PrintNotice of The Board's Supervision and Regulation Assessment for Year 2015
Regulation TT1 provides that each calendar year is an assessment period and defines an assessed company to be a company that, on December 31 of the assessment period, (1) is a BHC or SLHC with $50 billion or more in total consolidated assets, determined based on the average of the BHC's or SLHC's total consolidated assets reported for the assessment period, or (2) is a nonbank financial company supervised by the Board.
This notice provides the pertinent information for the 2015 assessment. Refer to Regulation TT for all provisions related to assessments for BHCs and SLHCs with total consolidated assets of $50 billion or more and nonbank financial companies supervised by the Board.
Assessment period: The 2015 assessment period is January 1, 2015, through December 31, 2015.
Assessed companies: An assessed company for the 2015 assessment period is a top-tier company2 that on December 31, 2015, is (1) a BHC with average total consolidated assets of $50 billion or more during the assessment period, (2) a SLHC with average total consolidated assets of $50 billion or more during the assessment period, or (3) a nonbank financial company supervised by the Board. The Board has determined that there are 69 assessed companies for the 2015 assessment period.
Assessment basis: As provided for in Regulation TT, the assessment basis is the average of the amount of total expenses the Board estimates is necessary or appropriate to carry out the supervisory and regulatory responsibilities of the Board with respect to assessed companies for that assessment period and the two prior assessment periods. Below is the description of how the 2015 assessment basis was calculated.
For 2013, 2014, and 2015 overall supervision and regulation and related operating expenses at the Reserve Banks and the Board totaled, $1,646.6, $1,733.7, and $1,895.6 million, composed of, $1,118.8, $1,168.5, and $1,252.1 million in supervision and regulation operating expenses for the Federal Reserve Banks (Reserve Banks) and $527.8, $565.3, and $643.5 million in supervision and regulation and related operating expenses for the Board, respectively. From these total supervision and regulation and related operating expenses, the Board estimates the portion of these operating expenses attributable to the assessed companies using the methodology described below.
The Reserve Banks' operating expenses are determined through a cost accounting system that provides uniform methods of accounting for expenses, allowing each Reserve Bank to determine the full cost of its services. The activities involved in the supervision and regulation of assessed companies are used to identify the relevant expenses for the assessment basis. For example: employee-time data are analyzed to determine the amount of time employees spend supervising assessed companies. This analysis along with other, similar analyses are used to allocate salaries and other personnel expenses.
The total estimated Reserve Bank operating expenses (direct, indirect, and pension expenses) attributed to the supervision and regulation of assessed companies for 2013, 2014, and 2015 were, respectively, $396.7, $399.5, and $438.2 million. The Reserve Banks' expenses directly attributable to the supervision of assessed companies were $170.4, $177.1, and $172.9 million. Expenses for support and overhead attributable to the supervision of assessed companies (indirect expenses) were $86.2, $91.5, and $87.8 million. A proportional share of Reserve Banks' expenses for other activities integral to supervisory activities3 are also included in the assessment basis. These proportions4 were then applied to the direct and indirect components of activities integral to supervisory responsibilities, which resulted in an additional $66.9, $69.0, and $85.7 million of direct expenses and $47.3, $52.3, and $61.9 million of indirect expenses in 2013, 2014, and 2015, respectively. Also, added to the assessment basis was the proportional share of the Reserve Banks' pension expenses. In 2013, 2014, and 2015 these amounts were, respectively, $54.7, $35.0, and $49.4 million. Excluded from the assessment basis in 2013, 2014, and 2015 were, $28.9, $25.4, and $19.5 million, respectively, for the Examiner Commissioning Program (ECP) and Shared National Credit Program (SNC) expenses.5
With respect to the operating expenses of the Board, the Board groups all divisions into one of two categories for the purpose of determining the contribution to the assessment basis--those that perform supervision- and regulation-related activities with respect to assessed companies (direct) and those that provide support to supervision and regulation related activities (indirect). Divisions that are categorized as direct are Banking Supervision and Regulation, Consumer and Community Affairs, Research and Statistics, International Finance, Monetary Affairs, Office of Financial Stability Policy and Research, and Legal. The remaining divisions are classified as indirect based on the support they provide to the direct divisions, necessary for the continuation of normal operations.6
Similar to the employee time data the Reserve Banks use to estimate operating expenses attributable to the supervision and regulation of assessed companies, the Board uses annual time surveys from employees in the direct divisions to determine the estimated proportion of time attributable to the supervision and regulation of assessed companies. For 2013, 2014, and 2015, operating expenses of the direct divisions totaled $260.5, $288.0, and $318.8 million, respectively, of which, respectively, $36.4, $38.0, and $42.0 million is directly attributable to the cost of supervising and regulating assessed companies. The employee-time survey data are also used to estimate the proportion of each direct division's non-personnel expenses, such as travel expenses, that is attributable to the supervision and regulation of assessed companies.
To determine the portion of the indirect divisions' expenses to be included in the assessment basis, the Board calculates the proportion of employee time in the direct divisions attributable to the supervision and regulation of assessed companies relative to the total employee time at the Board, which is then applied to the total expenses of the indirect divisions, and this portion of indirect division expenses is added to the assessment basis. For 2013, 2014, and 2015 the indirect divisions' expenses totaled, respectively, $267.3, $277.3, and $324.7 million. In 2013, 6.0 percent ($16.0 million), in 2014, 5.7 percent ($15.7 million) and, in 2015, 6.0 percent ($19.4 million) was added to the assessment basis. The Board also includes in the assessment basis a similarly calculated proportion of the Board's pension expenses, which for 2013, 2014, and 2015 was $5.2, $5.0, and $4.0 million, respectively. Thus, the total estimated Board operating expenses (direct, indirect and pension expenses) attributed to the supervision and regulation of assessed companies for 2013, 2014, and 2015, were, respectively, $57.6, $58.7, and $65.4 million.
In total, the Board estimates that the total expenses necessary or appropriate to carry out its supervision and regulation of assessed companies for 2013, 2014, and 2015 were $454.3, $458.2, and $503.6 million, respectively. For the 2015 assessment period, the assessment basis is $472.0 million, the average of these amounts. This is a $31.5 million or 7.2 percent increase from the 2014 assessment. The tables below provide a summary of the Board's estimate of expenses for 2013, 2014, and 2015.
| Actual Expenses | DFA Assessment Related | % of Division Exp. Attributable to DFA Assessment | Indirect Division Support Allocated to DFA Assessment | % Share of Total Indirect Expenses | Allocated Pension Expenses | Total Assessment Basis | |
|---|---|---|---|---|---|---|---|
| Banking Supervision and Regulation | $99.2 | $29.3 | 29.5% | $12.6 | 4.7% | $4.1 | $46.0 |
| Consumer & Community Affairs | 22.7 | 2.3 | 10.3% | 1.1 | 0.4% | 0.4 | 3.8 |
| Legal | 20.8 | 3.4 | 16.1% | 1.7 | 0.6% | 0.5 | 5.6 |
| Research Divisions (R, IF, MA, OFS) | 117.8 | 1.4 | 1.2% | 0.6 | 0.2% | 0.2 | 2.2 |
| Board Subtotal (Direct Divisions) | $260.5 | $36.4 | 14.0% | $16.0 | 6.0% | $5.2 | $57.6 |
| Indirect Divisions (e.g., BDM, IT, MGT, OSEC, RBOPS) |
267.3 | ||||||
| Board Total (Direct + Indirect) | $527.8 | 6.9% | 10.9% | ||||
| Reserve Bank Direct Expenses | |||||||
| Supervision of Financial Institutions Subject to Supervisory Assessments | $170.4 | $170.4 | 100.0% | $86.2 | 21.6% | $38.9 | $295.6 |
| Supervision of Banking Organizations with Assets >$10 Billion, Not Subject to Supervisory Assessments | 89.4 | 0 | 0.0% | 0 | 0.0% | 0 | 0 |
| Supervision of Banking Organizations with Assets < $10 Billion, Not Subject to Supervisory Assessments | 258.2 | 0 | 0.0% | 0 | 0.0% | 0 | 0 |
| Directly Attributable Supervisory Expenses (Direct) | 518 | 170.4 | 86.2 | 21.6% | 38.9 | 295.6 | |
| Other Activities Integral to Supervisory Responsibilities | 202.3 | 66.9 | 33.1% | 47.3 | 11.9% | 15.8 | 130 |
| Reserve Bank Supervision Subtotal (Direct) |
$720.3 | $237.3 | $133.5 | 33.5% | $54.7 | $425.6 | |
| Directly Attributable Indirect Expenses (support) | 209 | ||||||
| Other Indirect Expenses (support & overhead) | 189.5 | ||||||
| Reserve Bank Total (Direct + Indirect) | $1,118.8 | 21.2% | |||||
| "Carve-Outs" for the ECP and SNC programs | ($28.9) | ||||||
| $396.7 | |||||||
| 35.5% | |||||||
| System Total | $1,646.6 | $273.7 | 16.6% | $149.6 | 22.5% | $60.0 | $454.3 |
| Actual Expenses | DFA Assessment Related | % of Division Exp. Attributable to DFA Assessment | Indirect Division Support Allocated to DFA Assessment | % Share of Total Indirect Expenses | Allocated Pension Expenses | Total Assessment Basis | |
|---|---|---|---|---|---|---|---|
| Banking Supervision and Regulation | $113.2 | $27.0 | 23.9% | $10.6 | 3.8% | $3.3 | $41.0 |
| Consumer & Community Affairs | 25 | 2.8 | 11.3% | 1.2 | 0.5% | 0.4 | 4.5 |
| Legal | 25.4 | 5.5 | 21.7% | 2.5 | 0.9% | 0.8 | 8.8 |
| Research Divisions (R, IF, MA, OFS) | 124.4 | 2.7 | 2.2% | 1.4 | 0.5% | 0.4 | 4.5 |
| Board Subtotal (Direct Divisions) | $288.0 | $38.0 | 13.2% | $15.7 | 5.7% | $5.0 | $58.7 |
| Indirect Divisions (e.g., BDM, IT, MGT, OSEC, RBOPS) |
277.3 | ||||||
| Board Total (Direct + Indirect) | $565.3 | 6.7% | 10.4% | ||||
| Reserve Bank Direct Expenses | |||||||
| Supervision of Financial Institutions Subject to Supervisory Assessments | $177.1 | $177.1 | 100.0% | $91.5 | 21.5% | $24.8 | $293.4 |
| Supervision of Banking Organizations with Assets >$10 Billion, Not Subject to Supervisory Assessments | 98.3 | 0 | 0.0% | 0 | 0.0% | 0 | 0 |
| Supervision of Banking Organizations with Assets < $10 Billion, Not Subject to Supervisory Assessments | 260.6 | 0 | 0.0% | 0 | 0.0% | 0 | 0 |
| Directly Attributable Supervisory Expenses (Direct) | 536.1 | 177.1 | 91.5 | 21.5% | 24.8 | 293.4 | |
| Other Activities Integral to Supervisory Responsibilities | 207.3 | 69 | 33.3% | 52.3 | 12.3% | 10.2 | 131.5 |
| Reserve Bank Supervision Subtotal (Direct) |
$743.4 | $246.1 | $143.8 | 33.8% | $35.0 | $424.9 | |
| Directly Attributable Indirect Expenses (support) | 217.5 | ||||||
| Other Indirect Expenses (support & overhead) | 207.6 | ||||||
| Reserve Bank Total (Direct + Indirect) | $1,168.5 | 21.1% | |||||
| "Carve-Outs" for the ECP and SNC programs | ($25.4) | ||||||
| $399.5 | |||||||
| 34.2% | |||||||
| System Total | $1,733.7 | $284.2 | 16.4% | $159.5 | 22.7% | $39.9 | $458.2 |
| Actual Expenses | DFA Assessment Related | % of Division Exp. Attributable to DFA Assessment | Indirect Division Support Allocated to DFA Assessment | % Share of Total Indirect Expenses | Allocated Pension Expenses | Total Assessment Basis | |
|---|---|---|---|---|---|---|---|
| Banking Supervision and Regulation | $128.8 | $30.6 | 23.8% | $13.4 | 4.1% | $2.8 | $46.8 |
| Consumer & Community Affairs | 27.5 | 1.9 | 6.9% | 0.9 | 0.3% | 0.2 | 3 |
| Legal | 25.7 | 6.5 | 25.3% | 3.4 | 1.0% | 0.7 | 10.6 |
| Research Divisions (R, IF, MA, OFS) | 136.8 | 3 | 2.2% | 1.7 | 0.5% | 0.3 | 5 |
| Board Subtotal (Direct Divisions) | $318.8 | $42.0 | 13.2% | $19.4 | 6.0% | $4.0 | $65.4 |
| Indirect Divisions (e.g., BDM, IT, MGT, OSEC, RBOPS) |
324.7 | ||||||
| Board Total (Direct + Indirect) | $643.5 | 6.5% | 10.2% | ||||
| Reserve Bank Direct Expenses | |||||||
| Supervision of Financial Institutions Subject to Supervisory Assessments | $172.9 | $172.9 | 100.0% | $87.8 | 19.4% | $32.8 | $293.5 |
| Supervision of Banking Organizations with Assets >$10 Billion, Not Subject to Supervisory Assessments | 126.1 | 0 | 0.0% | 0 | 0.0% | 0 | 0 |
| Supervision of Banking Organizations with Assets < $10 Billion, Not Subject to Supervisory Assessments | 236 | 0 | 0.0% | 0 | 0.0% | 0 | 0 |
| Directly Attributable Supervisory Expenses (Direct) | 535 | 172.9 | 87.8 | 19.4% | 32.8 | 293.5 | |
| Other Activities Integral to Supervisory Responsibilities | 263.4 | 85.7 | 32.5% | 61.9 | 13.6% | 16.6 | 164.2 |
| Reserve Bank Supervision Subtotal (Direct) |
$798.4 | $258.6 | $149.7 | 33.0% | $49.4 | $457.7 | |
| Directly Attributable Indirect Expenses (support) | 215.1 | ||||||
| Other Indirect Expenses (support & overhead) | 238.7 | ||||||
| Reserve Bank Total (Direct + Indirect) | $1,252.10 | 20.7% | |||||
| "Carve-Outs" for the ECP and SNC programs | ($19.5) | ||||||
| $438.2 | |||||||
| 35.0% | |||||||
| System Total | $1,895.6 | $300.6 | 15.9% | $169.1 | 21.7% | $53.4 | $503.6 |
For the 2016 assessment period, based on actual expenses in 2014 and 2015, and budgeted expenses in 2016, the Board estimates that the 2016 assessment basis will be approximately 8.7 percent greater than the 2015 assessment basis. This increase is subject to change as actual 2016 expenses are realized.
Assessment Rate: As provided in Regulation TT, to calculate the assessment rate for the 2015 assessment period, the Board used the 2015 number of assessed companies, the total assessable assets of the 2015 assessment period, and the 2015 assessment basis.7
Assessment rate = Assessment Basis – (Number of Assessed Companies x $50,000)
Total Assessable Assets of All Assessed Companies
For the 2015 assessment rate calculation, the assessment basis was $472.0 million, the number of assessed companies was 69, and the total assessable assets of all assessed companies was $19,761 billion, which results in the assessment rate of 0.00002371.
Assessment rate = $472.0 million – (69 x $50,000) = 0.00002371
$19,761 billion
Assessment Formula: The assessment formula used to determine each assessed company's assessment is the Base Amount ($50,000) + (Total Assessable Assets x Assessment Rate).8 The Board will calculate each assessed company's assessment using this formula and provide the assessment amount, as well as each company's total assessable assets, in the notice of assessment.
Total Assessable Assets: Total assessable assets of assessed companies are generally calculated as (1) the average total consolidated assets during the assessment period of a U.S.-domiciled assessed company, or (2) the average total combined assets of U.S. operations during the assessment period for a foreign assessed company.9
Notice of Assessment: For the 2015 assessment, the Board issued a notice of assessment to each assessed company on or before June 30, 2016.
Appeal Period: Each assessed company will have thirty calendar days from June 30, 2016, to submit a written statement to appeal the Board's determination: (1) that the company is an assessed company; or (2) of the company's total assessable assets. For the 2015 assessment period, the Board will respond with the results of its consideration to an assessed company that has submitted a written appeal within 15 calendar days from the end of the appeal period.
Collection date: Each assessed company must remit to the Federal Reserve the amount of its assessment using the Fedwire Funds Service by September 15, 2016. The Board will provide Fedwire instructions in the notice of assessment.
Payment of Interest: If the Board does not receive the total amount of an assessed company's assessment by the collection date for any reason not attributable to the Board, the assessment will be delinquent and the assessed company shall pay to the Board interest on any sum owed to the Board according to this rule (delinquent payments).10 Interest on delinquent payments will be assessed beginning on the first calendar day after the collection date, and on each calendar day thereafter up to and including the day payment is received. Interest will be simple interest, calculated for each day payment is delinquent by multiplying the daily equivalent of the applicable interest rate by the amount delinquent. The rate of interest will be the United States Treasury Department's current value of funds rate (the ''CVFR percentage''); issued under the Treasury Fiscal Requirements Manual and published quarterly in the Federal Register. Each delinquent payment will be charged interest based on the CVFR percentage applicable to the quarter in which all or part of the assessment goes unpaid.
Questions and other Correspondence regarding assessments: All questions and correspondence regarding assessments, including appeals, should be sent to the following email address: [email protected].
1. 12 CFR 246 et seq. Return to text
2. For multi-tiered BHCs and multi-tiered SLHCs (where a holding company owns or controls, or is owned or controlled by, other holding companies), the assessed company is the top-tier, regulated holding company. In situations where two or more unaffiliated companies control the same U.S. bank or savings association and each company has average total consolidated assets of $50 billion or more, each of the unaffiliated companies is designated an assessed company. Generally, a company has control over a bank, savings association, or company if the company has (a) ownership, control, or power to vote 25 percent or more of the outstanding shares of any class of voting securities of the bank, savings association, or company, directly or indirectly or acting through one or more other persons; (b) control in any manner over the election of a majority of the directors or trustees of the bank, savings association, or company; or (c) the Board determines the company exercises, directly or indirectly, a controlling influence over the management or policies of the bank, savings association, or company. See 12 U.S.C. § 1841(a)(2) (BHCs) and 12 U.S.C. § 1467a(a)(2) (SLHCs). Return to text
3. Activities integral to carry out the supervisory responsibilities of the Reserve Banks include staff training and education, supervision policy and projects, regulatory reports processing, and supervision and regulation automation services. Operating expenses for the assessment basis include all expenses associated with the supervision and regulation of assessed companies, which are comprised primarily of personnel expenses, as well as those expenses for related administrative processes, support operations, and travel, support and overhead operations, and pension expenses. See 12 CFR 246.4(d)(2) n. 2. Return to text
4. To determine the proportion of the Reserve Banks' other activities integral to supervisory activities to include in the assessment basis, each yearly a percentage is developed based on the ratio of Reserve Banks' directly attributable cost of supervising assessed companies compared to costs of supervising all financial institutions subject to Board supervision. For 2013, 2014, and 2015, the percentages reflecting the proportional share of supervisory activities directly attributable to assessed institutions was 33,1 percent, 33.5 percent and 32.5 percent, respectively. Return to text
5. The Board excludes from the assessment basis those expenses associated with its ECP, which involves the training of new examiners that are not typically employed in the supervision and regulation of assessed companies, and expenses associated with the SNC. SNC expenses are excluded because they relate to the operations of regulated subsidiaries and, are therefore, not a component of the Board's consolidated supervisory responsibility. Return to text
6. The indirect divisions include the Office of Board Members, Office of the Secretary, Division of Financial Management, Information Technology, Office of the Chief Operating Officer, Office of the Chief Data Officer, the Management Division, and Reserve Bank Operations and Payment Systems. Return to text
7. 12 CFR 246.4(c)(2); 12 CFR 246.4(d)(1). Return to text
8. 12 CFR 246.4(b)(1). Return to text
9. 12 CFR 246.4(e). Return to text
10. 12 CFR 246.6(b). Return to text
