Nearly one year after the Federal Reserve Board (FRB) subjected certain intermediate holding companies (IHCs) to the CFO attestation requirement for the FR Y-14A/Q/M regulatory reports, it further amended the reports by, among other things, modifying the scope of the global market shock (GMS) component of the Dodd-Frank Act stress tests (DFAST) to include certain IHCs.
Specifically, the FRB amended the application of the GMS to include any firm that (1) has aggregate trading assets and liabilities of $50 billion or more, or aggregate trading assets and liabilities equal to 10 percent or more of total consolidated assets, and (2) is not a “large and noncomplex firm” under its capital plan rule.1 As a result of this change, the FRB expects that six IHCs will become subject to the GMS, and the six US bank holding companies that meet the current materiality threshold will remain subject to the requirement.
Although the FRB finalized the amendment to the GMS threshold as proposed, it decided to delay the application of the GMS to firms that will become newly subject to it (i.e., the six IHCs) until the 2019 Comprehensive Capital Analysis and Review (CCAR) and DFAST exercises (rather than the 2018 exercises, as originally proposed). The FRB explains that it “recognizes the challenges associated with building the systems necessary to report the data in the trading schedule.”2
However, the FRB emphasized that the “materiality of trading exposures and counterparty positions to US IHCs may warrant applying an additional component to firms that meet such criteria.” Accordingly, it noted that it may apply such components or scenarios under the 2018 DFAST exercise.
Large counterparty default scenario
In response to comments noting that the FRB did not address whether IHCs that become subject to the GMS also become subject to the large counterparty default scenario, the FRB only said it will “notify the firm in writing no later than December 31 of the preceding calendar year of its intention to require the firm to include one or more additional components in its stress test.”
Trading and counterparty data
The six IHCs subject to the GMS will be required to report the FR Y-14 trading (Schedule F) and counterparty (Schedule L) data beginning with the December 31, 2017 as-of date, and this data will be due by May 1, 2018.
The reports due by the March 31, 2018 as-of date will be due by June 30, 2018.
The reports due by the June 30, 2018 as-of date will be due as outlined in the FR Y-14 instructions.
Other changes, including CFO attestation timing
In addition to the changes regarding the GMS requirement, the FRB made several smaller amendments to the FR Y-14A/Q/M reports that affect all CCAR filers, including with respect to the timing and frequency for submitting their CFO attestations. Firms should carefully review the revisions to understand these changes.
As further developments occur, Deloitte will issue additional updates as appropriate.
Organizations may contact Deloitte with questions about the changes and activities to support planning, preparation, and compliance.
1A large and noncomplex firm is defined as a firm that (1) has total assets between $50 billion and $250 billion, (2) has average total nonbank assets of less than $75 billion, and (3) is not identified as a global systemically important bank holding company.
This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.
As used in this document, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see http://www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.
Copyright © 2017 Deloitte Development LLC. All rights reserved.