Board of Governors of the Federal Reserve System

Notice of the Board's Supervision and Regulation Assessment for Year 2021

Section 318 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") directed the Board of Governors of the Federal Reserve System ("Board") to collect assessments, fees, or other charges ("assessments") from bank holding companies ("BHCs") and savings and loan holding companies ("SLHCs") with $50 billion or more in total consolidated assets, and from nonbank financial companies designated by the Financial Stability Oversight Council pursuant to section 113 of the Dodd-Frank Act for supervision by the Board ("nonbank financial company supervised by the Board") (collectively, "assessed companies") equal to the expenses the Board estimates are necessary or appropriate to carry out its supervision and regulation of those companies.

In 2018, Section 401(c) of the Economic Growth, Regulatory Relief, and Consumer Protection Act ("EGRRCPA") raised the size threshold for assessments for BHCs and SLHCs from $50 billion to $100 billion in total consolidated assets. Therefore, BHCs and SLHCs with total consolidated assets between $50 billion and $100 billion were no longer subject to assessments starting in 2018. In addition, section 401 of EGRRCPA directed the Board to adjust the amount charged to assessed companies with total consolidated assets between $100 billion and $250 billion to reflect any changes in supervisory and regulatory responsibilities resulting from EGRRCPA. The Board issued a final rule implementing the requirements of section 401 of EGRRCPA in December 2020.¹

This notice provides the pertinent information for the 2021 assessment. Refer to the Federal Reserve Act and Regulation TT² for the relevant underlying provisions related to assessments.

Assessment period: The 2021 assessment period is January 1, 2021, through December 31, 2021.

Assessed companies: An assessed company for the 2021 assessment period is a top-tier company³ that on December 31, 2021, is (1) a BHC with average total consolidated assets of $100 billion or more during the assessment period, (2) a SLHC with average total consolidated assets of $100 billion or more during the assessment period, or (3) a nonbank financial company supervised by the Board. The Board has determined that there are 54 assessed companies for the 2021 assessment period.

Assessment basis: As provided in Regulation TT, the assessment basis is the three-year 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.⁴ The Board does not determine costs for supervising and regulating assessed companies on a firm-by-firm basis. Instead, each year, the total cost associated with overseeing assessed companies is estimated through the use of a cost accounting process and time surveys. Below is the description of how the 2021 assessment basis was calculated.

For 2019, 2020, and 2021 overall supervision and regulation and related operating expenses at the Reserve Banks and the Board totaled $2,261.5, $2,198.8, and $2,345.6 million, composed of, $1,473.0, $1,467.4, and $1,574.5 million in supervision and regulation operating expenses for the Federal Reserve Banks ("Reserve Banks") and $788.5, $731.4, and $771.1 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, is used to allocate salaries and other personnel expenses. In July 2021, the Reserve Banks adopted a new cost accounting framework. The new framework, Cost Accounting Strategic Planning and Reporting (CASPR), established cost-accounting policies and provides a uniform reporting structure for accumulating and reporting cost data for priced, reimbursable, assessed, and other central bank services of all Federal Reserve Banks. The framework provides rules to ensure the consistent application at all Reserve Banks of cost-accounting methodologies, data comparability, and practical measures of the cost of providing Federal Reserve services. The cost-accounting and data-reporting guidelines follow the direct and indirect cost-accounting policies for Federal Reserve services as determined and required by the Monetary Control Act of 1980; Section 318 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act); and the requirements for reimbursable expenses under fiscal agency arrangements made with the U.S. Treasury, other government agencies, and government-sponsored enterprises.

The expenses presented for 2021 represent the actual expenses incurred under the CASPR cost allocation methodology while expenses presented for 2019 and 2020 reflect actual expenses incurred under the former methodology. The CASPR implementation resulted in differences in costs allocated across Reserve Banks, cost centers, and business lines. The increase in estimated costs for 2021 is primarily due to this change in accounting methodology and increasing pension service costs.

The total estimated Reserve Bank operating expenses are comprised of direct, indirect, and pension expenses attributed to the supervision and regulation of assessed companies. The Reserve Banks' expenses directly attributable to the supervision of these companies were $208.0, $194.5, $248.0 million, for 2019, 2020, and 2021, respectively. Expenses for support and overhead attributable to the supervision of these companies (indirect expenses) were $107.5, $105.9, and $157.9 million. A proportional share of the Reserve Banks' expenses for other activities integral to supervisory activities⁵ are also included in the assessment basis. These proportions⁶ were applied to the direct and indirect components of activities integral to supervisory responsibilities, which resulted in an additional $122.7, $118.0, and $114.0 million of direct expenses and $97.9, $98.9, and $113.4 million of indirect expenses in 2019, 2020, and 2021, respectively. A proportional share of the Reserve Banks' pension expenses was also added to the assessment basis. In 2019, 2020, and 2021 these amounts were $76.6, $68.8, and $120.2 million, respectively. Excluded from the assessment basis in 2019, 2020, and 2021 were $31.5, $24.7, and $28.3 million, respectively, for Examiner Commissioning Program (ECP) and Shared National Credit Program (SNC) expenses.⁷  Based on these expenses, the total estimated Reserve Bank operating expenses for supervising these companies for 2019, 2020, and 2021 were, respectively, $581.4, $561.4, and $725.3 million.

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 Supervision and Regulation, Consumer and Community Affairs, Research and Statistics, International Finance, Monetary Affairs, Financial Stability, and Legal. The remaining divisions are classified as indirect based on the support, necessary for the continuation of normal operations, they provide to the direct divisions.⁸

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 2019, 2020, and 2021, operating expenses of the direct divisions totaled $391.7, $360.3, and $371.4 million, respectively, of which 9.2 percent ($36.2 million), 7.8 percent ($28.0 million), and 7.6 percent ($28.1 million) respectively, 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, attributable to the supervision and regulation of these 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 these companies relative to the total employee time at the Board. This percentage 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 2019, 2020, and 2021 the indirect divisions' expenses totaled $396.7, $371.1, and $399.6 million respectively, with corresponding expense ratios of 4.6 percent ($17.9 million), 8.5 percent ($31.7 million), and 9.1 percent ($36.3 million). The Board also includes in the assessment basis a similarly calculated proportion of the Board's pension expenses, which for 2019, 2020, and 2021 was $3.1, $2.9, and $6.3 million respectively. Thus, the total estimated Board operating expenses (direct, indirect and pension expenses) attributed to the supervision and regulation of assessed BHCs and SLHCs and nonbank financial companies supervised by the Board for 2019, 2020, and 2021, were, $57.2, $62.6, and $70.6 million, respectively.

Taking into account Reserve Bank and Board estimated operating expenses, the Board estimates that the total costs necessary or appropriate to carry out its supervision and regulation of assessed companies for 2019, 2020, and 2021 were $638.6, $624.0, and $796.0 million, respectively. For the 2021 assessment period, the assessment basis is $686.2 million, the three-year average. This represents a $68.8 million, or 11.1 percent, increase from the 2020 assessment basis. The tables below provide a summary of the Board's estimate of expenses for 2019, 2020, and 2021.

2019 Actual Data

2020 Actual Data

2021 Actual Data

For the 2022 assessment period, based on actual expenses in 2020 and 2021, and forecasted expenses in 2022, the Board estimates that the 2022 assessment basis will be approximately 9.6 percent greater than the 2021 assessment basis. This increase is subject to change as actual 2022 expenses are realized.

Assessment Rate:

Section 401 of EGRRCPA directed the Board to adjust the amount charged to assessed companies with between $100 billion and $250 billion in total consolidated assets to reflect any changes in supervisory and regulatory responsibilities resulting from EGRRCPA. In connection with implementing EGRRCPA, the Board modified the application of certain enhanced prudential standards and supervisory and regulatory programs for Category IV firms relating to capital stress testing; capital planning; risk management; liquidity risk management, stress testing, and buffer requirements; single-counterparty credit limits; and resolution planning programs. As described in the final rule, as a result of these changes, the Board expects the share of its expenses incurred in the supervision and regulation of Category IV and "other" firms to decline relative to the share of expenses incurred in the supervision and regulation of assessed companies subject to Categories I, II, and III standards (Category I, II, and III firms). In particular, the expenses associated with these programs for Category IV and "other" firms were estimated to be approximately 10 percent of the Board's total estimated expenses for assessed companies according to the most recently available data as of the Board's adoption of Regulation TT. Accordingly, the Board revised Regulation TT to adjust the amount charged to assessed companies with total consolidated assets between $100 billion and $250 billion to reflect EGRRCPA-related changes by reducing Category IV and "other" firms' share of the net assessment basis by 10 percent.

As provided in the revised Regulation TT, the assessment rate for Category IV and "other" firms would have been determined according to the following formula, where the estimated share of total program costs attributable to EGRRCPA-related supervisory and regulatory changes for Category IV and "other" firms is represented by the variable S (which has been set at 10 percent):⁹

 Assessment rate for Category IV and "other" firms =

[(Net assessment basis x Category IV and "other" firms' share of the total assessable assets of all assessed companies) x (1 – S)]

Category IV firms and "other" firms' total assessable assets

 

The assessment rate for Category IV and "other" firms was determined by multiplying the net assessment basis by these firms' share of the total assessable assets of all assessed companies multiplied by 0.9 (i.e., 1 – S, or 1 – 0.1), the product of which is then divided by the total assessable assets of Category IV and "other" firms.

The assessment rate for Category I, II, and III firms has been determined according to the following formula:¹⁰

Assessment rate for Category I, II and III firms =

 [(Net assessment basis x Category I, II, and III firms' share of the total assessable assets of all assessed companies) + (Net assessment basis x Category IV and "other" firms' share of total assessable assets x S)]

Category I, II, and III firms' total assessable assets

 

The assessment rate for Category I, II, and III firms was determined by multiplying the net assessment basis by these firms' share of the total assessable

For the 2021 assessment rate calculation, the assessment basis was $686.2 million, the number of BHCs and SLHCs with $100 billion or more in total consolidated assets and nonbank financial companies supervised by the Board was 54, and the total assessable assets of these companies was $23,071.2 billion.

For the 30 Category IV and "other" firms with total assessable assets of $3,033.2 billion the assessment rate is 0.00002628.

Assessment rate =

[$686.2 million x ($3,033.2 billion / $23,071.2 billion) x (1– .10)] - (30 x $50,000) = 0.00002628
$3,033.2 billion

 

For the 24 Category I, II, and III firms with total assessable assets of $20,038.0 billion the assessment rate is 0.00003013.

Assessment rate =

[$686.2 million x (($20,038.0 billion / $23,071.2 billion) +

(($3,033.2 billion / $23,071.2 billion) x .10))] – (24 x $50,000) = 0.00003013
$20,038.0 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).¹¹ The Board calculated each assessment using this formula and provided 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.¹²

Notice of Assessment: For the 2021 assessment, the Board issued a notice of assessment to each assessed company on June 30, 2022.

Appeal Period: Each assessed company will have thirty calendar days from June 30, 2022, 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 2021 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, 2022. 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 Regulation TT (delinquent payments).¹³ 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. 85 FR 78949 (Dec, 8, 2020). Return to text

2. 12 U.S.C. § 248(s); 12 CFR 246 et seq. Return to text

3. 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 $100 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

4. 12 CFR 246.4(d)(2). Return to text

5. 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

6. To determine the proportion of the Reserve Banks' other activities integral to supervisory activities to include in the assessment basis, each year 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 2019, 2020 and 2021 the percentages reflecting the proportional share of supervisory activities directly attributable to assessed companies was 36.3 percent, 35.2 percent, and 40.3 percent, respectively. Return to text

7. 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

8. 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

9. 12 CFR 246.4(c)(1)(i). Return to text

10. 12 CFR 246.4(c)(1)(ii). Return to text

11. 12 CFR 246.4(b)(1). Return to text

12. 12 CFR 246.4(e). Return to text

13. 12 CFR 246.6(b). Return to text