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Proposed Agency Information Collection Activities; Comment Request

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Information about this document as published in the Federal Register.

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Board of Governors of the Federal Reserve System.


On June 15, 1984, the Office of Management and Budget (OMB) delegated to the Board of Governors of the Federal Reserve System (Board) its approval authority under the Paperwork Reduction Act (PRA), to approve of and assign OMB control numbers to collection of information requests and requirements conducted or sponsored by the Board. Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information. Copies of the PRA Submission, supporting statements and approved collection of information instruments are placed into OMB's public docket files. The Federal Reserve may not conduct or sponsor, and the respondent is not required to respond to, an information collection that has been extended, revised, or implemented on or after October 1, 1995, unless it displays a currently valid OMB control number.


Comments must be submitted on or before July 27, 2015.


You may submit comments, identified by FR 4199, by any of the following methods:

All public comments are available from the Board's Web site at​apps/​foia/​proposedregs.aspx as submitted, unless modified for technical reasons. Accordingly, your comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper form in Room 3515, 1801 K Street (between 18th and 19th Streets NW.) Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on weekdays.

Additionally, commenters may send a copy of their comments to the OMB Desk Officer—Shagufta Ahmed—Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235 725 17th Street NW., Washington, DC 20503 or by fax to (202) 395-6974.

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A copy of the PRA OMB submission, including the proposed reporting form and instructions, supporting statement, and other documentation will be placed into OMB's public docket files, once approved. These documents will also be made available on the Federal Reserve Board's public Web site at:​apps/​reportforms/​review.aspx or may be requested from the agency clearance officer, whose name appears below.

Federal Reserve Board Acting Clearance Officer—Mark Tokarski—Office of the Chief Data Officer, Board of Governors of the Federal Reserve System, Washington, DC 20551 (202) 452-3829. Telecommunications Device for the Deaf (TDD) users may contact (202) 263-4869, Board of Governors of the Federal Reserve System, Washington, DC 20551.

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Request for Comment on Information Collection Proposal

The following information collection, which is being handled under this delegated authority, has received initial Board approval and is hereby published for comment. At the end of the comment period, the proposed information collection, along with an analysis of comments and recommendations received, will be submitted to the Board for final approval under OMB delegated authority. Comments are invited on the following:

a. Whether the proposed collection of information is necessary for the proper performance of the Federal Reserve's functions; including whether the information has practical utility;

b. The accuracy of the Federal Reserve's estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used;

c. Ways to enhance the quality, utility, and clarity of the information to be collected;

d. Ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and

e. Estimates of capital or start up costs and costs of operation, maintenance, and purchase of services to provide information.

Proposal To Approve Under OMB Delegated Authority the Extension for Three Years, Without Revision, of the Following Report

Report title: Basel II Interagency Pillar 2 Supervisory Guidance.

Agency form number: FR 4199.

OMB control number: 7100-0320.

Frequency: Annual.

Reporters: State member banks, bank holding companies (BHCs).

Estimated annual reporting hours: 5,460.

Estimated average hours per response: 420.

Number of respondents: 13.

General description of report: The Board's Legal Division has determined that the FR 4199 is authorized by section 9(6) of the Federal Reserve Act and section 5 of the Bank Holding Company Act. Section 9(6) of the Federal Reserve Act requires state member banks to “comply with the reserve and capital requirements of this chapter” and to make reports of condition “in such form” and “contain[ing] such information” as the Board may require (12 U.S.C. 324). Section 5 of the Bank Holding Company Act authorizes the Board to “issue regulations and orders relating to the capital requirement for bank holding companies” and requires BHCs to “keep the Board informed as to [their] financial condition, systems for monitoring and controlling financial and operating risks . . .” (12 U.S.C. 1844 (b) & (c)). Because the recordkeeping requirements are contained within guidance (and not a statute or regulation), they are voluntary. Because the FR 4199 recordkeeping requirements require that banks and BHCs retain their own records, the Freedom of Information Act (FOIA) would only be implicated if the Federal Reserve's examiners retained a copy of the records as part of an examination or supervision of a bank or BHC. However, records obtained as a part of an examination or supervision of a bank or BHC are exempt from disclosure under FOIA exemption (b)(8), for examination material (5 U.S.C. 552(b)(8)). In addition, the records may also be exempt under (b)(4), which exempts from disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential,” and under (b)(6) for non-public personal information regarding owners, shareholders, directors, officers or employees if the disclosure would “constitute a clearly unwarranted invasion of personal privacy” (5 U.S.C. 552(b)(4) and (b)(6)).

Abstract: The advanced approaches framework requires certain banks and BHCs to use an internal ratings-based approach to calculate regulatory credit risk capital requirements and advance measurement approaches to calculate regulatory operational risk capital requirements, and to meet the higher of the minimum requirements under the general risk-based capital rules and the minimum requirements under the advanced approaches framework.

A bank is required to comply with the advanced approaches framework if it meets either of two independent threshold criteria: (1) Consolidated total assets of $250 billion or more, as reported on the most recent year-end regulatory reports; or (2) consolidated total on-balance sheet foreign exposure of $10 billion or more at the most recent year-end.

A BHC is required to comply with the advanced approaches framework if the BHC has (1) consolidated total assets (excluding assets held by an insurance underwriting subsidiary) of $250 billion or more, as reported on the most recent year-end regulatory reports; (2) consolidated total on-balance sheet foreign exposure of $10 billion or more at the most recent year-end; or (3) a subsidiary depository institution (DI) that is meets the criteria to be subject to the advanced approaches rule, or elects to adopt the advanced approaches. As of September 30, 2014, 13 BHCs meet the above criteria and are therefore subject to the advanced approaches rule.[1]

Also, some banks or BHCs may voluntarily decide to adopt the advanced approaches framework. Both Start Printed Page 30461mandatory and voluntary respondents are required to meet certain qualification requirements before they can use the advanced approaches framework for risk-based capital purposes.

The Pillar 2 Guidance sets the expectation that respondents maintain certain documentation as described in paragraphs 37, 41, 43, and 46 of this portion of the guidance. Details of the expectations for each section are provided below.

Setting and Assessing Capital Adequacy Goals That Relate to Risk

Paragraph 37. In analyzing capital adequacy, a banking organization should evaluate the capacity of its capital to absorb losses. Because various definitions of capital are used within the banking industry, each banking organization should state clearly the definition of capital used in any aspect of its internal capital adequacy assessment process (ICAAP).[2] Since components of capital are not necessarily alike and have varying capacities to absorb losses, a banking organization should be able to demonstrate the relationship between its internal capital definition and its assessment of capital adequacy. If a banking organization's definition of capital differs from the regulatory definition, the banking organization should reconcile such differences and provide an analysis to support the inclusion of any capital instruments that are not recognized under the regulatory definition. Although common equity is generally the predominant component of a banking organization's capital structure, a banking organization may be able to support the inclusion of other capital instruments in its internal definition of capital if it can demonstrate a similar capacity to absorb losses. The banking organization should document any changes in its internal definition of capital, and the reason for those changes.

Ensuring Integrity of Internal Capital Adequacy Assessments

Paragraph 41. A banking organization should maintain thorough documentation of its ICAAP to ensure transparency. At a minimum, this should include a description of the banking organization's overall capital-management process, including the committees and individuals responsible for the ICAAP; the frequency and distribution of ICAAP-related reporting; and the procedures for the periodic evaluation of the appropriateness and adequacy of the ICAAP. In addition, where applicable, ICAAP documentation should demonstrate the banking organization's sound use of quantitative methods (including model selection and limitations) and data-selection techniques, as well as appropriate maintenance, controls, and validation. A banking organization should document and explain the role of third-party and vendor products, services and information—including methodologies, model inputs, systems, data, and ratings—and the extent to which they are used within the ICAAP. A banking organization should have a process to regularly evaluate the performance of third-party and vendor products, services and information. As part of the ICAAP documentation, a banking organization should document the assumptions, methods, data, information, and judgment used in its quantitative and qualitative approaches.

Paragraph 43. The board of directors and senior management have certain responsibilities in developing, implementing, and overseeing the ICAAP. The board should approve the ICAAP and its components. The board or its appropriately delegated agent should review the ICAAP and its components on a regular basis, and approve any revisions. That review should encompass the effectiveness of the ICAAP, the appropriateness of risk tolerance levels and capital planning, and the strength of control infrastructures. Senior management should continually ensure that the ICAAP is functioning effectively and as intended, under a formal review policy that is explicit and well documented. Additionally, a banking organization's internal audit function should play a key role in reviewing the controls and governance surrounding the ICAAP on an ongoing basis.

Paragraph 46. As part of the ICAAP, the board or its delegated agent, as well as appropriate senior management, should periodically review the resulting assessment of overall capital adequacy. This review, which should occur at least annually, should include an analysis of how measures of internal capital adequacy compare with other capital measures (such as regulatory, accounting-based or market-determined). Upon completion of this review, the board or its delegated agent should determine that, consistent with safety and soundness, the banking organization's capital takes into account all material risks and is appropriate for its risk profile. However, in the event a capital deficiency is uncovered (that is, if capital is not consistent with the banking organization's risk profile or risk tolerance) management should consult and adhere to formal procedures to correct the capital deficiency.

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Board of Governors of the Federal Reserve System, May 21, 2015.

Robert deV. Frierson,

Secretary of the Board.

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1.  Regulation YY permits a bank holding company that is a subsidiary of a foreign banking organization to elect not to comply with the advanced approaches rule prior to formation of an IHC with the prior approval of the Board. 12 CFR 252.153(e)(2)(C).

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2.  A bank holding company with total consolidated assets of $50 billion or more is required to develop and maintain a capital plan, which must set forth a capital adequacy process. 76 FR 74631 (December 1, 2011). ICAAP would constitute an internal capital adequacy process for purposes of the final rule, and bank holding companies that have a satisfactory ICAAP generally would be considered to have a satisfactory internal capital adequacy process for purposes of the final rule.

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[FR Doc. 2015-12738 Filed 5-27-15; 8:45 am]