Federal Reserve Board Proposes Reporting Requirements for the Intermediate Holding Companies of Foreign Banking Organizations
On February 2, 2016 the Federal Reserve issued proposed reporting requirements (the “Proposal”)1 for the U.S. intermediate holding companies (“IHCs”) to be formed by certain foreign banking organizations (“FBOs”) no later than July 1, 2016. The Proposal would require IHCs to submit various Federal Reserve regulatory reports, including reports on forms FR Y-6, FR Y-9C, FR Y-14A/Q/M, FR Y-15, and FR 4200 and 4201, beginning with the reporting period ending September 30, 2016 for most reports.2 A table setting forth the complete reporting panel is attached as Annex A hereto, including the proposed effective dates for each report. Notable provisions of the Proposal include:
- Reports on Forms FR Y-14 to “Mirror” Reporting by Bank Holding Companies. The Proposal would require IHCs to complete the FR Y-14 series of reports related to capital assessments and stress testing “in the same manner as a [bank holding company].”3 The Proposal does not explicitly address, and it is therefore unclear, whether this requirement is intended by the Federal Reserve to apply the recently-finalized CFO attestation requirements to the IHC/BHC subsidiaries of FBOs that are subject to supervision by the Federal Reserve’s Large Institution Supervision Coordinating Committee.4
- Reports on Forms FR Y-14 would Include Historical Data. With respect to the FR Y-14 series of reports, an IHC would be “subject to requirements to report historical data with respect to its U.S. bank and nonbank operations.”5 The Proposal states that this information is “necessary for the Federal Reserve to perform a supervisory assessment of the capital plans of IHCs and to conduct supervisory stress tests,” but also acknowledges the difficulty IHCs may encounter in reporting historical data prior to the formation of the IHC in light of the structural reorganizations associated with IHC formation. The Federal Reserve invites public comment on the ability of IHCs to report such data, specifically requesting (i) a description, with supporting detail, of any challenges that IHCs may face in providing historical data, (ii) specific compliance burdens for IHCs, such as issues related to systems integration or data retention policies, and (iii) whether an IHC would be able to report historical data if granted a compliance extension, and if so, how much additional time would be needed.
- Reports would Reflect Onboarding Filing Delays for Certain Schedules. The Proposal indicates that, with respect to the FR Y-14 series of reports, the reporting instructions provide IHCs with the submission dates for each report, including the onboarding filing delays applicable to certain schedules and the requirements for reporting historical data for the FR Y-14Q Retail and PPNR (Pre-provision net revenue) schedules, noting that IHCs will also receive this information in an IHC onboarding memo.
- Requirements for the Market Shock Exercise. Currently, six bank holding companies with large trading operations are required to incorporate a global market shock (the “Market Shock exercise”) as part of their scenarios for the 2016 Comprehensive Capital Analysis and Review (“CCAR”) and Dodd-Frank Act Stress Testing (“DFAST”) exercises. Application of the requirements for the Market Shock exercise to newly formed IHCs with significant trading activity will be addressed by the Federal Reserve in a separate proposal.6
Comments on the Proposal are due by April 5, 2016.