Agency Information Collection Activities: Announcement of Board Approval Under Delegated Authority and Submission to OMB
| Published date | 30 December 2020 |
| Citation | 85 FR 86560 |
| Record Number | 2020-28788 |
| Section | Notices |
| Court | Federal Reserve System |
Federal Register, Volume 85 Issue 250 (Wednesday, December 30, 2020)
[Federal Register Volume 85, Number 250 (Wednesday, December 30, 2020)]
[Notices]
[Pages 86560-86566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28788]
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FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Announcement of Board
Approval Under Delegated Authority and Submission to OMB
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Approval of information collection.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
has adopted two proposals to extend for three years, with revision, the
Capital Assessments and Stress Testing Reports (FR Y-14A/Q/M; OMB No.
7100-0341). The revisions are effective for the December 31, 2020, as
of date.
FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance
Officer--Nuha Elmaghrabi--Office of the Chief Data Officer, Board of
Governors of the Federal Reserve System, Washington, DC 20551, (202)
452-3829. Office of Management and Budget (OMB) Desk Officer--Shagufta
Ahmed--Office of Information and Regulatory Affairs, Office of
[[Page 86561]]
Management and Budget, New Executive Office Building, Room 10235, 725
17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
SUPPLEMENTARY INFORMATION: On June 15, 1984, OMB delegated to the Board
authority under the PRA to approve and assign OMB control numbers to
collections of information conducted or sponsored by the Board. Board-
approved collections of information are incorporated into the official
OMB inventory of currently approved collections of information. The OMB
inventory, as well as copies of the PRA Submission, supporting
statements, and approved collection of information instrument(s) are
available at https://www.reginfo.gov/public/do/PRAMain. These documents
are also available on the Federal Reserve Board's public website at
https://www.federalreserve.gov/apps/reportforms/review.aspx or may be
requested from the agency clearance officer, whose name appears above.
Final Approval Under OMB Delegated Authority of the Extension for Three
Years, With Revision, of the Following Information Collection
Report title: Capital Assessments and Stress Testing Reports.
Agency form number: FR Y-14A/Q/M.
OMB control number: 7100-0341.
Frequency: Annually, quarterly, and monthly.
Respondents: These collections of information are applicable to
bank holding companies (BHCs), U.S. intermediate holding companies
(IHCs), and savings and loan holding companies (SLHCs) \1\ with $100
billion or more in total consolidated assets, as based on: (i) The
average of the firm's total consolidated assets in the four most recent
quarters as reported quarterly on the firm's Consolidated Financial
Statements for Holding Companies (FR Y-9C); or (ii) if the firm has not
filed an FR Y-9C for each of the most recent four quarters, then the
average of the firm's total consolidated assets in the most recent
consecutive quarters as reported quarterly on the firm's FR Y-9Cs.
Reporting is required as of the first day of the quarter immediately
following the quarter in which the respondent meets this asset
threshold, unless otherwise directed by the Board.
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\1\ SLHCs with $100 billion or more in total consolidated assets
became members of the FR Y-14Q and FR Y-14M panels effective June
30, 2020, and become members of the FR Y-14A panel effective
December 31, 2020. See 84 FR 59032 (November 1, 2019).
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Estimated number of respondents: FR Y-14A/Q: 36; FR Y-14M: 34.\2\
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\2\ The estimated number of respondents for the FR Y-14M is
lower than for the FR Y-14Q and FR Y-14A because, in recent years,
certain respondents to the FR Y-14A and FR Y-14Q have not met the
materiality thresholds to report the FR Y-14M due to their lack of
mortgage and credit activities. The Board expects this situation to
continue for the foreseeable future.
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Estimated average hours per response: FR Y-14A: 1,186 hours; FR Y-
14Q: 2,203 hours; FR Y-14M: 1,072 hours; FR Y-14 On-going Automation
Revisions: 480 hours; FR Y-14 Attestation On-going Attestation: 2,560
hours.
Estimated annual burden hours: FR Y-14A: 42,696 hours; FR Y-14Q:
317,232 hours; FR Y-14M: 437,376 hours; FR Y-14 On-going Automation
Revisions: 17,280 hours; FR Y-14 Attestation On-going Attestation:
33,280 hours.
General description of report: This family of information
collections is composed of the following three reports:
The annual FR Y-14A collects quantitative projections of
balance sheet, income, losses, and capital across a range of
macroeconomic scenarios and qualitative information on methodologies
used to develop internal projections of capital across scenarios.\3\
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\3\ On October 10, 2019, the Board issued a final rule that
eliminated the requirement for firms subject to Category IV
standards to conduct and publicly disclose the results of a company-
run stress test. See 84 FR 59032 (Nov. 1, 2019). That final rule
maintained the existing FR Y-14 substantive reporting requirements
for these firms in order to provide the Board with the data it needs
to conduct supervisory stress testing and inform the Board's ongoing
monitoring and supervision of its supervised firms. However, as
noted in the final rule, the Board intends to provide greater
flexibility to banking organizations subject to Category IV
standards in developing their annual capital plans and consider
further change to the FR Y-14 reports. See 84 FR 59032, 59063. In
October 2020, the Board invited comment on a proposal that would
relieve firms subject to Category IV standards of the requirement to
report their company-run stress test results on the FR Y-14A and
would make certain other revisions to the FR Y-14 reports. 85 FR
63222 (Oct. 7, 2020).
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The quarterly FR Y-14Q collects granular data on various
asset classes, including loans, securities, trading assets, and PPNR
for the reporting period.
The monthly FR Y-14M is comprised of three retail
portfolio- and loan-level schedules, and one detailed address-matching
schedule to supplement two of the portfolio and loan-level schedules.
The data collected through the FR Y-14A/Q/M reports (FR Y-14
reports) provide the Board with the information needed to help ensure
that large firms have strong, firm[hyphen]wide risk measurement and
management processes supporting their internal assessments of capital
adequacy and that their capital resources are sufficient given their
business focus, activities, and resulting risk exposures. The reports
are used to support the Board's annual Comprehensive Capital Analysis
and Review (CCAR) and Dodd-Frank Act Stress Test (DFAST) exercises,
which complement other Board supervisory efforts aimed at enhancing the
continued viability of large firms, including continuous monitoring of
firms' planning and management of liquidity and funding resources, as
well as regular assessments of credit, market and operational risks,
and associated risk management practices. Information gathered in this
data collection is also used in the supervision and regulation of
respondent financial institutions. Respondent firms are currently
required to complete and submit up to 17 filings each year: One annual
FR Y-14A filing, four quarterly FR Y-14Q filings, and 12 monthly FR Y-
14M filings. Compliance with the information collection is mandatory.
Current actions: On July 8, 2020, the Board published a notice in
the Federal Register,\4\ which temporarily revised and requested public
comment for 60 days on the extension, with revision, of the FR Y-14
reports. The temporary revisions captured data pertaining to certain
aspects of the Coronavirus Aid, Relief, and Economic Security Act,
information on firm activity associated with various Federal Reserve
lending facilities, and information regarding emerging risks arising
from the coronavirus disease 2019 (COVID) event. In addition to a
proposal to extend these temporary revisions, the notice proposed
revisions to the FR Y-14 reports intended to address questions related
to the reporting of certain current expected credit losses (CECL) and
capital data. The comment period for this notice expired on September
8, 2020. The Board received two comment letters from banking industry
groups and one comment letter from a banking organization.
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\4\ See 85 FR 41040 (July 8, 2020).
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On September 17, 2020, the Board published another notice in the
Federal Register,\5\ which temporarily revised and requested public
comment for 60 days on the extension, with revision, of the FR Y-14
reports. The temporary revisions implemented changes necessary to
collect information used to conduct additional analysis in connection
with the resubmission of firms' capital plans, including consideration
of the global market shock (GMS) component, using data as of June
[[Page 86562]]
30, 2020. In addition to these temporary revisions, the notice proposed
revisions to the FR Y-14 reports that would have allowed the Board to
require the submission of additional FR Y-14A and FR Y-14Q data in
connection with a firm's resubmission of its capital plan. The comment
period for this notice expired on November 16, 2020. The Board did not
receive any comments on this notice.
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\5\ See 85 FR 58048 (September 17, 2020).
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The Board has approved the extension of the FR Y-14 reports for
three years, with revision. These revisions include adopting most of
the temporary revisions announced in the July 8, 2020, with minor
changes in response to public comments, for three additional months.
The temporary revisions will automatically expire following the March
31, 2021, as of date. In addition, the Board has adopted the revisions
related to CECL and capital data that were proposed in the July 8,
2020, notice, as well as the revisions related to FR Y-14 submission
requirements in connection with a firm's resubmission of its capital
plan that were proposed in the September 17, 2020, notice. All
revisions are effective beginning with the December 31, 2020, as of
date.
Detailed Discussion of Public Comments
General
Adoption of Temporary Revisions
The Board solicited comment on a proposal to extend the temporary
revisions included in the July 8, 2020, notice for three years, while
noting that the temporary revisions would automatically expire
following the December 31, 2020, as of date, unless explicitly
reauthorized by the Board. Two commenters recommended that the Board
only reauthorize specific temporary revisions to the extent those
revisions are critical, and to keep in mind firm resource constraints
during the COVID event when deciding whether to reauthorize any
temporary revisions. Additionally, two commenters recommended the Board
provide reporting firms and the public as much notice as possible,
preferably at least three months, before requiring firms to continue to
report any reauthorized revisions, in order to ease the reporting
burden.
Given ongoing economic uncertainty surrounding the COVID event, the
Board has adopted the proposal to extend the FR Y-14 reports with most
of these revisions with certain changes that are effective for the
December 31, 2020, as of date. However, in order to reduce reporting
burden, temporary revisions associated with Federal Reserve lending
facilities that are set to expire at the end of December 2020,
including the Main Street Lending Program (MSLP), will only remain in
place through the December 31, 2020, as of date. All other temporary
revisions will remain in place through the reports as of March 31,
2021.
Submission Frequency
The Board temporarily revised the FR Y-14Q instructions to indicate
that in times of crisis, the Board may temporarily request submissions
of schedules more frequently than firms are generally required to
submit the schedules. One commenter stated that requiring FR Y-14Q
schedules more frequently would cause reporting burden on firms, and
requested that any more frequent submission of schedules be required
only if firms are given at least 60 days' notice and if possible, an
opportunity to provide comments.
The Board notes that requiring any FR Y-14Q schedules more
frequently than firms generally are required to submit them would only
be done in times of crisis, and the Board would provide firms with as
much notice as possible given the circumstances.
FR Y-14 Reporting Questions
The Board did not temporarily revise or propose to revise its
current process for responding to FR Y-14 reporting questions. One
commenter requested that the Board expedite its responses to reporting
questions associated the FR Y-14 temporary revisions given that the
temporary revisions were implemented prior to the public comment
period.
The Board strives to respond to all FR Y-14 reporting questions it
receives from firms as soon as possible. Some questions require
significant time to research. The Board notes that it has responded
promptly to many questions regarding the temporary revisions to the FR
Y-14.
Supplemental Collections
At times, the Board has requested that certain firms submit
supplemental collections that provide alternative breakouts of FR Y-14
data that are not available from other sources in conjunction with the
FR Y-14 data submitted for use in the DFAST and CCAR exercises. One
commenter requested that the Board incorporate all supplemental
collections into the FR Y-14 report so firms can adequately plan for
the data requirements surrounding a given FR Y-14 submission.
The Board has incorporated several supplemental collections into
the FR Y-14 report. For example, as finalized on September 14, 2020,\6\
the Board incorporated three supplemental collections into the FR Y-14Q
report (two were incorporated into Schedule F (Trading) and one was
incorporated into Schedule M (Balances)). Where appropriate, the Board
will continue to incorporate supplemental collections into the FR Y-14
report.
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\6\ See 85 FR 56607 (September 14, 2020).
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Wholesale
Submission Frequency
The Board temporarily revised FR Y-14Q, Schedule H (Wholesale) to
be reported monthly instead of quarterly for firms subject to Category
I-III standards. Two commenters stated that certain items on Schedule H
are not available or are not collected by firms from third parties on a
monthly basis, and that firm resources are already constrained as a
result of the COVID event. Per the commenter, firms have not been able
to make permanent technological changes and have not been able to put
adequate resources towards a more streamlined solution to obtain and
verify data on a monthly basis due to the fact that this reporting
frequency change went into effect prior to the public comment period,
as well as the fact that this revision could have expired following the
December 31, 2020, as of date (i.e., Schedule H would revert to being
reported quarterly for all firms).
As indicated in the Schedule H instructions, the Board has
identified certain items that are not required for the monthly Schedule
H submissions that do not coincide with quarter ends (e.g., as of July
31). The remaining items are needed on a monthly basis in order to
assess the current economic status and to better understand potential
shifts in the risk profiles of firms. The Board acknowledges that some
items are not collected by third parties or are not available on a
monthly basis. In those cases, firms should report the information
available to the firm on a given as of date. In addition, the
instructions for several items allow firms to report the most recently
updated data or ``NA'' if updated information is not available.
Data Quality Checks
The Board performs quality checks on data submitted through
regulatory reports, such as the FR Y-14 reports. Two commenters
suggested that the Board should exclude certain quality checks for FR
Y-14Q, Schedule H (Wholesale) data submitted on a monthly basis, as
certain quality checks
[[Page 86563]]
are tied to other regulatory reports that are submitted quarterly
(e.g., FR Y-9C). The commenters went on to say that responding to these
quality checks on a monthly basis is particularly challenging as firm
resources are constrained by the COVID event. One commenter stated that
in some cases, values reported in certain ``Obligor Financial Data''
items (items 52 through 82) of Schedule H.1 (Corporate) do not factor
into the credit decision for a given exposure, such as in cases of
startup companies with limited or no available financial data. In these
cases, the commenter recommends that in order to reduce burden, firms
should be allowed to report ``NA'' for certain ``Obligor Financial
Data'' items and not be required to address any associated data quality
checks.
In order to facilitate the monthly Schedule H submission process,
the Board has reduced the number of edit responses required for non-
quarter end submissions. For example, the Board has not been running
data quality checks for non-quarter end monthly Schedule H submissions
that compare values to the FR Y-9C.
Main Street Lending Program
The Board temporarily revised FR Y-14Q, Schedule H (Wholesale) to
require firms to report only their exposures to loans associated with
the MSLP (i.e., not include the amount participated to third parties or
the unused portion of loan commitments). For other exposures reported
on Schedule H, firms are required to include the amount participated to
third parties, as well as the unused portion of loan commitments, as
part of the reporting firm's total lending commitment. One commenter
expressed concern that this divergence would cause an issue when
comparing commitments on Schedule H to those reported on the FR Y-9C,
which is referenced in the instructions for several Schedule H items.
The commenter stated that this different treatment for commitment
reporting is causing operational burden for firms, and recommends that
loans associated with the MSLP be reported consistently with other
loans reported on Schedule H.
The Board did not intend to require different treatment for loans
associated with the MSLP compared to other commitments reported on
Schedule H. In light of the concerns raised by the commenter, the Board
has revised the Schedule H instructions to align the reporting of
commitments to loans associated with the MSLP with other commitments
reported on the schedule, effective for the December 31, 2020, as of
date.
Internal Risk Rating Schedule
The Board did not temporarily revise or propose to revise FR Y-14Q,
Schedule H.4 (Internal Risk Rating). One commenter suggested that the
Board expand Schedule H.4 to require additional items, such as
probability of default information, which would provide the Board with
better context for understanding firms' internal risk ratings. The
commenter also suggested that the Board revise Schedule H.4 to
correspond with FR Y-14Q, Schedule L (Counterparty), as both schedules
require an internal and external rating equivalent factor.
The Board notes that firms are currently allowed to provide as much
detail as possible in the free text description of Schedule H.4, item 1
(``Internal Risk Rating''). For example, firms can provide information
that would provide a better understanding their internal ratings, such
as external rating equivalent data points. The Board intends to
consider adding items to Schedule H.4 that would provide more context
to the data submitted as part of a future notice. However, the Board
has not expanded Schedule H.4 to correspond with Schedule L, as the
data between the two schedules does not readily align.
Collateral Market Value
The current FR Y-14Q, Schedule H.1 (Corporate), item 93,
``Collateral Market Value,'' instructions require firms to report the
market value of collateral as of the reporting date, and to report
``NA'' if the value of the collateral has not been updated since
reported on the previous Schedule H.1 submission. The Board did not
temporarily revise or propose to revise Schedule H.1, item 93. One
commenter pointed out that the instructions for Schedule H.1, item 93
do not specify how to report the value of collateral that is typically
recorded at book value, such as receivables and inventory comprising a
borrowing base for asset-based lending. To ensure consistent reporting
across firms, the commenter recommended that the Board clarify how item
93 should be reported for types of collateral that not typically
recorded at market value.
For consistency across exposures, firms should continue to report
in line with the current instructions. The Board has not revised the
Schedule H.1, item 93 instructions to allow for reporting at book
value.
Past Due Reporting
The Board did not temporarily revise or propose to revise the
reporting of past due exposures in the ``# Days Principal or Interest
Past Due'' items (Schedule H.1, item 32; Schedule H.2, item 37). One
commenter noted that while Schedule H is reported at the facility
level, there could be cases where only some of the multiple loans under
a given facility are past due. Per the commenter, this creates
ambiguity for reporting the number of days past due for an entire
facility. The commenter recommended that the Board revise Schedule H to
add more granular delinquency buckets or an item to capture the total
balance past due within a given facility.
Per the instructions for the ``# Days Principal or Interest Past
Due'' items, firms are required to report the longest number of days
principal or interest are past due for any loan within the facility.
Given the different uses of the collected data on the FR Y-14 and FR Y-
9C, the Board has not revised the FR Y-14 to have similar delinquency
buckets as the FR Y-9C. In addition, the Board does not currently need
to capture the total balance of loans past due within a facility to
conduct its analysis, and so has not added an item to collect this
information.
Capital Call Subscriptions
The Board did not temporarily revise or propose to revise the
reporting of capital call subscriptions on FR Y-14Q, Schedule H
(Wholesale). One commenter noted that the Board previously revised
Schedule H.1 (Corporate), items 20 (``Credit Facility'') and 22
(``Credit Facility Purpose'') to require firms to indicate which
facilities are capital call subscriptions, effective for the September
30, 2020, as of date.\7\ Per the commenter, the Board should also
revise Schedule H.1 item 36 (``Security Type'') to allow firms to
identify the collateral associated with capital call subscriptions. The
commenter noted that this additional collateral information would
enable the Board to better capture information regarding a firm's
ability to require a fund manager to inject capital into a fund that is
declining in value, which would more accurately reflect the true risk
of these exposures. Relatedly, one commenter requested that the Board
provide definitions for the allowable values to be reported in Schedule
H.1, items 20 and 22, as there could be a divergence in practice across
firms.
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\7\ See 85 FR 56607 (September 14, 2020).
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[[Page 86564]]
As indicated in the instructions, the values for the descriptions
and codes used in Schedule H.1, items 20 and 22 relate to the
requirements referenced in the reporting for Shared National Credit
data.\8\ Please note that while the listing referenced in the reporting
for Shared National Credit data is not the entirety of the types and
purposes possible for Schedule H reporting, it does cover a majority of
them. The Board intends to consider adding definitions to the FR Y-14Q,
Schedule H instructions as part of a future notice.
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\8\ See https://www.kansascityfed.org/banking/bankerresources/complete-and-file-reports/shared-national-credit.
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Disposed Loans
The Board did not temporarily revise or propose to revise the
reporting of disposed loans on FR Y-14Q, Schedule H (Wholesale).
However, one commenter suggested that the Board revise the Schedule H
instructions to allow disposed facilities to be reported with data as
of the prior reporting cycle rather than as of the day of disposition.
The Board believes collecting loan disposition information as it
existed at the point of disposition is critical, and accordingly has
not revised the current requirements for disposed loans on Schedule H.
Par and Fair Value Items
The Board did not temporarily revise or propose to revise the
reporting of par value and fair value exposure items on FR Y-14Q,
Schedule H (Wholesale). However, one commenter noted that previous FR
Y-14 questions and answers (Q&As) have clarified that firms should
report certain fair value exposure items based on the predominate share
of the committed balance. Per the commenter, the reporting based on
these Q&As would enable the Board to derive the value for two par/fair
value exposure items (``Lower of Cost or Market (LOCOM) Flag,''
Schedule H.1, item 86 and Schedule H.2, item 56 and ``Target Hold''
Schedule H.1, item 101) from the four par/fair value exposure items
(``Committed Exposure Global Par Value'', Schedule H.1, item 105'',
Schedule H.2, item 66; ``Utilized Exposure Global Par Value'', Schedule
H.1, item 106; ``Committed Exposure Global Fair Value'', Schedule H.1,
item 107, Schedule H.2, item 68; ``Utilized Exposure Global Fair
Value'', Schedule H.1, item 108; ``Outstanding Balance Par Value'',
Schedule H.2, item 67; and ``Outstanding Balance Fair Value'', Schedule
H.2, item 69) that were added for the March 31, 2020, as of date.\9\
Therefore, the commenter recommends that the ``LOCOM Flag'' and
``Target Hold'' items be removed from Schedule H. The commenter further
stated that if the ``LOCOM Flag'' item is retained, then it is unclear
how exposures should be reported in the par/fair value exposure items.
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\9\ See 84 FR 70529 (December 23, 2019).
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The Board notes that each par/fair value exposure item on Schedule
H provides a different perspective on the exposures and gives a more
holistic view of the valuation of exposures. The ``LOCOM Flag'' and
``Target Hold'' items allow for validation and categorization of loan
data. Per the instructions, firms should report appropriate values of
the entire credit facility for held for sale loans and loans accounted
for under a fair value option for the par/fair value items. The Board
further notes that reporting guidance based on FR Y-14 Q&As issued
prior to the addition of the par/fair value exposure items (i.e., prior
to March 31, 2020) should not be applied to the par/fair value exposure
items that were added for the March 31, 2020, as of date. Firms should
report these items based on the Schedule H instructions.
Obligor and Guarantor Reporting
The Board did not temporarily revise or propose to revise the
reporting of the legal entity that provides the primary source of
repayment for a credit facility on FR Y-14Q, Schedule H (Wholesale).
The current FR Y-14Q, Schedule H.1 (Corporate) instructions require
firms to report the obligor in the ``Obligor Financial Data'' items
(items 52 through 82) as the legal entity that provides the primary
source of repayment for a credit facility identified in item 15
(``Internal Credit Facility ID''). The instructions further state that
the legal entity that provides the primary source of repayment will
generally be different than the guarantor, which provides secondary
support for repayment. Per one commenter, the instructions regarding
the obligor and guarantor create ambiguity as it is not clear whether
the guarantor could ever be viewed as the primary source of repayment,
which the commenter states could happen in cases where the guarantor is
used in underwriting as a primary source of repayment.
Per the instructions, Schedule H.1, item 15 should reflect the
legal entity providing the primary source of repayment or, if
different, the legal entity used by underwriting as the primary source
of repayment identified. Information surrounding the guarantor, or
secondary source of repayment, is outlined and differentiated in
Schedule H.1, items 44 through 48 (``Guarantor Flag'', ``Guarantor
Internal ID'', ``Guarantor Name'', ``Guarantor TIN'', and ``Guarantor
Internal Risk Rating'', respectively).
Loss Mitigation
Loss Mitigation Item Reporting
The Board temporarily added items and options to existing items to
capture loans in forbearance or other loss mitigation programs on
several FR Y-14 schedules, such as FR Y-14Q, Schedule H (Wholesale) and
FR Y-14M, Schedule B (Home Equity). One commenter recommended that
these items and options to existing items only be reported quarterly so
that the firms would not be required to recode systems for potentially
temporary changes to the FR Y-14 report. Per the commenter, quarterly
reporting of these items would reduce reporting burden.
Given that these loans in forbearance or other loss mitigation
programs have different risk characteristics than loans not in these
programs, receiving this information on a monthly basis is critical to
enable the Board to more accurately assess current banking conditions.
The Board temporarily added items to FR Y-14Q, Schedule A (Retail)
and Schedule J (Retail FVO/HFS) to require firms to report loans that
have completed loss mitigation or for which mitigation has expired
during the reporting period. One commenter stated that it is burdensome
for firms and may not provide valuable insight to commingle loans no
longer in loss mitigation programs with loans currently in loss
mitigation programs. The commenter recommends that the requirement to
include loans no longer in loss mitigation be removed.
Given the reporting burden and commingling effect of reporting
loans no longer in loss mitigation programs with loans currently in
loss mitigation programs, the Board has revised the Schedule A and
Schedule J instructions to require firms to exclude the balances of
loans that completed their loss mitigation programs in the current
month from these added items. In addition, due to questions from
reporting firms, the Board has revised the loss mitigation item on
Schedule J to capture the carrying value of loans in loss mitigation,
as opposed to the unpaid principal balance. Both of these revisions are
effective for the December 31, 2020, as of date.
The Board temporarily added items to FR Y-14Q, Schedule H
(Wholesale) to
[[Page 86565]]
capture loans currently in loss mitigation programs or forbearance as a
result of the COVID event. One commenter pointed out that the
instructions for these new items does not capture loans that were
classified as troubled debt restructurings (TDRs) prior to the onset of
the COVID event that have been subsequently modified as a result of the
COVID event. The commenter requested that the Board clarify how these
modified loans should be reported on Schedule H.
To remove ambiguity, the Board has revised the instructions to the
``Modifications Flag'' items (Schedule H.1, item 109; Schedule H.2,
item 70) to clarify that loans that were classified as TDRs prior to
the onset of the COVID event and have been subsequently modified should
be reported under Option 3 (``Other''), effective for the December 31,
2020, as of date.
Risk Mitigation Activities
The Board did not temporarily revise or propose to revise the
reporting of risk mitigation activities (e.g., subordinated credit
protection from third parties referencing an on-balance sheet portfolio
of loans) on the FR Y-14 report. However, one commenter noted that the
existing FR Y-14 report does not capture the data necessary to allow
risk mitigation activities to be taken into consideration by
supervisory models. Per the commenter, the inclusion of risk mitigation
activity data on the FR Y-14 report would allow the Board to more
accurately reflect the exposure risks to firms as part of the stress
test.
The Board intends to consider revising the FR Y-14 reports to
capture risk mitigation activities as part of a future notice.
Retail
Paycheck Protection Program Loans
The Board temporarily added an item to FR Y-14Q, Schedule A.9 (U.S.
Small Business) to capture loans fully guaranteed by the United States
government, which would include Paycheck Protection Program (PPP)
loans. One commenter stated that per the Schedule A.9 instructions,
only ``scored'' or ``delinquency managed'' loans should be reported,
and neither of those criteria apply to PPP loans. Schedule A.9 requires
certain variables (e.g., product type, available credit bureau score,
etc.) to be reported for loans reported on the schedule. According to
two commenters, many of these variables do not apply to PPP loans
because they are originated outside of the typical process for firms
given that they are fully guaranteed by the Small Business Association
(SBA). Additionally, one commenter raised that Schedule A.9 is only
supposed to capture retail exposures, but the current instructions for
the new item require reporting of both retail and wholesale exposures.
Given these concerns, two commenters recommend that the Board exclude
PPP loans from Schedule A.9 and instead have them reported on FR Y-14Q,
Schedule K (Supplemental), similar to how loans associated with the
MSLP are reported.
In response, the Board notes that it is important to capture PPP
loans in a consistent manner across FR Y-14 submissions for purposes of
data comparability. If certain variables required for Schedule A are
not available for PPP loans, then firms should only report the
variables for PPP loans that they have available. The Board has not
revised the reporting of PPP loans.
Historical Data Requirement
One commenter noted that the inclusion of PPP loans in Schedule A.9
has caused some firms to exceed the quantitative threshold for
reporting this schedule.\10\ With the initial submission of this
schedule, firms are required to report historical data going back to
January of 2007. One commenter stated that PPP loans are only expected
to be on a firm's books for a short period of time (i.e., less than one
year), and that once the PPP loans are no longer reported on Schedule
A.9, some firms will drop back below the reporting threshold. The
commenter further stated that firms face operational challenges with
gathering and validating 13 years of historical data. The commenter
recommended that if the Board continues to require PPP loans to be
reported on Schedule A.9, then firms should not be required to submit
historical data for Schedule A.9 if they exceed the reporting threshold
as a result of including PPP loans in this schedule.
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\10\ Large and complex firms, Large Institution Supervision
Coordinating Committee (LISCC) firms, and SLHCs subject to Category
II-III standards with a portfolio of U.S. small business (retail)
loans with an asset balance greater than $5 billion or greater than
ten percent of Tier 1 capital on average for four quarters preceding
the reporting quarter are required to file FR Y-14Q, Schedule A.9.
Large and noncomplex firms and SLHCs subject to Category IV
standards with a portfolio of U.S. small business (retail) loans
with an asset balance greater than $5 billion or greater than ten
percent of Tier 1 capital on average for four quarters preceding the
reporting quarter are required to file FR Y-14Q, Schedule A.9.
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The Board believes that the required historical data on Schedule
A.9 are critical to adequately monitor ongoing risks, and accordingly
has not revised this requirement.
Trading
Private Equity Investments
The Board did not temporarily revise or propose to revise the
reporting of non-fair value private equity investments on FR Y-14Q,
Schedule F (Trading). However, on December 23, 2019,\11\ the Board
indicated that it would assess whether the macro scenario is more
appropriate than the global market shock for evaluating losses
associated with non-fair value private equity investment exposures. One
commenter inquired about the status of this assessment.
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\11\ See 84 FR 70529 (December 23, 2019).
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At this time, the Board believes the macro scenario is more
appropriate than the global market shock for evaluating losses
associated with non-fair value private equity investment exposures, but
will continue to analyze the issue.
Separately, in an FR Y-14 question and answer (Q&A) published in
March of 2020,\12\ the Board clarified that firms could exclude tax
oriented investments held under the equity method of accounting from
the ``Other Fair Value Assets'' portion of FR Y-1Q, Schedule F
(Trading). The Board further clarified that tax oriented investments
held under the equity method of accounting should only be reported on
Schedule F if they are included in the included in other portions of
Schedule F (i.e., not the ``Other Fair Value Assets'' portion). One
commenter suggested that this same treatment should be applied to non-
fair value private equity investments, as non-fair value private equity
investments share many characteristics with fair value private equity
investments, such as an illiquid nature, expected multi-year holding
period, as well as the timing and amount of associated losses.
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\12\ See https://www.federalreserve.gov/publications/y-14-qas.htm.
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The exclusion of non-fair value tax oriented investments from
Schedule F was not based on an assessment of their risk
characteristics, but rather on the fact that they are neither trading
positions, private equity positions, nor fair value assets, and so do
not fall under the scope of Schedule F. The same rationale does not
apply to non-fair value private equity positions, which do fall under
the scope of Schedule F, as they are private equity positions. Given
this, the Board has not revised the reporting for non-fair value
private equity positions.
[[Page 86566]]
Seed Capital Invested in Mutual Funds
The Board did not temporarily revise or propose to revise the
reporting of seed capital invested in mutual funds. The current FR Y-
14Q, Schedule F (Trading) instructions require firms to report seed
capital invested in mutual funds as private equity exposures. One
commenter noted that this treatment may subject firms to unfavorable
stressed losses, as the underlying investments of seed capital invested
in mutual funds are in liquid, marketable securities across multiple
asset classes, including fixed income and equity. Given the liquid,
marketable nature of these underlying investments, the commenter
recommended that these exposures should not be reported as private
equity exposures, but rather reported within the respective sub-
schedules of Schedule F, according to the underlying exposure.
The Board intends to consider revising the reporting of seed
capital invested in mutual funds as part of a future notice.
Legal authorization and confidentiality: The Board has the
authority to require BHCs to file the FR Y-14 reports pursuant to
section 5(c) of the Bank Holding Company Act (``BHC Act''), 12 U.S.C.
1844(c), and pursuant to section 165(i) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act), 12 U.S.C. 5365(i),
as amended by section 401(a) and (e) of the Economic Growth, Regulatory
Relief, and Consumer Protection Act (EGRRCPA).\13\ The Board has
authority to require SLHCs to file the FR Y-14 reports pursuant to
section 10(b) of the Home Owners' Loan Act (12 U.S.C. 1467a(b)), as
amended by section 369(8) and 604(h)(2) of the Dodd-Frank Act. Lastly,
the Board has authority to require U.S. IHCs of FBOs to file the FR Y-
14 reports pursuant to section 5 of the BHC Act, as well as pursuant to
sections 102(a)(1) and 165 of the Dodd-Frank Act, 12 U.S.C. 5311(a)(1)
and 5365.\14\ In addition, section 401(g) of EGRRCPA, 12 U.S.C. 5365
note, provides that the Board has the authority to establish enhanced
prudential standards for foreign banking organizations with total
consolidated assets of $100 billion or more, and clarifies that nothing
in section 401 ``shall be construed to affect the legal effect of the
final rule of the Board . . . entitled `Enhanced Prudential Standard
for [BHCs] and Foreign Banking Organizations' (79 FR 17240 (March 27,
2014)), as applied to foreign banking organizations with total
consolidated assets equal to or greater than $100 million.'' \15\ The
FR Y-14 reports are mandatory. The information collected in the FR Y-14
reports is collected as part of the Board's supervisory process, and
therefore, such information is afforded confidential treatment pursuant
to exemption 8 of the Freedom of Information Act (FOIA), 5 U.S.C.
552(b)(8). In addition, confidential commercial or financial
information, which a submitter actually and customarily treats as
private, and which has been provided pursuant to an express assurance
of confidentiality by the Board, is considered exempt from disclosure
under exemption 4 of the FOIA, 5 U.S.C. 552(b)(4).\16\
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\13\ Public Law 115-174, Title IV 401(a) and (e), 132 Stat.
1296, 1356-59 (2018).
\14\ Section 165(b)(2) of the Dodd-Frank Act, 12 U.S.C.
5365(b)(2), refers to ``foreign-based bank holding company.''
Section 102(a)(1) of the Dodd-Frank Act, 12 U.S.C. 5311(a)(1),
defines ``bank holding company'' for purposes of Title I of the
Dodd-Frank Act to include foreign banking organizations that are
treated as bank holding companies under section 8(a) of the
International Banking Act of 1978, 12 U.S.C. 3106(a). The Board has
required, pursuant to section 165(b)(1)(B)(iv) of the Dodd-Frank
Act, 12 U.S.C. 5365(b)(1)(B)(iv), certain foreign banking
organizations subject to section 165 of the Dodd-Frank Act to form
U.S. intermediate holding companies. Accordingly, the parent
foreign-based organization of a U.S. IHC is treated as a BHC for
purposes of the BHC Act and section 165 of the Dodd-Frank Act.
Because Section 5(c) of the BHC Act authorizes the Board to require
reports from subsidiaries of BHCs, section 5(c) provides additional
authority to require U.S. IHCs to report the information contained
in the FR Y-14 reports.
\15\ The Board's Final Rule referenced in section 401(g) of
EGRRCPA specifically stated that the Board would require IHCs to
file the FR Y-14 reports. See 79 FR 17240, 17304 (March 27, 2014).
\16\ Please note that the Board publishes a summary of the
results of the Board's CCAR testing pursuant to 12 CFR
225.8(f)(2)(v), and publishes a summary of the results of the
Board's DFAST stress testing pursuant to 12 CFR 252.46(b) and 12 CFR
238.134, which includes aggregate data. In addition, under the
Board's regulations, covered companies must also publicly disclose a
summary of the results of the Board's DFAST stress testing. See 12
CFR 252.58; 12 CFR 238.146. The public disclosure requirement
contained in 12 CFR 252.58 for covered BHCs and covered IHCs is
separately accounted for by the Board in the Paperwork Reduction Act
clearance for FR YY (OMB No. 7100-0350) and the public disclosure
requirement for covered SLHCs is separately accounted for in by the
Board in the Paperwork Reduction Act clearance for FR LL (OMB No.
7100-0380).
Board of Governors of the Federal Reserve System, December 22,
2020.
Margaret Shanks,
Deputy Secretary of the Board.
[FR Doc. 2020-28788 Filed 12-29-20; 8:45 am]
BILLING CODE 6210-01-P
