[Federal Register Volume 69, Number 141 (Friday, July 23, 2004)]
[Notices]
[Pages 43993-43996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16819]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Proposed Collections; 
Comment Request

AGENCY: Board of Governors of the Federal Reserve System

ACTION: Notice

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SUMMARY: Background. On June 15, 1984, the Office of Management and 
Budget (OMB) delegated to the Board of Governors of the Federal Reserve 
System (Board) its approval authority under the Paperwork Reduction 
Act, as per 5 CFR 1320.16, to approve of and assign OMB control numbers 
to collection of information requests and requirements conducted or 
sponsored by the Board under conditions set forth in 5 CFR 1320 
Appendix A.1. Board-approved collections of information are 
incorporated into the official OMB inventory of currently approved 
collections of information. Copies of the OMB 83-Is and supporting 
statements and approved collection of information instruments are 
placed into OMB's public docket files. The Federal Reserve may not 
conduct or sponsor, and the respondent is not required to respond to, 
an information collection that has been extended, revised, or 
implemented on or after October 1, 1995, unless it displays a currently 
valid OMB control number.

Request for comment on information collection proposals

    The following information collections, which are being handled 
under this delegated authority, have received initial Board approval 
and are hereby published for comment. At the end of the comment period, 
the proposed information collections, along with an analysis of 
comments and recommendations received, will be submitted to the Board 
for final approval under OMB delegated authority. Comments are invited 
on the following:
    a. whether the proposed collections of information are necessary 
for the proper performance of the Federal Reserve's functions; 
including whether the information has practical utility;
    b. the accuracy of the Federal Reserve's estimate of the burden of 
the proposed information collections, including the validity of the 
methodology and assumptions used;
    c. ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    d. ways to minimize the burden of information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.

DATES: Comments must be submitted on or before September 21, 2004.

ADDRESSES: You may submit comments, identified by FR 2436 or FR Y-12, 
by any of the following methods:
     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.

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     E-mail: [email protected]. Include docket 
number in the subject line of the message.
     FAX: 202/452-3819 or 202/452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th & Street and Constitution Avenue, 
N.W., Washington, DC 20551.
    All public comments are available from the Board's web site at 
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, 
except as necessary for technical reasons. Accordingly, your comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper in Room 
MP-500 of the Board's Martin Building (20th and C Streets, N.W.) 
between 9:00 a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: A copy of the proposed forms and 
instructions, the Paperwork Reduction Act Submission (OMB 83-I), 
supporting statements, and other documents that will be placed into 
OMB's public docket files once approved may be requested from the 
agency clearance officer, whose name appears below.
    Cynthia Ayouch, Federal Reserve Board Clearance Officer (202-452-
3829), Division of Research and Statistics, Board of Governors of the 
Federal Reserve System, Washington, DC 20551. Telecommunications Device 
for the Deaf (TDD) users may contact (202-263-4869), Board of Governors 
of the Federal Reserve System, Washington, DC 20551.

SUPPLEMENTARY INFORMATION:

Proposal to approve under OMB delegated authority the extension for 
three years, with revision, of the following reports:

    1. Report title: Semiannual Report of Derivatives Activity
    Agency form number: FR 2436
    OMB control number: 7100-0286
    Frequency: Semiannual
    Reporters: Large U.S. dealers of over-the-counter (OTC) derivatives
    Annual reporting hours: 2,400 hours
    Estimated average hours per response: 150 hours
    Number of respondents: 8
    General description of report: This information collection is 
voluntary (12 U.S.C. Sec. Sec.  248(a)(2) and 353-359) and is given 
confidential treatment (5 U.S.C. Sec.  552(b)(4)).
    Abstract: This voluntary report collects derivatives market 
statistics from eight large U.S. dealers of OTC derivatives. Data are 
collected on notional amounts and gross market values of the volumes 
outstanding of broad categories of foreign exchange, interest rate, 
equity- and commodity-linked OTC derivatives contracts across a range 
of underlying currencies, interest rates, and equity markets.
    This collection of information complements the ongoing triennial 
Survey of Foreign Exchange and Derivatives Market Activity (FR 3036; 
OMB No. 7100-0285). The FR 2436 collects similar data on the 
outstanding volume of derivatives, but not on derivatives turnover. The 
Federal Reserve conducts both surveys in coordination with other 
central banks and forwards the aggregated data furnished by U.S. 
reporters to the Bank for International Settlements, which publishes 
global market statistics that are aggregations of national data.
    Current Actions: The Federal Reserve proposes to revise the FR 2436 
by adding tables to collect data on credit default swaps, effective 
with the December 31, 2004, report date. Given the very rapid growth of 
credit derivatives in recent years, the G-10 central banks determined 
that data on credit default swaps should be collected semiannually. The 
credit default swaps data would be collected on new Tables 4A through 
4D, while existing Table 4 and Table 5 would be re-numbered as Table 5 
and Table 6, respectively.
    The Federal Reserve proposes to collect data on outstanding 
positions (notional, gross positive and gross negative market values) 
of credit default swap contracts for protection bought and protection 
sold by instrument type and counterparty type. Distinguishing between 
protection bought and protection sold is of interest because it gives 
some indication of how credit default swaps are used to shift credit 
risk among market participants. Additionally, notional values of credit 
default swap contracts would be reported by rating category of the 
underlying reference entity, sector of the underlying reference entity, 
and remaining contract maturity.
    Instrument types would be disaggregated into single-name and 
multiple-name instruments.
    Counterparty types would be disaggregated into reporting dealers, 
other financial institutions, and nonreporting financial institutions. 
In addition, other financial institutions would be further 
disaggregated into:
     banks and securities firms
     insurance, reinsurance, and financial guaranty firms
     special purpose entities
     hedge funds
     other
    This finer disaggregation of counterparty types, as compared to the 
disaggregation for other types of OTC derivatives, would enable central 
banks and other data users to get a clearer picture of how credit 
default swaps transfer credit risk within the global financial system.
    Notional values would be further disaggregated by the credit rating 
of the underlying reference entity, by the sector of the underlying 
reference entity, and by remaining maturity of outstanding credit 
default swap contracts.
    Proposed Table 4A-Credit Default Swaps by Rating Category. Data 
would be disaggregated into upper investment grade (AA and higher), 
lower investment grade (A and BBB), non investment grade (BB and 
lower), and not rated. Information on the credit rating of the 
reference entity would give central banks and other data users a 
clearer picture of the nature and amount of credit risk that is being 
transferred in the credit default swap market.
    Proposed Table 4B-Credit Default Swaps by Sector of the Reference 
Entity. Data would be disaggregated into financial firms, nonfinancial 
firms, sovereigns, and multiple sectors (for multiple-name 
instruments). Information on the sector of the reference entity would 
give central banks and other data users a clearer picture of the nature 
of the credit risk that is being transferred in the credit default swap 
market.
    Proposed Table 4C-Credit Default Swaps by Remaining Contract 
Maturity. Data would be disaggregated into one year or less, over one 
year through five years, and over five years.
    Proposed Table 4D-Credit Default Swaps, Gross Positive and Gross 
Negative Market Values. Data would show the magnitude of unsettled 
changes in value of credit default swap contracts outstanding at the 
time of reporting. Such a time series is a valuable source of 
information for researchers and market participants in developing an 
understanding of the role and function of the credit default swap 
market in financial systems in various circumstances.
    The Federal Reserve would like to solicit comments about Table 4A; 
specifically about the costs and benefits of a further breakdown of 
column ``A/BBB'' into two separate columns, ``A'' and ``BBB.'' At many 
institutions, the ``A'' and ``BBB'' categories are of comparable size, 
and the proportion in each category is not constant over time, but 
appears to vary over the business cycle. Moreover, the default

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probabilities of A- and BBB-rated bonds, while both quite small, are 
nonetheless quite different, with a BBB-rated bond four times more 
likely to default over a five-year period than an A-rated bond.
    2. Report title: Consolidated Bank Holding Company Report of Equity 
Investments in Nonfinancial Companies
    Agency form number: FR Y-12
    OMB control number: 7100-0300
    Frequency: Quarterly and semi-annually
    Reporters: Bank holding companies
    Annual reporting hours: 1,696 hours
    Estimated average hours per response: 16 hours
    Number of respondents: 28
    General description of report: This information collection is 
mandatory pursuant to Section 5(c) of the Bank Holding Company Act (12 
U.S.C. 1844(c)) and data may be exempt from disclosure pursuant to 
Sections (b)(4) and (b)(8) of the Freedom of Information Act (5 U.S.C. 
552(b)(4) and (b)(8)).
    Abstract: The FR Y-12 was implemented as of September 30, 2001, in 
response to the Gramm-Leach-Bliley Act (GLB Act) of 1999, which 
broadened the scope of permissible investments in nonfinancial 
companies. The FR Y-12 collects information from certain domestic bank 
holding companies (BHCs) on their investments in nonfinancial companies 
on three schedules: Type of Investments, Type of Security, and Type of 
Entity within the Banking Organization. Large BHCs report on a 
quarterly basis, and small BHCs report semi-annually.
    Current Actions: The Federal Reserve proposes to revise the FR Y-12 
reporting form and instructions to enhance the Federal Reserve's 
ability to monitor and supervise the private equity merchant banking 
(PEMB) activity across all BHCs for purposes of safety and soundness. 
The proposed revisions to the FR Y-12 include (1) modifying the 
reporting threshold to reduce regulatory burden; (2) adding a 
memorandum item to Schedule A to collect data on investments managed 
for others; (3) adding a memorandum item to Schedule B to identify 
whether the BHC holds any warrants received in connection with equity 
investment activity; (4) simplifying Schedule C by eliminating three 
columns used to collect data on direct investments in public entities, 
direct investments in nonpublic entities, and all indirect investments; 
and (5) adding Schedule D ``Nonfinancial Investment Transactions During 
the Reporting Period'' to ollect information on all PEMB activity of 
the BHC during the reporting period and to better reflect the 
industry's focus on monitoring ``cash in and cash out.'' The Federal 
Reserve proposes to defer implementation of the revised FR Y-12 until 
March 31, 2005, to coincide with the implementation of proposed 
revisions to the FR Y-9C and FR Y-9SP reports (OMB No. 7100-0128).

Proposed Revisions to the FR Y-12 Reporting Form and Instructions

Schedule A - Type of Investments
     Retitle - Memorandum item 3 from ``Impact on net income 
from items 1, 2, and 3 above'' to ``Pre-tax impact on net income from 
items 1, 2, and 3 above.'' This modification would clarify the intent 
of the original item, as discussed in the instructions.
     Add - Memorandum item 4 ``Investments managed for 
others.'' This item would collect information on the extent of the 
BHC's role in managing private equity investments for others. This item 
would be used to provide new information regarding the extent of the 
institution's PEMB operation. Significant investment funds management 
activity could increase the inherent legal and reputational risk of the 
institution.
Schedule B - Type of Security
     Add - Memorandum item 2 ``Does the BHC hold any Warrants 
or similar instruments received in connection with equity investment 
activity? (Enter ``1'' if yes, ``0'' if no).'' This item would be used 
to identify whether the BHC holds any warrants or similar instruments 
received in connection with equity investment activity or similar 
``equity kickers'' that, while typically carried at only a nominal 
value, may potentially increase the risk profile of the corporation.
Schedule C - Type of Entity within the Banking Organization
Schedule C would be modified to categorize the type of investments, 
reported in Schedule A, by the booking entity within the banking 
organization. The portfolio totals from Schedule C should equal 
portfolio totals reported for Schedule A.
     Add - New column ``(Column B) Net Unrealized Holding Gains 
Not Recognized As Income.'' This information would identify net 
unrealized holding gains (or losses) that have not been recognized as 
income within the BHC structure through which the investments are made, 
as reported in Schedules A and B.
     Retitle - Old column ``(Column B) Carrying Value'' as 
``(Column C) Carrying Value.'' Add - Item 2.b ``Edge and 
agreement corporations,'' renumber ``SBICs'' as item 2.a, and renumber 
``Broker/Dealers'' as item 2.c. This breakout from ``All other'' would 
provide consistency with item 1, as Edge and agreement corporations may 
be housed in either a depository institution or parent holding company 
structure.
     Add - Item 2.d ``Private Equity subsidiaries'' and 
renumber ``All other'' as item 2.e. This additional breakout would 
identify those BHCs that have established nonbank subsidiaries 
primarily devoted to the PEMB activity. The larger BHCs active in PEMB 
have typically established private equity subsidiaries.
     Delete - Current Columns C, D, and E Carrying Value for: 
``Direct Investments in Public Entities,'' ``Direct Investments in 
Nonpublic Entities,'' and ``All Indirect Investments.'' These data were 
not significantly different than data collected in Schedule A, and 
Columns A and B of Schedule C.
Schedule D - Nonfinancial Investment Transactions During the Reporting 
Period
     Add - This proposed schedule would collect information on 
all PEMB activity of the BHC, on an aggregate basis, for the reporting 
period. Columns A and B would collect acquisition cost and carrying 
value for all purchases, returns of capital, and net changes in 
valuation made for all direct investments. Columns C and D would 
collect information on the same items for all transactions involving 
indirect (fund) investments. These data would provide valuable insight 
into the scope of activity on a transaction basis and, when reviewed 
over time, would provide critical trend data useful for industry 
studies as well as BHC supervisory monitoring.
    The proposed FR Y-12 instructions would be reorganized and 
clarified to conform with the proposed changes to the reporting form.

Proposed Revisions to the FR Y-12 Respondent Reporting Threshold 
Criteria

     Modify the reporting threshold criteria for respondents 
that file the FR Y-9C, by decreasing the aggregate nonfinancial equity 
investments threshold from $200 million to $100 million (on an 
acquisition cost basis) and increasing the consolidated Tier 1 capital 
threshold from 5 percent to 10 percent.
     Modify the reporting threshold criterion for respondents 
that file the FR Y-9SP, by increasing the total capital threshold from 
5 percent to 10 percent.
    The proposed decrease in the reporting threshold from $200 million 
to $100 million would require reporting from large complex banking 
organizations that have a significant

[[Page 43996]]

concentration of capital invested in this asset class, but fall below 
the current reporting threshold.
    The proposed increase in the reporting threshold from 5 percent to 
10 percent of capital would reduce burden for respondents, while 
continuing to screen for the smaller BHCs with a significant 
concentration of capital invested in this asset class.
     Delete - ``Has the bank holding company made an effective 
election to become a financial holding company?'' This information is 
readily available on the National Information Center database.
     Modify - Clarify the legal authority to read: ``Directly 
or indirectly through a subsidiary or affiliate, any nonfinancial 
equity investments within a Small Business Investment Company 
structure, or under section 4(c)(6) or 4(c)(7) of the Bank Holding 
Company Act, or pursuant to the merchant banking authority of section 
4(k)4(H) of the Bank Holding Company Act, or pursuant to the investment 
authority granted by Regulation K.''
    The Federal Reserve would like to solicit comments on the following 
issues related to the FR Y-12:
    1. Request comment on the reporting of information on an 
acquisition cost and carrying value basis. Specifically, whether the 
revised instructions on ``acquisition cost'' give BHCs the flexibility 
to report carrying cost in a manner consistent with how they maintain 
their internal books and records.
    2. Request comment on the reporting of information on convertible 
debt. Specifically, whether the reporting of convertible debt 
information is burdensome.
    3. Request comment on proposed Schedule D, ``Nonfinancial 
Investment Transactions During the Reporting Period.'' Specifically, 
whether the information requested is readily available.
    Board of Governors of the Federal Reserve System, July 19, 2004.

Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 04-16819 Filed 7-22-04; 8:45 am]
BILLING CODE 6210-01-S