Overview
Title
Agency Information Collection Activities: Revision of an Approved Information Collection; Comment Request; Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions With Total Consolidated Assets of $250 Billion or More Under the Dodd-Frank Wall Street Reform and Consumer Protection Act
Agencies
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The Office of the Comptroller of the Currency (OCC) wants to make sure big banks are ready for tough times without making them fill out too much paperwork. They're asking people to share their thoughts on how to do this better by March 29, 2021.
Summary AI
The Office of the Comptroller of the Currency (OCC) is inviting public and federal agency comments on a proposed revision to an information collection requirement under the Paperwork Reduction Act. This involves updating reporting requirements for national banks and federal savings associations, particularly those with assets of $250 billion or more, to align with stress test templates used by the Federal Reserve. The goal is to minimize the burden on these institutions while ensuring effective stress testing practices. Comments on the proposal are requested by March 29, 2021, and the OCC encourages electronic submissions.
Abstract
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to take this opportunity to comment on a continuing information collection as required by the Paperwork Reduction Act of 1995 (PRA). In accordance with the requirements of the PRA, the OCC 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 OCC is soliciting comment concerning a revision to a regulatory reporting requirement for national banks and federal savings associations titled, "Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions with Total Consolidated Assets of $250 Billion or More under the Dodd-Frank Wall Street Reform and Consumer Protection Act."
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AnalysisAI
Summary of the Document
This document, issued by the Office of the Comptroller of the Currency (OCC), seeks public and federal agency feedback on a proposed revision to an existing information collection requirement related to stress testing for large financial institutions. Specifically, it targets banks and federal savings associations with total consolidated assets of $250 billion or more. The document aligns these requirements with the templates used by the Federal Reserve, aiming to streamline reporting and decrease the regulatory burden on these institutions. The OCC is soliciting comments on these proposed changes and encourages electronic submissions by March 29, 2021.
Significant Issues or Concerns
Complex Language and Regulatory References: The document employs technical language and frequently refers to specific laws and frameworks, like the Dodd-Frank Act and the FR Y-14A report forms. These references might be difficult for non-experts to understand without additional context or explanations.
Confidentiality Concerns: The document mentions that the information collected will receive confidential treatment to the extent permitted by law, yet it does not provide clear examples or scenarios where such confidentiality would or would not apply. This could lead to confusion among financial institutions regarding the security of their data.
Potential for Increased Administrative Burden: Although the document claims that institutions can use existing systems to comply with the new templates, the changes might still impose extra administrative tasks or strain resources, particularly for smaller entities within this group.
Lack of Detailed Impact Analysis: The document proposes the removal of certain worksheets related to risk-weighted assets and pre-provision net revenue metrics, but it does not clarify how eliminating these will impact the accuracy and comprehensiveness of stress tests.
Public Impact
For the general public, this document represents a broader regulatory effort to ensure financial stability and oversight of major financial institutions. Effective stress testing can contribute to the resilience of the financial sector, potentially reducing risks of economic disruptions that could impact consumers directly, such as through changes in credit availability or interest rates.
Impact on Specific Stakeholders
Large Financial Institutions: These institutions stand to benefit from streamlined processes and reduced regulatory overlap if the new templates effectively simplify requirements. However, they might face initial challenges adapting to the revisions, including costs related to software updates and staff training.
Regulatory Bodies: For the OCC and entities like the Federal Reserve, the alignment of reporting requirements could facilitate easier analysis and a unified approach to monitoring financial health across institutions.
Consumer Advocacy Groups: Such groups may express interest in ensuring that the simplification does not compromise the thoroughness of stress testing, maintaining checks that guard against systemic risk.
Financial Analysts and Auditors: These professionals may need to stay vigilant about the changes to ensure that they understand and can assess the differences between current practices and the new approach, potentially requiring updates to their audit and compliance methodologies.
Overall, while the document's proposed changes aim at simplification and efficiency, stakeholders must carefully consider the practical implications and ensure comprehensive understanding and implementation of these revisions.
Financial Assessment
The document from the Office of the Comptroller of the Currency (OCC) features several financial references tied to its regulatory activities under the Dodd-Frank Wall Street Reform and Consumer Protection Act. These references center around certain reporting requirements for large financial institutions.
The primary monetary component in this document is the threshold of $250 billion in total consolidated assets. The document specifies that this threshold marks the dividing line for national banks and federal savings associations to be required to use a particular reporting template, known as the "Company-Run Annual Stress Test Reporting Template and Documentation." The requirements for these reports are intended to ensure compliance with stress testing mandates set by the Dodd-Frank Act.
Financial Implications for Covered Institutions
One significant issue tied to these financial references is the potential administrative and financial burden on institutions that fall above the $250 billion threshold. The document indicates that these institutions are already required to use the Comprehensive Capital Analysis and Review (CCAR) reporting form FR Y-14A. By aligning its requirements with the FR Y-14A, the OCC aims to minimize additional burdens by allowing these entities to reuse existing systems and processes.
The decision to follow the Board's FR Y-14A reporting standards gets rid of any extra tasks that come with having to deal with different regulatory requirements. This might reduce the overall amount of time and money these institutions need to comply with the OCC's regulatory demands. However, the absence of explicit details in the document about estimated capital or start-up costs and operational costs related to these changes leaves the potential financial impact on these institutions somewhat ambiguous.
Related Issues
One of the identified issues with these financial references is the complex language used in the document, which may hinder understanding among a general audience. The reference to a substantial asset threshold of $250 billion may not be immediately clear to those unfamiliar with financial regulations or the broader context of the Dodd-Frank Act.
Additionally, while the OCC mentions updates to various schedules related to regulatory capital requirements, the impact of removing certain worksheets, such as those for advanced approaches to risk-weighted assets and pre-provision net revenue (PPNR) metrics, isn't fully explained. For stakeholders reviewing these revisions, understanding any changes in the quality and depth of data collected is crucial, as it might affect their own financial planning and capital adequacy assessments.
In summary, the document underscores the complex interplay between regulatory compliance and financial obligations for large financial institutions. By emphasizing the $250 billion asset threshold and aligning with existing Board reporting requirements, the OCC intends to streamline processes for these entities, although the specific financial impacts remain somewhat obscure due to the lack of detailed cost assessments.
Issues
• The language used in the document is complex and may be difficult for a general audience to understand, particularly the references to specific laws and regulatory frameworks.
• The document references specific technical frameworks like the FR Y-14A and tailoring framework without providing adequate explanations or definitions for non-experts.
• The document mentions confidential treatment under 5 U.S.C. 552(b)(4) without clear examples or conditions under which confidentiality applies.
• There may be potential concerns about administrative burden and resource allocation for covered institutions in adapting to the proposed changes, although the document states that systems used for FR Y-14 reporting templates could be reused.
• There is no detailed explanation of how the OCC's revision aligns with or differs from the Board's FR Y-14A, which might be crucial for audit and compliance understanding.
• The potential impact of removing worksheets for advanced approaches risk-weighted assets and PPNR metrics on the overall analysis process is not explained.
• Estimates of capital or start-up costs and costs of operation for the proposed revisions are solicited from the public but not provided, leaving the financial impact unclear.