[Federal Register Volume 74, Number 58 (Friday, March 27, 2009)]
[Rules and Regulations]
[Pages 13336-13337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-6864]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 3

[Docket ID OCC-2009-0002]
RIN 1557-AD15


Risk-Based Capital Guidelines--Money Market Mutual Funds

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Final rule.

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SUMMARY: On September 19, 2008, the Board of Governors of the Federal 
Reserve System adopted the Asset-Backed Commercial Paper Money Market 
Mutual Fund Liquidity Facility (the ``AMLF'' or ``ABCP Lending 
Facility'') which enables depository institutions and bank holding 
companies to borrow from the Federal Reserve Bank of Boston on a non-
recourse basis if they use the proceeds of the loan to purchase certain 
asset-backed commercial paper (ABCP) from money market mutual funds. 
The purpose of this action was to reduce strains being experienced by 
money market mutual funds. To facilitate national bank participation in 
the program, the Office of the Comptroller of the Currency (OCC) 
adopted on September 19, 2008, on an interim final basis, an exemption 
from its risk-based capital guidelines for ABCP held by a national bank 
as a result of its participation in this program.
    The AMLF was set to expire on January 30, 2009. However, to 
encourage the stability of money market mutual funds, the program has 
been extended to October 30, 2009. This rule finalizes the risk-based 
capital exemption and extends the risk-based capital exemption to ABCP 
purchased beyond the original January 30, 2009, date. This final rule 
applies the risk-based capital exemption to any ABCP purchased as a 
result of a national bank's participation in the facility. The risk-
based capital exemption will continue to apply if the AMLF is extended 
beyond October 30, 2009.

DATES: Effective Date: March 27, 2009.

FOR FURTHER INFORMATION CONTACT: Margot Schwadron, Senior Risk Expert, 
(202) 874-6022, Capital Policy Division; Hugh Carney, Attorney; or 
Stuart Feldstein, Assistant Director, Legislative and Regulatory 
Activities Division, (202) 874-5090; Office of the Comptroller of the 
Currency, 250 E Street, SW., Washington, DC 20219.

SUPPLEMENTARY INFORMATION: 

Introduction

    In light of the ongoing dislocations in the financial markets, and 
their impact on the functioning of the ABCP markets and the operations 
of money market mutual funds, the Board of Governors of the Federal 
Reserve System (FRB) adopted the AMLF on September 19, 2008.\1\ Under 
the AMLF, 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 banking 
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 AMLF is to enable money market mutual funds to increase their 
liquidity by enabling them to sell some of their high-credit-quality 
secured assets at amortized cost. The AMLF was set to expire on January 
30, 2009. However, to promote continued stability in the money market 
mutual funds, the FRB extended the program until October 30, 2009.
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    \1\ The OCC's interim final rule refers to the AMLF as the 
``ABCP Lending Facility.''
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Description of Interim Final Rule

    National banks that participate in the AMLF must acquire and hold 
ABCP on their balance sheet. These ABCP holdings are subject to 
regulatory capital requirements under the OCC's regulatory capital 
guidelines and rules.\2\ To facilitate national bank participation in 
the AMLF, the OCC adopted, on an interim final basis, an exemption from 
its risk-based capital guidelines for ABCP purchased by a national bank 
as a result of its participation in the facility.\3\ Specifically, the 
interim final rule amended the OCC's risk-based capital guidelines to 
permit national banks to assign a zero percent risk weight to ABCP 
purchased as a result of participation in the facility. The interim 
final rule applied to ABCP purchased between September 19, 2008, and 
January 30, 2009. The OCC received one comment from an industry trade 
group that supported the rule and encouraged its adoption without 
change.
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    \2\ See 12 CFR Part 3.
    \3\ 73 FR 55704 (Sept. 26, 2008).
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Description of Final Rule

    The OCC continues to believe that the ABCP acquired by a national 
bank pursuant to the AMLF does not expose the participating national 
banks to credit or market risk because of the non-recourse nature of 
the Federal Reserve's credit extension. Therefore, the OCC concludes 
that it would be appropriate--and consistent with the economic 
substance of the transactions--to continue to apply the risk-based 
capital exemption to a national bank that serves as an intermediary in 
the AMLF. In light of the Federal Reserve's extension of the AMLF 
program, the OCC has determined to extend the risk-based capital 
exemption to ABCP purchased beyond the original January 30, 2009 date. 
The risk-based capital exemption applies to any ABCP purchased as a 
result of a national bank's participation in the facility. The risk-
based capital exemption will continue to apply if the Federal Reserve 
further extends the AMLF program beyond October 30, 2009.
    Consistent with generally accepted accounting principles, the OCC 
would expect national banks to report purchased ABCP as an investment 
security (for example, held-to-maturity). These assets would be 
reflected at the time of purchase at the national bank's best estimate 
of fair value. The non-recourse nature of the transaction would impact 
the valuation of the liability to the Federal Reserve. After reflecting 
any appropriate discounts on the assets and associated liabilities, 
national banks are not expected to report any material net gains or 
losses at the time of purchase.

Effective Date

    This final rule is effective immediately upon publication. An 
agency may publish a final rule with an immediate effective date if the 
agency finds good cause and publishes such with the final rule.\4\
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    \4\ 5 U.S.C. 553(d)(3).
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    The OCC finds that good cause exists for an immediate effective 
date. As previously described in this preamble, modification of the 
risk-based capital guidelines is critical to maintain the orderly 
functioning of financial markets, to provide market liquidity, and to 
encourage stability of the operations of money market mutual funds. In 
the current market environment, a 30 day delayed effective date is 
impracticable

[[Page 13337]]

and inconsistent with the public interest since it may result in undue 
constraint on national banks' ability to perform critical lending and 
financial intermediary roles, which are necessary for the orderly 
functioning and liquidity of financial markets. Issuance of this final 
rule furthers the public interest because it will reduce liquidity and 
other strains being experienced by money market mutual funds.

Regulatory Analysis

Executive Order 12866

    The OCC has determined that this final rule is not a significant 
regulatory action under Executive Order 12866. The changes made by this 
final rule will not have an annual effect on the economy of $100 
million or more within the meaning of Executive Order 12866.

Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (Pub. L. 96-354, Sept. 19, 1980) 
(RFA) applies only to rules for which an agency publishes a general 
notice of proposed rulemaking pursuant to 5 U.S.C. 553(b).\5\ Pursuant 
to the Administrative Procedure Act (APA) at 5 U.S.C. 553(b)(B), 
general notice and an opportunity for public comment are not required 
prior to the issuance of a final rule when an agency, for good cause, 
finds that ``notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.''\6\
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    \5\ 5 U.S.C. 601(2).
    \6\ 5 U.S.C. 553(b)(B).
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    For the reasons set forth in the interim final rule,\7\ the OCC 
determined for good cause that the APA did not require general notice 
and public comment on the interim final rule and, therefore, did not 
publish a general notice of proposed rulemaking. Thus, the RFA, 
pursuant to 5 U.S.C. 601(2), does not apply to this final rule.
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    \7\ 73 FR 55704 (Sept. 26, 2008).
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Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3506), the OCC has reviewed the final rule and 
determined that it contains no collections of information as defined by 
the Paperwork Reduction Act.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency 
prepare a budgetary impact statement before promulgating any rule 
likely to result in a Federal mandate that may result in the 
expenditure by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any one year. The 
OCC has determined that there is no Federal mandate imposed by this 
rulemaking. Accordingly, the final rule is not subject to section 202 
of the Unfunded Mandates Act.

List of Subjects in 12 CFR Part 3

    Administrative practices and procedure, Capital, National banks, 
Reporting and recordkeeping requirements, Risk.

12 CFR Chapter I

Authority and Issuance

0
For the reasons stated in the preamble, the Office of the Comptroller 
of the Currency amends Part 3 of chapter I of Title 12, Code of Federal 
Regulations, as follows:

PART 3--MINIMUM CAPITAL RATIOS; ISSUANCE OF DIRECTIVES

0
1. The authority citation for part 3 continues to read as follows:

    Authority: 12 U.S.C. 93a, 161, 1818, 1828(n), 1828 note, 1831n 
note, 1835, 3907, and 3909.


0
2. In Appendix A to part 3, section 3(a)(1) is amended by revising 
paragraph (ix) to read as follows:

Appendix A to Part 3--Risk-Based Capital Guidelines

* * * * *

Section 3. Risk Categories/Weights for On-Balance Sheet Assets and 
Off-Balance Sheet Items

* * * * *
    (a) * * *
    (1) Zero percent risk weight. * * *
    (ix) Asset-backed commercial paper (ABCP) that is:
    (A) Purchased by the bank on or after September 19, 2008, from a 
Securities and Exchange Commission (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
    (B) Pledged by the bank to a Federal Reserve Bank to secure 
financing from the ABCP lending facility (AMLF) established by the 
Federal Reserve Board on September 19, 2008.
* * * * *

    Dated: March 19, 2009.
John C. Dugan,
Comptroller of the Currency.
[FR Doc. E9-6864 Filed 3-26-09; 8:45 am]
BILLING CODE 4810-33-P