Office of the Comptroller of the Currency, Treasury; the Board of Governors of the Federal Reserve System; and the Federal Deposit Insurance Corporation
Joint notice of proposed rulemaking (NPR).
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) are seeking comment on an NPR that would clarify, correct, and update aspects of the agencies' regulatory capital rule applicable to banking organizations that are subject to the advanced approaches risk-based capital rule (advanced approaches banking organizations). The proposed revisions are largely driven by observations made by the agencies during the parallel-run review process of advanced approaches banking organizations. They are also intended to enhance consistency of the U.S. regulations with international standards for use of the advanced approaches rule.
Comments must be received no later than February 17, 2015.
Comments should be directed to:
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In 2013, 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) comprehensively revised and strengthened the capital requirements applicable to banking organizations
The advanced approaches rule applies to large, internationally active banking organizations, generally those with $250 billion or more in total consolidated assets or $10 billion or more in total on-balance sheet foreign exposure, depository institution subsidiaries of those banking organizations that use the advanced approaches rule, and banking organizations that elect to use the advanced approaches (advanced approaches banking organizations).
Consistent with section 171 of the Dodd-Frank Act,
In February 2014, the agencies permitted certain banking organizations to exit parallel run and to begin calculating their risk-based capital requirements using the advanced approaches rule, beginning with the second quarter of 2014.
Since publishing the regulatory capital framework, the agencies have identified typographical and technical errors in several provisions, including provisions of subpart E of the regulatory capital framework. The agencies have also identified provisions that warrant clarification or updating in light of revisions to other rules. The agencies are, therefore, proposing to revise the regulatory capital framework as described below.
The definition of
The criteria set forth in section 100(b) of the regulatory capital framework, which describe which banking organizations are required to use the advanced approaches rule, include an explanation of how a banking organization determines whether it meets the $10 billion total on-balance sheet foreign exposure threshold. The advanced approaches rule currently references line-item descriptions from a version of the FFIEC 009 Regulatory Report that has since been modified to adjust or rename those line items. The agencies therefore propose to update the methodology for calculating this measure in section 100(b)(ii) to reflect the relevant line-item descriptions and instructions from the most recent version of the FFIEC 009 Regulatory Report.
Section 173 of the regulatory capital framework requires advanced approaches banking organizations that have completed the parallel run process and have received notification from their primary Federal supervisor pursuant to section 121(d) of subpart E to provide timely disclosure of the information in the applicable tables in that section.
Table 6 of section 173 of the regulatory capital framework requires firms to explain and review the structure of internal ratings systems and the relation between internal and external ratings. Section 939A of the Dodd-Frank Act generally requires the Federal banking agencies to remove any reference to, or any requirement involving, the reliance on external credit ratings to assess the creditworthiness of a security or money market instrument. As a result, the agencies are proposing to amend table 6 of section 173 to clarify that the use of external ratings is not required for the purpose of an advanced approaches banking organization's internal rating assessment.
For the purpose of the disclosures required in table 6 of section 173, to the extent that the advanced approaches banking organization considers external ratings in its internal ratings process, it must include an explanation of the relation between the internal and external ratings. An advanced approaches banking organization that does not use or consider external ratings would not be required to make such a disclosure.
Table 9 in section 173 of the regulatory capital framework describes information related to securitization exposures that certain advanced approaches banking organizations are required to disclose. In the regulatory capital framework, the agencies revised the risk-based capital treatment of these items, but did not revise Table 9 to reflect the revisions. The agencies propose to update line (i)(2) under quantitative disclosures to appropriately reflect the current treatment under the regulatory capital framework of credit-enhancing interest only strips (CEIOs) and after-tax gain-on-sale resulting from a securitization. Specifically, under the regulatory capital framework, an after-tax gain-on-sale resulting from a securitization is deducted from common equity tier 1 capital, rather than from tier 1 capital as was the case under the 2007 rule. Also, under the regulatory capital framework, CEIOs that do not constitute after-tax gain-on-sale are risk-weighted at 1,250 percent, rather than deducted from total capital, as was the case under the 2007 rule.
Sections 133(b)(4)(ii) and 133(c)(4)(ii) of the regulatory capital framework require a clearing member client banking organization or a clearing member banking organization, respectively, to calculate a risk-weighted asset amount for any collateral provided to a central counterparty (CCP), clearing member, or custodian in connection with a cleared transaction in accordance with the requirements under section 131. The agencies note that section 131 only provides for the risk-weighting of wholesale and retail exposures whereas collateral posted to a CCP, clearing member, or custodian may also be in the form of a securitization exposure, equity exposure, or a covered position. Therefore, the agencies are proposing to amend sections 133(b)(4)(ii) and 133(c)(4)(ii) to replace the cross reference to section 131 with a broader cross reference, as applicable, to subpart E, which provides the risk-weighting methodology for wholesale, retail, securitization and equity exposures, or subpart F, which provides the risk weighting methodology for covered positions, so that the clearing member client banking organization and clearing member banking organization can determine the correct risk weight for the collateral provided.
Under the regulatory capital framework, a clearing member banking organization must assign a 2 percent risk weight to the trade exposure amount for a cleared transaction with a qualifying central counterparty (QCCP) and a risk weight according to section 32 to the trade exposure amount for a cleared transaction with a CCP that is not a QCCP. The definition of
This proposed approach would align the risk-based capital requirements for client-cleared transactions with recently finalized revisions to the treatment of those transactions under the agencies' supplementary leverage ratio rule.
Section 10(c) of the regulatory capital framework requires advanced approaches banking organizations that have completed the parallel run process to calculate the supplementary leverage ratio as described under section 10(c)(4).
Advanced approaches banking organizations are subject to supplementary leverage ratio disclosure requirements described in sections 172 and 173 of the regulatory capital framework.
In addition, the agencies are proposing to revise section 173 to clarify that a top-tier
Under subpart E of the regulatory capital framework, an advanced approaches banking organization that has received supervisory approval to calculate exposure at default (EAD) for derivative contracts using the internal models methodology (IMM) is permitted to reduce effective expected positive exposure (effective EPE) by the CVA recognized on the advanced approaches banking organization's balance sheet to reflect the fair value adjustment for counterparty credit risk in the valuation of a group of over-the-counter (OTC) derivative transactions in a netting set. The recognized CVA on the OTC derivative netting set deducted from effective EPE must not include any adjustments made by the advanced approaches banking organization to common equity tier 1 capital attributable to changes in the fair value of the banking organization's liabilities that are due to changes in its own credit risk since the inception of the derivative transaction with the counterparty. Similarly, the agencies are proposing to allow advanced approaches banking organizations to reduce the EAD for OTC derivative contracts calculated according to the current exposure methodology in section 132(c) for the purpose of calculating advanced approaches total risk-weighted assets. The agencies note that in determining the fair value of a derivative on a banking organization's balance sheet, the recognized CVA on the netting set of OTC derivative contracts is intended to reflect the credit quality of the counterparty.
As noted in the preamble to the regulatory capital framework, the CVA capital charge in section 132(e) addresses fair value losses resulting from the deterioration of a counterparty's credit quality short of default. The proposal to permit advanced approaches banking organizations to reduce EAD by the recognized CVA on an OTC derivative netting set would prevent the double counting of the counterparty credit risk, which is already included in advanced approaches total risk-weighted assets through the CVA capital charge. Consistent with the Basel Committee's Basel III capital standards and the treatment of recognized CVA in the calculation of EAD for OTC derivatives according to the IMM, the agencies are proposing to amend section 132(c)(1) to permit an advanced approaches banking organization to reduce the EAD calculated according to the current exposure methodology by the recognized CVA on the OTC derivative netting set. The agencies note that, for the purpose of calculating standardized total risk-weighted assets, advanced approaches banking organizations would not be permitted to reduce the EAD calculated according to the current exposure methodology because the standardized total risk-weighted assets calculation does not include the CVA
Section 132(d)(5)(iii)(B) of the regulatory capital framework includes upward adjustments to the margin period of risk in the IMM for large netting sets, netting sets involving illiquid collateral or OTC derivatives that cannot easily be replaced, or netting sets with two or more margin disputes with the counterparty over the previous two quarters that last for a certain length of time. The regulatory capital framework inadvertently required an upward adjustment to the margin period of risk for cleared transactions based solely on the fact that they are part of a large netting set. The agencies are therefore proposing to amend this provision to clarify that cleared transactions that are part of a netting set subject to a collateral agreement that exceeds 5,000 trades at any time during the previous quarter are not subject to the twenty business day margin-period-of-risk requirement unless the netting set contains illiquid collateral, OTC derivatives that cannot easily be replaced, or the banking organization had two or more margin disputes with the counterparty over the previous two quarters that last for a certain length of time. As noted in the preamble to the regulatory capital framework, the 5,000 trade threshold is one indicator that a set of transactions may require a lengthy period to close out in the event of a default of a counterparty. The agencies believe that unlike a large netting set of over-the-counter derivatives, a large netting set of cleared transactions would not require a lengthy period to close out in the event of a default of the CCP. In addition, the proposed amendment would conform the provision to the similar provision in section 37 of subpart D. However, for any netting set that involves illiquid collateral or OTC derivatives that cannot easily be replaced, or that has two or more margin disputes within a netting set over the previous two quarters that last for a certain length of time, the margin period of risk would require adjustments, as specified under section 132(d)(5)(iii)(B), regardless of whether the netting set consists of cleared transactions.
In February, 2014, the OCC and Board granted permission to a number of banking organizations to begin calculating their risk-based capital requirements under the advanced approaches.
Sections 122 and 131 of the regulatory capital framework set forth the qualification requirements for the internal ratings-based approach (IRB) for advanced approaches banking organizations and describe the mechanics for calculating risk-weighted assets for wholesale and retail exposures under the advanced approaches. When the agencies initially adopted the advanced approaches rule in the 2007 rule, they viewed certain elements of the international Basel framework as being more akin to supervisory guidance, and therefore incorporated these elements into the supervisory review process rather than the advanced approaches rule. However, the agencies believe elements of sections 122 and 131 of the regulatory capital framework should be clarified to ensure that advanced approaches banking organizations appropriately: (i) Obtain and consider all relevant and material information to estimate probability of default (PD), loss given default (LGD), and EAD; (ii) quantify risk parameters for wholesale and retail exposures; and (iii) establish internal requirements for collateral and risk management processes.
Accordingly, the agencies are proposing language to add specificity and enhance transparency regarding the qualification process for the IRB approach, as well as the mechanics used to calculate total wholesale and retail risk-weighted assets. More specifically, the NPR would amend sections 122 and 131 of the regulatory capital framework to clarify requirements associated with: (i) The frequency for reviewing risk rating systems, (ii) the independence of the systems' development, design, and implementation, (iii) time horizons for default and loss data when estimating risk parameters, (iv) changes in banking organizations' lending, payment processing, and account monitoring practices, (v) the use of all relevant available data for assigning risk ratings, and (vi) the need for internal requirements for collateral management and risk management processes. These modifications are consistent with the current overarching principles in sections 122 and 131 of the regulatory capital framework that advanced approaches banking organizations must have an internal risk rating and segmentation system that accurately and reliably differentiates among degrees of credit risk for wholesale and retail exposures, as well as a comprehensive risk-parameter quantification process that produces accurate, timely, and reliable risk-parameter estimates. The agencies emphasize that the proposed revisions are intended to clarify, but not change, existing requirements. In fact, many of these clarifications are already included in agency guidance or examination materials. Therefore, because they have demonstrated that they comply with the existing requirements, the agencies would expect that advanced approaches banking organizations that have already exited parallel run have demonstrated that they would meet the proposed requirements.
Section 22 of the regulatory capital framework requires a banking organization to adjust its common equity tier 1 capital for changes in the fair value of liabilities due to changes in the banking organization's own credit risk. The adjustment is made by deducting from common equity tier 1 capital any net gain and adding to common equity tier 1 capital any net loss to offset the capital effect of the changes in fair value of liabilities due to changes in the banking organization's own credit risk.
The agencies recognize that the regulatory capital framework is unclear as to whether the deduction of the credit spread premium for advanced approaches banking organizations is in addition to the adjustment for net gains or losses associated with changes in the value of liabilities attributed to changes in the banking organization's own credit risk. Therefore, the agencies are clarifying that for derivative liabilities, an advanced approaches banking organization would make the deduction
In addition to the revisions discussed above, the proposed rule would also make certain technical corrections. Most of the proposed corrections to these technical errors are self-explanatory and, therefore, do not warrant specific discussion in this preamble. In addition, there are several reference errors that the agencies propose to correct in an effort to better clarify the rule requirements. For example, the proposed rule would correct the following internal cross-references in the regulatory capital framework.
• In section 131(e)(3)(vi), amendments to reference section 22(d) and not section 22(a)(7);
• In Table 1 of section 132, amendments to the reference in the column heading to state that “Non-sovereign issuers risk weight under this section (in percent)” and “Sovereign issuers risk weight under this section (in percent)” actually are found in section 32.
• In section 132(d)(7)(iv)(B), amendments to reference section 132(b)(2) and not section 131(b)(2);
• In section 132(d)(9)(ii), amendments to reference section 132(e)(6) and not section 132(e)(3);
• In section 133(b)(3)(i)(B), amendments to reference section 133(b)(3)(i)(A) and not section 132(b)(3)(i)(A); and
• In section 136(e)(2)(i) and 136(e)(2)(ii), amendments to reference section 136(e)(1) and (e)(2) and not section 135(e)(1) and (e)(2).
In accordance with the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3521) (PRA), the agencies may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The agencies reviewed the proposed rule and determined that it would not introduce any new collection of information pursuant to the PRA.
Using the SBA's size standards, as of December 31, 2013, the OCC supervised 1,231 small entities.
As described in the
Using the SBA's size standards, as of June 30, 2014, the FDIC supervised 3,573 small entities. As described in the
The FDIC certifies that the proposed rule would not have a significant economic impact on a substantial number of small FDIC-supervised institutions.
Under 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 $550 million or less (a small banking organization).
The proposed rule would apply only to advanced approaches banking
The Board is aware of no other federal rules that duplicate, overlap, or conflict with the proposed rule. The Board believes that the proposed rule will not have a significant economic impact on small banking organizations supervised by the Board and therefore believes that there are no significant alternatives to the proposed rule that would reduce the economic impact on small banking organizations supervised by the Board.
The Board welcomes comment on all aspects of its analysis. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.
The OCC has analyzed the notice of proposed rulemaking under the factors set forth in the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this analysis, the OCC considered whether the proposed rule 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 (adjusted annually for inflation).
The proposed rule includes clarifications, corrections, and updates for certain aspects of the agencies' regulatory capital rules applicable to national banks and Federal savings associations subject to the OCC's advanced approaches risk-based capital rule.
Because the proposed rule is designed to clarify, correct, and update existing rules, and does not introduce any new requirements, the OCC has determined that it would not result in expenditures by State, local, and Tribal governments, or by the private sector, of $100 million or more. Accordingly, the OCC has not prepared a written statement to accompany its proposed rule.
Section 722 of the Gramm-Leach-Bliley Act requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The agencies have sought to present the proposed rule in a simple and straightforward manner, and invite comment on the use of plain language. For example:
• Have the agencies organized the material to suit your needs? If not, how could they present the proposed rule more clearly?
• Are the requirements in the proposed rule clearly stated? If not, how could the proposed rule be more clearly stated?
• Do the regulations contain technical language or jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes would achieve that?
• Is this section format adequate? If not, which of the sections should be changed and how?
• What other changes can the agencies incorporate to make the regulation easier to understand?
Administrative practice and procedure, Capital, National banks, Reporting and recordkeeping requirements, Risk.
Administrative practice and procedure, Banks, Banking, Capital, Federal Reserve System, Holding companies, Reporting and recordkeeping requirements, Securities.
Administrative practice and procedure, Banks, banking, Capital Adequacy, Reporting and recordkeeping requirements, Savings associations, State non-member banks.
For the reasons set forth in the common preamble and under the authority of 12 U.S.C. 93a, 1462, 1462a, 1463, 1464, 3907, 3909, 1831o, and 5412(b)(2)(B), the Office of the Comptroller of the Currency proposes to amend part 3 of chapter I of title 12, Code of Federal Regulations as follows:
12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).
(1)(i) An exposure that is primarily secured by a first or subsequent lien on one-to-four family residential property; or
(ii) An exposure with an original and outstanding amount of $1 million or less that is primarily secured by a first or subsequent lien on residential property that is not one-to-four family; and
(2) For purposes of calculating capital requirements under subpart E of this part, managed as part of a segment of exposures with homogeneous risk characteristics and not on an individual-exposure basis.
(c)
(b) * * *
(1) * * *
(iii) A national bank or Federal savings association must deduct any net gain and add any net loss related to changes in the fair value of liabilities that are due to changes in the national bank's or Federal savings association's own credit risk. An advanced approaches national bank or Federal savings association must deduct the difference between its credit spread premium and the risk-free rate for derivatives that are liabilities as part of this adjustment.
(b) * * *
(1) * * *
(ii) Has consolidated total on-balance sheet foreign exposure on its most recent year-end Call Report equal to $10 billion or more (where total on-balance sheet foreign exposure equals total foreign countries cross-border claims on an ultimate-risk basis, plus total foreign countries claims on local residents on an ultimate-risk basis, plus total foreign countries fair value of foreign exchange and derivative products), calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report;
The revisions and additions read as follows:
(a) * * *
(3) Each national bank or Federal savings association must have an appropriate infrastructure with risk measurement and management processes that meet the qualification requirements of this section and are appropriate given the national bank's or Federal savings association's size and level of complexity. Regardless of whether the systems and models that generate the risk parameters necessary for calculating a national bank's or Federal savings association's risk-based capital requirements are located at any affiliate of the national bank or Federal savings association, the national bank or Federal savings association itself must ensure that the risk parameters and reference data used to determine its risk-based capital requirements are representative of long run experience with respect to its own credit risk and operational risk exposures.
(b)
(ii) If a national bank or Federal savings association uses multiple rating or segmentation systems, the national bank's or Federal savings association's rationale for assigning an obligor or exposure to a particular system must be documented and applied in a manner that best reflects the obligor's or exposure's level of risk. A national bank or Federal savings association must not inappropriately allocate obligors or exposures across systems to minimize regulatory capital requirements.
(iii) In assigning ratings to wholesale obligors and exposures, including loss severity ratings grades to wholesale exposures, and assigning retail exposures to retail segments, a national bank or Federal savings association must use all relevant and material information and ensure that the information is current.
(iv) When assigning an obligor to a PD rating or retail exposure to a PD segment, a national bank or Federal savings association must assess the obligor or retail borrower's ability and willingness to contractually perform, taking a conservative view of projected information.
(2) * * *
(iii) A national bank or Federal savings association must have an effective process to obtain and update in a timely manner relevant and material information on obligor and exposure characteristics that affect PD, LGD and EAD.
(3) For retail exposures:
(i) A national bank or Federal savings association must have an internal system that groups retail exposures into the appropriate retail exposure subcategory and groups the retail exposures in each retail exposure subcategory into separate segments with homogeneous risk characteristics that provide a meaningful differentiation of risk. The national bank's or Federal savings association's system must identify and group in separate segments by subcategories exposures identified in § 3.131(c)(2)(ii) and (iii).
(ii) A national bank or Federal savings association must have an internal system that captures all relevant exposure risk characteristics, including borrower credit score, product and collateral types, as well as exposure delinquencies, and must consider cross-collateral provisions, where present.
(iii) The national bank or Federal savings association must review and, if appropriate, update assignments of individual retail exposures to segments and the loss characteristics and delinquency status of each identified risk segment. These reviews must occur whenever the national bank or Federal savings association receives new material information, but generally no less frequently than quarterly, and, in all cases, at least annually.
(5) The national bank's or Federal savings association's internal risk rating system for wholesale exposures must provide for the review and update (as appropriate) of each obligor rating and (if applicable) each loss severity rating whenever the national bank or Federal savings association obtains relevant and material information on the obligor or exposure that affect PD, LGD and EAD, but no less frequently than annually.
(c)
(2) A national bank's or Federal savings association's estimates of PD,
(i) Demonstrate that its estimates are representative of long run experience, including periods of economic downturn conditions, whether internal or external data are used;
(ii) Take into account any changes in lending practice or the process for pursuing recoveries over the observation period;
(iii) Promptly reflect technical advances, new data, and other information as they become available;
(iv) Demonstrate that the data used to estimate risk parameters support the accuracy and robustness of those estimates; and
(v) Demonstrate that its estimation technique performs well in out-of-sample tests whenever possible.
(5) The national bank or Federal savings association must be able to demonstrate which variables have been found to be statistically significant with regard to EAD. The national bank's or Federal savings association's EAD estimates must reflect its specific policies and strategies with regard to account management, including account monitoring and payment processing, and its ability and willingness to prevent further drawdowns in circumstances short of payment default. The national bank or Federal savings association must have adequate systems and procedures in place to monitor current outstanding amounts against committed lines, and changes in outstanding amounts per obligor and obligor rating grade and per retail segment. The national bank or Federal savings association must be able to monitor outstanding amounts on a daily basis.
(6) At a minimum, PD estimates for wholesale obligors and retail segments must be based on at least five years of default data. LGD estimates for wholesale exposures must be based on at least seven years of loss severity data, and LGD estimates for retail segments must be based on at least five years of loss severity data. EAD estimates for wholesale exposures must be based on at least seven years of exposure amount data, and EAD estimates for retail segments must be based on at least five years of exposure amount data. If the national bank or Federal savings association has relevant and material reference data that span a longer period of time than the minimum time periods specified above, the national bank or Federal savings association must incorporate such data in its estimates, provided that it does not place undue weight on periods of favorable or benign economic conditions relative to periods of economic downturn conditions.
(9) If a national bank or Federal savings association uses internal data obtained prior to becoming subject to this subpart E or external data to arrive at PD, LGD, or EAD estimates, the national bank or Federal savings association must demonstrate to the OCC that the national bank or Federal savings association has made appropriate adjustments if necessary to be consistent with the definition of default in § 3.101. Internal data obtained after the national bank or Federal savings association becomes subject to this subpart E must be consistent with the definition of default in § 3.101.
(10) The national bank or Federal savings association must review and update (as appropriate) its risk parameters and its risk parameter quantification process at least annually.
(11) The national bank or Federal savings association must, at least annually, conduct a comprehensive review and analysis of reference data to the national bank's or Federal savings association's exposures, quality of reference data to support PD, LGD, and EAD estimates, and consistency of reference data to the definition of default in § 3.101.
(i) * * *
(5) The national bank or Federal savings association must have an internal audit function or equivalent function that is independent of business-line management that at least annually:
(i) Reviews the national bank's or Federal savings association's advanced systems and associated operations, including the operations of its credit function and estimations of PD, LGD, and EAD;
(ii) Assesses the effectiveness of the controls supporting the national bank's or Federal savings association's advanced systems; and
(iii) Documents and reports its findings to the national bank's or Federal savings association's board of directors (or a committee thereof).
The revisions read as follows:
(d) * * *
(5)
(ii) A national bank or Federal savings association may take into account the risk reducing effects of guarantees and credit derivatives in support of retail exposures in a segment when quantifying the PD and LGD of the segment. In doing so, a national bank or Federal savings association must consider all relevant available information.
(iii) Except as provided in paragraph (d)(6) of this section, a national bank or Federal savings association may take into account the risk reducing effects of collateral in support of a wholesale exposure when quantifying the LGD of the exposure, and may take into account the risk reducing effects of collateral in support of retail exposures when quantifying the PD and LGD of the segment. In order to do so, a national bank or Federal savings association must have established internal requirements for collateral management, legal certainty, and risk management processes.
The revisions read as follows:
(c)
(d) * * *
(5) * * *
(iii) * * *
(B) Twenty business days if the number of trades in a netting set exceeds 5,000 at any time during the previous quarter (except if the national bank or Federal savings association is calculating EAD for a cleared transaction under § 3.133) or contains one or more trades involving illiquid collateral or any derivative contract that cannot be easily replaced. If over the two previous quarters more than two margin disputes on a netting set have occurred that lasted more than the margin period of risk, then the national bank or Federal savings association must use a margin period of risk for that netting set that is at least two times the minimum margin period of risk for that netting set. If the periodicity of the receipt of collateral is N-days, the minimum margin period of risk is the minimum margin period of risk under this paragraph (d) plus N minus 1. This period should be extended to cover any impediments to prompt re-hedging of any market risk.
The addition reads as follows:
(c) * * *
(3) * * *
(iii) Notwithstanding paragraphs (c)(3)(i) and (ii) of this section, a clearing member national bank or Federal savings association may apply a risk weight of 0 percent to the trade exposure amount for a cleared transaction with a CCP where the clearing member national bank or Federal savings association is acting as a financial intermediary on behalf of a clearing member client, the transaction offsets another transaction that satisfies the requirements set forth in § 3.3(a), and the clearing member national bank or Federal savings association is not obligated to reimburse the clearing member client in the event of the CCP default.
(d)(1) A national bank or Federal savings association that meets any of the criteria in § 3.100(b)(1) before January 1, 2015, must publicly disclose each quarter its supplementary leverage ratio and the components thereof (that is, tier 1 capital and total leverage exposure) as calculated under subpart B of this part, beginning with the first quarter in 2015. This disclosure requirement applies without regard to whether the national bank or Federal savings association has completed the parallel run process and received notification from the OCC pursuant to § 3.121(d).
(2) A national bank or Federal savings association that meets any of the criteria in § 3.100(b)(1) on or after January 1, 2015, must publicly disclose each quarter its supplementary leverage ratio and the components thereof (that is, tier 1 capital and total leverage exposure) as calculated under subpart B of this part beginning with the calendar quarter immediately following the quarter in which the national bank or Federal savings association becomes an advanced approaches national bank or Federal savings association. This disclosure requirement applies without regard to whether the national bank or Federal savings association has completed the parallel run process and has received notification from the OCC pursuant to § 3.121(d).
The revisions and additions read as follows:
(a)(1) An advanced approaches national bank or Federal savings association described in § 3.172(b) must make the disclosures described in Tables 1 through 12 to § 3.173.
(2) An advanced approaches national bank or Federal savings association that is required to publicly disclose its supplementary leverage ratio pursuant to § 3.172(d) must make the disclosures required under Table 13 to § 3.173, unless the national bank or Federal savings association is a consolidated subsidiary of a bank holding company, savings and loan holding company, or depository institution that is subject to these disclosures requirements or a subsidiary of a non-U.S. banking organization that is subject to comparable public disclosure requirements in its home jurisdiction.
(3) The disclosures described in Tables 1 through 12 to § 3.173 must be made publicly available for twelve consecutive quarters beginning on January 1, 2014, or a shorter period, as applicable, for the quarters after the national bank or Federal savings association has completed the parallel run process and received notification from the OCC pursuant to § 121(d) of subpart E of this part. The disclosures described in Table 13 to § 3.173 must be made publicly available for twelve consecutive quarters beginning on January 1, 2015, or a shorter period, as applicable, for the quarters after the national bank or Federal savings association becomes subject to the disclosure of the supplementary leverage ratio pursuant to § 3.172(d).
For the reasons set forth in the common preamble, part 217 of chapter II of title 12 of the Code of Federal Regulations is proposed to be amended as follows:
12 U.S.C. 248(a), 321–338a, 481–486, 1462a, 1467a, 1818, 1828, 1831n, 1831o, 1831p–l, 1831w, 1835, 1844(b), 1851, 3904, 3906–3909, 4808, 5365, 5368, 5371.
(1)(i) An exposure that is primarily secured by a first or subsequent lien on one-to-four family residential property; or
(ii) An exposure with an original and outstanding amount of $1 million or less that is primarily secured by a first or subsequent lien on residential property that is not one-to-four family; and
(2) For purposes of calculating capital requirements under subpart E of this part, managed as part of a segment of exposures with homogeneous risk characteristics and not on an individual-exposure basis.
(c)
(b) * * *
(1) * * *
(iii) A Board-regulated institution must deduct any net gain and add any net loss related to changes in the fair value of liabilities that are due to changes in the Board-regulated institution's own credit risk. An advanced approaches Board-regulated institution must deduct the difference between its credit spread premium and the risk-free rate for derivatives that are liabilities as part of this adjustment.
(b) * * *
(1) * * *
(ii) * * *
(B) Has consolidated total on-balance sheet foreign exposure on its most recent year-end Call Report, for a state member bank, or FR Y–9C, for a bank holding company or savings and loan holding company, as applicable, equal to $10 billion or more (where total on-balance sheet foreign exposure equals total foreign countries cross-border claims on an ultimate-risk basis, plus total foreign countries claims on local residents on an ultimate-risk basis, plus total foreign countries fair value of foreign exchange and derivative products), calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report;
The revisions and additions read as follows:
(a) * * *
(3) Each Board-regulated institution must have an appropriate infrastructure with risk measurement and management processes that meet the qualification requirements of this section and are appropriate given the Board-regulated institution's size and level of complexity. Regardless of whether the systems and models that generate the risk parameters necessary for calculating a Board-regulated institution's risk-based capital requirements are located at any affiliate of the Board-regulated institution, the Board-regulated institution itself must ensure that the risk parameters and reference data used to determine its risk-based capital requirements are representative of long run experience with respect to its own credit risk and operational risk exposures.
(b)
(ii) If a Board-regulated institution uses multiple rating or segmentation systems, the Board-regulated institution's rationale for assigning an obligor or exposure to a particular system must be documented and applied in a manner that best reflects the obligor or exposure's level of risk. A Board-regulated institution must not inappropriately allocate obligors across systems to minimize regulatory capital requirements.
(iii) In assigning ratings to wholesale obligors and exposures, including loss severity ratings grades to wholesale exposures, and assigning retail exposures to retail segments, a Board-regulated institution must use all relevant and material information and ensure that the information is current.
(iv) When assigning an obligor to a PD rating or retail exposure to a PD segment, a Board-regulated institution must assess the obligor or retail borrower's ability and willingness to contractually perform, taking a conservative view of projected information.
(2) * * *
(iii) A Board-regulated institution must have an effective process to obtain and update in a timely manner relevant and material information on obligor and exposure characteristics that affect PD, LGD and EAD.
(3) For retail exposures:
(i) A Board-regulated institution must have an internal system that groups retail exposures into the appropriate retail exposure subcategory and groups the retail exposures in each retail exposure subcategory into separate segments with homogeneous risk characteristics that provide a meaningful differentiation of risk. The Board-regulated institution's system must identify and group in separate segments by subcategories exposures identified in § 217.131(c)(2)(ii) and (iii).
(ii) A Board-regulated institution must have an internal system that captures all relevant exposure risk characteristics, including borrower credit score, product and collateral types, as well as exposure delinquencies, and must consider cross-collateral provisions, where present.
(iii) The Board-regulated institution must review and, if appropriate, update assignments of individual retail exposures to segments and the loss characteristics and delinquency status of each identified risk segment. These reviews must occur whenever the Board-regulated institution receives new material information, but generally no less frequently than quarterly, and, in all cases, at least annually.
(5) The Board-regulated institution's internal risk rating system for wholesale exposures must provide for the review and update (as appropriate) of each obligor rating and (if applicable) each loss severity rating whenever the Board-regulated institution obtains relevant and material information on the obligor or exposure that affect PD, LGD and EAD, but no less frequently than annually.
(c)
(2) A Board-regulated institution's estimates of PD, LGD, and EAD must incorporate all relevant, material, and available data that is reflective of the Board-regulated institution's actual wholesale and retail exposures and of sufficient quality to support the determination of risk-based capital requirements for the exposures. In particular, the population of exposures in the data used for estimation purposes, and lending standards in use when the data were generated, and other relevant characteristics, should closely match or be comparable to the Board-regulated institution's exposures and standards. In addition, a Board-regulated institution must:
(i) Demonstrate that its estimates are representative of long run experience, including periods of economic downturn conditions, whether internal or external data are used;
(ii) Take into account any changes in lending practice or the process for pursuing recoveries over the observation period;
(iii) Promptly reflect technical advances, new data, and other information as they become available;
(iv) Demonstrate that the data used to estimate risk parameters support the accuracy and robustness of those estimates; and
(v) Demonstrate that its estimation technique performs well in out-of-sample tests whenever possible.
(5) The Board-regulated institution must be able to demonstrate which variables have been found to be statistically significant with regard to EAD. The Board-regulated institution's EAD estimates must reflect its specific policies and strategies with regard to account management, including account monitoring and payment processing, and its ability and willingness to prevent further drawdowns in circumstances short of payment default. The Board-regulated institution must have adequate systems and procedures in place to monitor current outstanding amounts against committed lines, and changes in outstanding amounts per obligor and obligor rating grade and per retail segment. The Board-regulated institution must be able to monitor outstanding amounts on a daily basis.
(6) At a minimum, PD estimates for wholesale obligors and retail segments must be based on at least five years of default data. LGD estimates for wholesale exposures must be based on at least seven years of loss severity data, and LGD estimates for retail segments must be based on at least five years of loss severity data. EAD estimates for
(9) If a Board-regulated institution uses internal data obtained prior to becoming subject to this subpart E or external data to arrive at PD, LGD, or EAD estimates, the Board-regulated institution must demonstrate to the Board that the Board-regulated institution has made appropriate adjustments if necessary to be consistent with the definition of default in § 217.101. Internal data obtained after the Board-regulated institution becomes subject to this subpart E must be consistent with the definition of default in § 217.101.
(10) The Board-regulated institution must review and update (as appropriate) its risk parameters and its risk parameter quantification process at least annually.
(11) The Board-regulated institution must, at least annually, conduct a comprehensive review and analysis of reference data to the Board-regulated institution's exposures, quality of reference data to support PD, LGD, and EAD estimates, and consistency of reference data to the definition of default in § 217.101.
(i) * * *
(5) The Board-regulated institution must have an internal audit function or equivalent function that is independent of business-line management that at least annually:
(i) Reviews the Board-regulated institution's advanced systems and associated operations, including the operations of its credit function and estimations of PD, LGD, and EAD;
(ii) Assesses the effectiveness of the controls supporting the Board-regulated institution's advanced systems; and
(iii) Documents and reports its findings to the Board-regulated institution's board of directors (or a committee thereof).
The revisions read as follows:
(d) * * *
(5) * * *
(ii) A national bank or Federal savings association may take into account the risk reducing effects of guarantees and credit derivatives in support of retail exposures in a segment when quantifying the PD and LGD of the segment. In doing so, a national bank or Federal savings association must consider all relevant available information.
(iii) Except as provided in paragraph (d)(6) of this section, a national bank or Federal savings association may take into account the risk reducing effects of collateral in support of a wholesale exposure when quantifying the LGD of the exposure, and may take into account the risk reducing effects of collateral in support of retail exposures when quantifying the PD and LGD of the segment. In order to do so, a national bank or Federal savings association must have established internal requirements for collateral management, legal certainty, and risk management processes.
The revisions read as follows:
(c)
(d) * * *
(5) * * *
(iii) * * *
(B) Twenty business days if the number of trades in a netting set exceeds 5,000 at any time during the previous quarter (except if the Board-regulated institution is calculating EAD for a cleared transaction under § 217.133) or contains one or more trades involving illiquid collateral or any derivative contract that cannot be easily replaced. If over the two previous quarters more than two margin disputes on a netting set have occurred that lasted more than the margin period of risk, then the Board-regulated institution must use a margin period of risk for that netting set that is at least two times the minimum margin period of risk for that netting set. If the periodicity of the receipt of collateral is N-days, the minimum margin period of risk is the minimum margin period of risk under this paragraph (d) plus N minus 1. This period should be extended to cover any impediments to prompt re-hedging of any market risk.
The revisions and additions read as follows:
(c) * * *
(3) * * *
(iii) Notwithstanding paragraphs (c)(3)(i) and (ii) of this section, a clearing member Board-regulated institution may apply a risk weight of 0 percent to the trade exposure amount
(d)(1) A Board-regulated institution that meets any of the criteria in § 217.100(b)(1) before January 1, 2015, must publicly disclose each quarter its supplementary leverage ratio and the components thereof (that is, tier 1 capital and total leverage exposure) as calculated under subpart B of this part, beginning with the first quarter in 2015. This disclosure requirement applies without regard to whether the Board-regulated institution has completed the parallel run process and received notification from the Board pursuant to § 217.121(d).
(2) A Board-regulated institution that meets any of the criteria in § 217.100(b)(1) on or after January 1, 2015, must publicly disclose each quarter its supplementary leverage ratio and the components thereof (that is, tier 1 capital and total leverage exposure) as calculated under subpart B of this part beginning with the calendar quarter immediately following the quarter in which the Board-regulated institution becomes an advanced approaches Board-regulated institution. This disclosure requirement applies without regard to whether the Board-regulated institution has completed the parallel run process and has received notification from the Board pursuant to § 217.121(d).
The revisions and additions read as follows:
(a)(1) An advanced approaches Board-regulated institution described in § 217.172(b) must make the disclosures described in Tables 1 through 12 to § 217.173.
(2) An advanced approaches Board-regulated institution that is required to publicly disclose its supplementary leverage ratio pursuant to § 217.172(d) must make the disclosures required under Table 13 to § 217.173, unless the Board-regulated institution is a consolidated subsidiary of a bank holding company, savings and loan holding company, or depository institution that is subject to these disclosures requirements or a subsidiary of a non-U.S. banking organization that is subject to comparable public disclosure requirements in its home jurisdiction.
(3) The disclosures described in Tables 1 through 12 to § 217.173 must be made publicly available for twelve consecutive quarters beginning on January 1, 2014, or a shorter period, as applicable, for the quarters after the Board-regulated institution has completed the parallel run process and received notification from the Board pursuant to section 121(d) of subpart E of this part. The disclosures described in Table 13 to § 217.173 must be made publicly available for twelve consecutive quarters beginning on January 1, 2015, or a shorter period, as applicable, for the quarters after the Board-regulated institution becomes subject to the disclosure of the supplementary leverage ratio pursuant to § 217.172(d).
For the reasons stated in the preamble, the Federal Deposit Insurance Corporation proposes to amend part 324 of chapter III of Title 12, Code of Federal Regulations as follows:
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).
(1)(i) An exposure that is primarily secured by a first or subsequent lien on one-to-four family residential property; or
(ii) An exposure with an original and outstanding amount of $1 million or less that is primarily secured by a first or subsequent lien on residential property that is not one-to-four family; and
(2) For purposes of calculating capital requirements under subpart E of this part, managed as part of a segment of exposures with homogeneous risk characteristics and not on an individual-exposure basis.
(c)
(b) * * *
(1) * * *
(iii) An FDIC-supervised institution must deduct any net gain and add any net loss related to changes in the fair value of liabilities that are due to changes in the FDIC-supervised institution's own credit risk. An advanced approaches FDIC-supervised institution must deduct the difference between its credit spread premium and the risk-free rate for derivatives that are liabilities as part of this adjustment.
(b) * * *
(1) * * *
(ii) Has consolidated total on-balance sheet foreign exposure on its most recent year-end Call Report equal to $10 billion or more (where total on-balance sheet foreign exposure equals total foreign countries cross-border claims on an ultimate-risk basis, plus total foreign countries claims on local residents on an ultimate-risk basis, plus total foreign countries fair value of foreign exchange and derivative products), calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report;
The revisions and additions read as follows:
(a) * * *
(3) Each FDIC-supervised institution must have an appropriate infrastructure with risk measurement and management processes that meet the qualification requirements of this section and are appropriate given the FDIC-supervised institution's size and level of complexity. Regardless of whether the systems and models that generate the risk parameters necessary for calculating an FDIC-supervised institution's risk-based capital requirements are located at any affiliate of the FDIC-supervised institution, the FDIC-supervised institution itself must ensure that the risk parameters and reference data used to determine its risk-based capital requirements are representative of long run experience with respect to its own credit risk and operational risk exposures.
(b)
(ii) If an FDIC-supervised institution uses multiple rating or segmentation systems, the FDIC-supervised institution's rationale for assigning an obligor or exposure to a particular system must be documented and applied in a manner that best reflects the obligor or exposure's level of risk. An FDIC-supervised institution must not inappropriately allocate obligors across systems to minimize regulatory capital requirements.
(iii) In assigning ratings to wholesale obligors and exposures, including loss severity ratings grades to wholesale exposures, and assigning retail exposures to retail segments, an FDIC-supervised institution must use all relevant and material information and ensure that the information is current.
(iv) When assigning an obligor to a PD rating or retail exposure to a PD segment, an FDIC-supervised institution must assess the obligor or retail borrower's ability and willingness to contractually perform, taking a conservative view of projected information.
(2) * * *
(iii) An FDIC-supervised institution must have an effective process to obtain and update in a timely manner relevant and material information on obligor and exposure characteristics that affect PD, LGD and EAD.
(3) For retail exposures:
(i) An FDIC-supervised institution must have an internal system that groups retail exposures into the appropriate retail exposure subcategory and groups the retail exposures in each retail exposure subcategory into separate segments with homogeneous risk characteristics that provide a meaningful differentiation of risk. The FDIC-supervised institution's system must identify and group in separate segments by subcategories exposures identified in § 324.131(c)(2)(ii) and (iii).
(ii) An FDIC-supervised institution must have an internal system that captures all relevant exposure risk characteristics, including borrower credit score, product and collateral types, as well as exposure delinquencies, and must consider cross-collateral provisions, where present.
(iii) The FDIC-supervised institution must review and, if appropriate, update assignments of individual retail exposures to segments and the loss characteristics and delinquency status of each identified risk segment. These reviews must occur whenever the FDIC-supervised institution receives new material information, but generally no less frequently than quarterly, and, in all cases, at least annually.
(5) The FDIC-supervised institution's internal risk rating system for wholesale exposures must provide for the review and update (as appropriate) of each obligor rating and (if applicable) each loss severity rating whenever the FDIC-supervised institution obtains relevant and material information on the obligor or exposure that affect PD, LGD and EAD, but no less frequently than annually.
(c)
(2) An FDIC-supervised institution's estimates of PD, LGD, and EAD must incorporate all relevant, material, and available data that is reflective of the FDIC-supervised institution's actual wholesale and retail exposures and of sufficient quality to support the determination of risk-based capital requirements for the exposures. In particular, the population of exposures in the data used for estimation purposes, and lending standards in use when the data were generated, and other relevant characteristics, should closely match or be comparable to the FDIC-supervised institution's exposures and standards. In addition, an FDIC-supervised institution must:
(i) Demonstrate that its estimates are representative of long run experience, including periods of economic downturn conditions, whether internal or external data are used;
(ii) Take into account any changes in lending practice or the process for pursuing recoveries over the observation period;
(iii) Promptly reflect technical advances, new data, and other information as they become available;
(iv) Demonstrate that the data used to estimate risk parameters support the accuracy and robustness of those estimates; and
(v) Demonstrate that its estimation technique performs well in out-of-sample tests whenever possible.
(5) The FDIC-supervised institution must be able to demonstrate which variables have been found to be statistically significant with regard to EAD. The FDIC-supervised institution's EAD estimates must reflect its specific policies and strategies with regard to account management, including account monitoring and payment processing, and its ability and willingness to prevent further drawdowns in circumstances short of payment default. The FDIC-supervised institution must have adequate systems and procedures in place to monitor current outstanding amounts against committed lines, and changes in outstanding amounts per obligor and obligor rating grade and per retail segment. The FDIC-supervised institution must be able to monitor outstanding amounts on a daily basis.
(6) At a minimum, PD estimates for wholesale obligors and retail segments must be based on at least five years of default data. LGD estimates for wholesale exposures must be based on at least seven years of loss severity data, and LGD estimates for retail segments must be based on at least five years of loss severity data. EAD estimates for wholesale exposures must be based on at least seven years of exposure amount data, and EAD estimates for retail segments must be based on at least five years of exposure amount data. If the FDIC-supervised institution has relevant and material reference data that span a longer period of time than the minimum time periods specified above, the FDIC-supervised institution must incorporate such data in its estimates, provided that it does not place undue weight on periods of favorable or benign economic conditions relative to periods of economic downturn conditions.
(9) If an FDIC-supervised institution uses internal data obtained prior to becoming subject to this subpart E or external data to arrive at PD, LGD, or EAD estimates, the FDIC-supervised institution must demonstrate to the FDIC that the FDIC-supervised institution has made appropriate adjustments if necessary to be consistent with the definition of default in § 324.101. Internal data obtained after the FDIC-supervised institution becomes subject to this subpart E must be consistent with the definition of default in § 324.101.
(10) The FDIC-supervised institution must review and update (as appropriate) its risk parameters and its risk parameter quantification process at least annually.
(11) The FDIC-supervised institution must, at least annually, conduct a comprehensive review and analysis of reference data to the FDIC-supervised institution's exposures, quality of reference data to support PD, LGD, and EAD estimates, and consistency of reference data to the definition of default in § 324.101.
(i) * * *
(5) The FDIC-supervised institution must have an internal audit function or equivalent function that is independent of business-line management that at least annually:
(i) Reviews the FDIC-supervised institution's advanced systems and associated operations, including the operations of its credit function and estimations of PD, LGD, and EAD;
(ii) Assesses the effectiveness of the controls supporting the FDIC-supervised institution's advanced systems; and
(iii) Documents and reports its findings to the FDIC-supervised institution's board of directors (or a committee thereof).
The revisions read as follows:
(d) * * *
(5) * * *
(ii) An FDIC-supervised institution may take into account the risk reducing effects of guarantees and credit derivatives in support of retail exposures in a segment when quantifying the PD and LGD of the segment. In doing so, an FDIC-supervised institution must consider all relevant available information.
(iii) Except as provided in paragraph (d)(6) of this section, an FDIC-supervised institution may take into account the risk reducing effects of collateral in support of a wholesale exposure when quantifying the LGD of the exposure, and may take into account the risk reducing effects of collateral in support of retail exposures when quantifying the PD and LGD of the segment. In order to do so, an FDIC-supervised institution must have established internal requirements for collateral management, legal certainty, and risk management processes.
The revisions read as follows:
(c)
(d) * * *
(5) * * *
(iii) * * *
(B) Twenty business days if the number of trades in a netting set exceeds 5,000 at any time during the previous quarter (except if the FDIC-supervised institution is calculating EAD for a cleared transaction under § 324.133) or contains one or more trades involving illiquid collateral or any derivative contract that cannot be easily replaced. If over the two previous quarters more than two margin disputes on a netting set have occurred that lasted more than the margin period of risk, then the FDIC-supervised institution must use a margin period of risk for that netting set that is at least two times the minimum margin period of risk for that netting set. If the periodicity of the receipt of collateral is N-days, the minimum margin period of risk is the minimum margin period of risk under this paragraph (d) plus N minus 1. This period should be extended to cover any impediments to prompt re-hedging of any market risk.
The addition reads as follows:
(c) * * *
(3) * * *
(iii) Notwithstanding paragraphs (c)(3)(i) and (ii) of this section, a clearing member FDIC-supervised institution may apply a risk weight of 0 percent to the trade exposure amount for a cleared transaction with a CCP where the clearing member FDIC-supervised institution is acting as a financial intermediary on behalf of a clearing member client, the transaction offsets another transaction that satisfies the requirements set forth in § 324.3(a), and the clearing member FDIC-supervised institution is not obligated to reimburse the clearing member client in the event of the CCP default.
(d)(1) An FDIC-supervised institution that meets any of the criteria in § 324.100(b)(1) before January 1, 2015, must publicly disclose each quarter its supplementary leverage ratio and the components thereof (that is, tier 1 capital and total leverage exposure) as calculated under subpart B of this part, beginning with the first quarter in 2015. This disclosure requirement applies without regard to whether the FDIC-supervised institution has completed the parallel run process and received notification from the FDIC pursuant to § 324.121(d).
(2) An FDIC-supervised institution that meets any of the criteria in § 324.100(b)(1) on or after January 1, 2015, must publicly disclose each quarter its supplementary leverage ratio and the components thereof (that is, tier 1 capital and total leverage exposure) as calculated under subpart B of this part beginning with the calendar quarter immediately following the quarter in which the FDIC-supervised institution becomes an advanced approaches FDIC-supervised institution. This disclosure requirement applies without regard to whether the FDIC-supervised institution has completed the parallel run process and has received notification from the FDIC pursuant to § 324.121(d).
The revisions and additions read as follows:
(a)(1) An advanced approaches FDIC-supervised institution described in § 324.172(b) must make the disclosures described in Tables 1 through 12 to § 324.173.
(2) An advanced approaches FDIC-supervised institution that is required to publicly disclose its supplementary leverage ratio pursuant to § 324.172(d) must make the disclosures required under Table 13 to § 324.173, unless the FDIC-supervised institution is a consolidated subsidiary of a bank holding company, savings and loan holding company, or depository institution that is subject to these disclosures requirements or a subsidiary of a non-U.S. banking organization that is subject to comparable public disclosure requirements in its home jurisdiction.
(3) The disclosures described in Tables 1 through 12 to § 324.173 must be made publicly available for twelve consecutive quarters beginning on January 1, 2014, or a shorter period, as applicable, for the quarters after the FDIC-supervised institution has completed the parallel run process and received notification from the FDIC pursuant to section 121(d) of subpart E of this part. The disclosures described in Table 13 to § 324.173 must be made publicly available for twelve consecutive quarters beginning on January 1, 2015, or a shorter period, as applicable, for the quarters after the FDIC-supervised institution becomes subject to the disclosure of the supplementary leverage ratio pursuant to § 324.172(d).
By order of the Board of Directors.