# FDIC FIL-102-2020: Final Rule: Total Loss Absorbing Capital (TLAC) Holdings

> Federal · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/FDIC_FIL20102

## Section

- **Citation:** FDIC FIL-102-2020
- **Heading:** Final Rule: Total Loss Absorbing Capital (TLAC) Holdings
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** FDIC Financial Institution Letters / Final Rule: Total Loss Absorbing Capital (TLAC) Holdings

## Text

708
Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Rules and Regulations
1 See 84 FR 13814 (April 8, 2019).
2 When the proposal was issued, a banking
organization was an ‘‘advanced approaches banking
organization’’ if it had total assets of at least $250
billion, or if it had consolidated on-balance sheet
foreign exposures of at least $10 billion, or if it was
a subsidiary of a depository institution, bank
holding company, savings and loan holding
company or intermediate holding company that was
an advanced approaches banking organization. See
78 FR 62018, 62204 (October 11, 2013), 78 FR
55340, 55523 (September 10, 2013). See also 12
CFR part 3 (OCC); 12 CFR part 217 (Board); and 12
CFR part 324 (FDIC). In November 2019, the
agencies issued a final rule to revise the criteria for
determining the applicability of regulatory capital
and liquidity requirements for large U.S. banking
organizations and the U.S. intermediate holding
companies of certain foreign banking organizations,
including the application of the advanced
approaches (interagency tailoring final rule). Under
this final rule, advanced approaches banking
organizations include those banking organizations
subject to Category I standards (those banking
organizations that qualify as U.S. GSIBs) or
Category II standards (banking organizations with
(1) at least $700 billion in total consolidated assets
or (2) at least $75 billion in cross-jurisdictional
activity and more than $100 billion in total
consolidated assets), and a subsidiary depository
institution of such a banking organization. See 84
FR 59230 (November 1, 2019).
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket ID OCC–2018–0019]
RIN 1557–AE38
FEDERAL RESERVE SYSTEM
12 CFR Parts 217 and 252
[Regulation Q; Docket No
s-jurisdictional
activity and more than $100 billion in total
consolidated assets), and a subsidiary depository
institution of such a banking organization. See 84
FR 59230 (November 1, 2019).
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket ID OCC–2018–0019]
RIN 1557–AE38
FEDERAL RESERVE SYSTEM
12 CFR Parts 217 and 252
[Regulation Q; Docket No. R–1655]
RIN 7100–AF43
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 324
RIN 3064–AE79
Regulatory Capital Treatment for
Investments in Certain Unsecured Debt
Instruments of Global Systemically
Important U.S. Bank Holding
Companies, Certain Intermediate
Holding Companies, and Global
Systemically Important Foreign
Banking Organizations; Total Loss-
Absorbing Capacity Requirements
AGENCY: Office of the Comptroller of the
Currency, Treasury (OCC); the Board of
Governors of the Federal Reserve
System (Board); and the Federal Deposit
Insurance Corporation (FDIC).
ACTION: Final rule.
SUMMARY: The OCC, Board, and FDIC
(collectively, the agencies) are adopting
a final rule that applies to advanced
approaches banking organizations with
the aim of reducing both
interconnectedness within the financial
system and systemic risks. The final
rule requires deduction from a banking
organization’s regulatory capital for
certain investments in unsecured debt
instruments issued by foreign or U.S.
global systemically important banking
organizations (GSIBs) for the purposes
of meeting minimum total loss-
absorbing capacity (TLAC) requirements
and, where applicable, long-term debt
requirements, or for investments in
unsecured debt instruments issued by
GSIBs that are pari passu or
subordinated to such debt instruments.
In addition, the Board is adopting
changes to its TLAC rules to clarify
requirements and correct drafting errors.
DATES: The final rule is effective on
April 1, 2021.
FOR FURTHER INFORMATION CONTACT:
OCC: Andrew Tschirhart, Risk Expert
g-term debt
requirements, or for investments in
unsecured debt instruments issued by
GSIBs that are pari passu or
subordinated to such debt instruments.
In addition, the Board is adopting
changes to its TLAC rules to clarify
requirements and correct drafting errors.
DATES: The final rule is effective on
April 1, 2021.
FOR FURTHER INFORMATION CONTACT:
OCC: Andrew Tschirhart, Risk Expert
(202) 649–6370, Capital and Regulatory
Policy; or Carl Kaminski, Special
Counsel, or Jean Xiao, 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; Juan
Climent, Assistant Director, (202) 872–
7526; Mark Handzlik, Manager, (202)
475–6636; Sean Healey, Lead Financial
Institution Policy Analyst, (202) 912–
4611; Division of Supervision and
Regulation; or Benjamin McDonough,
Assistant General Counsel (202) 452–
2036; or Mark Buresh, Senior Counsel
(202) 452–5270, Legal Division, Board of
Governors of the Federal Reserve
System, 20th and C Streets NW,
Washington, DC 20551. For the hearing
impaired only, Telecommunication
Device for the Deaf (TDD), (202) 263–
4869.
FDIC: Benedetto Bosco, Chief, Capital
Policy Section; bbosco@fdic.gov;
Richard Smith, Capital Markets Policy
Analyst, rismith@fdic.gov;
regulatorycapital@fdic.gov; Capital
Markets Branch, Division of Risk
Management Supervision, (202) 898–
6888; or Michael Phillips, Counsel,
mphillips@fdic.gov; Catherine Wood,
Counsel, cawood@fdic.gov; or Ryan
Rappa, Counsel, rrappa@fdic.gov, Legal
Division, Federal Deposit Insurance
Corporation, 550 17th Street NW,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
A. Capital Requirements
B. TLAC Rule
III. Overview of the Notice of Proposed
Rulemaking and Comments
IV. Summary of the Final Rule
V
herine Wood,
Counsel, cawood@fdic.gov; or Ryan
Rappa, Counsel, rrappa@fdic.gov, Legal
Division, Federal Deposit Insurance
Corporation, 550 17th Street NW,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
A. Capital Requirements
B. TLAC Rule
III. Overview of the Notice of Proposed
Rulemaking and Comments
IV. Summary of the Final Rule
V. Regulatory Capital Treatment for
Advanced Approaches Banking
Organizations’ Investments in Covered
Debt Instruments
A. Scope of Application
B. Deduction From Tier 2 Capital
C. Amendments to Definitions
D. Investments in Covered Banking
Organizations’ Own Covered Debt
Instruments and Reciprocal Cross
Holdings
E. Significant and Non-Significant
Investments in Covered Debt Instruments
F. Corresponding Deduction Approach
G. Net Long Position Calculation
VI. Technical Amendment and Other
Comments
VII. Amendments to the Board’s TLAC Rule
VIII. Changes to Regulatory Reporting
A. Deductions From Tier 2 Capital Related
to Investments in Covered Debt
Instruments and Excluded Covered Debt
Instruments
B. Public Disclosure of Long-Term Debt
and TLAC by Covered BHCs and
Covered IHCs
IX. Regulatory Analyses
A. Paperwork Reduction Act
B. Regulatory Flexibility Act Analysis
C. Plain Language
D. OCC Unfunded Mandates Reform Act of
1995 Determination
E. Riegle Community Development and
Regulatory Improvement Act of 1994
F. Congressional Review Act
I. Introduction
The Office of the Comptroller of the
Currency (OCC), Board of Governors of
the Federal Reserve System (Board), and
Federal Deposit Insurance Corporation
(FDIC) (together, the agencies) are
issuing a final rule to revise the
regulatory capital rule in a manner
substantially consistent with a proposed
rule issued in April 2019 (proposal).1
The final rule addresses the regulatory
capital treatment of investments by
advanced approaches banking
organizations in unsecured debt
instruments issued by foreign or U.S
Deposit Insurance Corporation
(FDIC) (together, the agencies) are
issuing a final rule to revise the
regulatory capital rule in a manner
substantially consistent with a proposed
rule issued in April 2019 (proposal).1
The final rule addresses the regulatory
capital treatment of investments by
advanced approaches banking
organizations in unsecured debt
instruments issued by foreign or U.S.
global systemically important banking
organizations (GSIBs) for the purposes
of meeting minimum total loss-
absorbing capacity (TLAC) requirements
and, as applicable, long-term debt
requirements, or of investments in
unsecured debt instruments issued by
GSIBs that are pari passu or
subordinated to such debt instruments
(covered debt instruments).2 Consistent
with the proposal, the exposures of an
advanced approaches banking
organization to covered debt
instruments generally are subject to
deduction from the banking
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3 Banking organizations subject to the agencies’
capital rule include national banks, state member
banks, insured state nonmember banks, savings
associations, and top-tier bank holding companies,
intermediate holding companies, and savings and
loan holding companies domiciled in the United
States, but exclude banking organizations subject to
the Board’s Small Bank Holding Company and
Savings and Loan Holding Company Policy
Statement (12 CFR part 225, appendix C), qualifying
community banking organizations that elect to
comply with the agencies’ community bank
leverage ratio framework, and certain savings and
loan holding companies that are substantially
engaged in insurance underwriting or commercial
activities or that are estate trusts, and bank holding
companies and savings and loan holding companies
that are employee stock ownershi
appendix C), qualifying
community banking organizations that elect to
comply with the agencies’ community bank
leverage ratio framework, and certain savings and
loan holding companies that are substantially
engaged in insurance underwriting or commercial
activities or that are estate trusts, and bank holding
companies and savings and loan holding companies
that are employee stock ownership plans.
4 See 12 CFR 3.10(a) (OCC); 12 CFR 217.10(a)
(Board); and 12 CFR 324.10(a) (FDIC). In addition
to the generally applicable leverage ratio, advanced
approaches banking organizations are subject to a
supplementary leverage ratio, which measures a
banking organization’s tier 1 capital relative to its
on-balance sheet and certain off-balance sheet
exposures.
5 A different deduction framework applies to non-
advanced approaches banking organizations. See 84
FR 35234 (July 22, 2019).
6 See 12 CFR 3.22(c)(1) (OCC); 12 CFR
217.22(c)(1) (Board); and 12 CFR 324.22(c)(1)
(FDIC).
7 See 12 CFR 3.22(c)(2) (OCC); 12 CFR
217.22(c)(2) (Board); and 12 CFR 324.22(c)(2)
(FDIC).
8 See 12 CFR 3.22(c)(3), (c)(5), and (c)(6) (OCC);
12 CFR 217.22(c)(3), (c)(5), and (c)(6) (Board); and
12 CFR 324.22(c)(3), (c)(5), and (c)(6) (FDIC).
9 See 12 CFR part 3, subparts D, E, or F, as
applicable (OCC); 12 CFR part 217, subparts D, E,
and F, as applicable (Board); and 12 CFR part 324,
subparts D, E, or F, as applicable (FDIC).
10 See 12 CFR part 3, subparts D, E, or F, as
applicable (OCC); 12 CFR part 217, subparts D, E,
and F, as applicable (Board); and 12 CFR part 324,
subparts D, E, or F, as applicable (FDIC).
11 See 82 FR 8266 (January 24, 2017); 12 CFR part
252, subparts G and P. The TLAC rule’s TLAC and
long-term debt requirements took effect on January
1, 2019.
12 See 12 CFR 252.62 and 252.63; 12 CFR 252.162
and 252.165. The requirements applicable under
the TLAC rule to covered BHCs and covered IHCs
are similar but not identical
d 12 CFR part 324,
subparts D, E, or F, as applicable (FDIC).
11 See 82 FR 8266 (January 24, 2017); 12 CFR part
252, subparts G and P. The TLAC rule’s TLAC and
long-term debt requirements took effect on January
1, 2019.
12 See 12 CFR 252.62 and 252.63; 12 CFR 252.162
and 252.165. The requirements applicable under
the TLAC rule to covered BHCs and covered IHCs
are similar but not identical.
13 Long-term debt issued by a covered IHC to
affiliates of the covered IHC is subject to notable
additional requirements, including the inclusion of
a provision allowing the Board to order the
conversion of the debt into common equity tier 1
capital of the covered IHC. See 12 CFR 252.163.
14 The internal debt conversion provision
included in covered IHC long-term debt issued to
affiliates performs a similar function outside of a
resolution proceeding.
organization’s regulatory capital. The
final rule includes certain adjustments
to the proposal in response to
comments. The final rule aims to reduce
both interconnectedness within the
financial system and systemic risks.
II. Background
A. Capital Requirements
The agencies’ regulatory capital rule
(capital rule) imposes minimum capital
requirements on banking organizations
measured through risk-based and
leverage capital ratios.3 These regulatory
capital ratios consist of regulatory
capital measures relative to risk-
weighted assets and total assets,
respectively.4 The numerators of the
regulatory capital ratios include various
adjustments and deductions to balance-
sheet-based regulatory capital
components
um capital
requirements on banking organizations
measured through risk-based and
leverage capital ratios.3 These regulatory
capital ratios consist of regulatory
capital measures relative to risk-
weighted assets and total assets,
respectively.4 The numerators of the
regulatory capital ratios include various
adjustments and deductions to balance-
sheet-based regulatory capital
components.
The capital rule includes two broad
categories of deductions from regulatory
capital related to investments in the
capital instruments of financial
institutions by advanced approaches
banking organizations.5 First, it requires
a banking organization to deduct any
investment in its own regulatory capital
instruments and any investment in
regulatory capital instruments held
reciprocally with another financial
institution (reciprocal cross holding).6
Second, it requires a banking
organization to deduct investments in
capital instruments issued by
unconsolidated financial institutions
that would qualify as regulatory capital
if issued by the banking organization
itself.7 For the purpose of the latter
deduction, a banking organization may
be required to deduct the entire amount
of the investment, or it may be required
to deduct only the portion of the
investment that exceeds a certain
threshold.8 These deductions are
intended to reduce interconnectedness
and contagion risk among financial
institutions by discouraging banking
organizations from investing in the
capital of other financial institutions
nking organization may
be required to deduct the entire amount
of the investment, or it may be required
to deduct only the portion of the
investment that exceeds a certain
threshold.8 These deductions are
intended to reduce interconnectedness
and contagion risk among financial
institutions by discouraging banking
organizations from investing in the
capital of other financial institutions.
For deductions related to investments
in the capital of unconsolidated
financial institutions, a banking
organization must deduct from the
component of regulatory capital for
which the instrument qualifies or would
qualify if it were issued by the banking
organization that is holding the
exposure.9 For example, an advanced
approaches banking organization that
owns 10 percent or less of the common
stock of an unconsolidated financial
institution is said to have a ‘‘non-
significant investment’’ in the capital of
the unconsolidated financial institution.
If the advanced approaches banking
organization invests in tier 2
instruments issued by the
unconsolidated financial institution,
then it must deduct from its own tier 2
capital the amount, if any, by which the
investment, combined with other non-
significant investments in the capital of
other unconsolidated financial
institutions, exceeds 10 percent of the
sum of the banking organization’s
common equity tier 1 capital elements
minus all deductions from and
adjustments to common equity tier 1
capital elements required under section
__.22(a) through __.22(c)(3), net of
associated deferred tax liabilities (DTLs)
(10 percent threshold for non-significant
investments). Any non-significant
investments in the capital of
unconsolidated financial institutions
that are not deducted from regulatory
capital are risk-weighted in accordance
with the capital rule.10
B
common equity tier 1
capital elements required under section
__.22(a) through __.22(c)(3), net of
associated deferred tax liabilities (DTLs)
(10 percent threshold for non-significant
investments). Any non-significant
investments in the capital of
unconsolidated financial institutions
that are not deducted from regulatory
capital are risk-weighted in accordance
with the capital rule.10
B. TLAC Rule
In December 2016, the Board issued a
final rule to require the largest domestic
and foreign banking organizations
operating in the United States to
maintain a minimum amount of total
loss-absorbing capacity (TLAC),
consisting of tier 1 capital (excluding
minority interest) and certain long-term
debt instruments (TLAC rule).11 The
TLAC rule applies to a U.S. top-tier
bank holding company identified under
the Board’s rules as a global
systemically important bank holding
company (covered BHC) or a top-tier
U.S. intermediate holding company
subsidiary of a global systemically
important foreign banking organization
(foreign GSIB) with $50 billion or more
in U.S. non-branch assets (covered IHC)
(collectively, covered banking
organizations).
The objective of the TLAC rule is to
enhance financial stability by reducing
the impact of the failure of covered
banking organizations by requiring such
organizations to have sufficient loss-
absorbing capacity on both a going-
concern and a gone-concern basis. The
TLAC rule includes requirements that a
covered banking organization maintain
outstanding minimum levels of TLAC
and long-term debt.12 TLAC is the sum
of the tier 1 capital instruments issued
directly by the covered banking
organization (excluding minority
interest) and the long-term debt issued
directly by the covered banking
organization
h a going-
concern and a gone-concern basis. The
TLAC rule includes requirements that a
covered banking organization maintain
outstanding minimum levels of TLAC
and long-term debt.12 TLAC is the sum
of the tier 1 capital instruments issued
directly by the covered banking
organization (excluding minority
interest) and the long-term debt issued
directly by the covered banking
organization. Under the TLAC rule,
long-term debt is generally unsecured
debt that is issued directly by a covered
banking organization, has no features
that would interfere with an orderly
resolution proceeding, has a remaining
maturity of at least one year, and is
governed by U.S. law, among other
provisions.13
Long-term debt instruments under the
TLAC rule are capable of absorbing
losses in resolution (i.e., on a gone-
concern basis). This is because the debt
holders’ claim on a banking
organization’s assets may not receive
full payment in a resolution,
receivership, insolvency, or similar
proceeding.14 This potential loss-
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15 Long-term debt under the TLAC rule may also
qualify as tier 2 capital under the capital rule, if it
satisfies the eligibility criteria for tier 2 capital.
16 The proposal of the TLAC rule in 2015 was
issued solely by the Board. Therefore, the proposed
regulatory capital deductions in that proposal
would have only applied to Board-regulated
banking organizations, which include bank holding
companies, intermediate holding companies,
savings and loan holdings companies, and state
member banks.
17 As discussed further in section V.C.2 below,
the final rule excludes certain unsecured debt
instruments issued by foreign GSIBs from the scope
of the final rule
al deductions in that proposal
would have only applied to Board-regulated
banking organizations, which include bank holding
companies, intermediate holding companies,
savings and loan holdings companies, and state
member banks.
17 As discussed further in section V.C.2 below,
the final rule excludes certain unsecured debt
instruments issued by foreign GSIBs from the scope
of the final rule. Specifically, the final rule
generally excludes from the definition of covered
debt instrument an unsecured debt instrument that
cannot be written down or converted into equity
(i.e., bailed in) under a special resolution regime.
absorbing capacity of long-term debt is
part of the rationale for the deduction
approach for investments in such debt
instruments under this final rule.15
Given the ability of long-term debt to
absorb the losses of a covered banking
organization in a resolution,
receivership, insolvency, or similar
proceeding, the Board proposed
regulatory capital deductions for
investments by Board-regulated banking
organizations in long-term debt issued
under the TLAC rule when it initially
proposed the TLAC rule in 2015.16 The
Board did not finalize these limitations
when it issued the final TLAC rule
because it needed additional time to
work with the OCC and the FDIC to
develop a proposed interagency
approach regarding the regulatory
capital treatment for investments in
certain debt instruments issued by
covered banking organizations.
III. Overview of Notice of Proposed
Rulemaking and Comments
In April 2019, the agencies issued a
proposal to address, for purposes of the
capital rule, the systemic risks posed by
an advanced approaches banking
organization’s investments in covered
debt instruments and to create an
incentive for advanced approaches
banking organizations to limit their
exposure to GSIBs. The deductions
required under the proposal would have
affected the capital ratios of advanced
approaches banking organizations
address, for purposes of the
capital rule, the systemic risks posed by
an advanced approaches banking
organization’s investments in covered
debt instruments and to create an
incentive for advanced approaches
banking organizations to limit their
exposure to GSIBs. The deductions
required under the proposal would have
affected the capital ratios of advanced
approaches banking organizations.
Without the proposed changes,
investments in covered debt
instruments issued by covered BHCs,
foreign GSIBs, and covered IHCs are
generally not subject to deduction and
would generally be subject to a risk
weight of 100 percent.
An investment in a covered debt
instrument, as defined in the proposal,
by an advanced approaches banking
organization would have been treated as
an investment in a tier 2 capital
instrument for purposes of the existing
deduction framework. As a result, an
investment in a covered debt instrument
would have been subject to deduction
from the advanced approaches banking
organization’s own tier 2 capital.
The existing corresponding deduction
approach in the capital rule would have
been amended to apply any required
deduction by advanced approaches
banking organizations of an investment
in a covered debt instrument that
exceeded certain thresholds, consistent
with the deduction framework for
investments in the capital of
unconsolidated financial institutions. In
addition, the existing deduction
approaches under the capital rule would
have been amended to apply to an
advanced approaches banking
organization’s reciprocal cross holdings
of covered debt instruments; that is, an
advanced approaches banking
organization would have deducted from
its own tier 2 capital any reciprocal
cross holdings of covered debt
instruments with another banking
organization. The existing deduction
approaches under the capital rule would
have also been amended to apply to a
covered BHC’s investments in its own
covered debt instruments
ings
of covered debt instruments; that is, an
advanced approaches banking
organization would have deducted from
its own tier 2 capital any reciprocal
cross holdings of covered debt
instruments with another banking
organization. The existing deduction
approaches under the capital rule would
have also been amended to apply to a
covered BHC’s investments in its own
covered debt instruments. Similarly, the
existing deduction approaches under
the capital rule would have also been
amended to apply to a covered IHC
subject to the advanced approaches
(advanced approaches covered IHC) and
its investments in its own covered debt
instruments.
The proposal also included certain
exclusions from deduction. Importantly,
the proposal would have allowed
advanced approaches banking
organizations to exclude from deduction
investments in covered debt
instruments, subject to certain
qualifying and measurement criteria,
that are five percent or less of the sum
of advanced approaches banking
organization’s common equity tier 1
capital elements minus all deductions
from and adjustments to common equity
tier 1 capital elements required under
section __.22(a) through __.22(c)(3), net
of associated DTLs (five percent
exclusion). As discussed in the
preamble to the proposal, the agencies
designed the exclusion from deduction
to support deep and liquid markets for
covered debt instruments issued by
GSIBs. In the case of a U.S. GSIB, it
would have applied the proposed
exclusion only to ‘‘excluded covered
debt instruments,’’ which were defined
in the proposal as covered debt
instruments held for 30 business days or
less and held for the purpose of short-
term resale or with the intent of
benefiting from actual or expected short-
term price movements, or to lock in
arbitrage profits. This provision was
intended to limit the five percent
exclusion for U.S. GSIBs to covered debt
instruments held in connection with
market making activities
oposal as covered debt
instruments held for 30 business days or
less and held for the purpose of short-
term resale or with the intent of
benefiting from actual or expected short-
term price movements, or to lock in
arbitrage profits. This provision was
intended to limit the five percent
exclusion for U.S. GSIBs to covered debt
instruments held in connection with
market making activities. Advanced
approaches banking organizations that
are not U.S. GSIBs would not have been
subject to this limit on the use of the
five percent exclusion. Under the
proposal’s five percent exclusion, all
advanced approaches banking
organizations could exclude covered
debt instruments measured on a gross
long basis from the deduction
framework up to a cap of five percent
of the banking organization’s common
equity tier 1 capital.
The proposal would have revised
section __.22(c), (f), and (h) of the
capital rule to incorporate the proposed
deduction approach for investments in
covered debt instruments, and added
several new definitions to section __.2
to effectuate these deductions. Further,
the definition of ‘‘investment in the
capital of an unconsolidated financial
institution’’ would have been amended
to correct a typographical error.
Collectively, the agencies received ten
public comment letters from trade
associations, public interest groups,
private individuals, and other interested
parties. As further detailed below,
commenters generally supported the
overarching goal of the proposal to
reduce interconnectedness by creating
an incentive for advanced approaches
banking organizations to limit their
exposure to GSIBs. However,
commenters also expressed certain
general concerns with the proposal and
noted specific concerns with certain
technical aspects of it.
The agencies are jointly finalizing a
regulatory capital treatment for
investments in covered debt
instruments that applies to advanced
approaches banking organizations
advanced approaches
banking organizations to limit their
exposure to GSIBs. However,
commenters also expressed certain
general concerns with the proposal and
noted specific concerns with certain
technical aspects of it.
The agencies are jointly finalizing a
regulatory capital treatment for
investments in covered debt
instruments that applies to advanced
approaches banking organizations. The
final rule is substantially consistent
with the proposal, with certain
modifications in response to comments
as well as some technical clarifications.
IV. Summary of the Final Rule
The final rule applies to advanced
approaches banking organizations and
generally requires deductions from
capital for direct, indirect, and synthetic
exposures to covered debt instruments
and any other unsecured debt
instruments pari passu or subordinated
to covered debt instruments.17 Under
the final rule, an advanced approaches
banking organization treats investments
in covered debt instruments as
investments in tier 2 capital instruments
for purposes of applying the
corresponding deduction approach in
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18 See 12 CFR 3.22(h)(2) (OCC); 12 CFR
217.22(h)(2) (Board); 12 CFR 324.2(h)(2) (FDIC).
19 See 84 FR 59230 (November 1, 2019).
20 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board);
12 CFR 324.2 (FDIC).
the capital rule
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18 See 12 CFR 3.22(h)(2) (OCC); 12 CFR
217.22(h)(2) (Board); 12 CFR 324.2(h)(2) (FDIC).
19 See 84 FR 59230 (November 1, 2019).
20 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board);
12 CFR 324.2 (FDIC).
the capital rule. Deduction from capital
is required for:
• Investments in a covered BHC’s or
advanced approaches covered IHC’s
own covered debt instruments, as
applicable;
• Reciprocal cross holdings with
another financial institution of covered
debt instruments;
• Investments in covered debt
instruments of a financial institution
while also holding 10 percent or more
of the financial institution’s common
stock; and
• Investments in covered debt
instruments that, together with
investments in the capital of
unconsolidated financial institutions,
exceed 10 percent of the investing
advanced approaches banking
organization’s common equity tier 1
capital.
• Under the final rule, an advanced
approaches banking organization may
exclude from deduction investments in
certain covered debt instruments up to
five percent of its common equity tier 1
capital, as measured on a gross long
basis.18 Usage of the five percent
exclusion is tailored, depending on
whether the advanced approaches
banking organization is a U.S. GSIB.
For U.S. GSIBs, only ‘‘excluded
covered debt instruments’’ are eligible
for the five percent exclusion in the
final rule. Generally, ‘‘excluded covered
debt instruments’’ in the final rule are
investments in covered debt
instruments that are held in accordance
with market making activities, as
identified using criteria from the
regulations implementing section 13 of
the Bank Holding Company Act
(commonly known as the Volcker Rule)
as discussed in more detail in section
V.E. below. A U.S
in the
final rule. Generally, ‘‘excluded covered
debt instruments’’ in the final rule are
investments in covered debt
instruments that are held in accordance
with market making activities, as
identified using criteria from the
regulations implementing section 13 of
the Bank Holding Company Act
(commonly known as the Volcker Rule)
as discussed in more detail in section
V.E. below. A U.S. GSIB’s direct or
indirect exposure to a covered debt
instrument is an excluded covered debt
instrument if the exposure is held for 30
or fewer business days and held in
connection with market making-related
activities. A U.S. GSIB’s holding of a
synthetic exposure to a covered debt
instrument is not limited to 30 business
days in order to qualify as an excluded
covered debt instrument.
For advanced approaches banking
organizations that are not U.S. GSIBs,
any direct, indirect, or synthetic
exposure to a covered debt instrument
issued by an unconsolidated financial
institution that is a non-significant
investment is eligible for the five
percent exclusion in the final rule.
The final rule revises section __.22(c),
(f), and (h) of the capital rule to
incorporate the deduction approach for
investments in covered debt
instruments. As with the proposal,
several new definitions are added to
section __.2 in the final rule to
effectuate these deductions. More
information on these specific revisions
to the capital rule are provided below.
V. Regulatory Capital Treatment for
Advanced Approaches Banking
Organizations’ Investments in Covered
Debt Instruments
A. Scope of Application
The proposal would have applied the
deduction framework for covered debt
instruments to advanced approaches
banking organizations
o
effectuate these deductions. More
information on these specific revisions
to the capital rule are provided below.
V. Regulatory Capital Treatment for
Advanced Approaches Banking
Organizations’ Investments in Covered
Debt Instruments
A. Scope of Application
The proposal would have applied the
deduction framework for covered debt
instruments to advanced approaches
banking organizations. Since the
proposal was issued, the agencies issued
the interagency tailoring final rule that
included revisions to the scope of
advanced approaches banking
organizations.19 As a result of the
interagency tailoring final rule,
‘‘advanced approaches banking
organizations’’ include those banking
organizations subject to Category I
standards (i.e., those banking
organizations that qualify as U.S.
GSIBs), Category II standards (i.e.,
banking organizations with (1) at least
$700 billion in total consolidated assets
or (2) at least $75 billion in cross-
jurisdictional activity and at least $100
billion in total consolidated assets), or a
subsidiary depository institution of a
banking organization subject to Category
I or II standards. Some commenters
suggested that the agencies should
apply the proposal to all banking
organizations subject to the capital rule.
Other commenters suggested the
agencies apply the proposal to all
banking organizations subject to
Category I through IV standards, as
defined in the interagency tailoring final
rule.20
After considering the comments, the
agencies are continuing to limit the
scope of this rule to advanced
approaches banking organizations, as
revised by the interagency tailoring final
rule. As explained in the proposal, the
systemic risks associated with banking
organizations’ investments in covered
debt instruments is greatest for the
banking organizations covered by the
proposal
le.20
After considering the comments, the
agencies are continuing to limit the
scope of this rule to advanced
approaches banking organizations, as
revised by the interagency tailoring final
rule. As explained in the proposal, the
systemic risks associated with banking
organizations’ investments in covered
debt instruments is greatest for the
banking organizations covered by the
proposal. However, the agencies
acknowledge the possibility of potential
systemic risks associated with other
banking organizations’ investments in
covered debt instruments and will
continue to evaluate whether additional
steps are warranted to address such
risks.
B. Deduction From Tier 2 Capital
Under the agencies’ capital rule, a
banking organization must deduct from
regulatory capital any investments in its
own capital instruments and in the
capital of other financial institutions
that it holds reciprocally. Other
investments in the capital of
unconsolidated financial institutions are
subject to deduction to the extent they
exceed certain thresholds.
Under the proposal, an investment in
a covered debt instrument by an
advanced approaches banking
organization would have been treated as
an investment in a tier 2 capital
instrument for purposes of the
deduction framework, and therefore,
would have been subject to deduction
from the advanced approaches banking
organization’s own tier 2 capital. The
existing corresponding deduction
approach in the capital rule would have
been amended to apply to any
deduction by advanced approaches
banking organizations of an investment
in a covered debt instrument that
exceeded certain thresholds, as if the
covered debt instrument were a tier 2
capital instrument
deduction
from the advanced approaches banking
organization’s own tier 2 capital. The
existing corresponding deduction
approach in the capital rule would have
been amended to apply to any
deduction by advanced approaches
banking organizations of an investment
in a covered debt instrument that
exceeded certain thresholds, as if the
covered debt instrument were a tier 2
capital instrument. In addition, the
existing deduction approaches under
the capital rule would have been
amended to apply to a covered BHC’s or
advanced approaches covered IHC’s
investments in its own covered debt
instruments, and to advanced
approaches banking organizations’
reciprocal cross holdings of covered
debt instruments with other financial
institutions. Such investments and cross
holdings would be deducted from an
advanced approaches banking
organization’s own tier 2 capital, as
applicable.
Some commenters expressed concerns
that deducting a covered debt
instrument from an advanced
approaches banking organization’s own
tier 2 capital is insufficiently restrictive.
As an alternative, these commenters
recommended that advanced
approaches banking organizations
deduct investments in covered debt
instruments from their own common
equity tier 1 capital. Some commenters
suggested that the prohibition of all
holdings of covered debt instruments by
advanced approaches banking
organizations would be more
appropriate. Other commenters
expressed concerns that deducting a
covered debt instrument from an
advanced approaches banking
organization’s own tier 2 capital is
overly restrictive. These commenters
asserted that a covered BHC or
advanced approaches covered IHC
should be able to effectuate deductions
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g a
covered debt instrument from an
advanced approaches banking
organization’s own tier 2 capital is
overly restrictive. These commenters
asserted that a covered BHC or
advanced approaches covered IHC
should be able to effectuate deductions
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21 See 12 CFR 252.61.
22 See 12 CFR 252.161.
23 The Basel Committee’s TLAC Holdings
standard excludes from the definition of ‘‘other
TLAC liabilities’’ instruments that are pari passu to
(1) excluded liabilities and (2) other instruments
that are eligible for recognition as external TLAC by
virtue of the exemptions to the subordination
requirements in the Financial Stability Board’s
TLAC term sheet. See section 66.c of the TLAC
Holdings standard. Only a proportion of
instruments that are eligible to be recognized as
external TLAC by virtue of the subordination
exemptions may be considered TLAC under the
TLAC Holdings standard. The proportion equals the
ratio of (1) the debt instruments issued by a GSIB
that rank pari passu to excluded liabilities and that
are recognized as external TLAC by the GSIB, to (2)
the debt instruments issued by the GSIB that rank
pari passu to excluded liabilities and that would be
recognized as external TLAC if the subordination
requirement was not applied. As stated in the
proposal, the agencies believe that implementation
of the proportional deduction approach used in the
Basel Committee’s TLAC Holdings standard would
have introduced too much complexity and
operational burden to the capital rule; the final rule
does not implement the proportional deduction
approach. See Basel Committee for Banking
Supervision and Regulation, ‘‘TLAC Holdings’’
(October 12, 2016), available at https://www.bis.org/
bcbs/publ/d387.pdf. (TLAC Holdings standard)
roach used in the
Basel Committee’s TLAC Holdings standard would
have introduced too much complexity and
operational burden to the capital rule; the final rule
does not implement the proportional deduction
approach. See Basel Committee for Banking
Supervision and Regulation, ‘‘TLAC Holdings’’
(October 12, 2016), available at https://www.bis.org/
bcbs/publ/d387.pdf. (TLAC Holdings standard).
24 See Financial Stability Board, ‘‘Principles on
Loss-absorbing and Recapitalisation Capacity of G–
SIBs in Resolution—Total Loss-absorbing Capacity
(TLAC) Term Sheet,’’ (November 9, 2015), available
at https://www.fsb.org/wp-content/uploads/TLAC-
Principles-and-Term-Sheet-for-publication-
final.pdf.
25 Under the FSB’s TLAC term sheet, ‘‘excluded
liabilities’’ do not qualify as TLAC and therefore are
not subject to deduction under the TLAC Holdings
from its own TLAC-eligible long-term
debt rather than its own tier 2 capital.
Requiring deduction of a covered debt
instrument from tier 2 capital should be
a sufficiently prudent and simple
approach that discourages advanced
approaches banking organizations’
investments in such instruments and
thereby supports the objectives of
reducing both interconnectedness
within the financial system and
systemic risks. Effectuating deductions
from a covered BHC’s or advanced
approaches covered IHC’s own TLAC-
eligible debt, rather than own tier 2
capital, could disproportionately favor
the largest and most internationally
active banking organizations. A less
complex banking organization, such as
a non-GSIB advanced approaches
banking organization, would make all
deductions related to an investment in
a covered debt instrument from its own
tier 2 capital, since non-GSIBs are not
required to issue TLAC-eligible debt
than own tier 2
capital, could disproportionately favor
the largest and most internationally
active banking organizations. A less
complex banking organization, such as
a non-GSIB advanced approaches
banking organization, would make all
deductions related to an investment in
a covered debt instrument from its own
tier 2 capital, since non-GSIBs are not
required to issue TLAC-eligible debt.
Further, allowing covered BHCs and
advanced approaches covered IHCs to
deduct from their own TLAC-eligible
debt creates additional balance sheet
capacity for these banking organizations
to invest in covered debt instruments
issued by other GSIBs relative to non-
GSIB advanced approaches banking
organizations, thereby undermining a
goal of the final rule to reduce
interconnectedness among large and
internationally active banking
organizations. The disproportionate
effects of allowing deduction from own
TLAC-eligible debt would be further
exacerbated if the agencies were to
expand the scope of the final rule in the
future as described above.
As such, the agencies are finalizing, as
proposed, the requirement that an
advanced approaches banking
organization treat an investment in a
covered debt instrument as an
investment in a tier 2 capital
instrument, and therefore, deduct such
investment from its own tier 2 capital.
C. Amendments to Definitions
The proposal would have added or
amended certain definitions in section _
_.2 of the capital rule to implement the
proposed deduction approach.
1. Definition of ‘‘Covered Debt
Instrument’’ for Covered BHC and
Covered IHC Issuance
Under the proposal, a ‘‘covered debt
instrument’’ would have been defined to
include an unsecured debt instrument
that is:
(1) Issued by a covered BHC and that
is an ‘‘eligible debt security’’ for
purposes of the TLAC rule,21 or that is
pari passu or subordinated to any
‘‘eligible debt security’’ issued by the
covered BHC; or
Debt
Instrument’’ for Covered BHC and
Covered IHC Issuance
Under the proposal, a ‘‘covered debt
instrument’’ would have been defined to
include an unsecured debt instrument
that is:
(1) Issued by a covered BHC and that
is an ‘‘eligible debt security’’ for
purposes of the TLAC rule,21 or that is
pari passu or subordinated to any
‘‘eligible debt security’’ issued by the
covered BHC; or
(2) Issued by a covered IHC and that
is an ‘‘eligible Covered IHC debt
security’’ for purposes of the TLAC
rule,22 or that is pari passu or
subordinated to any ‘‘eligible Covered
IHC debt security’’ issued by the
covered IHC.
Under the proposal, a covered debt
instrument would not have included a
debt instrument that qualifies as tier 2
capital under the capital rule.
Some commenters requested that pari
passu or subordinated unsecured debt
instruments be excluded from the
definition of ‘‘covered debt instrument.’’
Commenters argued that it is not
practical to determine whether a given
instrument is pari passu or
subordinated to TLAC-eligible debt
issued by a covered BHC or covered IHC
and whether a given debt instrument
was an eligible long-term debt
instrument under the TLAC rule.
Further, commenters argued that
because the TLAC rule limits the
amount of debt that a covered BHC or
covered IHC can issue that is not TLAC-
eligible but is pari passu with or
subordinated to TLAC-eligible debt,
significant amounts of such debt should
not be outstanding.
Treating unsecured debt instruments
that are pari passu or subordinated to
TLAC-eligible debt instruments as
‘‘covered debt instruments’’ is
important, given that these liabilities
will incur losses ahead of or
proportionally with TLAC-eligible debt.
Excluding these pari passu and
subordinated instruments from the
regulatory deduction treatment would
understate the degree of risk of these
investments
ured debt instruments
that are pari passu or subordinated to
TLAC-eligible debt instruments as
‘‘covered debt instruments’’ is
important, given that these liabilities
will incur losses ahead of or
proportionally with TLAC-eligible debt.
Excluding these pari passu and
subordinated instruments from the
regulatory deduction treatment would
understate the degree of risk of these
investments. Advanced approaches
banking organizations should be able to
determine whether an instrument
qualifies as TLAC under applicable
standards, or whether an instrument is
pari passu or subordinated to a
company’s TLAC-eligible debt
instruments based on public
information and routine due diligence.
Accordingly, the agencies are finalizing
as proposed the above prongs of the
definition of covered debt instrument
for covered BHC and covered IHC debt
issuances.
2. Definition of ‘‘Covered Debt
Instrument’’ for Foreign GSIB Issuance
A ‘‘covered debt instrument’’ also
would have included any unsecured
debt instrument issued by a foreign
GSIB or any of its subsidiaries, other
than its covered IHC, for the purpose of
absorbing losses or recapitalizing the
issuer or any of its subsidiaries in
connection with a resolution,
receivership, insolvency, or similar
proceeding of the issuer or any of its
subsidiaries (foreign TLAC-eligible
debt). Further, covered debt instruments
would have also included any debt
instrument that is pari passu or
subordinated to any foreign TLAC-
eligible debt, other than an unsecured
debt instrument that is included in the
regulatory capital of the issuer
ction with a resolution,
receivership, insolvency, or similar
proceeding of the issuer or any of its
subsidiaries (foreign TLAC-eligible
debt). Further, covered debt instruments
would have also included any debt
instrument that is pari passu or
subordinated to any foreign TLAC-
eligible debt, other than an unsecured
debt instrument that is included in the
regulatory capital of the issuer.
Commenters suggested that the scope
of the definition of ‘‘covered debt
instrument’’ should be revised to
include only foreign TLAC-eligible debt
as determined under applicable home-
country standards.23 Commenters stated
that the proposed scope of the definition
is broader than necessary because the
issuance of such liabilities is subject to
the Financial Stability Board (FSB)’s
TLAC term sheet’s limitation on
issuance of excluded liabilities.24 Some
commenters suggested that liabilities
issued by foreign GSIBs that are
‘‘excluded liabilities’’ under the FSB’s
TLAC term sheet should be excluded
from the proposal’s definition of
covered debt instrument and therefore
exempted from the deduction
framework.25
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standard, even if they rank pari passu or
subordinated to a TLAC instrument. Excluded
liabilities include deposits, liabilities arising from
derivatives, and structured notes, among other
items. The TLAC rule prohibits or limits covered
banking organizations from entering into financial
arrangements that may compromise an orderly
resolution process, including limiting the amount of
liabilities to unaffiliated companies
ri passu or
subordinated to a TLAC instrument. Excluded
liabilities include deposits, liabilities arising from
derivatives, and structured notes, among other
items. The TLAC rule prohibits or limits covered
banking organizations from entering into financial
arrangements that may compromise an orderly
resolution process, including limiting the amount of
liabilities to unaffiliated companies.
26 Generally, a resolution regime that is consistent
with the FSB’s Key Attributes of Effective
Resolution Regimes for Financial Institutions would
be a special resolution regime that addresses the
failure or potential failure of a financial company.
See Financial Stability Board, ‘‘Key Attributes of
Effective Resolution Regimes for Financial
Institutions,’’ (October 15, 2014), https://
www.fsb.org/wp-content/uploads/r_141015.pdf.
Current examples of special resolution regimes that
address the failure or potential failure of a financial
company are those included in the International
Swaps and Derivatives Association (ISDA) 2015
Universal Resolution Stay Protocol and the ISDA
2018 U.S. Resolution Stay Protocol. See ISDA 2015
Universal Resolution Stay Protocol (November 4,
2015), http://assets.isda.org/media/ac6b533f-3/
5a7c32f8-pdf; ISDA 2018 U.S. Resolution Stay
Protocol (July 31, 2018), https://www.isda.org/a/
CIjEE/3431552_40ISDA-2018-U.S.-Protocol-
Final.pdf.
27 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board);
and 12 CFR 324.2 (FDIC) (‘‘investment in the capital
of an unconsolidated financial institution,’’
‘‘investment in the banking organization’s own
capital instrument,’’ ‘‘indirect exposure,’’ and
‘‘synthetic exposure’’).
Some commenters reiterated that it is
not practical for banking organizations
to determine whether a given
instrument is pari passu or
subordinated to foreign TLAC-eligible
debt as such a determination requires
complex analyses of foreign law with
respect to insolvency regimes and
creditor hierarchies
zation’s own
capital instrument,’’ ‘‘indirect exposure,’’ and
‘‘synthetic exposure’’).
Some commenters reiterated that it is
not practical for banking organizations
to determine whether a given
instrument is pari passu or
subordinated to foreign TLAC-eligible
debt as such a determination requires
complex analyses of foreign law with
respect to insolvency regimes and
creditor hierarchies. Commenters also
asserted that there could be unintended
consequences of including instruments
that are pari passu or subordinated to
foreign TLAC-eligible debt, including
interference with ordinary interbank
transactions. As a result, banking
organizations would make conservative
assumptions and treat all unsecured
debt instruments issued by foreign
GSIBs as subject to the deduction
framework. Therefore, commenters
suggested that the final rule should not
include instruments pari passu or
subordinated to foreign TLAC-eligible
debt in the definition of ‘‘covered debt
instruments.’’
For the same reasons discussed above
with respect to instruments issued by
covered BHCs and covered IHCs, the
final rule defines debt instruments that
are pari passu or subordinated to
foreign TLAC-eligible debt as ‘‘covered
debt instruments.’’ As discussed, such
instruments would incur losses ahead of
or proportionally with foreign TLAC-
eligible debt and therefore should be
subject to the deduction framework.
However, the agencies recognize the
commenters’ concerns and revise in two
ways the definition of covered debt
instruments issued by foreign GSIBs and
their subsidiaries, other than covered
IHCs. First, the final rule provides that
an instrument is a covered debt
instrument if it is ‘‘eligible for use to
comply with an applicable law or
regulation’’ requiring the issuance of a
minimum amount of instruments to
absorb losses or to recapitalize the
issuer or any of its subsidiaries in
connection with a resolution,
receivership, insolvency, or similar
proceeding
r than covered
IHCs. First, the final rule provides that
an instrument is a covered debt
instrument if it is ‘‘eligible for use to
comply with an applicable law or
regulation’’ requiring the issuance of a
minimum amount of instruments to
absorb losses or to recapitalize the
issuer or any of its subsidiaries in
connection with a resolution,
receivership, insolvency, or similar
proceeding. The proposal’s definition
would not have explicitly considered
whether the instrument is eligible for
use to comply with such a law or
regulation.
Second, the final rule revises the
definition of a covered debt instrument
to exclude certain unsecured debt
instruments from the scope of the
definition. If the issuer may be subject
to a special resolution regime, in its
jurisdiction of incorporation or
organization, that addresses the failure
or potential failure of a financial
company and foreign TLAC-eligible
debt is eligible under that special
resolution regime to be written down or
converted into equity or any other
capital instrument, then an instrument
is pari passu or subordinated to foreign
TLAC-eligible debt if that instrument is
eligible to be written down or converted
into equity or another capital
instrument under that special resolution
regime ahead of or proportionally with
any foreign TLAC-eligible debt. These
revisions reflect the FSB’s TLAC term
sheet’s focus on having instruments and
liabilities that should be readily
available for bail-in, and that
instruments that cannot be bailed in
effectively rank senior to foreign TLAC-
eligible debt in bail-in.26
These revisions should reduce the
burden associated with determining
whether unsecured debt instruments are
pari passu or subordinated to foreign
TLAC-eligible debt
s TLAC term
sheet’s focus on having instruments and
liabilities that should be readily
available for bail-in, and that
instruments that cannot be bailed in
effectively rank senior to foreign TLAC-
eligible debt in bail-in.26
These revisions should reduce the
burden associated with determining
whether unsecured debt instruments are
pari passu or subordinated to foreign
TLAC-eligible debt. For purposes of the
final rule, an advanced approaches
banking organization can rely on the
terms of any special resolution regime
and other applicable laws or regulations
for purposes of determining the
applicability of the final rule’s
deduction framework for an unsecured
debt instrument. For example, if the
applicable law or regulation specifies
the seniority of instruments that must be
issued, the advanced approaches
banking organization can rely on that
specification of seniority in determining
whether a different instrument is pari
passu or subordinated to TLAC-eligible
debt instruments.
These revisions also address concerns
raised by commenters that the proposal
could have interfered with ordinary
interbank transactions. For example, if
the special resolution regime applicable
to a foreign GSIB provides that deposits
are excluded from bail-in, those
deposits are not covered debt
instruments subject to the final rule’s
deduction framework.
3. Other Definitions
Similar to the measurement of
investments in the capital of
unconsolidated financial institutions, an
‘‘investment in a covered debt
instrument’’ would have been defined
in the proposal as a net long position in
a covered debt instrument, including
direct, indirect, and synthetic exposures
to such covered debt instruments.
Investments in covered debt
instruments would have excluded
underwriting positions held for five
business days or less
al of
unconsolidated financial institutions, an
‘‘investment in a covered debt
instrument’’ would have been defined
in the proposal as a net long position in
a covered debt instrument, including
direct, indirect, and synthetic exposures
to such covered debt instruments.
Investments in covered debt
instruments would have excluded
underwriting positions held for five
business days or less. In addition, the
proposal would have amended the
definitions of ‘‘indirect exposure’’ and
‘‘synthetic exposure’’ in the capital rule
to add exposures to covered debt
instruments.27 The agencies received no
comments on these technical elements
of the proposal, and are finalizing, as
proposed, the definitions for
‘‘investment in a covered debt
instrument,’’ ‘‘indirect exposure,’’ and
‘‘synthetic exposure.’’
D. Investments in Covered Banking
Organizations’ Own Covered Debt
Instruments and Reciprocal Cross
Holdings
Under the agencies’ capital rule, a
banking organization must deduct from
regulatory capital an investment in its
own capital instruments and
investments in the capital of other
financial institutions that it holds
reciprocally under sections __.22(c)(1)
and (3), respectively. The proposal
would have amended section
217.22(c)(1) to require a covered BHC or
a covered IHC to deduct from tier 2
capital its investments in its own
covered debt instruments. The proposal
also would have amended section __
.22(c)(3) to require advanced approaches
banking organizations to deduct from
tier 2 capital any investment in a
covered debt instrument that is held
reciprocally with another financial
institution
ection
217.22(c)(1) to require a covered BHC or
a covered IHC to deduct from tier 2
capital its investments in its own
covered debt instruments. The proposal
also would have amended section __
.22(c)(3) to require advanced approaches
banking organizations to deduct from
tier 2 capital any investment in a
covered debt instrument that is held
reciprocally with another financial
institution.
As described earlier, some
commenters expressed concerns that
deducting a covered debt instrument
from an advanced approaches banking
organization’s own tier 2 capital is
overly restrictive, including in cases of
deductions for investments in its own
covered debt instruments, as applicable,
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28 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board);
12 CFR 324.2 (FDIC) (‘‘significant investment in the
capital of an unconsolidated financial institution’’
and ‘‘non-significant investment in the capital of an
unconsolidated financial institution’’).
29 See 12 CFR 3.22(c)(6) and (d)(2)(i)(C) (OCC); 12
CFR 217.22(c)(6) and (d)(2)(i)(C) (Board); and 12
CFR 324.22(c)(6) and (d)(2)(i)(C) (FDIC). In addition
to the 10 percent threshold, a banking organization
could be subject to additional deductions for
significant investments in financial institutions in
the form of common stock, if the amount not
deducted under the 10 percent limit, combined
with mortgage servicing assets and deferred tax
assets that are not deducted, exceed 15 percent of
the banking organization’s common equity tier 1
capital. See 12 CFR 3.22(d) (OCC); 12 CFR 217.22(d)
(Board); and 12 CFR 324.22(d) (FDIC).
30 See 12 CFR 3.22(c)(5) (OCC); 12 CFR
217.22(c)(5) (Board); and 12 CFR 324.2(c)(5) (FDIC).
and reciprocal cross holdings with other
financial institutions
with mortgage servicing assets and deferred tax
assets that are not deducted, exceed 15 percent of
the banking organization’s common equity tier 1
capital. See 12 CFR 3.22(d) (OCC); 12 CFR 217.22(d)
(Board); and 12 CFR 324.22(d) (FDIC).
30 See 12 CFR 3.22(c)(5) (OCC); 12 CFR
217.22(c)(5) (Board); and 12 CFR 324.2(c)(5) (FDIC).
and reciprocal cross holdings with other
financial institutions. These
commenters asserted that a covered
BHC or a covered IHC should be able to
effectuate deductions from its own
TLAC-eligible long-term debt rather
than its own tier 2 capital for these
investments.
Requiring a deduction of a covered
debt instrument from tier 2 capital for
deductions related to investments in an
advanced approaches banking
organization’s own covered debt
instruments and reciprocal cross
holdings should be a sufficiently
prudent and simple approach that
discourages advanced approaches
banking organizations’ investments in
such instruments, as applicable, and
thereby supports the objectives of
reducing both interconnectedness
within the financial system and
systemic risks. As mentioned earlier,
effectuating deductions from a covered
BHC’s or a covered IHC’s own TLAC-
eligible debt, rather than its own tier 2
capital, could disproportionately favor
the largest and most internationally
active banking organizations. As such,
the agencies are finalizing, as proposed,
that an advanced approaches banking
organization will generally deduct
investments in own covered debt
instruments, as applicable, and
reciprocal cross holdings with other
financial institutions in covered debt
instruments from its own tier 2 capital.
Commenters asked that the final rule
include a separate deduction threshold
for market making activities in an
advanced approaches banking
organization’s own covered debt
instruments capped at five percent of a
covered BHC’s or advanced approaches
covered IHC’s own common equity tier
1 capital
ngs with other
financial institutions in covered debt
instruments from its own tier 2 capital.
Commenters asked that the final rule
include a separate deduction threshold
for market making activities in an
advanced approaches banking
organization’s own covered debt
instruments capped at five percent of a
covered BHC’s or advanced approaches
covered IHC’s own common equity tier
1 capital. Commenters stated that such
a threshold is necessary to better
facilitate deep and liquid markets for
TLAC-eligible debt instruments.
Further, commenters claimed that GSIBs
are often the biggest market makers in
their own covered debt instruments and,
under the U.S. GAAP accounting
standard, their own holdings of covered
debt instruments are not always
eliminated in full in consolidation. In
cases where a GSIB’s investments in its
own covered debt instruments are not
fully extinguished, the exposure amount
can be greater than zero and therefore
subject to deduction from tier 2 capital
under the proposal.
Commenters stated that a separate five
percent threshold for market making in
an advanced approaches banking
organization’s own covered debt
instruments in the final rule would
prevent a capital deduction for such
investments. However, finalizing the
rule with a separate threshold for
investments in an advanced approaches
banking organization’s own covered
debt instruments could create additional
balance sheet capacity for covered BHCs
and advanced approaches covered IHCs
to increase their investments in covered
debt instruments issued by other GSIBs.
Such an approach would not align with
the proposal’s goal of reducing
interconnectedness and systemic risks
among large and internationally active
banking organizations. Therefore, the
final rule does not implement this
suggested change.
E
sheet capacity for covered BHCs
and advanced approaches covered IHCs
to increase their investments in covered
debt instruments issued by other GSIBs.
Such an approach would not align with
the proposal’s goal of reducing
interconnectedness and systemic risks
among large and internationally active
banking organizations. Therefore, the
final rule does not implement this
suggested change.
E. Significant and Non-Significant
Investments in Covered Debt
Instruments
Under sections __.22(c)(5) and (6) of
the capital rule, an advanced
approaches banking organization must
deduct from regulatory capital certain
investments in the capital of
unconsolidated financial institutions.
The calculation of the deduction
depends on whether the banking
organization has a ‘‘significant’’ or a
‘‘non-significant’’ investment, with
‘‘significant’’ defined as ownership of
more than 10 percent of the common
stock of the unconsolidated financial
institution and ‘‘non-significant’’
defined as ownership of 10 percent or
less of the common stock of the
unconsolidated financial institution.28
When a banking organization has a
‘‘significant investment’’ in an
unconsolidated financial institution, the
banking organization must deduct from
regulatory capital any investment in the
capital of the unconsolidated financial
institution that is not in the form of
common stock as measured on a net
long basis, and the banking organization
must also deduct from regulatory capital
any investment in the capital of the
unconsolidated financial institution in
the form of common stock that exceeds
10 percent of the advanced approaches
banking organization’s own common
equity tier 1 capital as measured on a
net long basis.29 If an advanced
approaches banking organization has
one or more ‘‘non-significant
investments’’ in unconsolidated
financial institutions, it must aggregate
such investments and deduct from
regulatory capital any amount that
exceeds the 10 percent threshold for
non-significant investments, a
roaches
banking organization’s own common
equity tier 1 capital as measured on a
net long basis.29 If an advanced
approaches banking organization has
one or more ‘‘non-significant
investments’’ in unconsolidated
financial institutions, it must aggregate
such investments and deduct from
regulatory capital any amount that
exceeds the 10 percent threshold for
non-significant investments, as
measured on a net long basis.30
The proposal would have amended
the capital rule to require an advanced
approaches banking organization with
an investment in a covered debt
instrument issued by an unconsolidated
financial institution to deduct the
investment from tier 2 capital if the
advanced approaches banking
organization has a significant
investment in the capital of the
unconsolidated financial institution.
The agencies received no comments on
deductions for significant investments
in the capital of an unconsolidated
financial institution and are finalizing
this aspect of the rule as proposed.
The proposal would have amended
the capital rule to require an advanced
approaches banking organization with
an investment in a covered debt
instrument in a financial institution in
which the advanced approaches
banking organization does not also have
a significant investment in the form of
common stock to include such
investment in the covered debt
instrument in the aggregate amount of
non-significant investments in the
capital of unconsolidated financial
institutions. As under the existing
capital rule, the proposal would have
required an advanced approaches
banking organization to deduct from
regulatory capital the amount by which
the aggregate amount of non-significant
investments in the capital of
unconsolidated financial institutions
and such covered debt instruments
exceeds the 10 percent threshold for
non-significant investments
l
institutions. As under the existing
capital rule, the proposal would have
required an advanced approaches
banking organization to deduct from
regulatory capital the amount by which
the aggregate amount of non-significant
investments in the capital of
unconsolidated financial institutions
and such covered debt instruments
exceeds the 10 percent threshold for
non-significant investments. Any
investment in a covered debt instrument
subject to deduction would have been
deducted according to the
corresponding deduction approach
described below in section V.F. Any
investment in a covered debt instrument
not subject to deduction would have
been included in risk-weighted assets,
generally with a 100 percent risk
weight.
Some commenters suggested that the
agencies recalibrate the 10 percent
threshold for non-significant
investments in consideration of the
expanded scope of instruments that
would be included within that
threshold under the proposal. For
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31 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board);
12 CFR 324.2 (FDIC) (‘‘synthetic exposure’’).
32 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board);
12 CFR 324.2 (FDIC) (‘‘investment in the capital of
Continued
example, some commenters asked the
agencies to expand the non-significant
investments threshold to 10 percent of
an advanced approaches banking
organization’s own total capital from 10
percent of its own common equity tier
1 capital. Changing the non-significant
investments threshold in the manner the
commenters suggested could undermine
a main goal of the proposal—to reduce
interconnectedness among large and
internationally active banking
organizations
icant
investments threshold to 10 percent of
an advanced approaches banking
organization’s own total capital from 10
percent of its own common equity tier
1 capital. Changing the non-significant
investments threshold in the manner the
commenters suggested could undermine
a main goal of the proposal—to reduce
interconnectedness among large and
internationally active banking
organizations. Accordingly, the final
rule requires an advanced approaches
banking organization with an
investment in a covered debt instrument
in a financial institution in which the
advanced approaches banking
organization does not have a significant
investment to include such investment
in the aggregate amount of non-
significant investments in the capital of
unconsolidated financial institutions, as
proposed. Further, the final rule
requires an advanced approaches
banking organization to deduct from
regulatory capital the amount by which
the aggregate amount of non-significant
investments in the capital of
unconsolidated financial institutions
exceeds the 10 percent threshold for
non-significant investments, as
proposed.
The proposal would have included
limited exclusions from the 10 percent
threshold for non-significant
investments’ deduction approach. The
exclusions would have depended on
whether an advanced approaches
banking organization is a U.S. GSIB or
a subsidiary of a U.S. GSIB (U.S. GSIB
banking organization). To help support
a deep and liquid market for covered
debt instruments, the proposal would
have permitted U.S. GSIB banking
organizations to exclude limited
amounts of market making exposures
(‘‘excluded covered debt instruments’’)
from the 10 percent threshold for non-
significant investments deduction. For
example, a U.S. GSIB could have
excluded covered debt instruments from
the aggregate amount of non-significant
investments in the capital of
unconsolidated financial institutions
rmitted U.S. GSIB banking
organizations to exclude limited
amounts of market making exposures
(‘‘excluded covered debt instruments’’)
from the 10 percent threshold for non-
significant investments deduction. For
example, a U.S. GSIB could have
excluded covered debt instruments from
the aggregate amount of non-significant
investments in the capital of
unconsolidated financial institutions.
The aggregate amount of the exclusion,
measured on a gross long basis, was
limited to five percent of the GSIB’s
own common equity tier 1 capital
(market making exclusion). If the
aggregate amount of excluded covered
debt instruments were more than five
percent of the common equity tier 1
capital, then the excess over five percent
would have been subject to deduction
from tier 2 capital on a gross long basis.
In addition, if an excluded covered debt
instrument were held for more than 30
business days or ceased to be held in
connection with market making
activities, then the excluded covered
debt instrument would have been
subject to deduction from tier 2 capital
on a gross long basis. Finally, in order
to dissuade regulatory arbitrage, the
proposal would not have allowed U.S.
GSIB banking organizations to
subsequently move ‘‘excluded covered
debt instruments’’ from the market
making exclusion to the 10 percent
threshold for non-significant
investments.
Commenters stressed the importance
of derivatives to market making
activities in securities, particularly
covered debt instruments issued by
GSIBs. In market making transactions,
U.S. GSIBs will often act as financial
intermediaries between clients,
transferring risks related to covered debt
instruments. This risk transfer is often
conducted through offsetting derivative
transactions or directly buying and
selling covered debt instruments
market making
activities in securities, particularly
covered debt instruments issued by
GSIBs. In market making transactions,
U.S. GSIBs will often act as financial
intermediaries between clients,
transferring risks related to covered debt
instruments. This risk transfer is often
conducted through offsetting derivative
transactions or directly buying and
selling covered debt instruments.
Commenters stated that this market
making activity supports deep and
liquid markets for covered debt
instruments by allowing investors to
reduce (or gain) exposure to covered
debt instruments without actually
selling (or buying) the securities.
Derivatives are essential to such
activities because they allow market
makers to establish and hedge these
exposures.
As such, these commenters asserted
that the agencies should eliminate the
proposed 30-business-day requirement
because it would make the proposed
market making exclusion unavailable
for many market making activities that
support the depth and liquidity of the
markets for TLAC-eligible debt, in
particular synthetic exposures from
derivatives used in market making
activities. These commenters noted that
bona fide market making activities,
including derivative- and hedging-
related activities, often involve holding
exposures for longer than 30 business
days. Commenters further indicated that
the 30-business-day requirement would
also create incentives for U.S. GSIB
banking organizations to arbitrage the
final rule by exiting and reestablishing
hedge positions to avoid a mandatory
deduction from tier 2 capital if the
position is held for more than 30
business days. Commenters indicated
that re-establishing hedge positions
would result in costs to banking
organizations and clients without
reducing the risks associated with the
transactions. Additionally, these
commenters indicated that the vast
majority of market making activity in
covered debt instruments is in the form
of derivative exposures
f the
position is held for more than 30
business days. Commenters indicated
that re-establishing hedge positions
would result in costs to banking
organizations and clients without
reducing the risks associated with the
transactions. Additionally, these
commenters indicated that the vast
majority of market making activity in
covered debt instruments is in the form
of derivative exposures. Therefore,
retaining the 30-business-day
requirement would arguably make the
five percent exclusion inoperable for
most market making activities in
covered debt instruments. As an
alternative to the proposed market
making standard and the proposed 30-
business-day requirement, commenters
suggested the agencies use the
regulatory framework implementing the
Volcker Rule to identify which positions
in covered debt instruments are held for
market making purposes and eliminate
the 30-business-day requirement. These
commenters stated that this approach
would promote effectiveness,
simplicity, and efficiency in the
regulation.
After considering commenters’
suggestions to eliminate the proposed
30-business-day requirement for market
making in covered debt instruments, the
agencies have revised the proposal by
removing the 30-business-day
requirement for market making in the
form of ‘‘synthetic exposures’’ as
defined in the agencies’ capital rule.31
Synthetic market making exposures,
such as derivatives, may frequently be
held for more than 30 business days.
Removing the 30-business-day
requirement for synthetic exposures
would, relative to the proposal, better
align with the proposal’s goal of
supporting deep and liquid markets for
covered debt instruments by allowing
synthetic exposures arising from market
making activities to be included in the
market making exclusion, subject to
limits. As discussed, this exclusion is
limited to five percent of common
equity tier 1 capital, measured on a
gross long basis
ld, relative to the proposal, better
align with the proposal’s goal of
supporting deep and liquid markets for
covered debt instruments by allowing
synthetic exposures arising from market
making activities to be included in the
market making exclusion, subject to
limits. As discussed, this exclusion is
limited to five percent of common
equity tier 1 capital, measured on a
gross long basis. These limits are
consistent with financial stability goals
of avoiding asset fire sales in times of
stress, encouraging risk-mitigating
hedges, and reducing
interconnectedness while still
supporting deep and liquid markets for
TLAC-eligible debt instruments.
Accordingly, the final rule reflects this
change. However, the agencies continue
to believe that the 30-business-day
requirement is an appropriate metric to
identify market making positions in
‘‘direct’’ investments in covered debt
instruments (i.e., holding the instrument
on the banking organization’s balance
sheet) and ‘‘indirect’’ investments in
covered debt instruments (i.e., exposure
to the instrument through investment
funds).32 Direct investments in covered
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an unconsolidated financial institution’’ and
‘‘indirect exposure’’).
33 See 12 CFR 44.4 (OCC); 12 CFR 248.4 (Board);
12 CFR 351.4 (FDIC).
34 See 12 CFR 3.22(h) (OCC); 12 CFR 217.22(h)
(Board); 12 CFR 324.22(h) (FDIC).
debt instruments held in connection
with market making should turn over
regularly and the agencies seek to dis-
incentivize long-term direct and indirect
exposures to covered debt instruments,
given the risk of write-down or
conversion to equity of such
instruments
12 CFR 248.4 (Board);
12 CFR 351.4 (FDIC).
34 See 12 CFR 3.22(h) (OCC); 12 CFR 217.22(h)
(Board); 12 CFR 324.22(h) (FDIC).
debt instruments held in connection
with market making should turn over
regularly and the agencies seek to dis-
incentivize long-term direct and indirect
exposures to covered debt instruments,
given the risk of write-down or
conversion to equity of such
instruments.
Therefore, the final rule retains the
30-business-day requirement for
‘‘direct’’ and ‘‘indirect’’ investments in
excluded covered debt instruments, but
not for ‘‘synthetic’’ investments in
excluded covered debt instruments.
This change from the proposal should
balance the goals of limiting
interconnectedness among the largest
and most internationally active banking
organizations and promoting the
liquidity of TLAC-eligible debt
instruments. Additionally, the agencies
clarify that there is no requirement
under the final rule to assign
investments in covered debt
instruments held in connection with
market making as ‘‘excluded covered
debt instruments.’’ To the extent a U.S.
GSIB banking organization has available
capacity, all investments in covered
debt instruments could be held on a net
long basis as non-significant
investments in the capital of an
unconsolidated financial institution
subject to the 10 percent threshold for
non-significant investments.
After consideration of comments, the
agencies also have revised the rule to
use the Volcker Rule exemption for
market making activities to identify
covered debt instruments held for
market making for purposes of
qualifying for the final rule’s market
making exclusion. Relative to the
proposal, this change should decrease
compliance burden by allowing banking
organizations to use a single
methodology for identifying market
making activities, rather than two
similar, but non-identical regulatory
standards.
This approach would capture
essentially the same set of exposures as
the proposal’s standard
ualifying for the final rule’s market
making exclusion. Relative to the
proposal, this change should decrease
compliance burden by allowing banking
organizations to use a single
methodology for identifying market
making activities, rather than two
similar, but non-identical regulatory
standards.
This approach would capture
essentially the same set of exposures as
the proposal’s standard. However, the
final rule’s definition of ‘‘excluded
covered debt instrument’’ differs from
the proposal by referring to the relevant
provisions of each agency’s rule
implementing the market making
exemption in the Volcker Rule.33
The proposal also included a simpler
deduction approach for advanced
approaches banking organizations that
are not U.S. GSIB banking organizations
given that these banking organizations
pose less systemic risks than U.S.
GSIBs. Unlike a U.S. GSIB, these
banking organizations can include any
non-significant investments in covered
debt instruments of unconsolidated
financial institutions in the five percent
exclusion (i.e., use of the exclusion is
not restricted to only those investments
held in connection to market making
activities). Any amount in excess of this
five percent exclusion would be subject
to the 10 percent threshold for non-
significant investments deduction on a
net long basis. The agencies did not
receive comments on this provision of
the proposal. Therefore, the final rule
implements the five percent exclusion
for advanced approaches banking
organizations that are not U.S. GSIBs as
proposed.
As noted above, an advanced
approaches banking organization could
exclude certain investments in covered
debt instruments, as applicable, from
the 10 percent threshold for non-
significant investments calculation and
potential deduction under section __
.22(c)(4) if the aggregate amount of
covered debt instruments, measured by
gross long position, were five percent or
less of its common equity tier 1 capital
dvanced
approaches banking organization could
exclude certain investments in covered
debt instruments, as applicable, from
the 10 percent threshold for non-
significant investments calculation and
potential deduction under section __
.22(c)(4) if the aggregate amount of
covered debt instruments, measured by
gross long position, were five percent or
less of its common equity tier 1 capital.
To achieve consistency with the TLAC
Holdings standard and with the
calculation of the 10 percent threshold
for non-significant investments
deduction, the agencies are modifying
the calculation for determining the
amount of covered debt instruments that
can be omitted from the 10 percent
threshold for non-significant
investments calculation. Under the final
rule, an advanced approaches banking
organization can omit covered debt
instruments from the 10 percent
threshold calculation and potential
deduction under section __.22(c)(4) if
the aggregate amount of covered debt
instruments, measured by gross long
position, is five percent or less of the
sum of the banking organization’s
common equity tier 1 capital elements
minus all deductions from and
adjustments to common equity tier 1
capital elements required under section
__.22(a) through __.22(c)(3), net of
associated deferred tax liabilities
(DTLs). This includes, for example,
deductions related to goodwill,
intangibles, and deferred tax assets, and
adjustments related to accumulated net
gains and losses on cash flow hedges.
The agencies believe that to achieve
consistency and clarity throughout the
deduction framework, the amount of
covered debt instruments that can be
omitted from the 10 percent threshold
for non-significant investments
calculation should be computed using
the same basis as the 10 percent
threshold for non-significant
investments calculation itself
et
gains and losses on cash flow hedges.
The agencies believe that to achieve
consistency and clarity throughout the
deduction framework, the amount of
covered debt instruments that can be
omitted from the 10 percent threshold
for non-significant investments
calculation should be computed using
the same basis as the 10 percent
threshold for non-significant
investments calculation itself.
The agencies intend to monitor
advanced approaches banking
organizations’ holdings of covered debt
instruments in the form of synthetic
exposures to ensure that the capital held
for these positions is commensurate
with risk and that such holdings do not
raise safety and soundness concerns.
Further, to better understand advanced
approaches banking organizations’ risk
from exposures to the capital of
unconsolidated financial institutions,
the agencies may issue an information
collection proposal to collect quarterly
data on advanced approaches banking
organizations’ non-significant
investments in the capital of
unconsolidated financial institutions
and excluded covered debt instruments,
as applicable.
Some commenters disagreed with the
proposal’s design of the exclusions for
covered debt instruments, which
measures positions on a gross long
basis. These commenters suggested that
the measurement of the exclusions for
covered debt instruments be based on
the ‘‘net long position,’’ in accordance
with the agencies’ capital rule, which
allows gross long positions to be offset
against qualifying short positions.34 The
commenters noted that the 10 percent
threshold for non-significant
investments is based on the ‘‘net long
position’’ and suggested that the
exclusions for covered debt instrument
be consistent with that standard
nts be based on
the ‘‘net long position,’’ in accordance
with the agencies’ capital rule, which
allows gross long positions to be offset
against qualifying short positions.34 The
commenters noted that the 10 percent
threshold for non-significant
investments is based on the ‘‘net long
position’’ and suggested that the
exclusions for covered debt instrument
be consistent with that standard.
Further, commenters stated that
finalizing the exclusions for covered
debt instruments based on a net long
position measurement basis would
allow advanced approaches banking
organizations to better support the
depth and liquidity of market making in
TLAC-eligible debt instruments, because
market making activities are typically
well hedged and a ‘‘net long position’’
would allow more positions to qualify
for the exclusions.
The final rule maintains measurement
of the exclusions for covered debt
instruments based on the gross long
position. Moving to a ‘‘net long
position’’ measurement could
undermine the agencies’ goal of
reducing interconnectedness among
large and internationally active banking
organizations as it would allow such
banking organizations to accumulate
exposure to covered debt instruments
significantly beyond the threshold
envisioned in the proposal. Further,
advanced approaches banking
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35 See 12 CFR 3.22(c)(2) (OCC); 12 CFR
217.22(c)(2) (Board); and 12 CFR 324.22(c)(2)
(FDIC).
36 See 12 CFR 3.22(c)(2) and (f) (OCC); 12 CFR
217.22(c)(2) and (f) (Board); and 12 CFR 324.22(c)(2)
and (f) (FDIC).
37 See 12 CFR 3.22(f) (OCC); 12 CFR 217.22(f)
(Board); and 12 CFR 324.22(f) (FDIC).
38 See 12 CFR 3.22(h)(2)(iii) (OCC); 12 CFR
217.12(h)(2)(iii) (Board); and 12 CFR 324.22(h)
ons
35 See 12 CFR 3.22(c)(2) (OCC); 12 CFR
217.22(c)(2) (Board); and 12 CFR 324.22(c)(2)
(FDIC).
36 See 12 CFR 3.22(c)(2) and (f) (OCC); 12 CFR
217.22(c)(2) and (f) (Board); and 12 CFR 324.22(c)(2)
and (f) (FDIC).
37 See 12 CFR 3.22(f) (OCC); 12 CFR 217.22(f)
(Board); and 12 CFR 324.22(f) (FDIC).
38 See 12 CFR 3.22(h)(2)(iii) (OCC); 12 CFR
217.12(h)(2)(iii) (Board); and 12 CFR 324.22(h)
(2)(iii) (FDIC).
39 See 12 CFR 3.22(h)(3) (OCC); 12 CFR
217.12(h)(3) (Board); and 12 CFR 324.22(h)(3)
(FDIC).
organizations are able to assign hedged
covered debt instrument exposures to
the 10 percent threshold for non-
significant investments on a net long
basis. The optional exclusions remain
available to support market making
activities such as accumulating short
term cash positions to meet customer
demand and to acquire additional long
positions in covered debt instruments to
facilitate market stabilization during
times of stress. Such an approach is
consistent with financial stability goals
of avoiding asset fire sales in times of
stress, encouraging risk-mitigating
hedges, and reducing
interconnectedness while still
supporting deep and liquid markets for
TLAC-eligible debt instruments.
F. Corresponding Deduction Approach
Under the corresponding deduction
approach, a banking organization must
apply any required deduction to the
component of capital for which the
underlying instrument would qualify if
it were issued by the banking
organization.35 If the banking
organization does not have enough of
the component of capital to fully effect
the deduction, the corresponding
deduction approach provides that any
amount of the investment that has not
already been deducted would be
deducted from the next, more
subordinated component of capital.36 If,
for example, a banking organization has
insufficient amounts of tier 2 capital
and additional tier 1 capital to effect a
required deduction, the banking
organization would need to deduct from
common equity tier 1 capital the
amount
provides that any
amount of the investment that has not
already been deducted would be
deducted from the next, more
subordinated component of capital.36 If,
for example, a banking organization has
insufficient amounts of tier 2 capital
and additional tier 1 capital to effect a
required deduction, the banking
organization would need to deduct from
common equity tier 1 capital the
amount of the investment that exceeds
the tier 2 and additional tier 1 capital of
the banking organization.37 The
proposal would have amended the
corresponding deduction approach in
section __.22(c)(2) of the capital rule to
specify that an investment in a covered
debt instrument by an advanced
approaches banking organization would
have been subject to the corresponding
deduction approach, with the covered
debt instrument treated as a tier 2
capital instrument. Some commenters
disagreed with this approach and,
instead, asked the agencies to treat
investments in covered debt
instruments as a common equity tier 1
capital instrument or, as applicable,
allow deductions under the
corresponding deduction approach from
own TLAC-eligible debt instruments.
As stated earlier, requiring a
deduction of a covered debt instrument
from tier 2 capital should serve as a
sufficiently prudent and simple
approach that dis-incentivizes advanced
approaches banking organizations’
investments in such instruments and
thereby supports the objectives of
reducing both interconnectedness
within the financial system and
systemic risks. Accordingly, the
agencies are finalizing the proposal’s
amendments to the corresponding
deduction approach in section __
.22(c)(2) of the capital rule
G. Net Long Position Calculation
The proposal would have followed
the same general approach as currently
provided under the agencies’ capital
rule regarding the calculation of the
amount of any deduction and the
treatment of guarantees and indirect
investments for purposes of the
deductions
’s
amendments to the corresponding
deduction approach in section __
.22(c)(2) of the capital rule
G. Net Long Position Calculation
The proposal would have followed
the same general approach as currently
provided under the agencies’ capital
rule regarding the calculation of the
amount of any deduction and the
treatment of guarantees and indirect
investments for purposes of the
deductions. Under the capital rule, the
amount of a banking organization’s
investment in its own capital
instrument or in the capital of an
unconsolidated financial institution
subject to deduction is the banking
organization’s net long position in the
capital instrument as calculated under
section __.22(h) of the capital rule.
Under section __.22(h), a banking
organization may net certain qualifying
short positions in a capital instrument
against a gross long position in the same
instrument to determine the net long
position.
The proposal would have modified
section __.22(h) of the capital rule such
that an advanced approaches banking
organization would determine its net
long position in an exposure to its own
covered debt instrument, as applicable,
or in a covered debt instrument issued
by an unconsolidated financial
institution in the same manner as
currently provided for investments in an
institution’s own capital instruments or
investments in the capital of an
unconsolidated financial institution,
respectively. Consistent with the capital
rule, the calculation of a net long
position under the proposal would have
taken into account direct investments in
covered debt instruments as well as
indirect exposures to covered debt
instruments held through investment
funds
in an
institution’s own capital instruments or
investments in the capital of an
unconsolidated financial institution,
respectively. Consistent with the capital
rule, the calculation of a net long
position under the proposal would have
taken into account direct investments in
covered debt instruments as well as
indirect exposures to covered debt
instruments held through investment
funds.
A banking organization has three
options under the capital rule to
measure its gross long position in a
capital instrument held indirectly
through an investment fund.38 The
proposal would have amended section _
_.22(h)(2)(iii) of the capital rule to
provide the same three options to
determine the gross long position in a
covered debt instrument held through
an investment fund. The agencies
received no comments on this aspect of
the proposal and the final rule adopts
the changes as proposed.
The agencies’ capital rule sets
qualifying criteria for recognizing short
positions that can be netted against
gross long positions; specifically, a short
position must be in the ‘‘same
instrument’’ as the gross long position
and must meet minimum maturity
requirements, among other
requirements.39 The proposal would not
have changed these operational criteria
for recognizing short positions in the
calculation of a net long position. Some
commenters advocated for changes to
the capital rule’s requirements for
recognizing a short position under
section __.22(h)(3). These commenters
argued that the capital rule should be
modified to not require short positions
to be in the ‘‘same instrument’’ as the
gross long position when calculating the
net long position. Instead, commenters
recommended that the final rule allow
recognized short positions to be in any
instrument that is pari passu or
subordinated to the gross long position’s
instrument
.22(h)(3). These commenters
argued that the capital rule should be
modified to not require short positions
to be in the ‘‘same instrument’’ as the
gross long position when calculating the
net long position. Instead, commenters
recommended that the final rule allow
recognized short positions to be in any
instrument that is pari passu or
subordinated to the gross long position’s
instrument. These commenters
recommended that this change should
also apply to calculating the net long
position of investments in covered debt
instruments in the final rule.
The agencies have consistently
maintained that recognition of short
positions under the net long position
calculation are required to be in the
‘‘same instrument’’ as a matter of
prudent risk management and hedging
practices. To recognize short positions
in other than the ‘‘same instrument’’
would potentially undermine the
effectiveness of risk mitigating hedges.
Accordingly, the final rule adopts the
calculation of the net long position as
proposed.
Under the proposal, for purposes of
any deduction required for an advanced
approaches banking organization’s
investment in the capital of an
unconsolidated financial institution, the
amount of a covered debt instrument
would have included any contractual
obligations the advanced approaches
banking organization has to purchase
such covered debt instruments. The
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n the capital of an
unconsolidated financial institution, the
amount of a covered debt instrument
would have included any contractual
obligations the advanced approaches
banking organization has to purchase
such covered debt instruments. The
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40 See 84 FR 35234 (July 22, 2019).
41 See 12 CFR 3.1(d)(1) (OCC); 12 CFR 217.1(d)(1)
(Board); 12 CFR 324.1(d)(1) (FDIC).
42 84 FR 59230 (November 1, 2019).
43 83 FR 17317, 17322 (April 19, 2018).
agencies received no comment on this
aspect of the proposal, and the final rule
adopts this change as proposed.
VI. Technical Amendment and Other
Comments
The agencies proposed amending the
definition of ‘‘investment in the capital
of an unconsolidated financial
institution’’ in section __.2 of the capital
rule to correct a drafting error in that
definition. The agencies did not receive
any comment with regard to the
proposed technical amendment.
However, in the period between the
issuance of the proposal and this final
rule, this technical amendment was
implemented by the agencies’ final rule
to simplify the capital rule.40
A few commenters suggested that the
proposal should go further in limiting
the exposure of advanced approaches
banking organizations to GSIBs, given
their size and the risk their failure could
pose to the financial system. These
commenters argued that the final rule
should ensure that the cost of TLAC
debt better reflect heightened risks of
GSIBs and that the agencies should
require U.S. GSIBs to hold more
common equity tier 1 capital. Other
commenters suggested that the agencies
consider existing elements of the
regulatory framework—such as the
single counterparty credit limit and the
GSIB surcharge—when finalizing the
deduction framework
nal rule
should ensure that the cost of TLAC
debt better reflect heightened risks of
GSIBs and that the agencies should
require U.S. GSIBs to hold more
common equity tier 1 capital. Other
commenters suggested that the agencies
consider existing elements of the
regulatory framework—such as the
single counterparty credit limit and the
GSIB surcharge—when finalizing the
deduction framework.
Under the capital rule, each agency
has the authority to require a banking
organization to hold additional capital
based on the banking organization’s risk
profile.41 Similarly, while other
elements of the regulatory framework
address the systemic risks of large,
internationally active banking
organizations or concentrations of
exposures to counterparties, no existing
regulation specifically address the risks
associated with investments in TLAC-
eligible debt instruments. The agencies,
therefore, are finalizing the proposal to
establish a regulatory capital treatment
for investments in covered debt
instruments with certain modifications,
as previously described.
The proposal did not contemplate
providing a transition period for
implementation of the final rule by
advanced approaches banking
organizations. Some commenters
requested that the agencies provide
banking organizations with a transition
period to ease compliance burden.
Specifically, commenters requested that
the agencies provide 18 months before
banking organizations must effectuate
the deduction treatment. These
commenters asserted that a transition
period would give banking
organizations more time to build out
systems to track which instruments are
covered debt instruments and therefore
subject to the deduction framework. A
commenter requested that the agencies
not require deduction of any unsecured
debt instrument issued by a GSIB until
the information necessary to determine
whether the instrument is a covered
debt instrument is available
ould give banking
organizations more time to build out
systems to track which instruments are
covered debt instruments and therefore
subject to the deduction framework. A
commenter requested that the agencies
not require deduction of any unsecured
debt instrument issued by a GSIB until
the information necessary to determine
whether the instrument is a covered
debt instrument is available.
The agencies maintain the
supervisory expectation that large and
internationally active banking
organizations should be deeply
knowledgeable of the securities
exposures on their own balance sheets,
if only for the purposes of prudent risk
management. The final rule will become
effective on April 1, 2021. The agencies
believe this effective date provides
sufficient time for advanced approaches
banking organizations to evaluate
investments in covered debt
instruments and apply the final rule’s
deduction treatment.
In addition to the above, the agencies
are making certain technical
amendments to section __.10 of the
capital rule to more clearly differentiate
between requirements applicable to
advanced approaches banking
organizations and those applicable to
Category III banking organizations. In
section __.10 of the capital rule, as
amended by the recent interagency
tailoring rule,42 paragraphs (c)(1)–(3)
describe the capital ratio calculations
applicable to advanced approaches
banking organizations, whereas
paragraph 10(c)(4) of the capital rule
describes the supplementary leverage
ratio calculations applicable to both
advanced approaches banking
organizations and Category III banking
organizations. To avoid confusion, the
agencies are amending section __.10 of
the capital rule such that paragraph (c)
will provide only the supplementary
leverage ratio requirements. The
advanced approaches capital
calculations will be moved to revised
paragraph (d) of section __.10 of the
capital rule
pplicable to both
advanced approaches banking
organizations and Category III banking
organizations. To avoid confusion, the
agencies are amending section __.10 of
the capital rule such that paragraph (c)
will provide only the supplementary
leverage ratio requirements. The
advanced approaches capital
calculations will be moved to revised
paragraph (d) of section __.10 of the
capital rule. Current paragraph (d),
Capital adequacy, will be re-designated
as paragraph (e) of section __.10 of the
capital rule. The agencies are also
amending language in sections __.2 and
__.121 of the capital rule to correct
cross-references in light of the
amendments described above. These
technical amendments do not amend
any substantive requirements applicable
to banking organizations.
VII. Amendments to the Board’s TLAC
Rule
In 2018, the Board issued a notice of
proposed rulemaking that, among other
items, included minor proposed
amendments to the Board’s TLAC
rule.43 The proposal included revisions
to ensure that the external TLAC risk-
weighted buffer level, TLAC leverage
buffer level, and the TLAC buffer level
for covered IHCs would be amended to
use the same haircuts applicable to LTD
instruments that are currently used to
calculate outstanding minimum
required TLAC amounts, which do not
include a 50 percent haircut on LTD
instruments with a remaining maturity
of between one and two years. Another
proposed amendment was to ensure that
the term ‘‘external TLAC risk-weighted
buffer’’ is used consistently in the TLAC
rule. The proposal also would have
provided that a new covered IHC would
always have three years to conform to
most of the requirements of the TLAC
rule, and to align the articulation of the
methodology for calculating the covered
IHC’s LTD instrument amount with the
same methodology used for GSIBs
sure that
the term ‘‘external TLAC risk-weighted
buffer’’ is used consistently in the TLAC
rule. The proposal also would have
provided that a new covered IHC would
always have three years to conform to
most of the requirements of the TLAC
rule, and to align the articulation of the
methodology for calculating the covered
IHC’s LTD instrument amount with the
same methodology used for GSIBs.
The Board received minimal
comments on these proposed revisions
to the TLAC rule within the comments
received on its proposal overall and the
comments received were supportive of
the specific proposed revisions. As a
result, the Board is issuing these
revisions in the final rule without
change from the proposal.
VIII. Changes to Regulatory Reporting
A. Deductions From Tier 2 Capital
Related to Investments in Covered Debt
Instruments and Excluded Covered Debt
Instruments
In the April 2019 rulemaking, the
Board proposed to modify the
instructions to the Consolidated
Financial Statements for Holding
Companies (FR Y–9C), Schedule HC–R,
Part I and Part II, to effectuate the
deductions from regulatory capital for
Board-regulated advanced approaches
banking organizations related to
investments in covered debt
instruments and excluded covered debt
instruments as described in the
proposal.
Specifically, the Board would have
modified the instructions of the FR Y–
9C for Schedule HC–R, Part I, item 33,
‘‘Tier 2 capital deductions.’’ On the FR
Y–9C, a covered BHC would have been
required to deduct from tier 2 capital
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e
proposal.
Specifically, the Board would have
modified the instructions of the FR Y–
9C for Schedule HC–R, Part I, item 33,
‘‘Tier 2 capital deductions.’’ On the FR
Y–9C, a covered BHC would have been
required to deduct from tier 2 capital
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44 The proposed modifications would not affect
the Consolidated Reports of Condition and Income
for a Bank with Domestic Offices Only and Total
Assets Less than $1 Billion (FFIEC 051) because
banks and savings associations that are advanced
approaches banking organizations are not eligible to
file the FFIEC 051 report.
45 See 84 FR 53227 (October 4, 2019).
46 See 85 FR 15776 (March 19, 2020).
47 See 84 FR 13823–13824 (April 8, 2019).
48 See 85 FR 15776 (March 19, 2020).
the aggregate amount of its investments
in covered debt instruments that, when
combined with the banking
organization’s other non-significant
investments in the capital of
unconsolidated financial institutions,
exceed 10 percent of the common equity
tier 1 capital of the banking
organization. Also, if an excluded
covered debt instrument were held by a
covered BHC for more than 30 business
days, or no longer held in connection
with market making-related activities,
the excluded covered debt instrument
would have been deducted from tier 2
capital
capital of
unconsolidated financial institutions,
exceed 10 percent of the common equity
tier 1 capital of the banking
organization. Also, if an excluded
covered debt instrument were held by a
covered BHC for more than 30 business
days, or no longer held in connection
with market making-related activities,
the excluded covered debt instrument
would have been deducted from tier 2
capital.
In addition, for purposes of the
deduction requirements related to non-
significant investments in the capital of
unconsolidated financial institutions,
Board-regulated advanced approaches
banking organizations that are not
covered BHCs would have been
required to deduct from tier 2 capital
those investments in covered debt
instruments that exceed five percent of
common equity tier 1 capital, and that
also, when combined with the banking
organization’s other non-significant
investments in unconsolidated financial
institutions, exceed 10 percent of the
common equity tier 1 capital of the
banking organization. The Board also
would have modified the instructions
for calculating other deduction-related
and risk-weighted asset line items to
incorporate investments in covered debt
instruments and excluded covered debt
instruments, as applicable, by Board-
regulated advanced approaches banking
organizations.
In October 2019, the Federal Financial
Institutions Examination Council
(FFIEC) separately proposed to modify
the Consolidated Reports of Condition
and Income for a Bank with Domestic
and Foreign Offices (FFIEC 031),
Consolidated Reports of Condition and
Income for a Bank with Domestic
Offices Only (FFEIC 041) (collectively
with the FFIEC 031, the Call Report),44
and Regulatory Capital Reporting for
Institutions Subject to the Advanced
Capital Adequacy Framework (FFIEC
101) in a manner consistent with the
changes described above to the FR Y–9C
to effectuate the proposal’s deduction
approach for investments in covered
debt instruments and excluded covered
debt instruments, as app
ly (FFEIC 041) (collectively
with the FFIEC 031, the Call Report),44
and Regulatory Capital Reporting for
Institutions Subject to the Advanced
Capital Adequacy Framework (FFIEC
101) in a manner consistent with the
changes described above to the FR Y–9C
to effectuate the proposal’s deduction
approach for investments in covered
debt instruments and excluded covered
debt instruments, as applicable.45
In March 2020, the Board separately
proposed conforming changes to the FR
Y–14 to effectuate the proposed
deduction framework for investments in
covered debt instruments.46
With respect to the FR Y–9C proposed
changes, one commenter requested
clarification on the sequencing of
reporting changes related to effectuating
deductions for covered debt instruments
and the effective date of the final rule.
Specifically, this commenter requested
that the effective date of the final rule
should precede any requirement to
begin effectuating deductions related to
investments in covered debt
instruments on regulatory reports. The
agencies confirm that the effective date
of the final rule will precede any
reporting requirements related to
implementing the deduction framework
for covered debt instruments. The Board
received no comments on the FR Y–14
proposed changes.
As described above, reporting changes
to effectuate the deduction framework
for investments in covered debt
instruments described in the proposal
were proposed separately for the (1) FR
Y–9C, (2) FFIEC 101 and Call Report,
and (3) FR Y–14. The Board is finalizing
as proposed, changes to the FR Y–9C
and FR Y–14, to effectuate the
deduction framework for investments in
covered debt instruments in this
Federal Register notice. The agencies
will address comments submitted in
connection with the FFIEC’s October
2019 proposal when those forms and
instructions are finalized in a separate
Federal Register notice, consistent with
the final rule.
B
izing
as proposed, changes to the FR Y–9C
and FR Y–14, to effectuate the
deduction framework for investments in
covered debt instruments in this
Federal Register notice. The agencies
will address comments submitted in
connection with the FFIEC’s October
2019 proposal when those forms and
instructions are finalized in a separate
Federal Register notice, consistent with
the final rule.
B. Public Disclosure of Long-Term Debt
and TLAC by Covered BHCs and
Covered IHCs
In the April 2019 rulemaking, the
Board also proposed to modify Schedule
HC–R, Part I of the FR Y–9C by adding
new data items that would publicly
disclose: (1) The long-term debt and
TLAC for covered BHCs and covered
IHCs; (2) these banking organizations’
long-term debt and TLAC ratios to
ensure compliance with the TLAC rule;
(3) TLAC buffers; and (4) amendments
to the instructions for the calculation of
eligible retained income (item 47),
institution-specific capital buffer (items
46.a and 46.b), and distributions and
discretionary bonus payments (item 48)
for covered BHCs and covered IHCs.47
Commenters suggested that the Board
clarify in the final rule when changes to
FR Y–9C related to long-term debt and
TLAC reporting disclosures will become
effective. Reporting changes for
deductions related to investments in
covered debt instruments on the FR Y–
9C will not go into effect until after the
final rule’s effective date.
In March 2020, the Board separately
proposed conforming changes to the FR
Y–14 to disclose new items related to
long-term debt and TLAC, as described
above.48
In response to the proposal,
commenters requested that the Board
clarify how U.S. GSIBs are to calculate
the TLAC rule’s leverage ratios on the
FR Y–9C report. More specifically,
commenters suggested the Board clarify
that U.S. GSIBs should not be required
to report long-term debt and TLAC
leverage ratios based on total assets
because U.S
long-term debt and TLAC, as described
above.48
In response to the proposal,
commenters requested that the Board
clarify how U.S. GSIBs are to calculate
the TLAC rule’s leverage ratios on the
FR Y–9C report. More specifically,
commenters suggested the Board clarify
that U.S. GSIBs should not be required
to report long-term debt and TLAC
leverage ratios based on total assets
because U.S. GSIBs’ applicable long-
term debt and TLAC leverage
requirement is based on the
denominator for the supplementary
leverage ratio. Commenters noted that
only covered IHCs are required to report
the long-term debt and TLAC leverage
ratios based on total assets. The Board
confirms that reporting of the long-term
debt and TLAC leverage requirement for
U.S. GSIBs will only be based upon the
supplementary leverage ratio
denominator, consistent with the TLAC
rule’s leverage requirement. The Board
received no comments on the FR Y–14
proposed changes.
The Board is finalizing the proposed
changes to the FR Y–9C and FR Y–14 to
require covered BHCs and covered IHCs
to report their long-term debt and TLAC
resources, with modifications in
response to comment as described
above, in this Federal Register notice.
Some commenters suggested the
Board develop a more robust disclosure
regime related to TLAC so that the level
of risk is appropriately priced into these
instruments. They stated that
disclosures will incentivize GSIBs to
meet their TLAC requirements with
equity rather than debt instruments.
Commenters offered suggestions for
improving disclosures by noting that the
agencies should collaborate with the
Securities and Exchange Commission to
require plain-language warnings
regarding risk of bail-in to investors (1)
when purchasing a TLAC instrument in
their brokerage account and (2) in
offering materials published by pension
and mutual funds that invest in TLAC
instruments
s.
Commenters offered suggestions for
improving disclosures by noting that the
agencies should collaborate with the
Securities and Exchange Commission to
require plain-language warnings
regarding risk of bail-in to investors (1)
when purchasing a TLAC instrument in
their brokerage account and (2) in
offering materials published by pension
and mutual funds that invest in TLAC
instruments. The Board does not have
the authority to change disclosures
required by the Securities and Exchange
Commission related to securities
issuances or sales to retail investors.
The interagency statement on retail
sales of nondeposit investments
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49 See ‘‘Interagency Statement on Retail Sales of
Nondeposit Investment Products.’’ OCC Bulletin
1994–13 (OCC); SR 94–11 (FIS) (Board); and FIL–
9–94 (FDIC).
50 44 U.S.C. 3501–3521.
products should ensure certain
disclosures for retail sales programs
involving mutual funds, annuities and
other nondeposit investment
products.49 Further, the Board does not
have the authority to mandate
disclosures by pension or mutual funds.
The final rule does not incorporate these
suggestions.
IX. Regulatory Analyses
A. Paperwork Reduction Act
Certain provisions of the final rule
contain ‘‘collection of information’’
within the meaning of the Paperwork
Reduction Act of 1995 (PRA).50 In
accordance with the requirements of the
PRA, 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.
The final rule revises section __.22(c),
lection of information’’
within the meaning of the Paperwork
Reduction Act of 1995 (PRA).50 In
accordance with the requirements of the
PRA, 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.
The final rule revises section __.22(c),
(f), and (h) of the capital rule to
incorporate the proposed deduction
approach for investments in covered
debt instruments. Several new
definitions are added to section __.2 to
effectuate these deductions.
Each agency has an information
collection related to its regulatory
capital rules. The OMB control number
for the OCC is 1557–0318, Board is
7100–0313, and FDIC is 3064–0153. The
final rule will not, however, result in
changes to burden under these
information collections and therefore no
submissions will be made under section
3507(d) of the PRA (44 U.S.C. 3507(d))
and section 1320.11 of the OMB’s
implementing regulations (5 CFR 1320)
for each of the agencies’ regulatory
capital rules.
In addition, the final rule requires
changes to the Call Reports (OMB No.
1557–0081 (OCC), 7100–0036 (Board),
and 3064–0052 (FDIC)), and the FFIEC
101 (OMB No. 1557–0239 (OCC), 7100–
0319 (Board), and 3064–0159 (FDIC)),
which will be addressed in one or more
separate Federal Register notices.
The final rule requires changes to the
Consolidated Financial Statements for
Holding Companies (FR Y–9C; OMB No.
7100–0128) and the Capital
Assessments and Stress Testing Reports
(FR Y–14A/Q/M; OMB No. 7100–0341).
The Board reviewed the final rule under
the authority delegated to the Board by
OMB.
Revised Collection (Board only)
Title of Information Collection:
Consolidated 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: June 30, 2021.
Frequency: Quarterly, semiannually,
and annually
oard reviewed the final rule under
the authority delegated to the

[Text truncated at 120,000 characters. The full text is on the page linked above.]

## Nearby sections

- [FDIC FIL-1-2002 FOREIGN ASSETS CONTROL ACT](https://www.frixlaw.com/law-library/statutes/FDIC_FIL02001.md)
- [FDIC FIL-1-2010 Employee Compensation Advance Notice of Proposed Rulemaking](https://www.frixlaw.com/law-library/statutes/FDIC_FIL10001.md)
- [FDIC FIL-1-2024 Consolidated Reports of Condition and Income for Fourth Quarter 2023](https://www.frixlaw.com/law-library/statutes/FDIC_FIL24001.md)
- [FDIC FIL-2-2004 Foreign Assets Control Act](https://www.frixlaw.com/law-library/statutes/FDIC_FIL04002.md)
- [FDIC FIL-2-2020 Consolidated Reports of Condition and Income for Fourth Quarter 2019](https://www.frixlaw.com/law-library/statutes/FDIC_FIL20002.md)
- [FDIC FIL-3-2003 FILING PROCEDURES](https://www.frixlaw.com/law-library/statutes/FDIC_FIL03003.md)
- [FDIC FIL-4-2006 Commercial Real Estate Lending Proposed Interagency Guidance](https://www.frixlaw.com/law-library/statutes/FDIC_FIL06004.md)
- [FDIC FIL-4-2021 Revised Guidelines for Appeals of Material Supervisory Determinations](https://www.frixlaw.com/law-library/statutes/FDIC_FIL21004.md)
- [FDIC FIL-4-2023 Guidance to Help Financial Institutions and Facilitate Recovery in Areas of California Affected by Severe Winter Storms, Flooding, Landslides and Mudslides](https://www.frixlaw.com/law-library/statutes/FDIC_FIL23004.md)
- [FDIC FIL-4-2025 FDIC Statement of Policy on Bank Merger Transactions](https://www.frixlaw.com/law-library/statutes/FDIC_FIL25004.md)
- [FDIC FIL-5-2000 Consumer Credit Reporting Practices](https://www.frixlaw.com/law-library/statutes/FDIC_FIL00005.md)
- [FDIC FIL-5-2003 LETTER TO STAKEHOLDERS](https://www.frixlaw.com/law-library/statutes/FDIC_FIL03005.md)
- [FDIC FIL-5-2021 Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering (AML) Considerations](https://www.frixlaw.com/law-library/statutes/FDIC_FIL21005.md)
- [FDIC FIL-6-2000 Special Alert](https://www.frixlaw.com/law-library/statutes/FDIC_FIL00006.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FDIC_FIL20102. Check the current official text before relying on it. Not legal advice.