[Federal Register Volume 73, Number 188 (Friday, September 26, 2008)]
[Rules and Regulations]
[Pages 55706-55708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22702]
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FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H and Y; Docket No. 1332]
Risk-Based Capital Guidelines; Leverage Capital Guidelines
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Interim final rule with request for public comment.
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SUMMARY: To reduce liquidity and other strains being experienced by
money market mutual funds, the Federal Reserve System adopted on
September 19, 2008, a special lending facility (ABCP Lending Facility)
that enables depository institutions and bank holding companies to
borrow from the Federal Reserve Bank of Boston on a nonrecourse basis
if they use the proceeds of the loan to purchase certain types of
asset-backed commercial paper (ABCP) from money market mutual funds. To
facilitate this Federal Reserve lending program, the Board of Governors
of the Federal Reserve System (Board) also has adopted, on an interim
final basis, an exemption from its leverage and risk-based capital
rules for ABCP held by a state member bank or bank holding company as a
result of its participation in this program.
DATES: The interim final rule became effective on September 19, 2008.
Comments must be received on or before October 31, 2008.
ADDRESSES: You may submit comments, identified by Docket No. R-1332, 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.
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,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified 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 form in Room MP-500 of the Board's Martin Building (20th and C
Street, NW) between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Mark E. Van Der Weide, Assistant
General Counsel, (202) 452-2263, or Andrea R. Tokheim, Counsel, (202)
452-2300, Legal Division; Barbara J. Bouchard, Associate Director,
(202) 452-3072, or Juan C. Climent, Senior Supervisory Financial
Analyst, (202) 872-7526, Division of Banking Supervision and
Regulation. For the hearing impaired only, Telecommunication Device for
the Deaf (TDD), (202) 263-4869.
SUPPLEMENTARY INFORMATION: In light of the ongoing dislocations in the
financial markets, and the impact of such dislocations on the
functioning of the markets for ABCP and on the operations of money
market mutual funds, the Board adopted the ABCP Lending Facility on
September 19, 2008. Under the ABCP Lending Facility, depository
institutions and bank holding companies (banking organizations) are
able to borrow from the Federal Reserve Bank of Boston on a nonrecourse
basis on condition that the organizations use the proceeds of the
Federal Reserve credit to purchase, at amortized cost, certain highly
rated U.S. dollar-denominated ABCP from money market mutual funds. The
ABCP purchased must be used to secure the borrowing from the Reserve
Bank. The purpose of the ABCP Lending Facility is to assist money
market mutual funds to obtain liquidity by enabling them to sell some
of their high-credit-quality secured assets at amortized cost. The ABCP
Lending Facility will expire on January
[[Page 55707]]
30, 2009 (unless further extended by the Board).
Banking organizations that participate in the ABCP Lending Facility
must acquire and hold ABCP on their balance sheet. These ABCP holdings
attract leverage and risk-based capital charges under the Board's
regulatory capital rules for state member banks and bank holding
companies. To facilitate the ABCP Lending Facility, and for the reasons
discussed below, the Board has adopted, on an interim final basis, an
exemption from its leverage and risk-based capital rules for ABCP
purchased by a state member bank or bank holding company as a result of
its participation in the facility. Specifically, the interim final rule
(i) amends the Board's risk-based capital rules for state member banks
and bank holding companies to assign a zero percent risk weight to ABCP
purchased by the banking organization as a result of its participation
in the facility; and (ii) amends the Board's leverage capital rules for
state member banks and bank holding companies to permit banking
organizations to exclude from average total consolidated assets--the
denominator of the leverage ratio--ABCP purchased by the banking
organization as a result of its participation in the facility.
The Board has determined that the current leverage and risk-based
capital requirements for ABCP acquired by a banking organization
pursuant to the ABCP Lending Facility do not reflect the substantial
protections provided to the organization by the Federal Reserve in
connection with the facility. Because of the non-recourse nature of the
Federal Reserve's credit extension to the banking organization, the
organization is not exposed to the credit or market risk of the ABCP
purchased by the organization and pledged to the Federal Reserve.
Therefore, the Board believes that it would be appropriate--and
consistent with the economic substance of the transactions--not to
impose regulatory capital requirements on the ABCP purchased by a
banking organization in connection with its service as an intermediary
in the ABCP Lending Facility.
Consistent with its purpose to mitigate temporary stresses faced by
U.S. money market mutual funds, the interim final rule will expire on
January 30, 2009, unless extended by the Board.
Administrative Procedure Act
Pursuant to sections 553(b) and (d) of the Administrative Procedure
Act (5 U.S.C. 553(b) and (d)), the Board finds that there is good cause
for making the rule effective immediately on September 19, 2008, and
that it is impracticable, unnecessary, or contrary to the public
interest to issue a notice of proposed rulemaking and provide an
opportunity to comment before the effective date. The Board has adopted
the rule in light of, and to help address, the continuing unusual and
exigent circumstances in the financial markets. The rule will provide
immediate regulatory capital relief to state member banks and bank
holding companies that elect to participate in the Federal Reserve's
ABCP lending program. The Board is soliciting comment on all aspects of
the rule and will make such changes that they consider to be
appropriate or necessary after review of any comments received.
Regulatory Flexibility Act
The Regulatory Flexibility Act requires an agency that is issuing a
final rule to prepare and make available a regulatory flexibility
analysis that describes the impact of the final rule on small entities.
5 U.S.C. 603(a). The Regulatory Flexibility Act provides that an agency
is not required to prepare and publish a regulatory flexibility
analysis if the agency certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.
5 U.S.C. 605(b).
Pursuant to section 605(b), the Board certifies that this interim
final rule will not have a significant economic impact on a substantial
number of small entities. The rule reduces regulatory burden on large
and small state member banks and bank holding companies by granting an
exemption from the leverage and risk-based capital rules for state
member banks and bank holding companies that purchase ABCP from money
market mutual funds pursuant to the Federal Reserve's ABCP lending
program.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3506; 5
CFR Part 1320 Appendix A.1), the Board has reviewed the interim final
rule under authority delegated to the Board by the Office of Management
and Budget. The rule contains no collections of information pursuant to
the Paperwork Reduction Act.
Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the Board to use
``plain language'' in all proposed and final rules. In light of this
requirement, the Board has sought to present the interim final rule in
a simple and straightforward manner. The Board invites comment on
whether it could take additional steps to make the rule easier to
understand.
List of Subjects
12 CFR Part 208
Confidential business information, Crime, Currency, Federal Reserve
System, Mortgages, Reporting and recordkeeping requirements,
Securities.
12 CFR Part 225
Administrative practice and procedure, Banks, banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
Authority and Issuance
0
For the reasons stated in the preamble, the Board of Governors of the
Federal Reserve System amends parts 208 and 225 of chapter II of title
12 of the Code of Federal Regulations as follows:
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
0
1. The authority citation for part 208 continues to read as follows:
Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a,
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j),
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1835a, 1882, 2901-2907,
3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 78l(b), 78l(g),
78l(i), 78o-4(c)(5), 78q, 78q-1, and 78w, 6801, and 6805; 31 U.S.C.
5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
0
2. In Appendix A to part 208, amend section III.C.1. by adding a new
third paragraph to read as follows:
Appendix A to Part 208--Capital Adequacy Guidelines for State Member
Banks: Risk-Based Measure
* * * * *
III. * * *
C. * * *
1. * * *
* * * * *
This category also includes ABCP (i) purchased by a bank between
September 19, 2008, and January 30, 2009 (unless extended by the
Board), from an SEC-registered open-end investment company that
holds itself out as a money market mutual fund under SEC Rule 2a-7
(17 CFR 270.2a-7) and (ii) pledged by the bank to a Federal Reserve
Bank to secure financing from the ABCP lending facility established
by the Board on September 19, 2008.
* * * * *
0
3. In Appendix B to part 208, amend section II by adding a new
paragraph h to read as follows:
[[Page 55708]]
Appendix B to Part 208--Capital Adequacy Guidelines for State Member
Banks: Tier 1 Leverage Measure
* * * * *
II. * * *
h. Notwithstanding anything in this appendix to the contrary, a
bank may deduct from its average total consolidated assets the
amount of any asset-backed commercial paper (i) purchased by the
bank between September 19, 2008, and January 30, 2009 (unless
extended by the Board), from an SEC-registered open-end investment
company that holds itself out as a money market mutual fund under
SEC Rule 2a-7 (17 CFR 270.2a-7) and (ii) pledged by the bank to a
Federal Reserve Bank to secure financing from the ABCP lending
facility established by the Board on September 19, 2008.
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
0
1. The authority citation for part 225 continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3907, and
3909; 15 U.S.C. 6801 and 6805.
0
2. In Appendix A to part 225, amend section III.C.1. by adding a new
third paragraph to read as follows:
Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Risk-Based Measure
* * * * *
III. * * *
C. * * *
1. * * *
* * * * *
This category also includes ABCP (i) purchased by a bank holding
company between September 19, 2008, and January 30, 2009 (unless
extended by the Board), from an SEC-registered open-end investment
company that holds itself out as a money market mutual fund under
SEC Rule 2a-7 (17 CFR 270.2a-7) and (ii) pledged by the bank holding
company to a Federal Reserve Bank to secure financing from the ABCP
lending facility established by the Board on September 19, 2008.
* * * * *
0
3. In Appendix D to part 225, amend section II by adding new paragraph
d to read as follows:
Appendix D to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Tier 1 Leverage Measure
* * * * *
II. * * *
d. Notwithstanding anything in this appendix to the contrary, a
bank holding company may deduct from its average total consolidated
assets the amount of any asset-backed commercial paper (i) purchased
by the bank holding company between September 19, 2008, and January
30, 2009 (unless extended by the Board), from an SEC-registered
open-end investment company that holds itself out as a money market
mutual fund under SEC Rule 2a-7 (17 CFR 270.2a-7) and (ii) pledged
by the bank holding company to a Federal Reserve Bank to secure
financing from the ABCP lending facility established by the Board on
September 19, 2008.
By order of the Board of Governors of the Federal Reserve
System, September 19, 2008.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E8-22702 Filed 9-25-08; 8:45 am]
BILLING CODE 6210-01-P