Federal Register / Vol. 85, No. 190 / Wednesday, September 30, 2020 / Rules and Regulations 61577 

1ASU 2016–13 covers measurement of credit 

losses on financial instruments and includes three 

subtopics within Topic 326: (i) Subtopic 326–10 

Financial Instruments—Credit Losses—Overall; (ii) 

Subtopic 326–20: Financial Instruments—Credit 

Losses—Measured at Amortized Cost; and (iii) 

Subtopic 326–30: Financial Instruments—Credit 

Losses—Available-for-Sale Debt Securities. 

2Banking organizations subject to the capital rule 

include national banks, state member banks, state 

nonmember banks, savings associations, and toptier bank holding companies and savings and loan 

holding companies domiciled in the United States 

not subject to the Board’s Small Bank Holding 

Company Policy Statement (12 CFR part 225, 

appendix C), but exclude certain savings and loan 

holding companies that are substantially engaged in 

insurance underwriting or commercial activities or 

that are estate trusts, and bank holding companies 

and savings and loan holding companies that are 

employee stock ownership plans. 

3 84 FR 4222 (February 14, 2019). 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Part 3 

[Docket ID OCC–2020–0010] 

RIN 1557–AE82 

FEDERAL RESERVE SYSTEM 

12 CFR Part 217 

[Regulation Q; Docket No. R–1708] 

RIN 7100–AF82 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 324 

RIN 3064–AF42 

Regulatory Capital Rule: Revised 

Transition of the Current Expected 

Credit Losses Methodology for 

Allowances 

AGENCY: Office of the Comptroller of the 

Currency, Treasury; the Board of 

Governors of the Federal Reserve 

System; and the Federal Deposit 

Insurance Corporation. 

ACTION: Final rule. 

SUMMARY: The Office of the Comptroller 

of the Currency, the Board of Governors 

of the Federal Reserve System, and the 

Federal Deposit Insurance Corporation 

(collectively, the agencies) are adopting 

a final rule that delays the estimated 

impact on regulatory capital stemming 

from the implementation of Accounting 

Standards Update No. 2016–13, 

Financial Instruments—Credit Losses, 

Topic 326, Measurement of Credit 

Losses on Financial Instruments (CECL). 

The final rule provides banking 

organizations that implement CECL 

during the 2020 calendar year the 

option to delay for two years an estimate 

of CECL’s effect on regulatory capital, 

relative to the incurred loss 

methodology’s effect on regulatory 

capital, followed by a three-year 

transition period. The agencies are 

providing this relief to allow these 

banking organizations to better focus on 

supporting lending to creditworthy 

households and businesses in light of 

recent strains on the U.S. economy as a 

result of the coronavirus disease 2019, 

while also maintaining the quality of 

regulatory capital. This final rule is 

consistent with the interim final rule 

published in the Federal Register on 

March 31, 2020, with certain 

clarifications and minor adjustments in 

response to public comments related to 

the mechanics of the transition and the 

eligibility criteria for applying the 

transition. 

DATES: The final rule is effective 

September 30, 2020. 

FOR FURTHER INFORMATION CONTACT: 

OCC: Jung Sup Kim, Capital and 

Regulatory Policy, (202) 649–6528; or 

Kevin Korzeniewski, Counsel, Chief 

Counsel’s Office, (202) 649–5490, or for 

persons who are deaf or hearing 

impaired, TTY, (202) 649–5597, Office 

of the Comptroller of the Currency, 400 

7th Street SW, Washington, DC 20219. 

Board: Constance M. Horsley, Deputy 

Associate Director, (202) 452–5239; Juan 

C. Climent, Assistant Director, (202) 

872–7526; Andrew Willis, Lead 

Financial Institution Policy Analyst, 

(202) 912–4323; or Michael OforiKuragu, Senior Financial Institution 

Policy Analyst II, (202) 475–6623, 

Division of Supervision and Regulation; 

or Benjamin W. McDonough, Assistant 

General Counsel, (202) 452–2036; David 

W. Alexander, Senior Counsel, (202) 

452–2877; or Jonah Kind, Senior 

Attorney, (202) 452–2045, Legal 

Division, Board of Governors of the 

Federal Reserve System, 20th and C 

Streets NW, Washington, DC 20551. For 

the hearing impaired only, 

Telecommunication Device for the Deaf 

(TDD), (202) 263–4869. 

FDIC: Bobby R. Bean, Associate 

Director, bbean@fdic.gov; Benedetto 

Bosco, Chief, Capital Policy Section, 

bbosco@fdic.gov; Noah Cuttler, Senior 

Policy Analyst, ncuttler@fdic.gov; 

Andrew Carayiannis, Senior Policy 

Analyst, acarayiannis@fdic.gov; 

regulatorycapital@fdic.gov; Capital 

Markets Branch, Division of Risk 

Management Supervision, (202) 898– 

6888; or Michael Phillips, Counsel, 

mphillips@fdic.gov; Catherine Wood, 

Counsel, cawood@fdic.gov; Francis Kuo, 

Counsel, fkuo@fdic.gov; Supervision 

and Legislation Branch, Legal Division, 

Federal Deposit Insurance Corporation, 

550 17th Street NW, Washington, DC 

20429. For the hearing impaired only, 

Telecommunication Device for the Deaf 

(TDD), (800) 925–4618. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. Summary of Comments to the Interim 

Final Rule 

III. The Final Rule 

A. Approximating the Impact of CECL 

B. Mechanics of the 2020 CECL Transition 

Provision 

C. 2020 CECL Adopters 

D. Transitions Applicable to Advanced 

Approaches Banking Organizations 

E. Other Considerations 

F. Technical Amendments to the Interim 

Final Rule 

IV. Impact Assessment 

V. Administrative Law Matters 

A. Administrative Procedure Act 

B. Congressional Review Act 

C. Paperwork Reduction Act 

D. Regulatory Flexibility Act 

E. Riegle Community Development and 

Regulatory Improvement Act of 1994 

F. Plain Language 

G. Unfunded Mandates Reform Act 

I. Background 

In 2016, the Financial Accounting 

Standards Board (FASB) issued 

Accounting Standards Update (ASU) 

No. 2016–13, Financial Instruments— 

Credit Losses, Topic 326, Measurement 

of Credit Losses on Financial 

Instruments.1 The update resulted in 

significant changes to credit loss 

accounting under U.S. generally 

accepted accounting principles (GAAP). 

The revisions to credit loss accounting 

under GAAP included the introduction 

of the current expected credit losses 

methodology (CECL), which replaces 

the incurred loss methodology for 

financial assets measured at amortized 

cost. For these assets, CECL requires 

banking organizations 2 to recognize 

lifetime expected credit losses and to 

incorporate reasonable and supportable 

forecasts in developing the estimate of 

lifetime expected credit losses, while 

also maintaining the current 

requirement that banking organizations 

consider past events and current 

conditions. 

On February 14, 2019, the Office of 

the Comptroller of the Currency (OCC), 

the Board of Governors of the Federal 

Reserve System (Board), and the Federal 

Deposit Insurance Corporation (FDIC) 

(collectively, the agencies) issued a final 

rule that revised certain regulations to 

account for the aforementioned changes 

to credit loss accounting under GAAP, 

including CECL (2019 CECL rule).3 The 


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4 12 CFR part 3 (OCC); 12 CFR part 217 (Board); 

12 CFR part 324 (FDIC). 

5See 12 U.S.C. 1831n; See also current versions 

of the following: Instructions for Preparation of 

Consolidated Financial Statements for Holding 

Companies, Reporting Form FR Y–9C; Instructions 

for Preparation of Consolidated Reports of 

Condition and Income, Reporting Forms FFIEC 031 

and FFIEC 041; Instructions for Preparation of 

Consolidated Reports of Condition and Income for 

a Bank with Domestic Offices Only and Total Assets 

Less than $1 Billion, Reporting Form FFIEC 051. 

6 85 FR 17723 (March 31, 2020). 

2019 CECL rule revised the agencies’ 

regulatory capital rule (capital rule),4

stress testing rules, and regulatory 

disclosure requirements to reflect CECL, 

and made conforming amendments to 

other regulations that reference credit 

loss allowances. The 2019 CECL rule 

applies to banking organizations that 

file regulatory reports for which the 

accounting principles are uniform and 

consistent with GAAP,5 including 

banking organizations that are subject to 

the capital rule or stress testing 

requirements. 

The 2019 CECL rule also includes a 

transition provision that allows banking 

organizations to phase in over a threeyear period the day-one adverse effects 

of CECL on their regulatory capital 

ratios. The agencies intend for the 

transition provision to address concerns 

that despite adequate capital planning, 

unexpected economic conditions at the 

time of CECL adoption could result in 

higher-than-anticipated increases in 

allowances. This increase in allowances 

is expected largely because CECL 

requires banking organizations to 

consider current and reasonable and 

supportable forecasts of future economic 

conditions to estimate credit loss 

allowances. 

On March 31, 2020, as part of efforts 

to address the disruption of economic 

activity in the United States caused by 

the spread of coronavirus disease 2019 

(COVID–19), the agencies adopted a 

second CECL transition provision 

through an interim final rule.6 This 

transition provision provides banking 

organizations that were required to 

adopt CECL for purposes of GAAP (as in 

effect January 1, 2020), for a fiscal year 

that begins during the 2020 calendar 

year, the option to delay for up to two 

years an estimate of CECL’s effect on 

regulatory capital, followed by a threeyear transition period (i.e., a five-year 

transition period in total). The agencies 

provided this relief in response to the 

additional operational challenges and 

resource burden of implementing CECL 

amid the uncertainty caused by recent 

strains on the U.S. economy so that 

adopting banking organizations may 

better focus on supporting lending to 

creditworthy households and 

businesses, while maintaining the 

quality of regulatory capital and 

reducing the potential for competitive 

inequities across banking organizations. 

Under the interim final rule, an 

eligible banking organization would 

make an election to use the 2020 CECL 

transition provision in its first 

Consolidated Reports of Condition and 

Income (Call Report) or Consolidated 

Financial Statements for Holding 

Companies (FR Y–9C) filed during the 

2020 calendar year after it meets the 

eligibility requirements. The interim 

final rule provides electing banking 

organizations with a methodology for 

delaying the effect on regulatory capital 

of an estimated increase in the 

allowances for credit losses (ACL) that 

can be attributed to the adoption of 

CECL, relative to an estimated increase 

in the allowance for loan and lease 

losses (ALLL) that would occur for 

banking organizations operating under 

the incurred loss methodology. The 

interim final rule does not replace the 

three-year transition provision in the 

2019 CECL rule, which remains 

available to any banking organization at 

the time that it adopts CECL. Banking 

organizations that were required to 

adopt CECL during the 2020 calendar 

year have the option to elect the threeyear transition provision contained in 

the 2019 CECL rule or the 2020 CECL 

transition provision contained in the 

interim final rule, beginning with the 

March 31, 2020, Call Report or FR 

Y–9C. 

II. Summary of Comments to the 

Interim Final Rule 

The agencies received six public 

comments on the interim final rule from 

banking organizations and interest 

groups. Commenters supported the 

objectives of the interim final rule 

because it provides banking 

organizations additional flexibility to 

lend to creditworthy borrowers in the 

current economic environment, without 

imposing undue regulatory burden. 

However, several commenters suggested 

that the regulatory capital relief 

provided in the interim final rule is 

insufficient, especially given the current 

economic downturn. Some of these 

commenters asserted either that banking 

organizations should be permitted to 

add back a larger proportion of the ACL 

(temporarily or permanently) to 

common equity tier 1 capital or that the 

methodology for calculating the addback should address certain 

commenters’ concerns regarding procyclicality and differences in credit 

portfolios. One commenter asked the 

FASB and the agencies to allow banking 

organizations of all sizes the option to 

defer the implementation of CECL until 

2025, given current economic 

uncertainties. This commenter asserted 

that without a longer delay, community 

banking organizations may need to 

maintain loan portfolios with a credit 

profile that minimizes the regulatory 

capital volatility caused by CECL, rather 

than loan portfolios that meet the credit 

needs of the community. One 

commenter suggested that the agencies 

reevaluate whether to increase the 

amount of ACL includable in tier 2 

capital on a permanent basis to address 

the commenter’s concerns regarding 

pro-cyclicality and CECL. 

III. The Final Rule 

The final rule is consistent with the 

interim final rule with some 

clarifications and adjustments related to 

the calculation of the transitions and the 

eligibility criteria for using the 2020 

CECL transition provision, as discussed 

below. 

A. Approximating the Impact of CECL 

As discussed in the Supplementary 

Information to the interim final rule, the 

agencies considered different ways for 

determining the portion of credit loss 

allowances attributable to CECL that is 

eligible for transitional regulatory 

capital relief. To best capture the effects 

of CECL on regulatory capital, it would 

be necessary for a banking organization 

to calculate the effect on retained 

earnings of measuring credit loss 

allowances using both the incurred loss 

methodology and CECL. This approach, 

however, would require a banking 

organization to maintain the equivalent 

of two separate loss-provisioning 

processes. For many banking 

organizations that have adopted CECL, 

it would be burdensome to track credit 

loss allowances under both CECL and 

the incurred loss methodology, due to 

significant CECL-related changes 

already incorporated in internal systems 

or third-party vendor systems in place 

of elements of the incurred loss 

methodology. Further, if banking 

organizations were to maintain separate 

loss provisioning processes, there would 

also be burden associated with having to 

subject the incurred loss methodology to 

internal controls and supervisory 

oversight, which may in some respects 

differ from the controls and oversight 

over CECL. One commenter agreed that 

maintaining separate ongoing 

calculations of loan losses under two 

processes would entail significant 

burden. 

To address concerns regarding burden 

and to promote a consistent approach 

across electing banking organizations, 

the interim final rule provided a 


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7See Loudis, Bert and Ben Ranish. (2019) ‘‘CECL 

and the Credit Cycle.’’ Finance and Economics 

Discussion Series Working Paper 061. Available at: 

https://www.federalreserve.gov/econres/feds/files/ 

2019061pap.pdf and Covas, Francisco and William 

Nelson. ‘‘Current Expected Credit Loss: Lessons 

from 2007–2009.’’ (2018) Banking Policy Institute 

Working Paper. Available at: https://bpi.com/ 

wpcontent/uploads/2018/07/CECL_WP-2.pdf; the 

agencies reviewed data from public securities 

filings of various large banking organizations. These 

organizations reported allowances and provisions 

under CECL, on a weighted-average basis, 

approximately 30 percent higher on a pre-tax basis 

and 25 percent higher on an after-tax basis. The 

agencies chose a scalar closer to the after-tax 

median to avoid additional burden involved with 

making quarterly tax adjustments throughout the 

transition period. 8See 85 FR 29839 (May 19, 2020). 

uniform approach for estimating the 

effect of CECL during the first two years 

of the five-year transition period. 

Specifically, the interim final rule 

introduced a 25 percent scaling factor 

that approximates the average after-tax 

provision for credit losses attributable to 

CECL, relative to the incurred loss 

methodology, in a given reporting 

quarter. 

Some commenters asserted that the 25 

percent scaling factor was too low and 

that it was based on forecasts of benign 

economic conditions that existed at the 

beginning of 2020. Further, some 

commenters stated that the scaling 

factor could lead to disparate impacts 

on the availability of credit to different 

types of borrowers. These commenters 

suggested that a 100 percent add-back of 

incremental CECL allowances to 

regulatory capital would be appropriate 

for the duration of the transition period 

or until a longer-term solution is 

developed by the agencies for 

addressing potential unintended 

consequences of CECL on regulatory 

capital requirements. Other commenters 

stated that the regulatory capital relief 

provided through the interim final rule 

should be permanent to acknowledge 

the fundamental changes that CECL has 

introduced to credit loss allowance 

practices, to avoid the need for the 

agencies to intervene each time the 

economy contracts, and to promote 

credit availability in all economic 

conditions. 

The agencies also received several 

comments on the precision of the 25 

percent scaling factor. One commenter 

supported the interim final rule’s 

uniform scaling approach because it 

does not require banking organizations 

to calculate provisions under both the 

CECL and incurred loss methodologies, 

noting that such a requirement would 

have been labor-intensive and costly. 

Another commenter supported the 

objective of the agencies to make the 

regulatory capital impact of near-term 

accounting for credit losses under CECL 

through the crisis roughly comparable to 

the regulatory capital impact under the 

incurred loss methodology. However, 

this commenter asserted that a dynamic 

scaling factor that increases over time to 

50 percent and then reduces to zero 

percent over a nine quarter period 

would achieve this objective more 

effectively and accurately. 

After considering these comments, the 

agencies have decided to retain the 25 

percent scaling factor provided in the 

interim final rule. In developing an 

approach for adding back an amount of 

ACL measured under CECL to 

regulatory capital, the agencies have 

provided a measure of capital relief for 

banking organizations while not 

creating undue burden. In the agencies’ 

view, this approach should also 

consider the fundamental differences 

between CECL and the incurred loss 

methodology. Both CECL and the 

incurred loss methodology take into 

account historical credit loss experience 

and current conditions when estimating 

credit loss allowances; however, CECL 

also requires consideration of the effect 

of reasonable and supportable forecasts 

on collectability. This naturally causes a 

difference in the timing of the build-up 

of allowances. This difference in timing 

makes it more difficult to calibrate a 

more precise scaling factor that changes 

during a transition period because 

establishing the increases and decreases 

in the scaling factor that should apply 

for particular quarters during this period 

would require the agencies to anticipate 

the peaks and troughs of the economic 

crisis. Further, the amount of 

allowances required under CECL as 

compared to the incurred loss 

methodology is affected by the 

composition of a banking organization’s 

credit exposures subject to CECL. As a 

result, developing a scaling factor that 

changes over the course of a transition 

period could exacerbate inequities 

among banking organizations whose 

credit exposures might be weighted 

toward particular loan types. As noted 

in the Supplemental Information to the 

interim final rule, the agencies believe 

that the 25 percent scaling factor 

provides a reasonable estimate of the 

portion of the increase in allowances 

related to CECL relative to the incurred 

loss methodology.7 In addition, the 

uniform calibration promotes 

competitive equity in the current 

economic environment between electing 

banking organizations and those 

banking organizations that have not yet 

adopted CECL. 

B. Mechanics of the 2020 CECL 

Transition Provision 

The Supplementary Information to 

the interim final rule states that an 

electing banking organization must 

calculate transitional amounts for the 

following items: Retained earnings, 

temporary difference deferred tax assets 

(DTAs), and credit loss allowances 

eligible for inclusion in regulatory 

capital. For each of these items, the 

transitional amount is equal to the 

difference between the electing banking 

organization’s closing balance sheet 

amount for the fiscal year-end 

immediately prior to its adoption of 

CECL (pre-CECL amount) and its 

balance sheet amount as of the 

beginning of the fiscal year in which it 

adopts CECL (post-CECL amount) (i.e., 

day-one transitional amounts). To 

calculate the transitional amounts for 

these items, an electing banking 

organization must first calculate, as 

provided in the 2019 CECL rule, the 

CECL transitional amount, the adjusted 

allowances for credit losses (AACL) 

transitional amount, and the DTA 

transitional amount. The CECL 

transitional amount is equal to the 

difference between an electing banking 

organization’s pre-CECL and post-CECL 

amounts of retained earnings at 

adoption. The AACL transitional 

amount is equal to the difference 

between an electing banking 

organization’s pre-CECL amount of 

ALLL and its post-CECL amount of 

AACL at adoption. The DTA transitional 

amount is the difference between an 

electing banking organization’s preCECL amount and post-CECL amount of 

DTAs at adoption due to temporary 

differences. 

The agencies received several 

comments from banking organizations 

requesting clarification about how the 

day-one changes to the CECL 

transitional amount, DTA transitional 

amount, and AACL transitional amount 

should be calculated when an electing 

banking organization experiences a dayone increase in retained earnings. To the 

extent there is a day-one change for 

these items, an electing banking 

organization would calculate each 

transitional amount as a positive or 

negative number. For example, an 

electing banking organization with an 

increase in retained earnings upon 

adopting CECL would treat this amount 

as a negative value when calculating its 

modified CECL transitional amount for 

purposes of the 2020 CECL transition.8

The agencies adopted the 2020 CECL 

transition provision to mitigate the 

adverse effect of CECL on regulatory 

capital based on an estimated difference 

between allowances under the incurred 

loss methodology and CECL amid the 

uncertainty caused by recent strains on 


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9See 12 CFR 3.100(d) (OCC); 12 CFR 217.100(d) 

(Board); 12 CFR 324.100(d) (FDIC). 

10See Coronavirus Aid, Relief, and Economic 

Security Act, Public Law 116–136, 4014, 134 Stat. 

281 (Mar. 27, 2020). The CARES Act provides 

banking organizations optional temporary relief 

from complying with CECL ending on the earlier of 

(1) the termination date of the current national 

emergency, declared by the President on March 13, 

2020 under the National Emergencies Act (50 U.S.C. 

1601 et seq.) concerning COVID–19, or (2) 

December 31, 2020. 

the U.S. economy. To help achieve this 

goal, the final rule revises the capital 

rule to clarify that an electing banking 

organization is not required to apply the 

transitional amounts in any quarter in 

which it would not reflect a positive 

modified CECL transitional amount (i.e., 

when applying the transition would 

result in a decrease to retained earnings 

for regulatory capital).9 During quarters 

in which a banking organization does 

not calculate a positive modified CECL 

transitional amount, the electing 

banking organization would not reflect 

any of the transitional amounts in its 

regulatory capital calculations. 

However, the banking organization 

subsequently could resume applying the 

transitional amounts in the remaining 

quarters of the transition period if the 

banking organization calculates a 

positive modified CECL transitional 

amount during any of those quarters. 

The agencies are incorporating this 

clarification in this final rule. The 

agencies also are adopting as final all 

other aspects of the interim final rule 

related to the calculation of the 

transitional amounts. 

Under the final rule, an electing 

banking organization must adjust 

several key inputs to regulatory capital 

for purposes of the 2020 CECL 

transition, in addition to the day-one 

transitional amounts. In adjusting 

regulatory capital inputs, first an 

electing banking organization must 

increase retained earnings by a modified 

CECL transitional amount. The modified 

CECL transitional amount is adjusted to 

reflect changes in retained earnings due 

to CECL that occur during the first two 

years of the five-year transition period. 

The change in retained earnings due to 

CECL is calculated by taking the change 

in reported AACL relative to the first 

day of the fiscal year in which CECL 

was adopted and applying a scaling 

multiplier of 25 percent during the first 

two years of the transition period. 

Second, an electing banking 

organization must decrease AACL by 

the modified AACL transitional amount. 

The modified AACL transitional amount 

reflects an estimate of the change in 

credit loss allowances attributable to 

CECL that occurs during the first two 

years of the five-year transition period. 

This estimated change in credit loss 

allowances due to CECL is calculated 

with the same method used for the 

modified CECL transitional amount. 

Two additional regulatory capital 

inputs—temporary difference DTAs and 

average total consolidated assets—are 

also subject to adjustments. Reported 

average total consolidated assets for 

purposes of the leverage ratio is 

increased by the amount of the modified 

CECL transitional amount, and 

temporary difference DTAs are 

decreased by the DTA transitional 

amount as under the 2019 CECL rule. 

The agencies received one comment 

pertaining to the treatment of temporary 

difference DTAs. This commenter 

generally supported the approach for 

calculating the DTA transitional 

amount, but noted that not applying a 

dynamic adjustment to the DTA 

transitional amount during the first 

eight quarters of the transition could 

have a material impact on risk-weighted 

assets for particularly large banking 

organizations. Because revising the 

calculation for DTAs in a dynamic 

fashion, as suggested by commenters, 

likely would introduce undue 

complexity into the transition 

calculation, the final rule retains the 

calculation of the DTA transitional 

amount in the interim final rule, 

without revision. 

Consistent with the interim final rule, 

under the final rule, the modified CECL 

and modified AACL transitional 

amounts are calculated on a quarterly 

basis during the first two years of the 

transition period. An electing banking 

organization reflects those modified 

transitional amounts, which includes 

100 percent of the day-one impact of 

CECL plus a portion of the difference 

between AACL reported in the most 

recent regulatory report and AACL as of 

the beginning of the fiscal year that the 

banking organization adopts CECL, in 

transitional amounts applied to 

regulatory capital calculations. For the 

reasons described above, an electing 

banking organization would not apply 

the transitional amounts in any quarter 

in which the banking organization 

would not report a positive modified 

CECL transitional amount. After two 

years, the cumulative transitional 

amounts become fixed and are phased 

out of regulatory capital. The phase out 

of the transitional amounts from 

regulatory capital occurs over the 

subsequent three-year period: 75 

percent are recognized in year three; 50 

percent are recognized in year four; and 

25 percent are recognized in year five. 

Beginning in year six, the banking 

organization will not be able to adjust 

its regulatory capital by any of the 

transitional amounts. 

Some commenters requested that the 

first two years of the transition be 

applied on a permanent basis. While 

this aspect of the transition is generally 

based on the difference between lifetime 

expected credit losses and incurred 

credit losses, the agencies adopted the 

interim final rule to provide burden 

relief for operational challenges 

resulting from the implementation of a 

significant change in credit loss 

accounting during a shock to the 

economy caused by the spread of 

COVID–19, not to permanently 

recalibrate the capital rule. The agencies 

intend to propose the final key features 

of the Basel III reforms related to riskbased capital requirements soon. As part 

of that implementation, the agencies 

intend generally to preserve the 

aggregate level of loss absorbency in the 

banking system throughout the 

economic cycle and will consider the 

effect of CECL in their analysis. The 

agencies will also continue to monitor 

the effect of CECL on capital ratios. 

Finally, under the final rule, an 

electing banking organization applies 

the adjustments calculated above during 

each quarter of the transition period for 

purposes of calculating the banking 

organization’s regulatory capital ratios. 

No adjustments are reflected in balance 

sheet or income statement amounts. The 

electing banking organization reflects 

the transition adjustment to the extent 

the banking organization has reflected 

CECL in the Call Report or FR Y–9C, as 

applicable, in that quarter. If a banking 

organization chooses to revert to the 

incurred loss methodology pursuant to 

the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act) 10

in any quarter in 2020, the banking 

organization would not apply any 

transitional amounts in that quarter but 

would be allowed to apply the 

transitional amounts in subsequent 

quarters when the banking organization 

resumes use of CECL. However, a 

banking organization that has elected 

the transition, but subsequently elects to 

not apply the transitional amounts, in 

any quarter, would not receive any 

extension of the five-year transition 

period. 


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11The option to delay the use of CECL in 

accordance with section 4014 of the CARES Act 

also is available for other GAAP-based reporting. 

12A banking organization is an advanced 

approaches banking organization if it (1) is a global 

systemically important bank holding company, (2) 

is a Category II banking organization, (3) has elected 

to be an advanced approached banking 

organization, (4) is a subsidiary of a company that 

is an advanced approaches banking organization, or 

(5) has a subsidiary depository institution that is an 

advanced approaches banking organization. See 12 

CFR 3.100 (OCC); 12 CFR 217.100 (Board); 12 CFR 

324.100 (FDIC). 

13See 12 CFR 3.173 (OCC); 12 CFR 217.173 

(Board); 12 CFR 324.173 (FDIC). 

14See 12 U.S.C. 1831n(a)(2)(A). 

TABLE 1—CECL TRANSITIONAL AMOUNTS TO APPLY TO REGULATORY CAPITAL COMPONENTS DURING THE FINAL THREE

YEARS OF THE 2020 CECL TRANSITION

Year 3 Year 4 Year 5 

Increase retained earnings and average total consolidated assets by the following percentages of the modified CECL transitional amount ...................................................................... 75% 50% 25% 

Decrease temporary difference DTAs by the following percentages of the DTA transitional 

amount. 

Decrease AACL by the following percentages of the modified AACL transitional amount. 

C. 2020 CECL Adopters 

Consistent with the interim final rule, 

under the final rule, banking 

organizations that are required to adopt 

CECL under GAAP (as in effect January 

1, 2020) in the 2020 calendar year are 

eligible for the 2020 CECL transition 

provision. A banking organization that 

is required to adopt CECL under GAAP 

in the 2020 calendar year, but chooses 

to delay use of CECL for regulatory 

reporting in accordance with section 

4014 of the CARES Act, is also eligible 

for the 2020 CECL transition 

provision.11

Many depository institution holding 

companies that are Securities and 

Exchange Commission (SEC) filers are 

required to adopt CECL for financial 

statement purposes under GAAP in the 

2020 calendar year (in which case they 

are eligible for the 2020 CECL transition 

provision). Additionally, since issuing 

the interim final rule, supervisory 

experience has shown that depository 

institution subsidiaries of holding 

companies generally adopt CECL based 

on when their holding companies are 

required to adopt CECL. The agencies 

received comments through the 

supervisory process regarding CECL 

transition implementation challenges 

that can exist when the depository 

institution subsidiary of a holding 

company does not adopt CECL at the 

same time as its holding company, 

which would result in maintaining 

separate processes for calculating loan 

losses on the same exposure. However, 

because these depository institution 

subsidiaries are not required to adopt 

CECL under GAAP during the 2020 

calendar year, they would not have been 

eligible to use the 2020 CECL transition 

provision under the interim final rule. 

Additionally, a banking organization 

that is not required to adopt CECL under 

GAAP in the 2020 calendar year, but 

nonetheless chooses to early adopt 

CECL in the 2020 calendar year would 

not have been eligible to use the 2020 

CECL transition provision under the 

interim final rule. Due to the significant 

differences between CECL and the 

incurred loss methodology, the agencies 

understand that these banking 

organizations would have incurred 

substantial time and cost prior to 2020 

to implement CECL and it would be a 

significant burden to subsequently 

revert to the incurred loss methodology. 

To address these implementation 

challenges and facilitate more banking 

organizations to better focus on 

supporting lending to creditworthy 

borrowers, the final rule modifies the 

interim final rule. Specifically, the final 

rule permits use of the 2020 CECL 

transition provision by any banking 

organization that adopts CECL during 

the 2020 calendar year, including those 

not required to adopt CECL under 

GAAP in the 2020 calendar year and 

those that adopt CECL in an interim 

period in the 2020 calendar year. A 

banking organization that initially 

elected the three-year transition 

provision under the 2019 CECL rule 

earlier in 2020 because it was not 

eligible to elect the 2020 CECL 

transition provision under the interim 

final rule at that time may change its 

election to the 2020 CECL transition 

provision in its Call Report or FR Y–9C 

(as applicable) filed later in the 2020 

calendar year. In all cases, an electing 

banking organization must follow the 

calculations for determining the 

transitional amounts as described in the 

capital rule. 

D. Transitions Applicable to Advanced 

Approaches Banking Organizations 

Consistent with the interim final rule, 

the final rule adjusts the transitional 

amounts related to eligible credit 

reserves for advanced approaches 

banking organizations 12 that elect to use 

the 2020 CECL transition provision. The 

final rule also adjusts the transitional 

amounts related to the supplementary 

leverage ratio’s total exposure amount. 

An advanced approaches banking 

organization that elects the 2020 CECL 

transition provision continues to be 

required to disclose two sets of 

regulatory capital ratios under the 

capital rule: One set would reflect the 

banking organization’s capital ratios 

with the CECL transition provision and 

the other set would reflect the banking 

organization’s capital ratios on a fully 

phased-in basis.13

E. Other Considerations 

The agencies received a few 

comments on topics not discussed in 

the interim final rule. One commenter 

requested that the FASB and the 

agencies allow banking organizations of 

all sizes the option to defer the 

implementation of CECL until 2025, 

given current economic uncertainties. 

Other commenters requested that the 

agencies study further the relationship 

between regulatory capital and credit 

loss allowances and whether the impact 

of CECL on banking organizations’ 

regulatory capital should result in 

permanent revisions to the capital rule. 

One commenter requested that the 

agencies increase the amount of ACL 

that would be eligible to be added back 

to tier 2 capital. 

The agencies will continue to study 

the need for further revisions to the 

regulatory capital framework to account 

for CECL and take warranted actions as 

the agencies deem necessary. The 

agencies will continue to use GAAP as 

the basis for accounting principles 

applicable to reports or statements 

required to be filed with the agencies, 

consistent with section 37 of the Federal 

Deposition Insurance Act.14 The 

agencies will continue to use the 

supervisory process to examine credit 

loss estimates and allowance balances of 

banking organizations regardless of their 

election to use CECL transition 

provisions. In addition, the agencies 

may assess the capital plans at electing 

banking organizations for ensuring 


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61582 Federal Register / Vol. 85, No. 190 / Wednesday, September 30, 2020 / Rules and Regulations 

15The Board extended the due date for the Y–14A 

collection of supplemental CECL information from 

April 6th until May 11th (due date of the March 31 

FR Y–9C) and is including changes in the Y–14A 

instructions to align with the changes outlined in 

the interim final rule. These changes are effective 

for the submission associated with the FR Y–14 as 

of December 31, 2019. 

Under the Board’s December 2018 amendments to 

its stress test rules, a banking organization that had 

adopted CECL in 2020 was required to include the 

impact of CECL into their stressed projections 

beginning in the 2020 stress testing cycle. As a 

result of the interim final rule, firms that have 

already adopted CECL have the option to either 

include the adjustments from the interim final rule 

in their 2020 stress projections or delay doing so. 

As noted in the 2020 CCAR summary instructions, 

the Board will not issue supervisory findings on 

banking organizations’ stressed estimates of 

allowances under CECL until the 2022 CCAR cycle, 

at the earliest. 

sufficient capital at the expiration of 

such transition periods.15

F. Technical Amendments to the Interim 

Final Rule 

The agencies are making technical, 

non-substantive edits in the final rule to 

correct typographical errors in the 

interim final rule. Specifically, the 

amendments correct and clarify certain 

definitions and terminology used in the 

2020 CECL transition provision and 

remove extraneous language that was 

inadvertently included in the interim 

final rule. 

IV. Impact Assessment 

As discussed in the Supplementary 

Information to the interim final rule, 

CECL is expected to affect the timing 

and magnitude of banking 

organizations’ loss provisioning, 

particularly around periods of economic 

stress. As recently as late last year, 

economic conditions appeared stable 

and the introduction of CECL was 

expected to have only a modest effect on 

operations. However, the additional 

uncertainty due to the introduction of a 

new credit loss accounting standard in 

a period of stress associated with 

COVID–19 poses a unique and 

unanticipated challenge to business 

operations. 

The agencies issued the interim final 

rule to mitigate the extent to which 

CECL implementation complicates 

capital planning challenges posed by 

the economic effects of the COVID–19 

pandemic by making the regulatory 

capital impact of near-term accounting 

for credit losses under CECL through the 

crisis roughly comparable to the 

regulatory capital impact under the 

incurred loss methodology. To do so, 

the 2020 CECL transition provision 

includes the entire day-one impact as 

well as an estimate of the incremental 

increase in credit loss allowances 

attributable to CECL as compared to the 

incurred loss methodology. With the 

2020 CECL transition provision 

provided by the interim final rule, as 

clarified by the final rule, banking 

organizations have time to adapt capital 

planning under stress to the new credit 

loss accounting standard, improving 

their flexibility and enhancing their 

ability to serve as a source of credit to 

the U.S. economy. 

The uniform 25 percent scaling factor 

is only an approximation of the average 

after-tax provision for credit losses 

attributable to CECL, relative to the 

incurred loss methodology, in a given 

reporting quarter. Banking organizations 

may realize effects that are higher or 

lower than the amount calculated using 

the scaling factor. Additionally, the 

transition provision does not directly 

address likely differences in the timing 

of loss recognition under CECL and the 

incurred loss methodology. To the 

extent that allowances related to the 

economic effects of the COVID–19 

pandemic build sooner under CECL 

than they would have under the 

incurred loss methodology, the 

transition provision provided in the 

final rule will not fully offset the 

regulatory capital impact of CECL. 

However, there is a significant benefit to 

operational simplicity from using a 

single scalar for the quarterly 

adjustments for all electing banking 

organizations. 

As discussed previously, any banking 

organization that chooses to adopt, or is 

required to adopt CECL during the 2020 

calendar year, as well as any banking 

organization that is part of a 

consolidated group whose holding 

company adopts CECL under GAAP 

during the 2020 calendar year will be 

covered by the final rule. However, the 

final rule will only directly affect those 

institutions that opt to utilize the 2020 

CECL transition provision. The choice 

to adopt the 2020 CECL transition 

provision will depend on the 

characteristics of each individual 

institution, therefore the agencies do not 

know how many institutions will 

choose to do so. 

As mentioned previously, under the 

interim final rule and the final rule, 

banking organizations that are required 

to adopt CECL under GAAP (as in effect 

January 1, 2020) in the 2020 calendar 

year would be eligible for the 2020 

CECL transition provision. Under the 

final rule, the agencies are also 

permitting use of the 2020 CECL 

transition provision by any banking 

organization that is part of a 

consolidated group in which its holding 

company is required under GAAP to 

adopt CECL during the 2020 calendar 

year. Also, the agencies are expanding 

the scope of the 2020 CECL transition 

provision to include any banking 

organization that is not required to 

adopt CECL under GAAP in the 2020 

calendar year, but nonetheless chooses 

to early adopt CECL in the 2020 

calendar year, including a banking 

organization that adopts CECL in an 

interim period in the 2020 calendar 

year. The agencies do not have 

information necessary to estimate the 

number of institutions that may choose 

to adopt CECL in the 2020 calendar year 

and may avail themselves of the 2020 

CECL transition provision. 

The final rule provides electing 

banking organizations relief in response 

to the additional operational challenges 

and resource burden of implementing 

CECL amid the uncertainty caused by 

recent strains on the U.S. economy, so 

that electing banking organizations may 

better focus on supporting lending to 

creditworthy households and 

businesses, while maintaining the 

quality of regulatory capital and 

reducing the potential for competitive 

inequities across banking organizations. 

Banking organizations that are eligible 

for, and opt to utilize the 2020 CECL 

transition provision may incur some 

regulatory costs associated with making 

changes to their systems and processes. 

V. Administrative Law Matters 

A. Administrative Procedure Act 

The agencies are issuing this final rule 

without prior notice and the 

opportunity for public comment and the 

30-day delayed effective date ordinarily 

prescribed by the Administrative 

Procedure Act (APA). Pursuant to 

section 553(b)(B) of the APA, general 

notice and the opportunity for public 

comment are not required with respect 

to a rulemaking when an ‘‘agency for 

good cause finds (and incorporates the 

finding and a brief statement of reasons 

therefor in the rules issued) that notice 

and public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest.’’ 

The agencies recognize that the public 

interest is best served by implementing 

the final rule as soon as possible. As 

discussed above, recent events have 

suddenly and significantly affected 

global economic activity. In addition, 

financial markets have experienced 

significant volatility. The magnitude 

and persistence of the overall effects on 

the economy remain highly uncertain. 

The 2019 CECL rule, as amended by 

the interim final rule, was adopted by 

the agencies to address concerns that 

despite adequate capital planning, 

uncertainty about the economic 

environment at the time of CECL 


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Federal Register / Vol. 85, No. 190 / Wednesday, September 30, 2020 / Rules and Regulations 61583 

16 5 U.S.C. 801 et seq. 

17 5 U.S.C. 801(a)(3). 

18 5 U.S.C. 804(2). 19See 85 FR 44361 (July 22, 2020). 

20A savings and loan holding company (SLHC) 

must file one or more of the FR Y–9 series of reports 

unless it is: (1) A grandfathered unitary SLHC with 

primarily commercial assets and thrifts that make 

up less than 5 percent of its consolidated assets; or 

(2) a SLHC that primarily holds insurance-related 

assets and does not otherwise submit financial 

reports with the SEC pursuant to section 13 or 15(d) 

of the Securities Exchange Act of 1934. 

adoption could result in higher-thananticipated increases in credit loss 

allowances. Because of recent economic 

dislocations and disruptions in financial 

markets, banking organizations may face 

higher-than-anticipated increases in 

credit loss allowances. The final rule is 

intended to mitigate some of the 

uncertainty that comes with the increase 

in credit loss allowances during a 

challenging economic environment by 

temporarily limiting the approximate 

effects of CECL in regulatory capital. 

This will allow banking organizations to 

better focus on supporting lending to 

creditworthy households and 

businesses. 

The APA also requires a 30-day 

delayed effective date, except for (1) 

substantive rules which grant or 

recognize an exemption or relieve a 

restriction; (2) interpretative rules and 

statements of policy; or (3) as otherwise 

provided by the agency for good cause. 

Because the rule relieves a restriction, 

the final rule is exempt from the APA’s 

delayed effective date requirement. 

Additionally, the agencies find good 

cause to publish the final rule with an 

immediate effective date for the same 

reasons set forth above under the 

discussion of section 553(b)(B) of the 

APA. 

B. Congressional Review Act 

For purposes of Congressional Review 

Act, the OMB makes a determination as 

to whether a final rule constitutes a 

‘‘major’’ rule.16 If a rule is deemed a 

‘‘major rule’’ by the Office of 

Management and Budget (OMB), the 

Congressional Review Act generally 

provides that the rule may not take 

effect until at least 60 days following its 

publication.17

The Congressional Review Act defines 

a ‘‘major rule’’ as any rule that the 

Administrator of the Office of 

Information and Regulatory Affairs of 

the OMB finds has resulted in or is 

likely to result in (A) an annual effect 

on the economy of $100,000,000 or 

more; (B) a major increase in costs or 

prices for consumers, individual 

industries, Federal, State, or local 

government agencies or geographic 

regions, or (C) significant adverse effects 

on competition, employment, 

investment, productivity, innovation, or 

on the ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic and 

export markets.18

For the same reasons set forth above, 

the agencies are adopting the final rule 

without the delayed effective date 

generally prescribed under the 

Congressional Review Act. The delayed 

effective date required by the 

Congressional Review Act does not 

apply to any rule for which an agency 

for good cause finds (and incorporates 

the finding and a brief statement of 

reasons therefor in the rule issued) that 

notice and public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest. In light of current 

market uncertainty, the agencies have 

determined that delaying the effective 

date of the final rule would be contrary 

to the public interest. 

As required by the Congressional 

Review Act, the agencies will submit 

the final rule and other appropriate 

reports to Congress and the Government 

Accountability Office for review. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3521) (PRA) states that 

no agency may conduct or sponsor, nor 

is the respondent required to respond 

to, an information collection unless it 

displays a currently valid OMB control 

number. This final rule does not contain 

any information collection 

requirements. However, in connection 

with the interim final rule, the Board 

temporarily revised the Financial 

Statements for Holding Companies (FR 

Y–9 reports; OMB No. 7100–0128) and 

the Capital Assessments and Stress 

Testing Reports (FR Y–14A/Q/M; OMB 

No. 7100–0341) and invited comment 

on a proposal to extend those 

collections of information for three 

years, with revision. No comments were 

received regarding this proposal under 

the PRA. The Board has now extended, 

with revision, the FR Y–9 and FR Y– 

14A/Q/M reports as proposed, except 

for minor clarifications discussed below 

to align the reporting instructions with 

this final rule. 

Additionally, in connection with the 

interim final rule, the agencies made 

revisions to the Call Reports (OCC OMB 

Control No. 1557–0081; Board OMB 

Control No. 7100–0036; and FDIC OMB 

Control No. 3064–0052) and the FFIEC 

101 (OCC OMB Control No. 1557–0239; 

Board OMB Control No. 7100–0319; 

FDIC OMB Control No. 3064–0159). The 

final changes to the Call Reports, the 

FFIEC 101 and their related instructions 

are addressed in a separate Federal 

Register notice.19

Current Actions 

The Board has extended the FR Y–9C 

and FR Y–14A/Q/M for three years, 

with revision, as originally proposed, 

except for minor clarifications to the 

instructions to the reports to accurately 

reflect the CECL transition provision as 

modified by this final rule. In addition 

to the specific changes mentioned in the 

interim final rule, the final rule expands 

eligibility for the new transition to 

banking organizations that voluntarily 

early adopt CECL in the 2020 calendar 

year. The final rule also includes minor 

adjustments to clarify calculation of the 

transition provision. Specifically, the FR 

Y–9C instructions would be clarified to 

note that an electing banking 

organization that opted to apply the 

transition in the first quarter in which 

it was eligible is not required to apply 

the transition in any quarter in which it 

would not reflect a positive modified 

CECL transitional amount (that could 

result in negative retained earnings). 

Also, the FR Y–9C instructions would 

be clarified to note that the day-one 

transitional amounts (CECL transitional 

amount, AACL transitional amount, and 

DTA transitional amount) may be 

calculated as a positive or negative 

number. All of the updates to the FR 

Y–9C and FR Y–14A/Q/M noted in the 

interim and final rule result in a zero 

estimated net change in hourly burden. 

Revision, With Extension, of the 

Following Information Collections 

(1) Report Title: Financial Statements 

for Holding Companies. 

Agency Form Number: FR Y–9C, FR 

Y–9LP, FR Y–9SP, FR Y–9ES, and FR 

Y–9CS. 

OMB Control Number: 7100–0128. 

Effective Date: September 30, 2020 

Frequency: Quarterly, semiannually, 

and annually. 

Respondents: Bank holding 

companies, savings and loan holding 

companies,20 securities holding 

companies, and U.S. intermediate 

holding companies (collectively, HCs). 

Estimated Number of Respondents: 

FR Y–9C (non-advanced approaches 

community bank leverage ratio (CBLR) 

HCs with less than $5 billion in total 

assets): 71; FR Y–9C (non-advanced 

approaches CBLR HCs with $5 billion or 

more in total assets): 35; FR Y–9C (nonadvanced approaches, non CBLR, HCs 

with less than $5 billion in total assets): 

84; FR Y–9C (non-advanced approaches, 

non CBLR HCs, with $5 billion or more 

in total assets): 154; FR Y–9C (advanced 


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61584 Federal Register / Vol. 85, No. 190 / Wednesday, September 30, 2020 / Rules and Regulations 

21The Call Reports consist of the Consolidated 

Reports of Condition and Income for a Bank with 

Domestic Offices Only and Total Assets Less Than 

$5 Billion (FFIEC 051), the Consolidated Reports of 

Condition and Income for a Bank with Domestic 

Offices Only (FFIEC 041) and the Consolidated 

Reports of Condition and Income for a Bank with 

Domestic and Foreign Offices (FFIEC 031). 

22Under certain circumstances described in the 

FR Y–9C’s General Instructions, HCs with assets 

under $3 billion may be required to file the FR Y– 

9C. 

23A top-tier HC may submit a separate FR Y–9LP 

on behalf of each of its lower-tier HCs. 

approaches HCs): 19; FR Y–9LP: 434; FR 

Y–9SP: 3,960; FR Y–9ES: 83; FR Y–9CS: 

236. 

Estimated average hours per response: 

Reporting 

FR Y–9C (non-advanced approaches 

CBLR HCs with less than $5 billion in 

total assets): 29.17 hours; FR Y–9C (nonadvanced approaches CBLR HCs with 

$5 billion or more in total assets): 35.14; 

FR Y–9C (non-advanced approaches, 

non CBLR HCs, with less than $5 billion 

in total assets): 41.01; FR Y–9C (nonadvanced approaches, non CBLR, HCs 

with $5 billion or more in total assets): 

46.98 hours; FR Y–9C (advanced 

approaches HCs): 48.80 hours; FR 

Y–9LP: 5.27 hours; FR Y–9SP: 5.40 

hours; FR Y–9ES: 0.50 hours; FR Y–9CS: 

0.50 hours. 

Recordkeeping 

FR Y–9C (non-advanced approaches 

HCs with less than $5 billion in total 

assets), FR Y–9C (non-advanced 

approaches HCs with $5 billion or more 

in total assets), FR Y–9C (advanced 

approaches HCs), and FR Y–9LP: 1.00 

hour; FR Y–9SP, FR Y–9ES, and FR 

Y–9CS: 0.50 hours. 

Estimated annual burden hours: 

Reporting 

FR Y–9C (non-advanced approaches 

CBLR HCs with less than $5 billion in 

total assets): 8,284 hours; FR Y–9C (nonadvanced approaches CBLR HCs with 

$5 billion or more in total assets): 4,920; 

FR Y–9C (non-advanced approaches 

non CBLR HCs with less than $5 billion 

in total assets): 13,779; FR Y–9C (nonadvanced approaches non CBLR HCs 

with $5 billion or more in total assets): 

28,940 hours; FR Y–9C (advanced 

approaches HCs): 3,709 hours; FR 

Y–9LP: 9,149 hours; FR Y–9SP: 42,768 

hours; FR Y–9ES: 42 hours; FR Y–9CS: 

472 hours. 

Recordkeeping 

FR Y–9C: 1,452 hours; FR Y–9LP: 

1,736 hours; FR Y–9SP: 3,960 hours; FR 

Y–9ES: 42 hours; FR Y–9CS: 472 hours. 

General description of report: 

The FR Y–9C consists of standardized 

financial statements similar to the Call 

Reports filed by banks and savings 

associations.21 The FR Y–9C collects 

consolidated data from HCs and is filed 

quarterly by top-tier HCs with total 

consolidated assets of $3 billion or 

more.22

The FR Y–9LP, which collects parent 

company only financial data, must be 

submitted by each HC that files the FR 

Y–9C, as well as by each of its 

subsidiary HCs.23 The report consists of 

standardized financial statements. 

The FR Y–9SP is a parent company 

only financial statement filed 

semiannually by HCs with total 

consolidated assets of less than $3 

billion. In a banking organization with 

total consolidated assets of less than $3 

billion that has tiered HCs, each HC in 

the organization must submit, or have 

the top-tier HC submit on its behalf, a 

separate FR Y–9SP. This report is 

designed to obtain basic balance sheet 

and income data for the parent 

company, and data on its intangible 

assets and intercompany transactions. 

The FR Y–9ES is filed annually by 

each employee stock ownership plan 

(ESOP) that is also an HC. The report 

collects financial data on the ESOP’s 

benefit plan activities. The FR Y–9ES 

consists of four schedules: A Statement 

of Changes in Net Assets Available for 

Benefits, a Statement of Net Assets 

Available for Benefits, Memoranda, and 

Notes to the Financial Statements. 

The FR Y–9CS is a free-form 

supplemental report that the Board may 

utilize to collect critical additional data 

deemed to be needed in an expedited 

manner from HCs on a voluntary basis. 

The data are used to assess and monitor 

emerging issues related to HCs, and the 

report is intended to supplement the 

other FR Y–9 reports. The data items 

included on the FR Y–9CS may change 

as needed. 

Legal authorization and 

confidentiality: The Board has the 

authority to impose the reporting and 

recordkeeping requirements associated 

with the FR Y–9 family of reports on 

bank holding companies pursuant to 

section 5 of the Bank Holding Company 

Act of 1956 (BHC Act) (12 U.S.C. 1844); 

on savings and loan holding companies 

pursuant to section 10(b)(2) and (3) of 

the Home Owners’ Loan Act (12 U.S.C. 

1467a(b)(2) and (3)), as amended by 

sections 369(8) and 604(h)(2) of the 

Dodd-Frank Wall Street and Consumer 

Protection Act (Dodd-Frank Act); on 

U.S. intermediate holding companies 

pursuant to section 5 of the BHC Act (12 

U.S.C 1844), as well as pursuant to 

sections 102(a)(1) and 165 of the DoddFrank Act (12 U.S.C. 511(a)(1) and 

5365); and on securities holding 

companies pursuant to section 618 of 

the Dodd-Frank Act (12 U.S.C. 

1850a(c)(1)(A)). The obligation to 

submit the FR Y–9 series of reports, and 

the recordkeeping requirements set forth 

in the respective instructions to each 

report, are mandatory, except for the FR 

Y–9CS, which is voluntary. 

With respect to the FR Y–9C report, 

Schedule HI’s data item 7(g) ‘‘FDIC 

deposit insurance assessments,’’ 

Schedule HC P’s data item 7(a) 

‘‘Representation and warranty reserves 

for 1–4 family residential mortgage 

loans sold to U.S. government agencies 

and government sponsored agencies,’’ 

and Schedule HC P’s data item 7(b) 

‘‘Representation and warranty reserves 

for 1–4 family residential mortgage 

loans sold to other parties’’ are 

considered confidential commercial and 

financial information. Such treatment is 

appropriate under exemption 4 of the 

Freedom of Information Act (FOIA) (5 

U.S.C. 552(b)(4)) because these data 

items reflect commercial and financial 

information that is both customarily and 

actually treated as private by the 

submitter, and which the Board has 

previously assured submitters will be 

treated as confidential. It also appears 

that disclosing these data items may 

reveal confidential examination and 

supervisory information, and in such 

instances, this information would also 

be withheld pursuant to exemption 8 of 

the FOIA (5 U.S.C. 552(b)(8)), which 

protects information related to the 

supervision or examination of a 

regulated financial institution. 

In addition, for both the FR Y–9C 

report, Schedule HC’s memorandum 

item 2.b. and the FR Y–9SP report, 

Schedule SC’s memorandum item 2.b., 

the name and email address of the 

external auditing firm’s engagement 

partner, is considered confidential 

commercial information and protected 

by exemption 4 of the FOIA (5 U.S.C. 

552(b)(4)) if the identity of the 

engagement partner is treated as private 

information by HCs. The Board has 

assured respondents that this 

information will be treated as 

confidential since the collection of this 

data item was proposed in 2004. 

Additionally, items on the FR Y–9C, 

Schedule HC–C for loans modified 

under Section 4013, data items 

Memorandum items 16.a, ‘‘Number of 

Section 4013 loans outstanding’’; and 

Memorandum items 16.b, ‘‘Outstanding 

balance of Section 4013 loans’’ are 

considered confidential. While the 

Board generally makes institution-level 

FR Y–9C report data publicly available, 

the Board is collecting Section 4013 

loan information as part of condition 


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24SLHCs with $100 billion or more in total 

consolidated assets become members of the FR Y– 

14Q and FR Y–14M panels effective June 30, 2020, 

and the FR Y–14A panel effective December 31, 

2020. See 84 FR 59032 (Nov. 1, 2019). 

25The estimated number of respondents for the 

FR Y–14M is lower than for the FR Y–14Q and FR 

Y–14A because, in recent years, certain respondents 

to the FR Y–14A and FR Y–14Q have not met the 

materiality thresholds to report the FR Y–14M due 

to their lack of mortgage and credit activities. The 

Board expects this situation to continue for the 

foreseeable future. 

26 In certain circumstances, a BHC or IHC may be 

required to re-submit its capital plan. See 12 CFR 

225.8(e)(4). Firms that must re-submit their capital 

plan generally also must provide a revised FR 

Y–14A in connection with their resubmission. 

27On October 10, 2019, the Board issued a final 

rule that eliminated the requirement for firms 

subject to Category IV standards to conduct and 

publicly disclose the results of a company-run 

stress test. See 84 FR 59032 (Nov. 1, 2019). That 

final rule maintained the existing FR Y–14 

substantive reporting requirements for these firms 

in order to provide the Board with the data it needs 

to conduct supervisory stress testing and inform the 

Board’s ongoing monitoring and supervision of its 

supervised firms. However, as noted in the final 

rule, the Board intends to provide greater flexibility 

to banking organizations subject to Category IV 

standards in developing their annual capital plans 

and consider further change to the FR Y–14 forms 

as part of a separate proposal. See 84 FR 59032, 

59063 (Nov. 1, 2019). 

reports for the impacted HCs and the 

Board considers disclosure of these 

items at the HC level would not be in 

the public interest. Such information is 

permitted to be collected on a 

confidential basis, consistent with 5 

U.S.C. 552(b)(8). In addition, holding 

companies may be reluctant to offer 

modifications under Section 4013 if 

information on these modifications 

made by each holding company is 

publicly available, as analysts, 

investors, and other users of public FR 

Y–9C report information may penalize 

an institution for using the relief 

provided by the CARES Act. The Board 

may disclose Section 4013 loan data on 

an aggregated basis, consistent with 

confidentiality. 

Aside from the data items described 

above, the remaining data items on the 

FR Y–9C report and the FR–Y 9SP 

report are generally not accorded 

confidential treatment. The data items 

collected on FR Y–9LP, FR Y–9ES, and 

FR Y–9CS reports, are also generally not 

accorded confidential treatment. As 

provided in the Board’s Rules Regarding 

Availability of Information (12 CFR part 

261), however, a respondent may 

request confidential treatment for any 

data items the respondent believes 

should be withheld pursuant to a FOIA 

exemption. The Board will review any 

such request to determine if confidential 

treatment is appropriate, and will 

inform the respondent if the request for 

confidential treatment has been denied. 

To the extent the instructions to the 

FR Y–9C, FR Y–9LP, FR Y–9SP, and FR 

Y–9ES reports each respectively direct 

the financial institution to retain the 

work papers and related materials used 

in preparation of each report, such 

material would only be obtained by the 

Board as part of the examination or 

supervision of the financial institution. 

Accordingly, such information is 

considered confidential pursuant to 

exemption 8 of the FOIA (5 U.S.C. 

552(b)(8)). In addition, the financial 

institution’s work papers and related 

materials may also be protected by 

exemption 4 of the FOIA, to the extent 

such financial information is treated as 

confidential by the respondent (5 U.S.C. 

552(b)(4)). 

(2) Report title: Capital Assessments 

and Stress Testing Reports. 

Agency Form Number: FR Y–14A/ 

Q/M. 

OMB Control Number: 7100–0341. 

Frequency: Annually, quarterly, and 

monthly. 

Respondents: These collections of 

information are applicable to BHCs, U.S. 

intermediate holding companies (IHCs), 

and savings and loan holding 

companies (SLHCs) 24 (collectively, 

‘‘holding companies’’) with $100 billion 

or more in total consolidated assets, as 

based on: (i) The average of the firm’s 

total consolidated assets in the four 

most recent quarters as reported 

quarterly on the firm’s Consolidated 

Financial Statements for Holding 

Companies (FR Y–9C); or (ii) if the firm 

has not filed an FR Y–9C for each of the 

most recent four quarters, then the 

average of the firm’s total consolidated 

assets in the most recent consecutive 

quarters as reported quarterly on the 

firm’s FR 

Y–9Cs. Reporting is required as of the 

first day of the quarter immediately 

following the quarter in which the 

respondent meets this asset threshold, 

unless otherwise directed by the Board. 

Estimated number of respondents: FR 

Y–14A/Q: 36; FR Y–14M: 34.25

Estimated average hours per response: 

FR Y–14A: 1,085 hours; FR Y–14Q: 

2,142 hours; FR Y–14M: 1,072 hours; FR 

Y–14 On-going Automation Revisions: 

480 hours; FR Y–14 Attestation Ongoing Attestation: 2,560 hours. 

Estimated annual burden hours: FR 

Y–14A: 39,060 hours; FR Y–14Q: 

308,448 hours; FR Y–14M: 437,376 

hours; FR Y–14 On-going Automation 

Revisions: 17,280 hours; FR Y–14 

Attestation On-going Attestation: 33,280 

hours. 

General description of report: This 

family of information collections is 

composed of the following three reports: 

The annual 26 FR Y–14A collects 

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.27

The quarterly FR Y–14Q collects 

granular data on various asset classes, 

including loans, securities, trading 

positions, and pre-provision net revenue 

for the reporting period. 

The monthly FR Y–14M is comprised 

of three retail portfolio- and loan-level 

schedules, and one detailed addressmatching schedule to supplement two 

of the portfolio and loan-level 

schedules. 

The data collected through the FR Y– 

14A/Q/M reports provide the Board 

with the information needed to help 

ensure that large firms have strong, 

firm-wide risk measurement and 

management processes supporting their 

internal assessments of capital adequacy 

and that their capital resources are 

sufficient given their business focus, 

activities, and resulting risk exposures. 

The reports are used to support the 

Board’s annual Comprehensive Capital 

Analysis and Review (CCAR) and DoddFrank Act Stress Test (DFAST) 

exercises, which complement other 

Board supervisory efforts aimed at 

enhancing the continued viability of 

large firms, including continuous 

monitoring of firms’ planning and 

management of liquidity and funding 

resources, as well as regular assessments 

of credit, market and operational risks, 

and associated risk management 

practices. Information gathered in this 

data collection is also used in the 

supervision and regulation of 

respondent financial institutions. 

Compliance with the information 

collection is mandatory. 

Legal authorization and 

confidentiality: The Board has the 

authority to require BHCs to file the FR 

Y–14 reports pursuant to section 5(c) of 

the BHC Act, 12 U.S.C. 1844(c), and 

pursuant to section 165(i) of the DoddFrank Act, 12 U.S.C. 5365(i). The Board 

has authority to require SLHCs to file 

the FR Y–14 reports pursuant to section 

10(b) of the Home Owners’ Loan Act (12 

U.S.C. 1467a(b)). Lastly, the Board has 

authority to require U.S. IHCs of FBOs 

to file the FR Y–14 reports pursuant to 

section 5 of the BHC Act, as well as 

pursuant to sections 102(a)(1) and 165 

of the Dodd-Frank Act, 12 U.S.C. 

5311(a)(1) and 5365. In addition, section 

401(g) of the Economic Growth, 

Regulatory Relief, and Consumer 

Protection Act (EGRRCPA), 12 U.S.C. 

5365 note, provides that the Board has 

the authority to establish enhanced 


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61586 Federal Register / Vol. 85, No. 190 / Wednesday, September 30, 2020 / Rules and Regulations 

28The Board’s Final Rule referenced in section 

401(g) of EGRRCPA specifically stated that the 

Board would require IHCs to file the FR Y–14 

reports. See 79 FR 17240, 17304 (Mar. 27, 2014). 

29 5 U.S.C. 601 et seq. 

30Under regulations issued by the Small Business 

Administration, a small entity includes a depository 

institution, bank holding company, or savings and 

loan holding company with total assets of $600 

million or less and trust companies with total assets 

of $41.5 million or less. See 13 CFR 121.201. 

31 12 U.S.C. 4802(a). 

32 12 U.S.C. 4802. 

33Public Law 106–102, section 722, 113 Stat. 

1338, 1471 (1999). 

prudential standards for foreign banking 

organizations with total consolidated 

assets of $100 billion or more, and 

clarifies that nothing in section 401 

‘‘shall be construed to affect the legal 

effect of the final rule of the Board. . . 

entitled ‘Enhanced Prudential Standard 

for [BHCs] and Foreign Banking 

Organizations’ (79 FR 17240 (March 27, 

2014)), as applied to foreign banking 

organizations with total consolidated 

assets equal to or greater than $100 

million.’’ 28 The FR Y–14 reports are 

mandatory. The information collected in 

the FR Y–14 reports is collected as part 

of the Board’s supervisory process, and 

therefore, such information is afforded 

confidential treatment pursuant to 

exemption 8 of the Freedom of 

Information Act (FOIA), 5 U.S.C. 

552(b)(8). In addition, confidential 

commercial or financial information, 

which a submitter actually and 

customarily treats as private, and which 

has been provided pursuant to an 

express assurance of confidentiality by 

the Board, is considered exempt from 

disclosure under exemption 4 of the 

FOIA, 5 U.S.C. 552(b)(4). 

D. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(RFA) 29 requires an agency to consider 

whether the rules it proposes will have 

a significant economic impact on a 

substantial number of small entities.30

The RFA applies only to rules for which 

an agency publishes a general notice of 

proposed rulemaking pursuant to 5 

U.S.C. 553(b). Since the agencies were 

not required to issue a general notice of 

proposed rulemaking associated with 

this final rule, no RFA is required. 

Accordingly, the agencies have 

concluded that the RFA’s requirements 

relating to initial and final regulatory 

flexibility analysis do not apply. 

E. Riegle Community Development and 

Regulatory Improvement Act of 1994 

Pursuant to section 302(a) of the 

Riegle Community Development and 

Regulatory Improvement Act 

(RCDRIA),31 in determining the effective 

date and administrative compliance 

requirements for new regulations that 

impose additional reporting, disclosure, 

or other requirements on insured 

depository institutions (IDIs), each 

Federal banking agency must consider, 

consistent with the principle of safety 

and soundness and the public interest, 

any administrative burdens that such 

regulations would place on depository 

institutions, including small depository 

institutions, and customers of 

depository institutions, as well as the 

benefits of such regulations. In addition, 

section 302(b) of RCDRIA requires new 

regulations and amendments to 

regulations that impose additional 

reporting, disclosures, or other new 

requirements on IDIs generally to take 

effect on the first day of a calendar 

quarter that begins on or after the date 

on which the regulations are published 

in final form, with certain exceptions, 

including for good cause.32 The 

agencies have determined that the final 

rule does not impose additional 

reporting, disclosure, or other 

requirements on IDIs; therefore, the 

requirements of the RCDRIA do not 

apply. 

F. Plain Language 

Section 722 of the Gramm-LeachBliley Act 33 requires the Federal 

banking agencies to use ‘‘plain 

language’’ in all proposed and final 

rules published after January 1, 2000. In 

light of this requirement, the agencies 

have sought to present the final rule in 

a simple and straightforward manner. 

G. Unfunded Mandates 

As a general matter, the Unfunded 

Mandates Act of 1995 (UMRA), 2 U.S.C. 

1531 et seq., requires the preparation of 

a budgetary impact statement before 

promulgating a rule that includes a 

Federal mandate that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

in any one year. However, the UMRA 

does not apply to final rules for which 

a general notice of proposed rulemaking 

was not published. See 2 U.S.C. 1532(a). 

Since there was no general notice of 

proposed rulemaking, the OCC has not 

prepared an economic analysis of the 

final rule under the UMRA. 

List of Subjects 

12 CFR Part 3 

Administrative practice and 

procedure, Capital, National banks, 

Risk. 

12 CFR Part 217 

Administrative practice and 

procedure, Banks, Banking, Capital, 

Federal Reserve System, Holding 

companies, Reporting and 

recordkeeping requirements, Risk, 

Securities. 

12 CFR Part 324 

Administrative practice and 

procedure, Banks, Banking, Reporting 

and recordkeeping requirements, 

Savings associations, State non-member 

banks. 

Office of the Comptroller of the 

Currency 

12 CFR Chapter I 

Authority and Issuance 

■ For the reasons set forth in the 

preamble, the interim final rule 

amending chapter I of title 12 of the 

Code of Federal Regulations, which was 

published at 85 FR 17723 on March 31, 

2020, and amended at 85 FR 29839 on 

May 19, 2020, is adopted as final with 

the following changes: 

PART 3—CAPITAL ADEQUACY 

STANDARDS 

■ 1. The authority citation for part 3 

continues to read as follows: 

Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 

1463, 1464, 1818, 1828(n), 1828 note, 1831n 

note, 1835, 3907, 3909, 5412(b)(2)(B), and 

Pub. L. 116–136, 134 Stat. 281. 

Subpart G—Transition Provisions 

■ 2. Revise § 3.301 to read as follows: 

§ 3.301 Current Expected Credit Losses 

(CECL) transition. 

(a) CECL transition provision. (1) 

Except as provided in paragraph (d) of 

this section, a national bank or Federal 

savings organization may elect to use a 

CECL transition provision pursuant to 

this section only if the national bank or 

Federal savings association records a 

reduction in retained earnings due to 

the adoption of CECL as of the 

beginning of the fiscal year in which the 

national bank or Federal savings 

association adopts CECL. 

(2) Except as provided in paragraph 

(d) of this section, a national bank or 

Federal savings association that elects to 

use the CECL transition provision must 

elect to use the CECL transition 

provision in the first Call Report that 

includes CECL filed by the national 

bank or Federal savings association after 

it adopts CECL. 

(3) A national bank or Federal savings 

association that does not elect to use the 

CECL transition provision as of the first 

Call Report that includes CECL filed as 

described in paragraph (a)(2) of this 

section may not elect to use the CECL 


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transition provision in subsequent 

reporting periods. 

(b) Definitions. For purposes of this 

section, the following definitions apply: 

(1) Transition period means the threeyear period beginning the first day of 

the fiscal year in which a national bank 

or Federal savings association adopts 

CECL and reflects CECL in its first Call 

Report filed after that date; or, for the 

2020 CECL transition provision under 

paragraph (d) of this section, the fiveyear period beginning on the earlier of 

the date a national bank or Federal 

savings association was required to 

adopt CECL for accounting purposes 

under GAAP (as in effect January 1, 

2020), or the first day of the fiscal year 

that begins during the 2020 calendar 

year in which the national bank or 

Federal savings association files 

regulatory reports that include CECL. 

(2) CECL transitional amount means 

the difference, net of any DTAs, in the 

amount of a national bank’s or Federal 

savings association’s retained earnings 

as of the beginning of the fiscal year in 

which the national bank or Federal 

savings association adopts CECL from 

the amount of the national bank’s or 

Federal savings association’s retained 

earnings as of the closing of the fiscal 

year-end immediately prior to the 

national bank’s or Federal savings 

association’s adoption of CECL. 

(3) DTA transitional amount means 

the difference in the amount of a 

national bank’s or Federal savings 

association’s DTAs arising from 

temporary differences as of the 

beginning of the fiscal year in which the 

national bank or Federal savings 

association adopts CECL from the 

amount of the national bank’s or Federal 

savings association’s DTAs arising from 

temporary differences as of the closing 

of the fiscal year-end immediately prior 

to the national bank’s or Federal savings 

association’s adoption of CECL. 

(4) AACL transitional amount means 

the difference in the amount of a 

national bank’s or Federal savings 

association’s AACL as of the beginning 

of the fiscal year in which the national 

bank or Federal savings association 

adopts CECL and the amount of the 

national bank’s or Federal savings 

association’s ALLL as of the closing of 

the fiscal year-end immediately prior to 

the national bank’s or Federal savings 

association’s adoption of CECL. 

(5) Eligible credit reserves transitional 

amount means the difference in the 

amount of a national bank’s or Federal 

savings association’s eligible credit 

reserves as of the beginning of the fiscal 

year in which the national bank or 

Federal savings association adopts CECL 

from the amount of the national bank’s 

or Federal savings association’s eligible 

credit reserves as of the closing of the 

fiscal year-end immediately prior to the 

national bank’s or Federal savings 

association’s adoption of CECL. 

(c) Calculation of the three-year CECL 

transition provision. (1) For purposes of 

the election described in paragraph 

(a)(1) of this section and except as 

provided in paragraph (d) of this 

section, a national bank or Federal 

savings association must make the 

following adjustments in its calculation 

of regulatory capital ratios: 

(i) Increase retained earnings by 

seventy-five percent of its CECL 

transitional amount during the first year 

of the transition period, increase 

retained earnings by fifty percent of its 

CECL transitional amount during the 

second year of the transition period, and 

increase retained earnings by twentyfive percent of its CECL transitional 

amount during the third year of the 

transition period; 

(ii) Decrease amounts of DTAs arising 

from temporary differences by seventyfive percent of its DTA transitional 

amount during the first year of the 

transition period, decrease amounts of 

DTAs arising from temporary 

differences by fifty percent of its DTA 

transitional amount during the second 

year of the transition period, and 

decrease amounts of DTAs arising from 

temporary differences by twenty-five 

percent of its DTA transitional amount 

during the third year of the transition 

period; 

(iii) Decrease amounts of AACL by 

seventy-five percent of its AACL 

transitional amount during the first year 

of the transition period, decrease 

amounts of AACL by fifty percent of its 

AACL transitional amount during the 

second year of the transition period, and 

decrease amounts of AACL by twentyfive percent of its AACL transitional 

amount during the third year of the 

transition period; and 

(iv) Increase average total 

consolidated assets as reported on the 

Call Report for purposes of the leverage 

ratio by seventy-five percent of its CECL 

transitional amount during the first year 

of the transition period, increase average 

total consolidated assets as reported on 

the Call Report for purposes of the 

leverage ratio by fifty percent of its 

CECL transitional amount during the 

second year of the transition period, and 

increase average total consolidated 

assets as reported on the Call Report for 

purposes of the leverage ratio by twentyfive percent of its CECL transitional 

amount during the third year of the 

transition period. 

(2) For purposes of the election 

described in paragraph (a)(1) of this 

section, an advanced approaches or 

Category III national bank or Federal 

savings association must make the 

following additional adjustments to its 

calculation of its applicable regulatory 

capital ratios: 

(i) Increase total leverage exposure for 

purposes of the supplementary leverage 

ratio by seventy-five percent of its CECL 

transitional amount during the first year 

of the transition period, increase total 

leverage exposure for purposes of the 

supplementary leverage ratio by fifty 

percent of its CECL transitional amount 

during the second year of the transition 

period, and increase total leverage 

exposure for purposes of the 

supplementary leverage ratio by twentyfive percent of its CECL transitional 

amount during the third year of the 

transition period; and 

(ii) An advanced approaches national 

bank or Federal savings association that 

has completed the parallel run process 

and that has received notification from 

the OCC pursuant to § 3.121(d) must 

decrease amounts of eligible credit 

reserves by seventy-five percent of its 

eligible credit reserves transitional 

amount during the first year of the 

transition period, decrease amounts of 

eligible credit reserves by fifty percent 

of its eligible credit reserves transitional 

amount during the second year of the 

transition provision, and decrease 

amounts of eligible credit reserves by 

twenty-five percent of its eligible credit 

reserves transitional amount during the 

third year of the transition period. 

(d) 2020 CECL transition provision. 

Notwithstanding paragraph (a) of this 

section, a national bank or Federal 

savings association that adopts CECL for 

accounting purposes under GAAP as of 

the first day of a fiscal year that begins 

during the 2020 calendar year may elect 

to use the transitional amounts and 

modified transitional amounts in 

paragraph (d)(1) of this section with the 

2020 CECL transition provision 

calculation in paragraph (d)(2) of this 

section to adjust its calculation of 

regulatory capital ratios during each 

quarter of the transition period in which 

a national bank or Federal savings 

association uses CECL for purposes of 

its Call Report. A national bank or 

Federal savings association may use the 

transition provision in this paragraph 

(d) if it has a positive modified CECL 

transitional amount during any quarter 

ending in 2020, and makes the election 

in the Call Report filed for the same 

quarter. A national bank or Federal 

savings association that does not 

calculate a positive modified CECL 

transitional amount in any quarter is not 

required to apply the adjustments in its 

calculation of regulatory capital ratios in 


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61588 Federal Register / Vol. 85, No. 190 / Wednesday, September 30, 2020 / Rules and Regulations 

paragraph (d)(2) of this section in that 

quarter. 

(1) Definitions. For purposes of the 

2020 CECL transition provision 

calculation in paragraph (d)(2) of this 

section, the following definitions apply: 

(i) Modified CECL transitional amount 

means: 

(A) During the first two years of the 

transition period, the difference 

between AACL as reported in the most 

recent Call Report and the AACL as of 

the beginning of the fiscal year in which 

the national bank or Federal savings 

association adopts CECL, multiplied by 

0.25, plus the CECL transitional amount; 

and 

(B) During the last three years of the 

transition period, the difference 

between AACL as reported in the Call 

Report at the end of the second year of 

the transition period and the AACL as 

of the beginning of the fiscal year in 

which the national bank or Federal 

savings association adopts CECL, 

multiplied by 0.25, plus the CECL 

transitional amount. 

(ii) Modified AACL transitional 

amount means: 

(A) During the first two years of the 

transition period, the difference 

between AACL as reported in the most 

recent Call Report and the AACL as of 

the beginning of the fiscal year in which 

the national bank or Federal savings 

association adopts CECL, multiplied by 

0.25, plus the AACL transitional 

amount; and 

(B) During the last three years of the 

transition period, the difference 

between AACL as reported in the Call 

Report at the end of the second year of 

the transition period and the AACL as 

of the beginning of the fiscal year in 

which the national bank or Federal 

savings association adopts CECL, 

multiplied by 0.25, plus the AACL 

transitional amount. 

(2) Calculation of 2020 CECL 

transition provision. (i) A national bank 

or Federal savings association that has 

elected the 2020 CECL transition 

provision described in this paragraph 

(d) may make the following adjustments 

in its calculation of regulatory capital 

ratios: 

(A) Increase retained earnings by onehundred percent of its modified CECL 

transitional amount during the first year 

of the transition period, increase 

retained earnings by one hundred 

percent of its modified CECL 

transitional amount during the second 

year of the transition period, increase 

retained earnings by seventy-five 

percent of its modified CECL 

transitional amount during the third 

year of the transition period, increase 

retained earnings by fifty percent of its 

modified CECL transitional amount 

during the fourth year of the transition 

period, and increase retained earnings 

by twenty-five percent of its modified 

CECL transitional amount during the 

fifth year of the transition period; 

(B) Decrease amounts of DTAs arising 

from temporary differences by onehundred percent of its DTA transitional 

amount during the first year of the 

transition period, decrease amounts of 

DTAs arising from temporary 

differences by one hundred percent of 

its DTA transitional amount during the 

second year of the transition period, 

decrease amounts of DTAs arising from 

temporary differences by seventy-five 

percent of its DTA transitional amount 

during the third year of the transition 

period, decrease amounts of DTAs 

arising from temporary differences by 

fifty percent of its DTA transitional 

amount during the fourth year of the 

transition period, and decrease amounts 

of DTAs arising from temporary 

differences by twenty-five percent of its 

DTA transitional amount during the 

fifth year of the transition period; 

(C) Decrease amounts of AACL by 

one-hundred percent of its modified 

AACL transitional amount during the 

first year of the transition period, 

decrease amounts of AACL by one 

hundred percent of its modified AACL 

transitional amount during the second 

year of the transition period, decrease 

amounts of AACL by seventy-five 

percent of its modified AACL 

transitional amount during the third 

year of the transition period, decrease 

amounts of AACL by fifty percent of its 

modified AACL transitional amount 

during the fourth year of the transition 

period, and decrease amounts of AACL 

by twenty-five percent of its modified 

AACL transitional amount during the 

fifth year of the transition period; and 

(D) Increase average total consolidated 

assets as reported on the Call Report for 

purposes of the leverage ratio by onehundred percent of its modified CECL 

transitional amount during the first year 

of the transition period, increase average 

total consolidated assets as reported on 

the Call Report for purposes of the 

leverage ratio by one hundred percent of 

its modified CECL transitional amount 

during the second year of the transition 

period, increase average total 

consolidated assets as reported on the 

Call Report for purposes of the leverage 

ratio by seventy-five percent of its 

modified CECL transitional amount 

during the third year of the transition 

period, increase average total 

consolidated assets as reported on the 

Call Report for purposes of the leverage 

ratio by fifty percent of its modified 

CECL transitional amount during the 

fourth year of the transition period, and 

increase average total consolidated 

assets as reported on the Call Report for 

purposes of the leverage ratio by twentyfive percent of its modified CECL 

transitional amount during the fifth year 

of the transition period. 

(ii) An advanced approaches or 

Category III national bank or Federal 

savings association that has elected the 

2020 CECL transition provision 

described in this paragraph (d) may 

make the following additional 

adjustments to its calculation of its 

applicable regulatory capital ratios: 

(A) Increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by one-hundred percent of 

its modified CECL transitional amount 

during the first year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by one hundred percent of 

its modified CECL transitional amount 

during the second year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by seventy-five percent of 

its modified CECL transitional amount 

during the third year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by fifty percent of its 

modified CECL transitional amount 

during the fourth year of the transition 

period, and increase total leverage 

exposure for purposes of the 

supplementary leverage ratio by twentyfive percent of its modified CECL 

transitional amount during the fifth year 

of the transition period; and 

(B) An advanced approaches national 

bank or Federal savings association that 

has completed the parallel run process 

and that has received notification from 

the OCC pursuant to § 3.121(d) must 

decrease amounts of eligible credit 

reserves by one-hundred percent of its 

eligible credit reserves transitional 

amount during the first year of the 

transition period, decrease amounts of 

eligible credit reserves by one hundred 

percent of its eligible credit reserves 

transitional amount during the second 

year of the transition period, decrease 

amounts of eligible credit reserves by 

seventy-five percent of its eligible credit 

reserves transitional amount during the 

third year of the transition period, 

decrease amounts of eligible credit 

reserves by fifty percent of its eligible 

credit reserves transitional amount 

during the fourth year of the transition 

period, and decrease amounts of eligible 

credit reserves by twenty-five percent of 

its eligible credit reserves transitional 

amount during the fifth year of the 

transition period. 


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(e) Eligible credit reserves shortfall. 

An advanced approaches national bank 

or Federal savings association that has 

completed the parallel run process and 

that has received notification from the 

OCC pursuant to § 3.121(d), and whose 

amount of expected credit loss exceeded 

its eligible credit reserves immediately 

prior to the adoption of CECL, and that 

has an increase in common equity tier 

1 capital as of the beginning of the fiscal 

year in which it adopts CECL after 

including the first year portion of the 

CECL transitional amount (or modified 

CECL transitional amount) must 

decrease its CECL transitional amount 

(or modified CECL transitional amount) 

used in paragraph (c) of this section by 

the full amount of its DTA transitional 

amount. 

(f) Business combinations. 

Notwithstanding any other requirement 

in this section, for purposes of this 

paragraph (f), in the event of a business 

combination involving a national bank 

or Federal savings association where 

one or both of the national banks or 

Federal savings associations have 

elected the treatment described in this 

section: 

(1) If the acquirer national bank or 

Federal savings association (as 

determined under GAAP) elected the 

treatment described in this section, the 

acquirer national bank or Federal 

savings association must continue to use 

the transitional amounts (unaffected by 

the business combination) that it 

calculated as of the date that it adopted 

CECL through the end of its transition 

period. 

(2) If the acquired insured depository 

institution (as determined under GAAP) 

elected the treatment described in this 

section, any transitional amount of the 

acquired insured depository institution 

does not transfer to the resulting 

national bank or Federal savings 

association. 

BOARD OF GOVERNORS OF THE 

FEDERAL RESERVE SYSTEM 

12 CFR Chapter II 

Authority and Issuance 

■ For the reasons set forth in the 

preamble, the interim final rule 

amending chapter II of title 12 of the 

Code of Federal Regulations, which was 

published at 85 FR 17723 on March 31, 

2020, and amended at 85 FR 29839 on 

May 19, 2020, is adopted as final with 

the following changes: 

PART 217—CAPITAL ADEQUACY OF 

BANK HOLDING COMPANIES, 

SAVINGS AND LOAN HOLDING 

COMPANIES, AND STATE MEMBER 

BANKS (REGULATION Q) 

■ 3. The authority citation for part 217 

continues to read as follows: 

Authority: 12 U.S.C. 248(a), 321–338a, 

481–486, 1462a, 1467a, 1818, 1828, 1831n, 

1831o, 1831p–1, 1831w, 1835, 1844(b), 1851, 

3904, 3906–3909, 4808, 5365, 5368, 5371, 

5371 note, and sec. 4012, Pub. L. 116–136, 

134 Stat. 281. 

Subpart G—Transition Provisions 

■ 4. Revise § 217.301 to read as follows: 

§ 217.301 Current expected credit losses 

(CECL) transition. 

(a) CECL transition provision. (1) 

Except as provided in paragraph (d) of 

this section, a Board-regulated 

institution may elect to use a CECL 

transition provision pursuant to this 

section only if the Board-regulated 

institution records a reduction in 

retained earnings due to the adoption of 

CECL as of the beginning of the fiscal 

year in which the Board-regulated 

institution adopts CECL. 

(2) Except as provided in paragraph 

(d) of this section, a Board-regulated 

institution that elects to use the CECL 

transition provision must elect to use 

the CECL transition provision in the 

first Call Report or FR Y–9C that 

includes CECL filed by the Boardregulated institution after it adopts 

CECL. 

(3) A Board-regulated institution that 

does not elect to use the CECL transition 

provision as of the first Call Report or 

FR Y–9C that includes CECL filed as 

described in paragraph (a)(2) of this 

section may not elect to use the CECL 

transition provision in subsequent 

reporting periods. 

(b) Definitions. For purposes of this 

section, the following definitions apply: 

(1) Transition period means the threeyear period beginning the first day of 

the fiscal year in which a Boardregulated institution adopts CECL and 

reflects CECL in its first Call Report or 

FR Y–9C filed after that date; or, for the 

2020 CECL transition provision under 

paragraph (d) of this section, the fiveyear period beginning on the earlier of 

the date a Board-regulated institution 

was required to adopt CECL for 

accounting purposes under GAAP (as in 

effect January 1, 2020), or the first day 

of the fiscal year that begins during the 

2020 calendar year in which the Boardregulated institution files regulatory 

reports that include CECL. 

(2) CECL transitional amount means 

the difference net of any DTAs, in the 

amount of a Board-regulated 

institution’s retained earnings as of the 

beginning of the fiscal year in which the 

Board-regulated institution adopts CECL 

from the amount of the Board-regulated 

institution’s retained earnings as of the 

closing of the fiscal year-end 

immediately prior to the Boardregulated institution’s adoption of 

CECL. 

(3) DTA transitional amount means 

the difference in the amount of a Boardregulated institution’s DTAs arising 

from temporary differences as of the 

beginning of the fiscal year in which the 

Board-regulated institution adopts CECL 

from the amount of the Board-regulated 

institution’s DTAs arising from 

temporary differences as of the closing 

of the fiscal year-end immediately prior 

to the Board-regulated institution’s 

adoption of CECL. 

(4) AACL transitional amount means 

the difference in the amount of a Boardregulated institution’s AACL as of the 

beginning of the fiscal year in which the 

Board-regulated institution adopts CECL 

and the amount of the Board-regulated 

institution’s ALLL as of the closing of 

the fiscal year-end immediately prior to 

the Board-regulated institution’s 

adoption of CECL. 

(5) Eligible credit reserves transitional 

amount means the difference in the 

amount of a Board-regulated 

institution’s eligible credit reserves as of 

the beginning of the fiscal year in which 

the Board-regulated institution adopts 

CECL from the amount of the Boardregulated institution’s eligible credit 

reserves as of the closing of the fiscal 

year-end immediately prior to the 

Board-regulated institution’s adoption 

of CECL. 

(c) Calculation of the three-year CECL 

transition provision. (1) For purposes of 

the election described in paragraph 

(a)(1) of this section and except as 

provided in paragraph (d) of this 

section, a Board-regulated institution 

must make the following adjustments in 

its calculation of regulatory capital 

ratios: 

(i) Increase retained earnings by 

seventy-five percent of its CECL 

transitional amount during the first year 

of the transition period, increase 

retained earnings by fifty percent of its 

CECL transitional amount during the 

second year of the transition period, and 

increase retained earnings by twentyfive percent of its CECL transitional 

amount during the third year of the 

transition period; 

(ii) Decrease amounts of DTAs arising 

from temporary differences by seventyfive percent of its DTA transitional 

amount during the first year of the 

transition period, decrease amounts of 


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DTAs arising from temporary 

differences by fifty percent of its DTA 

transitional amount during the second 

year of the transition period, and 

decrease amounts of DTAs arising from 

temporary differences by twenty-five 

percent of its DTA transitional amount 

during the third year of the transition 

period; 

(iii) Decrease amounts of AACL by 

seventy-five percent of its AACL 

transitional amount during the first year 

of the transition period, decrease 

amounts of AACL by fifty percent of its 

AACL transitional amount during the 

second year of the transition period, and 

decrease amounts of AACL by twentyfive percent of its AACL transitional 

amount during the third year of the 

transition period; and 

(iv) Increase average total 

consolidated assets as reported on the 

Call Report or FR Y–9C for purposes of 

the leverage ratio by seventy-five 

percent of its CECL transitional amount 

during the first year of the transition 

period, increase average total 

consolidated assets as reported on the 

Call Report or FR Y–9C for purposes of 

the leverage ratio by fifty percent of its 

CECL transitional amount during the 

second year of the transition period, and 

increase average total consolidated 

assets as reported on the Call Report or 

FR Y–9C for purposes of the leverage 

ratio by twenty-five percent of its CECL 

transitional amount during the third 

year of the transition period. 

(2) For purposes of the election 

described in paragraph (a)(1) of this 

section, an advanced approaches or 

Category III Board-regulated institution 

must make the following additional 

adjustments to its calculation of its 

applicable regulatory capital ratios: 

(i) Increase total leverage exposure for 

purposes of the supplementary leverage 

ratio by seventy-five percent of its CECL 

transitional amount during the first year 

of the transition period, increase total 

leverage exposure for purposes of the 

supplementary leverage ratio by fifty 

percent of its CECL transitional amount 

during the second year of the transition 

period, and increase total leverage 

exposure for purposes of the 

supplementary leverage ratio by twentyfive percent of its CECL transitional 

amount during the third year of the 

transition period; and 

(ii) An advanced approaches Boardregulated institution that has completed 

the parallel run process and that has 

received notification from the Board 

pursuant to § 217.121(d) must decrease 

amounts of eligible credit reserves by 

seventy-five percent of its eligible credit 

reserves transitional amount during the 

first year of the transition period, 

decrease amounts of eligible credit 

reserves by fifty percent of its eligible 

credit reserves transitional amount 

during the second year of the transition 

provision, and decrease amounts of 

eligible credit reserves by twenty-five 

percent of its eligible credit reserves 

transitional amount during the third 

year of the transition period. 

(d) 2020 CECL transition provision. 

Notwithstanding paragraph (a) of this 

section, a Board-regulated institution 

that adopts CECL for accounting 

purposes under GAAP as of the first day 

of a fiscal year that begins during the 

2020 calendar year may elect to use the 

transitional amounts and modified 

transitional amounts in paragraph (d)(1) 

of this section with the 2020 CECL 

transition provision calculation in 

paragraph (d)(2) of this section to adjust 

its calculation of regulatory capital 

ratios during each quarter of the 

transition period in which a Boardregulated institution uses CECL for 

purposes of its Call Report or FR Y–9C. 

A Board-regulated institution may use 

the transition provision in this 

paragraph (d) if it has a positive 

modified CECL transitional amount 

during any quarter ending in 2020, and 

makes the election in the Call Report or 

FR Y–9C filed for the same quarter. A 

Board-regulated institution that does not 

calculate a positive modified CECL 

transitional amount in any quarter is not 

required to apply the adjustments in its 

calculation of regulatory capital ratios in 

paragraph (d)(2) of this section in that 

quarter. 

(1) Definitions. For purposes of the 

2020 CECL transition provision 

calculation in paragraph (d)(2) of this 

section, the following definitions apply: 

(i) Modified CECL transitional amount 

means: 

(A) During the first two years of the 

transition period, the difference 

between AACL as reported in the most 

recent Call Report or FR Y–9C, and the 

AACL as of the beginning of the fiscal 

year in which the Board-regulated 

institution adopts CECL, multiplied by 

0.25, plus the CECL transitional amount; 

and 

(B) During the last three years of the 

transition period, the difference 

between AACL as reported in the Call 

Report or Y–9C at the end of the second 

year of the transition period and the 

AACL as of the beginning of the fiscal 

year in which the Board-regulated 

institution adopts CECL, multiplied by 

0.25, plus the CECL transitional amount. 

(ii) Modified AACL transitional 

amount means: 

(A) During the first two years of the 

transition period, the difference 

between AACL as reported in the most 

recent Call Report or FR Y–9C, and the 

AACL as of the beginning of the fiscal 

year in which the Board-regulated 

institution adopts CECL, multiplied by 

0.25, plus the AACL transitional 

amount; and 

(B) During the last three years of the 

transition period, the difference 

between AACL as reported in the Call 

Report or FR Y–9C at the end of the 

second year of the transition period and 

the AACL as of the beginning of the 

fiscal year in which the Board-regulated 

institution adopts CECL, multiplied by 

0.25, plus the AACL transitional 

amount. 

(2) Calculation of 2020 CECL 

transition provision. (i) A Boardregulated institution that has elected the 

2020 CECL transition provision 

described in this paragraph (d) may 

make the following adjustments in its 

calculation of regulatory capital ratios: 

(A) Increase retained earnings by onehundred percent of its modified CECL 

transitional amount during the first year 

of the transition period, increase 

retained earnings by one hundred 

percent of its modified CECL 

transitional amount during the second 

year of the transition period, increase 

retained earnings by seventy-five 

percent of its modified CECL 

transitional amount during the third 

year of the transition period, increase 

retained earnings by fifty percent of its 

modified CECL transitional amount 

during the fourth year of the transition 

period, and increase retained earnings 

by twenty-five percent of its modified 

CECL transitional amount during the 

fifth year of the transition period; 

(B) Decrease amounts of DTAs arising 

from temporary differences by onehundred percent of its DTA transitional 

amount during the first year of the 

transition period, decrease amounts of 

DTAs arising from temporary 

differences by one hundred percent of 

its DTA transitional amount during the 

second year of the transition period, 

decrease amounts of DTAs arising from 

temporary differences by seventy-five 

percent of its DTA transitional amount 

during the third year of the transition 

period, decrease amounts of DTAs 

arising from temporary differences by 

fifty percent of its DTA transitional 

amount during the fourth year of the 

transition period, and decrease amounts 

of DTAs arising from temporary 

differences by twenty-five percent of its 

DTA transitional amount during the 

fifth year of the transition period; 

(C) Decrease amounts of AACL by 

one-hundred percent of its modified 

AACL transitional amount during the 

first year of the transition period, 

decrease amounts of AACL by one 


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hundred percent of its modified AACL 

transitional amount during the second 

year of the transition period, decrease 

amounts of AACL by seventy-five 

percent of its modified AACL 

transitional amount during the third 

year of the transition period, decrease 

amounts of AACL by fifty percent of its 

AACL transitional amount during the 

fourth year of the transition period, and 

decrease amounts of AACL by twentyfive percent of its AACL transitional 

amount during the fifth year of the 

transition period; and 

(D) Increase average total consolidated 

assets as reported on the Call Report or 

FR Y–9C for purposes of the leverage 

ratio by one-hundred percent of its 

modified CECL transitional amount 

during the first year of the transition 

period, increase average total 

consolidated assets as reported on the 

Call Report or FR Y–9C for purposes of 

the leverage ratio by one hundred 

percent of its modified CECL 

transitional amount during the second 

year of the transition period, increase 

average total consolidated assets as 

reported on the Call Report or FR Y–9C 

for purposes of the leverage ratio by 

seventy-five percent of its modified 

CECL transitional amount during the 

third year of the transition period, 

increase average total consolidated 

assets as reported on the Call Report or 

FR Y–9C for purposes of the leverage 

ratio by fifty percent of its modified 

CECL transitional amount during the 

fourth year of the transition period, and 

increase average total consolidated 

assets as reported on the Call Report or 

FR Y–9C for purposes of the leverage 

ratio by twenty-five percent of its 

modified CECL transitional amount 

during the fifth year of the transition 

period. 

(ii) An advanced approaches or 

Category III Board-regulated institution 

that has elected the 2020 CECL 

transition provision described in this 

paragraph (d) may make the following 

additional adjustments to its calculation 

of its applicable regulatory capital 

ratios: 

(A) Increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by one-hundred percent of 

its modified CECL transitional amount 

during the first year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by one hundred percent of 

its modified CECL transitional amount 

during the second year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by seventy-five percent of 

its modified CECL transitional amount 

during the third year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by fifty percent of its 

modified CECL transitional amount 

during the fourth year of the transition 

period, and increase total leverage 

exposure for purposes of the 

supplementary leverage ratio by twentyfive percent of its modified CECL 

transitional amount during the fifth year 

of the transition period; and 

(B) An advanced approaches Boardregulated institution that has completed 

the parallel run process and that has 

received notification from the Board 

pursuant to § 217.121(d) must decrease 

amounts of eligible credit reserves by 

one-hundred percent of its eligible 

credit reserves transitional amount 

during the first year of the transition 

period, decrease amounts of eligible 

credit reserves by one hundred percent 

of its eligible credit reserves transitional 

amount during the second year of the 

transition period, decrease amounts of 

eligible credit reserves by seventy-five 

percent of its eligible credit reserves 

transitional amount during the third 

year of the transition period, decrease 

amounts of eligible credit reserves by 

fifty percent of its eligible credit 

reserves transitional amount during the 

fourth year of the transition period, and 

decrease amounts of eligible credit 

reserves by twenty-five percent of its 

eligible credit reserves transitional 

amount during the fifth year of the 

transition period. 

(e) Eligible credit reserves shortfall. 

An advanced approaches Boardregulated institution that has completed 

the parallel run process and that has 

received notification from the Board 

pursuant to § 217.121(d), whose amount 

of expected credit loss exceeded its 

eligible credit reserves immediately 

prior to the adoption of CECL, and that 

has an increase in common equity tier 

1 capital as of the beginning of the fiscal 

year in which it adopts CECL after 

including the first year portion of the 

CECL transitional amount (or modified 

CECL transitional amount) must 

decrease its CECL transitional amount 

used in paragraph (c) of this section (or 

modified CECL transitional amount 

used in paragraph (d) of this section) by 

the full amount of its DTA transitional 

amount. 

(f) Business combinations. 

Notwithstanding any other requirement 

in this section, for purposes of this 

paragraph (f), in the event of a business 

combination involving a Boardregulated institution where one or both 

Board-regulated institutions have 

elected the treatment described in this 

section: 

(1) If the acquirer Board-regulated 

institution (as determined under GAAP) 

elected the treatment described in this 

section, the acquirer Board-regulated 

institution must continue to use the 

transitional amounts (unaffected by the 

business combination) that it calculated 

as of the date that it adopted CECL 

through the end of its transition period. 

(2) If the acquired company (as 

determined under GAAP) elected the 

treatment described in this section, any 

transitional amount of the acquired 

company does not transfer to the 

resulting Board-regulated institution. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Chapter III 

Authority and Issuance 

■ For the reasons set forth in the 

preamble, the interim final rule 

amending chapter III of title 12 of the 

Code of Federal Regulations, which was 

published at 85 FR 17723 on March 31, 

2020, and amended at 85 FR 29839 on 

May 19, 2020, is adopted as final with 

the following changes: 

PART 324—CAPITAL ADEQUACY OF 

FDIC-SUPERVISED INSTITUTIONS 

■ 5. The authority citation for part 324 

is revised to read as follows: 

Authority: 12 U.S.C. 1815(a), 1815(b), 

1816, 1818(a), 1818(b), 1818(c), 1818(t), 

1819(Tenth), 1828(c), 1828(d), 1828(i), 

1828(n), 1828(o), 1831o, 1835, 3907, 3909, 

4808; 5371; 5412; Pub. L. 102–233, 105 Stat. 

1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. 

L. 102–242, 105 Stat. 2236, 2355, as amended 

by Pub. L. 103–325, 108 Stat. 2160, 2233 (12 

U.S.C. 1828 note); Pub. L. 102–242, 105 Stat. 

2236, 2386, as amended by Pub. L. 102–550, 

106 Stat. 3672, 4089 (12 U.S.C. 1828 note); 

Pub. L. 111–203, 124 Stat. 1376, 1887 (15 

U.S.C. 78o–7 note), Pub. L. 115–174; section 

4014, Pub. L. 116–136, 134 Stat. 281 (15 

U.S.C. 9052). 

■ 6. Revise § 324.301 to read as follows: 

§ 324.301 Current expected credit losses 

(CECL) transition. 

(a) CECL transition provision. (1) 

Except as provided in paragraph (d) of 

this section, an FDIC-supervised 

institution may elect to use a CECL 

transition provision pursuant to this 

section only if the FDIC-supervised 

institution records a reduction in 

retained earnings due to the adoption of 

CECL as of the beginning of the fiscal 

year in which the FDIC-supervised 

institution adopts CECL. 

(2) Except as provided in paragraph 

(d) of this section, an FDIC-supervised 

institution that elects to use the CECL 

transition provision must elect to use 

the CECL transition provision in the 


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first Call Report that includes CECL 

filed by the FDIC-supervised institution 

after it adopts CECL. 

(3) An FDIC-supervised institution 

that does not elect to use the CECL 

transition provision as of the first Call 

Report that includes CECL filed as 

described in paragraph (a)(2) of this 

section may not elect to use the CECL 

transition provision in subsequent 

reporting periods. 

(b) Definitions. For purposes of this 

section, the following definitions apply: 

(1) Transition period means the threeyear period, beginning the first day of 

the fiscal year in which an FDICsupervised institution adopts CECL and 

reflects CECL in its first Call Report 

filed after that date; or, for the 2020 

CECL transition provision under 

paragraph (d) of this section, the fiveyear period beginning on the earlier of 

the date an FDIC-supervised institution 

was required to adopt CECL for 

accounting purposes under GAAP (as in 

effect January 1, 2020), or the first day 

of the fiscal year that begins during the 

2020 calendar year in which the FDICsupervised institution files regulatory 

reports that include CECL. 

(2) CECL transitional amount means 

the difference, net of any DTAs, in the 

amount of an FDIC-supervised 

institution’s retained earnings as of the 

beginning of the fiscal year in which the 

FDIC-supervised institution adopts 

CECL from the amount of the FDICsupervised institution’s retained 

earnings as of the closing of the fiscal 

year-end immediately prior to the FDICsupervised institution’s adoption of 

CECL. 

(3) DTA transitional amount means 

the difference in the amount of an FDICsupervised institution’s DTAs arising 

from temporary differences as of the 

beginning of the fiscal year in which the 

FDIC-supervised institution adopts 

CECL from the amount of the FDICsupervised institution’s DTAs arising 

from temporary differences as of the 

closing of the fiscal year-end 

immediately prior to the FDICsupervised institution’s adoption of 

CECL. 

(4) AACL transitional amount means 

the difference in the amount of an FDICsupervised institution’s AACL as of the 

beginning of the fiscal year in which the 

FDIC-supervised institution adopts 

CECL and the amount of the FDICsupervised institution’s ALLL as of the 

closing of the fiscal year-end 

immediately prior to the FDICsupervised institution’s adoption of 

CECL. 

(5) Eligible credit reserves transitional 

amount means the difference in the 

amount of an FDIC-supervised 

institution’s eligible credit reserves as of 

the beginning of the fiscal year in which 

the FDIC-supervised institution adopts 

CECL from the amount of the FDICsupervised institution’s eligible credit 

reserves as of the closing of the fiscal 

year-end immediately prior to the FDICsupervised institution’s adoption of 

CECL. 

(c) Calculation of the three-year CECL 

transition provision. (1) For purposes of 

the election described in paragraph 

(a)(1) of this section and except as 

provided in paragraph (d) of this 

section, an FDIC-supervised institution 

must make the following adjustments in 

its calculation of regulatory capital 

ratios: 

(i) Increase retained earnings by 

seventy-five percent of its CECL 

transitional amount during the first year 

of the transition period, increase 

retained earnings by fifty percent of its 

CECL transitional amount during the 

second year of the transition period, and 

increase retained earnings by twentyfive percent of its CECL transitional 

amount during the third year of the 

transition period; 

(ii) Decrease amounts of DTAs arising 

from temporary differences by seventyfive percent of its DTA transitional 

amount during the first year of the 

transition period, decrease amounts of 

DTAs arising from temporary 

differences by fifty percent of its DTA 

transitional amount during the second 

year of the transition period, and 

decrease amounts of DTAs arising from 

temporary differences by twenty-five 

percent of its DTA transitional amount 

during the third year of the transition 

period; 

(iii) Decrease amounts of AACL by 

seventy-five percent of its AACL 

transitional amount during the first year 

of the transition period, decrease 

amounts of AACL by fifty percent of its 

AACL transitional amount during the 

second year of the transition period, and 

decrease amounts of AACL by twentyfive percent of its AACL transitional 

amount during the third year of the 

transition period; and 

(iv) Increase average total 

consolidated assets as reported on the 

Call Report for purposes of the leverage 

ratio by seventy-five percent of its CECL 

transitional amount during the first year 

of the transition period, increase average 

total consolidated assets as reported on 

the Call Report for purposes of the 

leverage ratio by fifty percent of its 

CECL transitional amount during the 

second year of the transition period, and 

increase average total consolidated 

assets as reported on the Call Report for 

purposes of the leverage ratio by twentyfive percent of its CECL transitional 

amount during the third year of the 

transition period. 

(2) For purposes of the election 

described in paragraph (a)(1) of this 

section, an advanced approaches or 

Category III FDIC-supervised institution 

must make the following additional 

adjustments to its calculation of its 

applicable regulatory capital ratios: 

(i) Increase total leverage exposure for 

purposes of the supplementary leverage 

ratio by seventy-five percent of its CECL 

transitional amount during the first year 

of the transition period, increase total 

leverage exposure for purposes of the 

supplementary leverage ratio by fifty 

percent of its CECL transitional amount 

during the second year of the transition 

period, and increase total leverage 

exposure for purposes of the 

supplementary leverage ratio by twentyfive percent of its CECL transitional 

amount during the third year of the 

transition period; and 

(ii) An advanced approaches FDICsupervised institution that has 

completed the parallel run process and 

that has received notification from the 

FDIC pursuant to § 324.121(d) must 

decrease amounts of eligible credit 

reserves by seventy-five percent of its 

eligible credit reserves transitional 

amount during the first year of the 

transition period, decrease amounts of 

eligible credit reserves by fifty percent 

of its eligible credit reserves transitional 

amount during the second year of the 

transition provision, and decrease 

amounts of eligible credit reserves by 

twenty-five percent of its eligible credit 

reserves transitional amount during the 

third year of the transition period. 

(d) 2020 CECL transition provision. 

Notwithstanding paragraph (a) of this 

section, an FDIC-supervised institution 

that adopts CECL for accounting 

purposes under GAAP as of the first day 

of a fiscal year that begins during the 

2020 calendar year may elect to use the 

transitional amounts and modified 

transitional amounts in paragraph (d)(1) 

of this section with the 2020 CECL 

transition provision calculation in 

paragraph (d)(2) of this section to adjust 

its calculation of regulatory capital 

ratios during each quarter of the 

transition period in which an FDICsupervised institution uses CECL for 

purposes of its Call Report. An FDIC 

supervised-institution may use the 

transition provision in this paragraph 

(d) if it has a positive modified CECL 

transitional amount during any quarter 

ending in 2020 and makes the election 

in the Call Report filed for the same 

quarter. An FDIC-supervised institution 

that does not calculate a positive 

modified CECL transitional amount in 

any quarter is not required to apply the 


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adjustments in its calculation of 

regulatory capital ratios in paragraph 

(d)(2) of this section in that quarter. 

(1) Definitions. For purposes of the 

2020 CECL transition provision 

calculation in paragraph (d)(2) of this 

section, the following definitions apply: 

(i) Modified CECL transitional amount 

means: 

(A) During the first two years of the 

transition period, the difference 

between AACL as reported in the most 

recent Call Report and the AACL as of 

the beginning of the fiscal year in which 

the FDIC-supervised institution adopts 

CECL, multiplied by 0.25, plus the 

CECL transitional amount; and 

(B) During the last three years of the 

transition period, the difference 

between AACL as reported in the Call 

Report at the end of the second year of 

the transition period and the AACL as 

of the beginning of the fiscal year in 

which the FDIC-supervised institution 

adopts CECL, multiplied by 0.25, plus 

the CECL transitional amount. 

(ii) Modified AACL transitional 

amount means: 

(A) During the first two years of the 

transition period, the difference 

between AACL as reported in the most 

recent Call Report, and the AACL as of 

the beginning of the fiscal year in which 

the FDIC-supervised institution adopts 

CECL, multiplied by 0.25, plus the 

AACL transitional amount; and 

(B) During the last three years of the 

transition period, the difference 

between AACL as reported in the Call 

Report at the end of the second year of 

the transition period and the AACL as 

of the beginning of the fiscal year in 

which the FDIC-supervised institution 

adopts CECL, multiplied by 0.25, plus 

the AACL transitional amount. 

(2) Calculation of 2020 CECL 

transition provision. (i) An FDICsupervised institution that has elected 

the 2020 CECL transition provision 

described in this paragraph (d) may 

make the following adjustments in its 

calculation of regulatory capital ratios: 

(A) Increase retained earnings by onehundred percent of its modified CECL 

transitional amount during the first year 

of the transition period, increase 

retained earnings by one hundred 

percent of its modified CECL 

transitional amount during the second 

year of the transition period, increase 

retained earnings by seventy-five 

percent of its modified CECL 

transitional amount during the third 

year of the transition period, increase 

retained earnings by fifty percent of its 

modified CECL transitional amount 

during the fourth year of the transition 

period, and increase retained earnings 

by twenty-five percent of its modified 

CECL transitional amount during the 

fifth year of the transition period; 

(B) Decrease amounts of DTAs arising 

from temporary differences by onehundred percent of its DTA transitional 

amount during the first year of the 

transition period, decrease amounts of 

DTAs arising from temporary 

differences by one hundred percent of 

its DTA transitional amount during the 

second year of the transition period, 

decrease amounts of DTAs arising from 

temporary differences by seventy-five 

percent of its DTA transitional amount 

during the third year of the transition 

period, decrease amounts of DTAs 

arising from temporary differences by 

fifty percent of its DTA transitional 

amount during the fourth year of the 

transition period, and decrease amounts 

of DTAs arising from temporary 

differences by twenty-five percent of its 

DTA transitional amount during the 

fifth year of the transition period; 

(C) Decrease amounts of AACL by 

one-hundred percent of its modified 

AACL transitional amount during the 

first year of the transition period, 

decrease amounts of AACL by one 

hundred percent of its modified AACL 

transitional amount during the second 

year of the transition period, decrease 

amounts of AACL by seventy-five 

percent of its modified AACL 

transitional amount during the third 

year of the transition period, decrease 

amounts of AACL by fifty percent of its 

modified AACL transitional amount 

during the fourth year of the transition 

period, and decrease amounts of AACL 

by twenty-five percent of its modified 

AACL transitional amount during the 

fifth year of the transition period; and 

(D) Increase average total consolidated 

assets as reported on the Call Report for 

purposes of the leverage ratio by onehundred percent of its modified CECL 

transitional amount during the first year 

of the transition period, increase average 

total consolidated assets as reported on 

the Call Report for purposes of the 

leverage ratio by one hundred percent of 

its modified CECL transitional amount 

during the second year of the transition 

period, increase average total 

consolidated assets as reported on the 

Call Report for purposes of the leverage 

ratio by seventy-five percent of its 

modified CECL transitional amount 

during the third year of the transition 

period, increase average total 

consolidated assets as reported on the 

Call Report for purposes of the leverage 

ratio by fifty percent of its modified 

CECL transitional amount during the 

fourth year of the transition period, and 

increase average total consolidated 

assets as reported on the Call Report for 

purposes of the leverage ratio by twentyfive percent of its modified CECL 

transitional amount during the fifth year 

of the transition period. 

(ii) An advanced approaches or 

Category III FDIC-supervised institution 

that has elected the 2020 CECL 

transition provision described in this 

paragraph (d) may make the following 

additional adjustments to its calculation 

of its applicable regulatory capital 

ratios: 

(A) Increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by one-hundred percent of 

its modified CECL transitional amount 

during the first year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by one hundred percent of 

its modified CECL transitional amount 

during the second year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by seventy-five percent of 

its modified CECL transitional amount 

during the third year of the transition 

period, increase total leverage exposure 

for purposes of the supplementary 

leverage ratio by fifty percent of its 

modified CECL transitional amount 

during the fourth year of the transition 

period, and increase total leverage 

exposure for purposes of the 

supplementary leverage ratio by twentyfive percent of its modified CECL 

transitional amount during the fifth year 

of the transition period; and 

(B) An advanced approaches FDICsupervised institution that has 

completed the parallel run process and 

that has received notification from the 

FDIC pursuant to § 324.121(d) must 

decrease amounts of eligible credit 

reserves by one-hundred percent of its 

eligible credit reserves transitional 

amount during the first year of the 

transition period, decrease amounts of 

eligible credit reserves by one hundred 

percent of its eligible credit reserves 

transitional amount during the second 

year of the transition period, decrease 

amounts of eligible credit reserves by 

seventy-five percent of its eligible credit 

reserves transitional amount during the 

third year of the transition period, 

decrease amounts of eligible credit 

reserves by fifty percent of its eligible 

credit reserves transitional amount 

during the fourth year of the transition 

period, and decrease amounts of eligible 

credit reserves by twenty-five percent of 

its eligible credit reserves transitional 

amount during the fifth year of the 

transition period. 

(e) Eligible credit reserves shortfall. 

An advanced approaches FDICsupervised institution that has 

completed the parallel run process and 

that has received notification from the 


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61594 Federal Register / Vol. 85, No. 190 / Wednesday, September 30, 2020 / Rules and Regulations 

1S. Rep. No. 110–521, at 1 (2008). 

FDIC pursuant to § 324.121(d), whose 

amount of expected credit loss exceeded 

its eligible credit reserves immediately 

prior to the adoption of CECL, and that 

has an increase in common equity tier 

1 capital as of the beginning of the fiscal 

year in which it adopts CECL after 

including the first year portion of the 

CECL transitional amount (or modified 

CECL transitional amount) must 

decrease its CECL transitional amount 

used in paragraph (c) of this section (or 

modified CECL transitional amount 

used in paragraph (d) of this section) by 

the full amount of its DTA transitional 

amount. 

(f) Business combinations. 

Notwithstanding any other requirement 

in this section, for purposes of this 

paragraph (f), in the event of a business 

combination involving an FDICsupervised institution where one or 

both FDIC-supervised institutions have 

elected the treatment described in this 

section: 

(1) If the acquirer FDIC-supervised 

institution (as determined under GAAP) 

elected the treatment described in this 

section, the acquirer FDIC-supervised 

institution must continue to use the 

transitional amounts (unaffected by the 

business combination) that it calculated 

as of the date that it adopted CECL 

through the end of its transition period. 

(2) If the acquired insured depository 

institution (as determined under GAAP) 

elected the treatment described in this 

section, any transitional amount of the 

acquired insured depository institution 

does not transfer to the resulting FDICsupervised institution. 

Brian P. Brooks, 

Acting Comptroller of the Currency. 

By order of the Board of Governors of the 

Federal Reserve System. 

Ann E. Misback, 

Secretary of the Board. 

Federal Deposit Insurance Corporation. 

By order of the Board of Directors. 

Dated at Washington, DC, on or about 

August 21, 2020. 

James P. Sheesley, 

Acting Assistant Executive Secretary. 

[FR Doc. 2020–19782 Filed 9–29–20; 8:45 am] 

BILLING CODE 4810–33–P 6210–01–P 6714–01–P 

DEPARTMENT OF JUSTICE 

Drug Enforcement Administration 

21 CFR Parts 1300, 1301, 1304, and 

1306 

[Docket No. DEA–322] 

RIN 1117–AB20 

Implementation of the Ryan Haight 

Online Pharmacy Consumer Protection 

Act of 2008 

AGENCY: Drug Enforcement 

Administration, Department of Justice. 

ACTION: Final rule. 

SUMMARY: On April 6, 2009, the Drug 

Enforcement Administration published 

the interim final rule titled 

‘‘Implementation of the Ryan Haight 

Online Pharmacy Consumer Protection 

Act of 2008,’’ which amended DEA’s 

regulations by adding several new 

provisions to prevent the illegal 

distribution and dispensing of 

controlled substances by means of the 

internet. This action adopts the interim 

final rule as a final rule without change, 

apart from a minor technical 

amendment and certain changes to DEA 

regulations already made by intervening 

rules. This action also reinstates 

amendments that were inadvertently 

removed by the Controlled Substances 

and List I Chemical Registration and 

Reregistration Fees final rule published 

on March 15, 2012. 

DATES: This final rule is effective 

October 30, 2020. 

FOR FURTHER INFORMATION CONTACT: 

Scott A. Brinks, Diversion Control 

Division, Drug Enforcement 

Administration; Mailing Address: 8701 

Morrissette Drive, Springfield, VA 

22152; Telephone: (571) 362–3261. 

SUPPLEMENTARY INFORMATION: 

Outline 

I. Purpose of Regulatory Action 

II. Summary of Key Provisions of the Ryan 

Haight Act 

A. In-Person Medical Evaluation 

B. Requirement of Modified Registration 

C. Criminal Offenses 

III. The Interim Final Rule and Subsequent 

Changes to DEA Regulations 

IV. Discussion of Comments 

A. Distributors’ Responsibilities 

B. Pharmacies’ Responsibilities 

C. Exceptions to the Definition of ‘‘Online 

Pharmacy’’ 

D. Access to Medication 

E. Verification of Registration 

V. Section-by-Section Summary of the Final 

Rule 

VI. Regulatory Analyses 

I. Purpose of Regulatory Action 

The Ryan Haight Online Pharmacy 

Consumer Protection Act of 2008 (Pub. 

L. 110–425) (hereafter, the ‘‘Ryan Haight 

Act’’ or the ‘‘Act’’) was enacted on 

October 15, 2008. The Act amended the 

Controlled Substances Act (CSA) by 

adding various provisions to prevent the 

illegal distribution and dispensing of 

controlled substances by means of the 

internet. The Ryan Haight Act makes it 

illegal under Federal law to ‘‘deliver, 

distribute, or dispense a controlled 

substance by means of the internet, 

except as authorized by [the CSA]’’ or to 

aid or abet such activity. 21 U.S.C. 

841(h)(1). 

On April 6, 2009, the Drug 

Enforcement Administration (DEA) 

published an interim final rule that 

served (1) to explain the Ryan Haight 

Act, (2) to announce amendments to 

DEA regulations that implemented the 

Act, and (3) to request comments on 

these amendments to the regulations. 

See 74 FR 15596. 

Through this final rule, DEA is 

responding to the comments it received 

on the April 6, 2009, interim final rule 

and adopting the interim final rule as 

final without change (aside from a 

minor technical amendment and certain 

minor changes, discussed below, that 

were already made by intervening 

rules). 

II. Summary of Some of the Key 

Provisions of the Ryan Haight Act 

Congress passed the Ryan Haight Act 

because of ‘‘the increasing use of 

prescription controlled substances by 

adolescents and others for non-medical 

purposes, which [had] been exacerbated 

by drug trafficking on the internet.’’ 1

Recognizing that rogue websites fueled 

the abuse of prescription controlled 

substances and thereby increased the 

number of resulting overdoses and other 

harmful consequences, Congress passed 

the Ryan Haight Act to prevent the 

internet from being exploited to 

facilitate such unlawful drug activity. 

Consistent with the CSA, the Ryan 

Haight Act set out numerous regulatory 

requirements and other substantive 

provisions. These provisions and other 

aspects of the Act are explained in 

detail in the interim final rule. See 74 

FR 15597–15610. For this final rule, a 

summary of three key provisions of the 

Act will suffice: The in-person medical 

evaluation requirement for prescribing 

practitioners, the modified registration 

requirement for online pharmacies, and 

the criminal offenses the Act added to 

the CSA. 


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