This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
Rules and Regulations Federal Register
69365
Vol. 79, No. 225
Friday, November 21, 2014
1 77 FR 62417 (Oct. 15, 2012) (FDIC); 77 FR 61238
(October 9, 2012) (OCC); 77 FR 62396 (October 12,
2012) (Board).
2 12 CFR 325.202(d).
3 On an annual basis, prior to the start of the
stress testing period and no later than November 15,
the FDIC provides to covered banks a minimum of
three economic scenarios (baseline, adverse, and
severely adverse) and additional scenarios as the
FDIC determines appropriate for the covered banks
to use in performing their stress tests.
4 In addition, certain covered banks with
significant trading activities (as determined by the
FDIC) may be required to include a trading and
counterparty component for the scenarios used in
their stress tests.
5 12 CFR 325.204(a); 325.206(a); 325.207(a).
6 12 CFR 325.204(a); 325.206(a); 325.207(a).
7 12 CFR 325.207(b).
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 325
RIN 3064–AE18
Annual Stress Test
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Final rule.
SUMMARY: The Federal Deposit
Insurance Corporation (the Corporation
or FDIC) is issuing a final rule that
implements proposed revisions to
regulations regarding the annual stress
testing requirements for state
nonmember banks and state savings
associations with total consolidated
assets of more than $10 billion (covered
banks). The regulations, which
implement section 165(i)(2) of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act (the Dodd-
Frank Act), require covered banks to
conduct annual stress tests, report the
results of such stress tests to the
Corporation and the Board of Governors
of the Federal Reserve System (the
Board), and publicly disclose a
summary of the results of the required
stress tests. The final rule revises the
2016 stress test cycle and for years
thereafter to begin on January 1 of the
calendar year rather than October 1, as
is provided for by the current rule.
Additionally, the final rule modifies the
‘‘as of’’ dates for financial data (that
covered banks will use to perform their
stress tests) as well as the reporting
dates and public disclosure dates of the
annual stress tests for both $10 billion
to $50 billion covered banks and over
$50 billion covered banks.
DATES: This final rule is effective
January 1, 2015.
FOR FURTHER INFORMATION CONTACT:
Ryan Sheller, Section Chief, (202) 412–
4861, Large Bank Supervision, Division
of Risk Management and Supervision;
Mark G. Flanigan, Supervisory Counsel,
(202) 898–7426, Grace Pyun, Senior
Attorney, (202) 898–3609, or Benjamin
Klein, Senior Attorney, (202) 898–7027,
Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW., Washington, DC, 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Section 165(i) of the Dodd-Frank Act
requires two types of stress tests.
Section 165(i)(1) requires the Board to
conduct annual stress tests of holding
companies with $50 billion or more in
total consolidated assets (‘‘supervisory
stress tests’’). Section 165(i)(2) of the
Dodd-Frank Act requires the federal
banking agencies to issue regulations
requiring financial companies with
more than $10 billion in total
consolidated assets to conduct annual
stress tests themselves (company-run
stress tests), and it requires that the
implementing regulations issued by
each of the federal banking agencies be
consistent and comparable with each
other. In October 2012, the FDIC, the
Office of the Comptroller of the
Currency (the OCC), and the Board
(collectively the Agencies) issued final
rules 1 implementing the company-run
stress tests requirements. The FDIC’s
final rule was codified as part 325,
subpart C of the FDIC rules and
regulations (the Annual Stress Test
rule). The Annual Stress Test rule
requires FDIC-insured state nonmember
banks and FDIC-insured state-chartered
savings associations with total
consolidated assets of more than $10
billion to conduct annual stress tests.
Part 325, subpart C identifies two
categories of covered banks. The first
category includes state nonmember
banks and state savings associations that
have between $10 billion and $50
billion in total consolidated assets, and
the second category includes state
nonmember banks and state savings
associations with over $50 billion in
total consolidated assets.2 For both
categories of covered banks, the
company-run stress test must assess the
potential impact of different scenarios 3
on the capital of the covered bank and
certain related items over a forward-
looking, nine-quarter planning horizon,
taking into account all relevant
exposures and activities.4
Part 325, subpart C also provides
timeframes for the testing, reporting,
and publication of the company-run
stress tests, which vary depending on
the category into which the covered
bank falls. Covered banks use financial
data as of September 30 (the ‘‘as of’’
date) of the preceding calendar year to
make projections that estimate their
financial position under the different
stress scenarios, and to report and
publish the results of their annual stress
test in the following calendar year.
Covered banks with $10 billion to $50
billion in total assets must report the
results of their stress tests by March 31
and publish a summary of their results
between June 15 and June 30.5 Over $50
billion covered banks are required to
report the results of their annual stress
test by January 5 of each calendar year
and publish a summary of their results
between March 15 and March 31.6
These testing, reporting, and publication
milestones are consistent across the
federal banking agencies’ respective
annual stress testing rules.
A covered bank that is a consolidated
subsidiary of a bank holding company
or savings and loan holding company
subject to company-run stress test
requirements administered by the Board
is generally permitted to publish
abbreviated disclosures of its annual
stress test results with the parent
holding company’s summary and on the
same timeline as the parent holding
company.7 The FDIC requires that
specific information be included in the
disclosure to reflect the changes in the
covered bank’s capital ratios and the
reasons for those changes.
Since the publication and codification
of the Annual Stress Test rule, the
Agencies have received feedback from
the industry regarding the resource
VerDate Sep<11>2014 14:49 Nov 20, 2014 Jkt 235001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\21NOR1.SGM 21NOR1
rljohnson on DSK3VPTVN1PROD with RULES
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
Rules and Regulations Federal Register
69365
Vol. 79, No. 225
Friday, November 21, 2014
1 77 FR 62417 (Oct. 15, 2012) (FDIC); 77 FR 61238
(October 9, 2012) (OCC); 77 FR 62396 (October 12,
2012) (Board).
2 12 CFR 325.202(d).
3 On an annual basis, prior to the start of the
stress testing period and no later than November 15,
the FDIC provides to covered banks a minimum of
three economic scenarios (baseline, adverse, and
severely adverse) and additional scenarios as the
FDIC determines appropriate for the covered banks
to use in performing their stress tests.
4 In addition, certain covered banks with
significant trading activities (as determined by the
FDIC) may be required to include a trading and
counterparty component for the scenarios used in
their stress tests.
5 12 CFR 325.204(a); 325.206(a); 325.207(a).
6 12 CFR 325.204(a); 325.206(a); 325.207(a).
7 12 CFR 325.207(b).
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 325
RIN 3064–AE18
Annual Stress Test
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Final rule.
SUMMARY: The Federal Deposit
Insurance Corporation (the Corporation
or FDIC) is issuing a final rule that
implements proposed revisions to
regulations regarding the annual stress
testing requirements for state
nonmember banks and state savings
associations with total consolidated
assets of more than $10 billion (covered
banks). The regulations, which
implement section 165(i)(2) of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act (the Dodd-
Frank Act), require covered banks to
conduct annual stress tests, report the
results of such stress tests to the
Corporation and the Board of Governors
of the Federal Reserve System (the
Board), and publicly disclose a
summary of the results of the required
stress tests. The final rule revises the
2016 stress test cycle and for years
thereafter to begin on January 1 of the
calendar year rather than October 1, as
is provided for by the current rule.
Additionally, the final rule modifies the
‘‘as of’’ dates for financial data (that
covered banks will use to perform their
stress tests) as well as the reporting
dates and public disclosure dates of the
annual stress tests for both $10 billion
to $50 billion covered banks and over
$50 billion covered banks.
DATES: This final rule is effective
January 1, 2015.
FOR FURTHER INFORMATION CONTACT:
Ryan Sheller, Section Chief, (202) 412–
4861, Large Bank Supervision, Division
of Risk Management and Supervision;
Mark G. Flanigan, Supervisory Counsel,
(202) 898–7426, Grace Pyun, Senior
Attorney, (202) 898–3609, or Benjamin
Klein, Senior Attorney, (202) 898–7027,
Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW., Washington, DC, 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Section 165(i) of the Dodd-Frank Act
requires two types of stress tests.
Section 165(i)(1) requires the Board to
conduct annual stress tests of holding
companies with $50 billion or more in
total consolidated assets (‘‘supervisory
stress tests’’). Section 165(i)(2) of the
Dodd-Frank Act requires the federal
banking agencies to issue regulations
requiring financial companies with
more than $10 billion in total
consolidated assets to conduct annual
stress tests themselves (company-run
stress tests), and it requires that the
implementing regulations issued by
each of the federal banking agencies be
consistent and comparable with each
other. In October 2012, the FDIC, the
Office of the Comptroller of the
Currency (the OCC), and the Board
(collectively the Agencies) issued final
rules 1 implementing the company-run
stress tests requirements. The FDIC’s
final rule was codified as part 325,
subpart C of the FDIC rules and
regulations (the Annual Stress Test
rule). The Annual Stress Test rule
requires FDIC-insured state nonmember
banks and FDIC-insured state-chartered
savings associations with total
consolidated assets of more than $10
billion to conduct annual stress tests.
Part 325, subpart C identifies two
categories of covered banks. The first
category includes state nonmember
banks and state savings associations that
have between $10 billion and $50
billion in total consolidated assets, and
the second category includes state
nonmember banks and state savings
associations with over $50 billion in
total consolidated assets.2 For both
categories of covered banks, the
company-run stress test must assess the
potential impact of different scenarios 3
on the capital of the covered bank and
certain related items over a forward-
looking, nine-quarter planning horizon,
taking into account all relevant
exposures and activities.4
Part 325, subpart C also provides
timeframes for the testing, reporting,
and publication of the company-run
stress tests, which vary depending on
the category into which the covered
bank falls. Covered banks use financial
data as of September 30 (the ‘‘as of’’
date) of the preceding calendar year to
make projections that estimate their
financial position under the different
stress scenarios, and to report and
publish the results of their annual stress
test in the following calendar year.
Covered banks with $10 billion to $50
billion in total assets must report the
results of their stress tests by March 31
and publish a summary of their results
between June 15 and June 30.5 Over $50
billion covered banks are required to
report the results of their annual stress
test by January 5 of each calendar year
and publish a summary of their results
between March 15 and March 31.6
These testing, reporting, and publication
milestones are consistent across the
federal banking agencies’ respective
annual stress testing rules.
A covered bank that is a consolidated
subsidiary of a bank holding company
or savings and loan holding company
subject to company-run stress test
requirements administered by the Board
is generally permitted to publish
abbreviated disclosures of its annual
stress test results with the parent
holding company’s summary and on the
same timeline as the parent holding
company.7 The FDIC requires that
specific information be included in the
disclosure to reflect the changes in the
covered bank’s capital ratios and the
reasons for those changes.
Since the publication and codification
of the Annual Stress Test rule, the
Agencies have received feedback from
the industry regarding the resource
VerDate Sep<11>2014 14:49 Nov 20, 2014 Jkt 235001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\21NOR1.SGM 21NOR1
rljohnson on DSK3VPTVN1PROD with RULES
69366 Federal Register / Vol. 79, No. 225 / Friday, November 21, 2014 / Rules and Regulations
8 79 FR 37235 (July 1, 2014) (FDIC); 79 FR 37231
(OCC); 79 FR 37420 (Board).
constraints that covered banks face at
the beginning and end of the calendar
year arising from competing regulatory
and reporting deadlines. Furthermore,
the Agencies are aware that conducting
stress testing during the last quarter of
a calendar year may also make it
difficult for covered banks to make
timely modifications to strategic and
operational plans for the following year
that address any issues identified in the
company-run stress test results.
For these reasons, on July 1, 2014, the
FDIC, in coordination with the Board
and the OCC, issued a notice of
proposed rulemaking (the NPR) in the
Federal Register that proposed to
modify the dates of the stress test cycle
and the corresponding reporting and
publication deadlines. The NPR
proposed to shift the testing, reporting,
and disclosure dates for the 2016
company-run stress test cycle and each
annual cycle thereafter.8 The
Corporation is now issuing a final rule
modifying the dates of the stress test
cycle and the corresponding reporting
and publication deadlines as proposed
in the NPR, as described further below.
The final rule will be consistent with
final rules issued by the OCC and Board
making the same date modifications to
the stress testing cycle, agency
reporting, and public disclosure.
II. Comments Received
The NPR solicited public comment on
all aspects of the proposed rule. The
NPR’s comment period ended on
September 2, 2014, and the FDIC
received five comment letters.
Comments were submitted by, or on
behalf of, individuals, banks and bank
holding companies, and banking and
financial services industry trade groups
and associations. The commenters
generally supported the proposed
revisions in the NPR, but also requested
additional revisions to the proposed
timeline shifts.
The commenters supported the
proposed timing shift for the start of the
stress test cycles to address the
challenges to banking organizations and
personnel presented at the end of the
calendar year. Some commenters
encouraged the FDIC to accelerate
implementation of the proposed
changes so that the adjusted timeframes
apply beginning with the 2015 stress
test cycle, rather than with the 2016
stress test cycle. The final rule adopts
the proposed revisions to the start of the
stress test cycle and related dates, but
does not accelerate the implementation
of the modified dates. The transition
period is necessary to give the FDIC and
banking organizations sufficient time to
revise reporting schedules and change
internal systems. As such, the new
timeline will become applicable to the
stress testing cycle that begins on
January 1, 2016.
Commenters also requested that the
FDIC provide stress test scenarios by no
later than January 15 of a given calendar
year given the compressed timeframe for
implementation of stress testing
processes. In developing the scenarios,
the FDIC seeks to provide covered banks
with sufficient time to conduct the
annual stress tests, while also ensuring
that the scenarios reflect timely data on
economic and financial conditions.
Under the revised timeline, the FDIC
expects to provide stress test scenarios
as soon as possible and before the
deadlines set by the final rule.
Accordingly, the FDIC has adopted this
aspect of the proposal without
significant change.
Commenters additionally requested
that the length of the planning horizon
be reduced from nine quarters to eight
quarters. The NPR would have shifted
the stress testing timeline by one
quarter, but would have maintained the
nine-quarter planning horizon. The
commenters argued that the ninth
quarter does not provide additional
meaningful information given the
incremental uncertainty in projections
as they move further into the future, and
that eight quarters would still represent
two full years of capital planning. The
FDIC believes that the ninth quarter
period provides meaningful information
to the Agencies in assessing the
projections of covered banks.
Accordingly, the final rule maintains
the nine-quarter planning horizon.
Commenters also requested that the
Agencies delay incorporation of
advanced approaches risk-based capital
rules into the annual stress testing
process indefinitely. The NPR proposed
to revise the testing and reporting dates
and did not address the application of
the risk-based capital rules. As such, the
FDIC believes that technical aspects of
projecting risk-based capital
requirements under the advanced
approaches should be dealt with on a
case-by-case basis and through the
supervisory process.
III. The Final Rule
After reviewing the comments, the
FDIC is issuing this final rule to
implement the changes proposed in the
NPR to part 325, subpart C of the FDIC
Rules and Regulations.
A. Company-Run Stress Test Timelines
Beginning January 1, 2016, the stress
testing cycle that, under the previous
rule, would have begun on October 1 of
a given calendar year, will begin January
1 of a given calendar year. Beginning
with the 2016 stress-testing cycle, the
final rule requires covered banks to
conduct company-run stress tests using
financial data as of December 31 of the
preceding calendar year, which
represents a three-month shift from
September 30 in the previous rule. The
FDIC will provide the economic
scenarios to be used by covered banks
in their company-run stress tests no
later than February 15, rather than
November 15, as is provided under the
previous rule. For those certain covered
banks with significant amounts of
trading activities that are required to
include trading and counterparty
components in their adverse and
severely adverse scenarios, the FDIC
will select an ‘‘as of’’ date between
January 1 and March 1 of a calendar
year for the data used in this
component. The FDIC will
communicate this date to the covered
banks no later than March 1.
All $10 billion to $50 billion covered
banks will be required to conduct and
submit the results of their company-run
stress tests to the FDIC by July 31 and
publish those results during a period
beginning on October 15 and ending
October 31. Over $50 billion covered
banks will be required to conduct and
submit the results of their company-run
stress tests to the FDIC by April 5 and
publish those results during a period
beginning on June 15 and ending on
July 15. The April 5 reporting deadline
for over $50 billion covered banks is a
minor change from the April 7 deadline
proposed in the NPR.
Furthermore, a covered bank that is a
consolidated subsidiary of a bank
holding company or savings and loan
holding company that is required to
conduct an annual company-run stress
test under applicable regulations of the
Board may continue to elect to conduct
its stress test and report to the FDIC on
the same timeline as its parent bank
holding company or savings and loan
holding company as it had under the
previous rule. Under the final rule,
however, an over $50 billion covered
bank that is a consolidated subsidiary of
a holding company that is subject to
supervisory stress tests conducted by
the Board under 12 CFR part 252 may
publish the required summary of its
company-run stress test no earlier than
the date that the Board publishes the
supervisory stress test results for the
parent holding company, but no later
VerDate Sep<11>2014 14:49 Nov 20, 2014 Jkt 235001 PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 E:\FR\FM\21NOR1.SGM 21NOR1
rljohnson on DSK3VPTVN1PROD with RULES
8 79 FR 37235 (July 1, 2014) (FDIC); 79 FR 37231
(OCC); 79 FR 37420 (Board).
constraints that covered banks face at
the beginning and end of the calendar
year arising from competing regulatory
and reporting deadlines. Furthermore,
the Agencies are aware that conducting
stress testing during the last quarter of
a calendar year may also make it
difficult for covered banks to make
timely modifications to strategic and
operational plans for the following year
that address any issues identified in the
company-run stress test results.
For these reasons, on July 1, 2014, the
FDIC, in coordination with the Board
and the OCC, issued a notice of
proposed rulemaking (the NPR) in the
Federal Register that proposed to
modify the dates of the stress test cycle
and the corresponding reporting and
publication deadlines. The NPR
proposed to shift the testing, reporting,
and disclosure dates for the 2016
company-run stress test cycle and each
annual cycle thereafter.8 The
Corporation is now issuing a final rule
modifying the dates of the stress test
cycle and the corresponding reporting
and publication deadlines as proposed
in the NPR, as described further below.
The final rule will be consistent with
final rules issued by the OCC and Board
making the same date modifications to
the stress testing cycle, agency
reporting, and public disclosure.
II. Comments Received
The NPR solicited public comment on
all aspects of the proposed rule. The
NPR’s comment period ended on
September 2, 2014, and the FDIC
received five comment letters.
Comments were submitted by, or on
behalf of, individuals, banks and bank
holding companies, and banking and
financial services industry trade groups
and associations. The commenters
generally supported the proposed
revisions in the NPR, but also requested
additional revisions to the proposed
timeline shifts.
The commenters supported the
proposed timing shift for the start of the
stress test cycles to address the
challenges to banking organizations and
personnel presented at the end of the
calendar year. Some commenters
encouraged the FDIC to accelerate
implementation of the proposed
changes so that the adjusted timeframes
apply beginning with the 2015 stress
test cycle, rather than with the 2016
stress test cycle. The final rule adopts
the proposed revisions to the start of the
stress test cycle and related dates, but
does not accelerate the implementation
of the modified dates. The transition
period is necessary to give the FDIC and
banking organizations sufficient time to
revise reporting schedules and change
internal systems. As such, the new
timeline will become applicable to the
stress testing cycle that begins on
January 1, 2016.
Commenters also requested that the
FDIC provide stress test scenarios by no
later than January 15 of a given calendar
year given the compressed timeframe for
implementation of stress testing
processes. In developing the scenarios,
the FDIC seeks to provide covered banks
with sufficient time to conduct the
annual stress tests, while also ensuring
that the scenarios reflect timely data on
economic and financial conditions.
Under the revised timeline, the FDIC
expects to provide stress test scenarios
as soon as possible and before the
deadlines set by the final rule.
Accordingly, the FDIC has adopted this
aspect of the proposal without
significant change.
Commenters additionally requested
that the length of the planning horizon
be reduced from nine quarters to eight
quarters. The NPR would have shifted
the stress testing timeline by one
quarter, but would have maintained the
nine-quarter planning horizon. The
commenters argued that the ninth
quarter does not provide additional
meaningful information given the
incremental uncertainty in projections
as they move further into the future, and
that eight quarters would still represent
two full years of capital planning. The
FDIC believes that the ninth quarter
period provides meaningful information
to the Agencies in assessing the
projections of covered banks.
Accordingly, the final rule maintains
the nine-quarter planning horizon.
Commenters also requested that the
Agencies delay incorporation of
advanced approaches risk-based capital
rules into the annual stress testing
process indefinitely. The NPR proposed
to revise the testing and reporting dates
and did not address the application of
the risk-based capital rules. As such, the
FDIC believes that technical aspects of
projecting risk-based capital
requirements under the advanced
approaches should be dealt with on a
case-by-case basis and through the
supervisory process.
III. The Final Rule
After reviewing the comments, the
FDIC is issuing this final rule to
implement the changes proposed in the
NPR to part 325, subpart C of the FDIC
Rules and Regulations.
A. Company-Run Stress Test Timelines
Beginning January 1, 2016, the stress
testing cycle that, under the previous
rule, would have begun on October 1 of
a given calendar year, will begin January
1 of a given calendar year. Beginning
with the 2016 stress-testing cycle, the
final rule requires covered banks to
conduct company-run stress tests using
financial data as of December 31 of the
preceding calendar year, which
represents a three-month shift from
September 30 in the previous rule. The
FDIC will provide the economic
scenarios to be used by covered banks
in their company-run stress tests no
later than February 15, rather than
November 15, as is provided under the
previous rule. For those certain covered
banks with significant amounts of
trading activities that are required to
include trading and counterparty
components in their adverse and
severely adverse scenarios, the FDIC
will select an ‘‘as of’’ date between
January 1 and March 1 of a calendar
year for the data used in this
component. The FDIC will
communicate this date to the covered
banks no later than March 1.
All $10 billion to $50 billion covered
banks will be required to conduct and
submit the results of their company-run
stress tests to the FDIC by July 31 and
publish those results during a period
beginning on October 15 and ending
October 31. Over $50 billion covered
banks will be required to conduct and
submit the results of their company-run
stress tests to the FDIC by April 5 and
publish those results during a period
beginning on June 15 and ending on
July 15. The April 5 reporting deadline
for over $50 billion covered banks is a
minor change from the April 7 deadline
proposed in the NPR.
Furthermore, a covered bank that is a
consolidated subsidiary of a bank
holding company or savings and loan
holding company that is required to
conduct an annual company-run stress
test under applicable regulations of the
Board may continue to elect to conduct
its stress test and report to the FDIC on
the same timeline as its parent bank
holding company or savings and loan
holding company as it had under the
previous rule. Under the final rule,
however, an over $50 billion covered
bank that is a consolidated subsidiary of
a holding company that is subject to
supervisory stress tests conducted by
the Board under 12 CFR part 252 may
publish the required summary of its
company-run stress test no earlier than
the date that the Board publishes the
supervisory stress test results for the
parent holding company, but no later
VerDate Sep<11>2014 14:49 Nov 20, 2014 Jkt 235001 PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 E:\FR\FM\21NOR1.SGM 21NOR1
rljohnson on DSK3VPTVN1PROD with RULES