12 CFR 217.121 – Qualification process
(a) Timing. (1) A Board-regulated institution that is described in § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 217.10(b)(1) through (3) and § 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 § 217.10 if the Board determines that:
(1) The Board-regulated institution fully complies with all the qualification requirements in § 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 § 217.122.