The Federal Reserve Board and the Office of the Comptroller of the Currency today announced that they have permitted Wells Fargo and its subsidiary national banks to begin using the “advanced approaches” capital framework starting in the second quarter of 2015.

     Under this framework, firms must meet specific risk-measurement and risk-management criteria when calculating their risk-based capital requirements.  The framework implements standards developed by the Basel Committee on Banking Supervision and applies to large, internationally active banking organizations–generally those with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure–and includes the depository institution subsidiaries of those firms.

     Before a banking organization may use the advanced approaches framework, it must conduct a satisfactory trial, or “parallel run,” using the framework.  Under the supervision of its regulator, a firm must show it can comply with the framework during the parallel run period for at least four consecutive calendar quarters by using risk-measurement and risk-management systems that adhere to the advanced approaches framework.

     Wells Fargo and Company and its subsidiary national banks (Wells Fargo Bank Northwest, National Association; Wells Fargo Bank South Central, National Association; Wells Fargo Bank, National Association; and Wells Fargo Financial National Bank) have each completed a parallel run.  These firms will use the advanced approaches framework to calculate and publicly disclose their risk-based capital ratios beginning in the second quarter of 2015.  The firms must meet the minimum risk-based capital ratios under both the advanced approaches and the generally applicable risk-based capital frameworks.

——-  Wells Fargo gets U.S. approval to use internal models for capital

Tue Mar 31, 2015 3:28pm EDT

     (Reuters) – Wells Fargo won regulatory approval on Tuesdayfrom federal banking regulators to use its own tailored risk models for determining its capital requirements.

     The sign-off by the Federal Reserve and the Office of the Comptroller of the Currency comes about one year after the regulators gave similar approvals to other big banks. [ID: nL2N0LQ1M7]

 —— February 21st 2014 Federal Reserve Joint Announcement

     The Federal Reserve Board and the Office of the Comptroller of the Currency on Friday permitted certain banking organizations to begin using an additional approach to determine their risk-based capital requirements.

     Under the agencies’ “Advanced Approaches” capital framework, which implements standards developed by the Basel Committee on Banking Supervision, firms must meet specific risk measurement and management criteria when calculating their risk-based capital requirements. The framework applies to large, internationally active banking organizations–generally those with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure–and includes the depository institution subsidiaries of those firms.

     Before a banking organization may use the Advanced Approaches framework to determine its risk-based capital requirements, it must conduct a satisfactory trial, or “parallel run,” using the Advanced Approaches framework. Under the supervision of its regulator, a firm must show it can comply with the Advanced Approaches framework during the parallel run period for at least four consecutive calendar quarters using risk-measurement and risk-management systems that adhere to the Advanced Approaches framework.

     Eight bank holding companies, eight national banks, and four state member banks have completed their parallel run: The Bank of New York Mellon Corporation, the Bank of New York Mellon, and BNY Mellon National Association; Citigroup Inc. and Citibank, NA; The Goldman Sachs Group, Inc. and Goldman Sachs Bank USA; JPMorgan Chase & Co., JPMorgan Chase Bank, NA, Chase Bank USA National Association, and JPMorgan Bank and Trust Company, National Association; Morgan Stanley, Morgan Stanley Bank, NA, and Morgan Stanley Private Bank, NA; Northern Trust Corporation and The Northern Trust Company; State Street Corporation and State Street Bank and Trust Company; and U.S. Bancorp and U.S. Bank National Association. These firms will use the Advanced Approaches framework to calculate and publicly disclose their risk-based capital ratios beginning with the second quarter of 2014. Under the capital rules finalized by U.S. regulators in July 2013, these firms must meet the minimum risk-based capital ratios under both the Advanced Approaches and the generally applicable risk-based capital frameworks.

     Also on Friday, the Federal Reserve Board issued a final rule clarifying that bank holding companies using the Advanced Approaches framework will incorporate those changes into the capital planning and stress testing cycles that begin October 1, 2015. The Board previously adopted two interim final rules requiring firms to incorporate the Advanced Approaches framework into their capital planning and stress testing cycles that begin October 1, 2014. The final rule provides the Federal Reserve and the institutions additional time to integrate the Advanced Approaches framework into their respective stress testing and capital planning processes.