SECTION 217.121—Qualification
Process
(a) Timing.
(1) A Board-regulated institution that
is described in section 217.100(b)(1)(i) and (ii) must adopt a written
implementation plan no later than six months after the date the Board-regulated
institution meets a criterion in that section. The implementation
plan must incorporate an explicit start date no later than 36 months
after the date the Board-regulated institution meets at least one
criterion under section 217.100(b)(1)(i) and (ii). The Board may extend
the start date.
(2) A Board-regulated
institution that elects to be subject to this subpart under section
217.101(b)(1)(iii) must adopt a written implementation plan.
(b) Implementation plan.
(1) The Board-regulated institution’s
implementation plan must address in detail how the Board-regulated
institution complies, or plans to comply, with the qualification requirements
in section 217.122. The Board-regulated institution also must maintain
a comprehensive and sound planning and governance process to oversee
the implementation efforts described in the plan. At a minimum, the
plan must:
(i) Comprehensively
address the qualification requirements in section 217.122 for the
Board-regulated institution and each consolidated subsidiary (U.S.
and foreign-based) of the Board-regulated institution with respect
to all portfolios and exposures of the Board-regulated institution
and each of its consolidated subsidiaries;
(ii) Justify and support any proposed
temporary or permanent exclusion of business lines, portfolios, or
exposures from the application of the advanced approaches in this
subpart (which business lines, portfolios, and exposures must be,
in the aggregate, immaterial to the Board-regulated institution);
(iii) Include the Board-regulated
institution’s self-assessment of:
(A) The Board-regulated institution’s
current status in meeting the qualification requirements in section
217.122; and
(B) The consistency of
the Board-regulated institution’s current practices with the
Board’s supervisory guidance on the qualification requirements;
(iv) Based on the
Board-regulated institution’s self-assessment, identify and
describe the areas in which the Board-regulated institution proposes
to undertake additional work to comply with the qualification requirements
in section 217.122 or to improve the consistency of the Board-regulated
institution’s current practices with the Board’s supervisory
guidance on the qualification requirements (gap analysis);
(v) Describe what specific actions the
Board-regulated institution will take to address the areas identified
in the gap analysis required by paragraph (b)(1)(iv) of this section;
(vi) Identify objective, measurable
milestones, including delivery dates and a date when the Board-regulated
institution’s implementation of the methodologies described
in this subpart will be fully operational;
(vii) Describe resources that have been
budgeted and are available to implement the plan; and
(viii) Receive approval of the Board-regulated
institution’s board of directors.
(2) The Board-regulated institution must
submit the implementation plan, together with a copy of the minutes
of the board of directors’ approval, to the Board at least 60
days before the Board-regulated institution proposes to begin its
parallel run, unless the Board waives prior notice.
(c) Parallel run. Before determining
its risk-weighted assets under this subpart and following adoption
of the implementation plan, the Board-regulated institution must conduct
a satisfactory parallel run. A satisfactory parallel run is a period
of no less than four consecutive calendar quarters during which the
Board-regulated institution complies with the qualification requirements
in section 217.122 to the satisfaction of the Board. During the parallel
run, the Board-regulated institution must report to the Board on a
calendar quarterly basis its risk-based capital ratios determined
in accordance with section 217.10(b)(1) through (3) and section 217.10(d)(1)
through (3). During this period, the Board-regulated institution’s
minimum risk-based capital ratios are determined as set forth in subpart
D of this part.
(d) Approval to calculate
risk-based capital requirements under this subpart. The Board
will notify the Board-regulated institution of the date that the Board-regulated
institution must begin to use this subpart for purposes of section
217.10 if the Board determines that:
(1) The Board-regulated institution fully
complies with all the qualification requirements in section 217.122;
(2) The Board-regulated institution
has conducted a satisfactory parallel run under paragraph (c) of this
section; and
(3) The Board-regulated
institution has an adequate process to ensure ongoing compliance with
the qualification requirements in section 217.122.
