Comments to FRB re: Excluding Small Regional Banks

Dear Vice Chairman Quarles:

The American Bankers Association (ABA) is in the process of commenting on the banking agencies’proposed rulemakings to tailor prudential standards (Tailoring Proposals). Under the TailoringProposals, Category IV banks would move to a two-year cycle for supervisory stress testing and wouldno longer be subject to statutory company-run stress testing. At the October 31, 2018, meeting of theFederal Reserve Board at which the Tailoring Proposals were approved for public comment you stated:

"While the proposal will not be final in time to be formally effective for the 2019supervisory stress tests, I expect that the Board will move promptly to vote on actionmaking 2019 an 'off-cycle' year, in which we would rely more on normal-coursesupervisory tools. Effecting the two-year cycle for the firms in this size range as soon aspossible would provide immediate burden relief consistent with the statute's intent."

We are writing to request the Federal Reserve to issue an interim final rule or other actions providingCategory IV banks relief from the 2019 stress testing cycle as soon as possible. Consistent with yourstatement during the approval, the immediate relief should exclude Category IV banks fromrequirements and disclosures related to annual supervisory stress testing and biannual company runstress testing.

Providing immediate relief would bring much needed clarity and avoid waste. Until the FederalReserve acts, Category IV banks continue to be subject to the Comprehensive Capital AdequacyReview (CCAR) rule and must therefore continue the process of allocating personnel and resources inpreparation of the 2019 CCAR. These preparations include:

• Updating and maintaining systems, tools, models, etc., to accommodate running theSupervisory scenarios and population of FR Y-14A reporting;
• Generating supporting submission documentation; and,
• Scheduling of required governance committee meetings (including the Board of Directors) tosupport the capital plan review, challenge, and approval cadence.

In addition, in the absence of a supervisory stress test, it would be useful for the immediate relief toprovide guidance describing the regulatory expectations for Category IV banks’ 2019 capital planningactivities. This guidance should:

• Detail the constraints, if any, for firms to consider in recommending capital actions in theircapital plans;
• Provide an affirmative statement that banks are not required to conduct stress tests based onFederal Reserve scenarios used for capital planning;
• Outline the number of internal scenarios necessary, assuming Federal Reserve scenarios are notused; and,
• Detail the supporting documentation requirements and finalization dates for the capital plan.

Thank you very much for your attention to this issue. If the Federal Reserve would like additionalinformation regarding this request, please contact Hugh Carney at [email protected].

Sincerely,

Hugh C. Carney
Vice President of Capital Policy