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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations
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should not be subject to the large counterparty default component or the qualitative objection, and should only have to file certain schedules of the FR
Y14A. The Boards capital planning requirements are tailored based on a firms tailoring category as outlined above in Section I.B of this Supplementary Information section, as well as certain attributes of the firm that are independent of its tailoring category.
Specifically, the components of the capital planning requirements that apply to a firm are naturally tailored as they require a firms capital plan to include an assessment of the expected uses and sources of capital over the planning horizon that reflects the firms size, complexity, risk profile, and scope of operations, assuming both expected and stressful conditions.29 Similarly, the large counterparty default component in the Boards company-run stress testing requirements for bank holding companies and covered savings and loan holding companies is also tailored based on a firms risk profile as it only applies based on the firms financial condition, size, complexity, risk profile, scope of operations, or activities.30
Further, like the capital planning requirements for large bank holding companies, the Board will not have the ability to issue a qualitative objection to a covered savings and loan holding companys capital plan; rather, it will conduct a robust qualitative review of covered savings and loan holding companies capital planning practices during the traditional supervisory process. Finally, reporting requirements on the FR Y14A are also tailored, as certain firms are not required to complete certain schedules based on their size and complexity i.e., firms subject to Category IV standards are not required to complete FR Y14A, Schedule ASummary.
A commenter also asserted that the Board should provide a transition period until at least the 2024 capital planning cycle for covered and savings and loan holding companies to come into compliance with capital planning and stress capital buffer requirements, and should provide feedback on firms initial capital plans on a confidential basis without the initial submission being evaluated under the Federal 29 The Federal Reserves supervisory guidance for capital planning is also tailored to a firms risk profile. For example, the Federal Reserve SR Letter 1519 notes that a firm should employ risk measurement approaches that are appropriate for its size, complexity, and risk profile. See SR Letter 1519, Federal Reserve Supervisory Assessment of Capital Planning and Positions for Large and Noncomplex Firms, December 18, 2015.
30 See 12 CFR 238.143b2ii; 12 CFR
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Reserves LFI ratings framework. The commenter asserted that such a transition would provide the firm with additional time to understand the Federal Reserves supervisory expectations prior to receiving public feedback.
Under the tailoring final rules, covered savings and loan holding companies were required to comply with stress testing requirements on the first day of the ninth quarter following the effective date of the final rule. A
firm that was subject to the requirements on the date of the tailoring final rule would be required to comply with stress testing requirements for the 2022 stress test cycle. In addition, a firm would be required to file its first FR Y
14A submission on April 5, 2022. To align the stress testing requirements with the capital planning requirements, the capital plan rule applicable to covered savings and loan holding companies would have the same transition provision as the rule applicable to bank holding companies.
Specifically, a firm that becomes subject to the rule on or before September 30 of a calendar year must comply with the rule on January 1 of the next calendar year and a firm that becomes subject to the rule after September 30 of a calendar year must comply with the requirements beginning on January 1 of the second calendar year after it meets the relevant threshold. A covered savings and loan holding company will not receive a stress capital buffer requirement until the first year the Board conducts a supervisory stress test of the firm.
Moreover, the Federal Reserve generally does not provide firms with public feedback on their capital plans.
However, the initial submission will provide the Federal Reserve with information about the firms capital planning practices that will be considered as part of the firms rating evaluation.
The Board also proposed to revise the FR Y14A report to require covered savings and loan holding companies subject to Category II or III standards to submit FR Y14A, Schedule A
Summary, Schedule BScenario, Schedule EOperational Risk, and Schedule FBusiness Plan Changes, as these schedules are needed for the company-run and supervisory stress tests and for capital planning supervision. In the proposal, the Board asked whether it should revise the regulatory reporting requirements for covered savings and loan holding companies if they were to become subject to the capital plan rule. Given that the Board is applying capital planning and stress capital buffer
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requirements to savings and loan holding companies, the Board is also requiring covered savings and loan holding companies subject to Category II, III, or IV standards to submit FR Y
14A, Schedule CRegulatory Capital Instruments, as this schedule is essential for monitoring compliance with the capital plan rule. Requiring covered savings and loan holding companies to submit this information would better align the FR Y14A
reporting requirements for firms with similar risk characteristics.
ii. Stress Test Rule Changes As a part of the tailoring rule, covered savings and loan holding companies were made subject to the Boards supervisory stress test and company-run stress test requirements in the same manner as bank holding companies.
Currently, the capital action assumptions in the stress test rules for covered savings and loan holding companies are different than those for bank holding companies because they were not included in the stress capital buffer rule, in which the Board updated the distribution assumptions for bank holding companies. The proposal would have amended the stress test rules for covered savings and loan holding companies so the capital distribution assumptions for covered savings and loan holding companies would match the assumptions for bank holding companies.
The proposal also would have addressed an omission in the Boards company-run stress test requirements to ensure that all savings and loan holding companies with more than $250 billion in assets are required to publicly disclose the results of their stress tests, similar to the requirement for bank holding companies. This would have ensured the requirements are consistent with the Dodd-Frank Act.
No comments were received on these aspects of the proposal, and the final rule adopts them as proposed.
F. Definition of Common Stock Dividend in Capital Plan Rule As a part of the proposal, the Board sought comment on a definition for common stock dividends in the capital plan rule. The proposal noted that the definition of common stock dividend could be aligned with the definition on the FR Y9C or could include payments of cash to parent organizations irrespective of whether the amount paid is debited from the firms retained earnings.
Some commenters, particularly foreign banking organizations, opposed a definition of dividends for the capital
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