Overview
Title
Agency Information Collection Activities: Information Collection Renewal; Comment Request; Market Risk
Agencies
ELI5 AI
The Office of the Comptroller of the Currency (OCC) is asking people to share their thoughts on a plan that makes big banks tell how they handle risks in the market, aiming to make sure they have enough money to cover these risks. They want ideas on making the rules easier and less time-consuming, and people need to give their ideas by June 17, 2025.
Summary AI
The Office of the Comptroller of the Currency (OCC) is inviting public comments on the renewal of an information collection related to "Market Risk," as part of its ongoing effort to reduce paperwork and respondent burden, in line with the Paperwork Reduction Act of 1995. According to this rule, national banks and federal savings associations with significant market risk exposure are required to adhere to specific guidelines for managing and disclosing this risk. Public comments on the necessity, accuracy, and ways to improve the information collection process are due by June 17, 2025. The OCC aims to ensure that these financial institutions maintain sufficient capital adequacy for their market risk level through these regulations.
Abstract
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites 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 the renewal of its information collection titled, "Market Risk."
Keywords AI
Sources
AnalysisAI
The document in question is a notice from the Office of the Comptroller of the Currency (OCC) published in the Federal Register. It addresses the renewal of an information collection related to "Market Risk," which is part of a broader initiative to minimize paperwork and respondent burden. This is carried out in compliance with the Paperwork Reduction Act of 1995. The notice invites public comments on this renewal, specifically concerning national banks and federal savings associations that have substantial exposure to market risk. These financial entities are required to follow specific guidelines for managing and disclosing their market risk.
General Overview
This notice is a call for comments, seeking input from the public about the necessity and efficiency of an existing information collection related to market risk management by certain financial institutions. Comments are urged by June 17, 2025, and can be submitted through various channels, including email and traditional mail. The document outlines the necessity for national banks and federal savings associations with significant market exposure to adequately manage and disclose their market risks to ensure sufficient capital adequacy.
Key Issues and Concerns
Several issues arise from this notice, some of which could lead to difficulties for respondents. First, the term "significant exposure to market risk" is not clearly defined, which could cause confusion for the financial entities that this document addresses. Clarity on what thresholds or criteria determine "significant exposure" would help these organizations better understand whether they fall under the scope of the guidelines.
Furthermore, the estimated response burden for these disclosures is quite substantial. Each respondent is expected to spend around 1,964 hours annually, which overall amounts to a total of 33,388 hours across all respondents. This might suggest that the information collection process is inefficient or overly burdensome, thus necessitating a review to possibly streamline these processes.
Additionally, there is a lack of detail concerning the potential capital or startup costs, as well as operational and maintenance expenses, that respondents might incur. This information is crucial for organizations to understand the full financial impact of compliance.
The technical language and references to specific Code of Federal Regulations (CFR) sections could be inaccessible to non-experts. This may limit the document's usefulness to its intended audience, especially for those who are not well-versed in regulatory jargon.
Finally, there is an opportunity to elaborate on what constitutes confidential or inappropriate information in the context of public disclosures. This would reduce the risk of sensitive data being inadvertently disclosed to the public.
Impact on the Public
Broadly, this document does not have a direct impact on the general public, as it primarily addresses regulatory requirements for financial institutions. However, the efficiency and clarity with which these institutions manage and disclose their market risks can have indirect effects on the public. For instance, well-managed market risk ultimately contributes to the stability of these institutions, which in turn supports a more stable financial system.
Impact on Specific Stakeholders
The most immediate stakeholders affected by this document are the national banks and federal savings associations with significant market risks. For these institutions, the requirements set forth in the document could impose substantial administrative burdens in terms of time and resources needed for compliance. This could potentially redirect resources from other business operations.
On the positive side, the guidelines aim to ensure these institutions maintain adequate capital, which is a critical factor in safeguarding the institutions against potential financial downturns. In the long term, this could translate into greater stability and resilience for these entities and, by extension, the broader economy.
Overall, while the document has laudable objectives related to market risk management and disclosure, the execution and clarity of the guidelines need careful consideration to ensure that the desired outcomes are achieved without placing undue burden on the affected financial institutions.
Financial Assessment
The document titled "Agency Information Collection Activities: Information Collection Renewal; Comment Request; Market Risk" from the Office of the Comptroller of the Currency (OCC) primarily focuses on soliciting feedback regarding the renewal of information collection related to market risk. This follows the requirements of the Paperwork Reduction Act of 1995 (PRA). A notable financial reference in the document relates to how the OCC's market risk capital rule applies.
According to the financial reference, the OCC's market risk capital rule (12 CFR part 3, subpart F) is applicable to national banks and Federal savings associations that have significant exposure to market risk. This includes institutions where the aggregate trading assets and trading liabilities equal to 10 percent or more of quarter-end total assets or $1 billion or more. Essentially, this establishes a benchmark for determining which financial institutions fall within the scope of this rule based on their trading activities and associated risks.
Financial References and Issues
- Significance of Aggregate Trading Assets and Liabilities:
The document specifies that the rule targets institutions with substantial trading activities, using 10 percent of total assets or $1 billion as a threshold. This highlights a financial benchmark that a broad audience might interpret as a substantial exposure criterion; however, the issue arises because "significant exposure to market risk" is not explicitly defined beyond these metrics. This might cause some institutions to question whether they fall under this rule based on differing interpretations of what constitutes a significant market risk.
Estimated Burden and Costs:
- The expected burden on respondents mentions an average of 1,964 hours per respondent and a cumulative total of 33,388 hours across all respondents. This substantial time investment suggests possible inefficiencies in the information collection process, raising potential concerns about resource allocation and the financial impact on respondent institutions. The document fails to provide detailed explanations regarding capital or start-up costs, as well as costs of operation, maintenance, and services required for compliance. Clarification in these areas could assist in assessing the true financial implications for the involved institutions.
Overall, while the document clearly states which financial institutions should address these market risk criteria, additional clarity regarding financial impacts, particularly concerning operational costs and requirements, could enhance understanding and compliance. Addressing such issues might involve expanding the definition of "significant exposure" and offering more precise cost analyses to inform these institutions adequately.
Issues
• The call for comments does not specify what constitutes 'significant exposure to market risk,' which could be unclear to respondents.
• The estimated burden of 1,964 hours per respondent and a total of 33,388 hours might be considered high; this may suggest inefficient information collection processes.
• The document does not provide detailed information on the estimated capital or start-up costs and costs of operation, maintenance, and purchase of services for respondents; more clarity in this area might be necessary.
• The language used in sections like those detailing CFR codes and requirements can be technical and difficult for those not familiar with regulatory language to understand, potentially limiting the usefulness of the document to its intended audience.
• Statements about public disclosure could be more explicit about what constitutes confidential or inappropriate information, reducing the risk of inadvertent public exposure of sensitive data.