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pdfSUPPORTING STATEMENT
MARKET RISK CAPITAL REQUIREMENTS
(OMB Control No. 3064-0178)
INTRODUCTION
This submission is being made in connection with a joint notice of proposed rulemaking (NPR)
published in the Federal Register with the Federal Deposit Insurance Corporation (FDIC), the
Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal
Reserve System (FRB) (collectively, the agencies). The current information collection titled,
Market Risk Capital Requirements (OMB No. 3064-0178) expires on August 31, 2025.
A.
JUSTIFICATION
1. Circumstances and Need
The FDIC’s market risk capital rules (12 CFR part 324, subpart F) establish riskbased capital requirements for FDIC-supervised institutions with significant exposure
to market risk, provides methods for these FDIC-supervised institutions to calculate
their standardized measure for market risk and, if applicable, advanced measure for
market risk, and establishes public disclosure requirements. The NPR would
comprehensively overhaul both the market risk capital framework and the credit
valuation adjustment (CVA) framework, and would move the new CVA requirements
to subpart F. This proposed revisions are intended to enhance risk sensitivity, increase
transparency through enhanced disclosures and include requirements for the public
disclosure of certain qualitative and quantitative information about the market risk of
state nonmember banks and state savings associations (FDIC-supervised institutions).
Subpart F currently applies to FDIC-supervised institutions that have aggregated
trading assets and trading liabilities equal to 10 percent or more of quarter-end total
assets or $1 billion or more (covered FDIC-supervised institutions). The NPR would
apply to FDIC-supervised institutions that are Category I, II, III, or IV FDICsupervised institutions, and the market risk provisions would also apply to FDICsupervised institutions whose trading liabilities meet or exceed $1 billion or 10
percent of trading assets and liabilities. The collection of information is necessary to
ensure capital adequacy appropriate for the level of market and CVA risk.
The NPR would amend the market risk information collections to reflect the proposed
recordkeeping, disclosure, and reporting requirements associated with the proposed
market risk capital requirements. In addition, the NPR would add recordkeeping
requirements to this information collection associated with the proposed CVA
provisions. The specific information collection requirements are as follows:
Reporting
Sections 324.201(b)(5)(i) and (ii), 324.202(1)(ii)(A)(2), 324.204(d)(1),
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324.204(d)(3)(i), 324.204(e)(1), 324.204(e)(2)(v), 324.204(e)(3), 324.204(g)(2),
324.204(g)(4), 324.205(f)(1)(ii), 324.205(h)(1)(ii)(B), 324.205(h)(1)(ii)(A)(3),
324.207(a)(3), (4), and (5), 324.207(a)(8), 324.208(b)(4), 324.208(h)(3)(ii),
324.212(a)(2), 324.212(b)(1)(iii)(C), 324.212(b)(3), 324.215(c)(1), 324.215(d)(1)(i),
324.221(a), 324.221(c)(2)(iii), 324.221(3), 324.223(a)(1), and 324.224(d)(3)(iii)
reflect the requirements under part 324, subpart F (Market Risk and Credit Valuation
Adjustment) for prior approval.
Sections 324.204(g)(1)(iii), 324.212(b)(2), and 324.212(c) relate to the model-related
prior approvals.
Section 324.224(d)(3)(ii) relates to mapping and the prior approval of the agency
when no credit spread of any of the counterparty’s peers is available due to the
counterparty’s specific type. In this instance, a bank may, with the agency’s
approval, use an estimate of credit risk to proxy the spread of an illiquid counterparty;
provided that where a bank uses historical probabilities of default as part of this
assessment, the resulting spread must relate to credit markets and cannot be based on
historical probabilities of default alone.
Recordkeeping
Sections 324.203(c), 324.203(h), 324.208(h)(1)(ii)(B), and 324.214(b)(7),
Demonstrations of compliance regarding active management of market risk covered
positions, securitization positions, delta risk factors for foreign exchange risk, and
model eligibility of risk factors.
Sections 324.213(a) and 324.213(b) require documentation regarding PLA testing and
backtesting.
Sections 324.203(h)(2)(i) requires general recordkeeping for securitization positions.
Sections 324.203(i) and 324.205(h), describes the requirements for documentation
related to market risk covered positions, trading desks, and internal risk factors.
Section 324.203(a)(1) requires market risk policies and procedures.
Section 324.203(a)(2) requires clearly defined hedging strategies.
Section 324.203(b)(2) requires non-notional trading desk policies.
Section 324.203(e)(1) requires internal market risk management systems.
Section 324.203(e)(3) requires an internal audit function.
Section 324.203(f) requires a prudent valuation process.
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Section 324.203(g) requires a process for assessing capital adequacy.
Section 324.203(h)(2)(ii) requires a demonstration of a comprehensive understanding
of securitization positions.
Section 324.214(b)(7)(v) requires weekly risk factor updates with respect to modellable
risk factors.
Section 324.217(c) requires a formal reporting and disclosure policy.
Section 324.220(b) requires a CVA hedging policy.
Section 324.223(b)(4), (7), and (9) require a CVA model validation policy.
Section 324.223(b)(10) requires the acquisition of historical market data for CVA risk.
Disclosure
Section 324.217(d) provides that in cases where a bank reasonably believes that
reporting or disclosure of specific commercial or financial information would
materially prejudice its position by making public certain information that is either
proprietary or confidential in nature, the bank is not required to publicly report or
disclose these specific items, but must report or disclose more general information
about the subject matter of the requirement, together with the fact that, and the reason
why, the specific items of information have not been disclosed.
Section 324.217(e) requires that the bank either provide all of the public reports and
disclosures required in one place on the bank’s public website, or provide the reporting
and disclosures in more than one public financial report or other public regulatory
reports, provided that the bank publicly provides a summary table specifically
indicating the location(s) of all such reporting and disclosures.
Section 324.217(f)(1) and (f)(3), Quarterly public disclosures.
Section 324.217(f)(2), Annual public disclosures.
Under the NPR, a banking organization that is subject to the proposed market risk
capital requirements would have to provide public regulatory reports in the manner and
form prescribed by its primary Federal supervisor, including any additional information
and reports that the supervisor may require. A banking organization would have to
receive a prior written approval of its primary Federal supervisor for calculating market
risk capital requirements using internal models.
Section 324.212(b)(2)(i) of the market risk rule requires an FDIC-supervised institution
that is subject to the market risk capital requirements to obtain the prior written
approval of the FDIC for a trading desk to be a model-eligible trading desk.
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Section 324.203(h)(1) of the market risk rule requires that a subject FDIC-supervised
institution demonstrate to the satisfaction of the primary Federal supervisor a
comprehensive understanding of the features of a securitization position that would
materially affect the performance of the position by conducting and documenting the
analysis set forth in §324.203(h)(2).
The NPR also includes recordkeeping requirements for banking organizations subject
to the CVA. Those include that a banking organization must 1) have a clear documented
hedging policy for credit valuation adjustment (CVA) risk, 2) document identification
and management of CVA risk covered positions and eligible CVA hedges, 3) document
the initial and ongoing validation of models used for calculating regulatory CVA, and
4) maintain current and historical data inputs to exposure models.
Disclosure requirements related to the proposed CVA are included in section _.162,
which would be part of Subpart E of Regulation Q. Therefore, those requirements are
included in the Reporting, Recordkeeping, and Disclosure Requirements Associated
with Regulatory Capital Rules information collection (3064-0153).
2. Use of the Information Collected
The FDIC will use the data in this IC to assess the adequacy of a covered institution’s
capital held to cover exposure to market risk associated with foreign exchange and
commodity positions and positions located in the trading account.
3. Use of Technology to Reduce Burden
Respondents may use any available technology to reduce burden.
4. Effort to Identify Duplication
This information collection is unique and covers the institution’s particular
circumstances. No duplication exists.
5. Minimizing the 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 December 31, 2022, there
were 3,038 FDIC-supervised institutions. Only 9 of these FDIC- supervised
institutions are affected by the regulatory capital rule and do not have total assets of
less than $850 million therefore meeting the Small Business Administration’s
definition of a “small entity.”
6. Consequence of Less Frequent Collections
Without this information, the FDIC would be unable to meet the requirements of the
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statute.
7. Special Circumstances
None. This information collection is conducted in accordance with the guidelines in 5
CFR 1320.5(d)(2).
8. Consultation with Persons Outside the Agency
The agencies published the proposed rule in the Federal Register (88 FR 64028,
September 18, 2023). The comment period on the NPR in connection with the PRA
closes on November 30, 2023.
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 information collection contains no sensitive information.
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12. Burden Estimates
ESTIMATED HOURLY BURDEN - 2023 Basel III NPR (3064-0178)
Prior approval reporting burdens
under part 324, subpart F (Market
Risk and Credit Valuation
Adjustment) including but not
limited to Sections 324.201(b)(5)(i)
and (ii), 324.202, (1)(ii)(A)(2),
324.204(d)(1), 324.204(d)(3)(i),
324.204(e)(1), 324.204(e)(2)(v),
324.204(e)(3), 324.204(g)(2),
324.204(g)(4), 324.205(f)(1)(ii),
324.205(h)(1)(ii)(B),
324.205(h)(1)(ii)(A)(3),
324.207(a)(3), (4), and (5),
324.207(a)(8), 324.208(b)(4),
324.208(h)(3)(ii), 324.212(a)(2),
324.212(b)(1)(iii)(C),
324.212(b)(3), 324.215(c)(1),
324.215(d)(1)(i), 324.221(a),
324.221(c)(2)(iii), 324.221(3),
324.223(a)(1), and
324.224(d)(3)(iii)
Sections 324.204(g)(1)(iii),
324.212(b)(2), and 324.212(c)
Model related prior approvals
Section 324.224(d)(3)(ii)
Mapping
Sections 324.203(c), 324.203(h),
324.208(h)(1)(ii)(B), and
324.214(b)(7)
Demonstrations of compliance
Sections 324.213(a) and
324.213(b)
PLA Testing and backtesting
Sections 324.203(h)(2)(i)
General recordkeeping
Sections 324.203(i) and 324.205(h)
General recordkeeping
Section 324.203(a)(1)
Market risk policies and
procedures
Section 324.203(a)(2)
Hedging strategies
Section 324.203(b)(2)
Trading desk policies
Section 324.203(e)(1)
Internal market risk management
systems
Section 324.203(e)(3)
Internal audit function
Section 324.203(f)
Prudent valuation process
Section 324.203(g)
Capital adequacy assessment
Type of Burden
Estimated
Number of
Respondents
Estimated
Number of
Responses per
Respondent
Reporting
3
1
Reporting
1
Reporting
Frequency
of
Response
Total Annual
Estimated
Burden
1,200
On
Occasion
3,600
1
300
On
Occasion
300
1
1
2
On
Occasion
2
Recordkeeping
9
1
96
Annual
864
Recordkeeping
9
4
128
Quarterly
4,608
Recordkeeping
9
4
80
Quarterly
2,880
Recordkeeping
9
1
48
Annual
432
Recordkeeping
9
1
96
Annual
864
Recordkeeping
9
1
16
Annual
144
Recordkeeping
9
1
16
Annual
144
Recordkeeping
9
1
12
Annual
108
Recordkeeping
9
1
12
Annual
108
Recordkeeping
9
1
12
Annual
108
Recordkeeping
9
1
12
Annual
108
6
Estimated
Time per
Response
Type of Burden
Estimated
Number of
Respondents
Estimated
Number of
Responses per
Respondent
Recordkeeping
9
4
Recordkeeping
9
Recordkeeping
Frequency
of
Response
Total Annual
Estimated
Burden
12
Quarterly
432
52
12
Weekly
5,616
9
1
40
Annual
360
Recordkeeping
9
1
40
Annual
360
Recordkeeping
9
1
40
Annual
360
Recordkeeping
9
1
12
Annual
108
Section 324.217(d)
Proprietary confidential
information
Disclosure
9
1
12
On
Occasion
108
Section 324.217(e)
Location
Disclosure
9
1
12
On
Occasion
108
Disclosure
9
4
16
Quarterly
576
Disclosure
9
1
8
Annual
72
Section 324.203(h)(2)(ii)
Securitization data
Section 324.214(b)(7)(v)
Weekly risk factor updates
Section 324.217(c)
Reporting and disclosure policy
Section 324.220(b)
CVA hedging policy
Section 324.223(b)(4), (7), and (9)
CVA model validation policy
Section 324.223(b)(10)
Historical market data
Section 324.217(f)(1) and (f)(3)
Quarterly public disclosures
Section 324.217(f)(2)
Annual public disclosures
Estimated
Time per
Response
TOTAL ESTIMATED HOURLY BURDEN
22,370
Annualized Cost of Internal Hourly Burden:
22,370 hours x $95.11 per hour = $2,127,611.
Summary of Hourly Burden Cost Estimate (OMB No. 3064-0178)
Information
Collection
(Obligation to
Respond)
1. Prior approvals
under part 324,
subpart F, Market
Risk and CVA.
(Mandatory)
Percentage Shares of Hours Spent by and
Hourly Compensation Rates for each Occupation Group
(by Collection)
Estimated
Hourly
Compensation
Rate
Hourly
Weight
(%)
16.09
Exec. &
Mgr.
($133.82)
Lawyer
($165.76)
Compl.
Ofc.
($64.61)
IT
($102.64)
Fin. Anlst.
($101.15)
Clerical
($37.83)
10
15
0
0
45
30
7
$95.11
Information
Collection
(Obligation to
Respond)
2. Sections
324.204(g)(1)(iii),
324.212(b)(2), and
324.212(c),
Model related prior
approvals.
(Mandatory)
Estimated
Hourly
Compensation
Rate
Percentage Shares of Hours Spent by and
Hourly Compensation Rates for each Occupation Group
(by Collection)
Hourly
Weight
(%)
1.34
10
15
0
0
45
30
$95.11
0.01
10
15
0
0
45
30
$95.11
3.86
10
15
0
0
45
30
$95.11
20.60
10
15
0
0
45
30
$95.11
12.87
10
15
0
0
45
30
$95.11
7. Sections 324.203(i)
and 324.205(h),
General
recordkeeping.
(Mandatory)
1.93
10
15
0
0
45
30
$95.11
8. Section
324.203(a)(1),
Market risk policies
and procedures.
(Mandatory)
3.86
10
15
0
0
45
30
$95.11
9. Section
324.203(a)(2),
Hedging strategies.
(Mandatory)
0.64
10
15
0
0
45
30
$95.11
10. Section
324.203(b)(2),
Trading desk policies.
(Mandatory)
0.64
10
15
0
0
45
30
$95.11
11. Section
324.203(e)(1),
Internal market risk
management systems.
(Mandatory)
0.48
10
15
0
0
45
30
$95.11
12. Section
324.203(e)(3),
Internal audit
function.
(Mandatory)
0.48
10
15
0
0
45
30
$95.11
3. Section
324.224(d)(3)(ii),
Mapping.
(Mandatory)
4. Sections
324.203(c),
324.203(h),
324.208(h)(1)(ii)(B),
and 324.214(b)(7),
Demonstrations of
compliance.
(Mandatory)
5. Sections
324.213(a) and
324.213(b), PLA
Testing and
backtesting.
(Mandatory)
6. Sections
324.203(h)(2)(i),
General
recordkeeping.
(Mandatory)
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Information
Collection
(Obligation to
Respond)
Estimated
Hourly
Compensation
Rate
Percentage Shares of Hours Spent by and
Hourly Compensation Rates for each Occupation Group
(by Collection)
Hourly
Weight
(%)
13. Section
324.203(f), Prudent
valuation process.
(Mandatory)
0.48
10
15
0
0
45
30
$95.11
14. Section
324.203(g), Capital
adequacy assessment.
(Mandatory)
0.48
10
15
0
0
45
30
$95.11
15. Section
324.203(h)(2)(ii),
Securitization data.
(Mandatory)
1.93
10
15
0
0
45
30
$95.11
16. Section
324.214(b)(7)(v),
Weekly risk factor
updates. (Mandatory)
25.11
10
15
0
0
45
30
$95.11
17. Section
324.217(c), Reporting
and disclosure policy.
(Mandatory)
1.61
10
15
0
0
45
30
$95.11
18. Section
324.220(b), CVA
hedging policy.
(Mandatory)
1.61
10
15
0
0
45
30
$95.11
19. Section
324.223(b)(4), (7),
and (9), CVA model
validation policy.
(Mandatory)
1.61
10
15
0
0
45
30
$95.11
20. Section
324.223(b)(10),
Historical market
data. (Mandatory)
0.48
10
15
0
0
45
30
$95.11
0.48
10
15
0
0
45
30
$95.11
0.48
10
15
0
0
45
30
$95.11
2.57
10
15
0
0
45
30
$95.11
0.32
10
15
0
0
45
30
$95.11
21. Section
324.217(d),
Proprietary
confidential
information.
(Mandatory)
22. Section
324.217(e), Location.
(Mandatory)
23. Section
324.217(f)(1) and
(f)(3), Quarterly
public disclosures.
(Mandatory)
24. Section
324.217(f)(2), Annual
public disclosures.
(Mandatory)
Weighted Average Hourly Compensation Rate:
$95.11
Source: Bureau of Labor Statistics: 'National Industry-Specific Occupational Employment and Wage Estimates: Industry: Credit Intermediation
and Related Activities (5221 And 5223 only)' (May 2021), Employer Cost of Employee Compensation (March 2021), and Employment Cost
Index (March 2021 and December 2022). Standard Occupational Classification (SOC) Codes: Exec. And Mgr = 11-0000 Management
Occupations; Lawyer = 23-0000 Legal Occupations; Compl. Ofc. = 13-1040 Compliance Officers; IT = 15-0000 Computer and Mathematical
Occupations; Fin. Anlst. = 13-2051 Financial and Investment Analysts; Clerical = 43-0000 Office and Administrative Support Occupations.
Note: The estimated hourly compensation rate for a given collection is the average of the hourly compensation rates for the occupations used to
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comply with that collection, weighted by the share of hours spent by each occupation. The weighted average hourly compensation rate is the
average of the estimated hourly compensation rates for all information collections, weighted by the share of hourly burden for each collection.
These hourly weights, calculated as the estimated number of annual burden hours in a given collection over the total estimated number of
annual burden hours across all collections, are shown in the “Hourly Weight” column of this table.
13. Capital, Start-Up and Maintenance Costs
None.
14. Estimate Annualized Cost to the Government
None.
15. Reason for Change in Burden
The NPR modifies the reporting, recordkeeping, and disclosure requirements of the
regulatory capital rules by adding new requirements and revising existing reporting,
recordkeeping, and disclosure requirements. As a result, there is an increase in burden
hours of 17,910 hours.
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.
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| File Type | application/pdf |
| File Modified | 2023-09-18 |
| File Created | 2023-09-18 |