[Federal Register Volume 77, Number 98 (Monday, May 21, 2012)]
[Rules and Regulations]
[Pages 29884-29895]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-12047]


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DEPARTMENT OF THE TREASURY

31 CFR Part 150

RIN 1505--AC42


Assessment of Fees on Large Bank Holding Companies and Nonbank 
Financial Companies Supervised by the Federal Reserve Board To Cover 
the Expenses of the Financial Research Fund

AGENCY: Departmental Offices, Treasury.

ACTION: Final rule and interim final rule.

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SUMMARY: The Department of the Treasury is issuing this final rule and 
interim final rule to implement Section 155 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (``Dodd-Frank Act''), which 
directs the Treasury to establish by regulation an assessment schedule 
for bank holding companies with total consolidated assets of $50 
billion or greater and nonbank financial companies supervised by the 
Board of Governors of the Federal Reserve (``the Board'') to collect 
assessments equal to the total expenses of the Office of Financial 
Research (``OFR'' or ``the Office''). Included in the Office's expenses 
are expenses of the Financial Stability Oversight Council (``FSOC'' or 
``the Council''), as provided under Section 118 of the Dodd-Frank Act, 
and certain expenses of the Federal Deposit Insurance Corporation 
(``FDIC''), as provided under Section 210 of the Dodd-Frank Act. The 
portion of this rule concerning the assessment schedule for bank 
holding companies is issued as a final rule. The portion of this rule 
related to the assessments for nonbank financial companies supervised 
by the Board is issued as an interim final rule, to allow for the 
consideration of additional comments in conjunction with related FSOC 
rules. This final rule and interim final rule establish the key 
elements of Treasury's assessment program, which will collect 
semiannual assessment fees from these companies beginning on July 20, 
2012. These rules take into account the comments received on the 
January 3, 2012 proposed rule and make minor revisions pursuant to the 
comments.

DATES: Effective date for final rule: July 20, 2012. Effective date for 
interim final rule: Sections 150.2, 150.3(b), 150.5, and 150.6(a) and 
(b), which relate to nonbank financial companies, are effective on July 
20, 2012 Comment due date: September 18, 2012. Comments are invited on 
Sec. Sec.  150.2, 150.3(b)(4), 150.5, and 150.6(a) and (b), which 
relate to nonbank financial companies.

ADDRESSES: Submit comments electronically through the Federal 
eRulemaking Portal: http://www.regulations.gov, or by mail (if hard 
copy, preferably an original and two copies) to: The Treasury 
Department, Attn: Financial Research Fund Assessment Comments, 1500 
Pennsylvania Avenue NW., Washington, DC 20220. Because paper mail in 
the Washington, DC area may be subject to delay, it is recommended that 
comments be submitted electronically. Please include your name, 
affiliation, address, email address, and telephone number in your 
comment. Comments will be available for public inspection on 
www.regulations.gov. In general comments received, including 
attachments and other supporting materials, are part of the public 
record and are available to the public. Do not submit any information 
in your comment or supporting materials that you consider confidential 
or inappropriate for public disclosure.

FOR FURTHER INFORMATION CONTACT: Jonathan Sokobin: (202) 927-8172.

SUPPLEMENTARY INFORMATION: 

[[Page 29885]]

I. Executive Summary

A. Purpose of the Regulatory Action

1. Need for Regulatory Action
    Section 155 of the Dodd-Frank Act, Public Law 111-203 (July 21, 
2010), directs the Secretary of the Treasury to establish by 
regulation, and with the approval of the Council, an assessment 
schedule to collect assessments from certain companies equal to the 
total expenses of the Office beginning on July 20, 2012. Section 155 
describes these companies as:
    (A) Bank holding companies having total consolidated assets of $50 
billion or greater; and
    (B) Nonbank financial companies supervised by the Board.
    Under Section 118 of the Dodd-Frank Act, the expenses of the 
Council are considered expenses of, and are paid by, the OFR. In 
addition, under Section 210 implementation expenses associated with the 
FDIC's orderly liquidation authorities are treated as expenses of the 
Council,\1\ and the FDIC is directed to periodically submit requests 
for reimbursement to the Council Chair. The total expenses for the OFR 
thereby include the combined expenses of the OFR, the Council, and 
certain expenses of the FDIC. All of these expenses are paid out of the 
Financial Research Fund (FRF), a fund managed by the Department of the 
Treasury for this sole purpose.
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    \1\ Under Title II, Section 210(n)(10)(C) of the Dodd-Frank Act 
the term implementation expenses ``(i) means costs incurred by [the 
FDIC] beginning on the date of enactment of this Act, as part of its 
efforts to implement [Title II] that do not relate to a particular 
covered financial company; and (ii) includes the costs incurred in 
connection with the development of policies, procedures, rules, and 
regulations and other planning activities of the [FDIC] consistent 
with carrying out [Title II].''
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    The Council was established by the Dodd-Frank Act to coordinate 
across agencies in monitoring risks and emerging threats to U.S. 
financial stability. The OFR was established within the Treasury 
Department by the Dodd-Frank Act to serve the Council, its member 
agencies, and the public by improving the quality, transparency, and 
accessibility of financial data and information, by conducting and 
sponsoring research related to financial stability, and by promoting 
best practices in risk management.
2. Legal Authority
    The authority for this regulation is Section 155(d) of the Dodd-
Frank Act, which directs the Secretary of the Treasury to establish an 
assessment schedule by regulation, including the assessment base and 
rates, with the approval of the Council.

B. Summary of the Major Provisions of This Regulatory Action

    This final rule and interim final rule direct (a) how the Treasury 
will determine which companies will be subject to an assessment fee, 
(b) how the Treasury will estimate the total expenses that are 
necessary to carry out the activities to be covered by the assessment, 
(c) how the Treasury will determine the assessment fee for each of 
these companies, and (d) how the Treasury will bill and collect the 
assessment fee from these companies. The final rule applies to bank 
holding companies and foreign banking organizations; the interim final 
rule applies to nonbank financial companies. The comment period for the 
interim final rule is 120 days.
    Bank holding companies that have eligible assets of $50 billion or 
more will be subject to assessments, where eligible assets are 
calculated as the average of a company's total consolidated assets for 
the four quarters preceding the determination date. Foreign banking 
organizations that have eligible assets of $50 billion or more will be 
subject to assessments, where eligible assets are calculated as the 
average of the company's total assets of combined U.S. operations for 
the four quarters preceding the determination date. (For foreign 
banking organizations that only report to the Federal Reserve annually, 
eligible assets are calculated as the average of the company's total 
assets of combined U.S. operations for the two years preceding the 
determination date.) All nonbank financial companies supervised by the 
Board will be subject to assessments.
    For each assessment period, the Department will calculate an 
assessment basis that is sufficient to replenish the FRF to a level 
equivalent to the sum of the operating expenses of the OFR and the 
Council for the assessment period, the capital expenses for the OFR and 
the Council for the 12-month period beginning on the first day of the 
assessment period, and an amount necessary to reimburse reasonable 
implementation expenses of the FDIC orderly liquidation authorities. 
For the initial assessment covering July 21, 2012 to March 31, 2013, 
the assessment basis will be calculated as the sum of the operating 
expenses for the OFR and the Council during this time period, the 
capital expenses for the OFR and the Council for July 21, 2012 to April 
30, 2013, and the amount necessary to reimburse reasonable 
implementation expenses of the FDIC orderly liquidation authorities.
    Assessments for each company will be calculated as the product of a 
company's eligible assets and a fee rate, where the fee rate is set to 
replenish the FRF to the levels defined in the preceding paragraph. Fee 
rates will be published roughly one month prior to collections, with 
billing at least 14 days prior to collections. Collections will be 
managed through www.pay.gov, and will generally occur on March 15 and 
September 15. Determination dates will generally be November 30 and May 
31 of each year. The determination date for the initial assessment will 
be December 31, 2011.

C. Costs and Benefits

    The assessment and collection of fees described in this rule 
represent an economic transfer from assessed companies to the 
government, for purposes of providing the benefits associated with 
coordinated identification and monitoring of risks to U.S. financial 
stability, promoting market discipline, and responding to emerging 
threats to the U.S. financial system. As such, the assessments do not 
represent an economic cost. However, the allocation of the assessment 
may have distributional impacts. Treasury estimates that approximately 
50 companies will be determined as eligible for the initial assessment, 
and in addition the estimated cost for each company of filling out the 
forms and submitting payment to the Treasury Department will be $600.

II. Background

    Section 155 of the Dodd-Frank Act, Public Law 111-203 (July 21, 
2010), directs the Secretary of the Treasury to establish by 
regulation, and with the approval of the Council, an assessment 
schedule to collect assessments from certain companies equal to the 
total expenses of the Office beginning on July 20, 2012. Section 155 
describes these companies as:
    (A) Bank holding companies having total consolidated assets of $50 
billion or greater; and
    (B) Nonbank financial companies supervised by the Board.
    Under Section 118 of the Dodd-Frank Act, the expenses of the 
Council are considered expenses of, and are paid by, the OFR. In 
addition, under Section 210 implementation expenses associated with the 
FDIC's orderly liquidation authorities are treated as expenses of the 
Council,\2\ and the FDIC is directed to

[[Page 29886]]

periodically submit requests for reimbursement to the Council Chair. 
The total expenses for the OFR thereby include the combined expenses of 
the OFR, the Council, and certain expenses of the FDIC. All of these 
expenses are paid out of the Financial Research Fund (FRF), a fund 
managed by the Department of the Treasury.
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    \2\ Under Title II, Section 210(n)(10)(C) of the Dodd-Frank Act 
the term implementation expenses ``(i) means costs incurred by [the 
FDIC] beginning on the date of enactment of this Act, as part of its 
efforts to implement [Title II] that do not relate to a particular 
covered financial company; and (ii) includes the costs incurred in 
connection with the development of policies, procedures, rules, and 
regulations and other planning activities of the [FDIC] consistent 
with carrying out [Title II].''
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    The Council was established by the Dodd-Frank Act to coordinate 
across agencies in monitoring risks and emerging threats to U.S. 
financial stability. The Council is chaired by the Secretary of the 
Treasury and brings together all federal financial regulators, an 
independent member with insurance expertise appointed by the President, 
and certain state regulators. Under the Dodd-Frank Act, the Council is 
tasked with identifying and monitoring risks to U.S. financial 
stability, promoting market discipline, and responding to emerging 
threats to the U.S. financial system.\3\
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    \3\ As outlined in Section 112 of the Dodd-Frank Act, the 
Council is tasked with the following:
    1. To identify risks to the financial stability of the United 
States that could arise from the material financial distress or 
failure, or ongoing activities, of large, interconnected bank 
holding companies or nonbank financial companies, or that could 
arise outside the financial services marketplace.
    2. To promote market discipline, by eliminating expectations on 
the part of shareholders, creditors, and counterparties of such 
companies that the Government will shield them from losses in the 
event of failure.
    3. To respond to emerging threats to the stability of the United 
States financial system.
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    The OFR was established within the Treasury Department by the Dodd-
Frank Act to serve the Council, its member agencies, and the public by 
improving the quality, transparency, and accessibility of financial 
data and information, by conducting and sponsoring research related to 
financial stability, and by promoting best practices in risk 
management. Among the OFR's key tasks are:
     Measuring and analyzing factors affecting financial 
stability and helping FSOC member agencies to develop policies to 
promote it;
     Collecting needed financial data, and promoting their 
integrity, accuracy, and transparency for the benefit of market 
participants, regulators, and research communities;
     Reporting to the Congress and the public on the OFR's 
assessment of significant financial market developments and potential 
threats to financial stability; and
     Collaborating with foreign policymakers and regulators, 
multilateral organizations, and industry to establish global standards 
for data and analysis of policies that promote financial stability.
    On January 3, 2012, the Treasury published a proposed rule (77 FR 
35) to establish procedures to estimate, bill, and collect, on an 
ongoing basis beginning on July 20, 2012, the total budgeted expenses 
of the OFR, including those estimated separately by the Council for the 
Council's expenses, and expenses submitted by the FDIC.\4\ As described 
in the proposed rule, the aggregate of these estimated expenses would 
provide the basis for an assessment that the Treasury would collect 
through a semiannual fee on individual companies based on each 
company's total consolidated assets. For a foreign company, the 
assessment fee would be based on the total consolidated assets of the 
foreign company's combined U.S. operations.
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    \4\ As proposed, the assessment basis would be determined so as 
to replenish the FRF at the start of each assessment period to a 
level equivalent to six months of budgeted operating expenses and 
twelve months of capital expenses for the OFR and FSOC, as well as 
covered FDIC expenses.
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    The proposed rule outlined how the Treasury's assessment fee 
program would be administered, including (a) how the Treasury would 
determine which companies will be subject to an assessment fee, (b) how 
the Treasury would estimate the total expenses that are necessary to 
carry out the activities to be covered by the assessment, (c) how the 
Treasury would determine the assessment fee for each of these 
companies, and (d) how the Treasury would bill and collect the 
assessment fee from these companies. Treasury sought comments on all 
aspects of the proposed rulemaking. See 77 FR 35 for a complete 
discussion of the proposal.

III. This Final Rule and Interim Final Rule

    The final rule is adopted essentially as proposed for bank holding 
companies and foreign banking organizations, with an adjustment to the 
timeframe for assessment collections. The rule for nonbank financial 
companies is issued as an interim final rule, reflecting the Treasury's 
intent to evaluate the assessment schedule for nonbank financial 
companies as the Council implements its authority to determine 
companies for enhanced supervision by the Board.\5\ In response to 
comments received, several technical and administrative changes were 
made to clarify these rules, which are discussed below.
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    \5\ ``Authority to Require Supervision and Regulation of Certain 
Nonbank Financial Companies'', 77 FR 21637.
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    The Treasury received 12 comment letters on the proposed rule. Six 
comment letters were from associations that represent financial 
institutions (including one joint letter sent by five associations); 
two comment letters were from insurance companies; two comment letters 
were from individuals; one comment letter was from an association that 
represents financial professionals; and one comment letter was from a 
public interest group. For the reasons that follow, the Treasury has 
determined to adopt this rule and interim final rule as follows.

Comments and the Treasury's Responses

    Comments were received in the following broad categories:
     Assessment methodology
    [cir] Use of total consolidated assets to calculate total 
assessable assets
    [cir] Other assessment methodology comments
     Assessments on nonbank financial companies
     Assessment basis and administration
     Assessment timeframe
     Term definitions
     Comments of general support
Assessment Methodology
Use of Total Consolidated Assets To Calculate Total Assessable Assets
    Six of the comment letters from associations that represent 
financial institutions and insurance companies were critical of the 
proposed use of total consolidated assets to allocate the assessment 
basis to assessed companies. The letters argued that total consolidated 
assets alone was an insufficient representation of the risk factors 
outlined in Section 115(a)(2)(A) of the Dodd-Frank Act as referenced in 
Section 155(d) of the Act, and would not be sufficient to differentiate 
risk levels between companies for purposes of assessments. Two comment 
letters suggested alternative assessment approaches. One commenter 
suggested that the methodology be based on the six-category framework 
used to evaluate the potential for a nonbank financial company to pose 
a threat to U.S. financial stability, as outlined in the Council's rule 
on determination of nonbank financial companies for heightened 
supervision by the Board. Another commenter suggested that it be based 
on the risk-adjusted assessment schedule used by the FDIC to collect 
deposit insurance premiums from banks

[[Page 29887]]

and thrifts. Two of the comment letters, while expressing the concerns 
described above, also noted that using total consolidated assets to 
calculate assessable assets was simple, clear and transparent.
    One comment letter supported the proposal to base calculation of 
total assessable assets for foreign banking organizations on assets of 
combined U.S. operations and to only assess those companies with more 
than $50 billion in total assessable assets. The comment letter noted 
that these two features of the rule will facilitate administration of 
assessments and are consistent with the statutory requirement that the 
assessment schedule take into account differences among assessed 
companies, based on the considerations set forth in Section 115.
    The Treasury's proposed implementation of Section 155 \6\ was 
guided by the following principles:
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    \6\ Section 155(d) of the Act reads:
    PERMANENT SELF-FUNDING.--Beginning 2 years after the date of 
enactment of this Act, the Secretary shall establish, by regulation, 
and with the approval of the Council, an assessment schedule, 
including the assessment base and rates, applicable to bank holding 
companies with total consolidated assets of $50,000,000,000 or 
greater and nonbank financial companies supervised by the Board of 
Governors, that takes into account differences among such companies, 
based on the considerations for establishing the prudential 
standards under Section 115, to collect assessments equal to the 
total expenses of the Office.
    Section 115(a)(2) of the Act reads, in part:
    RECOMMENDED APPLICATION OF REQUIRED STANDARDS.--In making 
recommendations under this section, the Council may--
    (A) differentiate among companies that are subject to heightened 
standards on an individual basis or by category, taking into 
consideration their capital structure, riskiness, complexity, 
financial activities (including the financial activities of their 
subsidiaries), size, and any other risk-related factors that the 
Council deems appropriate.
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     The assessment structure should be simple and transparent; 
and
     Allocation among companies should take into account 
differences among such companies, based on the considerations for 
establishing the prudential standards under Section 115 of the Dodd-
Frank Act as required by the Act.
    As stated in the Preamble to the Notice of Public Rulemaking, the 
Treasury believes there is significant benefit to adopting a standard 
that is transparent, well-understood by market participants, and 
reasonably estimable. Commenters suggested that this transparency and 
predictability was particularly important for foreign entities 
assessed. As discussed in the proposed rule, a number of different 
assessment schedules for assessing companies were considered, based on 
the two principles outlined above. After evaluating these different 
assessment schedules, the Treasury proposed to allocate the assessment 
basis among assessed companies based on the total consolidated assets 
of each company. The Treasury, after considering the comments, 
continues to believe that relying on the total consolidated assets of 
each assessed company to allocate assessments on a percentage basis is 
consistent with its legislative mandate and represents the best 
approach to take into account differences among companies based on the 
considerations in Section 115 while keeping the assessment structure 
simple and transparent. Applying each Section 115 factor with respect 
to each assessed firm could well require individualized subjective 
determinations, which would be impracticable as well as opaque, and 
would not be consistent with the statutory requirement to create an 
``assessment schedule, including the assessment base and rates.'' \7\ 
Similarly, the Treasury considered relying on an established ratings 
system, such as the CAMELS system employed by the FDIC, as suggested by 
one commenter. The Treasury deemed such an approach as inappropriate 
for the following reasons: first, the methodology to produce the CAMELS 
ratings is non-public, the ratings are confidential supervisory 
information ,\8\ and the rating system was developed for U.S. 
depository institutions. Second, the broad rankings provided by such a 
system (CAMELS ratings range from one to five) would require subjective 
translation by the Treasury into assessment levels, introducing 
complexity and opacity. The Treasury considered other methods to 
calculate assessments based on risk-weighted assets, but these proved 
unsatisfactory for similar reasons. After considering all of the 
Section 115 factors, the Treasury has determined that an assessment 
schedule based on total consolidated assets best achieves the statutory 
purpose.
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    \7\ Dodd-Frank Act, Title I, Section 155(d).
    \8\ CAMELS ratings are confidential supervisory information per 
12 CFR 309.5(g)(8), 309.6, 327.4(d).
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    As discussed further below, the rule has been modified to include a 
final rule applicable to bank holding companies and foreign banking 
organizations, and an interim final rule applicable to those entities 
that are identified by the Council's rulemaking for determination of 
nonbank financial companies for heightened supervision by the Board.
Other Assessment Methodology Comments
    Two comment letters (the joint associations' letter and a second 
letter written by two authors of the joint letter) suggested that the 
Board continue providing funds to the FRF after July 21, 2012. Even if 
this suggestion could be reconciled with the statutory requirement that 
``[b]eginning 2 years after the date of enactment,'' the Treasury shall 
``collect assessments equal to the total expenses of the Office,'' \9\ 
the imposition of additional requirements on the Board of Governors 
would be beyond the Treasury's authority under Section 155(d) and 
outside the scope of this rulemaking.\10\
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    \9\ Dodd-Frank Act, Title I, Section 155(d).
    \10\ The comment letter from the public interest group stated 
that OFR, the Council and implementation expenses of the FDIC should 
be paid solely through the FRF assessment base after July 21, 2012, 
as intended by the Dodd-Frank Act, and should not be paid by the 
Board, as suggested in the two comment letters noted above. The 
Treasury agrees with this comment, which is consistent with the 
proposed and final rules.
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    One comment letter suggested that since the Council and the OFR 
will likely be investing a significantly larger proportion of their 
resources researching and monitoring nonbank financial companies as 
opposed to bank holding companies, the assessment methodology should 
charge nonbank financial companies proportionately higher assessments. 
The letter further suggested creation of a credit system whereby 
previously assessed bank holding companies and nonbank financial 
companies would pay lower assessment rates when new companies are 
assessed. The Treasury notes that the Dodd-Frank Act requires that the 
Council and the OFR monitor the financial system and respond to threats 
to U.S. financial stability across the system. Mitigating current and 
potential future threats to financial stability provides benefits for 
financial market participants, including bank holding companies, 
foreign banking organizations, and nonbank financial companies. 
Likewise, previously assessed companies, as well as newly assessed 
companies, are beneficiaries of these activities to mitigate threats to 
financial stability. For these reasons, the Treasury believes that a 
consistent allocation irrespective of sequence of inclusion in the 
assessment pool or institution type is appropriate.
    One comment letter suggested including language in the rule 
prohibiting banking institutions from passing OFR assessments through 
to retail or commercial customers in the form of fees or higher 
interest rates. The Treasury has considered this concern, but believes 
such a requirement would be difficult and costly to administer, and it 
is questionable whether such an

[[Page 29888]]

approach would be permitted by the law.
    One comment letter suggested that FDIC expenses associated with its 
orderly liquidation authorities should be well-defined to avoid 
shifting costs to OFR that should be borne by the FDIC. The Council and 
the FDIC have established guidelines for these expenses to ensure that 
only appropriate expenses are covered by the FRF.
    Some commenters raised issues related to budget process, strategy 
and the creation of an advisory committee that are outside the scope of 
this rulemaking. Materials relevant to these issues may be found in the 
OFR's Strategic Framework for FY2012-FY2014 published on March 15, 2012 
\11\ and in the notice of interest to establish a Financial Research 
Advisory Committee published in the Federal Register on March 22, 
2012.\12\
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    \11\ The FY2012-FY2014 Strategic Framework for the OFR, which 
includes information on the OFR's budget process, can be found at: 
http://www.treasury.gov/initiatives/wsr/ofr/Documents/OFRStrategicFramework.pdf.
    \12\ 77 FR 16894.
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Assessments on Nonbank Financial Companies
    Seven of the comment letters, including those from associations 
that represent financial institutions and insurance companies, 
expressed concerns about using unadjusted total consolidated assets to 
allocate the assessment basis among nonbank financial companies. Three 
comment letters (from an insurance company and two associations) 
suggested that insurance separate accounts be excluded from total 
consolidated assets for purposes of assessments. One association 
suggested that private equity managed accounts be excluded from total 
consolidated assets for purposes of assessments. Another association 
suggested that all nonbank financial companies' non-financial assets be 
excluded from total consolidated assets for purposes of assessments.
    In addition, several comment letters suggested alternative methods 
to assess nonbank financial companies or suggested that the Treasury 
delay its final rulemaking until after the Council has made 
determinations regarding nonbank financial companies for heightened 
supervision by the Board. One comment letter from an insurer suggested 
differentiating industries into classes based on their primary business 
activity and developing class-specific assessments based on Section 155 
criteria. Two comment letters suggested delaying rulemaking for nonbank 
financial companies altogether until after the Council has made 
determinations of nonbank financial companies for heightened 
supervision by the Board. Two additional comment letters supported the 
intent to re-evaluate the assessment schedule for nonbank financial 
companies after the Council's rule on determination of nonbank 
financial companies is finalized and the Council has begun making 
determinations. One comment letter emphasized that assessments should 
be reasonably and fairly allocated across bank holding companies and 
nonbank financial companies. One comment letter requested clarification 
on how non-public nonbank financial companies would be treated under 
the rule and the manner in which information from these companies would 
need to be reported to the Treasury for purposes of assessments.
    After reviewing these comments, the Treasury has decided to issue a 
final rule for bank holding companies and foreign banking 
organizations, and an interim final rule for nonbank financial 
companies. The comment period for the interim final rule for nonbank 
financial companies will be open for 120 days after the publication 
date of these rules, with possible extension. After the comment period, 
the Treasury will review the assessments schedule for nonbank financial 
companies and make adjustments to the nonbank financial company rule as 
necessary.
    The bank holding company and foreign banking organization final 
rule and nonbank financial company interim final rule both rely on 
total consolidated assets to calculate assessable assets. The Treasury 
agrees that, to the extent practicable, the composition of total 
consolidated assets used to calculate assessable assets for nonbank 
financial companies, bank holding companies, and foreign banking 
organizations should be comparable. As the Council implements its 
authority to determine nonbank financial companies for heightened 
supervision by the Board, the Treasury will evaluate substantive 
accounting differences between total consolidated assets as reported by 
nonbank financial companies supervised by the Board, bank holding 
companies, and foreign banking organizations and review the need to 
make adjustments to its definition of total consolidated assets for 
nonbank financial companies.
    Through its interim final rule, the Treasury continues to seek and 
consider comment on whether the methodology adopted here for 
determining the amount of the assessment for nonbank financial 
companies is appropriate and what alternative methodologies might be 
more appropriate. The Treasury also specifically seeks comments on the 
question of whether a single methodology for determining the amount of 
the assessment for nonbank financial companies is appropriate and, if 
not, what an appropriate framework for differentiating between nonbank 
financial companies might be.
Assessment Basis and Administration
    The Treasury received comments on the assessment basis and 
assessment administration from two commenters.
    One comment letter suggested that collecting 12 months of capital 
expenses, as opposed to six months of capital expenses, would result in 
an unnecessarily large amount of unused resources. Given the 
variability of timing for large-scale capital expenditures and the 
importance of avoiding unnecessary interruptions in budgeted 
investments, the Treasury believes it is necessary for each assessment 
to replenish the FRF to a total of 12 months of capital expenditures. 
The final rule and interim final rule retain the provision for each 
assessment to replenish the FRF to a level equivalent to six months of 
operating and 12 months of capital expenses for the FSOC and OFR.
    One commenter noted that the initial assessment basis will include 
operating expenses through March 31, 2013, capital expenses for the OFR 
and the Council through April 30, 2013, and the FDIC's implementation 
expenses through September 30, 2013. To clarify these dates, the first 
assessment in July 2012 is transitional and includes operating expenses 
for the remainder of fiscal year 2012 (July 21, 2012 to September 30, 
2012), the first six months of fiscal year 2013 (October 1, 2012 to 
March 31, 2013) and an amount necessary to reimburse reasonable 
implementation expenses of the FDIC, as provided under section 
210(n)(10) of the Dodd-Frank Act. Rather than collect 12 months of 
capital expenses in the initial assessment, as a smoothing measure the 
initial assessment includes capital expenses for the remainder of 
FY2012 (July 21, 2012 to September 30, 2012) plus the first seven 
months of FY2013 capital expenses (covering October 1, 2012 to April 
30, 2013), for a total of approximately nine months of capital 
expenses. The second assessment will bring capital funding in the FRF 
up to the full 12-month level contemplated in the rule.
    One comment letter expressed concern that the reports used to 
calculate a foreign banking organization's U.S.-based assets in the

[[Page 29889]]

proposed rule do not report assets on a consolidated basis, so that 
referencing data from multiple reports could result in double-counting. 
The commenter requested greater clarity on what line items will be used 
from each report to determine total assessable assets for foreign 
banking organizations and suggested that the confirmation statement 
sent to foreign banking organizations include a list of financial 
report line items used to calculate assessable assets. Treasury will 
make every effort to avoid double counting, consulting with the Board 
and the affected firms as necessary. Any questions can be addressed 
through the appeals process.
Assessment Timeframe
    Under the proposed rule, semiannual determination dates for a 
typical year would be December 31 and June 30. Confirmation statements 
to assessed companies would be sent out approximately two weeks after 
the determination date (and no later than 30 days prior to the first 
day of the assessment period); publication of the Notice of Fees would 
be about one month prior to the payment date; and billing would occur 
at least 14 calendar days prior to the payment date. Two comment 
letters noted that this time schedule for assessment collections 
allowed too little time for assessed companies to prepare appeals to 
assessments and too little time for companies with less liquid 
portfolios to arrange payments. Ambiguities in the dates for issuance 
of confirmation statements and publication of the Notice of Fees were 
also noted in the letters. The commenters proposed extending the time 
between issuance of the confirmation statement and billing date to 
allow more time for appeals and payment arrangements.
    The Treasury has considered these comments and is persuaded that an 
adjustment, as described below, is appropriate. In this final rule and 
interim final rule, the determination dates for a typical year are 
moved back one month (to November 30 and May 31); confirmation 
statements will be sent out 15 calendar days after the determination 
date (December 15 and June 15); written appeals requesting a 
redetermination would need to be provided by January 15 or July 15 
(under the guidelines outlined in the NPRM); publication of the Notice 
of Fees will be on February 15 and August 15; and billing will be on 
March 1 and September 1 for payment on March 15 and September 15. (See 
table below.) If the Treasury receives a written request for 
redetermination from a company by these dates, the Treasury will 
consider the company's request and respond with the results of a 
redetermination within 21 calendar days, if the Treasury concludes that 
a redetermination is warranted. If one of the dates referenced falls on 
a holiday or weekend, aside from the Billing Date, the effective date 
will be the next business day. (For the Billing Date, if the date 
referenced falls on a holiday or weekend, the effective date will be 
the first preceding business day.) The initial determination date, 
confirmation statement date, publication of Notice of Fees, billing 
date, and payment date are as outlined in the NPRM. These changes to 
the rule will provide assessed companies additional time to prepare 
appeals and make payment arrangements, as well as permit the Treasury 
additional time to calculate assessments, administer the billing 
process, and receive payments, as suggested in the comment letters. The 
table below shows dates of the assessment billing and collection 
process:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Confirmation         Publication of
        Assessment period                Determination date          statement date       notice of fees *        Billing date          Payment date
--------------------------------------------------------------------------------------------------------------------------------------------------------
Initial Assessment (July 2012 to   December 31, 2011............  7 calendar days       About one month       14 calendar days      July 20, 2012.
 March 2013).                                                      after final rule      prior to payment      prior to payment
                                                                   publication date.     date.                 date.
1st semiannual Assessment (April-  November 30..................  December 15 (or next  February 15 (or next  March 1 (or prior     March 15 (or next
 September).                                                       business day).        business day).        business day).        business day).
2nd semiannual Assessment          May 31.......................  June 15 (or next      August 15 (or next    September 1 (or       September 15 (or
 (October-March).                                                  business day).        business day).        prior business day).  next business day).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rate published in the Notice of Fees.

Term Definitions
    Several comment letters suggested clarifications to term 
definitions in the rule.
    One comment letter requested clarification on the conditions and 
procedure under which a company would cease to be an assessed company. 
Another comment letter stated that companies that cease to be 
assessable companies between the initial determination date and start 
of the initial assessment period should not be assessed.
    Under the definitions provided in this rule, companies meeting the 
following conditions will not be determined to be assessable companies 
on the determination date:
     For bank holding companies as defined in Section 2 of the 
Bank Holding Company Act of 1956, the average total consolidated assets 
(Schedule HC--Consolidated Balance Sheet), as reported on the bank 
holding company's four most recent Consolidated Financial Statements 
for Bank Holding Companies (FR Y-9C; OMB No. 7100-0128) submissions, is 
below $50 billion;
     For foreign banking organizations, the average of total 
assets at the end of a period (Part 1--Capital and Asset Information 
for the Top-tier Consolidated Foreign Banking Organization), as 
reported on the foreign banking organization's four most recent Capital 
and Asset Information for the Top-tier Consolidated Foreign Banking 
Organization (FR Y-7Q; OMB no. 7100-0125), is below $50 billion; \13\
---------------------------------------------------------------------------

    \13\ For those foreign banking organizations that file the FR Y-
7Q annually instead of quarterly, the company's total consolidated 
assets would be determined based on the average of total assets at 
end of period as reported on the foreign banking organization's two 
most recent FR Y-7Qs.
---------------------------------------------------------------------------

     For nonbank financial companies, the company is not 
determined by the Council to be required to be supervised by the Board 
under Section 113 of the Dodd-Frank Act.
    Companies that are determined to be assessable companies on the 
determination date for an assessment period will be assessed for that 
assessment period according to the rule. The assessment schedule is 
structured so that the sum of assessments on individual companies 
equals the sum

[[Page 29890]]

total necessary to support the duties of the Council and the OFR during 
each period plus implementation expenses associated with the FDIC's 
orderly liquidation authorities. Changes to one company's assessment 
for a particular period would necessitate a change in all other 
companies' assessments so that the aggregate of all assessment fees 
equals the assessment basis for the period. The Treasury believes that 
the burden and uncertainty that such changes would bring are too high 
to warrant attempting to delineate a process to allow changes to the 
information used by the Treasury to make its determinations, or adjust 
the company's semiannual fee determined by the published assessment fee 
schedule. The Treasury believes this burden and uncertainty would be 
issues for the initial assessment period as they are for subsequent 
assessment periods.
    One comment letter requested the rule include a list of financial 
reports that will be used to calculate total assessable assets for 
foreign banking organizations. While the list of financial reports that 
the Treasury anticipates it will use to calculate total assessable 
assets for foreign banking organizations are listed in the Preamble of 
the NPRM, it is possible that reporting requirements for foreign 
banking organizations will change over time and the list of reports 
will need to be adjusted. The rule does not include specific reference 
to these reports to allow for the possibility of these changes. The 
Treasury will provide a list of reports used to calculate assessments 
to any assessed company, and will also maintain a list of reports used 
to calculate assessments on its Web site for reference in advance of 
the assessment period.
    One comment letter requested that the definition of total 
assessable assets for foreign banking organizations be clarified to 
include U.S. branches and agencies in addition to subsidiaries. The 
definition of total assessable assets for foreign banking organizations 
in Section 150.2 has been modified to provide this clarity.
    One comment letter requested that the rule provide clarity that 
total assessable assets for foreign banking organizations will be 
calculated as the average of the four most recent FR Y7-Q total assets 
at end of period for quarterly filers and the average of the two most 
recent annual FR Y7-Q total assets at end of period for annual filers. 
(This distinction was provided in the Preamble of the NPRM but not the 
text of the rule.) For reasons noted above, the Treasury has not 
included a list of reference reports in the final rule, but language 
was added to the rule clarifying that the average of four quarters of 
data will be used to calculate assessments for quarterly filers and the 
average of two years of annual data will be used to calculate 
assessments for annual filers.
    One comment letter requested that the definition of ``bank holding 
company'' and ``foreign banking organization'' be clarified so that 
foreign banking organizations are limited to international banks that 
are subject to the Bank Holding Company Act of 1956 pursuant to Section 
8(a) of the International Banking Act of 1978. The letter suggested 
modifying the definition of ``bank holding company'' to specify U.S.-
domiciled bank holding companies and modify the definition of ``foreign 
banking organization'' to incorporate by reference the definition of 
that term in Section 211.21(o) of the Board's Regulation K. The letter 
also suggested revising paragraphs (1) and (2) of the definition of 
total assessable assets to reflect these revisions. The final rule 
clarifies these definitions accordingly.
    One comment letter suggested that the final rule clarify that only 
total assets of combined U.S. operations of U.S. companies with foreign 
affiliates would be assessable. The Dodd-Frank Act is silent on this 
point. However, the Dodd-Frank Act requires that the Council and the 
OFR monitor the financial system and respond to threats to U.S. 
financial stability across the system. Mitigating current and potential 
future threats to financial stability provides particular benefits for 
companies that conduct a majority of their business in U.S. markets. 
Treasury also notes that a significant disruption to foreign operations 
could impact the parent company, and where the parent company is a U.S. 
entity, it may have consequences for U.S. financial stability. The rule 
consequently retains calculation of total assessable assets for U.S.-
based companies based on global total consolidated assets.
Comments of General Support
    The two letters from individuals expressed general support for the 
rule. One comment letter expressed support for assessing financial 
institutions to fund the Office. One comment letter expressed support 
for the permanent self-funding provisions reflected in the rule and the 
mission of the Office.

III. Procedural Requirements

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires agencies to prepare an initial regulatory flexibility analysis 
(IRFA) to determine the economic impact of the rule on small entities. 
Section 605(b) allows an agency to prepare a certification in lieu of 
an IRFA if the rule will not have a significant economic impact on a 
substantial number of small entities. Pursuant to 5 U.S.C. 605(b), it 
is hereby certified that this rule will not have a significant economic 
impact on a substantial number of small entities. The size standard for 
determining whether a bank holding company or a nonbank financial 
company is small is $7 million in average annual receipts. Under 
Section 155 of the Dodd-Frank Act, only bank holding companies with 
more than $50 billion in total consolidated assets or nonbank financial 
companies regulated by the Federal Reserve will be subject to 
assessment. As such, this rule will not apply to small entities and a 
regulatory flexibility analysis is not required.

B. Paperwork Reduction Act

    On a one-time basis, assessed entities would be required to set up 
a bank account for fund transfers and provide the required information 
to the Treasury Department on a form. The form includes bank account 
routing information and contact information for the individuals at the 
company that will be responsible for setting up the account and 
ensuring that funds are available on the billing date. The Treasury 
Department estimates that approximately 50 companies \14\ may be 
affected, and that completing and submitting the form would take 
approximately fifteen minutes. The aggregate paper work burden is 
estimated at 12.5 hours.
---------------------------------------------------------------------------

    \14\ The Treasury estimates that approximately 50 bank holding 
companies and foreign banking organizations will be assessed in the 
initial assessment. The number of eligible bank holding companies 
and foreign banking organizations could increase or decrease over 
time. The number of assessed companies could also increase if the 
Council determines nonbank financial companies for heightened 
supervision by the Board.
---------------------------------------------------------------------------

    On a semi-annual basis, assessed companies will have the 
opportunity to review the confirmation statement and assessment bill. 
The rules do not require the companies to conduct the review, but it 
does permit it. We anticipate that at least some of the companies will 
conduct reviews, in part because the cost associated with it is very 
low.
    The collection of information contained in this rule has been 
approved by the Office of Management and Budget (OMB) under the 
requirements of the Paperwork Reduction Act, 44 U.S.C. 3507(d) and 
assigned control number 1505-0245. An agency may not conduct or sponsor 
an a person is not required to respond to

[[Page 29891]]

a collection of information unless it displays a valid OMB control 
number.
    The information collections are included in Sec.  150.6.

C. Regulatory Planning and Review (Executive Orders 12866 and 13563)

    It has been determined that this regulation is a significant 
regulatory action as defined in Executive Order 12866 as supplemented 
by Executive Order 13563, in that this rule would have an annual effect 
on the economy of $100 million or more. Accordingly, this rule has been 
reviewed by the Office of Management and Budget. The Regulatory Impact 
Assessment prepared by Treasury for this regulation is provided below.
1. Description of Need for the Regulatory Action
    Section 155 of the Dodd-Frank Act directs the Board to provide 
funding sufficient to cover the expenses of the OFR and FSOC during the 
two-year period following enactment. (The Dodd-Frank Act was enacted on 
July 21, 2010.) To provide funding after July 21, 2012, Section 155(d) 
of the Dodd-Frank Act directs the Secretary of the Treasury to 
establish by regulation, and with the approval of the FSOC, an 
assessment schedule for bank holding companies with total consolidated 
assets of $50 billion or greater and nonbank financial companies 
supervised by the Board.
2. Provision--Affected Population
    Section 155(d) of the Dodd-Frank Act defines the population of 
assessed companies as bank holding companies with total consolidated 
assets of $50 billion or greater and nonbank financial companies 
supervised by the Board.
    Under this definition, U.S bank holding companies and foreign 
banking organizations with $50 billion or more in total worldwide 
consolidated assets and nonbank financial companies supervised by the 
Board qualify for assessment. However, under the rule only U.S.-based 
assets of foreign banking organizations would be used to calculate 
their assessments. Foreign banking organizations with less than $50 
billion in U.S.-based assets would not be assessed. Based on 
information provided by the Board, we estimate that forty-eight bank 
holding companies qualified as assessed companies as of June 30, 2011.
    Nonbank financial companies determined by the FSOC to require 
heightened supervision under Title I would be assessed on the basis of 
their total consolidated assets for U.S. entities and on the basis of 
total consolidated assets of U.S. operations for foreign entities, 
similar to bank holding companies. All such nonbank financial companies 
would be assessed, regardless of their level of total consolidated 
assets.\15\
---------------------------------------------------------------------------

    \15\ To date, the Council has not made a determination regarding 
the applicability of Board supervision under section 113 for a 
nonbank financial company. Moreover, it is unclear as to what type 
of nonbank financial companies the Council may consider for a 
determination. For these reasons, as the Council begins to make 
determinations regarding nonbank financial companies under section 
113, the Treasury's methodology for determining the assessment fee 
for these companies would be reviewed and, as needed, revised 
through the rulemaking process to assure that the assessment fees 
charged to these companies would be appropriate.
---------------------------------------------------------------------------

3. Baseline
    The Dodd-Frank Act established the FSOC and the OFR, and vested the 
FDIC with orderly liquidation authorities. Prior to passage of the Act, 
these entities and authorities did not exist. Expenses associated with 
these activities are directed by the Dodd-Frank Act to be funded by the 
Board for a two-year period to end on July 21, 2012. After July 21, 
2012, the Dodd-Frank Act requires the Secretary of the Treasury 
establish an assessment schedule by regulation, with approval by the 
Council, to collect funds necessary to cover these expenses. There is 
no provision in the Dodd-Frank Act for the FSOC or the OFR to receive 
appropriated funds. Section 152(e) of the Dodd-Frank Act allows 
departments or agencies of government to provide funds, facilities, 
staff, and other support services to the OFR as the OFR may determine 
advisable. Section 152(e) and Section 111(j) allow for employees of the 
Federal Government to be detailed to the OFR and the FSOC, 
respectively, without reimbursement. Funding through departments or 
agencies of government would not be sufficient to perform all of the 
functions of the FSOC, the OFR, and the FDIC required by the Act. 
Agencies funded by appropriations would be restricted in the amount of 
funding support they could provide to the FSOC or the OFR. Agencies not 
funded by appropriations would be restricted in the amount of funding 
support they could provide for activities outside their primary 
mandate. Restrictions on the availability of funds or lack of 
predictability of funding would make it difficult to maintain 
consistent program activities, and complete analysis required to 
identify possible threats to financial stability. The implementation of 
this rule is not expected to have a discernible effect on the structure 
of the financial sector.
4. Assessment of Total Fees Collected
    It is anticipated that the annual assessments for the FRF will 
exceed $100 million, making the rule a significant regulatory action as 
defined in Executive Order 12866.
    The assessment and collection of fees described in this rule 
represent an economic transfer from assessed companies to the 
government, for purposes of providing the benefits described above. As 
such, the assessments do not represent an economic cost for purposes of 
this analysis. However, the allocation of the assessment may have 
distributional impacts.
    There is a wide range of possible assessment schedules which could 
be used to collect funds for the OFR and the FSOC. For example, the 
schedule could be structured to charge eligible companies a similar 
fee, it could include tiered fees and rates, or it could include 
assessments for all eligible companies as opposed to just entities with 
$50 billion in U.S.-based assets (i.e., including foreign banking 
organizations with more than $50 billion in worldwide assets but less 
than $50 billion in U.S.-based assets). Having a simple, more 
transparent assessment schedule reduces costs for government and for 
assessed companies by making assessments easier to calculate, budget 
for, and manage administratively. Executive Order 12866 specifically 
requires that agencies ``design its regulations in the most cost-
effective manner to achieve the regulatory objective.''
    The selection of the assessment schedule was governed by two 
guiding principles:
     The assessment structure should be simple and transparent; 
and
     Allocation should take into account differences among such 
companies, based on the considerations for establishing the prudential 
standards under section 115 of the Dodd-Frank Act as required by the 
Act.
    Under Section 155 of the Act, the assessment schedule is required 
to take into account criteria for establishing prudential standards for 
supervision and regulation of large bank holding companies and nonbank 
financial companies as described in Section 115 of the Act. The 
criteria in Section 115 include: ``Capital structure, riskiness, 
complexity, financial activities (including the financial activities of 
subsidiaries), size, and any other risk-related factors that the 
Council deems appropriate.'' Selection of total consolidated assets as 
the basis for assessments was intended to take into

[[Page 29892]]

account the criteria identified in Section 115, while providing a more 
transparent and administratively cost effective metric. Using other 
risk-related metrics as a base for calculation could dramatically 
increase the cost of calculating assessments, as well as reduce a 
company's ability to project their assessment level. As of June 30, 
2011, companies meeting the criteria for assessment had $18.7 trillion 
in total consolidated assets.
    Under the assessment structure, each assessed company's eligible 
assets would be multiplied by an assessment fee rate to determine their 
assessment amount. (Eligible assets would be total worldwide 
consolidated assets for U.S.-based bank holding companies and 
designated U.S.-based nonbank financial companies, and total U.S.-based 
assets for foreign banking organizations and foreign designated nonbank 
financial companies.) Assessments would be made semiannually, generally 
based on an average of the company's last four quarters of total 
consolidated assets.
    For example, based on data on assessable assets as of June 30, 
2011, for every $100 million collected the range of assessments would 
be $280,000 for the smallest assessed company (with just over $50 
billion in assets) to $12.5 million for the largest assessed company 
(with approximately $2.3 trillion in assets).\16\ Assessments on the 
ten largest assessed companies would provide roughly two-thirds of the 
total assessed amount.
---------------------------------------------------------------------------

    \16\ Semiannual assessments will be set to maintain FRF balance 
at 12 months of budgeted capital expenses and six months of budgeted 
operating expenses. The initial assessment basis would be equivalent 
to the budgeted expenses for the end of fiscal year 2012 (July 20, 
2012 to September 30, 2012), seven months of budgeted capital 
expenses and six months of budgeted operating expenses for FY 2013.
---------------------------------------------------------------------------

    Based on currently available data, no assessed company will have 
less than $50 billion in assets; thus no small businesses are directly 
affected by the regulation. Under the structure of the rule, the only 
assessed companies that could have less than $50 billion in assets 
would be nonbank financial companies subject to enhanced prudential 
supervision by the Board. While no such determinations have yet been 
made, Treasury believes that the FSOC will not make such a 
determination for any nonbank financial company that is a small 
business. It is not anticipated that the regulation will unduly 
interfere with state, local, and tribal governments in the exercise of 
their governmental functions.
    We estimate that there are certain direct costs associated with 
complying with these rules. On a one-time basis, assessed entities 
would be required to set up a bank account for fund transfers and 
provide the required information to the Treasury Department through an 
information collection form. The information collection form includes 
bank account routing information and contact information for the 
individuals at the company that will be responsible for setting up the 
account and ensuring that funds are available on the billing date. We 
estimate that approximately 50 companies could be affected, and that 
the cost associated with filling out the form and submitting it to the 
Treasury Department is approximately $600.\17\ We note that this 
represents a conservative estimate of costs as some of these companies 
may have already established an account for payments or collections to 
the U.S. government.
---------------------------------------------------------------------------

    \17\ The cost of this activity is calculated by multiplying the 
50 companies by the time it takes to complete the form (15 minutes) 
by an approximate hourly wage of $48 (assuming an annual salary of 
$100,000).
---------------------------------------------------------------------------

    On a semi-annual basis, assessed companies will have the 
opportunity to review the confirmation statement and assessment bill. 
The rules do not require the companies to conduct the review, but it 
does permit it. We anticipate that at least some of the companies will 
conduct reviews, in part because the cost associated with it is very 
low.
5. Alternative Approaches Considered
    We have noted that there are many possible assessment structures 
which could be employed to collect assessments. As part of the 
rulemaking process, Treasury contemplated a variety of structures for 
determining how assessments would be allocated. Particularly, Treasury 
considered alternate approaches with regard to the complexity of the 
method of assessment. In addition, Treasury considered alternative 
approaches with the following features: (1) Approaches designed to 
charge assessed companies at a similar fee level, distributing 
collections more evenly; (2) approaches designed to charge different 
rates for different levels of total consolidated assets, creating a 
``tiered'' structure of rates; and (3) approaches designed to charge 
eligible bank holding companies and foreign banking organizations 
against world-wide assets, as opposed to charging foreign banking 
organizations against U.S.-based assets. We discuss these alternative 
approaches below.
a. Complexity of Approach
    In evaluating methodologies for determining individual company 
assessments, the Treasury notes that there has been a variety of 
assessment approaches employed by other federal and international 
agencies which incorporate measures of risk that are similar to the 
considerations mentioned in Section 115 of the Dodd-Frank Act. For 
example, Basel III capital adequacy standards set minimum capital 
requirements based on risk-weighted assets and also provide a mandatory 
capital conservation buffer and a discretionary countercyclical buffer. 
The risk-based calculations incorporate capital tiers, leverage, credit 
valuation adjustments, and other factors. As required by the Dodd-Frank 
Act, the FDIC recently revised how banks are charged deposit insurance 
assessments. With some minor exceptions, the FDIC assessment base is 
total consolidated assets minus tangible equity.
    In the U.S., the FDIC uses the CAMELS system to assign risk ranking 
to its regulated banks. As suggested by commenters, the Treasury 
considered using CAMELS as a classification system for assigning 
relative assessments, but deemed the approach inappropriate as the 
methodology used to produce CAMELS ratings is non-public, the ratings 
are confidential supervisory information, and the rating system was 
developed to apply to U.S. depository institutions. The system also 
provides broad rankings (ranging from one to five) which would require 
subjective translation into assessment levels.
    In each of these cases, and in other related determinations, the 
complexity of the assessment methodology is tied to the goal of the 
charge. For instance, the Dodd-Frank Act requires the Board to collect 
assessments designed to cover the costs of heightened regulation and 
supervision of large bank holding companies, large savings and loan 
holding companies, and nonbank financial companies supervised by the 
Board.
    In evaluating these arrangements, Treasury notes that complexity in 
the assessment design increases the administrative burden to assessed 
companies, including planning for those assessments, and decreases 
transparency to the public. Treasury does not believe that the benefits 
of a complex methodology justify their increased costs in the context 
of this rulemaking.

[[Page 29893]]

b. Charging Companies Fees at a Similar Level
    Section 155 of the Dodd-Frank Act requires that the assessment 
schedule take into account criteria for establishing prudential 
standards for supervision and regulation of large bank holding 
companies and nonbank financial companies as described in Section 115 
of the Act. The criteria in Section 115 include: ``capital structure, 
riskiness, complexity, financial activities (including the financial 
activities of subsidiaries), size, and any other risk-related factors 
that the Council deems appropriate.'' The option of charging companies 
at a similar level was rejected as it would appear to contradict the 
intent of the Act for the schedule to charge larger, more complex and 
riskier firms higher fees. On the basis of size alone, we estimate that 
the largest eligible companies have over 40 times the assessable assets 
of smallest companies.
c. Charging Fees Under a Tiered Rate Structure
    A number of regulators rely on tiered assessment schedules to 
collect fees. The Office of the Comptroller of the Currency uses a 
tiered assessment structure to collect fees associated with regulating 
and supervising national banks. The Office of Thrift Supervision used a 
tiered structure to collect fees to regulate and supervise thrifts. The 
main benefit of a tiered structure is that it allows fees to be charged 
at different rates to different companies. For example, supervision may 
benefit from economies of scale, meaning that the additional resources 
required for supervision do not grow dollar for dollar with the size of 
the entity. Alternatively, larger companies may pose risks that are 
disproportionately larger than their asset size, requiring even more 
resources for supervision than do smaller companies. A tiered approach 
could accommodate such differences by allowing different fee rates to 
be charges against assessed assets by tier.
    Consideration was given to establishing such a structure for FRF 
assessments. The primary benefit would have been greater flexibility in 
determining the relative amounts assessed on larger companies versus 
smaller companies. However, these benefits were balanced against an 
interest for assessment fees to be reasonably estimable and simpler to 
calculate, reducing administrative costs both for assessed companies 
and the Treasury, improving transparency, and allowing companies to 
better anticipate assessment amounts. Given that all assessed companies 
are large (generally with over $50 billion in assets) and systemically 
important, and the activities of the FSOC, the OFR, and implementation 
expenses of the FDIC correspond to all of them, the relative benefits 
of a tiered structure over a fixed rate structure were unclear.
d. Charging All Eligible Bank Holding Companies
    Based on the definition of ``bank holding company'' in Title I of 
the Dodd-Frank Act, assessments can be made against any foreign banking 
organizations with $50 billion or more in total consolidated assets. 
Since many of these eligible foreign banking companies have a 
relatively small percentage of their operations in the United States, 
there is limited basis for assessing these companies. Consideration was 
given to charging a small fee, so that all eligible companies would be 
charged, but the additional costs associated with administering the fee 
and cost of compliance by these companies outweighed the perceived 
benefits of this choice. The final determination was to charge foreign 
banking organizations with $50 billion or more in total U.S.-based 
assets and U.S. based bank holding companies with $50 billion or more 
in total consolidated assets.

D. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. A major rule cannot take effect until 60 days after it 
is published in the Federal Register. This action is a ``major rule'' 
as defined by 5 U.S.C. 804(2) and will be effective 60 days after 
publication.

E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, the Act addresses actions that may 
result in the expenditure by a state, local, or tribal government, in 
the aggregate, or by the private sector of $100,000,000 (adjusted for 
inflation) or more in any one year. Treasury believes that the 
regulatory impact analysis provides the analysis required by the 
Unfunded Mandates Reform Act.

F. Administrative Procedure Act

    The Administrative Procedure Act (5 U.S.C. 551 et seq.) (APA) 
generally requires public notice and comment procedures before 
promulgation of regulations. See 5 U.S.C. 553(b). The Treasury 
published a notice of proposed rulemaking requesting comment on the 
proposed rule on January 3, 2012. The Treasury is finalizing the rule 
as it relates to bank holding companies without an opportunity for 
additional comment.
    The comments that relate to nonbank financial companies have been 
considered but have not been fully addressed in this interim rule 
because the Department believes the rulemaking would benefit from 
additional public comment prior to establishing it as a final rule.
    The Department believes, however, that good cause exists under 5 
U.S.C. 553(b) to effectuate the rule as it relates to nonbank financial 
companies on an interim basis. As discussed in this preamble, nonbank 
financial companies supervised by the Board pursuant to section 113 of 
the Dodd-Frank Act are subject to assessments. To date, no nonbank 
financial company has been subject to the section 113 supervision. Once 
designated by the Council and subject to Board supervision, a nonbank 
financial company will also be subject to assessments under the Dodd-
Frank Act. In order to be consistent with the requirements of section 
155 of the Act in assessing designated nonbank financial companies, the 
Treasury finds that it would be impracticable and contrary to the 
public interest to delay implementation of the rule pending further 
public comment. To implement the rule only as it relates to bank 
holding companies would impose an increased burden on bank holding 
companies and prevent the collection from designated nonbank financial 
companies of the assessments required to be imposed by statute. 
Accordingly, the Treasury is effectuating the rule as it relates to 
nonbank financial companies, but also invites public comment on 
portions of Sec. Sec.  150.2, 150.3, 150.4, 150.5, and 150.6 as they 
relate to nonbank financial companies.

List of Subjects in 31 CFR Part 150

    Bank holding companies, Nonbank financial companies, Financial 
research fund.

    For the reasons set forth in the preamble, the Treasury amends 
Title 31, Chapter I of the Code of Federal Regulations by adding part 
150 to read as follows:

[[Page 29894]]

PART 150--FINANCIAL RESEARCH FUND

Sec.
150.1 Scope.
150.2 Definitions.
150.3 Determination of assessed companies.
150.4 Calculation of assessment basis.
150.5 Calculation of assessments.
150.6 Notice and payment of assessments.

    Authority: 12 U.S.C. 5345; 31 U.S.C. 321.


Sec.  150.1  Scope.

    The assessments contained in this part are made pursuant to the 
authority contained in 12 U.S.C. 5345.


Sec.  150.2  Definitions.

    As used in this part:
    Assessed company means:
    (1) A bank holding company that has $50 billion or more in total 
consolidated assets, based on the average of total consolidated assets 
as reported on the bank holding company's four most recent quarterly 
Consolidated Financial Statements for Bank Holding Companies (or, in 
the case of a foreign banking organization, based on the average of 
total assets at end of period as reported on such company's four most 
recent quarterly Capital and Asset Information for the Top-tier 
Consolidated Foreign Banking Organization submissions if filed 
quarterly, or two most recent annual submissions if filed annually, as 
appropriate); or
    (2) A nonbank financial company required to be supervised by the 
Board under section 113 of the Dodd-Frank Act.
    Assessment basis means, for a given assessment period, an estimate 
of the total expenses that are necessary or appropriate to carry out 
the responsibilities of the Office and the Council as set out in the 
Dodd-Frank Act (including an amount necessary to reimburse reasonable 
implementation expenses of the Corporation that shall be treated as 
expenses of the Council pursuant to section 210(n)(10) of the Dodd-
Frank).
    Assessment fee rate, with regard to a particular assessment period, 
means the rate published by the Department for the calculation of 
assessment fees for that period.
    Assessment payment date means:
    (1) For the initial assessment period, July 20, 2012;
    (2) For any semiannual assessment period ending on March 31 of a 
given calendar year, September 15 of the prior calendar year; and
    (3) For any semiannual assessment period ending on September 30 of 
a given calendar year, March 15 of the same year.
    Assessment period means any of:
    (1) The initial assessment period; or
    (2) Any semiannual assessment period.
    Bank holding company means:
    (1) A bank holding company as defined in section 2 of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841); or
    (2) A foreign banking organization.
    Board means the Board of Governors of the Federal Reserve System.
    Corporation means the Federal Deposit Insurance Corporation.
    Council means the Financial Stability Oversight Council established 
by section 111 of the Dodd-Frank Act.
    Department means the Department of the Treasury.
    Determination date means:
    (1) For the initial assessment period, December 31, 2011.
    (2) For any semiannual assessment period ending on March 31 of a 
given calendar year, May 31 of the prior calendar year.
    (3) For any semiannual assessment period ending on September 30 of 
a given calendar year, November 30 of the prior calendar year.
    Dodd-Frank Act means the Dodd-Frank Wall Street Reform and Consumer 
Protection Act.
    Foreign banking organization means a foreign bank or company that 
is treated as a bank holding company for purposes of the Bank Holding 
Company Act of 1956, pursuant to section 8(a) of the International 
Banking Act of 1978 (12 U.S.C. 3106(a)).
    Initial assessment period means the period of time beginning on 
July 20, 2012 and ending on March 31, 2013.
    Office means the Office of Financial Research established by 
section 152 of the Dodd-Frank Act.
    Semiannual assessment period means:
    (1) Any period of time beginning after the initial assessment 
period on October 1 and ending on March 31 of the following calendar 
year; or
    (2) Any period of time beginning after the initial assessment 
period on April 1 and ending on September 30 of the same calendar year.
    Total assessable assets means:
    (1) For a bank holding company other than a foreign banking 
organization, the average of total consolidated assets for the four 
quarters preceding the determination date, as reported on the bank 
holding company's four most recent FR Y-9C filings;
    (2) For any other bank holding company that has $50 billion or more 
in total consolidated assets, the average of the company's total assets 
of combined U.S. operations for the four quarters preceding the 
determination date, based on the combined total assets of the foreign 
banking organization's U.S. branches, agencies, and subsidiaries as 
reported on the foreign banking organization's four most recent 
quarterly financial reports, or, if the company only files financial 
reports annually, the average of the company's total assets of combined 
U.S. operations for the two years preceding the determination date, 
based on the combined total assets of the foreign banking 
organization's U.S. branches, agencies, and subsidiaries as reported on 
the foreign banking organization's two most recent annual financial 
reports; or
    (3) For a nonbank financial company supervised by the Board under 
section 113 of the Dodd-Frank Act, either the average of total 
consolidated assets for the four quarters preceding the determination 
date, if the company is a U.S. company, or the average of total assets 
of combined U.S. operations for the four quarters preceding the 
determination date, if the company is a foreign company.


Sec.  150.3  Determination of assessed companies.

    (a) The determination that a bank holding company or a nonbank 
financial company is an assessed company will be made by the 
Department.
    (b) The Department will apply the following principles in 
determining whether a company is an assessed company:
    (1) For tiered bank holding companies for which a holding company 
owns or controls, or is owned or controlled by, other holding 
companies, the assessed company shall be the top-tier, regulated 
holding company.
    (2) In situations where more than one top-tier, regulated bank 
holding company has a legal authority for control of a U.S. bank, each 
of the top-tier regulated holding companies shall be designated as an 
assessed company.
    (3) In situations where a company has not filed four consecutive 
quarters of the financial reports referenced above for the most recent 
quarters (or two consecutive years for annual filers of the FR Y-7Q or 
successor form), such as may be true for companies that recently 
converted to a bank holding company, the Department will use, at its 
discretion, other financial or annual reports filed by the company, 
such as Securities and Exchange Commission (SEC) filings, to determine 
a company's total consolidated assets.
    (4) In situations where a company does not report total 
consolidated assets in its public reports or where a company uses a 
financial reporting methodology other than U.S. GAAP to report on its

[[Page 29895]]

U.S. operations, the Department will use, at its discretion, any 
comparable financial information that the Department may require from 
the company for this determination.
    (c) Any company that the Department determines is an assessed 
company on a given determination date will be an assessed company for 
the entire assessment period related to such determination date, and 
will be subject to the full assessment fee for that assessment period, 
regardless of any changes in the company's assets or other attributes 
that occur after the determination date.


Sec.  150.4  Calculation of assessment basis.

    (a) For the initial assessment period, the Department will 
calculate the assessment basis such that it is equivalent to the sum 
of:
    (1) Budgeted operating expenses for the Office for the period 
beginning July 21, 2012 and ending March 31, 2013;
    (2) Budgeted operating expenses for the Council for the period 
beginning July 21, 2012 and ending March 31, 2013;
    (3) Capital expenses for the Office for the period beginning July 
21, 2012 and ending April 30, 2013; and
    (4) Capital expenses for the Council for the period beginning July 
21, 2012 and ending April 30, 2013; and
    (5) An amount necessary to reimburse reasonable implementation 
expenses of the Federal Deposit Insurance Corporation as provided under 
section 210(n)(10) of the Dodd-Frank Act.
    (b) For each subsequent assessment period, the Department will 
calculate an assessment basis that shall be sufficient to replenish the 
Financial Research Fund to a level equivalent to the sum of:
    (1) Budgeted operating expenses for the Office for the applicable 
assessment period;
    (2) Budgeted operating expenses for the Council for the applicable 
assessment period;
    (3) Budgeted capital expenses for the Office for the 12-month 
period beginning on the first day of the applicable assessment period;
    (4) Budgeted capital expenses for the Council for the 12-month 
period beginning on the first day of the applicable assessment period; 
and
    (5) An amount necessary to reimburse reasonable implementation 
expenses of the Federal Deposit Insurance Corporation as provided under 
section 210(n)(10) of the Dodd-Frank Act.


Sec.  150.5  Calculation of assessments.

    (a) For each assessed company, the Department will calculate the 
total assessable assets in accordance with the definition in Sec.  
150.2.
    (b) The Department will allocate the assessment basis to the 
assessed companies in the following manner:
    (1) Based on the sum of all assessed companies' total assessable 
assets, the Department will calculate the assessment fee rate necessary 
to collect the assessment basis for the applicable assessment period.
    (2) The assessment payable by an assessed company for each 
assessment period shall be equal to the assessment fee rate for that 
assessment period multiplied by the total assessable assets of such 
assessed company.
    (3) Foreign banking organizations with less than $50 billion in 
total assessable assets shall not be assessed.


Sec.  150.6  Notice and payment of assessments.

    (a) No later than fifteen calendar days after the determination 
date (or, in the case of the initial assessment period, no later than 
seven days after the publication date of this rule), the Department 
will send to each assessed company a statement that:
    (1) Confirms that such company has been determined by the 
Department to be an assessed company; and
    (2) States the total assessable assets that the Department has 
determined will be used for calculating the company's assessment.
    (b) If a company that is required to make an assessment payment for 
a given semiannual assessment period believes that the statement 
referred to in paragraph (a) of this section contains an error, the 
company may provide the Department with a written request for a revised 
statement. Such request must be received by the Department via email 
within one month and must include all facts that the company requests 
the Department to consider. The Department will respond to all such 
requests within 21 calendar days of receipt thereof.
    (c) No later than the 14 calendar days prior to the payment date 
for a given assessment period, the Department will send an electronic 
billing notification to each assessed company, containing the final 
assessment that is required to be paid by such assessed company.
    (d) For the purpose of making the payments described in Sec.  
150.5, each assessed company shall designate a deposit account for 
direct debit by the Department through www.pay.gov or successor Web 
site. No later than the later of 30 days prior to the payment date for 
an assessment period, or the effective date of this rule, each such 
company shall provide notice to the Department of the account 
designated, including all information and authorizations required by 
the Department for direct debit of the account. After the initial 
notice of the designated account, no further notice is required unless 
the company designates a different account for assessment debit by the 
Department, in which case the requirements of the preceding sentence 
apply.
    (e) Each assessed company shall take all actions necessary to allow 
the Department to debit assessments from such company's designated 
deposit account. Each such company shall, prior to each assessment 
payment date, ensure that funds in an amount at least equal to the 
amount on the relevant electronic billing notification are available in 
the designated deposit account for debit by the Department. Failure to 
take any such action or to provide such funding of the account shall be 
deemed to constitute nonpayment of the assessment. The Department will 
cause the amount stated in the applicable electronic billing 
notification to be directly debited on the appropriate payment date 
from the deposit account so designated.
    (f) In the event that, for a given assessment period, an assessed 
company materially misstates or misrepresents any information that is 
used by the Department in calculating that company's total assessable 
assets, the Department may at any time re-calculate the assessment 
payable by that company for that assessment period, and the assessed 
company shall take all actions necessary to allow the Department to 
immediately debit any additional payable amounts from such assessed 
company's designated deposit account.
    (g) If a due date under this section falls on a date that is not a 
business day, the applicable date shall be the next business day.

    Dated: May 14, 2012.
Mary Miller,
Under Secretary for Domestic Finance, Department of the Treasury.
[FR Doc. 2012-12047 Filed 5-18-12; 8:45 am]
BILLING CODE 4810-25-P