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TCH Comments on Capital Assessments and Stress Testing Information Collection Proposal

The Clearing House Association filed an industry comment letter with the Federal Reserve on its recent proposal addressing information collection related to capital assessments and stress testing (FR Y-14). The letter raised certain aspects of the proposal that cause the industry concern including the appropriate set of rules that should be used for Basel III projections for the upcoming comprehensive capital analysis and review (“CCAR”), the new chief financial officer attestation requirement, confidentiality, and legal reserves.

Additionally, the industry raised a significant number of specific areas where additional clarification was needed in order to provide meaningful and accurate data submissions. The Fed finalized its proposed revision to its FR Y-14 series, effective September 30, 2012. After considering the issues raised in TCH’s comment letter, the Fed accepted each of TCH's key recommendations and suggestions. Specifically, the new rules do not include a CFO attestation requirement; require banks to prepare Basel III estimates on the basis of the U.S. NPRs rather than the BIS rules used in CCAR 2012; permit banks to exclude a particular data item from the schedules if a foreign law prohibits the bank from providing such information (subject to legal analysis); delay implementation of the MSR schedule; and allow first-time respondents extended filing deadlines. With respect to the disclosure of litigation reserves in the PPNR projections and quarterly worksheet, the Fed has adopted the industry’s preferred alternative, Method 4, which would reduce the possibility that an outside observer could identify the existence and value of reserves related to a particular event.