Capital
CAP 1. Capital Pre-Positioning and Balance
Q. How should a firm determine the appropriate balance between resources pre-positioned at the U.S. IHC subsidiaries and held at the U.S. IHC?
A. The 2018 Guidance addresses this issue on pages 5-6. The Agencies are not prescribing a specific percentage allocation of resources pre-positioned at the U.S. IHC subsidiaries versus resources held at the U.S. IHC. In considering the balance between certainty and flexibility, the Agencies note that the risk profile of each U.S. IHC subsidiary should inform the "unanticipated losses" at the entity, which should be taken into account in determining the appropriate balance.
CAP 2. Definition of "Well-Capitalized" Status
Q. How should firms apply the term "well-capitalized"?
A. U.S. non-branch material entities must comply with the capital requirements and expectations of their primary regulator. U.S. non-branch material entities should be recapitalized to meet jurisdictional requirements and to maintain market confidence as required under the U.S. resolution strategy.
CAP 3. RCEN Relationship to DFAST Severely Adverse Scenario
Q. How should the firm's RCEN and RLEN estimates relate to the DFAST Severely Adverse scenario? Can those estimates be recalibrated in actual stress conditions?
A. For resolution plan submission purposes, the estimation of RLEN and RCEN should assume macroeconomic conditions consistent with the DFAST Severely Adverse scenario.
However, the RLEN and RCEN methodologies should have the flexibility to incorporate macroeconomic conditions that may deviate from the DFAST Severely Adverse scenario in order to facilitate execution of the U.S. resolution strategy.
CAP 4. TLAC Rule
Q. Since the plan submission date in 2018 precedes the compliance date in 2019 of the Federal Reserve's final TLAC rule, should firms document their current or future state compliance with the final TLAC rule?
A. The Agencies are not pulling forward the requirements of the final TLAC rule. Firms should document both their current state and their planned future state with respect to IHC TLAC in their discussions of RCAP.