|
FDIC Federal Register Citations
[Federal Register: January 24, 2008 (Volume 73, Number 16)]
[Notices]
[Page 4220-4229]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ja08-84]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
Agency Information Collection Activities: Submission for OMB
Review; Joint Comment Request
AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury;
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision
(OTS), Treasury.
ACTION: Notice of information collections to be submitted to OMB for
review and approval under the Paperwork Reduction Act.
-----------------------------------------------------------------------
SUMMARY: In accordance with the requirements of the Paperwork Reduction
Act of 1995 (44 U.S.C. chapter 35), the OCC, the Board, the FDIC, and
the OTS (collectively, the agencies) may not conduct or sponsor, and
the respondent is not required to respond to, an information collection
unless it displays a currently valid Office of Management and Budget
(OMB) control number. On September 25, 2006, the agencies, under the
auspices of the Federal Financial Institutions Council (FFIEC),
requested public comment on a proposal to implement new regulatory
reporting requirements for banks \1\ that qualify for and adopt the
Advanced Capital Adequacy Framework to calculate their risk-based
capital requirement or are in the parallel run stage of qualifying to
adopt this framework (71 FR 55981). The agencies have made certain
modifications to the proposed reporting requirements as described in
this notice both in response to comments received and to reflect
requirements of the final rule implementing the Advanced Capital
Adequacy Framework (72 FR 69288, referred to hereafter as the final
rule). The FFIEC, of which the agencies are members, has approved
publication of these reporting requirements and the agencies are
submitting these reporting requirements to OMB for review and approval.
Upon approval, OMB control numbers will be obtained.
---------------------------------------------------------------------------
\1\ For simplicity, and unless otherwise indicated, this notice
uses the term ``bank'' to include banks, savings associations, and
bank holding companies (BHCs). The terms ``bank holding company''
and ``BHC'' refer only to bank holding companies regulated by the
Board and do not include savings and loan holding companies
regulated by the OTS. For a detailed description of the institutions
covered by this notice, refer to Part I, Section 1, of the final
rule entitled Risk-Based Capital Standards: Advanced Capital
Adequacy Framework.
DATES: Comments must be submitted on or before February 25, 2008. These
reporting requirements are effective April 1, 2008, and institutions
subject to these requirements must begin reporting data at the end of
---------------------------------------------------------------------------
the first quarter in which they have begun their parallel run period.
ADDRESSES: Interested parties are invited to submit written comments to
any or all of the agencies. All comments, which should refer to the OMB
control number(s), will be shared among the agencies.
OCC: Communications Division, Office of the Comptroller of the
Currency, Public Information Room, Mail Stop 1-5, Attention: 1557-NEW,
250 E Street, SW., Washington, DC 20219. In addition, comments may be
sent by fax to (202) 874-4448, or by electronic mail to regs.comments@occ.treas.gov.
You may personally inspect and photocopy
comments at the OCC's Public Information Room, 250 E Street, SW.,
Washington, DC. For security reasons, the OCC requires that visitors
make an appointment to inspect comments. You may do so by calling (202)
874-5043. Upon arrival, visitors will be required to present valid
government-issued photo identification and submit to security screening
in order to inspect and photocopy comments.
Board: You may submit comments, which should refer to ``FFIEC 101''
by any of the following methods:
Agency Web Site: http://www.federalreserve.gov
Follow the instructions for submitting comments on the http://.
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
FAX: 202-452-3819 or 202-452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
FDIC: You may submit comments, which should refer to ``FFIEC 101,''
by any of the following methods: http://www.FDIC.gov/regulations/laws/federal/notices.html..
E-mail: comments@FDIC.gov. Include ``FFIEC 101'' in the
subject line of the message.
Mail: Valerie Best (202-898-3907), Supervisory Counsel,
Attn: Comments, Room F-1070, Federal Deposit Insurance Corporation, 550
17th Street, NW., Washington, DC 20429.
Hand Delivery: Comments may be hand delivered to the guard
station at the rear of the 550 17th Street Building (located on F
Street) on business days between 7 a.m. and 5 p.m.
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal/notices.html
including any personal information provided. Comments may be inspected
at the FDIC Public Information Center, Room E-1002, 3501 Fairfax Drive,
Arlington, VA 22226, between 9 a.m. and 5 p.m. on business days.
OTS: You may submit comments, identified by ``FFIEC 101'' by any of
the following methods:
E-mail address:
infocollection.comments@ots.treas.gov.
Please include ``FFIEC 101'' in the subject line of the message and
include your name and telephone number in the message.
Fax: (202) 906-6518.
Mail: Information Collection Comments, Chief Counsel's
Office, Office of Thrift Supervision, 1700 G Street, NW., Washington,
DC 20552, Attention: ``FFIEC 101.''
Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention:
Information Collection Comments, Chief Counsel's Office, Attention:
``FFIEC 101.''
Instructions: All submissions received must include the agency name
and OMB
[[Page 4221]]
Control Number for this information collection. All comments received
will be posted without change to the OTS Internet Site at
http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1
, including any personal information provided.
Docket: For access to the docket to read background documents or
comments received, go to
http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1
.
In addition, you may inspect comments at the Public Reading Room,
1700 G Street, NW., by appointment. To make an appointment for access,
call (202) 906-5922, send an e-mail to public.info@ots.treas.gov, or
send a facsimile transmission to (202) 906-7755. (Prior notice
identifying the materials you will be requesting will assist us in
serving you.) We schedule appointments on business days between 10 a.m.
and 4 p.m. In most cases, appointments will be available the next
business day following the date we receive a request.
Additionally, commenters may send a copy of their comments to the
OMB desk officer for the agencies by mail to the Office of Information
and Regulatory Affairs, U.S. Office of Management and Budget, New
Executive Office Building, Room 10235, 725 17th Street, NW.,
Washington, DC 20503, or by fax to (202) 395-6974.
FOR FURTHER INFORMATION CONTACT: For further information about the
regulatory reporting requirements discussed in this notice, please
contact any of the agency clearance officers whose names appear below.
In addition, copies of reporting schedules and instructions can be
obtained from the FFIEC's Web site.\2\
---------------------------------------------------------------------------
\2\ http://www.ffiec.gov/ffiec_report_forms.htm.
---------------------------------------------------------------------------
OCC: Mary Gottlieb, OCC Clearance Officer (202-874-5090),
Legislative and Regulatory Activities Division, Office of the
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
Board: Michelle Shore, Federal Reserve Board Clearance Officer,
Division of Research and Statistics, Board of Governors of the Federal
Reserve System, 20th and C Streets, NW., Washington, DC 20551 (202-452-
3829). Telecommunications Device for the Deaf (TDD) users may call
(202) 263-4869.
FDIC: Valerie Best (202-898-3812), Supervisory Counsel, Legal
Division, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
OTS: Ira L. Mills at ira.mills@ots.treas.gov, (202) 906-6531, or
facsimile number (202) 906-6518, Regulations and Legislation Division,
Chief Counsel's Office, Office of Thrift Supervision, 1700 G Street,
NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION: The agencies are requesting OMB approval to
implement the following new information collection.
Report Title: Advanced Capital Adequacy Framework Regulatory
Reporting Requirements.
Form Number: FFIEC 101.
Frequency of Response: Quarterly.
Affected Public: Business or other for-profit.
OCC
OMB Number: 1557-NEW.
Estimated Number of Respondents: 52 national banks.
Estimated Time per Response: 625 hours.
Estimated Total Annual Burden: 130,000 hours.
Board
OMB Number: 7100-NEW.
Estimated Number of Respondents: 6 state member banks.
Estimated Time per Response: 625 hours.
Estimated Total Annual Burden: 15,000 hours.
OMB Number: 7100-NEW.
Estimated Number of Respondents: 15 BHCs.
Estimated Time per Response: 625 hours.
Estimated Total Annual Burden: 37,500 hours.
FDIC
OMB Number: 3064-NEW.
Estimated Number of Respondents: 19 state nonmember banks.
Estimated Time per Response: 625 hours.
Estimated Total Annual Burden: 47,500 hours.
OTS
OMB Number: 1550-NEW.
Estimated Number of Respondents: 5 savings associations.
Estimated Time per Response: 625 hours.
Estimated Total Annual Burden: 12,500 hours.
General Description of Reports
This information collection is mandatory for banks using the
Advanced Capital Adequacy Framework: 12 U.S.C. 161 (for national
banks), 12 U.S.C. 324 and 12 U.S.C. 1844(c) (for state member banks and
BHCs respectively), 12 U.S.C. 1817 (for insured state nonmember
commercial and savings banks), and 12 U.S.C. 1464 (for savings
associations). This information collection will be given confidential
treatment (5 U.S.C. 552(b)(4)) except for selected data items
(Schedules A and B, and data items 1-2 of the operational risk Schedule
S) that will be released for reporting periods after an institution has
successfully completed its parallel run period and is qualified to use
the advanced approaches for regulatory capital purposes. The agencies
will not publicly release information submitted during an entity's
parallel run period.
Abstract
Each bank that qualifies for and applies the advanced internal
ratings-based approach to calculate regulatory credit risk capital and
the advanced measurement approaches to calculate regulatory operational
risk capital, as described in the final rule, is required to file
quarterly regulatory data. The agencies will use these data to assess
and monitor the levels and components of each reporting entity's risk-
based capital requirements and the adequacy of the entity's capital
under the Advanced Capital Adequacy Framework; to evaluate the impact
and competitive implications of the Advanced Capital Adequacy Framework
on individual reporting entities and on an industry-wide basis; as one
input to develop an interagency study at the end of the second
transitional floor period as described more fully in the final rule
implementing the Advanced Capital Adequacy Framework; and to supplement
on-site examination processes. The reporting schedules will also assist
banks in understanding expectations around the system development
necessary for implementation and validation of the Advanced Capital
Adequacy Framework. Submitted data that is released publicly following
a reporting entity's parallel run period will also provide other
interested parties with information about banks' risk-based capital.
Current Actions
Risk-Based Capital Standards: Advanced Capital Adequacy Framework:
Regulatory Reporting Requirements
I. Background
On September 25, 2006, the agencies issued for comment a joint
notice of proposed regulatory capital reporting requirements (71 FR
55981) for U.S. banks that qualify for and adopt the advanced internal
ratings-based (AIRB) approach for calculating regulatory credit risk
capital and the advanced measurement approaches (AMA) for
[[Page 4222]]
calculating regulatory operational risk capital (together, the advanced
approaches). These proposed regulatory reporting requirements were
issued concurrently with the joint notice of proposed rulemaking
seeking public comment on a new risk-based capital framework for banks
(71 FR 55830). On December 7, 2007, the agencies published final rules
implementing the new risk-based capital framework (72 FR 69288). This
notice describes the final risk-based capital reporting requirements
for banks that qualify for and adopt the new risk-based capital
framework or are in the parallel run stage of qualifying to adopt this
framework.
Data items contained within the reporting proposal pertained to the
risk parameters and drivers of a bank's regulatory capital measures
under the AIRB and AMA approaches. The reporting proposal identified a
number of uses for the data to be submitted, which included the ability
of the agencies to monitor risk-based capital requirements, assess the
components of these requirements, evaluate the impact of implementing
the new advanced approaches, and supplement on-site examination
processes relating to the implementation of the new advanced
approaches. The proposal also indicated that certain summary
information would be made available to the public for reporting periods
after a bank has qualified to use the advanced approaches for
regulatory capital to provide a sufficient degree of public disclosure
to market participants.
The agencies have evaluated comments received on the reporting
proposal and have made changes to the reporting requirements as
described below. Certain changes to the reporting requirements,
collected data elements, and reporting instructions have also been made
to conform reporting to changes made to the final rule.
II. Comment Overview
The agencies received sixteen comment letters that directly
addressed the reporting proposal. In addition to providing responses to
the specific questions posed by the agencies, a number of commenters
identified both general and technical issues relating to the reporting
requirements, report schedules, and reporting instructions. Some
additional comments focused primarily on the Pillar 3 disclosure
requirements of the joint notice of proposed rulemaking, but also
included less specific comments on regulatory reporting.
In general, commenters reflected concerns over the perceived
burdens of the proposed reporting requirements without sufficient
offsetting benefits in terms of the analytical needs of supervisors and
the information needs of investors and other public users of financial
information. Specific areas of concern identified in the comments
covered a range of issues including concerns about (1) the length of
time allowed following a quarter-end to file reports with the agencies,
(2) public disclosures of certain risk estimates used to calculate
risk-weighted assets for credit risk portfolios, (3) public disclosures
of certain data items contained in the operational risk schedule, (4)
the reporting of credit risk portfolios not defined in the proposed
rulemaking, (5) the reporting of data elements not required for
calculation of regulatory capital, and (6) potential duplication or
inconsistencies of the reporting requirements with Pillar 3
disclosures.
The agencies have made a number of modifications to the reporting
requirements in light of these comments. Among the changes that address
concerns about reporting burden, the agencies have eliminated three
schedules and approximately 600 reportable data items, expanded the
submission deadlines during a bank's parallel run period, and allowed
more data items to be reported on an optional basis (depending on
information availability, e.g., information pertaining to pre-credit
risk mitigation risk estimates for wholesale exposures when the
substitution approach is used, and various data items pertaining to
operational risk modeling). Additionally, in recognition of concerns
about report certification requirements, the agencies have adopted
alternative certification language that focuses on meeting the
requirements imposed by the final rule and reporting instructions as
opposed to a statement attesting to the accuracy of data items that
include parameter estimates.
The reporting proposal raised three specific questions for
industry's consideration. First, the agencies asked about the
feasibility of collecting additional information to help isolate the
causes of changes in regulatory credit risk-based capital requirements
(the lookback portfolio approach). The agencies have decided not to
pursue the collection of this additional information at this time but
intend to explore with the industry in the future ways to facilitate
such analyses. Second, the agencies asked about the desirability of
using an alternative approach to fixed bands for reporting wholesale
and retail schedules. Although the majority of commenters favored the
alternative approach, the agencies have decided to retain the fixed
band approach to achieve greater comparability among reporting banks.
Third, the agencies asked about the appropriateness of making certain
data items available to the public for reporting periods subsequent to
a bank's parallel run period. With the exception of certain information
contained in the operational risk schedule (data items 3 through 7 of
this schedule), the agencies have decided to continue to require public
disclosure of all other data items contained in Schedules A and B, and
data items 1 and 2 only of the operational risk schedule, for reporting
periods after a bank has qualified to use the advanced approaches for
regulatory capital purposes. The agencies believe that such disclosures
are consistent with Pillar 3 of the Advanced Capital Adequacy Framework
and will provide useful information to investors and other market
participants about a bank's capital structure, risk exposures, and main
components of a bank's regulatory capital calculations. As in the
reporting proposal, all other information submitted per these reporting
requirements will remain confidential.
One commenter also indicated its belief that the burden estimate
provided in the reporting proposal of 280 hours per respondent was
significantly understated. Although the final reporting requirements
require submission of significantly less data items than under the
reporting proposal, the agencies have revised their estimates of
reporting burden on a per respondent basis upward in recognition of
reporting burdens incurred by banks on other types of regulatory
reports and the level of detail required to be submitted under these
reports.
Certain other modifications, such as the elimination of data items
relating to expected loss given default, were made to conform the
reporting requirements and instructions to the final rule. A complete
discussion of comments, and changes made to the reporting requirements,
is contained in the following sections.
III. Scope and Frequency of Reporting
Banks That Are Required To Submit Reports
The reporting requirements associated with the final rule will
apply, as proposed, to each BHC, on a consolidated basis, and each
depository institution that qualifies for and applies the advanced
approaches (section I of the final rule provides a detailed discussion
of institutions covered by these reporting requirements), as well as
[[Page 4223]]
banks in the parallel run stage of qualifying to use the advanced
approaches. The agencies did not receive any comments objecting to the
scope of application of these reporting requirements as stated.
Frequency of Reports
As proposed, the reports described herein are to be submitted to
the agencies on a quarterly basis. The agencies did not receive
comments that generally opposed quarterly reporting. However, as
discussed below, some commenters argued for less frequent or lagged
reporting of certain data elements relating to operational risk.
Reporting Due Dates
A number of commenters raised concerns over the proposed
requirement to align reporting due dates with those currently required
for banks, savings associations, and BHCs that file Consolidated
Reports of Condition and Income (Call Reports), Thrift Financial
Reports (TFRs), and BHC FR Y-9C reports, respectively. These commenters
offered a range of alternative reporting deadlines but generally argued
for extended deadlines through at least the parallel run and
transitional floor periods. The agencies agree that it is reasonable to
extend reporting deadlines through the parallel run period to 60 days
following the end of a quarter. However, the agencies believe that once
a bank qualifies to use the advanced approaches and enters the
transitional floor period, the bank should have the ability to fully
support regulatory capital calculations to coincide with the timing of
other financial disclosures. Accordingly, after a bank's parallel run
period, the agencies are requiring submission of the information
required by this notice within the same timeframes set forth in the
reporting instructions for the Call Report, TFR, and BHC FR Y-9C filed
by banks, savings associations, and BHCs, respectively.
Report Certification Requirements
Under the reporting proposal, banks would be required to meet the
same reporting standards that are applied to other regulatory reports
including certification by a bank's Chief Financial Officer attesting
to the correctness of the reports. While acknowledging the
reasonableness of requiring certifications of reported information, one
commenter raised concerns over certifications of the accuracy of risk
parameter estimates and the procedures used to validate those
estimates. In recognition of these concerns, the agencies have modified
the certification requirements for this regulatory report submission.
These report certifications are substantially similar to those required
for banks' Pillar 3 disclosures in that they require one or more senior
officers of the reporting entity to attest that the risk estimates and
other information submitted to the agencies meet the requirements set
forth in the final rule and reporting instructions.
Initial Reporting Period
For those banks subject to these reporting requirements, the first
reporting period (as proposed) will correspond to the quarter-end of
the first quarter of a bank's parallel run period. Although no
commenters objected to this requirement, some commenters did raise
concerns over the ability to implement those systems changes necessary
to meet these reporting requirements without a sufficient amount of
time between publishing these requirements and the first reporting
period. The agencies are mindful of the tight timeframes for banks
whose first reporting period corresponds to the quarter-end following
the effective date of the final rule. The agencies expect that systems
development will be an iterative process during the parallel run
period, with steady improvement in overall reporting and gradual
reduction of manual processes prior to qualification.
Relationship to Other Regulatory Reporting of Risk-Based Capital
As proposed, banks subject to these reporting requirements will
submit capital information under both this notice and under the
existing risk-based capital reporting requirements (the general risk-
based capital rules) during their respective parallel run periods and
subsequent transitional floor periods.\3\ A bank would discontinue
reporting under the general risk-based capital rules once it is
permitted to exit its third transitional floor period. The agencies
received no comments on this requirement.
---------------------------------------------------------------------------
\3\ General risk-based capital data under the existing risk-
based capital standards are currently captured in the Consolidated
Reports of Condition and Income (Call Report) for banks (Form FFIEC
031 or FFIEC 041); OMB No. 1557-0081 for the OCC, 7100-0036 for the
Board, and 3064-0052 for the FDIC), the Thrift Financial Report
(TFR) for savings associations (OTS Form 1313; OMB No. 1550-0023),
and the Consolidated Financial Statements for Bank Holding Companies
(Board Form FR Y-9C; OMB No. 7100-0128).
---------------------------------------------------------------------------
Electronic Submission of Reports
Consistent with requirements for the agencies' reports which
collect data under the existing risk-based capital reporting
requirements, banks subject to these reporting requirements must submit
these reports in an electronic format using file specifications and
formats determined by the agencies.
IV. Overview of the Data Reporting Requirements
The reporting proposal contained 22 separate schedules: One
schedule (Schedule A) detailing banks' capital elements (the numerator
of the risk-based capital calculation); one schedule (Schedule B) that
summarizes the components of risk-weighted assets for categories of
credit risk portfolios, operational risk exposures, and market risk;
and 20 schedules (Schedules C through V) that provide additional detail
on the risk parameters and drivers of credit risk-weighted and
operational risk-weighted assets. For wholesale and retail credit
exposures, the reporting schedules contain information on the risk
parameters used in specific risk-based capital formulas to determine
risk-weighted asset amounts, namely: Probability of default (PD, which
measures the likelihood that an obligor will default over a one-year
horizon); loss given default (LGD, which is an estimate of the economic
loss if a default occurs during downturn economic conditions); exposure
at default (EAD, which is measured in dollars and is an estimate of the
amount that would be owed to the bank at the time of default); and, for
wholesale credit exposures, an exposure's effective maturity (M, which
is measured in years and reflects the effective remaining maturity of
the exposure). The retail credit risk schedules also include
information on loan-to-values, credit bureau scores, and account
seasoning, which are likely to be important risk drivers within these
portfolios. For securitization, equity, and operational risk exposures,
the reporting schedules include data on the main inputs to, and outputs
of, internal models and regulatory risk weight functions used to
determine risk-weighted assets for these exposures.
Several commenters raised concerns about burdens associated with
and the need for reporting of certain types of credit exposures not
explicitly defined outside the reporting proposal. These exposure types
include Construction Income Producing Real Estate (IPRE) and Other
Retail Exposures--Small Business. In response to industry concerns, the
agencies have consolidated several schedules. Specifically, the final
reporting requirements consolidate reporting of Construction IPRE and
non-construction IPRE exposures into one IPRE schedule (new Schedule
F), consolidate reporting
[[Page 4224]]
of Qualifying Revolving Exposures--Credit Cards and Qualifying
Revolving Exposures--All Other into one Qualifying Revolving Exposure
schedule (new Schedule N), and consolidate reporting of Other Retail
Exposures--Small Business and Other Retail Exposures--All Other into
one Other Retail Exposure schedule (new Schedule O). With these
schedule consolidations, the final reporting requirements require the
submission of 19 schedules instead of the 22 schedules contained in the
reporting proposal.
A. Publicly Available Risk-Based Capital Data for the Advanced
Approaches
Content of Schedules A and B
Schedule A contains information about the components of Tier 1 and
Tier 2 capital, as well as adjustments to regulatory risk-based capital
as defined in the final rule. Certain modifications were made to data
item captions, schedule footnotes, and instructions for clarification
purposes and to conform the reporting requirements to the final rule.
More specifically, in Part 1 of Schedule A for banks and BHCs, data
item 6b, ``Qualifying trust preferred securities,'' as well as the
deduction in data item 7b, ``LESS: Cumulative change in fair value of
all financial liabilities accounted for under a fair value option that
is included in retained earnings and is attributable to changes in the
bank's own creditworthiness,'' were added to derive the appropriate
numerator for the Tier 1 risk-based capital calculation. In addition,
the deductions in data items 10a and 16a, ``LESS: Insurance
underwriting subsidiaries' minimum regulatory capital (for BHCs only)''
were added to conform to the final rule and are necessary to derive the
numerator for both the Tier 1 and Tier 2 risk-based capital
calculation. A number of proposed data items relating to the regulatory
leverage capital ratio were also eliminated from Part 1 of the schedule
because they are reported in other regulatory reports.
Schedule B contains summary information about risk-weighted assets
by exposure categories, and for credit risk exposures, outstanding
balances and aggregated information about the estimates that underlie
the calculation of risk-weighted assets. The information in Schedule B
is largely unchanged from the reporting proposal with some minor
modifications. The modifications include: (1) The addition of data item
24 for unsettled transactions (balance sheet amount and risk-weighted
assets) in response to industry comments, (2) the addition of data item
28 for the calculation of total credit risk-weighted assets scaled by
the 1.06 multiplier contained in the final rule, (3) the addition of
data item 29 to recognize risk-weighted asset deductions for excess
eligible credit reserves not included in Tier 2 capital (to be
consistent with paragraph (a)(2) of section 13 of the final rule), (4)
the elimination of three data items for exposure types whose reporting
has been consolidated with other exposure types as described above, and
(5) changes to various caption headings to align them with the
descriptions and definitions contained in the final rule.
The agencies received the following technical comments on data
elements contained in Schedule B, Summary of Risk Weighted Assets for
Banks Approved to Use the Advanced Approaches:
Several commenters recommended re-labeling line 30 in the
reporting proposal from Immaterial Exposures to Credit Exposures on
Other Methods. These commenters argued that a broader exposure category
was needed for the inclusion of unsettled securities transactions and
other exposures where it is not feasible to estimate risk parameters
under the advanced approaches. The agencies have modified Schedule B to
include a separate data item for reporting the balance sheet amounts
and risk-weighted assets associated with unsettled transactions (data
item 24). The agencies note that the final rule specifically addresses
and defines credit exposures that are not included within a defined
exposure category, as well as non-material portfolios of exposures.
Schedule B has been modified to include reporting of the risk-weighted
assets and balance sheet amounts for these categories of exposures as
described in the final rule;
Several commenters sought clarification that the Expected
Credit Loss (ECL) column in Schedule B should be reported after
considering credit risk mitigation (CRM) effects. The agencies confirm
that all ECL data items within the reporting schedules are to be
reported on a post-CRM basis; and
One commenter requested revisions to Schedule B to allow
for agreement between aggregated credit portfolio (balance sheet)
information and amounts listed in other regulatory reports such as Call
Reports and the BHC FR Y-9C report. The agencies acknowledge the
desired objective conveyed by this commenter to ensure that regulatory
capital calculations encompass all exposures within a bank. However,
the agencies believe it is more important to delineate exposures by
exposure categories (and subcategories) as defined within the final
rule since each of these exposures is associated with a specific set of
risk weight curves, risk weight functions, or calculation approaches.
As a result, the agencies have decided not to redefine exposure
categories to be consistent with those defined within other regulatory
reports. The agencies have also decided not to impose additional burden
of reconciling the financial information contained in these reports to
balance sheet information contained in other regulatory reports.
Rather, the agencies believe that the comprehensiveness of these
reports can be confirmed through other means such as on-site reviews.
Publicly Available Information
The agencies received a number of comments relating to the public
disclosure of information reported in Schedules A and B, and data items
1 through 7 of the Operational Risk schedule. These commenters argued
for limited or phased-in disclosure of Schedule B data items in
particular, limiting disclosure of Schedule B data items to risk-
weighted assets by exposure type and related on- and off-balance sheet
amounts, or flexibility in timing of submissions when an institution
views certain information as proprietary in nature. These commenters
generally argued that components of the risk-weighted asset calculation
such as PD, LGD, and EAD are not well understood, are incomplete
measures of risk, are not comparable across institutions, and may be
subject to misinterpretation by investors and other market
participants.
After consideration, the agencies have decided to retain public
disclosure of all data items in Schedules A and B (as modified) for
reporting periods after a bank has qualified to use the advanced
approaches for regulatory capital purposes (i.e., once a bank enters
its first transitional floor period). All reported information will
remain confidential during the bank's parallel run. The agencies
believe such disclosures, at the bank level, are consistent with the
Advanced Capital Adequacy Framework and will provide useful information
to investors and other market participants about a bank's capital
structure, its risk exposures, and the main components and risk drivers
underlying the bank's regulatory capital calculations. Although the
agencies agree with industry comments that care must be taken in making
comparisons of aggregated risk parameters across institutions, the
agencies note that comparability concerns have been substantially
reduced by changes made to the final rule (such as the elimination
[[Page 4225]]
of expected loss given default or ELGD and the adoption of the New
Accord's definition of default for wholesale credit exposures). As with
the Pillar 3 disclosure requirements, the agencies believe public
disclosure of the information in Schedules A and B is consistent with
the objectives of market discipline and transparency advanced within
the final rule and will provide investors and other market participants
with a basic set of summary-level standardized information about the
main components of banks' risk-based capital requirements. As noted in
the proposed reporting requirements, banks may be able to use certain
data items in these disclosures to augment Pillar 3 disclosures
required by the final rule.
Data items 1 and 2 only of the operational risk schedule (Schedule
S), will also be made publicly available for reporting periods after a
bank has qualified to use the advanced approaches for regulatory
capital purposes (i.e., once an institution enters into its first
transitional floor period). This requirement is a modification of the
reporting proposal, which proposed making data items 1 through 7 of
this schedule publicly available along with information in Schedules A
and B. A number of commenters raised concerns that data items 3 through
7 of the operational risk schedule contain proprietary or sensitive
information. In light of these comments, the agencies have reevaluated
whether these data elements are appropriate for public disclosure and
have concluded they are not. Therefore, all operational risk schedule
data items with the exception of data items 1 and 2 will remain
confidential. Commenters generally agreed that data items 1 and 2 of
this schedule were appropriate for public disclosure.
B. Non-Publicly Available Risk-Based Capital Data for the Advanced
Approaches
With the exception of data items 1 and 2 in Schedule S, information
submitted in Schedules C through S will be shared among the four
agencies but will not be released to the public. The data elements
contained in these schedules will provide the agencies with additional,
aggregated detail about the components and main drivers of reporting
banks' risk-based capital levels. The agencies will use this
information to help focus on-site supervisory examination efforts by
facilitating off-site monitoring of banks' regulatory capital
calculations and regulatory capital trends, and to facilitate peer
comparisons of capital and capital risk estimation parameters.
Reporting of Credit Risk by Fixed Supervisory Bands
For the wholesale and retail credit portfolios (Schedules C through
O), aggregated information is reported at the level of fixed
supervisory PD bands as defined within the reporting proposal. The
agencies received a number of comments on the use of supervisory PD
bands for purposes of aggregating information in the wholesale and
retail schedules (question 2 of the reporting proposal). Most
commenters indicated such aggregations would impose reporting burdens
over an alternative approach discussed in the reporting proposal that
would have allowed banks to report information by internal loan grades
and internal segments. One commenter indicated indifference to the two
reporting approaches for wholesale exposures. However, this latter
commenter indicated that reporting of retail exposures by fixed PD
bands would be more practical since reporting by internal segments
could be unwieldy, given the large number of possible segments and
segmentation schemes within a given bank, and would reduce, if not
eliminate, comparability. One commenter supported reporting by fixed PD
band and suggested that reporting burdens could actually increase to
achieve comparability under the alternative approach.
The agencies have considered these comments and have decided to
retain reporting by fixed supervisory PD bands as presented in the
reporting proposal. While the agencies acknowledge some incremental
reporting burden related to this approach, the agencies believe this
reporting format achieves the desired objective of facilitating peer
comparisons of risk-weighted asset and risk parameter estimation
information. Moreover, the agencies believe that the alternative
approach could introduce incremental reporting burdens over the adopted
approach given the need to develop rules for combining and aggregating
the large number of possible segmentation schemes used by banks.
Lookback Portfolio Reporting
The agencies also received many comments opposing the data
collection alternative presented in question 1 of the reporting
proposal. This alternative involved collecting additional information
to help identify causes of changes in credit risk regulatory capital
requirements (the lookback portfolio proposal). Commenters were
strongly opposed to this alternative, citing significant additional
reporting burdens and concerns about the lack of specificity of the
alternative. Many of these same commenters indicated that changes in
regulatory capital could be better and more efficiently identified
through alternative processes such as on-site reviews. After
considering these comments, the agencies have decided at this time not
to require submissions of the additional information suggested by this
alternative lookback reporting proposal.
The agencies continue to see merit in being able to identify
whether changes in a bank's assessment of risk are due to changes in
the mix of exposures held or due to changes in risk assessments. As a
result, the agencies intend to publish a proposal for comment that
would facilitate such analyses. This notice would identify safety and
soundness issues that could be addressed by additional data items
contained in the proposal as well as other alternatives beyond a formal
reporting process for obtaining this information. Comments received on
this proposal will directly influence the agencies' decision whether to
collect additional information beyond what is contained in the
reporting requirements contained in this notice.
Wholesale Exposures
Data reported in Schedules C through J include information about
the risk-weighted assets, balance sheet exposures, number of obligors,
and main components or aggregated risk parameter estimates of the risk-
based capital calculation for wholesale credit exposures. Each schedule
represents a sub-portfolio of the wholesale exposure category and each
portfolio corresponds to a data item on the summary Schedule B. The
wholesale sub-portfolios are as follows: Corporate (Schedule C); Bank
(Schedule D); Sovereign (Schedule E); Income Producing Real Estate or
``IPRE'' (Schedule F); High Volatility Commercial Real Estate or
``HVCRE'' (Schedule G); Eligible Margin Loans, Repo-Style Transactions,
and OTC Derivatives with Cross-product Netting (Schedule H); Eligible
Margin Loans and Repo-Style Transactions without Cross-product Netting
(Schedule I); and OTC Derivatives without Cross-product Netting
(Schedule J). As discussed above, exposures reported in these schedules
are to be grouped into more detailed sub-portfolio segments using the
fixed supervisory PD bands.
Several commenters raised concerns about the reporting proposal's
requirement to calculate and disclose the impact of guarantees and
credit derivatives on risk-weighted assets for wholesale exposures.
These commenters indicated that such a requirement would impose
significant burden on
[[Page 4226]]
institutions whose current practice is not to maintain separate risk
information for obligors and guarantors on certain exposures. Some of
these commenters suggested an alternative reporting approach that would
require reporting of the EAD amounts associated with exposures where
risk is mitigated by guarantees or credit derivatives.
The agencies have considered these comments and note that similar
concerns were raised with respect to the application of the
substitution approach described in the agencies' proposed rule. For
reporting, the agencies have revised the reporting instructions
relating to credit risk mitigation to conform to the final rule.
Specifically, banks need not calculate and report the impact of
guarantees and credit derivatives on risk-weighted assets where a bank
extends credit based solely on the financial strength of a guarantor,
provided the bank applies the PD substitution approach to all exposures
of that obligor. The agencies believe that this modification to the
reporting instructions should alleviate much of the concern expressed
in the comments since reporting the effects of credit risk mitigation
on risk-weighted assets would be required only in those situations
where the bank is required by the final rule to maintain separate
internal risk ratings for a wholesale obligor and the guarantor or
credit provider under a credit derivative. The agencies note that
reporting under the double default approach is not affected by this
modification since separate internal risk ratings are a necessary
requirement to calculate regulatory risk-based capital using this
approach. In those cases where it is feasible to do so, the agencies
are retaining the approach contained in the reporting proposal to
require institutions to report the impact of credit risk mitigation on
risk-weighted assets rather than adopt the suggestion made in some
comments to report the EAD related to exposures eligible for the
substitution, LGD adjustment, or double default approaches.
One commenter also questioned the need for a separate column for
the weighted average LGD percentage before consideration of guarantees
and credit derivatives, arguing that banks have little incentive to use
the LGD adjustment approach since adjustment is subject to a floor
based on the PD substitution approach (i.e., the risk-based capital
requirement for a hedged exposure can never be lower than that of a
direct exposure to the protection provider). Notwithstanding any
disincentives to using the LGD adjustment approach, banks subject to
the advanced approaches have the option of using this approach to
reduce capital requirements against hedged wholesale exposures.
Therefore, the agencies have decided to retain these columns in the
wholesale schedules. The agencies intend to reevaluate the need for
this information in light of actual submissions.
The agencies received the following technical comments relating to
data to be reported in Schedules C through J:
Two commenters indicated possible confusion in Schedule E
of where to reflect the impact of sovereign guarantees since such
guarantees often are used to reduce corporate exposures, not sovereign
exposures. These commenters noted that the confusion could be
eliminated by adopting a recommendation to report the EAD of exposures
eligible for the substitution, LGD adjustment, or double default
approaches. In response, the agencies have modified the reporting
instructions to indicate that while banks should generally use the
underlying obligor as the basis for categorizing wholesale credit
exposures, the categorization of wholesale exposures may be determined
by the guarantor in cases where a PD is not assigned to the obligor;
One commenter sought clarification of the term ``Number of
Obligors'' listed as a column in Schedules C through G under the
following scenarios: (i) When a bank has multiple facilities
outstanding to one borrower; (ii) when a bank lends to both a
subsidiary and to a parent of that same facility; and (iii) when a bank
has two exposures to an obligor, one with no guarantee and the other
with a guarantee. The agencies note that similar comments were received
with respect to the internal risk rating assignment process described
in the proposed rule and that a formal definition for obligor was
adopted in the final rule as a result. For reporting purposes, banks
should apply this same definition when determining how to quantify the
number of obligors to report in Schedules C through G; \4\
---------------------------------------------------------------------------
\4\ The final rule defines an obligor as the legal entity or
natural person contractually obligated on a wholesale exposure
except that a bank may treat the following exposures as having
separate obligors: (1) Exposures to the same legal entity or natural
person denominated in different currencies; (2)(i) an income-
producing real estate exposure for which all or substantially all of
the repayment of the exposure is reliant on cash flows of the real
estate serving as collateral for the exposure; the bank, in economic
substance, does not have recourse to the borrower beyond the real
estate serving as collateral; and no cross-default or cross-
acceleration clauses are in place other than clauses obtained solely
out of an abundance of caution; and (ii) other credit exposures to
the same legal entity; and (3)(i) a wholesale exposure authorized
under section 364 of the U.S. Bankruptcy Code (11 U.S.C. 364) to a
legal entity or natural person who is a debtor-in-possession for
purposes of Chapter 11 of the Bankruptcy Code; and (ii) other credit
exposures to the same legal entity or natural person.
---------------------------------------------------------------------------
One commenter sought clarification that exposures reported
in the new Schedules I and J include transactions not subject to cross-
product netting but may be subject to single-product netting. The
agencies confirm this interpretation; and
One commenter indicated that the PD ranges for the
reporting of eligible margin loans, repo-style transactions, and OTC
derivatives (new Schedules H through J) should be consistent with the
PD ranges contained in other wholesale schedules. The agencies believe
that the different PD ranges for exposures in these schedules, which
contain a larger number of lower-risk PD bands, will likely result in
more meaningful reported distributions of exposures across the credit
quality spectrum for these sub-portfolios. Accordingly, the agencies
have decided to retain the PD bands as proposed. However, to capture a
larger range of low-risk exposures and achieve better comparability
across exposure categories, the agencies have also decided to widen one
of the PD bands and align the end points of two PD bands with those in
other wholesale credit schedules. Specifically, the PD band for line 2
on these schedules was widened to 0.03 to 0.10 (from 0.03 to 0.05 in
the reporting proposal); and the PD bands for lines 3 and 4 were
changed to 0.10 to 0.15 and 0.15 to 0.25, respectively (from 0.05 to
0.10 and 0.10 to 0.25, respectively).
The agencies made two additional clarifications in the instructions
to the wholesale exposure Schedules C through J to conform reporting to
the final rule. Both of these clarifications relate to the basis for
assigning exposures to the fixed supervisory PD bands specified within
each wholesale exposure schedule. Generally, these assignments should
be based on the PD estimates associated with the internal loan rating
assigned to the obligor. However, consistent with the final rule, an
exception is made in cases where the bank extends credit based solely
on the financial strength of the guarantor provided that all of the
bank's exposures to an obligor are fully covered by eligible guarantees
and the bank applies the PD substitution approach to all of those
exposures. In these cases, banks may use the PD estimate associated
with the internal loan grade assigned to the guarantor for purposes of
assigning exposures to a given fixed supervisory PD band. Another
exception is made for eligible purchased wholesale exposures
[[Page 4227]]
(as defined in the final rule). For these exposures, banks should use
segment-level risk estimates for purposes of assigning exposures to a
given fixed supervisory PD band.\5\ This treatment is consistent with
paragraph (d)(4) of section 31 of the final rule.
---------------------------------------------------------------------------
\5\ Reporting of other risk parameters (LGD, EAD, M, and ECL)
for eligible purchased wholesale exposures should also be done on a
segment-level basis.
---------------------------------------------------------------------------
The agencies made the following additional modifications to
Schedules H, I, and J: (1) To conform reporting to the final rule, the
agencies added a data item 13 to columns C and E in Schedules H and I
to capture the EAD and risk-weighted asset amounts associated with
eligible margin loans subject to a 300 percent risk weight, (2) data
items for reporting the number of counterparties were eliminated from
all three schedules, and (3) certain captions and footnotes were
modified for clarity and to conform to the terminology used in the
final rule.
Retail Exposures
Data reported in Schedules K through O include information about
the risk-weighted assets, balance sheet exposures, the number of
accounts, and the main components or risk parameters of the risk-based
capital calculation for retail credit exposures. These schedules also
incorporate information pertaining to risk characteristics believed to
be commonly used drivers within banks' risk management and measurement
processes, to include information on loan-to-values, credit bureau
scores, and account seasoning. Each schedule represents a sub-portfolio
of the retail exposure category and each portfolio corresponds to a
data item on the public Schedule B. These retail sub-portfolios are as
follows: Residential Mortgage--Closed-end First Lien Exposures
(Schedule K); Residential Mortgage--Closed-end Junior Lien Exposures
(Schedule L); Residential Mortgage--Revolving Exposures (Schedule M);
Qualifying Revolving Exposures (Schedule N); and Other Retail Exposures
(Schedule O). As with the wholesale credit schedules, exposures
reported in these schedules are to be grouped into more detailed sub-
portfolio segments using the fixed supervisory PD bands.
Many commenters objected to the inclusion of information pertaining
to loan-to-values (LTV) and EAD of accounts with updated LTVs for
mortgage exposures. These commenters indicated in general that this
risk driver information was not necessary for determination of risk-
based capital requirements, is not always used in a bank's segmentation
processes, and is not always readily available and therefore
potentially burdensome to collect (particularly information pertaining
to updated LTVs). The agencies note that the instructions accompanying
the reporting proposal required reporting of LTV-related information
only to the extent the information is available. The agencies continue
to believe that LTV is likely to be an important risk driver for
mortgage exposures and will be used by many institutions in the
mortgage segmentation process. Several commenters also questioned the
collection of weighted average bureau scores, and the names and types
of credit scoring systems used, for retail exposures. These commenters
indicated in general that this risk driver information was not
necessary for determination of risk-based capital requirements, is not
always used in a bank's segmentation processes, and may not be
meaningful for banks that use internal scores or behavioral scores in
their risk measurement and segmentation processes. Some commenters also
indicated that some scoring systems (for example, non-U.S. scores)
would not align with each other, making the calculation of weighted
averages either incomplete or potentially misleading. The agencies note
that the instructions accompanying the reporting proposal required
reporting of credit bureau score information only to the extent the
information is available, and only for commonly-mapped scoring systems
used for the largest proportion of exposures in a sub-portfolio when
multiple scoring systems are used. The agencies continue to believe
that credit bureau scores are likely to be an important risk driver for
many types of retail exposures and will be used by many institutions in
their retail segmentation processes.
Some commenters also raised concerns about reporting the age of
mortgage exposures. These commenters indicated that this information is
not always used to segment mortgage loan exposures and that there could
be a number of possible ways to interpret the term ``average age'' used
to calculate the weighted average age of a mortgage exposure depending
on whether the loan was originated or purchased. These commenters
indicated that it would be significantly burdensome to determine months
since origination for purchased loans and sought confirmation that the
number of months on books could be used instead. The agencies believe
that loan seasoning is likely to be an important risk driver for many
types of retail exposures, especially for closed-end mortgage
exposures. Accordingly, for closed-end mortgages, the agencies are
retaining the definition of account age, which requires that banks
determine the age of an account (in months) with respect to the
account's origination date. For revolving exposures, the agencies agree
that account age (in months) should be determined with respect to the
time on the bank's books. For all other retail exposures, the agencies
will allow banks the flexibility to determine the age of an account
using a reference point deemed most logical by the reporting bank.
The agencies received the following technical comments relating to
data to be reported in Schedules K through O:
Two commenters indicated that it was not a common practice
to include both junior and senior lien positions in the calculation of
LTVs when only the senior lien position was held. These comments
recommended that only senior lien positions be included in the
calculation for first lien exposures. The agencies agree with this
comment and have revised the footnotes and instructions for first lien
mortgage exposures accordingly;
A commenter sought confirmation that LTV cell values do
not cumulate across the columns. The agencies confirm that the LTV cell
values do not cumulate across the columns and have reworded the
appropriate footnotes in the mortgage schedules; and
A commenter indicated that if LTV reporting is retained,
an additional column should be added to encompass exposures where the
LTV is unknown. Since the reporting of LTV information is required only
when the information is available, the agencies do not believe it is
necessary to collect information pertaining to exposures with unknown
LTVs.
After further consideration, the agencies have made an additional
modification to the retail credit risk schedules to eliminate all
columns requiring the reporting of weighted average LGD before
consideration of eligible guarantees and credit derivatives. The
agencies believe that the quantification of this data item could have
imposed an excessive burden on banks since it would have required
disentangling the effect of credit risk mitigation on LGDs assigned to
a retail segment. Accordingly, the LGD estimates reflected in all
retail credit exposure schedules should be inclusive of any credit risk
mitigation effects.
[[Page 4228]]
Securitization Exposures
Schedule P provides information by rating categories about
exposures subject to either the Ratings-Based Approach (RBA) or the
Internal Assessment Approach (IAA). Schedule Q provides additional
memoranda information about unrated securitization exposures, exposures
treated under the Supervisory Formula Approach (SFA), synthetic
securitizations, and risk-weighted assets relating to early
amortization features of securitizations as prescribed in the final
rule.
The agencies did not receive any substantive comments on the
securitization exposure schedules but did receive the following
technical comments:
One commenter requested clarification on how to report
long-term securitization exposures rated more than one category below
investment grade, and short-term securitization exposures rated below
the third highest grade. The agencies have clarified reporting
instructions to indicate that such exposures are not to be reported in
Schedule P. These low-rated exposures are to be included in the
appropriate data items of Schedule A (lines 9f and 17c);
One commenter requested clarification about the possible
inconsistency of reporting between data items 1 and 2 on the
securitization detail schedule (new Schedule Q) and data item 5 of
schedule for securitization exposures subject to either the RBA or IAA
(Schedule P). As described below, the agencies have made a number of
modifications to the securitization detail schedule to improve the
consistency and logical flow of the schedule as well as to conform
reported data items and captions with the final rule; and
Multiple comments were received about the burdens
associated with calculating the risk-weighted assets for securitization
exposures not capped under section 42(d) of the final rule (data item
6b of Schedule T in the reporting proposal). The agencies have removed
this data item from the new Schedule Q.
The following additional modifications were made to the
securitization detail schedule (new schedule Q) to more comprehensively
capture securitization deductions specified in the final rule and to
consolidate certain data items on the schedule: (1) Data item 1 was
added to require reporting of deductions under the RBA and IAA
approaches; (2) proposed data item 1, ``unrated exposures requiring
deduction because no IRB treatment for the underlying exposures,'' was
replaced by data item 2, requiring reporting of all other
securitization deductions; (3) proposed data item 2, deductions under
the SFA, was consolidated with proposed data item 3 requiring reporting
of exposures and risk-weighted assets for this approach (see data item
3); (4) reporting of exposures and risk-weighted assets of synthetic
exposures and hedged synthetic exposures on proposed data items 4 and 5
were consolidated into one line (see data item 4); and (5) the captions
for proposed data items 7 and 8, relating to investors' interest in
securitization, were modified to conform to the terminology used in the
final rule.
Equity Exposures
Data reported in Schedule R contains exposure amount and risk-
weighted asset information about a bank's equity exposures by type of
exposure and by approach to measuring required capital including equity
exposures subject to specific risk weights and equity exposures to
investment funds. Banks would also complete the appropriate section of
the schedule based on whether it uses a simple risk weight approach, a
full internal models approach, or a partially modeled approach to
measuring required capital for equity exposures.
The agencies received the following technical comments on the
equity risk schedule:
Two commenters indicated that the flow of the schedule's
sections was confusing and recommended that the schedule be redesigned.
These commenters also requested clarification of reporting for certain
data items such as equity investments in investment funds that have
material liabilities. In response, the agencies have modified the
equity schedule to more closely align with the structure and flow of
the equity risk capital calculation approaches contained in the final
rule. The agencies have also developed more specific reporting
instructions and modified captions of reported data items to conform
with the terminology used in the final rule. With respect to the
treatment of equity investments in investment funds with material
liabilities, the agencies refer to the discussion of such investments
in section V.F.4 in the preamble of the final rule.
The agencies made several additional modifications to the equity
schedule to simplify reporting and conform data items within the
schedule to the final rule. These changes include the following: (i)
The elimination of proposed data items 7 and 8, for ``excluded equity
exposures to investment funds'' and ``aggregate equity exposures in
hedge pairs with smaller adjusted carrying value;'' (ii) the
elimination of reporting for the 100 percent risk-weight category for
FHLB/Farmer Mac exposures proposed data item 4 (such exposures are risk
weighted at 20 percent under the final rule); (iii) the addition of
data item 9, ``600 percent risk weight equity exposures under the
Simple Risk Weighted Approach (SRWA)'' to conform with the final rule;
(iv) the addition of data item 14 for reporting exposures to investment
funds eligible for treatment under the Money Market Fund Approach
defined within the final rule; and (v) splitting proposed data items
13, 18, and 22 to better conform with the logical flow of the
calculation of risk-weighted assets for equity exposures under the
final rule using one of three different approaches: the SRWA, the full
Internal Models Approach (IMA), or the partial IMA.
Operational Risk
The new Schedule S provides data items pertaining to risk-based
capital held against operational risk as well as various details about
historical operational losses used to model operational risk capital.
The schedule also contains data items related to scenarios,
distribution assumptions, and loss caps used to model operational risk
capital.
The agencies received several comments objecting to quarterly
disclosures of certain data contained in the proposed operational risk
schedule, particularly those disclosures pertaining to the disclosure
of historical loss event frequency and severity information. These
commenters indicated that such disclosures were contrary to the
principles outlined in the Basel Committee's New Accord and represented
only a portion of information that is used to develop regulatory
capital for operational risk. After considering these comments, the
agencies have made several modifications to the reporting requirements
for operational risk data items that includes the elimination of
certain data items (i.e., the reporting of current period loss
distribution information) and the inclusion of conditional reporting
for a number of data items depending on whether a bank uses a given
technique (e.g., historical loss distributions or scenario analyses) or
parameterization assumption (e.g., loss threshold) to develop
regulatory capital requirements for operational risk. In cases where
these techniques or
[[Page 4229]]
assumptions are not used, banks would report either ``N/A'' or ``0''
(none) for these data items, as discussed in the instructions.
Several commenters also raised a question about which specific
subsidiaries the operational risk disclosures would apply to. The
agencies believe that all banking subsidiaries that qualify for and
adopt the advanced approaches for calculating regulatory capital should
be required to submit information about the regulatory capital held
against operational risk capital to include certain details about the
information used to model operational risk capital. In those situations
where a banking subsidiary does not use a specified technique or
assumption, it will be allowed to report either ``N/A'' or ``0''
depending on the context of the reported data item.
The agencies received the following technical comments on the
operational risk schedule:
Several commenters requested clarification whether column
B in the proposed operational risk reporting schedule refers to the
quarterly reporting period for the schedule or for a model that may be
annual. The agencies have decided to eliminate column B from the
schedule;
Several commenters requested clarification on how to
report starting and ending dates for event loss data when these dates
differ for frequency and for severity estimation purposes. The agencies
have revised the schedule to request starting and ending dates for both
historical frequency and severity distribution data, and only to the
extent a bank uses this information to model operational risk capital
(see data items 8a through 8d);
Several commenters requested clarification of how to
report loss thresholds in data item 9 of the schedule when multiple
thresholds are used within the modeling framework. The agencies have
clarified the instructions to require reporting of the largest
threshold used;
Several commenters requested clarification of how to
report the number and dollar amount of individual loss events in data
items 11 through 15 of the schedule when losses below internal
thresholds are aggregated without capturing the number of individual
events. Another commenter also requested that banks be allowed to
report losses on an event basis rather than a dollar volume basis and
that banks be allowed to report such information on a one quarter
lagged basis. The agencies have clarified the instructions to specify
that a loss event may encompass multiple loss transactions as long as
they are all related to the same event. However, losses that do not
relate to the same event should be considered separate loss events and
should be separately counted for purposes of reporting data items 11
through 15. The instructions have also been clarified to state that
reporting of the dollar volume of losses in data item 15 should be
calculated on an event basis. In addition, data item 14a for loss
events ``less than $10,000'' and data item 15a for the dollar amount of
losses ``Less than $10,000'' have been added to provide a comprehensive
distribution of loss events. The agencies have eliminated the
requirement to report loss event information pertaining to the
``current reporting period'' and therefore see no need to allow banks
to report remaining loss event information on a one quarter lagged
basis;
Two commenters requested confirmation that information
pertaining to the number of scenarios used to model operational risk
capital on data items 16 through 18 referred to the number of relevant
industry events. The agencies have clarified the reporting instructions
to state that only scenarios used in calculating the risk-based capital
requirements for operational risk should be included in these data
items. In addition, data item 18a, for scenario analysis in the range
of ``less than $1 million'' was added in order to provide a
comprehensive distribution of scenario data;
Several commenters requested clarification of information
pertaining to distributional assumptions in data items 20 and 21 as to
whether the change in assumptions refers to a change in a parameter of
a distribution or a change in the distribution class or type. The
agencies have clarified the instructions to specify that the change in
assumptions refers to a change in distribution type. Further, no
reporting is required when the bank does not use a frequency or
severity distribution to model risk-based capital for operational risk;
and
Several commenters requested confirmation that the
agencies would accept ``not applicable'' in response to the loss cap
information requested in data items 22 through 24 when a bank does not
use loss caps. The agencies have clarified the instructions to report
the number ``0'' on line 22 and ``N/A'' in lines 23 and 24 when no loss
caps are used.
V. Request for Comment
Public comment is requested on all aspects of this joint notice.
Comments are invited on:
(a) Whether the proposed new collections of information are
necessary for the proper performance of the agencies' functions,
including whether the information has practical utility;
(b) The accuracy of the agencies' 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 information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
Comments submitted in response to this joint notice will be shared
among the agencies. All comments will become a matter of public record.
Dated: January 10, 2008.
Stuart E. Feldstein,
Assistant Director, Legislative and Regulatory Activities Division,
Office of the Comptroller of the Currency.
Board of Governors of the Federal Reserve System, January 17,
2008.
Robert deV. Frierson,
Deputy Secretary of the Board.
Dated at Washington, DC, this 14th day of January, 2008.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
Dated: January 17, 2008.
Deborah Dakin,
Senior Deputy Chief Counsel, Regulations and Legislation Division, The
Office of Thrift Supervision.
[FR Doc. E8-1198 Filed 1-23-08; 8:45 am]
BILLING CODE 4810-33-P
|
