Proposed Rule2023-16896
Regulatory Capital Rule: Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies; Systemic Risk Report (FR Y-15)
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Published
September 1, 2023
Issuing agencies
Federal Reserve System
Abstract
The Board of Governors of the Federal Reserve System (Board) is inviting public comment on a notice of proposed rulemaking to amend the Board's rule that identifies and establishes risk-based capital surcharges for global systemically important bank holding companies (GSIBs). The proposal would also amend the Systemic Risk Report (FR Y- 15), which is the source of inputs to the implementation of the GSIB framework under the capital rule. The changes set forth in the proposal would improve the precision of the GSIB surcharge and better measure systemic risk under the framework. For certain systemic indicators currently measured only as of a single date, the proposal would change to reporting of the average of daily or monthly values to reduce the effects of temporary changes to indicator values around measurement dates. To improve risk capture, the proposal would also make improvements to the measurement of some systemic indicators used in the GSIB surcharge framework and the framework for determining prudential standards for large banking organizations. In addition, the proposal would reduce cliff effects and enhance the sensitivity of the surcharge to changes in the method 2 score by calculating surcharges based on narrower score band ranges. Finally, the proposal would make several amendments to the FR Y-15 to improve the consistency of data reporting and systemic indicator measurement.
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[Federal Register Volume 88, Number 169 (Friday, September 1, 2023)]
[Proposed Rules]
[Pages 60385-60402]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-16896]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 88, No. 169 / Friday, September 1, 2023 /
Proposed Rules
[[Page 60385]]
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Regulation Q; Docket No. R-1814]
RIN 7100-AG65
Regulatory Capital Rule: Risk-Based Capital Surcharges for Global
Systemically Important Bank Holding Companies; Systemic Risk Report (FR
Y-15)
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is inviting public comment on a notice of proposed rulemaking to amend
the Board's rule that identifies and establishes risk-based capital
surcharges for global systemically important bank holding companies
(GSIBs). The proposal would also amend the Systemic Risk Report (FR Y-
15), which is the source of inputs to the implementation of the GSIB
framework under the capital rule. The changes set forth in the proposal
would improve the precision of the GSIB surcharge and better measure
systemic risk under the framework. For certain systemic indicators
currently measured only as of a single date, the proposal would change
to reporting of the average of daily or monthly values to reduce the
effects of temporary changes to indicator values around measurement
dates. To improve risk capture, the proposal would also make
improvements to the measurement of some systemic indicators used in the
GSIB surcharge framework and the framework for determining prudential
standards for large banking organizations. In addition, the proposal
would reduce cliff effects and enhance the sensitivity of the surcharge
to changes in the method 2 score by calculating surcharges based on
narrower score band ranges. Finally, the proposal would make several
amendments to the FR Y-15 to improve the consistency of data reporting
and systemic indicator measurement.
DATES: Comments must be received on or before November 30, 2023.
ADDRESSES: You may submit comments, identified by Docket No. R-1814 and
RIN 7100-AG65, by any of the following methods:
<bullet> Agency Website: <a href="http://www.federalreserve.gov">http://www.federalreserve.gov</a>. Follow the
instructions for submitting comments at <a href="http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm">http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm</a>.
<bullet> Federal eRulemaking Portal: <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
Follow the instructions for submitting comments.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#2e5c4b495d004d4143434b405a5d6e484b4a4b5c4f425c4b5d4b5c584b00494158"><span class="__cf_email__" data-cfemail="2c5e494b5f024f4341414942585f6c4a4948495e4d405e495f495e5a49024b435a">[email protected]</span></a>. Include docket
number and RIN in the subject line of the message.
<bullet> Fax: (202) 452-3819 or (202) 452-3102.
<bullet> Mail: Ann Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
In general, all public comments will be made available on the
Board's website at <a href="http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm">www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm</a> as submitted, and will not be modified to remove
confidential, contact or any identifiable information. Public comments
may also be viewed electronically or in paper in Room M-4365A, 2001 C
St. NW, Washington, DC 20551, between 9:00 a.m. and 5:00 p.m. during
Federal business weekdays.
FOR FURTHER INFORMATION CONTACT: Anna Lee Hewko, Associate Director,
(202) 250-1577; Brian Chernoff, Manager, (202) 452-2952; Jennifer
McClean, Senior Financial Institution Policy Analyst II, (202) 785-
6033, Policy Development, Division of Supervision and Regulation; or
Jay Schwarz, Assistant General Counsel, (202) 452-2970; Mark Buresh,
Special Counsel, (202) 452-5270, Jonah Kind, Senior Counsel, (202) 452-
2045, David Imhoff, Attorney, (202) 452-2249, Legal Division, Board of
Governors of the Federal Reserve System, 20th and C Streets NW,
Washington, DC 20551. For users of TDD-TYY, (202) 263-4869 or dial 711
from any telephone anywhere in the United States.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
A. Background
B. Systemic Risk Report (FR Y-15)
II. Summary of the Proposal
A. Data Averaging of Certain Systemic Indicators
B. Reducing Cliff Effects in the Calculation of Method 2 GSIB
Surcharges
C. Effective Date of Changes to a Firm's GSIB Surcharge
Requirement
D. Clarification for Reduction in GSIB Surcharge Calculated
During the Intervening Year Between Calculation and Effective Date
of a GSIB Surcharge Increase
E. Amendments to Systemic Indicators
i. Interconnectedness and Complexity
ii. Substitutability
iii. Cross-Jurisdictional Activity
iv. Short-Term Wholesale Funding
F. Foreign Banking Organization Reporting Requirements
G. Implementation and Timing
H. Interaction With Other Proposals
III. Impact
A. Benefits of the Proposed Changes
B. Costs of the Proposed Changes
C. Interaction With Other Rules and Proposals
IV. Administrative Law Matters
A. Paperwork Reduction Act Analysis
B. Regulatory Flexibility Act Analysis
C. Plain Language
D. Providing Accountability Through Transparency Act of 2023
I. Introduction
The Board of Governors of the Federal Reserve System (Board)
adopted a final rule in 2015 that established a methodology for
identifying U.S. global systemically important bank holding companies
(GSIBs) and assigning a risk-based capital surcharge for the largest,
most interconnected U.S.-based bank holding companies.\1\ The GSIB
surcharge framework requires a GSIB to maintain additional capital to
strengthen the firm's resiliency, thereby reducing the probability of
its failure and the risks that the firm's failure or distress could
pose to the U.S. financial system.
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\1\ Regulatory Capital Rules: Implementation of Risk-Based
Capital Surcharges for Global Systemically Important Bank Holding
Companies, 80 FR 49082 (Aug. 14, 2015). See 12 CFR Pt. 217, Subpart
H.
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The Board is inviting public comment on a notice of proposed
rulemaking (proposal) that would improve the measurement of systemic
indicators under the GSIB surcharge framework and enhance the
sensitivity of the surcharge to changes in a bank holding company's
risk profile. By improving the calculation of surcharges, the
[[Page 60386]]
proposal would better ensure that each GSIB maintains capital levels
commensurate with its systemic footprint. The proposed changes include
revisions to the Board's capital rule and amendments to the measurement
and reporting of certain systemic indicators used in the GSIB surcharge
framework. Certain of the indicators that the proposal would modify are
also used for purposes of the Board's framework for determining
prudential standards for large banking organizations (regulatory
tiering framework).\2\ The proposed changes include revisions
consistent with the framework used by the Basel Committee on Banking
Supervision (Basel Committee) to identify GSIBs and assess their
systemic importance.\3\
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\2\ See 12 CFR 252.5 and 238.10; see also ``Prudential Standards
for Large Bank Holding Companies, Savings and Loan Holding
Companies, and Foreign Banking Organizations,'' 84 FR 59032
(November 1, 2019); and ``Changes to Applicability Thresholds for
Regulatory Capital and Liquidity Requirements,'' 84 FR 59230
(November 1, 2019). As used in this Supplementary Information
section, the term ``banking organizations'' refers to U.S. GSIBs for
purposes of the GSIB surcharge framework and to FR Y-15 reporters
(bank holding companies, savings and loan holding companies, foreign
banking organizations, and U.S. intermediate holding companies of
foreign banking organizations meeting certain criteria) for purposes
of the FR Y-15. There are also certain circumstances under which a
depository institution that is not required to report the FR Y-15
would be subject to standards based on calculation methodologies
contained in the FR Y-15. See, e.g., 12 CFR 217.2, ``Category III
Board-regulated institution.''
\3\ The Basel Committee is a committee comprised of central
banks and banking supervisory authorities, which was established by
the central bank governors of the G-10 countries in 1975. It is the
primary global standard setter for the prudential regulation of
banking organizations. The Basel Committee developed a methodology,
available at <a href="https://www.bis.org/bcbs/gsib/">https://www.bis.org/bcbs/gsib/</a>, that uses an indicator-
based measurement approach for assessing the systemic importance of
global systemically important banks. In July 2018, the Basel
Committee made revisions to its methodology, which are available at
<a href="https://www.bis.org/bcbs/publ/d445.htm">https://www.bis.org/bcbs/publ/d445.htm</a>.
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A. Background
The methodology to identify a GSIB (method 1) uses five equally
weighted categories that are correlated with systemic importance--(1)
size, (2) interconnectedness, (3) substitutability, (4) complexity, and
(5) cross-jurisdictional activity--and subdivides certain categories
into systemic indicators. Generally, a bank holding company subject to
Category I, II, or III capital standards must calculate its method 1
score annually.\4\ A bank holding company calculates each systemic
indicator by dividing its own measure of the indicator by an aggregate
global measure for that indicator.\5\ The resulting value for each
systemic indicator is then multiplied by the prescribed weighting in
the capital rule and by 10,000 to reflect the result in basis points. A
bank holding company then sums the weighted values for the twelve
systemic indicators to determine its method 1 score.\6\ A bank holding
company is identified as a GSIB if its method 1 score equals or exceeds
130 basis points.\7\
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\4\ 12 CFR 217.400 and 217.402. In 2019, the Board, with the
Office of the Comptroller of the Currency (OCC) and the Federal
Deposit Insurance Corporation (FDIC), adopted rules establishing
four categories of capital standards for U.S. banking organizations
with $100 billion or more in total assets and foreign banking
organizations with $100 billion or more in combined U.S. assets.
Under this framework, Category I capital standards apply to U.S.
global systemically important bank holding companies and their
depository institution subsidiaries. Category II standards apply to
banking organizations with at least $700 billion in total
consolidated assets or at least $75 billion in cross-jurisdictional
activity and their depository institution subsidiaries. Category III
standards apply to banking organizations with total consolidated
assets of at least $250 billion or at least $75 billion in weighted
short-term wholesale funding, nonbank assets, or off-balance sheet
exposure and their depository institution subsidiaries. Category IV
standards apply to banking organizations with total consolidated
assets of at least $100 billion that do not meet the thresholds for
a higher category and their depository institution subsidiaries. See
12 CFR 252.5 and 238.10; see also ``Prudential Standards for Large
Bank Holding Companies, Savings and Loan Holding Companies, and
Foreign Banking Organizations,'' 84 FR 59032 (November 1, 2019); and
``Changes to Applicability Thresholds for Regulatory Capital and
Liquidity Requirements,'' 84 FR 59230 (November 1, 2019).
\5\ 12 CFR 217.404. The Board annually publishes the aggregate
global measures.
\6\ 12 CFR 217.404. Scores are rounded to the nearest basis
point according to standard rounding rules for the purposes of
assigning levels. That is, fractional amounts between zero and one-
half are rounded down to zero, while fractional amounts at or above
one-half are rounded to one. A bank's substitutability category
score is capped at 100 basis points. See also 80 FR at 49088 (Aug.
14, 2015).
\7\ 12 CFR 217.402.
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If a bank holding company is identified as a GSIB, it must also
calculate its method 2 score.\8\ Method 2 measures a bank holding
company's systemic risk profile using the same systemic indicators as
method 1, except that the substitutability category is replaced with a
measurement of reliance on short-term wholesale funding.\9\ Method 2
also uses fixed coefficient values for each of the systemic indicators,
rather than multiplying indicators by a measure that changes each year
based on the aggregate global measure for that indicator.\10\ A firm
multiplies its indicator values by the respective fixed coefficients
and aggregates the amount together to compute the firm's method 2
score.
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\8\ 12 CFR 217.403.
\9\ 12 CFR 217.405 and 406. The short-term wholesale funding
score is calculated by dividing the firm's average weighted short-
term wholesale funding by the firm's average risk-weighted assets
and multiplying the result by a fixed factor of 350.
\10\ 12 CFR 217.405. See also 80 FR at 49087-88 (Aug 14, 2015).
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A GSIB is subject to the larger GSIB surcharge that applies based
on its method 1 score and method 2 score. A GSIB is subject to a
minimum surcharge of 1.0 percent, and surcharges increase with GSIB
score under both method 1 and method 2. Method 1 surcharges increase in
increments of 0.5 percentage points for each 100-basis point method 1
score band, up to a method 1 surcharge of 2.5 percent, which is
associated with a method 1 score ranging from 430 to 529 basis points.
If a GSIB's method 1 score exceeds 529, the GSIB's method 1 surcharge
equals 3.5 percent, plus 1.0 percentage point for every further 100-
basis point increase in score. Like the method 1 surcharge, the method
2 surcharge uses score band ranges of 100 basis points, with the lowest
score band ranging from 130 to 229 basis points. The method 2 surcharge
increases in increments of 0.5 percentage points per score band.
B. Systemic Risk Report (FR Y-15)
The Systemic Risk Report form (FR Y-15) collects systemic risk data
from U.S. bank holding companies and covered savings and loan holding
companies \11\ with total consolidated assets of $100 billion or more,
any U.S.-based bank holding company designated as a GSIB that does not
meet that consolidated assets threshold, and foreign banking
organizations with combined U.S. assets of $100 billion or more.\12\
The FR Y-15 collects data on a firm's structure, activities, and
funding that is consistent and comparable among firms and is often
unavailable from other sources. In addition, the data collected on the
FR Y-15 is used to identify other firms that may present significant
systemic risk, to analyze the systemic risk implications of proposed
mergers and acquisitions, and to determine the application of
prudential standards to large banking organizations. Respondents must
submit the FR Y-15 quarterly.
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\11\ Covered savings and loan holding companies are those that
are not substantially engaged in insurance or commercial activities.
For more information, see the definition of ``covered savings and
loan holding company'' provided in 12 CFR 217.2.
\12\ The mandatory FR Y-15 is authorized by sections 163 and 165
of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) (12 U.S.C. 5463 and 5365), the International
Banking Act (12 U.S.C. 3106 and 3108), the Bank Holding Company Act
(12 U.S.C. 1844), and Home Owners' Loan Act (HOLA) (12 U.S.C.
1467a).
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Under the GSIB surcharge framework, any U.S.-based top-tier bank
holding company that qualifies as a Category I,
[[Page 60387]]
II, or III Board-regulated institution must compute annually its method
1 score using the values for the systemic indicators (in each of the
size, interconnectedness, substitutability, complexity, and cross-
jurisdictional activity categories) that it reported on its FR Y-15 as
of December 31 of the prior year. A GSIB must also determine its GSIB
surcharge based on the data reported on its FR Y-15 as of the same
date.
Data reported on the FR Y-15 is also used to determine the
applicable category of prudential standards for U.S. banking
organizations with total consolidated assets of $100 billion or more
and foreign banking organizations with combined U.S. assets of $100
billion or more, under the framework adopted by the Board in 2019.\13\
Specifically, measures for cross-jurisdictional activity, weighted
short-term wholesale funding, and off-balance sheet exposure, which are
used to determine whether a banking organization is subject to Category
II or III standards, use or include data reported on the FR Y-15.\14\
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\13\ See 12 CFR part 252, subpart A, and 12 CFR 238.10.
\14\ See id.
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II. Summary of the Proposal
A. Data Averaging of Certain Systemic Indicators
Under the current framework, FR Y-15 filers report many of the data
values used to calculate a firm's method 1 or method 2 score on a
point-in-time basis, reflecting the firm's amount for the indicators as
of end of the reporting quarter. Indicators calculated on a point-in-
time basis include intra-financial system assets, intra-financial
system liabilities, securities outstanding, assets under custody,
notional amount of over-the-counter (OTC) derivatives, trading and
available-for-sales securities, Level 3 assets, cross-jurisdictional
claims, and cross-jurisdictional liabilities. A firm's GSIB method 1
and 2 score calculations use as inputs the value of these indicators as
of December 31 of the previous calendar year.
The value of a firm's indicator on December 31 may not, however, be
accurately representative of a firm's actual systemic footprint if the
value of the indicator on December 31 differs materially from the value
on other dates. For example, the seasonality of market dynamics could
cause December 31 to be an anomalous day for any given firm.
Additionally, measurement based only on a single point in time may
create incentives for a firm to manage the values of its systemic
indicators on December 31 to reduce the amount of its GSIB surcharge in
a manner that would not be commensurate with the firm's actual systemic
footprint, based on the values of its systemic indicators on other days
of the year.
The proposal would require a GSIB to report intra-financial system
assets, intra-financial system liabilities, securities outstanding,
assets under custody, OTC derivatives, trading and available for sale
securities, Level 3 assets, cross-jurisdictional claims, and cross-
jurisdictional liabilities on the FR Y-15 as the average of daily
values of the indicator over the reporting quarter, instead of quarter-
end point-in-time values.\15\ For certain off-balance sheet items, a
GSIB would report the average of month-end values over the reporting
quarter, rather than an average of daily values. (See Table 1.) For
example, for the December 31 reporting date, a GSIB would report for
most items the average of the values of that item for each business day
from October 1 through December 31, and for specified off-balance sheet
items, the average of the month-end values for October, November, and
December. This methodology would be similar to how GSIBs currently
report the on- and off-balance-sheet components of the total exposures
systemic indicator.\16\ In addition, the proposal would base a GSIB's
method 1 and method 2 score calculation for these indicators on the
average of reported values over all four quarters of a calendar year,
rather than only the reported values for the fourth quarter.
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\15\ Unless otherwise noted, references to averaging of
``daily'' values in this Supplementary Information section refer to
averaging of values for each business day. A firm that newly becomes
a GSIB would be required to begin reporting the average of daily
values as of the first quarter following its identification as a
GSIB.
\16\ Currently, for the purposes of calculating a Category I-III
banking organization's GSIB surcharge score, the total exposures
systemic indicator reflects the average of daily values for on-
balance sheet items within the fourth quarter and the average of
month-end values for off-balance sheet items within the fourth
quarter.
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The proposal would not change the current reporting methodology for
indicators that measure flows (payments activity, underwritten
transactions, and trading volume) and short-term wholesale funding.\17\
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\17\ For these indicators, where firms currently report items as
12-month sums or averages, the proposal would require reporting of
values for the reporting quarter only, with a separate line item to
include the 12-month sum or averages, to align with the proposed
reporting of other indicators.
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The proposed changes to require reporting of average data for
previously point-in-time indicators would only apply to GSIBs. For
these firms, the averaging requirement will better reflect a firm's
systemic risk profile in the calculation of its GSIB surcharge
requirements and reduce opportunities to manage the values of systemic
indicators in a manner that would result in a surcharge requirement
that is not commensurate with the firm's systemic risk profile.
The proposal would require a firm subject to Category II or III
standards to calculate its method 1 and method 2 GSIB scores by using
the average of its four quarterly reported values for the year. Except
as noted below regarding the total exposures systemic indicator, the
proposal would not require firms that are subject to Category II, III,
or IV standards to newly report FR Y-15 data as averages of daily or
monthly values, in order to limit operational burdens for firms that
are not yet identified as GSIBs.
Table 1 displays the systemic indicator by categories and the
proposed reporting requirements for GSIBs relative to the current
requirements.
Table 1--Measurement of GSIB Surcharge Inputs for GSIBs
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Category Systemic indicator Current U.S. reporting Proposal
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Size................................. Total exposures........ For on-balance sheet No changes in
items, average of reporting.
daily values over the
fourth quarter.
For off-balance sheet No changes in
items, average of the reporting.
three month-end
balances over the
fourth quarter.
[[Page 60388]]
Interconnectedness................... Intra-financial system For on-balance sheet For on-balance sheet
assets. items, as of December items, report average
31. of daily values over
the reporting quarter.
For off-balance sheet For off-balance sheet
items, as of December items, report average
31. of month-end exposure
amounts over the
reporting quarter.
Intra-financial system For on-balance sheet For on-balance sheet
liabilities. items, as of December items, report average
31. of daily values over
the reporting quarter.
For off-balance sheet For off-balance sheet
items, as of December items, report average
31. of month-end exposure
amounts over the
reporting quarter.
Securities outstanding. As of December 31...... Report average daily
balances over the
reporting quarter.
Substitutability (Method 1 Only)..... Payments activity...... Total gross value of No change.
all cash payments sent
via large-value
payment systems over
the last year.
Assets under custody... As of December 31...... Report average daily
balances over the
reporting quarter.
Underwritten Total underwriting over No change.
transactions in debt the last year.
and equity markets.
Short-Term Wholesale Funding (Method Short-term wholesale Average of daily values No change.
2 Only). funding metric (ratio). for weighted short-
term wholesale funding
over the preceding
four quarters in the
numerator. Four-
quarter average of
total risk-weighted
assets in the
denominator.
Complexity........................... Notional amount of over- As of December 31...... For off-balance sheet
the-counter (OTC) items, report average
derivatives. of month-end exposure
amounts over the
reporting quarter.
Trading and available- As of December 31...... Report average daily
for-sale securities. balances over the
reporting quarter.
Level 3 assets......... As of December 31...... Report average daily
balances over the
reporting quarter.
Cross-Jurisdictional Activity........ Cross-jurisdictional As of December 31...... Report average daily
claims. balances over the
reporting quarter.
Cross-jurisdictional As of December 31...... Report average daily
liabilities. balances over the
reporting quarter.
----------------------------------------------------------------------------------------------------------------
Interaction With Other Proposals
Currently, the FR Y-15 requires banking organizations subject to
Category I, II, or III standards to report data for the total exposures
indicator as the average of daily values for on-balance sheet items and
the average of month-end values for off-balance sheet items. This
reporting methodology aligns with the calculation of total leverage
exposure for purposes of the supplementary leverage ratio
requirement.\18\ Other banking organizations must elect to report this
data using averages or point-in-time data.
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\18\ See 12 CFR 217.10(c).
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The Board, with the OCC and FDIC (together with the Board, the
agencies), is separately issuing a proposal that would revise the
agencies' risk-based capital framework applicable to banking
organizations with at least $100 billion in total assets and their
depository institution subsidiaries and to banking organizations with
significant trading activities. In addition to revising risk-based
capital requirements, this separate proposal would also revise the
applicability of the supplementary leverage ratio requirement to
include all banking organizations subject to the capital rule with at
least $100 billion in total assets and their depository institution
subsidiaries.
In connection with this separately proposed change to broaden the
scope of application of the supplementary leverage ratio requirement,
the proposal would require all banking organizations that file the FR
Y-15 to report data for the total exposures systemic indicator as the
average of daily values for on-balance sheet items and the average of
month-end values for off-balance sheet items, to align with the
calculation of total leverage exposure for purposes of the
supplementary leverage ratio requirement.
Question 1: What would be the advantages and disadvantages of
requiring firms subject to the GSIB surcharge framework or all firms
that report the FR Y-15 to report indicators that they currently report
as of a single point in time instead as averages of daily, weekly, or
monthly values?
Question 2: What operational burdens would be required, relative to
what banking organizations already do to track this information? To
what extent would the operational burdens of reporting averages of
daily, weekly, monthly values differ for the different indicators?
Question 3: For off-balance sheet items, what would be the
advantages or disadvantages of requiring reporting based on an average
of more frequent data than month-end values, such as an average of
daily or weekly values?
[[Page 60389]]
Question 4: What would be the advantages and disadvantages of
requiring calculation of GSIB surcharges based on indicators averaged
over the fourth quarter only, rather than based on average values over
all four quarters of the calendar year? For which indicators and why?
B. Reducing Cliff Effects in the Calculation of Method 2 GSIB
Surcharges
As described in the 2015 rulemaking, the Board chose to assign GSIB
surcharges using 100-basis point score band sizes so that modest
changes in a firm's systemic indicators would generally not cause a
change in its surcharge and surcharges would be reasonably sensitive to
changes in a firm's systemic footprint. In practice, the Board has
observed that firms' method 2 scores tend to cluster close to the upper
limit of a score band range, especially at year-end.
In order to increase the sensitivity of a firm's surcharge to its
systemic risk profile and reduce cliff effects around changing score
bands, the Board is proposing to make the method 2 score band ranges
narrower.\19\ Instead of 100-basis point score band ranges
corresponding to 0.5-percentage point increments in the surcharge
(1.0%, 1.5%, 2.0%, etc.), the proposal would modify the ranges in
method 2 to 20-basis point ranges that would correspond to 0.1-
percentage point increments (1.0%, 1.1%, 1.2%, etc.).
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\19\ The proposal would not amend the score band ranges for
method 1, as discussed further below.
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Under this approach, the lowest score band range would be method 2
scores of 189 basis points or less, corresponding to a 1.0 percent
surcharge, the lowest applicable surcharge for a GSIB. If the method 2
score of a GSIB equaled or exceeded 190 basis points, the method 2
surcharge would equal the sum of 1.1 percent and an additional 0.1
percent for each additional 20 basis points by which the GSIB's method
2 score exceeded 190 basis points. Expressed mathematically, this is
equivalent to:
[GRAPHIC] [TIFF OMITTED] TP01SE23.000
Where ceiling means to round the fraction to the nearest integer above
or equal to it.\20\ Table 2 illustrates the application of this formula
up to a score of 1129.
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\20\ For example, 2.1 rounds up to 3; 4.7 rounds up to 5; 6 does
not require rounding.
Table 2--Proposed Revised Method 2 Surcharge Score Band Ranges
----------------------------------------------------------------------------------------------------------------
Method 2 surcharge Method 2 surcharge
-------------------------------- Method 2 score -------------------------------
Method 2 score range Current Proposed range Current Proposed
(percent) (percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Less than 189................... 1.0 1.0 630-649 3.5 3.3
190-209......................... 1.1 650-669 3.4
210-229......................... 1.2 670-689 3.5
230-249......................... 1.5 1.3 690-709 3.6
250-269......................... 1.4 710-729 3.7
270-289......................... 1.5 730-749 4.0 3.8
290-309......................... 1.6 750-769 3.9
310-329......................... 1.7 770-789 4.0
330-349......................... 2.0 1.8 790-809 4.1
350-369......................... 1.9 810-829 4.2
370-389......................... 2.0 830-849 4.5 4.3
390-409......................... 2.1 850-869 4.4
410-429......................... 2.2 870-889 4.5
430-449......................... 2.5 2.3 890-909 4.6
450-469......................... 2.4 910-929 4.7
470-489......................... 2.5 930-949 5.0 4.8
490-509......................... 2.6 950-969 4.9
510-529......................... 2.7 970-989 5.0
530-549......................... 3.0 2.8 990-1009 5.1
550-569......................... 2.9 1010-1029 5.2
570-589......................... 3.0 1030-1049 5.5 5.3
590-609......................... 3.1 1050-1069 5.4
610-629......................... 3.2 1070-1089 5.5
1090-1109 5.6
1110-1129 5.7
----------------------------------------------------------------------------------------------------------------
[[Page 60390]]
The proposed method 2 score band range structure would result in a
surcharge equivalent to that under the current method 2 surcharge score
band range structure when a method 2 score is in the middle quintile of
the current score band range, as displayed in Table 2. For example, a
method 2 score of 280 basis points is near the center of the current
2.5 percent surcharge score band range and would likewise receive a 2.5
percent surcharge under the proposal. Under the proposal, method 2
scores at the lower end of a current method 2 score band range would
receive a modest GSIB surcharge reduction. Method 2 scores at the
higher end of a current method 2 score band range would receive a
modest GSIB surcharge increase under the proposal.
The proposed revision is not meant to alter the overall calibration
of the method 2 surcharge, as reflected by the fact that the surcharge
for a proposed score band range that is at the center of a current
score band range would remain unchanged. Rather, the proposal would
apply a more continuous approach to determining a firm's GSIB surcharge
that would reduce cliff-effects in the framework and increase its risk
sensitivity.
The proposal would not amend the score band ranges for method 1.
Because method 1 is structured to be generally consistent with the
methodology used by other major jurisdictions to calculate GSIB
surcharges and with the GSIB surcharge standard published by the Basel
Committee, the proposal would keep the existing score band ranges for
method 1 in the interest of continuing to promote international
consistency.
Question 5: What are the advantages and disadvantages of the
proposed approach to method 2 surcharges, including for firms' capital
planning? What alternative approaches, if any, should the Board
consider for reducing cliff effects and better reflecting a firm's
systemic risk profile in its GSIB surcharge?
Question 6: What would be the advantages and disadvantages of a
wider or narrower score band structure than the proposed approach of 20
basis points of method 2 score per 0.1 percentage point increase in
method 2 surcharge?
C. Effective Date of Changes to a Firm's GSIB Surcharge Requirement
Under the current framework, an increase in the GSIB surcharge of a
global systemically important bank holding company takes effect on
January 1 of the year that is one full calendar year after the
increased GSIB surcharge was calculated.\21\ This approach facilitates
GSIBs' capital planning and allows time for a GSIB to shrink its
systemic risk profile such that it would be subject to a lower GSIB
surcharge.
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\21\ A firm typically calculates its method 2 score for a given
year after it files its FR Y-15 for the fourth quarter, which
typically occurs around April of the following year. For method 1, a
firm typically calculates its score later that same year, after the
Board publishes the aggregate global measures for that year, which
typically occurs around November or December.
---------------------------------------------------------------------------
The Board is seeking comment on whether it would be appropriate to
modify the effective date of changes to a firm's GSIB surcharge
requirement following a change in its GSIB score. Under the proposed
change to measure certain indicators based on average values over a
four-quarter period, rather than year-end point-in-time values, it is
possible that a GSIB may have greater ability to predict its applicable
GSIB surcharge further in advance than under the current framework. In
addition, under the proposed change to a narrower score band structure
for determining method 2 surcharges, it is possible that incremental
changes in GSIB surcharge requirements may be smaller than under the
current approach.
Given these dynamics, the Board requests comment regarding possible
changes to the timing for an increase in a firm's GSIB surcharge to
take effect following the calculation date. One potential approach
could be for the effective date of the GSIB surcharge under both method
1 and 2 to occur with a shorter lag, such that increases would take
effect on April 1 of the year that immediately follows the calculation
of the increased GSIB surcharge. This approach would have the benefit
of providing a closer matching in time between the measurement of a
firm's systemic indicators and the application of a GSIB surcharge
based on that data.
An alternative approach could be for the effective date of the GSIB
surcharge under method 2, if binding, to coincide with the effective
date of the stress capital buffer, October 1, of the year in which the
increased GSIB surcharge was calculated. The effective date under
method 1, if binding, could be April 1 or October 1 of the year that
immediately follows the year in which the increased GSIB surcharge was
calculated. This approach would have a similar benefit to the first
approach, but also account for the consideration that the calculation
of method 1 scores typically occurs later in the calendar year, based
on the Board's publication date of the aggregate global measures used
in the method 1 calculation.
Question 7: What would be the advantages and disadvantages of
adjusting the timing for a firm's GSIB surcharge to take effect
following the calculation date of its GSIB score? To what extent would
other elements of the proposal, such as averaging of indicators and a
narrower method 2 score band structure, reduce the amount of time
needed for a GSIB to meet a higher GSIB surcharge? How would such a
change affect a GSIB's capital planning?
Question 8: What would be the advantages and disadvantages of
changing the effective date of a change to a firm's GSIB surcharge
requirement to coincide with the effective date of the stress capital
buffer requirement?
Question 9: What other approaches to the effective date of the GSIB
surcharge should the Board consider, and why?
D. Clarification for Reduction in GSIB Surcharge Calculated During the
Intervening Year Between Calculation and Effective Date of a GSIB
Surcharge Increase
The proposal would amend section 217.403 of the capital rule to
clarify ambiguity regarding the GSIB surcharge for a GSIB that
calculates a GSIB score that would result in a higher GSIB surcharge
taking effect on January 1 of the year that is one full calendar year
after a calculation date, but then in the year after that calculation
date calculates a GSIB score that would result in a lower GSIB score
than the one scheduled to take effect. The proposal would clarify that
in that situation, the lower, more recently calculated score would
apply. The proposed clarification would specify that a firm's GSIB
surcharge in effect for a calendar year is the surcharge calculated in
the immediately prior calendar year, unless the surcharge calculated in
the calendar year two years prior was lower, in which case the GSIB
surcharge calculated in the calendar year two years prior shall be in
effect. For example, a GSIB may calculate a GSIB score in 2024 that
results in an increased GSIB surcharge from 2.0 to 2.2 percent to take
effect on January 1, 2026. If, in 2025, that GSIB calculates a GSIB
surcharge of 2.1 percent, the GSIB's effective surcharge on January 1,
2026, would be the 2.1 percent calculated in 2025, instead of the 2.2
percent calculated in 2024. If, in 2025, the GSIB calculates a GSIB
surcharge of 2.3 percent, its effective surcharge on January 1, 2026,
would be the 2.2 percent calculated in 2024.
[[Page 60391]]
E. Amendments to Systemic Indicators
The Board is proposing to revise various aspects of the systemic
indicators, as implemented in certain cases through the data collected
on the FR Y-15. This section discusses these revisions, grouped by
systemic indicator category. Unless otherwise noted, each proposed
modification in this section would apply to all filers of the FR Y-15.
Table 3 summarizes the proposed modifications to the GSIB framework and
the FR Y-15 reporting.
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\22\ The capital rule currently requires banking organizations
subject to Category I and II standards to use SA-CCR to calculate
standardized total risk-weighted assets and total leverage exposure
and to use SA-CCR or the internal models methodology to calculate
their advanced approaches total risk-weighted assets. Firms subject
to Category III or IV standards may, but are not required to, use
SA-CCR. The Board, with the OCC and the FDIC, is separately
proposing changes to the capital rule that would remove the advanced
approaches capital requirements and require firms subject to
Category I, II, III, and IV standards to use SA-CCR to calculate
total risk-weighted assets and total leverage exposure.
Table 3--Proposed Amendments to Systemic Indicators
------------------------------------------------------------------------
Proposed amendments Affected systemic indicators
------------------------------------------------------------------------
Revise definition of ``financial Intra-financial system assets;
institutions'' for interconnectedness intra-financial system
category and treatment of holdings of liabilities; securities
securities issued by an exchange- outstanding.
traded fund.
Clarify treatment of certain exposures Intra-financial system assets;
of a banking organization that arise intra-financial system
in connection with client cleared liabilities; notional amount
derivatives positions. of OTC derivatives.
Incorporate the standardized approach Intra-financial system assets;
for counterparty credit risk (SA-CCR) intra-financial system
to measure derivative exposures \22\. liabilities.
Update treatment of non-cash collateral Intra-financial system assets;
in over-the-counter (OTC) derivatives intra-financial system
transactions. liabilities.
Update treatment of certificates of Securities outstanding.
deposit.
Clarify scope for reporting of Securities outstanding.
preferred shares.
Introduce two trading volume indicators Trading volume.
Update list of currencies.............. Payments activity.
Add derivatives exposures.............. Cross-jurisdictional claims;
cross-jurisdictional
liabilities.
Streamline reporting of the cross- Cross-jurisdictional
jurisdictional liabilities systemic liabilities.
indicator.
Technical edits to align the FR Y-15 Short-term wholesale funding.
instructions for reporting short-term
wholesale funding with the capital
rule.
------------------------------------------------------------------------
i. Interconnectedness and Complexity
a. Definition of ``Financial Institution'' and Treatment of Exchange-
Traded Funds
Banking organizations often enter into transactions with other
financial sector entities, giving rise to a range of obligations. These
transactions can serve many purposes and can also serve as transmission
channels for stress. Financial distress at a banking organization can
materially raise the likelihood of distress at other firms given the
network of obligations throughout the financial system. Accordingly,
the GSIB framework includes as a measure of a banking organization's
systemic risk profile indicators of its interconnectedness with other
financial institutions and the financial sector as a whole.
The GSIB surcharge framework measures interconnectedness using
three systemic indicators: intra-financial system assets, intra-
financial system liabilities, and securities outstanding. For purpose
of these indicators, the FR Y-15 instructions currently define
``financial institutions'' as depository institutions, bank holding
companies, securities brokers, securities dealers, insurance companies,
mutual funds, hedge funds, pension funds, investment banks, and central
counterparties. The definition excludes central banks and other public
sector bodies, such as multilateral development banks and the Federal
Home Loan Banks, but includes state-owned commercial banks. The
definition also excludes stock exchanges, though stock exchanges may
have subsidiaries that are included, such as securities dealers or
central counterparties.
This proposal would expand the definition of ``financial
institution'' to include savings and loan holding companies, private
equity funds, asset management companies, and exchange-traded funds.
The proposed inclusion of savings and loan holding companies would
clarify that a reporting firm should include positions with these firms
in the same manner as other depository institution holding companies,
since a banking organization's positions with these firms can act as a
similar channel for transmission of distress that can undermine
financial stability.
The proposed inclusion of private equity funds in the
interconnectedness indicators would be consistent with the purpose of
the interconnectedness category to holistically assess a banking
organization's exposures to and from other financial sector
entities.\23\ Private equity funds are engaged in asset management
activities, which are a financial activity, and they typically have
transactions or relationships with a broad set of other financial
market participants. Like with other asset management entities,
perceptions of distress at a private equity fund could affect market
perceptions of the soundness of other financial market participants. As
such, they can present a similar channel for transmission of distress
and financial instability as other asset management entities and other
types of entities included in the definition of ``financial
institution.''
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\23\ The proposed change would not include the portfolio
companies of a private equity fund unless a portfolio company itself
meets the definition of ``financial institution.''
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The proposed change regarding asset management companies would
similarly reflect that positions with asset management companies, in
addition to positions with the underlying funds managed by the
companies, represent sources of financial sector interconnectedness.
To improve clarity, the proposal would modify the FR Y-15
instructions to specify that exchange-traded funds are included in the
definition of ``financial institution,'' and would include in the line
items for holdings of securities issued by other financial institutions
(within the intra-financial system assets indicator) holdings of
securities of an exchange-traded fund.
[[Page 60392]]
Currently, the instructions for this line item state not to include
bond exchange-traded funds. Although the redemption structures for
shares of exchange-traded funds generally differ from the structure of
an open-ended mutual fund, asset management entities can have a variety
of redemption structures and still act a source of financial sector
interconnectedness. This change would improve the clarity of reporting
instructions and the consistency of treatment of asset management
entities and provide a more complete measure of a banking
organization's interconnectedness.
The proposal would implement these changes through revisions to the
instructions of the FR Y-15 that would apply to all filers.
Question 10: What other types of entities should the definition of
``financial institution'' include, and why?
Question 11: In what ways could the Board further improve clarity
regarding the types of entities included in the term ``financial
institution'' for purposes of the interconnectedness indicators?
b. Derivatives
The proposal would revise the FR Y-15 instructions for the
interconnectedness and complexity indicators--specifically, intra-
financial system assets and liabilities in the interconnectedness
category and notional amount of OTC derivatives in the complexity
category--to clarify the treatment of certain exposures of a banking
organization that arise in connection with client cleared derivatives
positions.
When a banking organization acts as a derivatives clearing
intermediary for a client, it generally does so under one of two
structures: the principal model or the agent model. Under the principal
model, the banking organization facilitates the clearing of derivatives
for a client by becoming a direct counterparty to both the client and
the central counterparty (CCP). Under the agency model, the clearing
member client and the CCP face each other directly, and the banking
organization provides to the CCP a guarantee of the client's
performance.
Under current reporting, all three indicators include client
cleared derivative positions under the principal model. For the
complexity indicator, filers must report the notional amounts
associated with each of its positions with the CCP and the clearing
member client. For the interconnectedness indicators, filers must
report net exposures to the CCP and the net exposures to clients that
fit the definition of a financial institution.
To promote consistent treatment of the two clearing models and
better capture sources of interconnectedness and complexity, the
proposal would include in all three indicators (intra-financial system
assets and intra-financial system liabilities in the interconnectedness
category and notional amount of OTC derivatives in the complexity
category) a firm's guarantees of client performance to a CCP with
respect to client cleared derivative positions.
For the interconnectedness indicators, inclusion of guarantees by a
banking organization of a client's performance would provide a more
accurate measurement of the firm's interconnectedness. While the
banking organization is not the primary obligor under these positions,
these positions could become transmission channels for distress if the
banking organization experienced material distress or failure.
For the complexity indicator, inclusion of guarantees by a banking
organization of a client's performance on derivative contracts would
provide a more accurate assessment of the firm's complexity, because it
would provide a more complete picture of the firm's derivative
exposures. As OTC derivatives contribute to complexity, whether the
banking organization is a primary or secondary obligor, a more accurate
representation of the notional amount of OTC derivatives exposures
would improve the Board's ability to assess systemic risk.
Question 12: What are the advantages and disadvantages of including
in the interconnectedness and complexity indicators guarantees of
client performance to a CCP with respect to client cleared derivative
positions?
The proposal would also update the reporting of derivative
positions in the interconnectedness indicators to align with amendments
to the capital rule in 2019 that adopted the standardized approach for
counterparty credit risk (SA-CCR). The indicators for intra-financial
system assets and intra-financial system liabilities include the net
fair value and potential future exposure of OTC derivatives with other
financial institutions, as calculated under the capital rule. The
current instructions specify that firms should use the current exposure
method to calculate the potential future exposure of these positions.
The proposal would update the instructions for the relevant line items,
5(b) and 11(b) in the interconnectedness category, to provide instead
for calculation using SA-CCR for a banking organization that uses SA-
CCR. Specifically, the proposal would state that a firm should report
the exposure amount of derivatives in accordance with the capital rule,
12 CFR 217.34(a). This change would align with the measurement of
derivatives in the interconnectedness category with that used in the
size category, as well as in the calculation of standardized total
risk-weighted assets and total leverage exposure in the capital rule.
In addition, the proposal would allow a banking organization to
recognize, for purposes of the intra-financial system assets and intra-
financial system liabilities indicators, the value of non-cash
collateral to offset the net fair value of derivatives if such
collateral is financial collateral (as defined in the capital rule, 12
CFR 217.2) and if adjusted for the applicable haircuts under SA-CCR or
the current exposure method, depending on which the banking
organization uses in accordance with the capital rule, 12 CFR
217.34(a). Specifically, this proposal would revise line items 5(a) and
11(a) in the interconnectedness category of the FR Y-15. This change
would provide recognition of risk mitigants that reduce the impact to
other financial institutions from a firm's failure.
c. Securities Outstanding
The proposal would revise the scope of certain exposures measured
under the securities outstanding systemic indicator in the
interconnectedness category. First, the proposal would revise the FR Y-
15 instructions to indicate that filers should not report a certificate
of deposit in the securities outstanding indicator if the certificate
of deposit is not due to or held by a financial institution and is non-
transferable. This modification would exclude such certificates of
deposit from the interconnectedness category because they are not, and
cannot become, exposures due to or held by a financial institution.
Consistent with the purpose of the interconnectedness indicators,
filers would continue to include in the securities outstanding
indicator a certificate of deposit that is issued to a financial
institution and a certificate of deposit that is transferable.
The proposal would also modify the instructions for other items
included in the securities outstanding systemic indicator in order to
provide greater clarity to filers. Specifically, the proposal would
require banking organizations to include preferred shares that have a
determinable fair value in the securities outstanding systemic
indicator, even if the preferred shares are not registered with the
[[Page 60393]]
Securities and Exchange Commission or listed on a securities exchange.
The proposed change would clarify the FR Y-15 instructions, which state
that publicly traded instruments must be reported. The proposed change
is intended to include instruments for which banking organizations can
easily determine a fair value, which can be done for securities for
which there is an active market. The proposed change would be
consistent with the intent of the securities outstanding category to
accurately measure issued and outstanding debt and equity instruments
of a banking organization.
Question 13: What further modifications or clarifications to the
securities outstanding systemic indicator should the Board consider,
and why?
Question 14: What are the advantages and disadvantages of the
proposed revisions to the interconnectedness and complexity categories?
What other changes should the Board consider, and why?
ii. Substitutability
a. Trading Volume
The substitutability category used in method 1 measures the extent
to which a banking organization provides critical financial services
and infrastructure to third parties and the broader financial system
that would be difficult to substitute in a period of financial stress
or failure. Currently, there are three substitutability indicators: (1)
payments activity; (2) assets under custody; and (3) underwritten
transactions in debt and equity markets.
The proposal would revise the substitutability category to
introduce two new systemic indicators, ``trading volume--fixed income''
and ``trading volume--equity and other,'' as a complement to the
existing systemic indicator for underwritten transactions in debt and
equity markets.
The proposed inclusion in the substitutability category of trading
volume in addition to underwriting activity would provide a broader
measure of the extent to which a banking organization's activities
contribute to liquidity in the primary market (underwriting) and
secondary market (trading). The permitted trading activity of banking
organizations, such as market making, can promote market liquidity,
thereby enhancing price discovery and permitting market participants to
manage financial risk more holistically. The provision of market-making
services can require substantial investments in information technology
and infrastructure, making it difficult to substitute in a period of
financial stress or firm default. The proposal would include separate
systemic indicators for trading volume in fixed income and in equities
and other securities to avoid disproportionate impact due to
differences in overall trading volumes in the two markets.
The FR Y-15 sections for the substitutability indicators (Schedules
C and J) currently include these measures as memoranda line items. The
proposal would move these line items into the main section of Schedule
C to reflect their inclusion as new systemic indicators.\24\ The
indicator for trading volume in fixed income securities includes money
market instruments, certificates of deposit, bills, bonds, and other
fixed income securities, such as commercial paper, corporate bonds,
syndicated corporate loans, covered bonds, convertible debt, and
securitized products.\25\ This indicator includes securities issued by
public sector entities (as defined in 12 CFR 217.2) as well as
securities issued or guaranteed by government-sponsored agencies,
multilateral development banks, and state and local governments, but
does not include securities issued by a sovereign, as defined in 12 CFR
217.2. The indicator for trading volume of equities and other
securities includes all publicly traded equities (as defined in 12 CFR
217.2), including American depositary receipts (ADRs) and global
depositary receipts (GDRs), unlisted equity securities, preferred
stock, trust preferred securities, and securities issued by investment
funds, as defined in 12 CFR 217.2.\26\
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\24\ As discussed in section II.F of this Supplementary
Information section below, the proposal would remove Schedule J to
streamline reporting by foreign banking organizations.
\25\ See FR Y-15 Instructions, Schedule C, line items M5, M5(a),
M5(b), and M6.
\26\ See FR Y-15 Instructions, Schedule C, line items M5, M5(c),
M5(d), and M7.
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The proposal would also modify the weighting of the indicators for
substitutability in a firm's method 1 GSIB score calculation to reflect
the addition of the two new indicators. Currently, the indicator for
underwritten transactions in debt and equity markets receives a 6.67
percent weighting. The proposal would reallocate a portion of this
weighting to the two new indicators: the indicator for underwritten
transactions in debt and equity markets would receive a 3.33 percent
weighting, and the trading volume--fixed income and trading volume--
equity and other systemic indicators would each receive a 1.67 percent
weight. The remaining systemic indicators in the substitutability
category would retain their current weighting of 6.67 percent each. The
inclusion of the proposed systemic indicators for trading volume would
not affect a GSIB's method 2 score calculation, as method 2 does not
include the substitutability category of indicators.
Question 15: What are the advantages and disadvantages of the
proposed trading volume systemic indicators as measures of a banking
organization's substitutability, based on its contributions to
efficient market functioning? What alternative indicators, if any,
should the Board consider?
Question 16: What, if any, other trading instruments and exposures
besides those mentioned above should the proposed systemic indicators
for trading volume include, and why?
b. Currencies Included in the Payments Activity Systemic Indicator and
Associated Memoranda Items
The payments activity indicator includes the value of all cash
payments sent via large-value payment systems, along with the value of
all cash payments sent through an agent (for example, using a
correspondent or nostro account), over the calendar year in major
global currencies. To determine which currencies to include in this
indicator, the Board considers factors such as the extent to which a
currency represents a material share of global foreign exchange market
turnover, among other factors.\27\ In identifying major currencies, the
Board takes into account the list of major currencies announced by the
Basel Committee for purposes of the international GSIB surcharge
standard, including updates typically announced by the Basel Committee
every three years.\28\ The FR Y-15 also collects payments activity for
certain other currencies (memorandum item currencies) that are not used
at sufficient volumes to be included in the payments activity metric,
in order to help inform the selection of major currencies in the future
and monitor activity more consistently over time in currencies that may
become major currencies in the future.
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\27\ For example, a currency may also be considered a major
currency if it represents a material share of global nominal gross
domestic product (GDP).
\28\ See, e.g., Instructions for the end-2022 G-SIB assessment
exercise, January 2023, available at <a href="https://www.bis.org/bcbs/gsib/instr_end22_gsib.pdf">https://www.bis.org/bcbs/gsib/instr_end22_gsib.pdf</a>.
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The proposal would update the list of currencies that are included
in the payments activity systemic indicator to reflect changes in the
materiality of
[[Page 60394]]
certain currencies' share of global foreign exchange market turnover.
The proposal would also update the list of currencies that are not
included in the payments activity systemic indicator but that are
collected as memorandum item currencies.
The proposal would revise the payments activity systemic indicator
to include the Singapore dollar based on its use in global foreign
exchange markets, and to remove the Brazilian real and the Mexican peso
from the systemic indicator based on their reduced relative use in
global foreign exchange markets. Based on the 2022 Triennial Central
Bank Survey published by the Bank for International Settlements (BIS),
the Singapore dollar accounted for over 2 percent of foreign exchange
market turnover in April 2022.\29\ The Mexican peso, which the FR Y-15
currently includes in the payments systemic indicator, accounted for
slightly less than 2 percent of foreign exchange market turnover, and
the Brazilian real, which the FR Y-15 also currently includes in the
payments systemic indicator, accounted for significantly less than 2
percent of foreign exchange market turnover.
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\29\ The BIS Triennial Central Bank Survey is a comprehensive
source of information on the size and structure of global over-the-
counter markets in foreign exchange and interest rate derivatives.
The BIS coordinates the Triennial Survey every three years. The
foreign exchange turnover part of the 2022 Triennial Survey took
place in April 2022 and involved central banks and other authorities
in 52 jurisdictions. These authorities collected data from more than
1,200 banks and other dealers and reported national aggregates to
the BIS for inclusion in global aggregates. See Triennial Central
Bank Survey, October 2022, available at <a href="https://www.bis.org/statistics/rpfx22_fx.pdf">https://www.bis.org/statistics/rpfx22_fx.pdf</a>.
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Under the proposal, the Board would continue to collect data on
payments in the Mexican peso on the FR Y-15 as a memorandum item
currency, based on its share of foreign exchange market turnover. In
addition, the proposal would add payments activity in Norwegian krone
and South Korean won as memoranda item currencies on the FR Y-15. These
currencies each accounted for slightly less than 2 percent of foreign
exchange market turnover, based on the Triennial Central Bank Survey.
Like other memoranda item currencies, the Norwegian krone and South
Korean won would not be included in the payments activity systemic
indicator under the proposal.
The proposal would amend the FR Y-15 to no longer collect data on
payments activity in Russian rubles and the Brazilian real, which are
currently included as memoranda item currencies, as the foreign
exchange market turnover for these currencies is significantly less
than the other currencies for which the report collects information.
Question 17: Which, if any, other currencies should the Board
include in the payments activity systemic indicator or as memorandum
item currencies, and why?
Question 18: Which, if any, of the currencies that would be
included in the payments activity systemic indicator or as memorandum
item currencies should the Board not include, and why?
c. Clarifications for the Payments Activity Indicator
The proposal would make additional changes to the FR Y-15
instructions for the payments activity indicator to improve clarity for
filers. First, the proposal would modify the instructions for payments
made in the last four quarters to more clearly state the current
requirement that filers should include in their reported values the
quarter including the as-of date of the report. This clarification
would make no substantive change to the current instructions.
Additionally, the proposal would update a footnote in the instructions
for line item 1, which cites a report published by the Bank for
International Settlements' Committee on Payment and Settlement Systems,
to reflect a change in the name of this body to the Committee on
Payments and Market Infrastructures and to provide an updated
hyperlink.
iii. Cross-Jurisdictional Activity
a. Cross-Jurisdictional Derivatives Activity
Banking organizations with large cross-border activities and
exposures may be more difficult and costly to resolve than domestically
focused banking organizations in the event of a failure. The greater a
banking organization's exposures across borders and to non-domestic
counterparties, the more difficult it can be to coordinate its
resolution were it to fail. In addition, cross-jurisdictional activity
can add complexity and present channels for transmission of distress
with parties in different jurisdictions. The two systemic indicators
included in this category--cross-jurisdictional claims and cross-
jurisdictional liabilities--measure a depository institution holding
company's global profile by considering its activity and exposures
outside of the United States.
Under the current FR Y-15 instructions, neither of these indicators
for cross-jurisdictional activity include derivative exposures.
Derivatives, however, can give rise to cross-jurisdictional claims and
liabilities, present sources of cross-border complexity, and act as
channels for transmission of distress in the same manner as other
assets and liabilities or even to a greater extent to amplify the
effect of a banking organization's failure. (The failure of Lehman
Brothers during the 2007-09 financial crisis presents a notable
example.) Omission of derivatives from the systemic indicators for
cross-jurisdictional activity can materially understate this measure
for a banking organization, and also present opportunities for a
banking organization to use derivatives to structure its exposures in a
manner that reduces the value of its systemic indicators without
reducing the risks the indicator is intended to measure.
Accordingly, the proposal would revise the systemic indicators for
cross-jurisdictional claims and cross-jurisdictional liabilities to
include derivative exposures. As a result of this change, these
indicators would provide a more accurate and comprehensive measure of a
banking organization's cross-jurisdictional activity and the associated
risks intended to be captured. Under the proposal, cross-jurisdictional
derivative claims and cross-jurisdictional derivative liabilities would
be calculated gross of collateral in order to measure the underlying
scale of a banking organization's cross-jurisdictional derivatives
activity. A banking organization may be engaged in significant cross-
jurisdictional derivatives business even if its cross-jurisdictional
claims and liabilities are relatively small net of collateral. The
proposal would implement the modification to include derivative
exposures to the cross-jurisdictional activity category systemic
indicators through revisions to the FR Y-15, which currently collects
such cross-jurisdictional derivative exposures as memoranda items.\30\
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\30\ Currently, the cross-jurisdictional derivative claims
memorandum item is reported net of cash collateral. Under the
proposal, a banking organization would report cross-jurisdictional
derivative claims gross of cash and other collateral.
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In addition to its usage under the GSIB surcharge framework, cross-
jurisdictional activity as reported on the FR Y-15 also serves as a
risk-based indicator in the Board's framework for determining the
applicable category of prudential standards for large banking
organizations. Specifically, a banking organization that has cross-
jurisdictional activity of $75 billion or more is subject to Category
II standards.\31\ The proposed change would therefore also have the
effect of
[[Page 60395]]
improving the measurement of cross-jurisdictional activity for the
purposes of determining the application of prudential standards for
large banking organizations, for the same reasons described above.
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\31\ See 12 CFR 252.2.
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Question 19: What other modifications, if any, would improve
measurement of the cross-jurisdictional activity indicators?
b. Other Changes to Measurement of Cross-Jurisdictional Activity
Indicators
Currently, the FR Y-15 instructions direct filers to measure cross-
jurisdictional liabilities by referencing instructions for the Treasury
International Capital reports and the Country Exposure Report (FFIEC
009). To streamline the reporting instructions for cross-jurisdictional
liabilities, the proposal would remove references to the Treasury
International Capital reports, consolidate line items related to cross-
jurisdictional liabilities, and apply consistent definitions with the
FFIEC 009 for the measurement of cross-jurisdictional liabilities. This
approach would result in a consistent methodology for measuring the
consolidated cross-jurisdictional liabilities of firms while
simplifying the reporting instructions.
As part of this change, the proposal would revise the scope of the
cross-jurisdictional liabilities indicator to include total liabilities
booked at foreign offices regardless of whether payment is guaranteed
at locations outside the country of the office. Foreign office
liabilities may present complexity or increase the difficulty and cost
of resolving a banking organization in the event of a failure
regardless of whether payments are guaranteed at locations outside the
country of the office. Therefore, this revision would better reflect a
banking organization's cross-jurisdictional activities and exposures.
The proposal would also make other revisions to the FR Y-15
instructions for cross-jurisdictional activity to provide greater
clarity to filers.
iv. Short-Term Wholesale Funding
The proposal would make amendments to the short-term wholesale
funding indicator and its associated FR Y-15 instructions to improve
the consistency of data measurement and reporting, reduce operational
burden, and improve the clarity of reporting instructions. For purposes
of the method 2 surcharge, short-term wholesale funding measures the
ratio of weighted daily average wholesale funding with a remaining
maturity of one year or less to average risk weighted assets. In
addition to the method 2 surcharge, short-term wholesale funding is
also used to determine the applicable category of prudential standards
under the regulatory tiering framework adopted by the Board in 2019.
Specifically, a firm with weighted short-term wholesale funding of $75
billion or more is subject to Category III standards.\32\
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\32\ See 12 CFR part 252, subpart A.
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a. Alignment With Other Requirements
To improve consistency of data measurement and reporting and reduce
operational burden for filers, the proposal would align the maturity
categories used to calculate a firm's short-term wholesale funding
score under the GSIB surcharge framework and reported on the FR Y-15
with the maturity categories used for liquidity data reporting on the
Complex Institution Liquidity Monitoring Report (FR 2052a) and for
purposes of the net stable funding ratio (NSFR) rule,\33\ by moving the
start and end dates for certain categories by one day.
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\33\ See 12 CFR part 249; see also Net Stable Funding Ratio:
Liquidity Risk Measurement Standards and Disclosure Requirements, 86
FR 9120 (Feb. 11, 2021).
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Due to recent amendments to the FR 2052a to align the report with
the net stable funding ratio (NSFR) rule,\34\ there is currently a one-
day difference between the start and end dates for certain maturity
categories for reporting data items on the FR Y-15 and the FR 2052a.
Specifically, one of the maturity categories in the FR 2052a and under
the NSFR rule includes a lower bound of 180 days. The short-term
wholesale funding indicator under the GSIB surcharge framework and the
FR Y-15 reporting form, however, include a category for remaining
maturity of 181 to 365 days.
---------------------------------------------------------------------------
\34\ Id.
---------------------------------------------------------------------------
The proposal would modify the maturity category of 91 to 180 days
under the GSIB surcharge framework and FR Y-15 to a remaining maturity
of 91 to 179 days, and the maturity category of 181 to 365 days to a
maturity of 180 to 364 days, to align with the FR 2052a. This change
would improve consistency and reduce operational burdens, for example,
by allowing banking organizations to pull data from the FR 2052a to
complete FR Y-15 reporting.
b. Sweep Deposits
The GSIB surcharge framework's method 2 score calculation of short-
term wholesale funding requires banking organizations to include
brokered deposits, as defined in the Board's liquidity coverage ratio
and NSFR rules.\35\ The proposal would make a conforming amendment to
the GSIB surcharge framework's reference to brokered deposits to align
with a 2021 change to the defined term under the Board's liquidity
rules. In the 2021 NSFR final rule, the Board amended the definition of
``brokered deposit'' to create a separate defined term, ``sweep
deposits,'' for a category of funding that had previously been included
in the scope of the term ``brokered deposits.'' \36\
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\35\ 12 CFR part 249.
\36\ ``Net Stable Funding Ratio: Liquidity Risk Measurement
Standards and Disclosure Requirements,'' 86 FR 9120 (February 11,
2021). A sweep deposit is a deposit held at a banking organization
by a customer or counterparty through a contractual feature that
automatically transfers to the banking organization from another
regulated financial company at the close of business each day
amounts identified under the agreement governing the account from
which the amount is being transferred. See 12 CFR 249.3. The 2021
change was also consistent with amendments adopted by the FDIC to
its regulations regarding brokered deposits. See ``Unsafe and
Unsound Banking Practices: Brokered Deposits and Interest Rate
Restrictions,'' 86 FR 6742 (January 22, 2021).
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The proposal would clarify that the change to create a separate
defined term for this class of funding was not intended to scope sweep
deposits out of the short-term wholesale funding indicator in the GSIB
surcharge framework. Specifically, the proposal would amend the GSIB
surcharge framework to add ``sweep deposits'' to the scope of the
short-term wholesale funding indicator and add a definition of ``sweep
deposits.'' The Board made similar conforming terminology changes to
the FR Y-15 and its instructions for Schedules G and N, ``Short-Term
Wholesale Funding Indicator,'' line item 1.b, ``Retail brokered
deposits and sweeps,'' as well as the glossary entry for ``sweep
deposit,'' as of the June 30, 2021, reporting period.
c. Short-Term Wholesale Funding Calculation
The proposal would revise the General Instructions for the short-
term wholesale funding indicator in the FR Y-15 to more closely align
with the GSIB surcharge framework. The revised instructions would
clarify that firms should report short-term wholesale funding
consistent with the definition in the capital rule.\37\
---------------------------------------------------------------------------
\37\ See 12 CFR 217.406(b)(2).
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Question 20: In addition to the proposed changes, what additional
changes, if any, should the Board consider making to the FR Y-15, and
why--for example, to improve the measurement of indicators and systemic
risk or to reduce operational reporting burdens?
[[Page 60396]]
F. Foreign Banking Organization Reporting Requirements
In 2019, in connection with the final rule establishing categories
and thresholds for determining prudential standards for large banking
organizations, the Board added new Schedules H through N to the FR Y-
15, which apply solely to foreign banking organizations and their U.S.
intermediate holding companies. The new schedules were intended to
simplify reporting for foreign banking organizations and their
intermediate holding companies. However, based on experience since this
change, the Board is proposing to consolidate FR Y-15 reporting for
U.S. and foreign banking organizations on a single set of schedules to
reduce technical challenges and operational burden and improve
administration and consistency of reporting.
To simplify and streamline the reporting form and its instructions,
the proposal would remove Schedules H through N and make adjustments to
accommodate reporting by foreign banking organizations using the same
schedules as domestic firms, Schedules A through G. Under the proposal,
a foreign banking organization would file Schedules A through G for its
combined U.S. operations and separately for any applicable U.S.
intermediate holding company. This change would only reorganize the way
that foreign banking organizations report the FR Y-15 and would not
change the actual information collected. The proposal would make
corresponding updates to the FR Y-15 instructions to reflect this
change.
G. Implementation and Timing
The proposal's amendments to the capital rule, FR Y-15, and FR Y-15
instructions would take effect two calendar quarters after the date of
adoption of a final rule. This effective date timing would give firms a
minimum of two quarters to make the required changes to their systems
and processes. During the initial three quarters following the
effective date, items that require a four-quarter average or sum would
include data from quarters for which the underlying reporting
instructions differ. Banking organizations would not be required to
adjust data reported in previous quarters when calculating these four-
quarter averages or sums. A banking organization that does not have
data for an indicator for a previous quarter would be required to use a
pro-rata approach.
Question 21: What alternative implementation timing should the
Board consider and why?
Question 22: To the extent that the Board decides to adopt any
particular element of this proposal and not to adopt other elements of
this proposal, how should the Board account for that for those elements
of the proposal that are adopted? Which elements of the proposal, if
any, would require adjustment if another element is not adopted and
what adjustments should the Board consider?
H. Interaction With Other Proposals
The Board, with the OCC and FDIC, is separately issuing a proposal
that would revise the agencies' risk-based capital framework applicable
to banking organizations with at least $100 billion in total assets and
their depository institution subsidiaries and to banking organizations
with significant trading activities (the capital proposal).\38\ The
capital proposal would require these banking organizations to use more
risk-sensitive standardized approaches and reduce the use of internal
models to enhance consistency in capital requirements across these
banking organizations and better reflect the risks of these banking
organizations' exposures.\39\
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\38\ In addition to revising risk-based capital requirements,
the capital proposal would also revise the applicability of the
supplementary leverage ratio and countercyclical capital buffer
requirements to include all banking organizations with at least $100
billion in total assets and their depository institution
subsidiaries.
\39\ The capital proposal also includes certain proposed
amendments to the FR Y-15 form and instructions.
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Question 23: What modifications, if any, should the Board consider
to this proposal due to the capital proposal?
III. Impact
This section assesses the impact of the proposed changes, using
supervisory data for 2021 and 2022. The impact analysis focuses on
domestic GSIBs, which would see small changes to their GSIB scores and
capital surcharges as a result of the proposal.\40\ Additionally, some
proposed changes, such as the amendments to the FR Y-15 reporting
requirements, would affect all FR Y-15 filers, as well as, potentially,
their categorizations and requirements under the regulatory tiering
framework for large banking organizations.\41\ Overall, the Board
expects that the systemic stability and operational benefits of the
proposed changes would outweigh their relatively small costs.
---------------------------------------------------------------------------
\40\ Where not explicitly noted, the impact analysis considers
the proposal's impact on both method 1 and method 2 GSIB scores,
although method 2 GSIB scores determine the applicable capital
surcharges of GSIBs at the time of this proposal. Currently, there
are eight GSIBs in the United States: Bank of America Corporation,
The Bank of New York Mellon Corporation, Citigroup Inc., The Goldman
Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, State Street
Corporation, and Wells Fargo & Company.
\41\ See 12 CFR part 252, subpart A; see also 84 FR 59230.
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The Board analyzed the combined benefits and costs of the proposal.
Where feasible and relevant, the Board assessed the effects of
measuring systemic indicators by using averages of daily or monthly
values (henceforth: ``averaging'') and using narrow GSIB score bands
separately from the rest of the proposed changes. The analysis also
considered potential interactions between the proposal and other
elements of the regulatory framework for banking organizations, such as
the regulatory tiering framework, and with proposed changes by the
Board, OCC, and FDIC to make amendments to their capital rule for large
banking organizations and banking organizations with significant
trading activity (the capital proposal, as described above in section
II.H of this SUPPLEMENTARY INFORMATION section).
A. Benefits of the Proposed Changes
The proposed changes would increase the stability of the financial
system by better aligning firms' applicable GSIB capital surcharges
with the intended functioning of the GSIB framework. The proposal would
achieve this by enhancing the risk sensitivity of method 1 and method 2
GSIB scores as well as implementing a more continuous correspondence
between the method 2 GSIB scores and the applicable capital surcharges.
The reporting of systemic indicators on an average, rather than
point-in-time, basis would improve the measurement of firms' systemic
footprints and reduce opportunities for firms to lower their systemic
indicators at year end so that they receive lower GSIB capital
surcharges than warranted by their actual systemic footprints, as
measured by the value of their systemic indicators at other times of
the year. Both internal staff analysis and empirical evidence in Berry,
Khan, and Rezende (2020) show that some domestic GSIBs have reported
reduced systemic indicators at year end relative to amounts reported on
other dates, especially reporting reduced ``complexity'' systemic
indicators before year end.\42\ Averaging would both
[[Page 60397]]
reduce the incentive and the associated social costs of this practice,
such as the potential reduction of market depth and willingness to
participate in related market segments at year end, which is an
important consideration given the supply of liquidity that GSIBs
provide in financial markets.\43\ Additionally, averaging would also
have the benefit of making the measurement of systemic indicators more
robust to seasonal (intra-year) fluctuations and thus yielding a more
accurate measure of firms' systemic footprints for the determination of
GSIB capital surcharges.
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\42\ For more details, see Berry, J., Khan, A., and Rezende, M.,
``How Do U.S. Global Systemically Important Banks Lower Their
Capital Surcharges?,'' FEDS Notes (2020) and working paper (2021,
available at: <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3764965">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3764965</a>).
\43\ For the role of domestic GSIBs as liquidity providers and
``lenders of second-to-last resort'' in U.S. Treasury repurchase
agreement and foreign exchange swap markets, see Correa, R., Du, W.,
and Liao, G.Y., ``U.S. Banks and Global Liquidity,'' National Bureau
of Economic Research working paper 27491 (2020).
---------------------------------------------------------------------------
The proposed amendments to FR Y-15 reporting requirements would
further enhance the risk sensitivity of GSIB scores by improving the
measurement of firms' systemic footprints. Most of the amendments would
entail small refinements to the cross-jurisdictional activity,
interconnectedness, and short-term wholesale funding systemic
indicators. Additionally, many of the amendments would improve
measurement and reporting consistency across jurisdictions, by aligning
with changes to the international GSIB surcharge standard published by
the Basel Committee on Banking Supervision.
The benefits of implementing more narrow method 2 GSIB score bands
would include reducing cliff effects and improving the alignment
between firms' systemic footprints and their capital surcharges. Cliff
effects occur when firms cross the boundary between two score bands and
thus experience a relatively large change in their applicable capital
surcharges, which could affect their marginal lending, investment, and
capital distribution decisions. Narrow score bands would substantially
reduce the size of these changes in the capital surcharge (from 50
basis points to 10 basis points), thereby making the transition between
score bands and the related changes in firms' cost of capital smoother.
Narrow score bands would also have the benefit of tying the applicable
capital surcharges more closely to firms' systemic footprints, as
measured by method 2 GSIB scores. Specifically, the proposal would
ensure that firms with similar systemic footprints are assigned similar
capital surcharges by reducing score differences across GSIBs that fall
in the same band.
Crucially, under the proposal, the rate of change in the GSIB
capital surcharge per score change (that is, the steepness of the
surcharge schedule) would be unchanged, and firms would retain their
ability to determine their capital surcharges in the long run by
adjusting their systemic risk profiles.
B. Costs of the Proposed Changes
The proposal would modestly increase the GSIB scores and capital
surcharges of GSIBs, with minimal effect on their cost of capital and
real economic activity. The Board estimates that most of the method 2
score increase would be driven by the addition of cross-jurisdictional
derivative exposures to the cross-jurisdictional activity systemic
indicators, which would increase method 2 GSIB scores by about 11
points on average across firms. The averaging of systemic indicators
would have a somewhat smaller effect, increasing method 2 GSIB scores
by about 9 points on average across firms. This effect would primarily
affect the scores of those GSIBs that have recently reported lower
systemic indicators at year end such that they received lower GSIB
capital surcharges than would be warranted based on typical systemic
indicator values at other times of the year. Notably, the
implementation of narrow score bands would not affect GSIB scores, and
the proposed score bands would not have a material effect on firms'
GSIB capital surcharges.
Considering all proposed changes, the Board estimates that their
combined effect would increase method 2 GSIB scores by about 27 points
on average across firms, which corresponds to an about 13-basis-point
increase in the average method 2 GSIB capital surcharge. At the end of
2022, the combined effect of the proposed changes would correspond to
an about $13 billion aggregate increase in the risk-based capital
requirements of domestic GSIBs.
Finally, the Board anticipates that the proposal may increase the
costs of regulatory compliance, as detailed below in the Paperwork
Reduction Act section of the preamble.
C. Interaction With Other Rules and Proposals
The last part of this impact analysis considers the interactions of
the proposal with other elements of the regulatory framework for
banking organizations. Specifically, the Board examined the interaction
of the proposal with the regulatory tiering framework, capital
proposal, and long-term debt and total loss-absorbing capacity
requirements.\44\
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\44\ See 12 CFR part 252, subpart G; see also 85 FR 17003.
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The Board estimates that the proposed revisions to the cross-
jurisdictional activity systemic indicator would not have a material
impact on the category of prudential standards applicable to any
domestic banking organization. The Board estimates that the proposed
revisions would substantially increase the reported value of cross-
jurisdictional activity of the combined U.S. operations and U.S.
intermediate holding companies of most foreign banking organizations
that have combined U.S. assets of $100 billion or more. For some of
these firms, this change could result in the application of more
stringent capital and liquidity standards.
For the combined U.S. operations of most foreign banking
organizations that have combined U.S. assets of $100 billion or more,
the reported value of cross-jurisdictional activity would increase
above $75 billion as a result of the proposal. This change would result
in seven foreign banking organizations that are currently subject to
Category III or IV standards becoming subject to Category II standards,
which include requirements for daily liquidity reporting (rather than
monthly or no liquidity reporting); monthly (rather than quarterly)
internal liquidity stress testing; and full (rather than reduced)
liquidity risk management. This change would have the benefit of
enhancing the liquidity positions and liquidity risk management of
these foreign banking organizations' U.S. operations at the cost of
somewhat higher administrative expenses.
For the U.S. intermediate holding companies of foreign banking
organizations, the Board estimates that the increase in the reported
value of cross-jurisdictional activity would move two firms that are
currently subject to Category III standards to Category II, making them
subject to more stringent capital and liquidity requirements.
Consequently, these two firms would have to conduct annual company-run
stress testing (rather than every two years); recognize accumulated
other comprehensive income (AOCI) in their regulatory capital; and meet
the full (rather than 85 percent reduced) standardized liquidity
requirements. The Board expects that the two affected U.S. intermediate
holding companies would not incur significant costs to meet the
increased liquidity requirements because they had sufficiently large
liquidity buffers throughout 2022 and in the first quarter
[[Page 60398]]
of 2023. The impact of AOCI inclusion in regulatory capital would be
small, while the cost of increasing the frequency of company-run stress
tests would likely be modest for these firms.\45\ A notable benefit of
the proposed change would be to make the categorization and regulatory
treatment of banking organizations more consistent within the tiering
framework through the enhanced measurement of the cross-jurisdictional
activities of banking organizations, which would ensure the application
of more stringent requirements for firms with significant cross-
jurisdictional activity.
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\45\ Under the capital proposal, the Board, OCC, and FDIC are
separately proposing to require banking organizations subject to
Category III and IV standards to recognize AOCI in their regulatory
capital, in addition to banking organizations subject to Category I
and II standards.
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The capital proposal, which the Board, the OCC, and the FDIC are
concurrently proposing, would also interact with the effects of this
proposal on the scores and surcharges of GSIBs through changes to the
calculation of risk-weighted assets of these firms under the capital
rule. The capital proposal would increase the risk-weighted assets of
most GSIBs, affecting their GSIB capital surcharge in two ways. First,
the risk-weighted asset change would reduce the short-term wholesale
funding systemic indicators of most GSIBs (by mechanically increasing
the denominator of the indicator), which in turn would reduce their
capital surcharges. Second, the dollar amounts of the capital surcharge
changes under the proposal would be proportionally larger due to the
change in risk-weighted assets.
Finally, the Board considered how the small increase in method 1
and method 2 GSIB scores would affect the long-term debt and total
loss-absorbing capacity requirements of GSIBs. The increase in GSIB
scores would have no immediate impact on long-term debt requirements
because it only affects the risk-based long-term debt requirement,
which was not binding at the end of 2021 for any of the domestic GSIBs.
Meanwhile, the Board estimates that the total loss-absorbing capacity
requirement would increase by a small amount for one GSIB as a result
of increases to method 1 GSIB scores under the proposal.
IV. Administrative Law Matters
A. Paperwork Reduction Act Analysis
Certain provisions of the proposed rule contain ``collections of
information'' within the meaning of the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3501-3521). The Board 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 Board reviewed the proposed rule under the
authority delegated to the Board by OMB.
The proposed rule contains reporting requirements subject to the
PRA. To implement these requirements, the Board proposes to revise the
Systemic Risk Report (FR Y-15; OMB No. 7100-0352).
Comments are invited on the following:
(a) Whether the proposed collections of information are necessary
for the proper performance of the Board's functions, including whether
the information has practical utility;
(b) The accuracy of the estimates of the burden of the proposed
information collections, including the validity of the methodology and
assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the information collections on
respondents, including using automated collection techniques or other
forms of information technology; and
(e) Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
Comments on aspects of this proposed rule that may affect reporting
or recordkeeping requirements and burden estimates should be sent to
the addresses listed in the ADDRESSES section of the Supplementary
Information. A copy of the comments may also be submitted to the OMB
desk officer for the Agencies: By mail to U.S. Office of Management and
Budget, 725 17th Street NW, #10235, Washington, DC 20503 or by
facsimile to (202) 395-5806, Attention, Federal Banking Agency Desk
Officer.
Proposed Revision, With Extension, of the Following Information
Collection
Collection title: Systemic Risk Report.
Collection identifier: FR Y-15.
OMB control number: 7100-0352.
General description of report: The FR Y-15 quarterly report
collects systemic risk data from U.S. bank holding companies and
covered savings and loan holding companies with total consolidated
assets of $100 billion or more, any U.S.-based bank holding company
designated as a GSIB that does not meet the consolidated assets
threshold, and foreign banking organizations with $100 billion or more
in combined U.S. assets. The Board uses the FR Y-15 data to monitor, on
an ongoing basis, the systemic risk profile of subject institutions. In
addition, the FR Y-15 is used to (1) facilitate the implementation of
the GSIB surcharge rule, (2) identify other institutions that may
present significant systemic risk, and (3) analyze the systemic risk
implications of proposed mergers and acquisitions.
Proposed effective date: Two full quarters after the adoption of
the final rule.
Frequency: Quarterly.
Affected Public: Businesses or other for-profit.
Respondents: Top-tier U.S. bank holding companies and covered
savings and loan holding companies with $100 billion or more in total
consolidated assets, any U.S.-based bank holding company designated as
a GSIB that does not meet that consolidated assets threshold, and
foreign banking organizations with combined U.S. assets of $100 billion
or more.
Estimated number of respondents: 53.
Estimated average hours per response: Reporting--56 hours for
GSIBs, 49 hours for Category II and Category III firms, and 50 hours
for Category IV Firms. Recordkeeping--0.25 hours.
Estimated annual burden hours: Reporting--10,528 hours; \46\
Recordkeeping--53 hours.
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\46\ This estimated total annual burden reflects adjustments
that have been made to the Board's burden methodology for the FR Y-
15 that provide a more consistent estimate of respondent burden
across different regulatory reports.
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Estimated change in total burden: 256 hours.
Legal authorization and confidentiality:
Sections 163 and 165 of the Dodd-Frank Act, as amended by the
Economic Growth, Regulatory Relief, and Consumer Protection Act,
authorize the Board to consider risk to U.S. financial stability in
regulating and examining bank holding companies with $100 billion or
more in consolidated assets and nonbank financial companies who are
under the Board's supervision.\47\ The Board is further authorized to
impose prudential standards for such entities and to differentiate
among companies on an individual basis or by category, taking into
consideration their capital structure, riskiness, complexity, financial
activities, size, and any other risk-related factors that the Board
deems appropriate.\48\ This authorization also
[[Page 60399]]
covers certain foreign banks with U.S. operations under the
International Banking Act (``IBA'').\49\ Sections 165(b)(1)(B) and
165(f) of the Dodd-Frank Act authorize the Board to establish enhanced
public disclosures for companies subject to prudential standards under
section 165.\50\
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\47\ 12 U.S.C. 5363; 5365.
\48\ 12 U.S.C. 5365(a)(2)(C). The Board is required to establish
prudential standards for bank holding companies with assets equal to
or greater than $250 billion and nonbank financial companies
supervised by the Board that (A) are more stringent than the
standards and requirements applicable to nonbank financial companies
and bank holding companies that do not present similar risks to the
financial stability of the United States; and (B) increase in
stringency based on the considerations enumerated in section
165(b)(3). 12 U.S.C. 5365(a)(1).
\49\ 12 U.S.C. 3106(a). Section 8(a) provides that certain
foreign banks with U.S. operations will be treated as bank holding
companies for purposes of the Bank Holding Company Act (``BHC
Act''), and sections 163 and 165 of the Dodd-Frank Act amend the BHC
Act.
\50\ 12 U.S.C. 5365(b)(1)(B) and (f).
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In addition, the reporting requirements associated with the FR Y-15
are authorized for bank holding companies pursuant to section 5 of the
BHC Act; \51\ for savings and loan holding companies pursuant to
sections 10(b)(2) and 10(g) of the Home Owners' Loan Act; \52\ and for
U.S. intermediate holding companies of foreign banking organizations
pursuant to section 5 of the BHC Act and sections 8(a) and 13(a) of the
IBA.\53\
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\51\ 12 U.S.C. 1844.
\52\ 12 U.S.C. 1467a(b)(2); 1467a(g).
\53\ 12 U.S.C. 3106(a); 3108(a).
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The FR Y-15 report is mandatory.
The data collected on the FR Y-15 is made public unless a specific
request for confidentiality is submitted by the reporting entity,
either on the FR Y-15 or on the form from which the data item is
obtained. Determinations regarding confidential treatment will be made
on a case-by-case basis based on exemption 4 of the Freedom of
Information Act (FOIA), which protects from disclosure trade secrets
and commercial or financial information (5 U.S.C. 552(b)(4)). A number
of the items in the FR Y-15 are retrieved from the FR Y-9C and other
items may be retrieved from the FFIEC 009 and FFIEC 101. Confidential
treatment will also extend to any automatically calculated items on the
FR Y-15 that have been derived from confidential data items and that,
if released, would reveal the underlying confidential data. To the
extent confidential data collected under the FR Y-15 will be used for
supervisory purposes, it may be exempt from disclosure under exemption
8 of FOIA (5 U.S.C. 552(b)(8)).
The Board proposes to modify the confidentiality treatment of items
1 through 4 in Schedule G. Currently, the FR Y-15 instructions indicate
that these items will be kept confidential until the first reporting
date after the final liquidity coverage ratio standard has been
implemented. Because the Board has implemented that standard,\54\ this
language is no longer appropriate, and would be deleted under the
proposal. Under the amended instructions, requests for confidential
treatment with respect to these items would be considered on a case-by-
case basis based on exemption 4 of FOIA.
---------------------------------------------------------------------------
\54\ See ``Liquidity Coverage Ratio: Public Disclosure
Requirements; Extension of Compliance Period for Certain Companies
To Meet the Liquidity Coverage Ratio Requirements,'' 81 FR 94922
(December 27, 2016).
---------------------------------------------------------------------------
Current Actions: The Board is proposing to amend the FR Y-15 form
and instructions to align with the proposed rulemaking which would
amend the Board's GSIB surcharge requirement under the Board's capital
rule. See section II of the proposal for a description of the changes
to the FR Y-15.
B. Regulatory Flexibility Act Analysis
The Board is providing an initial regulatory flexibility analysis
with respect to this proposed rule. The Regulatory Flexibility Act \55\
(RFA), requires an agency to consider whether the rule it proposes will
have a significant economic impact on a substantial number of small
entities.\56\ In connection with a proposed rule, the RFA requires an
agency to prepare and invite public comment on an initial regulatory
flexibility analysis describing the impact of the rule on small
entities, unless the agency certifies that the proposed rule, if
promulgated, would not have a significant economic impact on a
substantial number of small entities. An initial regulatory flexibility
analysis must contain (1) a description of the reasons why action by
the agency is being considered; (2) a succinct statement of the
objectives of, and legal basis for, the proposed rule; (3) a
description of, and, where feasible, an estimate of the number of small
entities to which the proposed rule will apply; (4) a description of
the projected reporting, recordkeeping, and other compliance
requirements of the proposed rule, including an estimate of the classes
of small entities that will be subject to the requirement and the type
of professional skills necessary for preparation of the report or
record; (5) an identification, to the extent practicable, of all
relevant Federal rules which may duplicate, overlap with, or conflict
with the proposed rule; and (6) a description of any significant
alternatives to the proposed rule which accomplish the stated
objectives of applicable statutes and minimize any significant economic
impact of the proposed rule on small entities.\57\
---------------------------------------------------------------------------
\55\ 5 U.S.C. 601 et seq.
\56\ Under regulations issued by the Small Business
Administration, a small entity includes a bank holding company with
total assets of $850 million or less. Consistent with the General
Principles of Affiliation in 13 CFR 121.103(a), the assets of all
domestic and foreign affiliates are counted toward the size
threshold when determining whether to classify a Board-regulated
institution as a small entity. As of December 31, 2022, there were
approximately 2,081 small bank holding companies and approximately
88 small savings and loan holding companies.
\57\ 5 U.S.C. 603(b).
---------------------------------------------------------------------------
The Board has considered the potential impact of the proposed rule
on small entities in accordance with the RFA. Based on its analysis and
for the reasons stated below, the Board believes that this proposed
rule will not have a significant economic impact on a substantial
number of small entities. Nevertheless, the Board is publishing and
inviting comment on this initial regulatory flexibility analysis. The
proposal would also make corresponding changes to the Board's reporting
forms.
As discussed in detail above, the proposed rule would amend the
Board's rule that identifies and establishes risk-based capital
surcharges for GSIBs, as well as related regulatory reports. The
proposed rule would improve the precision of the GSIB surcharge and
better measure systemic risk under the GSIB framework, including by
changing the reporting of certain values from point-in-time indicators
to longer-term averages, making additional improvements to certain
systemic risk indicators, and reducing cliff effects by implementing
narrower score band ranges.
The Board has broad authority to establish regulatory capital
standards for bank holding companies and U.S. intermediate holding
companies of foreign banking organizations under the Bank Holding
Company Act and the Dodd-Frank Act.\58\ Sections 163 and 165 of the
Dodd-Frank Act, as amended by the Economic Growth, Regulatory Relief,
and Consumer Protection Act, authorize the Board to consider risk to
U.S. financial stability in regulating and examining bank holding
companies with $100 billion or more in consolidated assets and nonbank
financial companies under the Board's supervision.\59\ The Board is
further authorized to impose prudential standards for such entities and
to differentiate among companies on an individual basis or by category,
taking into consideration their capital
[[Page 60400]]
structure, riskiness, complexity, financial activities, size, and any
other risk-related factors that the Board deems appropriate.\60\ This
authorization also covers certain foreign banks with U.S. operations
under the International Banking Act.\61\ The Board also has broad
authority under the International Lending Supervision Act (ILSA) \62\
to establish regulatory capital requirements for the institutions it
regulates. For example, ILSA directs each Federal banking agency to
cause banking institutions to achieve and maintain adequate capital by
establishing minimum capital requirements as well as by other means
that the agency deems appropriate.\63\
---------------------------------------------------------------------------
\58\ See 12 U.S.C. 1844, 5365, and 5371.
\59\ 12 U.S.C. 5363 and 5365.
\60\ 12 U.S.C. 5365(a).
\61\ 12 U.S.C. 3106(a).
\62\ 12 U.S.C. 3901-3911.
\63\ 12 U.S.C. 3907(a)(1).
---------------------------------------------------------------------------
As discussed in the SUPPLEMENTARY INFORMATION section, the Board is
proposing to revise its GSIB surcharge framework under its capital rule
and related regulatory reports. The only companies subject to these
rules and reports, and thus potentially impacted by the proposal, are
GSIBs; holding companies subject to Category II, III, and IV standards;
and foreign banking organizations with combined U.S. assets of $100
billion or more. Companies that would be impacted by the proposal
therefore substantially exceed the $850 million asset threshold at
which a banking entity is considered a ``small entity'' under SBA
regulations.\64\ The proposed rule therefore would not impose mandatory
requirements on any small entities.
---------------------------------------------------------------------------
\64\ 13 CFR 121.201.
---------------------------------------------------------------------------
As discussed previously in the Paperwork Reduction Act section, the
proposed rule includes proposed changes to the Systemic Risk Report (FR
Y-15). The Board is aware of no other Federal rules that duplicate,
overlap, or conflict with the proposed rule. Because the proposed rule
generally would not apply to any small entities supervised by the
Board, the Board believes that the proposed rule would not have a
significant economic impact on small banking organizations supervised
by the Board. Therefore, the Board 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. In
particular, the Board requests that commenters describe the nature of
any impact on small entities and provide empirical data to illustrate
and support the extent of the impact.
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113
Stat. 1338, 1471, 12 U.S.C. 4809) requires the Federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. The Board has sought to present the proposed rule in a
simple and straightforward manner and invites comment on the use of
plain language. For example:
<bullet> Is the material organized to suit your needs? If not, how
could the Board present the proposed rule more clearly?
<bullet> Are the requirements in the proposed rule clearly stated?
If not, how could the proposed rule be more clearly stated?
<bullet> Does the proposal contain technical language or jargon
that is not clear? If so, which language requires clarification?
<bullet> Would a different format (grouping and order of sections,
use of headings, paragraphing) make the proposed rule easier to
understand? If so, what changes would achieve that?
<bullet> Is this section format adequate? If not, which of the
sections should be changed and how?
<bullet> What other changes can the Board incorporate to make the
proposed rule easier to understand?
D. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 (12
U.S.C. 553(b)(4)) requires that a notice of proposed rulemaking include
the internet address of a summary of not more than 100 words in length
of the proposed rule, in plain language, that shall be posted on the
internet website under section 206(d) of the E-Government Act of 2002
(44 U.S.C. 3501 note).
In summary, in the proposal the Federal Reserve Board requests
comment on a proposal that would make certain adjustments to the
calculation of the capital surcharge for the largest and most complex
banks. The changes would better align the surcharge to each bank's
systemic risk profile, in particular by measuring a bank's systemic
importance averaged over the entire year, instead of only at the year-
end value.
The proposal and such a summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a> and <a href="https://www.federalreserve.gov/supervisionreg/reglisting.htm">https://www.federalreserve.gov/supervisionreg/reglisting.htm</a>.
List of Subjects in 12 CFR Part 217
Administrative practice and procedure, Banks, Banking, Capital,
Federal Reserve System, Holding companies.
Authority and Issuance
For the reasons set forth in the preamble, the Board of Governors
of the Federal Reserve System proposes to amend chapter II of title 12
of the Code of Federal Regulations as follows:
PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)
0
1. The authority citation for Part 217 is revised to read as follows:
Authority: 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, and 5371 note.
0
2. In Sec. 217.401:
0
a. Revise paragraphs (b), (j) through (m), (q), (r), (t), (w), (y),
(z), (aa) through (dd); and
0
b. Add new paragraph (ee).
The revisions and addition read as follows:
Sec. 217.401 Definitions.
* * * * *
(b) Assets under custody means the value reported as ``Assets under
custody--systemic indicator amount'' on Schedule C of the FR Y-15.
* * * * *
(j) Cross-jurisdictional claims means the value reported as ``Total
cross-jurisdictional claims--systemic indicator amount'' on Schedule E
of the FR Y-15.
(k) Cross-jurisdictional liabilities means the value reported as
``Total cross-jurisdictional liabilities--systemic indicator amount''
on Schedule E of the FR Y-15.
(l) Intra-financial system assets means the value reported as
``Total intra-financial system assets--systemic indicator amount'' on
Schedule B of the FR Y-15.
(m) Intra-financial system liabilities means the value reported as
``Total intra-financial system liabilities--systemic indicator amount''
on Schedule B of the FR Y-15.
* * * * *
(q) Level 3 assets means the value reported as ``Total Level 3
assets--systemic indicator amount'' on Schedule D of the FR Y-15.
(r) Notional amount of over-the-counter (OTC) derivatives means the
value reported as ``Total notional amount of over-the-counter (OTC)
[[Page 60401]]
derivative contracts--systemic indicator amount'' on Schedule D of the
FR Y-15.
* * * * *
(t) Payments activity means the value reported as ``Payments
activity--systemic indicator amount'' on Schedule C of the FR Y-15.
* * * * *
(w) Securities outstanding means the value reported as ``Total
securities outstanding--systemic indicator amount'' on Schedule B of
the FR Y-15.
* * * * *
(y) Sweep deposit has the meaning set forth in 12 CFR 249.3.
(z) Systemic indicator includes the following indicators included
on the FR Y-15:
(1) Total exposures;
(2) Intra-financial system assets;
(3) Intra-financial system liabilities;
(4) Securities outstanding;
(5) Payments activity;
(6) Assets under custody;
(7) Underwritten transactions in debt and equity markets;
(8) Trading volume--equity and other;
(9) Trading volume--fixed income;
(10) Notional amount of over-the-counter (OTC) derivatives;
(11) Trading and available-for-sale (AFS) securities;
(12) Level 3 assets;
(13) Cross-jurisdictional claims; or
(14) Cross-jurisdictional liabilities.
(aa) Total exposures means the value reported as ``Total
exposures--systemic indicator amount'' on Schedule A of the FR Y-15.
(bb) Trading and AFS securities means the value reported as ``Total
trading and available-for-sale (AFS) securities--systemic indicator
amount'' on Schedule D of the FR Y-15.
(cc) Trading volume--equity and other means the value reported as
``Trading volume--equities and other securities--systemic indicator
amount'' on Schedule C of the FR Y-15.
(dd) Trading volume--fixed income means the value reported as
``Trading volume--fixed income--systemic indicator amount'' on Schedule
C of the FR Y-15.
(ee) Underwritten transactions in debt and equity markets means the
value reported as ``Underwriting activity--systemic indicator amount''
on Schedule C of the FR Y-15.
0
3. In Sec. 217.403:
0
a. Remove Table 2 to Sec. 217.403; and
0
b. Revise paragraphs (c) and (d).
The revisions read as follows:
Sec. 217.403 GSIB Surcharge.
* * * * *
(c) Method 2 surcharge--
(1) General. The method 2 surcharge of a global systemically
important BHC is 1.0 percent if the method 2 score of the global
systemically important BHC is 189 basis points or less.
(2) Higher method 2 surcharges. To the extent that the method 2
score of a global systemically important BHC equals or exceeds 190
basis points, the method 2 surcharge equals the sum of:
(i) 1.1 percent; and
(ii) An additional 0.1 percent for each 20 basis points that the
global systemically important BHC's score exceeds 190 basis points.
(d) Effective date of an adjusted GSIB surcharge. As of January 1
of a calendar year, the GSIB surcharge in effect (i.e., incorporated
into the maximum payout ratio under Sec. 217.11) for a global
systemically important BHC for that year is the GSIB surcharge
calculated by the global systemically important BHC in the immediately
prior calendar year, unless the GSIB surcharge calculated by the global
systemically important BHC in the calendar year two years prior was
lower, in which case the GSIB surcharge calculated in the calendar year
two years prior shall be in effect.
0
4. In Sec. 217.404, revise Table 1 to Sec. 217.404 to read as
follows:
Sec. 217.404 Method 1 Score.
* * * * *
Table 1 to Sec. 217.404--Systemic Indicator Weights
------------------------------------------------------------------------
Indicator
Category Systemic indicator weight
(percent)
------------------------------------------------------------------------
Size.............................. Total exposures..... 20
Interconnectedness................ Intra-financial 6.67
system assets.
Intra-financial 6.67
system liabilities.
Securities 6.67
outstanding.
Substitutability.................. Payments activity... 6.67
Assets under custody 6.67
Underwritten 3.33
transactions in
debt and equity
markets.
Trading volume-- 1.67
fixed income.
Trading volume-- 1.67
equity and other.
Complexity........................ Notional amount of 6.67
over-the-counter
(OTC) derivatives.
Trading and 6.67
available-for-sale
(AFS) securities.
Level 3 assets...... 6.67
Cross-jurisdictional activity..... Cross-jurisdictional 10
claims.
Cross-jurisdictional 10
liabilities.
------------------------------------------------------------------------
0
5. In Sec. 217.406:
0
a. Revise paragraph (b)(2); and
0
b. Revise Table 1 to Sec. 217.406.
The revisions read as follows:
Sec. 217.406 Short-term wholesale funding score.
* * * * *
(b) * * *
(2) Short-term wholesale funding includes the following components:
(i) All funds that the bank holding company must pay under each
secured funding transaction, other than an operational deposit, with a
remaining maturity of 1 year or less;
(ii) All funds that the bank holding company must pay under all
unsecured wholesale funding, other than an operational deposit, with a
remaining maturity of 1 year or less;
(iii) The fair value of an asset as determined under GAAP that a
bank holding company must return under a covered asset exchange with a
remaining maturity of 1 year or less;
(iv) The fair value of an asset as determined under GAAP that the
bank holding company must return under a short position to the extent
that the borrowed asset does not qualify as a Level 1 liquid asset or a
Level 2A liquid asset;
(v) All brokered deposits held at the bank holding company provided
by a retail customer or counterparty; and
(vi) All sweep deposits held at the bank holding company.
* * * * *
[[Page 60402]]
Table 1 to Sec. 217.406--Short-Term Wholesale Funding Components and Weights
----------------------------------------------------------------------------------------------------------------
Remaining
maturity of 30 Remaining Remaining Remaining
Component of short-term wholesale days of less or maturity of 31 to maturity of 91 to maturity of 180
funding no maturity 90 days (percent) 179 days to 364 days
(percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Category 1.......................... 25 10 0 0
(1) Secured funding transaction
secured by a level 1 liquid
asset;
(2) Unsecured wholesale funding
where the customer or
counterparty is not a financial
sector entity or a consolidated
subsidiary thereof;
(3) Brokered deposits and sweep
deposits provided by a retail
customer or counterparty; and
(4) Short positions where the
borrowed asset does not qualify
as either a level 1 liquid
asset or level 2A liquid asset.
Category 2.......................... 50 25 10 0
(1) Secured funding transaction
secured by a level 2A liquid
asset; and
(2) Covered asset exchanges
involving the future exchange
of a Level 1 liquid asset for a
Level 2A liquid asset.
Category 3.......................... 75 50 25 10
(1) Secured funding transaction
secured by a level 2B liquid
asset;
(2) Covered asset exchanges
(other than those described in
Category 2); and
(3) Unsecured wholesale funding
(other than unsecured wholesale
funding described in Category
1).
Category 4.......................... 100 75 50 25
Any other component of short-
term wholesale funding.
----------------------------------------------------------------------------------------------------------------
By order of the Board of Governors of the Federal Reserve
System.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2023-16896 Filed 8-31-23; 8:45 am]
BILLING CODE 6210-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.