SPST-0197 LCR (NSFR Final Rule) - 2-11-2021

SUPPORTING STATEMENT
LIQUIDITY COVERAGE RATIO:
LIQUIDITY RISK MEASUREMENT, STANDARDS, AND MONITORING (LCR)
(OMB Control No. 3064-0197)
INTRODUCTION
This submission is being made in connection with a final rule published in the Federal Register
with the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the
Federal Reserve System (FRB), and the Federal Deposit Insurance Corporation 1 (FDIC)
(collectively, the agencies). The final rule revises certain reporting and recordkeeping
requirements in the LCR rule found at 12 C.F.R. part 329 therefore changing the burden
associated with the current information collection titled, “Liquidity Coverage Ratio: Liquidity
Risk Measurement, Standards, And Monitoring (LCR)” (OMB No. 3064-0197), which expires
on January 31, 2023.
A.

JUSTIFICATION
1.

Circumstances and Need
In 2014, the OCC, the FRB and the FDIC adopted the Liquidity Coverage Ratio
(LCR) rule that implemented a quantitative liquidity requirement consistent with
the liquidity coverage ratio standard established by the Basel Committee on
Banking Supervision. The LCR rule establishes a quantitative minimum liquidity
coverage ratio that requires a company subject to the rule to maintain an amount
of high-quality liquid assets (the numerator of the ratio) that is no less than 100
percent of its total net cash outflows over a prospective 30 calendar-day period
(the denominator of the ratio). The LCR rule applies to all internationally active
banking organizations, generally, bank holding companies, certain savings and
loan holding companies, and depository institutions with more than $250 billion
in total assets or more than $10 billion in on-balance sheet foreign exposure, and
to their consolidated subsidiaries that are depository institutions with $10 billion
or more in total consolidated assets. The LCR rule contains reporting and
recordkeeping requirements that are found in Sections 329.22 and 329.40.
In 2019, the rule was revised 2 and the criteria for determining the applicability of
liquidity requirements for large U.S. banking organizations and the U.S.
intermediate holding companies of certain foreign banking organizations was
changed. In particular, Sections 329.1, .3, .10, .30, and .50 of the FDIC’s LCR
rule were revised. The rule now establishes four risk-based categories for

1 Net Stable Funding Ratio: Liquidity Risk Measurement Standards and Disclosure Requirements, 86 FR 9120
(February 11, 2021). The FDIC issued the final rule under its authorities under Sections 12 U.S.C. 1815, 1816, 1818,
1819, 1828, 1831p-1, and 5412 of the Federal Deposit Insurance Act.
2 Changes to Applicability Thresholds for Regulatory Capital and Liquidity Requirements; Final Rule, 84 FR 59230
(Nov. 1, 2019). The FDIC issued the final rule under its authorities under Sections 12 U.S.C. 1828 and 1831o of the
Federal Deposit Insurance Act.

determining the applicability of requirements under the agencies’ LCR rule.
Under the revised rule, such requirements increase in stringency based on
measures of size, cross-jurisdictional activity, weighted short-term wholesale
funding, nonbank assets, and off-balance sheet exposure. The revised rule now
applies tailored liquidity requirements to depository institution holding companies
and U.S. intermediate holding companies with $100 billion or more in total
consolidated assets as well as to certain depository institutions.
Final Rule
The final rule implements a stable funding requirement, known as the net stable
funding ratio (NSFR), for certain large banking organizations. The final rule
establishes a quantitative metric, the NSFR, to measure the stability of the
funding profile of certain large banking organizations and requires these banking
organizations to maintain minimum amounts of stable funding to support their
assets, commitments, and derivatives exposures over a one-year time horizon. The
NSFR is designed to reduce the likelihood that disruptions to a banking
organization’s regular sources of funding will compromise its liquidity position,
promote effective liquidity risk management, and support the ability of banking
organizations to provide financial intermediation to businesses and households
across a range of market conditions. The NSFR supports financial stability by
requiring banking organizations to fund their activities with stable sources of
funding on an ongoing basis, reducing the possibility that funding shocks would
substantially increase distress at individual banking organizations. The final rule
applies to certain large U.S. depository institution holding companies, depository
institutions, and U.S. intermediate holding companies of foreign banking
organizations, each with total consolidated assets of $100 billion or more,
together with certain depository institution subsidiaries (together, covered
companies). In particular, the final rule revises Sections 329.110 and 329.108 of
the FDIC’s LCR rule.
Section 329.110 requires a covered company to take certain actions following any
NSFR shortfall. A covered company would be required to notify its appropriate
Federal banking agency of the shortfall no later than 10 business days (or such
other period as the appropriate Federal banking agency may otherwise require by
written notice) following the date that any event has occurred that would cause or
has caused the covered company's NSFR to be less than 1.0. It must also submit
to its appropriate Federal banking agency its plan for remediation of its NSFR to
at least 1.0, and submit at least monthly reports on its progress to achieve
compliance.
329.108(b) provides that if an institution includes an available stable funding
amount in excess of the required stable funding amount of the consolidated
subsidiary, it must implement and maintain written procedures to identify and
monitor applicable statutory, regulatory, contractual, supervisory, or other
restrictions on transferring assets from the consolidated subsidiaries. These

procedures must document which types of transactions the institution could use to
transfer assets from a consolidated subsidiary to the institution and how these
types of transactions comply with applicable statutory, regulatory, contractual,
supervisory, or other restrictions. Section 329.110(b) requires preparation of a
plan for remediation to achieve an NSFR of at least equal to 1.0, as required under
§ 329.100.
2.

Use of the Information Collected
The LCR rule is designed to promote the short-term resilience of the liquidity risk
profile of large and internationally active banking organizations, thereby
improving the banking sector’s ability to absorb shocks arising from financial and
economic stress, and to further improve the measurement and management of
liquidity risk.

3.

Use of Technology to Reduce Burden
Respondents may use any type of improved information technology they have
available to meet the requirements of this regulation.

4.

Efforts to Identify Duplication
There is no duplication. This information is not available elsewhere.

5.

Minimizing Burden on Small Entities
This collection does not have a significant impact on a substantial number of
small entities. In particular, according to Call Report data as of June 30, 2020,
there were 3,270 FDIC-supervised institutions. Only four of these FDICsupervised institutions are affected by the final rule and do not have total assets of
less than $600 million, the Small Business Administration’s definition of a “small
entity.”

6.

Consequences of Less Frequent Collections
Less frequent collection would result in safety and soundness concerns.

7.

Special Circumstances
None.

8.

Consultation with Persons Outside the FDIC
On June 1, 2016, the agencies published the proposed rule in the Federal Register
(81 FR 35124). No comments were received with respect to the Paperwork
Reduction Act.

9.

Payment or Gift to Respondents
None.

10.

Confidentiality
Any information deemed to be of a confidential nature would be exempt from
public disclosure in accordance with the provisions of the Freedom of Information
Act (5 U.S.C. 552).

11.

Information of a Sensitive Nature
This collection contains no sensitive information.

12.

Estimates of Hour Burden and Annualized Cost

2020 Summary of Annual Burden and Internal Cost (3064-0197) - NSFR Final Rule
Estimated
Estimated
Estimated
Type of
Obligation to
Frequency
Number of
Time per
Burden
Respond
of
Respondents
Response
Responses
Liquidity Coverage Ratio (LCR) - 12
Reporting
Mandatory
CFR 329.40 and .110
329.40(a) Notification that liquidity
coverage ratio is less than minimum in
Reporting
Mandatory
4
12
0.50
329.10; 329.110(a) NSFR shortfall
notification
329.40(b) Notification that liquidity
coverage ratio is less than minimum in
329.10 for 3 consecutive days or otherwise
Reporting
Mandatory
4
1
0.50
noncompliant; 329.110(b) NSFR shortfall
liquidity plan
329.40(b) and 329.110(b) Plan for
Recordkeeping
Mandatory
4
1
200.00
achieving compliance
329.40(b)(3)(iv) and 329.110(b)(3)
Weekly report of progress toward
Reporting
Mandatory
4
4
0.50
achieving compliance
Liquidity Coverage Ratio (LCR) - 12
Recordkeeping
Mandatory
CFR 329.22(a)(2), .22(a)(5), and .108(b)
329.22(a)(2) Policies that require eligible
HQLA to be under control of liquidity risk
management function
329.22(a)(5) Documented methodology
providing consistent treatment for
determining whether eligible HQLA meets
operational requirements
329.108(b) - NSFR consolidation
procedures
TOTAL HOURLY BURDEN
TOTAL INTERNAL COST

Frequency
of
Response

Total
Annual
Estimated
Burden

On
Occasion

24

On
Occasion

2

On
Occasion

800

On
Occasion

8

Recordkeeping

Mandatory

4

1

10.00

On
Occasion

40

Recordkeeping

Mandatory

4

1

10.00

On
Occasion

40

Recordkeeping

Mandatory

4

1

20.00

On
Occasion

80

$73.00

/HR

994 hours
$72,562.00

Annualized Cost of Internal Hourly Burden:
994 hours x $73 per hour 3 = $72,562.00.
Estimated Category of Personnel Responsible
for Complying with the PRA Burden

Total Estimated
Hourly Compensation

Estimated
Weights

Estimated Total Weighted
Labor Cost Component

Executives and Managers*

$122

0%

$0

Lawyers**

$156

0%

$0

Compliance Officer***

$63

50%

$32

IT Specialists†

$89

0%

$0

Financial Analysts††

$83

50%

$42

Clerical‡

$32

0%

$0

100%

$73

Total Estimated Weighted Average Hourly
Compensation Rate

Source: Bureau of Labor Statistics: "National Industry-Specific Occupational Employment and Wage Estimates:
Depository Credit Intermediation Sector: hourly 75th percentile wage" (May 2017), Employer Cost of Employee
Compensation (December 2018), Consumer Price Index (December 2018).
Note: The wage information reported by the BLS in the Specific Occupational Employment and Wage Estimates
does not include health benefits and other non-monetary benefits. According to the December 2018 Employer Cost
of Employee Compensation data compensation rates for health and other benefits are 33.7 percent of total
compensation. Additionally, the wage has been adjusted for inflation according BLS data on the Consumer Price
Index for Urban Consumers (CPI-U) so that it is contemporaneous with the non-wage compensation statistic. The
inflation rate was 3.59 percent between May 2017 and December 2018.
*

Occupation (SOC Code): Management Occupations (110000)

** Occupation (SOC Code): Lawyers, Judges, and Related Workers(231000)
*** Occupation (SOC Code): Compliance Officers(131041)
†

Occupation (SOC Code): Computer and Mathematical Occupations (150000)

†† Occupation (SOC Code): Financial Analyst (132051)
‡

Occupation (SOC Code): Office and Administrative Support Occupations(430000)

13.

Capital, Start-Up, Operating, and Maintenance Costs
None.

3
The wage information reported by the BLS in the Specific Occupational Employment and Wage Estimates does not
include health benefits and other non-monetary benefits. According to the December 2018 Employer Cost of
Employee Compensation data compensation rates for health and other benefits are 33.7 percent of total
compensation. Additionally, the wage has been adjusted for inflation according BLS data on the Consumer Price
Index for Urban Consumers (CPI-U) so that it is contemporaneous with the non-wage compensation statistic. The
inflation rate was 3.59 percent between May 2017 and December 2018.

14.

Estimate of annualized costs to the government
None.

15.

Change in burden
There is a 497 increase in hourly burden as a result of the final rule. As discussed
above, the final rule revises certain LCR reporting and recordkeeping
requirements found at 12 C.F.R. part 329.

16.

Publication
The information is not published.

17.

Display of expiration date
Not applicable.

18.

Exceptions to certification statement
None.

B.

STATISTICAL METHODS
Not applicable.