[Federal Register Volume 78, Number 111 (Monday, June 10, 2013)]
[Rules and Regulations]
[Pages 34545-34550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13670]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 78, No. 111 / Monday, June 10, 2013 / Rules
and Regulations
[[Page 34545]]
FEDERAL RESERVE SYSTEM
12 CFR Part 237
[Docket No. R-1458]
RIN 7100-AD96
Prohibition Against Federal Assistance to Swaps Entities
(Regulation KK)
AGENCIES: Board of Governors of the Federal Reserve System (``Board'')
ACTION: Interim final rule with request for comment.
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SUMMARY: The Board invites comment on an interim final rule that treats
an uninsured U.S. branch or agency of a foreign bank as an insured
depository institution for purposes of section 716 of the Dodd-Frank
Act and establishes a process by which a state member bank or uninsured
state branch or agency of a foreign bank may request a transition
period to conform its swaps activities to the requirements of section
716.
DATES: This rule is effective on June 10, 2013. Comments must be
received on or before August 4, 2013.
ADDRESSES: You may submit comments, identified by Docket No. R-1458 and
RIN No. 7100-AD96, by any of the following methods:
Agency Web site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments.
Email: [email protected]. Include docket number in
the subject line of the message.
Facsimile: (202) 452-3819 or (202) 452-3102.
Mail: Robert deV. Frierson, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW.,
Washington, DC 20551.
All public comments are available from the Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons. Accordingly, your comments will
not be edited to remove any identifying or contact information. Public
comments may also be viewed electronically or in paper form in Room MP-
500 of the Board's Martin Building (20th and C Streets NW.) between
9:00 a.m. and 5:00 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Laurie Schaffer, Associate General
Counsel, (202) 452-2272, Christopher Paridon, Counsel, (202) 452-3264,
Victoria Szybillo, Counsel (202) 475-6325, or Christine Graham, Senior
Attorney, (202) 452-3005, Legal Division; or Jordan Bleicher,
Supervisory Financial Analyst, (202) 973-6123, Division of Banking
Supervision and Regulation, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue NW., Washington, DC 20551.
Users of Telecommunication Device for Deaf (TDD) only, call (202) 263-
4869.
SUPPLEMENTARY INFORMATION: Section 716 of Title VII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank Act'')
generally prohibits the provision of ``Federal assistance'' to any
``swaps entity'' with regard to any swap, security-based swap, or other
activity of the swaps entity.\1\ ``Federal assistance'' is defined by
section 716 to include ``advances from any Federal Reserve credit
facility or discount window that is not part of a program or facility
with broad-based eligibility under section 13(3)(A) of the Federal
Reserve Act'' and Federal Deposit Insurance Corporation (``FDIC'')
insurance or guarantees.\2\ For purposes of section 716, the term
``swaps entity'' generally includes any swap dealer, security-based
swap dealer, major swap participant, or major security-based swap
participant that is registered under the Commodity Exchange Act or the
Securities Exchange Act of 1934, as applicable.\3\
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\1\ See Section 716(a) of the Dodd-Frank Act; 15 U.S.C. 8305(a).
\2\ Id.
\3\ See section 716(b)(2) of the Dodd-Frank Act; 15 U.S.C.
8305(b)(2).
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Section 716 provides a specific exclusion from the definition of
``swaps entity'' for any insured depository institution that is a major
swap participant or major security-based swap participant.\4\ Section
716 also provides that its prohibition does not apply to an insured
depository institution that limits its swaps activities to certain
specified activities.\5\
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\4\ Id. This exclusion is available to major swap participants
and major security-based swap participants that are not otherwise
swap dealers or security-based swap dealers.
\5\ See section 716(d) of the Dodd-Frank Act; 15 U.S.C. 8305(d).
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Section 716 provides insured depository institutions with a
transition period to facilitate compliance with the requirements of the
section. By its terms, the prohibitions of section 716 apply to insured
depository institutions only with respect to swaps and security-based
swaps entered into after the expiration of the transition period. The
provisions of section 716 become effective on July 16, 2013.\6\
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\6\ See Guidance on the Effective Date of Section 716 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, 77 FR
27465 (May 10, 2012).
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The interim final rule addresses the application of section 716 to
swaps entities that are uninsured U.S. branches or agencies of a
foreign bank and establishes a process by which a state member bank and
an uninsured state branch or agency of a foreign bank may request a
transition period to conform its swaps activities to the requirements
of section 716. In particular, the interim final rule treats uninsured
U.S. branches and agencies of foreign banks as insured depository
institutions for purposes of section 716.
I. Description of Interim Final Rule
A. Treatment of Uninsured U.S. Branches and Agencies of Foreign Banks
Section 716(d) of the Dodd-Frank Act provides that the prohibition
on Federal assistance does not apply to the provision of Federal
assistance to insured depository institutions that limit their swap and
security-based swap activities to activities identified in that
section.\7\ Those identified activities are: (i) Hedging and other
similar risk-mitigating activities directly related to the activities
of the insured depository
[[Page 34546]]
institution, and (ii) acting as a swaps entity for swaps or security-
based swaps involving rates or reference assets permissible for
investment by a national bank pursuant to 12 U.S.C. 24 (Seventh), other
than acting as a swaps entity for non-cleared credit default swaps.\8\
In addition, section 716(b)(2) of the Dodd-Frank Act exempts insured
depository institutions that are major swap participants from the
prohibition in section 716(a).
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\7\ See section 716(d) of the Dodd-Frank Act; 15 U.S.C. 8305(d).
\8\ See id. at 8305(d)(1)-(3).
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Moreover, section 716 provides insured depository institutions with
a transition period to conform their activities to those permissible
under section 716.\9\ The appropriate Federal banking agency for an
insured depository institution, in consultation with the Securities and
Exchange Commission (``SEC'') and Commodities Futures Trading
Commission (``CFTC''), as appropriate, has the authority to establish
the length of the transition period, which can be up to 24 months, and
to extend the transition period for a period of up to one additional
year. For purposes of establishing a transition period, the Board is
the appropriate Federal banking agency for state member banks and
uninsured state branches and agencies of foreign banks.\10\ Finally,
section 716 applies to swaps and security-based swaps entered into by
an insured depository institution only after expiration of the
transition period.\11\
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\9\ See section 716(f) of the Dodd-Frank Act; 15 U.S.C. 8305(f).
\10\ See 12 U.S.C. 1813(q)(3). The Office of the Comptroller of
Currency (OCC) is the appropriate Federal banking agency for any
Federal branch or agency of a foreign bank. See 12 U.S.C.
1813(q)(1).
\11\ See section 716(e) of the Dodd-Frank Act; 15 U.S.C.
8305(e).
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The structure, language, and purpose of section 716 create an
ambiguity regarding the definition of ``insured depository
institution'' for purposes of the various provisions of section 716,
including, in particular, regarding the scope of the exceptions and
transition period granted to insured depository institutions. The term
``insured depository institution'' is not defined for purposes of these
provisions. Section 2 of the Dodd-Frank Act provides that ``except as
the context otherwise requires . . .,'' \12\ the definition of
``insured depository institution'' has the same meaning as in the
Federal Deposit Insurance Act. ``Insured depository institution'' is
defined by section 3(c)(2) of the Federal Deposit Insurance Act to mean
a bank or savings association the deposits of which are insured by the
FDIC, and, for some purposes under section 3(c)(3), an uninsured U.S.
branch or agency.\13\
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\12\ See section 2 (chapeau) and (18)(A) of the Dodd-Frank Act;
12 U.S.C. 5301 (chapeau) and (18)(A).
\13\ See 12 U.S.C. 1813(c)(2), (c)(3).
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In the context of section 716, uninsured U.S. branches and agencies
of foreign banks would appear to be properly considered to be insured
depository institutions. By statute, both uninsured and insured U.S.
branches and agencies of foreign banks may receive Federal Reserve
advances on the same terms and conditions that apply to domestic
insured state member banks.\14\ Thus, uninsured U.S. branches and
agencies of foreign banks are treated as insured member banks for
purposes of the only Federal assistance that causes uninsured U.S.
branches and agencies of foreign banks to be affected by section 716.
Moreover, the authority vested in the Federal banking agencies to
enforce compliance with laws such as Title VII of the Dodd-Frank Act
against uninsured U.S. branches and agencies of foreign banks is based
on the treatment of those branches and agencies as insured depository
institutions.\15\ Section 716 appears therefore, to be predicated on
treatment of uninsured U.S. branches and agencies as insured depository
institutions.
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\14\ Section 13(14) of the Federal Reserve Act; 12 U.S.C. 347d.
\15\ 12 U.S.C. 1813(c)(3). While commercial lending companies
owned or controlled by foreign banks are also treated as insured
depository institutions for purposes of section 1813(c)(3) of the
Federal Deposit Insurance Act, these companies do not have access to
Federal Reserve advances under the Federal Reserve Act, and thus,
are not treated as insured depository institutions for purposes of
this interim final rule.
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Treating uninsured U.S. branches and agencies of foreign banks as
insured depository institutions is also consistent with the purpose and
legislative history of section 716. Section 716 and Title VII of the
Dodd-Frank Act generally are intended to reduce systemic risks from
derivatives activities. Treating uninsured U.S. branches and agencies
as insured depository institutions furthers these objectives by
providing sufficient opportunity for uninsured U.S. branches and
agencies to conform or cease their swaps activities in an orderly
manner and to continue the same risk-mitigating hedging and other
activities permitted for insured depository institutions under section
716. This approach is also consistent with the legislative history,
which suggests Congress intended to treat uninsured branches and
agencies as insured depository institutions.\16\
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\16\ Senator Lincoln, the sponsor of section 716, and Senator
Dodd, the Chairman of the Senate Committee on Banking, Housing, and
Urban Affairs, engaged in a colloquy on the Senate floor during
Senate consideration of the Dodd-Frank Act Conference Report in
which they confirmed that uninsured U.S. branches and agencies
should be treated in the same manner as insured depository
institutions. See 156 Cong. Rec. S5904 (daily ed. July 15, 2010)
(statement of Sen. Lincoln).
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The interim final rule provides that, for purposes of section 716
of the Dodd-Frank Act and the interim final rule, the term ``insured
depository institution'' includes any insured depository institution as
defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813) and any uninsured U.S. branch or agency of a foreign bank.\17\
The terms branch, agency, and foreign bank are defined in section 1 of
the International Banking Act of 1978.\18\
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\17\ The interim final rule would define uninsured U.S. branches
and agencies of foreign banks as insured depository institutions
solely for the purposes of section 716 and the interim final rule.
Nothing in this interim final rule affects the availability of
deposit insurance under the Federal Deposit Insurance Act with
respect to deposits received by an uninsured U.S. branch or agency
of a foreign bank.
\18\ 12 U.S.C. 3101. Insured branches of foreign banks are also
included in the definition of ``insured depository institution''
under section 3(c)(2) of the Federal Deposit Insurance Act.
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B. Transition Period for Insured Depository Institutions and Uninsured
U.S. Branches and Agencies of Foreign Banks
Section 716 provides insured depository institutions with a
transition period to conform their activities.\19\ Under section
716(f), the appropriate Federal banking agency for an insured
depository institution, in consultation with the SEC and CFTC, as
appropriate, is required to establish the length of the transition
period for conformance with the requirements of section 716. That
transition period may be up to 24 months and may be extended for a
period of up to one additional year.
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\19\ See 15 U.S.C. 8305(f).
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In establishing the length of the transition period for an insured
depository institution, the Board is required by statute to take into
account and make written findings regarding the potential impact of
divestiture or cessation of swap or security-based swaps activities on
the insured depository institution's: (i) Mortgage lending; (ii) small
business lending; (iii) job creation; (iv) capital formation versus the
potential negative impact on insured depositors and the Deposit
Insurance Fund of the FDIC; and (v) any other factor that the Board
believes appropriate to consider.
The interim final rule provides that a state member bank and an
uninsured state branch and agency of foreign bank may seek a transition
period of up to 24 months from July 16, 2013 (for an entity
[[Page 34547]]
that is a swaps entity as of July 16, 2013), or from the date on which
the entity becomes a swaps entity (if that date occurs after July 16,
2013), by submitting a written request to the Board. The request must
include: (i) The length of the transition period requested; (ii) a
description of the quantitative and qualitative impacts of immediate
divestiture or cessation of swap or security-based swaps activities on
the institution, including regarding the potential impact of
divestiture or cessation of swap or security-based swaps activities on
the institution's mortgage lending, small business lending, job
creation, capital formation versus the potential negative impact on
insured depositors and the Deposit Insurance Fund of the FDIC; and
(iii) a description of the insured institution's plan for conforming
its activities to the requirements of section 716.
Under the interim final rule, the Board may also request additional
information that it believes is necessary in order to act on a request
for a transition period. The Board will seek to act on a request for a
transition period expeditiously after the receipt of a complete
request. The interim final rule would allow the Board to impose
conditions on any transition period granted if the Board determines
such conditions are necessary and appropriate. Consistent with section
716(f), the interim final rule also permits the Board, in consultation
with the SEC and CFTC, as appropriate, to extend the transition period
for up to one additional year. To request an extension of the
transition period, an insured depository institution must submit a
written request no later than 60 days before the end of the transition
period.
II. Request for Comments
The Board is interested in receiving comments on all aspects of the
interim final rule. In particular:
Question 1. Is it appropriate and consistent with section 716 to
define insured depository institution to include an uninsured U.S.
branch or agency?
Question 2. How could the transition period process be modified to
better achieve the purposes of section 716? Are there any additional
factors that the Board should consider in reviewing a request for a
transition period?
Question 3. Are there specific additional conditions or limitations
that the Board should, by rule, impose in connection with granting a
transition period? If so, what conditions or limitations would be
appropriate? Alternatively, should the Board consider what conditions
or limitations might be appropriate to apply during a transition period
(including any extension thereof) on a tailored or case-by-case basis?
III. Effective Date; Solicitation of Comments
This interim final rule is effective immediately. Pursuant to the
Administrative Procedure Act (APA), at 5 U.S.C. 553(b)(B), notice and
comment are not required prior to the issuance of a final rule if an
agency, for good cause, finds that ``notice and public procedure
thereon are impracticable, unnecessary, or contrary to the public
interest.'' \20\ Similarly, a final rule may be published with an
immediate effective date if an agency finds good cause and publishes
such with the final rule.\21\
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\20\ 5 U.S.C. 553(b)(B).
\21\ 5 U.S.C. 553(d)(3).
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Consistent with section 553(b)(B) of the APA, the Board finds that
issuing this rule as an interim final rule is necessary to avoid
significant disruptions in the swaps activities of the uninsured U.S.
branches and agencies of foreign banks, and that obtaining notice and
comment prior to issuing the interim final rule would be impracticable
and contrary to the public interest. Furthermore, the Board finds that
there is good cause to publish the interim final rule with an immediate
effective date.
The Board views the scope of section 716's prohibition as closely
related to the application of the Title VII framework to the cross-
border activities of foreign banks. The CFTC and SEC both have issued
proposals regarding the cross-border application of Title VII.\22\ The
CFTC issued an exemptive order granting temporary relief from certain
cross-border applications of the swaps provisions of Title VII.\23\
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\22\ 76 FR 858, 860 (January 7, 2013), 78 FR 30,967 (May 23,
2013).
\23\ 76 FR 858. The SEC did not issue a similar exemptive order
because it has not established the compliance date for the security-
based swap dealer registration provisions of Title VII.
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Although the Title VII regulatory structure is still being
developed, section 716 goes into effect on July 16, 2013. Accordingly,
the Board is seeking to provide clarity to uninsured U.S. branches and
agencies of foreign banks regarding the availability of the transition
period and the exceptions available for insured depository
institutions. Absent clarity regarding the availability of the
transition period, uninsured U.S. branches and agencies of foreign
banks arguably would have to terminate their swaps activities by July
16, 2013 in order to continue to be eligible for access to the discount
window. Terminating swaps activities by this date may result in foreign
banks and their counterparties winding down their swaps activities in
an inefficient and disorderly fashion that could present significant
operational and other risks.
There is also good cause to provide clarity on the availability of
the exceptions set forth in section 716 through this interim final rule
because notice and public procedure would be impracticable and contrary
to the public interest. Without such clarity, uninsured branches and
agencies would be required to begin terminating all their swap
activities during the transition period, even those that qualified for
the exceptions. The novation of existing swaps may require the branch
or agency to enter quickly into new master swap agreements with each
customer, which could present operational risks to the branch or agency
and its customers. In the Board's view, the potential harm to these
entities and their counterparties that may result from not providing
clarity on the availability of the exceptions warrants a departure from
the notice and comment rulemaking procedure.
Last, the Board finds that there is good cause to establish the
process for applying for transition period relief through this interim
final rule because notice and comment would be unnecessary and contrary
to the public interest. The interim final rule establishes a procedure
of obtaining a statutory transition period and reduces burden on
applying institutions by narrowing and clarifying the information that
must be provided to obtain this statutory benefit. State member banks
are eligible for the transition period under section 716(f) absent
implementing regulations, and the Board has already received
applications from state member banks requesting transition period
relief. In addition, this portion of the interim final rule is
appropriately characterized as a rule of procedure, and therefore would
not normally be subject to notice and comment requirements. The Board
has determined to publish the transition period procedures in this
interim final rule in order to provide notice to all state member banks
regarding these procedures.
Although notice and comment are not required prior to the effective
date of this interim final rule, the Board invites comment on all
aspects of this rulemaking and will revise this interim final rule if
necessary or appropriate in light of the comments received.
[[Page 34548]]
IV. Regulatory Analysis
A. Regulatory Flexibility Act Analysis
In accordance with section 4 of the Regulatory Flexibility Act
(``RFA''), 5 U.S.C. 601 et seq., the Board is publishing an initial
regulatory flexibility analysis for the interim final rule. The RFA
generally requires an agency to assess the impact a rule is expected to
have on small entities.\24\ The RFA requires an agency either to
provide a regulatory flexibility analysis or to certify that the
interim final rule will not have a significant economic impact on a
substantial number of small entities. Based on this analysis and for
the reasons stated below, the Board believes that this interim final
rule will not have a significant economic impact on a substantial
number of small entities. Nevertheless, the Board is publishing an
initial regulatory flexibility analysis and requesting public comment
on the effect of the interim final rule on small entities. A final
regulatory flexibility analysis will be conducted after consideration
of comments received during the public comment period.
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\24\ Under standards the U.S. Small Business Administration has
established, an entity is considered ``small'' if it has $175
million or less in assets for banks and other depository
institutions. U.S. Small Business Administration, Table of Small
Business Size Standards Matched to North American Industry
Classification System Codes, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.
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The Board is adopting this interim final rule to treat an uninsured
U.S. branch or agency of a foreign bank as an insured depository
institution for purposes of section 716 of the Dodd-Frank Act and
establish a process by which a state member bank and uninsured branch
or agency of a foreign bank may request a transition period to conform
its swaps activities to the requirements of section 716.
Under regulations issued by the Small Business Administration
(``SBA''), a ``small entity'' includes those firms within the ``Finance
and Insurance'' sector with asset sizes that vary from $7 million or
less to $175 million or less.\25\ The Board believes that the Finance
and Insurance sector constitutes a reasonable universe of firms for
these purposes because such firms generally engage in activities that
are financial in nature. Consequently, bank holding companies or
nonbank financial companies with assets sizes of $175 million or less
are small entities for purposes of the RFA.
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\25\ 13 CFR 121.201.
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As discussed in the Supplementary Information, the interim final
rule would apply to an uninsured U.S. branch or agency of a foreign
bank and a state member bank that is registered with the CFTC or SEC as
a swap dealer or security-based swap dealer, respectively. Regulations
issued by the CFTC and SEC provide that a person shall not be deemed a
swap dealer if its swap dealing activity over the preceding 12 months
results in swap positions with an aggregate gross notional amount of no
more than $3 billion, and an aggregate gross notional amount of no more
than $25 million with regard to swaps with a ``special entity'' (which
includes municipalities, other political subdivisions and employee
benefit plans).\26\ Given the relative size of the de minimis
exemption, it is unlikely that a financial firm that is at or below the
$175 million asset threshold would be engaged in swaps transactions
that would meet or exceed the threshold to qualify as a swap dealer or
security-based swap dealer.\27\
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\26\ 77 FR 30596 (May 23, 2012).
\27\ See id. at 30701 and 30743.
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As noted above, because the interim final rule is not likely to
apply to any company with assets of $175 million or less, it is not
expected to apply to any small entity for purposes of the RFA. The
Board does not believe that the interim final rule duplicates,
overlaps, or conflicts with any other Federal rules. In light of the
foregoing, the Board does not believe that the interim final rule, if
adopted in final form, would have a significant economic impact on a
substantial number of small entities supervised. Nonetheless, the Board
seeks comment on whether the interim final rule would impose undue
burdens on, or have unintended consequences for, small organizations,
and whether there are ways such potential burdens or consequences could
be minimized in a manner consistent with section 716 of the Dodd-Frank
Act.
B. Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act required the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The Federal banking agencies invite
comment on how to make this interim final rule easier to understand.
For example:
Has the Board organized the material to suit your needs?
If not, how could the rule be more clearly stated?
Are the requirements in the rule clearly stated? If not,
how could the rule be more clearly stated?
Do the regulations contain technical language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes would make the regulation easier to
understand?
Would more, but shorter, sections be better? If so, which
sections should be changed?
What else could the Board do to make the regulation easier
to understand?
C. Paperwork Reduction Act
Request for Comment on Proposed Information Collection
In accordance with section 3512 of the Paperwork Reduction Act of
1995 (44 U.S.C. 3501-3521) (``PRA''), the Board may not conduct or
sponsor, and a respondent is not required to respond to, an information
collection unless it displays a currently valid Office of Management
and Budget (``OMB'') control number. The OMB control number for this
information collection will be assigned. The Board reviewed the interim
final rule under the authority delegated to the Board by OMB.
The interim final rule contains requirements subject to the PRA.
The reporting requirements are found in sections 237.22(a)1 and
237.22(e). This information collection requirement would implement
section 716 of the Dodd-Frank Act.
Proposed Information Collection
Title of Information Collection: Reporting Requirements Associated
with Regulation KK.
Frequency of Response: On occasion.
Affected Public: Businesses or other for-profit.
Respondents: Uninsured state branches or agencies of foreign banks,
state member banks.
Abstract: The interim final rule would treat an uninsured U.S.
branch or agency of a foreign bank as an insured depository institution
and establish a process by which a state member bank and uninsured
state branch or agency of a foreign bank may request a transition
period to conform its swaps activities.
Section 237.22(a)(1) would enable an insured depository institution
for which the Board is the appropriate Federal banking agency to
request a transition period of up to 24 months from the later of July
16, 2013, or the date on which it becomes a swaps entity, during which
to conform its swaps activities to the requirements of this section by
submitting a request in writing to the
[[Page 34549]]
Board. Any request submitted must, at a minimum, include the following
information: (i) The length of the transition period requested; (ii) a
description of the quantitative and qualitative impacts of divestiture
or cessation of swap or security-based swaps activities on the insured
depository institution, including information that addresses the
factors in paragraph (d) of that section; and (iii) a detailed
explanation of the insured depository institution's plan for conforming
its activities to the requirements of section 716 of the Dodd-Frank Act
(15 U.S.C. 8305) and this part.
Section 237.22(e) would allow the Board to extend a transition
period for a period of up to one additional year. To request an
extension of the transition period, an insured depository institution
must submit a request containing the information set forth in paragraph
(a) of this section. The insured depository institution must submit the
request no later than 60 days before the end of the transition period.
Estimated Paperwork Burden
Number of Respondents: 29.
Estimated Average Hours per Response: 7 hours.
Total Estimated Annual Burden: 203 hours.
Comments are invited on:
(a) Whether the proposed collections of information are necessary
for the proper performance of the Federal Reserve's functions,
including whether the information has practical utility;
(b) The accuracy of the Federal Reserve's estimate of the burden of
the proposed information collections, including the validity of the
methodology and assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
The Board has a continuing interest in the public's opinions of
collections of information. At any time, comments regarding the burden
estimate, or any other aspect of this collection of information,
including suggestions for reducing the burden, may be sent to:
Secretary, Board of Governors of the Federal Reserve System, 20th and C
Streets NW., Washington, DC 20551; and to the Office of Management and
Budget, Paperwork Reduction Project, Washington, DC 20503.
List of Subjects in 12 CFR Part 237
Administrative practice and procedure, Banks and banking, Capital,
Derivatives, Foreign banking, Holding companies, Margin requirements,
Reporting and recordkeeping requirements, Risk.
Authority and Issuance
For the reasons stated in the Supplementary Information, the Board
amends 12 CFR Chapter II by adding new part 237 to read as follows:
PART 237--MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP ENTITIES
(REGULATION KK)
Subpart A--[RESERVED]
Subpart B-- Prohibition Against Federal Assistance to Swaps Entities
Sec.
237.20 Definitions.
237.21 Definition of insured depository institution for purposes of
section 716.
237.22 Transition period for insured depository institutions.
Authority: 15 U.S.C. 8305, 12 U.S.C. 343-350, 12 U.S.C. 1818,
12 U.S.C. 3101 et seq.
Subpart A--[RESERVED]
Subpart B-- Prohibition Against Federal Assistance to Swaps
Entities
Sec. 237.20 Definitions.
Unless otherwise specified, for purposes of this subpart:
Board means the Board of Governors of the Federal Reserve System.
Dodd-Frank Act means the Dodd-Frank Wall Street Reform and Consumer
Protection Act.
Foreign bank has the same meaning as in Sec. 211.21(n) of the
Board's Regulation K (12 CFR 211.21(n)).
Major security-based swap participant has the same meaning as in
section 3(a)(67) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(67)) and as implemented in rules and orders issued by the
Securities and Exchange Commission.
Major swap participant has the same meaning as in section 1a(33) of
the Commodity Exchange Act (7 U.S.C. 1a(33)) and as implemented in
rules and orders issued by the Commodity Futures Trading Commission.
Security-based swap has the same meaning as in section 3(a)(68) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)) and as
implemented in rules and orders issued by the Securities and Exchange
Commission.
Security-based swap dealer has the same meaning as in section
3(a)(71) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(71))
and as implemented in rules and orders issued by the Commodity Futures
Trading Commission.
Swap dealer has the same meaning as in section 1a(49) of the
Commodity Exchange Act (7 U.S.C. 1a(49)) and as implemented in rules
and orders issued by the Commodity Futures Trading Commission.
Swaps entity means a person that is registered as a swap dealer,
security-based swap dealer, major swap participant, or major security-
based swap participant under the Commodity Exchange Act or Securities
Exchange Act of 1934, other than an insured depository institution that
is registered as a major swap participant or major security-based swap
participant.
Sec. 237.21 Definition of insured depository institution for purposes
of section 716.
For purposes of section 716 of the Dodd-Frank Act (15 U.S.C. 8305)
and this subpart, the term ``insured depository institution'' includes
any insured depository institution as defined in section 3 of the
Federal Deposit Insurance Act (12 U.S.C. 1813) and any uninsured U.S.
branch or agency of a foreign bank. The terms branch, agency, and
foreign bank are defined in section 1 of the International Banking Act
of 1978 (12 U.S.C. 3101).
Sec. 237.22 Transition period for insured depository institutions.
(a) Approval of transition period. (1) To the extent an insured
depository institution for which the Board is the appropriate Federal
banking agency qualifies as a ``swaps entity'' and would be subject to
the Federal assistance prohibition in section 716(a) of the Dodd-Frank
Act, the insured depository institution may request a transition period
of up to 24 months from the later of July 16, 2013, or the date on
which it becomes a swaps entity, during which to conform its swaps
activities to the requirements of this section by submitting a request
in writing to the Board. Any request submitted pursuant to this
paragraph (a) of this section shall, at a minimum, include the
following information:
(i) The length of the transition period requested;
(ii) A description of the quantitative and qualitative impacts of
divestiture or cessation of swap or security-based swaps activities on
the insured depository institution, including information that
addresses the factors in paragraph (d) of this section; and
[[Page 34550]]
(iii) A detailed explanation of the insured depository
institution's plan for conforming its activities to the requirements of
section 716 of the Dodd-Frank Act (15 U.S.C. 8305) and this part.
(2) The Board may, at any time, request additional information that
it believes is necessary for its decision.
(b) Transition period for insured depository institutions.
Following review of a written request submitted under paragraph (a) of
this section, the Board shall permit an insured depository institution
for which it is the appropriate Federal banking agency up to 24 months
after the later of July 16, 2013, or the date on which the insured
depository institution becomes a swaps entity, to comply with the
requirements of section 716 of the Dodd-Frank Act (15 U.S.C. 8305) and
this subpart based on its consideration of the factors in paragraph (c)
of this section.
(c) Factors governing Board determinations. In establishing an
appropriate transition period pursuant to any request under this
section, the Board will take into account and make written findings
regarding:
(1) The potential impact of divestiture or cessation of swap or
security-based swaps activities on the insured depository
institution's:
(i) Mortgage lending;
(ii) Small business lending;
(iii) Job creation; and
(iv) Capital formation versus the potential negative impact on
insured depositors and the Deposit Insurance Fund of the Federal
Deposit Insurance Corporation; and
(2) Any other factor that the Board believes appropriate.
(d) Timing of Board review. The Board will seek to act on a request
under paragraph (a) of this section expeditiously after the receipt of
a complete request.
(e) Extension of transition period. The Board may extend a
transition period provided under this section for a period of up to one
additional year. To request an extension of the transition period, an
insured depository institution must submit a written request containing
the information set forth in paragraph (a) of this section no later
than 60 days before the end of the transition period.
(f) Authority to impose restrictions during any transition period.
The Board may impose such conditions on any transition period granted
under this section as the Board determines are necessary or
appropriate.
(g) Consultation. The Board shall consult with the Commodity
Futures Trading Commission or the Securities and Exchange Commission,
as appropriate, prior to the approval of a request by an insured
depository institution for a transition period under this section.
By order of the Board of Governors of the Federal Reserve
System, June 5, 2013.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
[FR Doc. 2013-13670 Filed 6-7-13; 8:45 am]
BILLING CODE 6210-01-P