirements, the Board will 

analyze GECC’s size, scope of 

operations, activities, and systemic 

importance to determine whether the 

proposed standard is appropriate in 

light of these characteristics of the 

company. For example, the Board 

expects to seek comment on additional 

enhancements to the risk-based capital 

rules for largest, most systemic bank 

holding companies in the future, and 

will consider whether applying similar 

enhancements to the risk-based capital 

rules to GECC is appropriate after 

considering GECC’s size, scope of 

operations, activities, and systemic 

importance. The Board would seek 

comment on any additional proposed 

enhancements. 

3. Due to the similarity in structure and 

activities of GECC with that of a bank 

holding company, the Board has 

proposed to apply capital standards to 

GECC that are generally consistent with 

the requirements imposed on a large 

bank holding company. Should the 

Board consider altering any of the 

proposed capital requirements that it is 

considering applying to GECC? 

4. Should the Board consider applying 

any additional capital standards to 

GECC? 

B. Capital Planning Requirements 

1. Capital Plan Rule 

The recent financial crisis highlighted 

a need for large bank holding companies 

to incorporate into their capital 

planning forward-looking assessments 

of capital adequacy under stressed 

conditions. The crisis also underscored 

the importance of strong internal capital 

planning practices and processes among 

large bank holding companies. The 

Board issued the capital plan rule to 

build upon the Board’s existing 

supervisory expectation that large bank 

holding companies have robust systems 

and processes that incorporate forwardlooking projections of revenue and 

losses to monitor and maintain their 

internal capital adequacy. By helping to 

ensure that the largest bank holding 

companies have sufficient capital to 

withstand significant stress and to 

continue to operate, capital plan 


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33 12 CFR 225.8. 

34See Supervision and Regulation Letter 12–17, 

Consolidated Supervision Framework for Large 

Financial Institutions (December 12, 2012), 

available at: http://www.federalreserve.gov/

bankinforeg/srletters/sr1217.htm; 12 CFR part 217; 

12 CFR 225.8; Supervision and Regulation Letter 

99–18, Assessing Capital Adequacy in Relation to 

Risk at Large Banking Organizations and Others 

with Complex Risk Profiles (July 1, 1999), available 

at: http://www.federalreserve.gov/boarddocs/

srletters/1999/SR9918.HTM. 

35 GECC will not be the only intermediate holding 

company subject to the capital plan rule and CCAR. 

Notably, some U.S. bank holding company 

subsidiaries of foreign banking organizations 

participate in CCAR. In addition, under the Board’s 

intermediate holding company rule, all foreign 

banking organizations with $50 billion or more in 

U.S. non-branch assets will be required to form a 

U.S. intermediate holding company that will be 

subject to the capital plan rule. See Subpart O to 

12 CFR 252. 

36See Subpart E to 12 CFR part 252. 

reviews also help the Board meet its 

macro-prudential supervisory objective 

of helping to ensure that the financial 

system as a whole can continue to 

function under stressed conditions. 

The capital plan rule requires each 

bank holding company with $50 billion 

or more in total consolidated assets to 

submit an annual capital plan to the 

Board describing its planned capital 

actions and demonstrating its ability to 

meet a 5 percent tier 1 common capital 

ratio and maintain capital ratios above 

the Board’s minimum regulatory capital 

ratios under both baseline and stressed 

conditions over a forward-looking 

planning horizon.33 A capital plan must 

also include an assessment of a bank 

holding company’s sources and uses of 

capital reflecting the size, complexity, 

risk profile, and scope of operations of 

the company, assuming both expected 

and stressed conditions. 

Under the capital plan rule, the Board 

annually evaluates a large bank holding 

company’s capital adequacy and capital 

planning practices and the 

comprehensiveness of the capital plan, 

including the strength of the underlying 

analysis. The Comprehensive Capital 

Analysis and Review (CCAR) is the 

Board’s supervisory process for 

reviewing capital plans submitted by 

bank holding companies under the 

capital plan rule. As part of CCAR, the 

Board conducts a quantitative 

assessment of each large bank holding 

company’s capital adequacy under an 

assumption of stressed conditions and 

conducts a qualitative assessments of 

the company’s internal capital planning 

practices, each of which can provide a 

basis on which the Board may object to 

a company’s capital plan. If the Board 

objects to a bank holding company’s 

capital plan, the company may not make 

any capital distribution other than those 

approved in writing by the Board or the 

appropriate Reserve Bank. A bank 

holding company that receives an 

objection may submit a revised capital 

plan for review by the Board. 

The Federal Reserve conducts its 

quantitative assessment of a large bank 

holding company’s capital plan based 

on the supervisory stress test conducted 

under the Board’s rules implementing 

the stress tests required under the DoddFrank Act, discussed below, combined 

with the bank holding company’s 

planned capital actions under the 

baseline scenario. This assessment helps 

determine whether a bank holding 

company would be capable of meeting 

supervisory expectations for its 

regulatory capital ratios even if stressed 

conditions emerge and the company 

does not reduce planned capital 

distributions. 

In the CCAR qualitative assessment, 

the Board evaluates each large bank 

holding company’s risk-identification, 

risk-measurement, and risk-management 

practices supporting the capital 

planning process, including estimation 

practices used to produce stressed loss, 

revenue, and capital ratios, as well as 

the governance and controls around 

these practices. In reviewing the 

company’s capital plan, the Board 

considers the comprehensiveness of the 

capital plan, the reasonableness of the 

company’s assumptions and analysis 

underlying the capital plan, and the 

company’s methodologies for reviewing 

the robustness of its capital adequacy 

process. The Board may object to a 

capital plan based on deficiencies in a 

bank holding company’s capital 

planning processes, even if the company 

maintained regulatory capital ratios 

above minimum requirements 

throughout the planning horizon under 

stressed scenarios. 

2. Proposed Capital Planning 

Requirements To Be Applied to GECC 

To ensure that GECC continues to 

maintain sufficient capital and has 

internal processes for assessing its 

capital adequacy that appropriately 

account for the company’s risks, the 

Board is proposing to require GECC to 

comply with the Board’s capital plan 

rule, 12 CFR 225.8, and to submit a 

capital plan for the capital plan cycle 

beginning January 1, 2016. 

As described above, GECC’s activities, 

risk profile, and balance sheet are 

similar to those of large bank holding 

companies. Accordingly, requiring 

GECC to comply with the Board’s 

capital plan rule as if it were a bank 

holding company will ensure that GECC 

holds capital that is commensurate with 

its risk profile and activities, can meet 

its obligations to creditors and other 

counterparties, and can continue to 

serve as a financial intermediary 

through periods of financial and 

economic stress.34

The Board recognizes that unlike 

domestic bank holding companies, 

GECC is an intermediate holding 

company of a larger, publicly traded 

company. The Board’s capital plan rule 

will help ensure that GECC manages its 

capital, and any capital distributions to 

its parent, in a manner that is 

commensurate with its risks and 

consistent with its safety and soundness 

through the Federal Reserve’s review 

and non-objection to GECC’s capital 

plan.35 As discussed above, the capital 

plan rule will act as a counterweight to 

pressures that a company may face to 

make capital distributions during a 

period of economic stress helping to 

mitigate the risk of material financial 

distress at GECC. 

The Board recognizes that GECC 

likely will need time to build and 

implement the internal systems 

necessary to fully meet the requirements 

of the capital plan rule and the CCAR 

process. Accordingly, for GECC’s first 

capital plan cycle, which would begin 

on January 1, 2016, the Board’s 

quantitative assessment of GECC’s 

capital plan will not be based on 

supervisory stress test estimates 

conducted under the Board’s stress test 

rules, as described below.36 Instead, the 

Board intends to conduct a more limited 

quantitative assessment of GECC’s 

capital plan based on GECC’s own stress 

scenario and any scenarios provided by 

the Board and a qualitative assessment 

of GECC’s capital planning processes 

and supporting practices. This approach 

would be consistent with the capital 

plan review (CapPR) process that the 

Board used to evaluate the initial capital 

plan submissions of bank holding 

companies that were subject to the 

capital plan rule but that did not 

participate in the 2009 Supervisory 

Capital Assessment Program. 

The Board also expects to 

communicate to GECC the Board’s 

expectations on capital planning 

practices and capital adequacy 

processes in connection with its first 

capital plan submission. Although the 

Board’s stress test and capital plan rules 

establish requirements for all banking 

organizations that are subject to the 

rules, the Board is tailoring its 

expectations for companies of different 

sizes, scope of operations, activities, and 

systemic importance. Notably, the Board 

has significantly heightened supervisory 

expectations for the largest and most 

complex bank holding companies 


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37Board, Capital Planning at Large Bank Holding 

Companies: Supervisory Expectations and Range of 

Current Practice at pg. 3 (August 19, 2013), 

available at: http://www.federalreserve.gov/

bankinforeg/bcreg20130819a1.pdf. 

38 77 FR 62378 (Oct. 12, 2012); Subparts E and F 

to 12 CFR part 252. 

39 77 FR 62378 (Oct. 12, 2012); Subparts E and F 

to 12 CFR part 252. 40Subparts E and F to 12 CFR part 252. 

41 12 U.S.C. 5365(b)(1)(A)(ii). 

42 79 FR 61440 (October 10, 2014); 12 CFR part 

249. 

regarding all aspects of capital planning 

and expects these bank holding 

companies to have capital planning 

practices that incorporate existing 

leading practices.37 The Board would 

expect to tailor its supervisory 

expectations for GECC to account for 

any material differences between the 

company and large bank holding 

companies. 

5. Should the Board consider applying 

any additional capital planning 

requirements to GECC? 

C. Stress-Testing Requirements 

1. Dodd-Frank Act Stress-Tests Rule 

Section 165 of the Dodd-Frank Act 

requires the Board to conduct annual 

supervisory stress tests of bank holding 

companies with total consolidated 

assets of $50 billion or more and 

nonbank financial companies 

supervised by the Board and also 

requires the Board to issue regulations 

that require those companies to conduct 

company-run stress tests semi-annually. 

In 2012, the Board, in coordination with 

the Federal Deposit Insurance 

Corporation, the Office of the 

Comptroller of the Currency, and the 

Federal Insurance Office adopted stress 

testing rules under section 165(i) for 

large bank holding companies and 

nonbank financial companies (stress test 

rule).38 The stress test rule establishes a 

framework for the Board to conduct 

annual supervisory stress tests and 

requires these companies to conduct 

semi-annual company-run stress tests.39

The stress tests conducted under the 

Board’s stress test rule are 

complementary to the Board’s review of 

a large bank holding company’s capital 

plan in CCAR. These stress tests use 

stylized scenarios and capital action 

assumptions specified in the stress 

testing rules to calculate the post-stress 

capital ratios, while the CCAR poststress capital ratios use the bank holding 

company’s planned capital actions in 

the baseline scenario. The capital action 

assumptions in the Board’s stress test 

rules are intended to make the results of 

the stress tests more comparable across 

institutions, which enhances the quality 

of the required public disclosure of the 

stress-testing results. There is no poststress minimum capital ratio 

requirement for the stress tests required 

under the stress test rule. 

As noted, under the stress test rule, 

large bank holding companies are also 

subject to mid-cycle stress tests, in 

which companies design their own 

stress scenarios based on the definitions 

in the Board’s stress test rules. For both 

the annual and mid-cycle company-run 

stress tests, large bank holding 

companies must disclose the results of 

their company-run stress test conducted 

under the severely adverse scenario. 

2. Proposed Stress-Testing 

Requirements To Be Applied to GECC 

The Board is proposing to require 

GECC to comply with the stress-testing 

requirements applicable to bank holding 

companies with $50 billion or more in 

total consolidated assets under the 

stress test rule (subparts E and F of 

Regulation YY) in the stress-testing 

cycle that would commence on January 

1, 2017.40 Similar to the proposed 

application of the capital plan rule to 

GECC, the Board is proposing to apply 

the Board’s stress test rule to GECC in 

the same manner as it currently applies 

to large bank holding companies due to 

the similarity in activities, risk profile, 

and balance sheet between GECC and 

large bank holding companies. In 

addition, because the Board’s 

supervisory stress tests under its stress 

test rule are conducted on the basis of 

standardized scenarios and capital 

assumptions, any supervisory stress 

testing of GECC would provide a 

horizontal assessment of GECC’s capital 

adequacy compared with that of large 

bank holding companies that have 

comparable activities, risk profiles, and 

balance sheets. Moreover, the companyrun stress testing requirements under 

the Board’s stress test rule will ensure 

that GECC develops the necessary 

systems and processes to evaluate its 

capital adequacy on an ongoing basis. 

Subjecting GECC to the stress testing 

requirements in the stress testing cycle 

beginning on January 1, 2017, would 

allow GECC the time to develop 

appropriate systems and processes to 

conduct the stress tests and to provide 

the data and other information that the 

Board would require in connection with 

these tests. This approach would be 

consistent with the approach taken by 

the Board for bank holding companies 

with $50 billion or more in total 

consolidated assets that did not 

participate in the Supervisory Capital 

Assessment Program. The Board 

delayed application of the stress-testing 

requirements for these companies in 

order to provide them additional time to 

develop appropriate systems and to 

gather relevant information to comply 

with the stress-testing requirements. 

The Board expects to communicate to 

GECC any further expectation the Board 

may have regarding the company-run 

stress tests conducted under the stress 

test rule. Requiring GECC’s compliance 

with the stress test rule beginning on 

January 1, 2017, would also allow the 

Board adequate time to collect data from 

GECC to further assess its activities and 

risk profile to help the Board 

appropriately tailor the stress testing 

requirements based on GECC’s systemic 

footprint, which may include additional 

components or scenarios. 

6. Should the Board consider applying 

any additional stress testing 

requirements to GECC? 

7. Should the Board consider an 

alternate time frame for GECC’s 

compliance with the stress testing 

requirements? If so, why? 

D. Liquidity Requirements 

Section 165(b) of the Dodd-Frank Act 

directs the Board to adopt enhanced 

liquidity requirements for bank holding 

companies with total consolidated 

assets of $50 billion or more and 

nonbank financial companies 

supervised by the Board.41 Liquidity is 

measured by a company’s capacity to 

efficiently meet its expected and 

unexpected cash outflows and collateral 

needs at a reasonable cost without 

adversely affecting the daily operations 

or the financial condition of the 

company. The financial crisis of 2008– 

2009 illustrated that liquidity can 

evaporate quickly and cause severe 

stress in the financial markets, and 

demonstrated that even solvent 

financial companies may experience 

material financial distress if they do not 

manage their liquidity in a prudent 

manner. Through recent rulemakings 

and guidance, the Board has established 

quantitative liquidity requirements and 

liquidity risk-management standards in 

order to ensure financial companies’ 

resiliency during periods of financial 

market stress. 

1. LCR 

On September 3, 2014, the Board 

adopted a final rule that implements a 

quantitative liquidity requirement 

consistent with the LCR standard 

established by the Basel Committee.42

The requirement is designed to promote 

the short-term resilience of the liquidity 

risk profile of internationally active 


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43Under the LCR standard, certain categories of 

assets may qualify as eligible HQLA and may 

contribute to the HQLA amount if they are 

unencumbered by liens and other restrictions on 

transfer and can therefore be converted quickly into 

cash without reasonably expecting to incur losses 

in excess of the applicable LCR haircuts during a 

stress period. A covered company’s total net cash 

outflow amount is determined under the final rule 

by applying outflow and inflow rates, which reflect 

certain standardized stressed assumptions, against 

the balances of a covered company’s funding 

sources, obligations, transactions, and assets over a 

prospective 30 calendar-day period. Inflows are 

limited to 75 percent of outflows, to ensure that 

covered companies are maintaining sufficient onbalance-sheet liquidity and are not overly reliant on 

inflows, which may not materialize in a period of 

stress. 

44 12 CFR 252.34, 252.35. 

45 12 CFR 252.34(a). 

46 12 CFR 252.34(e). 

47 12 CFR 252.34(f). 

48 12 CFR 252.35. 

49SR letter 10–6 incorporated the Basel 

Committee’s ‘‘Principles for Sound Liquidity Risk 

Management and Supervision.’’ Basel Committee, 

Principles for Sound Liquidity Risk Management 

and Supervision (September 2008), available at: 

http://www.bis.org/publ/bcbs144.htm. See also 

Supervision and Regulation Letter SR 10–6, 

Interagency Policy Statement on Funding and 

Liquidity Risk Management, 75 FR 13656 (March 

17, 2010), available at: http://

www.federalreserve.gov/boarddocs/srletters/2010/

sr1006.pdf. 

banking organizations, thereby 

improving the banking sector’s ability to 

absorb shocks arising from financial and 

economic stress, and to further improve 

the measurement and management of 

liquidity risk. The LCR standard 

establishes a quantitative minimum LCR 

that requires a company subject to the 

rule to maintain an amount of highquality liquid assets (HQLA) (the 

numerator of the ratio) that is no less 

than 100 percent of its total net cash 

outflows over a prospective 30 calendarday period (the denominator of the 

ratio).43 The ability to rapidly monetize 

such high-quality liquid assets enables a 

covered company to meet its liquidity 

needs during an acute short-term 

liquidity stress scenario. 

The Board did not apply the LCR 

standard to nonbank financial 

companies in the final LCR rule. Rather, 

similar to the approach the Board 

followed in the adoption of Regulation 

YY, the Board indicated that, following 

designation of a nonbank financial 

company for supervision by the Board, 

the Board would thoroughly assess the 

business model, capital structure, and 

risk profile of the designated company 

to determine how the LCR standard 

should apply, and if appropriate, would 

tailor application of the standards by 

order or regulation to that nonbank 

financial company or to a category of 

nonbank financial companies. 

2. Regulation YY 

The liquidity requirements in 

Regulation YY require bank holding 

companies with total consolidated 

assets of $50 billion or more to comply 

with liquidity risk-management 

requirements (covered bank holding 

company), conduct internal liquidity 

stress tests, and hold a buffer of highlyliquid assets that is sufficient to meet 

the company’s projected net stressed 

cash-flow need over a 30-day period 

based on the results of such stress 

tests.44

The liquidity risk-management 

requirements of Regulation YY include 

requirements that the board of directors 

of the bank holding company approve 

an acceptable level of liquidity risk that 

the bank holding company may assume 

in connection with its operating 

strategies (liquidity risk tolerance), 

receive and review information from 

senior management regarding the 

company’s compliance with the 

established liquidity risk tolerance, and 

approve and periodically review 

liquidity risk-management strategies, 

policies, and procedures established by 

senior management.45 Regulation YY 

requires senior management of a 

covered bank holding company to 

establish and implement liquidity riskmanagement strategies, policies, and 

procedures, approved by the company’s 

board of directors; review and approve 

new products and business lines; and 

evaluate liquidity costs, benefits and 

risks related to new business lines and 

products. In addition, Regulation YY 

requires a covered bank holding 

company to establish and maintain 

procedures for monitoring collateral, 

legal entity, and intraday liquidity risks, 

and requires an independent review of 

a covered bank holding company’s 

liquidity risk-management processes 

and its liquidity stress-testing processes 

and assumptions. 

Regulation YY requires covered bank 

holding companies to produce 

comprehensive cash-flow projections at 

least monthly that project cash flows 

arising from assets, liabilities, and offbalance sheet exposures, over short-term 

and long-term horizons.46 In addition, 

covered bank holding companies must 

establish and maintain a contingency 

funding plan that sets forth strategies for 

addressing liquidity and funding needs 

during liquidity stress events.47 The 

contingency funding plan must be 

approved by the bank holding 

company’s risk committee and must 

include procedures to monitor emerging 

liquidity stress events. 

Regulation YY also requires a covered 

bank holding company to conduct 

monthly internal liquidity stress tests, 

and to maintain a buffer of highly liquid 

assets based on the results of the stress 

tests. The liquidity stress test 

requirements are based on firm-specific 

stress scenarios and assumptions 

tailored to the specific products and risk 

profile of the company. In conducting 

these liquidity stress tests, the firm must 

use a minimum of three stress scenarios 

designed by the firm (market, 

idiosyncratic or combination) and a 

minimum of three time horizons (30, 60, 

90 day period).48

Regulation YY’s liquidity 

requirements are designed to 

complement the requirements of the 

LCR, as described above. Regulation 

YY’s internal liquidity stress-test 

requirements provide a view of an 

individual firm under multiple 

scenarios and include assumptions 

tailored to the specific products and risk 

profile of the company and the 

idiosyncratic aspects of the firm’s 

liquidity profile, while the standardized 

measure of liquidity adequacy under the 

LCR is designed to facilitate a 

transparent assessment of a covered 

bank holding company’s liquidity 

position under a standard stress 

scenario and facilitates comparison 

across firms. 

3. Supervisory Guidance 

Regulation YY builds on the Board’s 

supervisory framework for liquidity, 

including guidance set forth in the 

Board’s Supervision and Regulation 

(SR) letter 10–6, Interagency Policy 

Statement on Funding and Liquidity 

Risk Management, issued in March 

2010.49 SR 10–6 reiterates the process 

that institutions should follow to 

appropriately identify, measure, 

monitor, and control their funding and 

liquidity risk. In particular, the 

guidance re-emphasizes the importance 

of cash-flow projections, diversified 

funding sources, stress testing, a 

cushion of liquid assets, and a formal 

well-developed contingency funding 

plan as primary tools for measuring and 

managing liquidity risk. The guidance 

also explains the expectation that 

institutions manage liquidity risk using 

processes and systems that are 

commensurate with the institution’s 

complexity, risk profile, and scope of 

operations. 

4. Application to GECC 

In designating GECC as a nonbank 

financial company that should be 

subject to Board supervision, the 

Council noted that: 

If GECC were unable to access funding 

markets, GECC could either reduce its 


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50See GECC Determination at 2. 

51 12 CFR 252.34, 252.35. 

52 12 CFR 249.50(b). 

53As indicated in the preamble to final LCR 

rulemaking, the Board anticipates separately 

seeking comment upon proposed regulatory 

reporting requirements and instructions pertaining 

to the LCR. 79 FR 61440, 61445 (October 10, 2014). 

The Board expects those reporting requirements 

and instructions to apply to any nonbank financial 

company supervised by the Board to which the 

Board has required by rule or order to comply with 

the LCR. 

54 12 CFR 252.34, 35. 

55 12 U.S.C. 5365(b)(1)(A). 

56 12 U.S.C. 5365(h). 

provision of credit or be forced to sell assets 

quickly to fund its operations and meet its 

obligations. If GECC had to rapidly liquidate 

assets, the impact could drive down asset 

prices and cause balance sheet losses for 

other large financial firms on a scale similar 

to those that could be caused by asset sales 

by some of the largest U.S. BHCs. The 

resulting capital losses across financial firms, 

particularly during a time of general 

economic distress, could exacerbate the 

stresses on the financial system and economy 

by forcing other firms to sell assets and draw 

on their credit lines to meet liquidity 

pressures. If GECC were unable to access 

funding markets, there could be a reduction 

in credit availability, which could lead to a 

broader reduction in economic activity.50

In order to promote the short-term 

resilience of GECC, improve its ability 

to withstand financial and economic 

stress, and to mitigate the potential 

adverse effects on other financial firms 

and markets, the Board is proposing to 

require GECC to manage its liquidity in 

a manner that is comparable to a bank 

holding company subject to the LCR 

standard, Regulation YY, and the 

Board’s supervisory guidance.51 GECC, 

like a large bank holding company, is 

primarily a lender and lessor to 

commercial entities and consumers, and 

is substantially involved in the 

provision of credit in the United States. 

Similar to large bank holding 

companies, GECC is also an active 

participant in the capital markets and 

relies on wholesale funding, such as 

commercial paper held by institutional 

investors and committed lines of credit 

provided by large commercial banks, 

exposing the company to liquidity risks. 

Therefore, to ensure that GECC has 

sufficient liquidity to meet outflows 

during a period of significant financial 

stress, and given the similarities 

between its operations and risk with 

those of large bank holding companies, 

the Board is proposing to apply the LCR 

standard under 12 CFR part 249 that 

would apply to advanced approaches 

banking organizations, without change, 

to GECC beginning July 1, 2015. GECC 

would be subject to the same transition 

periods and compliance timelines as all 

other advanced approaches banking 

organizations that do not have $700 

billion in total consolidated assets or 

$10 trillion in assets under custody, 

including the temporary monthly LCR 

calculation until July 1, 2016, and the 

requirement to maintain an LCR of 80 

percent from July 1, 2015 to December 

31, 2015, an LCR of 90 percent from 

January 1, 2016 to December 31, 2016, 

and an LCR of 100 percent thereafter.52

The standardized requirements of the 

LCR would allow for horizontal 

comparisons between GECC and other 

companies with similar balance sheets 

and risk profiles. Because the LCR 

applies outflow and inflow rates that are 

based on a covered bank holding 

company’s particular risk profile and 

activities, the LCR requirements would 

be tailored to GECC’s activities, balance 

sheet, and risk profile, and would help 

ensure that GECC holds sufficient 

HQLA to meet the expected outflows for 

such activities over a 30 calendar-day 

period.53

To complement the LCR 

requirements, the Board believes that 

the individualized liquidity riskmanagement requirements established 

in Regulation YY for bank holding 

companies with $50 billion or more in 

total consolidated assets are appropriate 

for GECC, and is proposing to apply 

them, without change, to GECC 

beginning July 1, 2015.54 The firmspecific liquidity risk management and 

stress testing requirements of Regulation 

YY would help ensure that GECC 

develops the necessary compliance 

infrastructure to evaluate the liquidity 

risk profile of its operations on a 

continuing basis. The liquidity risk 

management and stress testing 

requirements of Regulation YY require 

the covered bank holding company to 

tailor its compliance framework to the 

particular size, complexity, structure, 

risk profile, and activities of the 

organization. Thus, in implementing 

these requirements, GECC would be 

expected to tailor its compliance 

framework to suit the company’s 

structure. Finally, the Board is also 

proposing to apply SR 10–6, Interagency 

Policy Statement on Funding and 

Liquidity Risk Management, and would 

require GECC to comply with the 

expectations outlined in this letter by 

July 1, 2015. 

8. Are there other liquidity standards 

that the Board should consider applying 

to GECC, and if so, what are they? 

9. Should the Board consider tailoring 

the proposed liquidity requirements to 

GECC? If so, which of the requirements 

should the Board consider tailoring 

based on GECC’s activities, balance 

sheet and risk profile? 

E. Risk-Management and RiskCommittee Requirements 

Sound enterprise-wide risk 

management by large financial 

companies reduces the likelihood of 

their material distress or failure and 

thus promotes financial stability. During 

the recent financial crisis, a number of 

companies that experienced material 

financial distress or failure had 

significant deficiencies in key areas of 

risk management. Senior managers at 

successful companies were actively 

involved in risk management, including 

determining the company’s overall risk 

preferences and creating the incentives 

and controls to induce employees to 

abide by those preferences. The boards 

of directors of these successful 

companies were actively involved in 

determining the company’s risk 

tolerance. Successful risk management 

also depends on senior managers having 

access to adaptive management 

information systems to identify and 

assess risks based on a range of dynamic 

measures and assumptions. 

1. Section 165 and Regulation YY 

Section 165(b)(1)(A) of the DoddFrank Act requires the Board to 

establish enhanced risk-management 

requirements for bank holding 

companies with total consolidated 

assets of $50 billion or more and 

nonbank financial companies 

supervised by the Board.55 In addition, 

section 165(h) directs the Board to issue 

regulations requiring publicly traded 

bank holding companies with total 

consolidated assets of $10 billion or 

more and publicly traded nonbank 

financial companies to establish risk 

committees.56 Section 165(h) requires 

the risk committee to be responsible for 

the oversight of the enterprise-wide riskmanagement practices of the company, 

to have such number of independent 

directors as the Board determines 

appropriate, and to include at least one 

risk-management expert with 

experience in identifying, assessing, and 


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57Under Regulation YY, publicly traded is 

defined to mean ‘‘an instrument that is traded on 

. . . [a]ny exchange registered with the U.S. 

Securities and Exchange Commission as a national 

securities exchange under section 6 of the 

Securities Exchange Act of 1934 (15 U.S.C. 78f).’’ 

12 CFR 252.2(p) (emphasis added). Although GECC 

does not have publicly traded shares of common 

equity, the company has debt securities that are 

publicly traded on the New York Stock Exchange 

under section 12(b) of the Securities Exchange Act 

of 1934. The Board is proposing to impose the 

requirements of Regulation YY and the additional 

risk management standards discussed below under 

its authority in section 165(h) to impose risk 

committee and risk management standards and its 

authority under section 165(b)(1)(B)(iv) to impose 

other standards that the Board determines are 

appropriate. 12 U.S.C. 5365(b)(1)(B)(iv). 

58 12 CFR 252.33(a)(3), (4). 

59 12 CFR 252.33(a). 

60 12 CFR 252.33(b). 

61 12 CFR 252.33(a)(2). 

62 Id. 

63 12 CFR 252.33. 

64 12 CFR 252.33(a)(4). 

65 Id. 

66See Supervision and Regulation Letter SR 12– 

17, Consolidated Supervision Framework for Large 

Financial Institutions (December 17, 2012), 

available at: http://www.federalreserve.gov/

bankinforeg/srletters/sr1217.htm. 

managing risk exposures of large, 

complex firms.57

Under the Board’s Regulation YY, the 

Board requires all bank holding 

companies with $50 billion or more in 

total consolidated assets to establish a 

risk committee that: Is an independent 

committee of the company’s board of 

directors; is chaired by an independent 

director; and includes at least one 

member who has experience in 

identifying, assessing and managing risk 

exposures of large, complex financial 

firms.58 The risk committee is required 

to approve and periodically review the 

risk-management policies of the bank 

holding company’s global operations, 

oversee the operation of the bank 

holding company’s global riskmanagement framework, and oversee 

the bank holding company’s compliance 

with the liquidity risk-management 

requirements of Regulation YY.59 In 

addition, a covered bank holding 

company is required to appoint a chief 

risk officer with experience in 

identifying, assessing, and managing 

risk exposures of large, complex 

financial firms, and who has 

responsibility for establishing 

enterprise-wide risk limits for the 

company and monitoring compliance 

with such limits.60 The chief risk officer 

is also required to develop policies and 

procedures to ensure the 

implementation of, and compliance 

with, the risk management framework. 

The chief risk officer must be 

compensated in a manner that is 

consistent with the provision of an 

objective assessment of the company’s 

risks, must report directly to both the 

risk committee and chief executive 

officer of the company, and must report 

risk-management deficiencies and 

emerging risks to the risk committee. 

Under Regulation YY, each covered 

bank holding company is required to 

establish a global risk-management 

framework that is commensurate with 

the company’s structure, risk profile, 

complexity, activities, and size.61 The 

risk-management framework is required 

to include policies and procedures for 

the establishment of risk-management 

governance and risk-control 

infrastructure of the company’s global 

operations. In addition, the riskmanagement framework must include 

processes and systems for identifying 

and reporting risk-management 

deficiencies in an effective and timely 

manner, must establish managerial and 

employee responsibilities for risk 

management, must ensure the 

independence of the risk-management 

function, and integrate risk management 

and associated controls with 

management goals and its compensation 

structure for the global operations of the 

company.62

2. Proposed Risk-Management 

Standards To Be Applied to GECC 

The Board is proposing to require 

GECC to adopt a risk-management 

framework that is consistent with the 

supervisory expectations established for 

bank holding companies of a similar 

size because of the similarities between 

GECC’s activities, risk profile, and 

balance sheet to that of a large bank 

holding company. Specifically, the 

Board is proposing to apply the riskmanagement standards under the 

Board’s Regulation YY to GECC 

beginning July 1, 2015.63 The adoption 

of sound risk-management principles by 

GECC will reduce the likelihood of 

material distress or failure of GECC and 

thus promote financial stability. 

The risk-management standards of the 

Board’s Regulation YY require a covered 

bank holding company to tailor its 

compliance framework to the particular 

size, complexity, structure, risk profile, 

and activities of the organization. Thus, 

in implementing these requirements, 

GECC would be expected to tailor its 

risk-management framework to suit the 

company’s structure. The Board 

understands that GE has established a 

dedicated risk committee that oversees 

the risk management of GE and GECC. 

However, the Board believes that, 

consistent with the designation of GECC 

as a nonbank financial company, 

GECC’s risk-management framework 

should have a dedicated risk committee 

at the company that is solely 

responsible for the oversight of GECC’s 

risk management. 

In addition to the proposed 

application of the risk-management 

standards under section 252.33 of the 

Board’s Regulation YY, the Board is 

proposing to apply additional riskmanagement requirements that are 

tailored to reflect GECC’s structure as an 

intermediate holding company of a 

larger, publicly traded company. As 

GECC is a subsidiary of a larger, 

publicly traded company, the Board 

believes that it is necessary to ensure 

that GECC’s board of directors includes 

members who are independent of GE so 

that their attention is focused on the 

business operations and safety and 

soundness of GECC itself, apart from the 

needs of its parent GE. These directors 

also must be independent of GECC’s 

management to provide views apart 

from management. 

In particular, the Board is proposing 

to require that, beginning July 1, 2015, 

the board of directors of GECC have the 

greater of 25 percent or two directors 

that are independent of GE’s and 

GECC’s management and GE’s board of 

directors and that one of these directors 

serve as the chair of GECC’s risk 

committee established under Regulation 

YY.64 Under the proposed order, GECC 

would be required to maintain, at a 

minimum, two directors on its board of 

directors who are independent of GE’s 

and GECC’s management and GE’s 

board of directors. One of these 

directors would be required to chair 

GECC’s risk committee established 

under Regulation YY. In addition, 

pursuant to Regulation YY, GECC would 

be required to maintain at least one 

director with expertise in ‘‘identifying, 

assessing, and managing risk exposures 

of large, complex financial firms’’ on its 

risk committee.65 This director may be 

one of the independent directors 

required by the proposed order. The 

Board invites comment on whether the 

proposed additional GECC governance 

requirements are appropriate to address 

the status of GECC as an intermediate 

holding company and the potential 

conflict of interests in the relationship 

between GE and GECC. 

Finally, in addition to the risk 

management standards discussed above, 

the Board would continue to require 

GECC to observe the Board’s existing 

risk-management guidance and 

supervisory expectations for nonbank 

financial companies supervised by the 

Board.66


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67 12 U.S.C. 5365(b)(1)(B). 68 12 U.S.C. 371c–1; subpart F to 12 CFR part 223. 

69With respect to single-counterparty credit 

limits, the Board participated in the Basel 

Committee’s initiative to develop a similar large 

exposure regime for global banks and intends to 

take into account this effort in implementing the 

single-counterparty credit limits under the DoddFrank Act. With respect to the early remediation 

framework, the Board is considering how to reflect 

the revised capital framework as well as how to 

address other issues presented by commenters. 

70 12 U.S.C. 5361(a). 

71 GECC is a savings and loan holding company 

supervised by the Board. So long as GECC remains 

a savings and loan holding company, GECC 

continues to be subject to all reporting requirements 

applicable to a savings and loan holding company. 

Consistent with section 161(a)(2) of the Dodd-Frank 

Act, the Board intends to confer with GECC as to 

whether the information requested in the required 

reports may be available from other sources, and, 

to the extent any reporting requirements overlap, 

GECC will not be subjected to duplicative reporting 

requirements as both a savings and loan holding 

company and a nonbank financial company 

supervised by the Board. 12 U.S.C. 5361(a)(2). The 

reporting requirements under the proposed order 

would continue to apply to GECC as a nonbank 

financial company in the event that GECC ceases to 

be a savings and loan holding company and ceases 

to be subject to the reporting requirements 

applicable to savings and loan holding companies. 

10. In addition to the requirements 

discussed above, should the Board 

consider imposing any additional 

corporate governance requirements on 

GECC? For example, should the Board 

consider requiring that additional 

directors be independent of GE, GECC, 

or both? 

11. Should the Board require GECC to 

establish independent committees of its 

board of directors, such as an audit or 

compensation committee? 

12. Should the Board consider requiring 

additional directors on GECC’s board of 

directors to have experience in 

identifying, assessing and managing risk 

exposures of large, complex financial 

firms? 

F. Other Prudential Standards: 

Restrictions on Intercompany 

Transactions 

Section 165(b)(1)(B) allows the Board 

to establish additional enhanced 

prudential standards for nonbank 

financial companies and bank holding 

companies with assets of $50 billion or 

more, including three enumerated 

standards—a contingent capital 

requirement, enhanced public 

disclosures, and short-term debt limit— 

and any ‘‘other prudential standards’’ 

that the Board determines are 

‘‘appropriate.’’ 67 With respect to the 

three enumerated standards, the Board 

is currently considering whether it 

would be appropriate to develop such 

standards for bank holding companies 

and nonbank financial companies. 

During this process, the Board will 

consider whether it will be appropriate 

to apply such standards to GECC based 

on its profile, structure, activities, and 

risks. 

The Board is proposing to apply as an 

enhanced prudential standard certain 

restrictions on GECC’s transactions with 

affiliated entities that are not under 

GECC’s control. Like the riskmanagement standards proposed to be 

applied to GECC, the Board believes that 

it is appropriate to apply enhanced 

prudential standards to GECC that 

address the potential for conflicts of 

interest with GE and its affiliates, and to 

address the possibility of any such 

conflicts on the financial condition of 

GECC. Specifically, the Board is 

proposing to require GECC to comply 

with restrictions on transactions with 

affiliated entities in order to address the 

effect of any conflicts of interest that 

may arise in interactions between GECC 

and GE and its affiliates. Specifically, 

beginning on July 1, 2015, the Board is 

proposing to apply the requirements of 

section 23B of the Federal Reserve Act 

and the corresponding provisions of 

Regulation W (subpart F of 12 CFR part 

223) to transactions between GECC (or 

any of its subsidiaries) with any affiliate 

(as defined in the Federal Reserve Act 

and Regulation W), as if GECC (or any 

of its subsidiaries) were a ‘‘member 

bank’’ and GE (or any of its subsidiaries 

other than GECC and subsidiaries of 

GECC) were an ‘‘affiliate.’’ 68

As noted above, the Board, as the 

prudential regulator of nonbank 

financial companies designated by the 

Council for its supervision, is required 

to establish enhanced prudential 

standards that are designed to prevent 

or mitigate risks to the financial stability 

of the United States from the material 

financial distress or failure of such 

companies. Section 23B of the Federal 

Reserve Act is designed to protect the 

safety and soundness of insured 

depository institutions by ensuring that 

an insured depository institution is not 

engaging in transactions with affiliates 

that are on terms that are unfavorable to 

the depository institution. The 

application of section 23B of the Federal 

Reserve Act to transactions between 

GECC and GE and its affiliates is 

designed to enhance the safety and 

soundness of GECC and to reduce the 

risk of material financial distress at 

GECC by ensuring that GECC is not 

engaging in transactions with affiliates 

on terms that are unfavorable to GECC 

and those that would not have been 

required, but for the affiliation between 

the companies. 

13. In applying the restrictions of 

section 23B and the corresponding 

requirements of Regulation W to 

transactions between GECC and its 

subsidiaries with any affiliates, are there 

any transactions or entities that should 

be exempted from the restrictions? 

14. Are there other enhanced prudential 

standards that the Board should 

consider applying to GECC? 

Specifically, are there other restrictions 

on transactions between GECC and its 

affiliates that would be appropriate? 

G. Future Standards 

With respect to the remaining 

standards required under section 165 of 

the Dodd-Frank Act, the Board is 

continuing to develop standards that are 

designed to further mitigate the risks to 

the financial stability of the United 

States presented by large banking 

organizations and nonbank financial 

companies supervised by the Board. For 

example, the Board’s initial proposed 

rules to implement the requirements of 

section 165 and 166 of the Dodd-Frank 

Act included single-counterparty credit 

limits and early remediation 

requirements for the companies covered 

under sections 165 and 166 of the DoddFrank Act. The Board is working to 

further develop these requirements and 

will be considering the tailoring of these 

requirements to nonbank financial 

companies supervised by the Board.69

As the Board develops additional 

standards related to capital, liquidity, 

risk management, or other standards, for 

bank holding companies and savings 

and loan holding companies, the Board 

will consider the applicability of these 

standards to GECC. 

V. Proposed Reporting Requirements 

Section 161(a) of the Dodd-Frank 

Act 70 authorizes the Board to require a 

nonbank financial company supervised 

by the Board, and any subsidiary 

thereof, to submit reports to the Board 

related to: (1) The financial condition of 

the company or subsidiary, systems of 

the company or subsidiary for 

monitoring and controlling financial, 

operating, and other risks, and the 

extent to which the activities and 

operations of the company or subsidiary 

pose a threat to the financial stability of 

the United States; and (2) compliance by 

the company or subsidiary with the 

requirements of Title I of the DoddFrank Act, which includes the enhanced 

prudential standards to which nonbank 

financial companies are subject. 

Pursuant to this authority, the Board 

is proposing to require GECC to file the 

following reports: 71 (i) The FR Y–6 

report (Annual Report of Holding 

Companies); (ii) the FR Y–10 report 


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(Report of Changes in Organizational 

Structure); (iii) the FR Y–9C report 

(Consolidated Financial Statements for 

Holding Companies) and FR Y–9LP 

report (Parent Company Only Financial 

Statements for Large Holding 

Companies); (iv) the FR Y–11 report and 

FR Y–11S report (Financial Statements 

of U.S. Nonbank Subsidiaries of U.S. 

Holding Companies); (v) the FR 2314 

report and FR 2314S report (Financial 

Statements of Foreign Subsidiaries of 

U.S. Banking Organizations); (vi) the FR 

Y–14A, FR Y–14M, and FR Y–14Q 

reports (Capital Assessments and Stress 

Testing) (together, the FR Y–14 series 

reporting forms); (vii) the FR Y–15 

report (Banking Organization Systemic 

Risk Report); (viii) the FFIEC 009 report 

(Country Exposure Report) and FFIEC 

009a report (the Country Exposure 

Information Report); and (ix) the FFIEC 

102 report (Market Risk Regulatory 

Report for Institutions Subject to the 

Market Risk Capital Rule), if the market 

risk capital rule becomes applicable to 

GECC. The Board intends to confer with 

GECC to identify any report schedules 

that may not be necessary for GECC to 

provide based on its profile, structure, 

activities, risks, or other characteristics 

and to determine an appropriate phasein period for report submission by 

GECC. Other than the FR Y–14 series 

reporting forms, discussed below, the 

Board is proposing that, beginning July 

1, 2015, GECC would be required to file 

each of these reports in accordance with 

the timelines set forth in their respective 

reporting instructions. 

Because the FR Y–14A reporting form 

relates to the Board’s capital planning 

and stress testing requirements, the 

Board expects that it would require 

GECC to file its first FR Y–14A 

submission on April 5, 2016, to report 

its first capital plan. The Board expects 

GECC would be required to submit its 

first FR Y–14Q and Y–14M reports as of 

one calendar year before the as-of date 

of its first supervisory and company-run 

stress test under the Board’s stress test 

rules. 

A. FR Y–6 Report 

The FR Y–6 (Annual Report of 

Holding Companies) is an annual 

information collection currently 

submitted by top-tier bank holding 

companies, savings and loan holding 

companies, securities holding 

companies, and non-qualifying foreign 

banking organizations. It collects 

financial data, an organization chart, 

verification of domestic branch data, 

and information about certain 

shareholders. 

With respect to GECC, the Board 

expects to use this information, in 

conjunction with the information 

collected through the FR Y–10 report, to 

monitor the financial condition and the 

activities of GECC. This information 

will also be used by the Board to 

monitor the extent to which the 

activities and operations of GECC pose 

a threat to the financial stability of the 

United States and GECC’s compliance 

with the requirements of Title I of the 

Dodd-Frank Act, the enhanced 

prudential standards that are imposed 

on GECC, and other relevant law. In 

addition, this information will be used 

to capture the legal entity structure of 

GECC. The Board also expects to use 

this information, combined with the 

information collected through the FR 

Y–9C, FR Y–9LP, FR Y–10, FR Y–11, FR 

Y–11S, FR 2314, and FR 2314S reports, 

to monitor intercompany transactions 

and changes in GECC’s legal entity 

structure over time. 

B. FR Y–10 Report 

The FR Y–10 (Report of Changes in 

Organizational Structure) is an eventgenerated information collection 

currently submitted by top-tier bank 

holding companies; savings and loan 

holding companies; state member banks 

unaffiliated with a bank holding 

company or a foreign banking 

organization; Edge and agreement 

corporations that are not controlled by 

a state member bank, a domestic bank 

holding company, or a foreign banking 

organization; and nationally chartered 

banks that are not controlled by a bank 

holding company or a foreign banking 

organization (with regard to their 

foreign investments only), to capture 

changes in their regulated investments 

and activities. The Board uses this 

information to ensure that these firms’ 

activities are conducted in a safe and 

sound manner. The data also provide 

the Board with information integral to 

monitoring compliance with the BHC 

Act, the Gramm-Leach-Bliley Act, the 

Federal Reserve Act, the International 

Banking Act, the Sarbanes-Oxley Act, 

the Board’s Regulation Y, the Board’s 

Regulation K, the Board’s Regulation LL, 

and HOLA. 

The information in this report, in 

conjunction with the information in the 

FR Y–6, will be used to capture the legal 

entity structure of GECC. As noted 

above, the FR Y–6 and FR Y–10 reports 

are the only detailed sources of 

information on the structure of these 

top-tier firms. This information will also 

be used by the Board to monitor the 

extent to which the activities and 

operations of GECC pose a threat to the 

financial stability of the United States 

and GECC’s compliance with the 

requirements of Title I of the DoddFrank Act, the enhanced prudential 

standards that are imposed on GECC, 

and other relevant law. In addition, this 

information will be used to capture the 

legal entity structure of GECC. The 

Board also expects to use this 

information, combined with the 

information collected through the FR 

Y–9C, FR Y–9LP, FR Y–10, FR Y–11, FR 

Y–11S, FR 2314, and FR 2314S reports, 

to monitor intercompany transactions 

and changes in GECC’s legal entity 

structure over time. 

C. FR Y–9C and FR Y–9LP Reports 

The FR Y–9C (Consolidated Financial 

Statements for Holding Companies) and 

FR Y–9LP (Parent Company Only 

Financial Statements for Large Holding 

Companies) reports are standardized 

financial statements currently submitted 

by bank holding companies, savings and 

loan holding companies, and securities 

holding companies on a quarterly basis. 

The FR Y–9C consists of standardized 

financial statements and collects 

consolidated data from these entities. 

The FR Y–9LP collects basic financial 

data from domestic bank holding 

companies, savings and loan holding 

companies, and securities holding 

companies on a consolidated, parentonly basis in the form of a balance sheet, 

an income statement, and supporting 

schedules relating to investments, cash 

flow, and certain memoranda items. 

Financial information from these reports 

is used to assess and monitor the 

financial condition of holding company 

organizations, which may include 

parent, bank, and nonbank entities. This 

information also is used to detect 

emerging financial problems, to review 

performance and conduct preinspection analysis, to monitor and 

evaluate capital adequacy, to evaluate 

mergers and acquisitions, and to analyze 

the overall financial condition of bank 

holding companies, savings and loan 

holding companies, and securities 

holding companies, to ensure safe and 

sound operations. 

With respect to GECC, the Board 

expects to use the data to monitor the 

financial condition of the company and 

subsidiaries and assess the systems of 

the company and subsidiaries for 

monitoring and controlling financial, 

operating, and other risks. This 

information also may be used to analyze 

the extent to which the activities and 

operations of the company or 

subsidiaries pose a threat to the 

financial stability of the United States 

and to monitor GECC’s compliance with 

Title I of the Dodd-Frank Act, the 

enhanced prudential standards that are 

imposed on GECC, and other relevant 

law. The standardized format of these 


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reports allows for the consistent 

assessment of financial condition across 

all firms that are required to report 

under these forms. The level of detail 

provided within the supporting 

schedules of these reports is not 

available through public financial 

filings or alternate sources. 

D. FR Y–11 and FR Y–11S Reports 

The FR Y–11 and FR Y–11S 

(Financial Statements of U.S. Nonbank 

Subsidiaries of U.S. Holding 

Companies) reports collect financial 

information for individual nonfunctionally regulated U.S. nonbank 

subsidiaries of domestic bank holding 

companies, savings and loan holding 

companies, and securities holding 

companies. This report consists of a 

balance sheet and income statement; 

information on changes in equity 

capital, changes in the allowance for 

loan and lease losses, off-balance-sheet 

items, and loans; and a memoranda 

section. Top-tier bank holding 

companies, savings and loan holding 

companies, and securities holding 

companies file the FR Y–11 and FR 

Y–11S reports on a quarterly or annual 

basis according to filing criteria. The 

information obtained through the FR Y– 

11 and FR Y–11S reports is used with 

other bank holding companies, savings 

and loan holding companies, and 

securities holding companies data to 

assess the condition of firms that are 

engaged in nonbanking activities and to 

monitor the volume, nature, and 

condition of their nonbanking 

operations. 

With respect to GECC, the Board 

expects to use this information, in 

conjunction with the information 

collected through the FR 2314 and FR 

2314S reports, to assess the financial 

condition of U.S. nonbanking entities 

within GECC and to monitor their 

activities. This information also may be 

used to monitor the financial condition 

of subsidiaries of GECC and to assess 

the systems of the company for 

monitoring and controlling financial, 

operating, and other risks. This 

information may further be used to 

analyze the extent to which the 

activities and operations of GECC or its 

subsidiaries pose a threat to the 

financial stability of the United States 

and to monitor GECC’s compliance with 

Title I of the Dodd-Frank Act, the 

enhanced prudential standards that are 

imposed on GECC, and other relevant 

law. In addition, the information 

collected through the FR Y–11, FR 

Y–11S, FR 2314, and FR 2314 reports 

serves to identify material legal entities. 

E. FR 2314 and FR 2314S Reports 

The FR 2314 and FR 2314S (Financial 

Statements of Foreign Subsidiaries of 

U.S. Banking Organizations) reports 

collect financial information for nonfunctionally regulated direct or indirect 

foreign subsidiaries of U.S. state 

member banks, Edge and agreement 

corporations, bank holding companies, 

and savings and loan holding 

companies. The FR 2314 and FR 2314S 

reports consist of a balance sheet and 

income statement; information on 

changes in equity capital, changes in the 

allowance for loan and lease losses, offbalance-sheet items, and loans; and a 

memoranda section. Holding companies 

file this report on a quarterly or annual 

basis according to filing criteria. The 

data is used to identify current and 

potential problems at the foreign 

subsidiaries of U.S. parent companies, 

to monitor the activities of U.S. banking 

organizations in specific countries, and 

to develop a better understanding of 

activities within the industry, in 

general, and of individual institutions, 

in particular. The FR 2314 and FR 

2314S reports are the only source of 

comprehensive and systematic data on 

the assets, liabilities, and earnings of the 

foreign bank and nonbank subsidiaries 

of U.S. state member banks, holding 

companies, and Edge Act and agreement 

corporations. 

With respect to GECC, the Board 

expects to use this information, in 

conjunction with the information 

collected through the FR Y–11 and FR 

Y–11S reports, to assess the financial 

condition of foreign subsidiaries of 

GECC and to monitor their activities. 

This information may be used to assess 

the systems of GECC and its foreign 

subsidiaries for monitoring and 

controlling financial, operating, and 

other risks. This information also may 

be used to analyze the extent to which 

the activities and operations of the 

foreign subsidiaries pose a threat to the 

financial stability of the United States 

and to monitor compliance with Title I 

of the Dodd-Frank Act, the enhanced 

prudential standards that are imposed 

on GECC, and other relevant law. The 

information collected through the FR Y– 

11, FR Y–11S, FR 2314, and FR 2314S 

reports will allow the Board to develop 

a better understanding of the activities 

of GECC and its subsidiaries in specific 

countries, and to develop a better 

understanding of the activities 

conducted within the industries in 

which GECC operates. 

F. FR Y–14A, FR Y–14M, and FR Y–14Q 

Reports 

Submitted as part of the Board’s 

CCAR and stress testing processes, the 

FR Y–14A, FR Y–14M, and FR Y–14Q 

(Capital Assessments and Stress 

Testing) reports collect detailed 

financial information from top-tier bank 

holding companies (other than foreign 

banking organizations) with $50 billion 

or more in total consolidated assets, as 

determined based on: (i) The average of 

the bank holding company’s total 

consolidated assets in the four most 

recent quarters as reported quarterly on 

the bank holding company’s FR Y–9C 

reports; or (ii) the average of the bank 

holding company’s total consolidated 

assets in the most recent consecutive 

quarters as reported quarterly on the 

bank holding company’s FR Y–9C 

reports, if those bank holding 

companies have not filed an FR Y–9C 

report for each of the most recent four 

quarters. 

The FR Y–14A report is an annual 

collection of these bank holding 

companies’ quantitative projections of 

balance sheet, income, losses, and 

capital across a range of macroeconomic 

scenarios and qualitative information on 

methodologies used to develop internal 

projections of capital across scenarios, 

with certain projections and information 

collected on a semi-annual basis. The 

FR Y–14M report is a monthly 

submission that comprises three loanand portfolio-level collections of data 

concerning domestic residential 

mortgages, domestic home equity loan 

and home equity lines of credit, and 

domestic credit card loans, and one 

detailed address-matching collection to 

supplement two of the loan- and 

portfolio-level collections. The FR Y– 

14Q report is a quarterly collection of 

granular data on these bank holding 

companies’ various asset classes and 

pre-provision net revenue for the 

reporting period, including information 

pertaining to securities, retail loans, 

wholesale loans, mortgage servicing 

rights, regulatory capital instruments, 

operational risk, and trading, private 

equity, and other fair-value assets. 

Collectively, the Y–14 data is used to 

assess the capital adequacy of large bank 

holding companies using forwardlooking projections of revenue and 

losses, and to support supervisory stress 

test models and continuous monitoring 

efforts. 

With respect to GECC, the Board 

expects to use this information to assess 

GECC’s internal assessments of its 

capital adequacy under a stressed 

scenario, and to conduct the Federal 

Reserve’s supervisory stress tests that 


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72 12 U.S.C. 5365. 

73See Subpart F to 12 CFR 217. 

74The Board’s market risk capital rule applies to 

any state member bank, bank holding company, or 

savings and loan holding company with aggregate 

trading assets and trading liabilities (as reporting on 

the applicable Call Report, for a state member bank, 

or FR Y–9C, for a bank holding company or savings 

and loan holding company, as applicable) equal to: 

(i) 10 percent or more of the quarter-end total assets 

as reported on the most recent regulatory report; or 

(ii) $1 billion or more. 12 CFR 217.201(b). As of 

September 30, 2014, GECC had approximately $229 

million in aggregate trading assets and trading 

liabilities. 

assess GECC’s ability to withstand stress 

in a manner consistent with bank 

holding companies subject to the 

Board’s capital plan and stress testing 

rules. In addition, this information will 

be used to support ongoing monitoring 

of changes in GECC’s risk profile and 

composition. 

The Board would require GECC to file 

its first FR Y–14A submission on April 

5, 2016, as part of its capital plan. In 

addition, the Board would require GECC 

to submit its first FR Y–14Q and Y–14M 

reports as of one calendar year before 

the as of date of its first supervisory and 

company-run stress test under the 

Board’s stress test rules, which would 

be as of December 31, 2015, under this 

proposal. 

G. FR Y–15 Report 

The FR Y–15 (Banking Organization 

Systemic Risk Report) report collects 

consolidated systemic risk data from 

bank holding companies with total 

consolidated assets of $50 billion or 

more and the U.S. operations or large 

foreign banking organizations. The data 

items collected in this report mirror 

those developed by the Basel Committee 

to assess the global systemic importance 

of banks. The Board uses the 

information collected annually through 

the FR Y–15 report to: (i) Facilitate the 

future implementation of the capital 

surcharge on global systemicallysignificant banking organizations 

through regulation; (ii) identify 

institutions that may be domestic 

systemically-significant banking 

organizations under a future framework; 

(iii) analyze the systemic risk 

implications of proposed mergers and 

acquisitions; and (iv) monitor, on an 

ongoing basis, the systemic risk profile 

of the institutions that are subject to 

enhanced prudential standards under 

section 165 of the Dodd-Frank Act.72

If applied to GECC, the Board expects 

to use this data to assess and monitor 

GECC’s systemic risk profile and its 

global systemic importance, as well as 

its ongoing compliance with Title I of 

the Dodd-Frank Act, the enhanced 

prudential standards that are imposed 

on GECC, and other relevant law. 

H. FFIEC 009 and FFIEC 009a Reports 

The Federal Financial Institutions 

Examination Council (FFIEC) is a formal 

interagency body empowered to 

prescribe uniform principles, standards, 

and report forms for the federal 

examination of financial institutions by 

the Board, the FDIC, the National Credit 

Union Administration, the OCC, and the 

Consumer Financial Protection Bureau 

and to make recommendations to 

promote uniformity in the supervision 

of financial institutions. The FFIEC 009 

(Country Exposure Report) and FFIEC 

009a (the Country Exposure Information 

Report) reports are quarterly 

information collections currently 

submitted by U.S. commercial banks 

and bank holding companies holding 

with $30 million or more in claims on 

residents of foreign countries. The 

FFIEC 009 collects detailed information 

on the distribution, by country, of 

claims on foreigners held by U.S. banks 

and bank holding companies. The 

FFIEC 009a is a supplement to the 

FFIEC 009 that provides specific 

information about the reporting 

institutions’ exposures in particular 

countries. 

The FFIEC 009 report consists of four 

schedules that collect information 

concerning: (1) Claims on the firm on 

the basis of the country of residence of 

the borrower (except claims from the 

fair value of derivative contracts); (2) the 

reporting firm’s claims on an ultimaterisk basis with additional details related 

to those claims; (3) the firm’s foreignoffice liabilities; and (4) the firm’s offbalance-sheet exposures from 

commitments, guarantees, and credit 

derivatives. The information collected is 

used to determine the presence of credit 

and related risks, including transfer and 

country risk. The FFIEC 009a is filed if 

exposures to a country exceed 1 percent 

of total assets or 20 percent of capital at 

the reporting institution and requires 

that the respondent also furnish a list of 

countries in which exposures were 

between 0.75 percent and one percent of 

total assets or between 15 and 20 

percent of capital. 

With respect to GECC, the Board 

expects to use this information to assess 

GECC’s credit and related risks. 

Specifically, the information collected 

on the FFIEC 009 report and the FFIEC 

009a report provides additional 

information on counterparties, the type 

of claim being reported, and credit 

derivative exposure. The information 

also provides details on a limited 

number of risk mitigants to help provide 

context for currently reported gross 

exposure numbers. This information 

may be used to analyze the extent to 

which GECC’s credit exposures pose a 

threat to the financial stability of the 

United States. The information collected 

through the FFIEC 009 report and the 

FFIEC 009a report will allow the Board 

to develop a better understanding of 

GECC’s exposures in specific countries, 

and to monitor trends in exposures to 

foreign creditors. 

I. FFIEC 102 

The proposed FFIEC 102 reporting 

form is designed to implement the 

reporting requirements for institutions 

that are subject to the federal banking 

agencies’ market risk capital rule under 

the revised capital framework.73 The 

proposed reports would be quarterly 

information collections used to assess 

the reasonableness and accuracy of a 

market risk institution’s calculation of 

its minimum capital requirements under 

the market risk capital rule and to 

evaluate such an institution’s capital in 

relation to its risks. 

The market risk information collected 

in the FFIEC 102 is designed to: (a) 

Permit the federal banking agencies to 

monitor the market risk profile of and 

evaluate the impact and competitive 

implications of the market risk capital 

rule on individual market risk 

institutions and the industry as a whole; 

(b) provide the most current statistical 

data available to identify areas of market 

risk on which to focus for onsite and 

offsite examinations; (c) allow the 

federal banking agencies to assess and 

monitor the levels and components of 

each reporting institution’s risk-based 

capital requirements for market risk and 

the adequacy of the institution’s capital 

under the market risk capital rule; and 

(d) assist market risk institutions to 

implement and validate the market risk 

framework. 

Although GECC would not currently 

be subject to the Board’s market risk 

capital rule because it does not meet the 

applicable aggregate trading assets and 

trading liabilities thresholds, the 

proposed order would require GECC to 

submit the FFIEC 102 should GECC 

become subject to the Board’s market 

risk capital rule.74 The information 

collected on the FFIEC 102 would allow 

the Board to monitor GECC’s market risk 

profile and the adequacy of GECC’s 

capital under the market risk capital 

rule should it become applicable. 

VI. Timing of Application 

In general, the Board is proposing to 

require GECC to begin complying with 

the proposed enhanced prudential 

standards beginning July 1, 2015, except 


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75 12 U.S.C. 1467a, 5361. 

for the Board’s capital planning and 

stress testing rules, which the Board has 

proposed will apply to GECC beginning 

on the next capital planning and stress 

testing cycle beginning January 1, 2016, 

and January 1, 2017, respectively. 

However, regardless of the transition 

period for application of the enhanced 

prudential standards, GECC will 

continue to be subject to the Board’s 

examination and oversight authority, 

and any other prudential requirements 

imposed under HOLA.75

15. Should the Board consider 

providing a longer transition period for 

any of the standards that it has proposed 

to apply to GECC? 

VII. Paperwork Reduction Act 

Certain provisions of the Board’s 

proposed order contain ‘‘collection of 

information’’ requirements within the 

meaning of the Paperwork Reduction 

Act (PRA) of 1995 (44 U.S.C. 3501– 

3521). In accordance with the 

requirements of the PRA, 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 Office of 

Management and Budget (OMB) control 

number. The Board reviewed the 

proposed order under the authority 

delegated to the Board by OMB. 

The proposed order contains 

reporting requirements subject to the 

PRA and would require GECC to submit 

the following reporting forms in the 

same manner as a bank holding 

company: 

(1) Country Exposure Report and 

Country Exposure Information Report 

(FFIEC 009 and FFIEC 009a; OMB No. 

7100–0035); 

(2) Proposed Market Risk Regulatory 

Report for Institutions Subject to the 

Market Risk Capital Rule (FFIEC 102; 

OMB No. to be obtained) (See the initial 

Federal Register notice (79 FR 52108) 

published on September 2, 2014.); 

(3) Financial Statements of Foreign 

Subsidiaries of U.S. Banking 

Organizations; and Abbreviated 

Financial Statements of Foreign 

Subsidiaries of U.S. Banking 

Organizations (FR 2314; and FR 2314S 

OMB No. 7100–0073); 

(4) Annual Report of Holding 

Companies (FR Y–6; OMB No. 7100– 

0297); 

(5) Consolidated Financial Statements 

for Holding Companies (FR Y–9C; OMB 

No. 7100–0128); 

(6) Parent Company Only Financial 

Statements for Large Holding 

Companies (FR Y–9LP; OMB No. 7100– 

0128); 

(7) Report of Changes in 

Organizational Structure (FR Y–10; 

OMB No. 7100–0297); 

(8) Financial Statements of U.S. 

Nonbank Subsidiaries of U.S. Holding 

Companies; and Abbreviated Financial 

Statements of U.S. Nonbank 

Subsidiaries of U.S. Holding Companies 

(FR Y–11; and FR Y–11S OMB No. 

7100–0244); 

(9) Capital Assessments and Stress 

Testing (FR Y–14A; FR Y–14M; and FR 

Y–14Q OMB No. 7100–0341); and 

(10) Banking Organization Systemic 

Risk Report (FR Y–15; OMB No. 7100– 

0352). 

The proposed order contains 

reporting, recordkeeping, or disclosure 

requirements subject to the PRA and 

would require GECC to comply with the 

following information collections in the 

same manner as a bank holding 

company: 

(1) Funding and Liquidity Risk 

Management Guidance (FR 4198; OMB 

No. 7100–0326). See the Enhanced 

Prudential Standards for Bank Holding 

Companies and Foreign Banking 

Organizations final rule (79 FR 17239) 

published on March 27, 2014. 

(2) Risk-Based Capital Standards: 

Advanced Capital Adequacy Framework 

Information Collection (FR 4200; OMB 

No. 7100–0313). See the Regulatory 

Capital Rules final rule (78 FR 62017) 

published on October 11, 2013, and the 

Regulatory Capital Rules final rule (79 

FR 57725) published on September 26, 

2014. 

(3) Risk-Based Capital Guidelines: 

Market Risk (FR 4201; OMB No. 7100– 

0314). See the Regulatory Capital Rules 

final rule (78 FR 62017) published on 

October 11, 2013. 

(4) Recordkeeping and Reporting 

Requirements Associated with 

Regulation Y (Capital Plans) (Reg Y–13; 

OMB No. 7100–0342). See the Capital 

Plans final rule (76 FR 74631) published 

on December 1, 2011, the Supervisory 

and Company-Run Stress Test 

Requirements for Covered Companies 

final rule (77 FR 62377) published on 

October 12, 2012, and the Capital Plan 

and Stress Test Rules final rule (79 FR 

64025) published on October 27, 2014. 

(5) Reporting and Recordkeeping 

Requirements Associated with 

Regulation WW (Liquidity Coverage 

Ratio: Liquidity Risk Measurement, 

Standards, and Monitoring) (Reg WW; 

OMB No. to be obtained). See the 

Liquidity Coverage Ratio final rule (79 

FR 61439) published on October 10, 

2014. 

(6) Reporting, Recordkeeping, and 

Disclosure Requirements Associated 

with Regulation YY (Enhanced 

Prudential Standards) (Reg YY; OMB 

No. 7100–0350). See the Supervisory 

and Company-Run Stress Test 

Requirements for Covered Companies 

final rule (77 FR 62377) published on 

October 12, 2012, and the Enhanced 

Prudential Standards for Bank Holding 

Companies and Foreign Banking 

Organizations final rule (79 FR 17239) 

published on March 27, 2014. 

Comments are invited on: 

(a) Whether the proposed collections 

of information are necessary for the 

proper performance of the Federal 

Reserve’s functions, including whether 

the information has practical utility; 

(b) The accuracy of the Federal 

Reserve’s estimates of the burden of the 

proposed information collections, 

including the validity of the 

methodology and assumptions used; 

(c) Ways to enhance the quality, 

utility, and clarity of the information to 

be collected; 

(d) Ways to minimize the burden of 

the information collections on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology; 

and 

(e) Estimates of capital or start-up 

costs and costs of operation, 

maintenance, and purchase of services 

to provide information. 

All comments will become a matter of 

public record. Comments on aspects of 

this proposed order that may affect 

reporting, recordkeeping, or disclosure 

requirements and burden estimates 

should be sent to the addresses listed in 

the ADDRESSES section above. A copy of 

the comments may also be submitted to 

the OMB desk officer: By mail to Office 

of Information and Regulatory Affairs, 

Office of Management and Budget, New 

Executive Office Building, Room 10235, 

725 17th Street NW., Washington, DC 

20503 or by facsimile to 202–395–6974, 

Attention, Federal Reserve Desk Officer. 

VIII. Proposed Order 

FEDERAL RESERVE SYSTEM 

General Electric Capital Corporation, 

Inc. 

Norwalk, Connecticut 

Order Imposing Enhanced Prudential 

Standards and Reporting Requirements 

Pursuant to section 165 of the DoddFrank Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act), the 

Board of Governors of the Federal 

Reserve System (Board) is required to 

apply enhanced prudential standards to 

General Electric Capital Corporation 

(GECC), a nonbank financial company 

that the Financial Stability Oversight 

Council has determined should be 

supervised by the Board (nonbank 


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1 12 CFR part 217. 

2 12 CFR 217.204. 

3 12 CFR 225.8. 

4Subparts E and F of 12 CFR part 252. 

5 12 CFR 252.34, 252.35. 

6 12 CFR part 249. 

7Board of Governors of the Federal Reserve 

System, Division of Banking Supervision and 

Regulation (2010), ‘‘Interagency Policy Statement 

on Funding and Liquidity Risk Management,’’ 

Supervision and Regulation Letter SR 10–6 (March 

17); 75 FR 13656 (March 22, 2010); available at: 

http://www.federalreserve.gov/boarddocs/srletters/

2010/sr1006.pdf. 

8 12 CFR 252.33. 

9 12 CFR 252.33(a). 

10See Board of Governors of the Federal Reserve 

System, Division of Banking Supervision and 

Regulation (2012), ‘‘Consolidated Supervision 

Framework for Large Financial Institutions,’’ 

Supervision and Regulation Letter SR 12–17 

(December 17), available at: http://

www.federalreserve.gov/bankinforeg/srletters/

sr1217.htm. 

11 12 U.S.C. 371c–1; subpart F of 12 CFR part 223. 

12 12 U.S.C. 371c(a)(2); 12 CFR 223.16. 

13 12 U.S.C. 5361(a). 

14 GECC shall become subject to the FFIEC 102 

report in the event the company meets the aggregate 

trading assets and trading liabilities threshold for 

application of the Board’s market risk capital rule. 

12 CFR 217.201(b). 

financial company supervised by the 

Board). 

After consideration of all of the 

relevant factors set forth in sections 

165(a) and 165(b) of the Dodd-Frank 

Act, for the reasons set forth in the 

preamble to this order, the Board is 

applying the following enhanced 

prudential standards and reporting 

requirements to GECC that the Board 

has tailored, where appropriate, in light 

of those factors. 

Capital Requirements 

Beginning on July 1, 2015, GECC shall 

comply with the Board’s capital 

framework, set forth in 12 CFR part 

217,1 as if GECC were a bank holding 

company that is an ‘‘advanced 

approaches Board-regulated institution’’ 

and a ‘‘covered BHC,’’ each as defined 

under 12 CFR 217.2, provided, however, 

that notwithstanding 12 CFR 217.100(b), 

GECC will not be required to comply 

with subpart E of 12 CFR part 217 or to 

calculate an advanced measure for 

market risk.2

Capital Planning 

GECC shall comply with the capital 

plan rule set forth in 12 CFR 225.8 as 

a nonbank financial company 

supervised by the Board, pursuant to 12 

CFR 225.8(b)(1)(iv), and shall submit a 

capital plan for the capital plan cycle 

beginning on January 1, 2016.3

Stress Testing 

GECC shall comply with the stress 

testing requirements set forth in 

subparts E and F of Regulation YY (12 

CFR part 252, subparts E and F) as a 

nonbank financial company supervised 

by the Board, pursuant to 12 CFR 

252.43(a)(1)(iii) and 12 CFR 

252.53(a)(1)(iii), beginning with the 

stress testing cycle beginning on January 

1, 2017.4

Liquidity Requirements 

1. Beginning on July 1, 2015, GECC 

shall comply with the liquidity 

requirements, set forth in sections 

252.34 and 252.35 of the Board’s 

Regulation YY, as though it were a bank 

holding company with $50 billion or 

more in total consolidated assets.5

2. Beginning on July 1, 2015, GECC 

shall comply with the liquidity coverage 

ratio (LCR) standard, set forth in 12 CFR 

part 249, as a covered nonbank 

company, pursuant to 12 CFR 

249.1(b)(1)(iv) and 12 CFR 249.3, subject 

to the transition periods set forth under 

12 CFR 249.50(b).6

3. Beginning on July 1, 2015, GECC 

shall comply with the Board’s 

supervisory guidance on principles of 

sound liquidity risk management, as set 

forth in the Board’s Supervision and 

Regulation letter 10–6, ‘‘Interagency 

Policy Statement on Funding and 

Liquidity Risk Management,’’ issued in 

March 2010.7

Risk Management 

1. Beginning on July 1, 2015, GECC 

shall comply with the risk-management 

standards under section 252.33 of the 

Board’s Regulation YY as though it were 

a bank holding company with $50 

billion or more in total consolidated 

assets.8

a. In addition, beginning on July 1, 

2015, GECC is required to maintain a 

board of directors that has the greater of 

25 percent of directors or two directors 

who are independent of General Electric 

Company’s management and board of 

directors and GECC’s management, one 

of whom may satisfy the independent 

director requirement under section 

252.33(a)(4) of Regulation YY; and 

b. GECC shall ensure that the chair of 

the risk committee established at GECC 

pursuant to Regulation YY is among the 

directors who are independent of 

General Electric Company’s 

management and board of directors and 

GECC’s management.9

2. GECC shall continue to comply 

with the Board’s existing riskmanagement guidance and supervisory 

expectations applicable to nonbank 

financial companies supervised by the 

Board.10

Restrictions on Intercompany 

Transactions 

Beginning on July 1, 2015, all 

transactions between GECC (or any of its 

subsidiaries) and GE (or any of its 

subsidiaries other than GECC or 

subsidiaries of GECC) shall be subject to 

the requirements of section 23B of the 

Federal Reserve Act and the 

corresponding provisions of Regulation 

W (subpart F of 12 CFR part 223) as if 

GECC (or any of its subsidiaries) were a 

‘‘member bank’’ and GE (or any of its 

subsidiaries other than GECC and 

subsidiaries of GECC) were an 

‘‘affiliate’’ as defined in section 23B of 

the Federal Reserve Act and Regulation 

W.11 However, this restriction would 

not apply to transactions between GECC 

and any person the proceeds of which 

are used for the benefit of, or transferred 

to, an affiliate, which would otherwise 

be a covered transaction under section 

23A(a)(2) of the Federal Reserve Act and 

section 223.16 of Regulation W.12

Future Standards 

Nothing herein limits the Board’s 

authority to impose additional 

enhanced prudential standards to apply 

to GECC in the future. 

Reporting Requirements 

1. Beginning on July 1, 2015, pursuant 

to section 161(a) of the Dodd-Frank 

Act,13 GECC shall file the following 

reports with the Board: 

a. FFIEC 102 report (Market Risk 

Regulatory Report for Institutions 

Subject to the Market Risk Capital 

Rule); 14

b. FFIEC 009 report (Country 

Exposure Report) and FFIEC 009a report 

(Country Exposure Information Report); 

c. FR Y–6 report (Annual Report of 

Holding Companies); 

d. FR Y–10 report (Report of Changes 

in Organizational Structure); 

e. FR Y–9C report (Consolidated 

Financial Statements for Holding 

Companies) and FR Y–9LP report 

(Parent Company Only Financial 

Statements for Large Holding 

Companies); 

f. FR Y–11 and FR Y–11S reports 

(Financial Statements of U.S. Nonbank 

Subsidiaries of U.S. Holding 

Companies); 

g. FR 2314 and FR 2314S reports 

(Financial Statements of Foreign 

Subsidiaries of U.S. Banking 

Organizations); 

h. FR Y–14A, FR Y–14M, and FR 

Y–14Q reports (Capital Assessments and 

Stress Testing); and 

i. FR Y–15 report (Banking 

Organization Systemic Risk Report). 

2. Other than the FR Y–14A, FR 

Y–14M, and FR Y–14Q reports, GECC 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 232 / Wednesday, December 3, 2014 / Notices 71785 

shall file each of the reports in 

accordance with the timelines set forth 

in the applicable instructions to each 

reporting form. 

3. GECC shall submit its first FR 

Y–14A report on April 5, 2016, in 

connection with its first submission 

under the capital plan rule (12 CFR 

225.8). 

4. GECC shall submit its first FR 

Y–14Q and FR Y–14M reports one 

calendar year before the as of date of its 

first supervisory and company-run 

stress test under the Board’s stress 

testing requirements under Regulation 

YY (12 CFR part 252, subparts E and F). 

5. The Board intends to confer with 

GECC to determine whether GECC 

should modify any reporting schedules 

that may not be necessary for GECC to 

provide, based on its profile, structure, 

activities, risks, or other characteristics. 

By order of the Board of Governors of the 

Federal Reserve System, November 25, 2014. 

Robert deV. Frierson, 

Secretary of the Board. 

[FR Doc. 2014–28414 Filed 12–2–14; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

Change in Bank Control Notices; 

Acquisitions of Shares of a Bank or 

Bank Holding Company 

The notificants listed below have 

applied under the Change in Bank 

Control Act (12 U.S.C. 1817(j)) and 

§ 225.41 of the Board’s Regulation Y (12 

CFR 225.41) to acquire shares of a bank 

or bank holding company. The factors 

that are considered in acting on the 

notices are set forth in paragraph 7 of 

the Act (12 U.S.C. 1817(j)(7)). 

The notices are available for 

immediate inspection at the Federal 

Reserve Bank indicated. The notices 

also will be available for inspection at 

the offices of the Board of Governors. 

Interested persons may express their 

views in writing to the Reserve Bank 

indicated for that notice or to the offices 

of the Board of Governors. Comments 

must be received not later than 

December 15, 2014. 

A. Federal Reserve Bank of St. Louis 

(Yvonne Sparks, Community 

Development Officer) P.O. Box 442, St. 

Louis, Missouri 63166–2034: 

1. Byron B. Webb, III, Emden, 

Missouri, as Trustee of the Byron B. 

Webb, III Separate Property Trust, dated 

April 26, 2004, and Victoria Webb Sack, 

Del Mar, California, as Trustee of the 

Victoria Webb Sack Separate Property 

Recoverable Stock Trust, dated June 12, 

2008; to acquire voting shares of Byron 

B. Webb, Inc., and thereby indirectly 

acquire voting shares of HomeBank, 

both in Palmyra, Missouri. 

B. Federal Reserve Bank of Kansas 

City (Dennis Denney, Assistant Vice 

President) 1 Memorial Drive, Kansas 

City, Missouri 64198–0001: 

1. The Virgil A. Lair and Mary A. Lair 

Irrevocable Trust dated August 15, 

2013, Chanute, Kansas; Gregory D. Lair, 

Piqua, Kansas; Casey A. Lair, Neodesha, 

Kansas; Mark T. Lair, Chanute, Kansas; 

and Jill A. Aylward, Chanute, Kansas; 

all individually and as trustees; to retain 

voting shares of Southeast Bancshares, 

Inc., and thereby indirectly retain voting 

shares of Bank of Commerce, both in 

Chanute, Kansas; Chetopa State Bank & 

Trust Company, Chetopa, Kansas; and 

First Neodesha Bank, Neodesha, Kansas. 

Board of Governors of the Federal Reserve 

System, November 28, 2014. 

Margaret McCloskey Shanks, 

Deputy Secretary of the Board. 

[FR Doc. 2014–28433 Filed 12–2–14; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

Formations of, Acquisitions by, and 

Mergers of Bank Holding Companies 

The companies listed in this notice 

have applied to the Board for approval, 

pursuant to the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841 et seq.) 

(BHC Act), Regulation Y (12 CFR part 

225), and all other applicable statutes 

and regulations to become a bank 

holding company and/or to acquire the 

assets or the ownership of, control of, or 

the power to vote shares of a bank or 

bank holding company and all of the 

banks and nonbanking companies 

owned by the bank holding company, 

including the companies listed below. 

The applications listed below, as well 

as other related filings required by the 

Board, are available for immediate 

inspection at the Federal Reserve Bank 

indicated. The applications will also be 

available for inspection at the offices of 

the Board of Governors. Interested 

persons may express their views in 

writing on the standards enumerated in 

the BHC Act (12 U.S.C. 1842(c)). If the 

proposal also involves the acquisition of 

a nonbanking company, the review also 

includes whether the acquisition of the 

nonbanking company complies with the 

standards in section 4 of the BHC Act 

(12 U.S.C. 1843). Unless otherwise 

noted, nonbanking activities will be 

conducted throughout the United States. 

Unless otherwise noted, comments 

regarding each of these applications 

must be received at the Reserve Bank 

indicated or the offices of the Board of 

Governors not later than December 26, 

2014. 

A. Federal Reserve Bank of 

Minneapolis (Jacquelyn K. Brunmeier, 

Assistant Vice President) 90 Hennepin 

Avenue, Minneapolis, Minnesota 

55480–0291: 

1. HF Financial Corp., Sioux Falls, 

South Dakota; to become a bank holding 

company by converting its whollyowned subsidiary Home Federal Bank, 

Sioux Falls, South Dakota, from a 

federal savings bank to a South Dakota 

state-chartered bank. 

Board of Governors of the Federal Reserve 

System, November 28, 2014. 

Margaret McCloskey Shanks, 

Deputy Secretary of the Board. 

[FR Doc. 2014–28435 Filed 12–2–14; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

Notice of Proposals To Engage in or 

To Acquire Companies Engaged in 

Permissible Nonbanking Activities 

The companies listed in this notice 

have given notice under section 4 of the 

Bank Holding Company Act (12 U.S.C. 

1843) (BHC Act) and Regulation Y, (12 

CFR part 225) to engage de novo, or to 

acquire or control voting securities or 

assets of a company, including the 

companies listed below, that engages 

either directly or through a subsidiary or 

other company, in a nonbanking activity 

that is listed in § 225.28 of Regulation Y 

(12 CFR 225.28) or that the Board has 

determined by Order to be closely 

related to banking and permissible for 

bank holding companies. Unless 

otherwise noted, these activities will be 

conducted throughout the United States. 

Each notice is available for inspection 

at the Federal Reserve Bank indicated. 

The notice also will be available for 

inspection at the offices of the Board of 

Governors. Interested persons may 

express their views in writing on the 

question whether the proposal complies 

with the standards of section 4 of the 

BHC Act. 

Unless otherwise noted, comments 

regarding the applications must be 

received at the Reserve Bank indicated 

or the offices of the Board of Governors 

not later than December 15, 2014. 

A. Federal Reserve Bank of San 

Francisco (Gerald C. Tsai, Director, 

Applications and Enforcement) 101 

Market Street, San Francisco, California 

94105–1579: 

1. First Financial Northwest, Inc. 

(‘‘FFNW’’), to engage de novo though its 

subsidiary, First Financial Diversified 

Corporation, both of Renton, 

Washington, in extending, acquiring, 


tkelley on DSK3SPTVN1PROD with NOTICES