[Federal Register Volume 85, Number 197 (Friday, October 9, 2020)]
[Rules and Regulations]
[Pages 64003-64009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19922]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 3
[Docket ID OCC-2020-0017]
RIN 1557-AE89
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Regulation Q; Docket No. R-1711]
RIN 7100-AF85
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 324
RIN 3064-AF47
Regulatory Capital Rule: Temporary Changes to and Transition for
the Community Bank Leverage Ratio Framework
AGENCY: The Office of the Comptroller of the Currency, Treasury; the
Board of Governors of the Federal Reserve System; and the Federal
Deposit Insurance Corporation.
ACTION: Final rule.
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SUMMARY: The Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, and the Federal Deposit
Insurance Corporation are adopting as final the revisions to the
community bank leverage ratio framework made under two interim final
rules issued in the Federal Register on April 23, 2020. The final rule
adopts these interim final rules with no changes. Under the final rule,
the community bank leverage ratio will remain 8 percent through
calendar year 2020, will be 8.5 percent through calendar year 2021, and
will be 9 percent thereafter. The final rule also maintains a two-
quarter grace period for a qualifying community banking organization
whose leverage ratio falls no more than 1 percentage point below the
applicable community bank leverage ratio requirement.
DATES: The final rule is effective November 9, 2020.
FOR FURTHER INFORMATION CONTACT:
OCC: Benjamin Pegg, Risk Expert, or Jung Sup Kim, Risk Specialist,
Capital and Regulatory Policy, (202) 649-6370; Carl Kaminski, Special
Counsel, or Daniel Perez, Senior Attorney, Chief Counsel's Office,
(202) 649-5490, for persons who are deaf or hearing impaired, TTY,
(202) 649-5597, Office of the Comptroller of the Currency, 400 7th
Street SW, Washington, DC 20219.
Board: Constance M. Horsley, Deputy Associate Director, (202) 452-
5239; Elizabeth MacDonald, Manager, (202) 872-7526; Christopher Appel,
Senior Financial Institution Policy Analyst II, (202) 973-6862; or
Brendan Rowan, Senior Financial Institution Policy Analyst I, (202)
475-6685, Division of Supervision and Regulation; or Benjamin W.
McDonough, Assistant General Counsel, (202) 452-2036; Mark Buresh,
Senior Counsel, (202) 452-2877; Andrew Hartlage, Counsel, (202) 452-
6483; or Jonah Kind, Senior Attorney, (202) 452-2045, Legal Division,
Board of Governors of the Federal Reserve System, 20th Street and
Constitution Avenue NW, Washington, DC 20551. Users of
Telecommunication Device for the Deaf (TDD) only, call (202) 263-4869.
FDIC: Bobby R. Bean, Associate Director, [email protected]; Benedetto
Bosco, Chief, Capital Policy Section, [email protected]; Noah Cuttler,
Senior Policy Analyst, [email protected]; [email protected];
Capital Markets Branch, Division of Risk Management Supervision, (202)
898-6888; or Michael Phillips, Counsel, [email protected]; Catherine
Wood, Counsel, [email protected]; Supervision and Legislation Branch,
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street
NW, Washington, DC 20429. For the hearing impaired only,
Telecommunication Device for the Deaf (TDD), (800) 925-4618.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background on the Community Bank Leverage Ratio Framework
II. Interim Final Rules
III. Final Rule
IV. Impact Analysis
V. Administrative Law Matters
A. Congressional Review Act
B. Paperwork Reduction Act
C. Regulatory Flexibility Act
D. Riegle Community Development and Regulatory Improvement Act
of 1994
E. Use of Plain Language
F. Unfunded Mandates Act
I. Background on the Community Bank Leverage Ratio Framework
The community bank leverage ratio framework provides a simple
measure of capital adequacy for community banking organizations that
meet certain qualifying criteria. The community bank leverage ratio
framework implements section 201 of the Economic Growth, Regulatory
Relief, and Consumer Protection Act (EGRRCPA), which requires the
Office of the Comptroller of the Currency (OCC), the Board of
[[Page 64004]]
Governors of the Federal Reserve System (Board), and the Federal
Deposit Insurance Corporation (FDIC) (collectively, the agencies) to
establish a community bank leverage ratio of not less than 8 percent
and not more than 10 percent for a qualifying community banking
organization.\1\ Under section 201(c) of EGRRCPA, a qualifying
community banking organization whose leverage ratio exceeds the
community bank leverage ratio, as established by the agencies, shall be
considered to have met the generally applicable risk-based and leverage
capital requirements in the capital rule (generally applicable rule),
any other applicable capital or leverage requirements, and, if
applicable, the ``well capitalized'' capital ratio requirements for
purposes of section 38 of the Federal Deposit Insurance Act. Section
201(b) of EGRRCPA also requires the agencies to establish procedures
for the treatment of a qualifying community banking organization whose
leverage ratio falls below the community bank leverage ratio
requirement as established by the agencies.
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\1\ Public Law 115-174, 132 Stat. 1296, 1306-07 (2018) (codified
at 12 U.S.C. 5371 note). The authorizing statutes use the term
``qualifying community bank,'' whereas the regulation implementing
the statutes uses the term ``qualifying community banking
organization.'' The terms generally have the same meaning. Section
201(a)(3) of EGRRCPA provides that a qualifying community bank is a
depository institution or depository institution holding company
with total consolidated assets of less than $10 billion that
satisfies such other factors, based on the banking organization's
risk profile, that the agencies determine are appropriate. This
determination shall be based on consideration of off-balance sheet
exposures, trading assets and liabilities, total notional
derivatives exposures, and any such factors that the agencies
determine appropriate.
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In November 2019, the agencies issued a final rule establishing the
community bank leverage ratio framework, which became effective January
1, 2020 (2019 final rule).\2\ Under the 2019 final rule, the agencies
established a community bank leverage ratio of 9 percent using the
existing leverage ratio calculation. A qualifying community banking
organization that maintained a leverage ratio of greater than 9 percent
and elected to use the community bank leverage ratio framework would
have been considered to have satisfied the generally applicable rule,
any other applicable capital or leverage requirements, and, if
applicable, the capital ratio requirements to be considered well
capitalized.\3\
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\2\ 84 FR 61776 (November 13, 2019).
\3\ Under existing prompt corrective action requirements
applicable to insured depository institutions, to be considered
``well capitalized'' a banking organization must demonstrate that it
is not subject to any written agreement, order, capital directive,
or as applicable, prompt corrective action directive, to meet and
maintain a specific capital level for any capital measure. See 12
CFR 6.4(b)(1)(iv) (OCC); 12 CFR 208.43(b)(1)(v) (Board); 12 CFR
324.403(b)(1)(v) (FDIC). The same legal requirements continue to
apply under the community bank leverage ratio framework.
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Under the 2019 final rule, a qualifying community banking
organization is any depository institution or depository institution
holding company that has less than $10 billion in total consolidated
assets, off-balance sheet exposures (excluding derivatives other than
sold credit derivatives and unconditionally cancelable commitments) of
25 percent or less of total consolidated assets, and trading assets and
liabilities of 5 percent or less of total consolidated assets. The
banking organization also cannot be an advanced approaches banking
organization.\4\
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\4\ A banking organization is an advanced approaches banking
organization if it is a global systemically important bank holding
company, is a Category II banking organization, has elected to be an
advanced approaches banking organization, is a subsidiary of a
company that is an advanced approaches banking organization, or has
a subsidiary depository institution that is an advanced approaches
banking organization. See 12 CFR 3.100 (OCC); 12 CFR 217.100
(Board); 12 CFR 324.100 (FDIC).
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In addition, the 2019 final rule established a two-quarter grace
period during which a qualifying community banking organization that
temporarily failed to meet any of the qualifying criteria, including
the leverage ratio requirement, generally would still have been
considered well capitalized so long as the banking organization
maintained a leverage ratio of greater than 8 percent during that grace
period. A banking organization that either failed to meet all the
qualifying criteria within the grace period or failed to maintain a
leverage ratio of greater than 8 percent would have been required to
comply with the generally applicable rule and file the appropriate
regulatory reports.
II. Interim Final Rules
On March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) became law.\5\ Section 4012 of the CARES Act
directs the agencies to issue an interim final rule providing that, for
purposes of section 201 of EGRRCPA, the community bank leverage ratio
shall be 8 percent, and a qualifying community banking organization
whose leverage ratio falls below the community bank leverage ratio
requirement established under the CARES Act shall have a reasonable
grace period to satisfy that requirement. Section 4012 of the CARES Act
specifies that the interim final rule is effective during the period
beginning on the date on which the agencies issue the interim final
rule and ending on the sooner of the termination date of the national
emergency concerning the coronavirus disease (COVID-19) outbreak
declared by the President on March 13, 2020, under the National
Emergencies Act, or December 31, 2020 (termination date).
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\5\ Public Law 116-136, 134 Stat. 281.
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Accordingly, the agencies issued an interim final rule that
implements a temporary 8-percent community bank leverage ratio
requirement, as mandated under section 4012 of the CARES Act (statutory
interim final rule).\6\ In addition, under the statutory interim final
rule, a community banking organization that temporarily fails to meet
any of the qualifying criteria, including the 8-percent community bank
leverage ratio requirement, generally will still be considered well
capitalized provided that the banking organization maintains a leverage
ratio equal to 7 percent or greater. A banking organization that fails
to meet the qualifying criteria after the end of the grace period or
reports a leverage ratio of less than 7 percent must comply with the
generally applicable rule and file the appropriate regulatory reports.
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\6\ 85 FR 22924 (April 23, 2020).
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Since the statutory interim final rule could cease to be effective
at any time before December 31, 2020, the agencies issued a separate
interim final rule pursuant to section 201(b) of EGRRCPA that provides
a graduated transition from the temporary 8-percent community bank
leverage ratio requirement to the 9-percent community bank leverage
ratio requirement as established under the 2019 final rule (transition
interim final rule).\7\ Specifically, the transition interim final rule
provides that, once the statutory interim final rule ceases to apply,
the community bank leverage ratio will be 8 percent in the second
quarter through fourth quarter of calendar year 2020, 8.5 percent in
calendar year 2021, and 9 percent thereafter. The transition interim
final rule also modifies the two-quarter grace period for a qualifying
community banking organization to account for the graduated increase in
the community bank leverage ratio requirement. The interim final rules
do not make any changes to the other qualifying criteria in the
community bank leverage ratio framework.
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\7\ 85 FR 22930 (April 23, 2020).
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The transition interim final rule extends the 8-percent community
bank leverage ratio through December 31, 2020, in the event the
statutory interim final rule terminates before December 31, 2020. Thus,
even if the statutory
[[Page 64005]]
interim final rule were to terminate prior to December 31, 2020, the
community bank leverage ratio would continue to be set at 8 percent for
the remainder of 2020. Section 201 of EGRRCPA requires a qualifying
community banking organization to exceed the community bank leverage
ratio established by the agencies in order to be considered to have met
the generally applicable rule, any other applicable capital or leverage
requirements, and, if applicable, the ``well capitalized'' capital
ratio requirements, whereas section 4012 of the CARES Act requires that
a qualifying community banking organization meet or exceed an 8 percent
community bank leverage ratio to be considered the same.
In the 2019 final rule, the agencies adopted a 9-percent community
bank leverage ratio requirement on the basis that this threshold, with
complementary qualifying criteria, generally maintains the current
level of regulatory capital held by qualifying banking organizations
and supports the agencies' goals of reducing regulatory burden while
maintaining safety and soundness. The agencies intend for the graduated
approach under the transition interim final rule to provide community
banking organizations with sufficient time to meet a 9-percent
community bank leverage ratio requirement while they also focus on
supporting lending to creditworthy households and businesses. This
latter goal is particularly critical given the recent strain on the
U.S. economy caused by COVID-19.
Consistent with section 201(c) of EGRRCPA, under the transition
interim final rule, a qualifying community banking organization that
temporarily fails to meet any of the qualifying criteria, including the
applicable community bank leverage ratio requirement, generally would
still be deemed well capitalized during a two-quarter grace period so
long as the banking organization maintains a leverage ratio of the
following: Greater than 7 percent in the second quarter through fourth
quarter of calendar year 2020, greater than 7.5 percent in calendar
year 2021, and greater than 8 percent thereafter.\8\ A banking
organization that fails to meet the qualifying criteria by the end of
the grace period or reports a leverage ratio of equal to or less than 7
percent in the second through fourth quarters of calendar year 2020,
equal to or less than 7.5 percent in calendar year 2021, or equal to or
less than 8 percent thereafter, would be required to comply immediately
with the generally applicable rule and file the appropriate regulatory
reports.
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\8\ While the statutory interim final rule is in effect, a
qualifying community banking organization that temporarily fails to
meet any of the qualifying criteria, including the applicable
community bank leverage ratio requirement, generally would still be
deemed well capitalized so long as the banking organization
maintains a leverage ratio of 7 percent or greater during a two-
quarter grace period. Similarly, while the statutory interim final
rule is in effect, a banking organization that fails to meet the
qualifying criteria by the end of the grace period or reports a
leverage ratio of less than 7 percent must comply with the generally
applicable rule and file the appropriate regulatory reports.
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The agencies adopted in the 2019 final rule a two-quarter grace
period with a leverage ratio requirement that is 1 percentage point
below the community bank leverage ratio on the basis that this grace
period would appropriately mitigate potential volatility in capital and
associated regulatory reporting requirements based on temporary changes
in a banking organization's risk profile from quarter to quarter, while
capturing more permanent changes in a banking organization's risk
profile. The agencies maintained this approach in the interim final
rules because they believed that this approach is appropriate and
provides a qualifying community banking organization whose leverage
ratio falls below the applicable community bank leverage ratio
requirement a reasonable amount of time to once again satisfy that
requirement. This approach is consistent with section 201(b)(2) of
EGRRCPA, which directs the agencies to establish procedures for the
treatment of a qualifying community bank whose leverage ratio falls
below the community bank leverage ratio requirement as established by
the agencies.
The agencies received one public comment that addressed the
substance of the interim final rules. The commenter urged the agencies
to revert to a 9 percent community bank leverage ratio by January 1,
2022, which is consistent with the transition interim final rule. The
agencies are adopting as final the interim final rules with no changes.
III. Final Rule
Under the final rule, a qualifying community banking organization
must have a leverage ratio equal to or greater than 8 percent beginning
in the second quarter of calendar year 2020. If the national emergency
is terminated during 2020, under the final rule, a qualifying community
banking organization must have a leverage ratio greater than 8 percent
for the remainder of calendar year 2020. Subsequently, a qualifying
community banking organization must have a leverage ratio greater than
8.5 percent through calendar year 2021 and greater than 9 percent
thereafter.\9\
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\9\ The provisions under the final rule are effective November
9, 2020. Banking organizations will continue to be subject to the
requirements under the statutory interim final rule or transition
interim final rule for purposes of filing their Consolidated Report
of Condition and Income (Call Report) or Form FR Y-9C, as
applicable. A banking organization's compliance with capital
requirements for a quarter prior to the final rule's effective date
shall be determined according to the generally applicable rule
unless the banking organization has filed its Call Report or FR Y-9C
report, as applicable, for the prior quarter and has indicated that
it has elected to use the community bank leverage ratio framework.
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The final rule also includes the modified two-quarter grace period
for a qualifying community banking organization to take into account
the graduated increase in the community bank leverage ratio
requirement.\10\ Specifically, a qualifying community banking
organization that temporarily fails to meet any of the qualifying
criteria, including the applicable community bank leverage ratio
requirement, will generally still be deemed well capitalized during a
two-quarter grace period so long as the banking organization maintains
a leverage ratio of the following: greater than 7 percent in the second
quarter through fourth quarter of calendar year 2020, greater than 7.5
percent in calendar year 2021, and greater than 8 percent
thereafter.\11\
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\10\ Consistent with the 2019 final rule, a banking organization
that ceases to satisfy the qualifying criteria as a result of a
business combination also will receive no grace period and will be
required to comply with the generally applicable rule.
\11\ Prior to the termination date, a qualifying community
banking organization that temporarily fails to meet any of the
qualifying criteria, including the applicable community bank
leverage ratio requirement, generally would still be deemed well
capitalized so long as the banking organization maintains a leverage
ratio of 7 percent or greater during a two-quarter grace period.
Similarly, prior to the termination date, a banking organization
that fails to meet the qualifying criteria after the end of the
grace period or reports a leverage ratio of less than 7 percent must
comply with the generally applicable rule and file the appropriate
regulatory reports.
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The final rule does not make any changes to the other qualifying
criteria in the community bank leverage ratio framework.
[[Page 64006]]
Table 1--Schedule of Community Bank Leverage Ratio Requirements
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Leverage ratio
Community bank requirement
leverage ratio under the
Calendar year requirement applicable
(percent) grace period
(percent)
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2020.................................... 8 7
2021.................................... 8.5 7.5
2022 and thereafter..................... 9 8
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The agencies are maintaining the 2019 final rule's requirement that
the grace period will begin as of the end of the calendar quarter in
which the electing banking organization ceases to satisfy any of the
qualifying criteria (so long as the banking organization maintains a
leverage ratio of greater than the requirement for the applicable grace
period) and will end after two consecutive calendar quarters. For
example, if an electing banking organization, which had met all
qualifying criteria as of March 31, 2020, no longer met one of the
qualifying criteria as of May 15, 2020, and still had not met the
criteria as of the end of that quarter, the grace period for the
banking organization would have begun as of the end of the quarter
ending June 30, 2020. The banking organization may continue to use the
community bank leverage ratio framework as of September 30, 2020 (so
long as the banking organization maintains a leverage ratio of greater
than the requirement for the applicable grace period), but would need
to comply fully with the generally applicable rule and associated
reporting requirements as of December 31, 2020, unless the banking
organization once again meets all qualifying criteria by that date.
If an electing banking organization is in the grace period when the
community bank leverage ratio increases, the banking organization would
be subject, as of the date of the change, to both the higher community
bank leverage ratio requirement and higher grace period leverage ratio
requirement. For example, if the electing banking organization that
were to meet all qualifying criteria as of September 30, 2020, but
reports a 7.2 percent leverage ratio as of December 31, 2020, and meets
all the other qualifying criteria, the grace period for such a banking
organization would begin as of the end of the fourth quarter 2020. The
banking organization may continue to use the community bank leverage
ratio framework as of March 31, 2021, if the banking organization
reports a leverage ratio of greater than 7.5 percent, and would need to
comply fully with the generally applicable rule and associated
reporting requirements as of June 30, 2021, unless the banking
organization reports a leverage ratio of greater than 8.5 percent (and
meets all the other qualifying criteria) by that date. In this example,
if the banking organization has a leverage ratio equal to or less than
7.5 percent as of March 31, 2021, it would not be eligible to use the
community bank leverage ratio framework and would be subject to the
requirements of the generally applicable rule and associated reporting
requirements as of March 31, 2021.
As mentioned above, the grace period for an electing community
banking organization is limited to two consecutive calendar quarters.
For example, if an electing banking organization were to meet all
qualifying criteria as of June 30, 2021, but reports a 8.3 percent
leverage ratio (while meeting all the other qualifying criteria) as of
the end of September 30, 2021, the grace period for such a banking
organization would begin as of the end of the third quarter 2021. The
banking organization may continue to use the community bank leverage
ratio framework as of December 31, 2021, if the banking organization
reports a leverage ratio of greater than 7.5 percent, and would need to
comply fully with the generally applicable rule and associated
reporting requirements as of March 31, 2022, unless the banking
organization reports a leverage ratio of greater than 9.0 percent (and
meets all the other qualifying criteria) by that date.
IV. Impact Analysis
The final rule will affect all banking organizations (i.e.,
depository institutions and depository institution holding companies)
that qualify for the community bank leverage ratio framework and elect
to adopt it. Based on data as of March 31, 2020, there are 5,189
banking organizations with less than $10 billion in total consolidated
assets.\12\ The agencies estimate that approximately 96 percent of
these banking organizations qualify to use the community bank leverage
ratio framework under the 8 percent requirement in effect for the
remainder of calendar year 2020. As of March 31, 2020, the temporary
reduction in the community bank leverage ratio requirement during the
remainder of calendar year 2020 from 9 percent to 8 percent will
increase the scope of qualifying community banks by approximately 480
depository institutions and approximately 20 depository institution
holding companies (holding companies).
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\12\ Based on data reported on Form FR Y-9C and the Reports of
Condition and Income (Call Reports).
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As of March 31, 2020, approximately 39 percent of qualifying
banking organizations have elected to use the community bank leverage
ratio framework. Approximately 92 percent of these banking
organizations have total assets of less than $1 billion. As of March
31, 2020, 1,709 depository institutions have elected to use the
community bank leverage ratio framework. As of the same period, 29
holding companies have elected to use the community bank leverage ratio
framework. The agencies anticipate that banking organizations that have
elected to use the community bank leverage ratio framework should be
able to manage the transition in the leverage ratio requirement under
the final rule in a prudent manner, given that the final rule provides
a graduated transition back to a 9 percent leverage ratio requirement
by 2022.
V. Administrative Law Matters
A. Congressional Review Act
For purposes of the Congressional Review Act, the Office of
Management and Budget (OMB) makes a determination as to whether a final
rule constitutes a ``major'' rule.\13\ If a rule is deemed a ``major
rule'' by the OMB, the Congressional Review Act generally provides that
the rule may not take effect until at least 60 days following its
publication.\14\
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\13\ 5 U.S.C. 801 et seq.
\14\ 5 U.S.C. 801(a)(3).
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The Congressional Review Act defines a ``major rule'' as any rule
that the Administrator of the Office of Information and Regulatory
Affairs of the OMB finds has resulted in or is likely to result in (A)
an annual effect on the economy of $100,000,000 or more; (B) a major
increase in costs or prices for consumers, individual industries,
Federal, State, or local government agencies or geographic regions; or
(C) significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
enterprises to compete with foreign-based enterprises in domestic and
export markets.\15\
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\15\ 5 U.S.C. 804(2).
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As required by the Congressional Review Act, the agencies will
submit the final rule and other appropriate reports to Congress and the
Government Accountability Office for review.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA)
states that
[[Page 64007]]
no agency may conduct or sponsor, nor is the respondent required to
respond to, an information collection unless it displays a currently
valid OMB control number. This final rule does not contain any
information collection requirements. However, in connection with the
transition interim final rule, the Board temporarily revised the
Financial Statements for Holding Companies (FR Y-9 reports; OMB No.
7100-0128) and invited comment on a proposal to extend that collection
of information for three years, with revision. No comments were
received regarding this proposal under the PRA. The Board has now
extended, with revision, the FR Y-9 reports, as proposed, to align the
reporting instructions with this final rule. The Board will submit
information collection burden estimates to OMB to finalize the
revisions. All of the updates to the FR Y-9C noted in the transition
interim final rule should be minimal and result in zero net change in
hourly burden.
Additionally, in connection with the transition interim final rule,
the agencies made revisions to the Call Reports (OCC OMB Control No.
1557-0081; Board OMB Control No. 7100-0036; and FDIC OMB Control No.
3064-0052) and the FFIEC 101 (OCC OMB Control No. 1557-0239; Board OMB
Control No. 7100-0319; FDIC OMB Control No. 3064-0159). The final
changes to the Call Reports, the FFIEC 101, and their related
instructions are addressed in a separate Federal Register notice.\16\
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\16\ See 85 FR 44361 (May 22, 2020).
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Revision, With Extension, of the Following Information Collections
(1) Report Title: Financial Statements for Holding Companies.
Agency form number: FR Y-9C, FR Y-9LP, FR Y-9SP, FR Y-9ES, and FR
Y-9CS.
OMB control number: 7100-0128.
Effective date: Currently effective.
Frequency: Quarterly, semiannually, and annually.
Respondents: Bank holding companies, savings and loan holding
companies,\17\ securities holding companies, and U.S. intermediate
holding companies (collectively, HCs).
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\17\ A savings and loan holding company (SLHC) must file one or
more of the FR Y-9 series of reports unless it is: (1) A
grandfathered unitary SLHC with primarily commercial assets and
thrifts that make up less than 5 percent of its consolidated assets;
or (2) a SLHC that primarily holds insurance-related assets and does
not otherwise submit financial reports with the SEC pursuant to
section 13 or 15(d) of the Securities Exchange Act of 1934.
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Estimated number of respondents: FR Y-9C (non-advanced approaches
CBLR HCs with less than $5 billion in total assets): 71; FR Y-9C (non-
advanced approaches CBLR HCs with $5 billion or more in total assets):
35; FR Y-9C (non-advanced approaches, non CBLR, HCs with less than $5
billion in total assets): 84; FR Y-9C (non-advanced approaches, non
CBLR HCs, with $5 billion or more in total assets): 154; FR Y-9C
(advanced approaches HCs): 19; FR Y-9LP: 434; FR Y-9SP: 3,960; FR Y-
9ES: 83; FR Y-9CS: 236.
Estimated average hours per response:
Reporting
FR Y-9C (non-advanced approaches CBLR HCs with less than $5 billion
in total assets): 29.17 hours; FR Y-9C (non-advanced approaches CBLR
HCs with $5 billion or more in total assets): 35.14; FR Y-9C (non-
advanced approaches, non CBLR HCs, with less than $5 billion in total
assets): 41.01; FR Y-9C (non-advanced approaches, non CBLR, HCs with $5
billion or more in total assets): 46.98 hours; FR Y-9C (advanced
approaches HCs): 48.80 hours; FR Y-9LP: 5.27 hours; FR Y-9SP: 5.40
hours; FR Y-9ES: 0.50 hours; FR Y-9CS: 0.50 hours.
Recordkeeping
FR Y-9C (non-advanced approaches HCs with less than $5 billion in
total assets), FR Y-9C (non-advanced approaches HCs with $5 billion or
more in total assets), FR Y-9C (advanced approaches HCs), and FR Y-9LP:
1.00 hour; FR Y-9SP, FR Y-9ES, and FR Y-9CS: 0.50 hours.
Estimated annual burden hours:
Reporting
FR Y-9C (non-advanced approaches CBLR HCs with less than $5 billion
in total assets): 8,284 hours; FR Y-9C (non-advanced approaches CBLR
HCs with $5 billion or more in total assets): 4,920; FR Y-9C (non-
advanced approaches non CBLR HCs with less than $5 billion in total
assets): 13,779; FR Y-9C (non-advanced approaches non CBLR HCs with $5
billion or more in total assets): 28,940 hours; FR Y-9C (advanced
approaches HCs): 3,709 hours; FR Y-9LP: 9,149 hours; FR Y-9SP: 42,768
hours; FR Y-9ES: 42 hours; FR Y-9CS: 472 hours.
Recordkeeping
FR Y-9C: 1,452 hours; FR Y-9LP: 1,736 hours; FR Y-9SP: 3,960 hours;
FR Y-9ES: 42 hours; FR Y-9CS: 472 hours.
General description of report:
The FR Y-9C consists of standardized financial statements similar
to the Call Reports filed by commercial banks.\18\ The FR Y-9C collects
consolidated data from HCs and is filed quarterly by top-tier HCs with
total consolidated assets of $3 billion or more.\19\ The FR Y-9LP,
which collects parent company only financial data, must be submitted by
each HC that files the FR Y-9C, as well as by each of its subsidiary
HCs.\20\ The report consists of standardized financial statements.
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\18\ The Call Reports consist of the Consolidated Reports of
Condition and Income for a Bank with Domestic Offices Only and Total
Assets Less Than $5 Billion (FFIEC 051), the Consolidated Reports of
Condition and Income for a Bank with Domestic Offices Only (FFIEC
041) and the Consolidated Reports of Condition and Income for a Bank
with Domestic and Foreign Offices (FFIEC 031).
\19\ Under certain circumstances described in the FR Y-9C's
General Instructions, HCs with assets under $3 billion may be
required to file the FR Y-9C.
\20\ A top-tier HC may submit a separate FR Y-9LP on behalf of
each of its lower-tier HCs.
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The FR Y-9SP is a parent company only financial statement filed
semiannually by HCs with total consolidated assets of less than $3
billion. In a banking organization with total consolidated assets of
less than $3 billion that has tiered HCs, each HC in the organization
must submit, or have the top-tier HC submit on its behalf, a separate
FR Y-9SP. This report is designed to obtain basic balance sheet and
income data for the parent company, and data on its intangible assets
and intercompany transactions.
The FR Y-9ES is filed annually by each employee stock ownership
plan (ESOP) that is also an HC. The report collects financial data on
the ESOP's benefit plan activities. The FR Y-9ES consists of four
schedules: A Statement of Changes in Net Assets Available for Benefits,
a Statement of Net Assets Available for Benefits, Memoranda, and Notes
to the Financial Statements.
The FR Y-9CS is a free-form supplemental report that the Board may
utilize to collect critical additional data deemed to be needed in an
expedited manner from HCs on a voluntary basis. The data are used to
assess and monitor emerging issues related to HCs, and the report is
intended to supplement the other FR Y-9 reports. The data items
included on the FR Y-9CS may change as needed.
Legal authorization and confidentiality: The Board has the
authority to impose the reporting and recordkeeping requirements
associated with the FR Y 9 family of reports on bank holding companies
pursuant to section 5 of the Bank Holding Company Act of 1956 (BHC Act)
(12 U.S.C. 1844); on savings and loan holding companies pursuant to
section 10(b)(2) and (3) of the Home Owners' Loan Act (12 U.S.C.
1467a(b)(2) and (3)), as amended by sections 369(8) and 604(h)(2) of
the
[[Page 64008]]
Dodd-Frank Wall Street and Consumer Protection Act (Dodd-Frank Act); on
U.S. intermediate holding companies pursuant to section 5 of the BHC
Act (12 U.S.C. 1844), as well as pursuant to sections 102(a)(1) and 165
of the Dodd-Frank Act (12 U.S.C. 511(a)(1) and 5365); and on securities
holding companies pursuant to section 618 of the Dodd-Frank Act (12
U.S.C. 1850a(c)(1)(A)). The obligation to submit the FR Y 9 series of
reports, and the recordkeeping requirements set forth in the respective
instructions to each report, are mandatory, except for the FR Y-9CS,
which is voluntary.
With respect to the FR Y 9C report, Schedule HI's data item 7(g)
``FDIC deposit insurance assessments,'' Schedule HC P's data item 7(a)
``Representation and warranty reserves for 1 4 family residential
mortgage loans sold to U.S. government agencies and government
sponsored agencies,'' and Schedule HC P's data item 7(b)
``Representation and warranty reserves for 1 4 family residential
mortgage loans sold to other parties'' are considered confidential
commercial and financial information. Such treatment is appropriate
under exemption 4 of the Freedom of Information Act (FOIA) (5 U.S.C.
552(b)(4)) because these data items reflect commercial and financial
information that is both customarily and actually treated as private by
the submitter, and which the Board has previously assured submitters
will be treated as confidential. It also appears that disclosing these
data items may reveal confidential examination and supervisory
information, and in such instances, this information would also be
withheld pursuant to exemption 8 of the FOIA (5 U.S.C. 552(b)(8)),
which protects information related to the supervision or examination of
a regulated financial institution.
In addition, for both the FR Y 9C report, Schedule HC's memorandum
item 2.b. and the FR Y 9SP report, Schedule SC's memorandum item 2.b.,
the name and email address of the external auditing firm's engagement
partner, is considered confidential commercial information and
protected by exemption 4 of the FOIA (5 U.S.C. 552(b)(4)) if the
identity of the engagement partner is treated as private information by
HCs. The Board has assured respondents that this information will be
treated as confidential since the collection of this data item was
proposed in 2004.
Additionally, items on the FR Y-9C, Schedule HC-C for loans
modified under Section 4013, data items Memorandum items 16.a, ``Number
of Section 4013 loans outstanding''; and Memorandum items 16.b,
``Outstanding balance of Section 4013 loans'' are considered
confidential. While the Board generally makes institution-level FR Y-9C
report data publicly available, the Board is collecting Section 4013
loan information as part of condition reports for the impacted HCs and
the Board considers disclosure of these items at the HC level would not
be in the public interest. Such information is permitted to be
collected on a confidential basis, consistent with 5 U.S.C. 552(b)(8).
In addition, holding companies may be reluctant to offer modifications
under Section 4013 if information on these modifications made by each
holding company is publicly available, as analysts, investors, and
other users of public FR Y-9C report information may penalize an
institution for using the relief provided by the CARES Act. The Board
may disclose Section 4013 loan data on an aggregated basis, consistent
with confidentiality.
Aside from the data items described above, the remaining data items
on the FR Y-9C report and the FR-Y 9SP report are generally not
accorded confidential treatment. The data items collected on FR Y-9LP,
FR Y-9ES, and FR Y-9CS reports, are also generally not accorded
confidential treatment. As provided in the Board's Rules Regarding
Availability of Information (12 CFR part 261), however, a respondent
may request confidential treatment for any data items the respondent
believes should be withheld pursuant to a FOIA exemption. The Board
will review any such request to determine if confidential treatment is
appropriate, and will inform the respondent if the request for
confidential treatment has been denied.
To the extent the instructions to the FR Y-9C, FR Y-9LP, FR Y-9SP,
and FR Y-9ES reports each respectively direct the financial institution
to retain the work papers and related materials used in preparation of
each report, such material would only be obtained by the Board as part
of the examination or supervision of the financial institution.
Accordingly, such information is considered confidential pursuant to
exemption 8 of the FOIA (5 U.S.C. 552(b)(8)). In addition, the
financial institution's work papers and related materials may also be
protected by exemption 4 of the FOIA, to the extent such financial
information is treated as confidential by the respondent (5 U.S.C.
552(b)(4)).
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires an agency to consider
whether the rules it proposes will have a significant economic impact
on a substantial number of small entities.\21\ The RFA requires an
agency to prepare a final regulatory flexibility analysis when it
promulgates a final rule after being required to publish a general
notice of proposed rulemaking.\22\ As discussed previously, the
agencies have decided to adopt, without changes, revisions to the
community bank leverage ratio framework made under the statutory
interim final rule and the transition interim final rule. There is no
general notice of proposed rulemaking associated with this final rule.
Accordingly, the agencies have concluded that the RFA's requirements
relating to initial and final regulatory flexibility analysis do not
apply to the promulgation of this final rule.
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\21\ Under regulations issued by the Small Business
Administration, a small entity includes a depository institution,
bank holding company, or savings and loan holding company with total
assets of $600 million or less and trust companies with annual
receipts of $41.5 million or less. See 13 CFR 121.201.
\22\ 5 U.S.C. 604.
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D. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\23\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
insured depository institutions, each Federal banking agency must
consider, consistent with the principle of safety and soundness and the
public interest, any administrative burdens that such regulations would
place on depository institutions, including small depository
institutions, and customers of depository institutions, as well as the
benefits of such regulations. In addition, section 302(b) of RCDRIA
requires new regulations and amendments to regulations that impose
additional reporting, disclosures, or other new requirements on insured
depository institutions generally to take effect on the first day of a
calendar quarter that begins on or after the date on which the
regulations are published in final form.\24\ Each Federal banking
agency has determined that the final rule would not impose additional
reporting, disclosure, or other requirements; therefore the
requirements of the RCDRIA do not apply.
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\23\ 12 U.S.C. 4802(a).
\24\ 12 U.S.C. 4802.
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[[Page 64009]]
E. Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act \25\ requires the Federal
banking agencies to use ``plain language'' in all proposed and final
rules published after January 1, 2000. In light of this requirement,
the agencies have sought to present the final rule in a simple and
straightforward manner. The agencies did not receive any comments on
the use of plain language.
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\25\ 12 U.S.C. 4809.
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F. Unfunded Mandates Act
As a general matter, the Unfunded Mandates Act of 1995 (UMRA), 2
U.S.C. 1531 et seq., requires the preparation of a budgetary impact
statement before promulgating a rule that includes a Federal mandate
that may result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year. However, the UMRA does not apply to
final rules for which a general notice of proposed rulemaking was not
published.\26\ Therefore, because the OCC has found good cause to
dispense with notice and comment for the final rule, the OCC concludes
that the requirements of UMRA do not apply to this final rule.
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\26\ See 2 U.S.C. 1532(a).
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Authority and Issuance
For the reasons set forth in the joint preamble, the interim final
rules which were published at 85 FR 22924 and 85 FR 22930 on April 23,
2020, are adopted as a final rule by the OCC, Board, and FDIC without
change.
Brian P. Brooks,
Acting Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System.
Ann Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on or about August 21, 2020.
James P. Sheesley,
Acting Assistant Executive Secretary.
[FR Doc. 2020-19922 Filed 10-8-20; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P