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4-790

SUBPART L—COMPANY-RUN STRESS TEST REQUIREMENTS FOR FOREIGN BANKING ORGANIZATIONS AND FOREIGN SAVINGS AND LOAN HOLDING COMPANIES WITH TOTAL CONSOLIDATED ASSETS OVER $10 BILLION BUT LESS THAN $50 BILLION

SECTION 252.120—Definitions

For purposes of this subpart, the following definitions apply:
(a) Eligible asset means any asset of the U.S. branch or U.S. agency held in the United States that is recorded on the general ledger of a U.S. branch or U.S. agency of the foreign banking organization (reduced by the amount of any specifically allocated reserves held in the United States and recorded on the general ledger of the U.S. branch or U.S. agency in connection with such assets), subject to the following exclusions and, for purposes of this definition, as modified by the rules of valuation set forth in paragraph (a)(2) of this section.
(1) The following assets do not qualify as eligible assets:
(i) Equity securities;
(ii) Any assets classified as loss at the preceding examination by a regulatory agency, outside accountant, or the bank’s internal loan review staff;
(iii) Accrued income on assets classified loss, doubtful, substandard or value impaired, at the preceding examination by a regulatory agency, outside accountant, or the bank’s internal loan review staff;
(iv) Any amounts due from the home office, other offices and affiliates, including income accrued but uncollected on such amounts;
(v) The balance from time to time of any other asset or asset category disallowed at the preceding examination or by direction of the Board for any other reason until the underlying reasons for the disallowance have been removed;
(vi) Prepaid expenses and unamortized costs, furniture and fixtures and leasehold improvements; and
(vii) Any other asset that the Board determines should not qualify as an eligible asset.
(2) The following rules of valuation apply:
(i) A marketable debt security is valued at its principal amount or market value, whichever is lower;
(ii) An asset classified doubtful or substandard at the preceding examination by a regulatory agency, outside accountant, or the bank’s internal loan review staff, is valued at 50 percent and 80 percent, respectively;
(iii) With respect to an asset classified value impaired, the amount representing the allocated transfer risk reserve that would be required for such exposure at a domestically chartered bank is valued at 0 and the residual exposure is valued at 80 percent; and
(iv) Real estate located in the United States and carried on the accounting records as an asset are valued at net book value or appraised value, whichever is less.
(b) Foreign savings and loan holding company means a savings and loan holding company as defined in section 10 of the Home Owners’ Loan Act (12 U.S.C. 1467a(a)) that is incorporated or organized under the laws of a country other than the United States.
(c) Liabilities of all U.S. branches and agencies of a foreign banking organization means all liabilities of all U.S. branches and agencies of the foreign banking organization, including acceptances and any other liabilities (including contingent liabilities), but excluding:
(1) Amounts due to and other liabilities to other offices, agencies, branches and affiliates of such foreign banking organization, including its head office, including unremitted profits; and
(2) Reserves for possible loan losses and other contingencies.
(d) Pre-provision net revenue means revenue less expenses before adjusting for total loan loss provisions.
(e) Stress test cycle has the same meaning as in subpart F of this part.
(f) Total loan loss provisions means the amount needed to make reserves adequate to absorb estimated credit losses, based upon management’s evaluation of the loans and leases that the company has the intent and ability to hold for the foreseeable future or until maturity or payoff, as determined under applicable accounting standards.

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