Appendix A: Organizing Capital Plan Submissions

When submitting materials to the secure collaboration site, BHCs may categorize each component in order to facilitate identification and review of relevant documentation.Table A.1 shows the categorization system that may be used for submissions to the secure collaboration site.

Capital Plan Narrative

This section outlines a potential organizational structure for a BHC's capital plan narrative. Components of this structure that reflect one of the four mandatory elements of a capital plan under the capital plan rule are noted (see the section "Mandatory Elements of a Capital Plan" for more information).

• Capital plan--provides a summary of the BHC's capital plan and the pro forma financial results under the different scenarios evaluated as part of the capital planning process. The document should summarize the BHC's proposed capital actions, the various scenarios used in the capital planning process, the key risks and drivers of financial performance under each scenario, key assumptions, and other relevant information.
• Capital policies--provides the BHC's policies outlining the principles and guidelines used for capital planning, capital issuance, usage, and distributions (mandatory element 3).
• Planned capital actions--provides (1) a description of all planned capital actions over the planning horizon and (2) a summary of all capital actions by instrument quarterly over the nine-quarter path, which should align with the capital actions included in the FR Y-14A Summary and Regulatory Capital Instruments schedules (mandatory element 1(d)). (See "Description of All Capital Actions Assumed over the Planning Horizon".)
• Capital planning process--provides a detailed description of the BHC's process for assessing capital adequacy, including key assumptions, and limitations (mandatory element 2).
• Risk-identification program overview--describes the risk-identification process the BHC uses to support the BHC-wide stress testing required in the capital plans and how these risks are captured in the BHC's capital planning process.
• BHC scenario design process overview--describes the BHC's process and approach to developing the BHC baseline and BHC stress scenarios, including all methodologies, variables and key assumptions, and how the BHC stress scenarios address the BHC's particular vulnerabilities. (See "BHC Scenarios".)
• Material business plan changes--provides a discussion of any expected changes to the BHC's business plan that are likely to have a material impact on the BHC's capital adequacy and funding profile (e.g., a proposed merger, acquisition, or divestiture; changes in key business strategies; or significant investments) (mandatory element 4).
• Summary of assumptions, limitations, and weaknesses--provides credible support for all assumptions used to derive loss estimates, including assumptions related to the components of loss, severity of loss, and any known weaknesses in the translation of assumptions into loss estimates.
• Governance framework--describes internal governance around the development of the BHC's comprehensive capital plan. Documentation should demonstrate that senior management has provided the board of directors with sufficient information to facilitate the board's full understanding of stress testing used by the firm for capital planning purposes.
• Summary of audit findings--provides a summary of the most recent findings and conclusions from a review of the BHC's capital planning process carried out by internal audit or an independent party. In the discussion, the BHC should describe the scope of audit work and specifically identify any areas of the end-to-end capital planning process that have not been independently reviewed.

If the BHC chooses to organize its capital plan narrative in the format set forth above, the capital plan narrative elements may be submitted as one large file, as individual files, or as several files that combine various elements. When uploading these documents to the secure collaboration site, a BHC should follow these instructions:

1. For document type, categorize all documents as "Capital plan narrative."

2. For document subtype, please choose the appropriate category from the list below based on the descriptions above.

   • Document subtype categories: (1) Complete narrative, (2) Capital plan summary, (3) Capital policy, (4) Planned capital actions, (5) Capital planning process, (6) Risk-identification and risk inventory, (7) BHC scenario design process overview, (8) Material business plan changes, (9) Assumptions - limitations - weaknesses, (10) Governance framework, (11) Summary of audit findings, and (12) Other

     • If the entire capital plan narrative (i.e., all elements above) is in one file, please choose "Complete narrative."
     • If combining some of the elements above into one file, please choose "Other" and provide a description of the supporting document in the "Other - defined" field.
     • If supporting documentation does not fit one of the defined elements above, please choose "Other" and provide a description of the supporting document in the "Other - defined" field.

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Capital Plan and FR Y-14A Supporting Documentation

This section outlines a potential organizational structure for the required documentation that each BHC must submit through the collaboration site to support the capital plan and the FR Y-14A schedules. All model and methodology documentation described below should be organized by the following work streams: retail, wholesale, fair value option and held-for-sale loans, securities, trading, counterparty, operational risk, pre-provision net revenue (PPNR), mortgage-servicing rights (MSR), and regulatory capital transitions. This supporting documentation also addresses mandatory element 1 under the capital plan rule.

• Policies and procedures--all policies and procedures related to the capital planning process, including the BHC's model risk management policy. (See the FR Y-14A Instructions and SR letters 15-18 and 15-19 for specific supervisory expectations for a model risk management policy.)
• Methodology and model inventory mapping to FR Y-14A--provides an inventory of all models and methodologies used to estimate losses, revenues, expenses, balances, and risk-weighted assets and the status of validation/independent review for each. As required by the FR Y-14A Instructions, documentation should also include mapping that clearly conveys the methodology used for each FR Y-14A product line under each stress scenario.

• Methodology documentation--Methodology documentation should include, at a minimum, the following documents: ⁵¹

  • Methodology and process overview--describes key methodologies and assumptions for performing stress testing on the BHC's portfolios, business, and performance drivers. Documentation should clearly describe the model-development process, the derivation of outcomes, and validation procedures as well as assumptions concerning the evolution of balance sheet and risk-weighted assets under the scenarios, changing business strategies, and other impacts to a BHC's risk profile. Supporting documentation should clearly describe any known model weaknesses and how such information is factored into the capital plan.⁵²
  • Model technical documents--BHCs should include thorough documentation in their capital plan submissions that describes and makes transparent key methodologies and assumptions for performing stress testing on the BHC's portfolios. In particular, the design, theory, and logic underlying the methodology should be well-documented and generally supported by published research and sound industry practice.⁵³
  • Model validation--Models employed by BHCs (either developed internally or supplied by a vendor) should be independently validated or otherwise reviewed in line with model risk management expectations presented in existing supervisory guidance, including SR letter 11-7 and SR letters 15-18 and 15-19. Institutions should provide model validation documentation developed in accordance with their internal policies and consistent with supervisory expectations. (See appendix A of the FR Y-14A Instructions.)
  • Audit reports--BHCs should submit audit reports from their internal audit of the capital planning process including reviews of the models and methodologies used in the process. (See appendix A of the FR Y-14A Instructions.)

  • Results finalization and challenge materials--BHCs should ensure that they have sound processes for review, challenge, and aggregation of estimates used in their capital planning processes. This category would be used to provide any documentation relating to the review, challenge, and aggregation processes and the finalization of results that ensures transparency and repeatability. (See appendix A of the FR Y-14A Instructions.)

    Methodology documentation should be provided in accordance with the supporting documentation requirements outlined in the appendix of the
    FR Y-14A Instructions as follows:
  • Retail - See A.2 in the appendix.
  • Wholesale - See A.3 in the appendix.
  • Fair value option and held-for-sale loans - See A.4 in the appendix.
  • AFS/HTM securities - See A.5 in the appendix.
  • Trading - See A.6 in the appendix.
  • Counterparty credit risk - See A.7 in the appendix.
  • Operational risk - See A.8 in the appendix.
  • PPNR - See A.9 in the appendix.
  • MSR - See A.10 in the appendix.
  • Regulatory capital transitions - See Schedule D in the appendix.
• Consolidated pro forma financials methodology--describes (1) how the various balance sheet and income statement line items were developed and reported; (2) the specific assumptions used to calculate regulatory capital, including a discussion of any proposed capital distributions; and (3) any other information necessary to understand the BHC's capital calculations (e.g., calculations related to the projections of the deferred tax asset or servicing assets that may be disallowed for regulatory capital purposes). Methodology documentation should be provided in accordance with the supporting documentation requirements outlined in A.1 of the appendix of the FR Y-14A Instructions for the Income Statement, Balance Sheet, and Capital worksheets.

If a BHC chooses to organize its capital plan and FR Y-14A supporting documentation in the format set forth above, the BHC should follow these instructions:

1. For document type, categorize all supporting documents as "Supporting materials."

   • Do NOT categorize any FR Y-14 supporting documentation as "FR Y-14 Schedule." That category is for FR Y-14 schedules only--that is, Excel or XML files only.

2. For document subtype, please choose the appropriate category from the list below based on the descriptions above.

   • Document subtype categories: (1) Policies and procedures, (2) Methodology inventory mapped to FR Y-14A, (3) Methodology and process overview, (4) Model technical documents, (5) Model validation, (6) Audit reports, (7) Results finalize & challenge materials, (8) Cons pro forma financials methodology, and (9) Other
   • If you have combined some of the elements above into one file, please choose "Other" and provide a description of the supporting document in the "Other - defined" field.
   • If you have supporting documentation that does not fit one of the defined elements above, please choose "Other" and provide a description of the supporting document in the "Other - defined" field.
3. In the "Comment" field, please provide the information described in the appendix of the FR Y-14A Instructions for each supporting document.

4. For the work stream, please choose the appropriate category from the list below.

   • Work stream categories: (1) General, (2) Wholesale, (3) Retail, (4) Operational risk, (5) Securities, (6) Trading, (7) Counterparty, (8) PPNR - balance sheet - RWA, and (9) Regulatory capital.
   • All supporting documentation should be categorized by one of the specific work-stream categories above. The "General" category should only be used for (1) policies and procedures that are not related to a specific work stream, (2) the model/methodology inventory, (3) consolidated pro forma financials methodology, and (4) any documentation on results finalization and the challenge process that are not work-stream specific.

Table A.1. Capital plan submission categorization scheme

Submission type (REQUIRED)	Submission subtype (REQUIRED)	Supporting materials only
		Comment (OPTIONAL) 1	Topic (REQUIRED)
Capital plan narrative	Complete narrative Capital plan Capital policy Planned capital actions Capital adequacy process Risk-identification program overview BHC scenario design process overview Material business plan changes Assumptions - limitations - weaknesses Governance framework Summary of audit findings Other (please define)
Supporting documents (capital plan & FR Y-14)	Policies and procedures Methodology inventory mapped to Y-14A Methodology and process overview Model technical document Model validation Audit report Results finalize & challenge materials Cons pro forma financials methodology Contact list Other (please define) 2		General Wholesale Retail Operational risk Securities Trading Counterparty PPNR - balance sheet - RWA Regulatory capital
FR Y-14 schedule (OFFICIAL TEMPLATES) 3	Y-14A - Sch A - Summary Y-14A - Sch B - Scenario Y-14A - Sch C - Reg cap instruments Y-14A - Sch D - Reg cap transitions Y-14A - Sch E - Ops risk Y-14A - Sch F - Business plan changes Y-14Q - Sch A - Retail Y-14Q - Sch B - Securities Y-14Q - Sch C - Reg cap instruments Y-14Q - Sch D - Reg cap transitions Y-14Q - Sch E - Ops risk Y-14Q - Sch F - Trading Y-14Q - Sch G - PPNR Y-14Q - Sch H - Wholesale Y-14Q - Sch I - MSR valuation Y-14Q - Sch J - FVO/HFS Y-14Q - Sch K - Supplemental Y-14Q - Sch L - Counterparty Y-14Q - Sch M - Balances

1. See FR Y-14A Instructions, Appendix A: Supporting Documentation. Return to table

2. If BHC selects "Other," it will be prompted to provide a description of the submission. Return to table

3. These will be additional submission categories for special collections in CCAR 2016. Return to table

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References

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