[Federal Register Volume 78, Number 140 (Monday, July 22, 2013)]
[Proposed Rules]
[Pages 43829-43838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-16434]


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FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 225

[Regulations H, Q, and Y; Docket No. R-1459]
RIN 7100 AD-98


Risk-Based Capital Guidelines; Market Risk

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of proposed rulemaking (NPR).

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
proposes to revise its market risk capital rule (market risk rule) to 
address recent changes to the Country Risk Classifications (CRCs) 
published by the Organization for Economic Cooperation and Development 
(OECD), which are referenced in the Board's market risk rule; to 
clarify the treatment of certain traded securitization positions; to 
make a technical amendment to the definition of covered position; and 
to clarify the timing of the required market risk disclosures. These 
changes would conform the Board's current market risk rule to the 
requirements in the Board's new capital framework and thereby allow the 
current market risk rule to serve as a bridge until the new capital 
framework becomes fully effective for all banking organizations.

DATES: Comments must be submitted on or before September 3, 2013.

ADDRESSES: Comments should be directed to:
    When submitting comments, please consider submitting your comments 
by email or fax because paper mail in the Washington, DC area and at 
the Board may be subject to delay. You may submit comments, identified 
by Docket No. R-1459 and RIN No. 7100 AD-98, 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 the 
Docket and RIN numbers in the subject line of the message.
     Fax: (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 
Street NW., Washington, DC 20551) between 9 a.m. and 5 p.m. on 
weekdays.

FOR FURTHER INFORMATION CONTACT: Constance Horsley, Manager, (202) 452-
5239, or Tim Geishecker, Senior Supervisory Financial Analyst, (202) 
475-6353, Capital and Regulatory Policy, Division of Banking 
Supervision and Regulation; or Benjamin McDonough, Senior Counsel, 
(202) 452-2036, or Mark Buresh, Attorney (202) 452-5270, Legal 
Division, Board of Governors of the Federal Reserve System, 20th and C 
Streets NW., Washington, DC 20551. For the hearing impaired only, 
Telecommunication Device for the Deaf (TDD), (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    On August 30, 2012, the Office of the Comptroller of the Currency 
(OCC), the Board of Governors of the Federal Reserve System (Board), 
and the Federal Deposit Insurance Corporation (FDIC)

[[Page 43830]]

(collectively, the agencies) published a final rule to revise their 
respective market risk rules (the August 2012 final rule).\1\ The rule 
revised the market risk rule to better capture positions for which the 
market risk rule is appropriate; reduce pro-cyclicality; enhance the 
rules' sensitivity to risks that were not adequately captured under the 
existing methodologies; and increase transparency through enhanced 
disclosures.
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    \1\ 77 FR 53060 (August 30, 2012). The agencies' market risk 
rules are at 12 CFR part 3, appendix B (OCC); 12 CFR parts 208 and 
225, appendix E (Board); and 12 CFR part 325, appendix C (FDIC).
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    As described in more detail in the August 2012 final rule, the 
revisions to the market risk rule were designed to incorporate features 
of documents published by the Basel Committee on Bank Supervision 
(BCBS) and the International Organizations of Securities Commissions 
(IOSCO) in 2005, 2009, and 2010 that revised the market risk 
framework,\2\ and to implement certain provisions of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), 
including the prohibition against including references to credit 
ratings in Federal regulations set forth in section 939A.\3\
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    \2\ The BCBS published a revised capital framework in 2004 
entitled International Convergence of Capital Measurement and 
Capital Standards: A Revised Framework (Basel II Accord) (available 
at http://www.bis.org/publ/bcbs107.htm) and, between 2005 and 2010, 
made revisions included in the 2005 publication of The Application 
of Basel II to Trading Activities and the Treatment of Double 
Default Effects (available at http://www.bis.org/publ/bcbs111.htm); 
the 2009 publications of Revisions to the Basel II Market Risk 
Framework (available at http://www.bis.org/publ/bcbs158.htm), 
Guidelines for Computing Capital for Incremental Risk in the Trading 
Book (available at http://www.bis.org/publ/bcbs159.htm), and 
Enhancements to the Basel II Framework (available at http://www.bis.org/publ/bcbs/basel2enh0901.htm); and the 2010 publication 
that established a floor on the risk-based capital requirement for 
modeled correlation trading positions (available at http://www.bis.org/press/p100618/annex.pdf). The agencies provided 
additional detail on this history in the preamble to the August 2012 
final rule. See, 77 FR 53060, 53060-53062 (August 30, 2012).
    \3\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010). Section 
939A(a) of the Dodd-Frank Act provides that not later than 1 year 
after the date of enactment, each Federal agency shall: (1) Review 
any regulation issued by such agency that requires the use of an 
assessment of the credit-worthiness of a security or money market 
instrument; and (2) any references to or requirements in such 
regulations regarding credit ratings. Section 939A further provides 
that each such agency ``shall modify any such regulations identified 
by the review under subsection (a) to remove any reference to or 
requirement of reliance on credit ratings and to substitute in such 
regulations such standard of credit-worthiness as each respective 
agency shall determine as appropriate for such regulations.'' See 15 
U.S.C. 78o-7 note.
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    Revisions to the market risk framework from both 2005 and 2009 
included provisions that reference credit ratings. The 2005 revisions 
also expanded the ``government'' category of debt positions to include 
all sovereign debt and changed the standardized specific risk-weighting 
factor for sovereign debt from 0 percent to a range of between 0 and 12 
percent based on the credit rating of the obligor and the remaining 
contractual maturity of the debt position.
    In the United States, section 939A the Dodd-Frank Act prevents the 
agencies from implementing those aspects of the BCBS revisions that 
relied on the use of credit ratings. Instead, the agencies developed 
alternative standards of creditworthiness and, in a joint notice of 
proposed rulemaking (NPR) published in December 2011, the agencies 
proposed to incorporate the non-credit rating based standards into the 
market risk rule's calculation of specific risk capital requirements 
for sovereign debt positions, certain other covered debt positions, and 
securitization positions.\4\ The August 2012 final rule incorporated 
those non-credit ratings based standards for measuring specific risk 
capital requirements.
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    \4\ 76 FR 79380 (December 21, 2011).
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    In this NPR, the Board is proposing to revise its market risk rule 
to address recent changes to the country risk classifications (CRCs) 
published by the Organization for Economic Cooperation and Development 
(OECD); clarify the treatment of certain traded securitization 
positions; make a technical amendment to the definition of covered 
position; and clarify the timing of required market risk disclosures. 
These proposed changes would conform the Board's current market risk 
rule to the material requirements in the Board's new capital framework 
and thereby allow the current market risk rule to serve as a bridge 
until the new capital framework becomes fully effective for all banking 
organizations.

II. Description of Proposed Revisions to the Market Risk Rule

A. Sovereign Debt Positions

    Under the current market risk rule, a sovereign entity is defined 
as a central government (including the U.S. government) or an agency, 
department, ministry, or central bank of a central government. The 
specific risk capital requirement for a sovereign debt position that is 
not backed by the full faith and credit of the United States is 
determined, in part, using CRCs based on the OECD's CRC methodology. 
The OECD's CRCs are an assessment of country risk, used to set interest 
rates for transactions covered by the OECD arrangement on export 
credits.
    The OECD's CRC methodology was established in 1999 and classifies 
countries into categories based on the application of two basic 
components: (1) the country risk assessment model (CRAM), which is an 
econometric model that produces a quantitative assessment of country 
credit risk; and (2) the qualitative assessment of the CRAM results, 
which integrates political risk and other risk factors not fully 
captured by the CRAM. The two components of the CRC methodology are 
combined and result in countries being classified into one of eight 
risk categories (0-7), with countries assigned to the 0 category having 
the lowest possible risk assessment and countries assigned to the 7 
category having the highest. The OECD regularly updates CRCs for over 
150 countries.\5\ Also, CRCs are recognized by the BCBS as an 
alternative to credit ratings.\6\
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    \5\ Please refer to http://www.oecd.org/document/49/0,3343,en_2649_34169_1901105_1_1_1_1,00.html for more information on the 
OECD CRC methodology.
    \6\ See, Basel II: International Convergence of Capital 
Measurement and Capital Standards: A Revised Framework--
Comprehensive Version (June 2006). See paragraph 55 at page 20. 
Available at http://www.bis.org/publ/bcbs128b.pdf.
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    As noted in the preamble to the August 2012 final rule, the 
agencies determined that the use of CRCs to measure sovereign risk for 
purposes of their respective risk-based capital regulations is 
permissible under section 939A of the Dodd-Frank Act, because section 
939A was not intended to apply to assessments made by organizations 
such as the OECD. Additionally, the agencies noted that the use of the 
CRCs was limited in scope.
    Following the publication of the August 2012 final rule, the OECD 
determined that it will no longer classify certain high-income 
countries that previously received a CRC of zero. Under the August 2012 
final rule, sovereign debt positions without a CRC generally receive a 
specific risk-weighting factor of 8 percent (the equivalent of a 100 
percent risk weight). According to the OECD, the CRAM was not used to 
categorize high-income OECD and Euro Area countries, therefore, the 
OECD determined that applying a CRC to such countries was no longer 
appropriate.\7\ However, the OECD stated that such countries ``will 
remain subject to the same market credit risk pricing disciplines that 
are applied to all Category Zero countries. This

[[Page 43831]]

means that the change will have no practical impact on the rules that 
apply to the provision of official export credits.'' \8\
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    \7\ ``Changes agree to the Participant Country Risk 
Classification System,'' available at: http//www.oecd.org/tad/xcred/cat0.htm.
    \8\ Id.
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    In light of these changes and recognizing that CRCs have certain 
limitations, the Board continues to believe that referencing CRCs in 
its market risk rule is appropriate and represents a reasonable 
alternative to credit ratings for sovereign exposures. Moreover, the 
CRC methodology is more granular and risk-sensitive than the previous 
risk-weighting methodology, which was based solely on a sovereign 
entity's OECD membership. Furthermore, referencing CRCs poses moderate 
additional burden for banking organizations, because the OECD regularly 
updates CRCs and makes the assessments available on its public Web 
site. Additionally, the use of CRCs is consistent with the treatment of 
sovereign debt positions in the Basel II Accord.\9\
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    \9\ See footnote 2.
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    Consistent with the August 2012 final rule, the proposal would map 
the risk weights to CRCs in a manner consistent with the Basel II 
standardized approach, which provides risk weights for exposures to 
foreign sovereigns based on CRCs. This proposal would amend the Board's 
market risk rule to allow exposures to OECD member countries that are 
covered positions and that no longer receive a CRC to continue to 
receive a zero percent specific risk-weighting factor (except in cases 
of default by the sovereign entity). The revised specific risk-
weighting factors for sovereign debt positions, with the new category 
for OECD members with no CRC rating, are set forth in Table 1.

  Table 1--Specific Risk-Weighting Factors for Sovereign Debt Positions
------------------------------------------------------------------------
                                                         Risk-weighting
                                 Remaining contractual     factor  (in
                                       maturity             percent)
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Sovereign CRC:
    0-1.......................  ......................                 0
    2-3.......................  6 months or less......              0.25
                                Greater than 6 months                1.0
                                 and up to and
                                 including 24 months.
                                Exceeds 24 months.....               1.6
    4-6.......................  ......................               8.0
    7.........................  ......................              12.0
OECD Member with No CRC.......  ......................               0.0
Non-OECD Member with No CRC...  ......................               8.0
Sovereign Default.............  ......................              12.0
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    A banking organization may assign to a sovereign debt position a 
specific risk-weighting factor lower than the applicable specific risk-
weighting factor in Table 1 if the position is denominated in the 
sovereign entity's currency, the banking organization has at least an 
equivalent amount of liabilities in that foreign currency, and the 
sovereign entity allows banks under its jurisdiction to assign the 
lower specific risk-weighting factor to the same exposures to the 
sovereign entity.
    The Board notes that the specific risk-weighting factors for debt 
positions that are exposures to a public sector entity (PSE), 
depository institution, foreign bank, or credit union will continue to 
be tied to the CRC of the applicable sovereign entity. Therefore, under 
the proposed changes to the market risk rule, a banking organization 
must assign a specific risk-weighting factor of 0.25, 1.0, or 1.6 
percent (depending on the remaining contractual maturity of the 
position), to a debt position that is an exposure to a PSE, depository 
institution, foreign bank, or credit union, if the applicable sovereign 
entity does not have a CRC but is a member of the OECD, unless the 
sovereign debt position must otherwise be assigned a higher specific 
risk-weighting factor (for example, in the case of default by the 
sovereign entity). For each applicable table of specific risk-weighting 
factors in the rule, the Board proposes to add an ``OECD Member with No 
CRC'' category and to revise the current ``No CRC'' category to read 
``Non-OECD Member with No CRC,'' each with appropriate corresponding 
specific risk-weighting factors. This additional category would address 
those situations, discussed above, where a sovereign entity that had 
received a CRC of zero will no longer receive a CRC going forward. This 
approach to an exposure to a sovereign entity, PSE, depository 
institution, foreign bank, or credit union is consistent with the 
approach that the agencies are finalizing in their new comprehensive 
capital framework.
    Following the publication of the August 2012 final rule and the 
three interagency proposals to revise the agencies' risk-based capital 
rules consistent with the Basel III Accord and with the Dodd-Frank Act, 
some commenters contended that the OECD's CRC methodology unduly 
benefits certain jurisdictions with unstable fiscal positions, because 
certain countries that restructured their sovereign debt due to 
financial distress were able to retain their preferential CRC.\10\ This 
concern is misplaced, however, because the August 2012 final rule 
requires a banking organization to apply a higher 12 percent specific 
risk-weighting factor (the equivalent of a 150 percent risk weight) to 
sovereign debt positions upon determining that an event of sovereign 
default has occurred during the previous five years. Under the 
proposal, the Board's market risk rule will retain this treatment for 
defaulted sovereign exposures. Under the proposal, as under the current 
rule, default by a sovereign entity would be defined as noncompliance 
by the sovereign entity with its external debt service obligations or 
the inability or unwillingness of a sovereign government to service an 
existing loan according to its original terms, as evidenced by failure 
to pay principal and interest timely and fully, arrearages, or 
restructuring. A default includes a voluntary or involuntary 
restructuring that results in a sovereign not servicing an existing 
obligation in accordance with the obligation's original terms.
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    \10\ 77 FR 52793 (August 30, 2012); 77 FR 52888 (August 30, 
2012); 77 FR 52978 (August 30, 2012).
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B. Securitization Positions--Simplified Supervisory Formula Approach

    The August 2012 final rule removed the option for banking 
organizations to use an internal model to measure the

[[Page 43832]]

specific risk of most securitization positions and instead provided 
that a banking organization subject to the market risk rule generally 
must assign a 100 percent specific risk-weighting factor to its 
securitization positions or apply the so-called Simplified Supervisory 
Formula Approach (SSFA), which takes into account the nature and 
quality of the underlying collateral of the securitization and was 
designed to apply relatively higher capital requirements to the more 
risky junior tranches of a securitization that are the first to absorb 
losses and relatively lower requirements to the most senior positions. 
This NPR would clarify the treatment of certain securitization 
positions under the SSFA with regard to determining the delinquency of 
the underlying exposures as discussed below.
    Among the inputs to the SSFA is a parameter designed to increase 
the capital requirements for a securitization exposure when 
delinquencies in the underlying assets of the securitization grow. In 
the SSFA, this is labeled as the ``W'' parameter. This parameter W 
equals the ratio of (1) the sum of the dollar amounts of any underlying 
exposures of the securitization that meet certain criteria to (2) the 
balance, measured in dollars, of underlying exposures. The criteria are 
that the underlying exposure is 90 days or more past due, subject to a 
bankruptcy or insolvency proceeding, in the process of foreclosure, 
held as real estate owned, in default, or has contractually deferred 
interest payments for 90 days or more.
    Since the issuance of the August 2012 final rule, banking 
organizations subject to the rule have commented that the criteria 
could be read to include deferrals of interest that are unrelated to 
the performance of the loan or the borrower and may inappropriately 
include certain federally guaranteed student loans. The Board did not 
intend for parameter W to be interpreted in this manner. Instead, the 
August 2012 final rule was intended to capture contractual provisions 
present in certain instruments that permit borrowers to defer payments 
due to financial difficulties and, therefore, may conceal credit 
quality deterioration in the assets underlying a securitization 
exposure. Accordingly, the Board proposes to clarify parameter W in its 
market risk rule to ensure that parameter W excludes loans with 
contractual provisions that allow deferral of principal and interest on 
federally-guaranteed student loans, in accordance with the terms of 
those guarantee programs, or on consumer loans including non-federally-
guaranteed student loans, provided that such payments are deferred 
pursuant to provisions included in the contract at the time funds are 
disbursed that provide for periods of deferral that are not initiated 
based on changes in the creditworthiness of the borrower. This 
clarification would help to avoid regulatory disincentives for banking 
organizations to invest in securitizations, particularly 
securitizations of federally-guaranteed student loans, where the 
underlying exposures include provisions that allow for the deferral of 
certain payments for non-credit related reasons. This clarification is 
consistent with the approach that the agencies are finalizing in their 
new comprehensive capital framework.

C. Definition of Covered Position

    The Board proposes to make a technical amendment to the market risk 
rule with respect to the definition of ``covered position.'' Currently, 
this definition excludes equity positions that are not publicly traded. 
The Board proposes to refine this exception such that a covered 
position may include a position in an investment company, as defined in 
and registered with the SEC under the Investment Company Act of 1940 
(15 U.S.C. 80 a-1 et seq.) (or its non-U.S. equivalent), that is not 
publicly traded, provided that all the underlying equities held by the 
investment company are publicly traded. The Board believes that a 
``look-through'' approach is appropriate in these circumstances because 
of the liquidity of the underlying positions, so long as the other 
conditions of a covered position are satisfied. This modification to 
the definition of ``covered position'' is consistent with the approach 
that the agencies are finalizing in their new comprehensive capital 
framework.

D. Timing of Market Risk Disclosures

    The Board proposes to clarify when a banking organization subject 
to the market risk rule must make its required market risk disclosures. 
These changes would conform the current market risk rule to the final 
comprehensive capital framework and are consistent with the expectation 
that public disclosures should be made in a timely manner. Under the 
proposal, a banking organization would be required to provide timely 
quantitative disclosures after each calendar quarter. In addition, the 
proposal would clarify that a banking organization would be required to 
provide timely qualitative disclosures at least annually, after the end 
of the fourth calendar quarter, provided any significant changes must 
be disclosed in the interim.
    The Board acknowledges that the timing of disclosures that are 
required by the federal banking agencies may not always coincide with 
the timing of disclosures required under other federal laws, including 
disclosures required under the federal securities laws and their 
implementing regulations by the SEC. For calendar quarters that do not 
correspond to fiscal year-end, the Board would consider those 
disclosures that are made within 45 days of the end of the calendar 
quarter (or within 60 days for the limited purpose of the banking 
organization's first reporting period in which it is subject to the 
rule) as timely. In general, where a banking organization's fiscal 
year-end coincides with the end of a calendar quarter, the Board would 
consider disclosures to be timely if they are made no later than the 
applicable SEC disclosure deadline for the corresponding Form 10-K 
annual report. In cases where an institution's fiscal year-end does not 
coincide with the end of a calendar quarter, the primary federal 
supervisor would consider the timeliness of disclosures on a case-by-
case basis. In some cases, a banking organization's management may 
determine that a significant change has occurred, such that the most 
recent reported amounts do not reflect the banking organization's 
capital adequacy and risk profile. In those cases, a banking 
organization would be required to disclose the general nature of these 
changes and briefly describe how they are likely to affect public 
disclosures going forward.

III. Solicitation of Comments

    The Board solicits comments on the proposed changes to the 
determination of specific risk-weighting factors for sovereign debt and 
related positions, the proposed revisions to parameter W in the SSFA, 
the proposed amendments to the definition of ``covered position,'' and 
the proposed clarifications regarding the timing of disclosures under 
the market risk rule. In particular, the Board solicits comments on 
whether the proposed revisions to parameter W and the definition of 
``covered position'' appropriately cover the types of loans and 
entities (for example, investment companies that are not publicly 
traded), respectively, that the Board intends to cover by these 
revisions, as discussed in this preamble. In addition, the Board 
solicits comments on whether, for purposes of any final rule, the Board 
should adopt any necessary conforming

[[Page 43833]]

changes to subpart F of the Board's new capital framework.\11\
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    \11\ To be codified at 12 CFR part 217, subpart F.
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IV. Regulatory Analysis

A. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA) requires 
an agency to provide an initial regulatory flexibility analysis with a 
proposed rule or to certify that the rule will not have a significant 
economic impact on a substantial number of small entities (defined for 
purposes of the RFA beginning on July 22, 2013, to include banks with 
assets less than or equal to $500 million) \12\ and publish its 
certification and a short, explanatory statement in the Federal 
Register along with the proposed rule.
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    \12\ See 13 CFR 121.201. Effective July 22, 2013, the Small 
Business Administration revised the size standards for banking 
organizations to $500 million in assets from $175 million in assets. 
78 FR 37409 (June 20, 2013).
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    The Board is providing an initial regulatory flexibility analysis 
with respect to this NPR. As discussed above, this NPR is designed to 
enhance the safety and soundness of entities with substantial trading 
activities that the Board supervises. Under regulations issued by the 
Small Business Administration, a small entity includes a depository 
institution or bank holding company with total assets of $500 million 
or less (a small banking organization). As of March 31, 2013, there 
were 636 small state member banks. As of December 31, 2012, there were 
approximately 3,802 small bank holding companies.
    The proposal would apply only to banking organizations supervised 
by the Board with aggregate trading assets and trading liabilities (as 
reported in the banking organizations' most recent quarterly regulatory 
reporting form) equal to 10 percent or more of quarter-end assets or $1 
billion or more. Currently, no small state member bank or small banking 
holding company would meet these threshold criteria, so there would be 
no additional projected compliance requirements imposed on small 
banking organizations supervised by the Board. The Board is aware of no 
other Federal rules that duplicate, overlap, or conflict with the 
proposed rule. The Board believes that the proposed rule will not have 
a significant economic impact on small banking organizations supervised 
by the Board and therefore believes that there are no significant 
alternatives to the proposed rule that would reduce the economic impact 
on small banking organizations supervised by the Board.
    The Board welcomes comment on all aspects of its analysis. A final 
regulatory flexibility analysis will be conducted after consideration 
of comments received during the public comment period.

B. Solicitation of Comments on Use of Plain Language

    Section 722 of the GLBA 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 proposed rule easier to understand. For example:
     Have we 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 we do to make the regulation easier to 
understand?

C. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, the 
agencies reviewed this notice of proposed rulemaking regarding 
revisions to the market risk rule for exposures to sovereign entities, 
the criteria used for purposes of the calculation of the SSFA parameter 
W factor for certain securitization exposures, the definition of 
``covered position,'' and the timing of market risk disclosures.\13\ No 
additional collections of information pursuant to the Paperwork 
Reduction Act are contained in this notice of proposed rulemaking.
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    \13\ 44 U.S.C. 3501 et seq.
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List of Subjects

12 CFR Part 208

    Confidential business information, Crime, Currency, Federal Reserve 
System, Mortgages, reporting and recordkeeping requirements, 
Securities.

12 CFR Part 225

    Administrative practice and procedure, Banks, banking, Federal 
Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Securities.

Board of Governors of the Federal Reserve System

12 CFR CHAPTER II

Authority and Issuance

    For the reasons set forth in the preamble, parts 208 and 225 of 
chapter II of title 12 of the Code of Federal Regulations are proposed 
to be amended as follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL 
RESERVE SYSTEM (REGULATION H)

0
1. The authority citation for part 208 continues to read as follows:

     Authority:  12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-
338a, 371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 
1833(j), 1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 
1835a, 1882, 2901-2907, 3105, 3310, 3331-3351, 3905-3909, and 5371; 
15 U.S.C. 78b, 78I(b), 78l(i), 780-4(c)(5), 78q, 78q-1, and 78w, 
1681s, 1681w, 6801, and 6805; 31 U.S.C. 5318; 42 U.S.C. 4012a, 
4104a, 4104b, 4106 and 4128.

0
2. Amend appendix E, section 2, by revising paragraphs (3)(v)-(vii) and 
adding paragraph (3) (viii) in the definition of ``Covered position'' 
to read as follows:

Appendix E to Part 208--Risk-Based Capital Guidelines; Market Risk

* * * * *

Section 2. Definitions

* * * * *
    Covered position * * *
    (3) * * *
    (v) Any equity position that is not publicly traded, other than 
a derivative that references a publicly traded equity and other than 
a position in an investment company as defined in and registered 
with the SEC under the Investment Company Act of 1940 (15 U.S.C. 80 
a-1 et seq.), provided that all the underlying equities held by the 
investment company are publicly traded;
    (vi) Any equity position that is not publicly traded, other than 
a derivative that references a publicly traded equity and other than 
a position in an entity not domiciled in the United States (or a 
political subdivision thereof) that is supervised and regulated in a 
manner similar to entities described in paragraph (3)(v) of this 
definition;
    (vii) Any position a bank holds with the intent to securitize; 
or
    (viii) Any direct real estate holding.
* * * * *
0
3. Amend appendix E, section 10, by
0
(a) Revising paragraph (b)(2)(i)(A), Table 2, and paragraphs 
(b)(2)(i)(B), (C), and (D), and adding paragraph (b)(2)(i)((E);
0
(b) Revising paragraph (b)(2)(iv)(A) and Table 3;

[[Page 43834]]

0
(c) Revising paragraph (b)(2)(v), Table 4 and Table 5 to read as 
follows:

Section 10. Standardized Measurement Method for Specific Risk

* * * * *
    (b) Debt and securitization positions.* * *
    (2) * * *
    (i) Sovereign Debt Positions. (A) In accordance with Table 2, a 
bank must assign a specific risk-weighting factor to a sovereign 
debt position based on the CRC applicable to the sovereign entity 
and, as applicable, the remaining contractual maturity of the 
position, or, if there is no CRC applicable to the sovereign entity, 
based on whether the sovereign entity is a member of the OECD. 
Notwithstanding any other provision in this appendix E, sovereign 
debt positions that are backed by the full faith and credit of the 
United States are treated as having a CRC of 0.

  Table 2--Specific Risk-Weighting Factors for Sovereign Debt Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                     Specific risk-weighting factor
                                              (in percent)
                               -----------------------------------------
CRC:
    0-1.......................                     0.0
                               -----------------------------------------
    2-3.......................  Remaining contractual               0.25
                                 maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
                               -----------------------------------------
    4-6.......................                     8.0
                               -----------------------------------------
    7.........................                    12.0
                               -----------------------------------------
OECD Member with No CRC.......                     0.0
                               -----------------------------------------
Non-OECD Member with No CRC...                     8.0
                               -----------------------------------------
Default by the Sovereign                          12.0
 Entity.
------------------------------------------------------------------------

    (B) Notwithstanding paragraph (b)(2)(i)(A) of this section, a 
bank may assign to a sovereign debt position a specific risk-
weighting factor that is lower than the applicable specific risk-
weighting factor in table 2 if:
    (1) The position is denominated in the sovereign entity's 
currency;
    (2) The bank has at least an equivalent amount of liabilities in 
that currency; and
    (3) The sovereign entity allows banks under its jurisdiction to 
assign the lower specific risk-weighting factor to the same 
exposures to the sovereign entity.
    (C) A bank must assign a 12.0 percent specific risk-weighting 
factor to a sovereign debt position immediately upon determination a 
default has occurred; or if a default has occurred within the 
previous five years.
    (D) A bank must assign a 0.0 percent specific risk-weighting 
factor to a sovereign debt position if the sovereign entity is a 
member of the OECD and does not have a CRC assigned to it, except as 
provided in paragraph (b)(2)(i)(C) of this section.
    (E) A bank must assign an 8.0 percent specific risk-weighting 
factor to a sovereign debt position if the sovereign entity is not a 
member of the OECD and does not have a CRC assigned to it, except as 
provided in paragraph (b)(2)(i)(C) of this section.
* * * * *
    (iv) Depository institution, foreign bank, and credit union debt 
positions. (A) Except as provided in paragraph (b)(2)(iv)(B) of this 
section, a bank must assign a specific risk-weighting factor to a 
debt position that is an exposure to a depository institution, a 
foreign bank, or a credit union in accordance with table 3, based on 
the CRC that corresponds to that entity's sovereign of incorporation 
or the OECD membership status of that entity's sovereign of 
incorporation if there is no CRC applicable to the entity's 
sovereign of incorporation, and, as applicable, the remaining 
contractual maturity of the position.
* * * * *

  Table 3--Specific Risk-Weighting Factors for Depository Institution,
              Foreign Bank, and Credit Union Debt Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                     Specific risk-weighting factor
                                              (in percent)
                               -----------------------------------------
CRC 0-2 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
                               -----------------------------------------
CRC 3.........................                     8.0
                               -----------------------------------------
CRC 4-7.......................                    12.0
                               -----------------------------------------
Non-OECD Member with No CRC...                     8.0
                               -----------------------------------------
Default by the Sovereign                          12.0
 Entity.
------------------------------------------------------------------------

* * * * *
    (v) PSE debt positions. (A) Except as provided in paragraph 
(b)(2)(v)(B) of this section, a bank must assign a specific risk-
weighting factor to a debt position that is an exposure to a PSE in 
accordance with table 4 and table 5 depending on the position's 
categorization as a general obligation or revenue obligation, based 
on the CRC that corresponds to the PSE's sovereign of incorporation 
or the OECD membership status of the PSE's sovereign of 
incorporation

[[Page 43835]]

if there is no CRC applicable to the PSE's sovereign of 
incorporation, and, as applicable, the remaining contractual 
maturity of the position.
    (B) A bank may assign a lower specific risk-weighting factor 
than would otherwise apply under tables 4 and 5 to a debt position 
that is an exposure to a foreign PSE if:
    (1) The PSE's sovereign of incorporation allows banks under its 
jurisdiction to assign a lower specific risk-weighting factor to 
such position; and
    (2) The specific risk-weighting factor is not lower than the 
risk weight that corresponds to the PSE's sovereign of incorporation 
in accordance with tables 4 and 5.
    (C) A bank must assign a 12.0 percent specific risk-weighting 
factor to a PSE debt position immediately upon determination that a 
default by the PSE's sovereign of incorporation has occurred or if a 
default by the PSE's sovereign of incorporation has occurred within 
the previous five years.

Table 4--Specific Risk-Weighting Factors for PSE General Obligation Debt
                                Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                    General obligation specific risk-
                                             weighting factor
                                              (in percent)
                               -----------------------------------------
CRC 0-2 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
                               -----------------------------------------
CRC 3.........................                     8.0
                               -----------------------------------------
CRC 4-7.......................                    12.0
                               -----------------------------------------
Non-OECD Member with No CRC...                     8.0
                               -----------------------------------------
Default by the Sovereign                          12.0
 Entity.
------------------------------------------------------------------------


Table 5--Specific Risk-Weighting Factors for PSE Revenue Obligation Debt
                                Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                    Revenue obligation specific risk-
                                             weighting factor
                               -----------------------------------------
                                              (in percent)
                               -----------------------------------------
CRC 0-1 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
                               -----------------------------------------
CRC 2-3.......................                     8.0
                               -----------------------------------------
CRC 4-7.......................                    12.0
                               -----------------------------------------
Non-OECD Member with No CRC...                     8.0
                               -----------------------------------------
Default by the Sovereign                          12.0
 Entity.
------------------------------------------------------------------------

* * * * *
0
4. Amend appendix E, section 11, by revising paragraph (b)(2) to read 
as follows:

Section 11

* * * * *
    (b) SSFA parameters. * * *
    (2) Parameter W is expressed as a decimal value between zero and 
one. Parameter W is the ratio of the sum of the dollar amounts of 
any underlying exposures of the securitization that meet any of the 
criteria as set forth in paragraphs (i) through (vi) of this 
paragraph (b)(2) to the balance, measured in dollars, of underlying 
exposures:
    (i) Ninety days or more past due;
    (ii) Subject to a bankruptcy or insolvency proceeding;
    (iii) In the process of foreclosure;
    (iv) Held as real estate owned;
    (v) Has contractually deferred payments for 90 days or more, 
other than principal or interest payments deferred on:
    (A) Federally-guaranteed student loans, in accordance with the 
terms of those guarantee programs; or
    (B) Consumer loans, including non-federally-guaranteed student 
loans, provided that such payments are deferred pursuant to 
provisions included in the contract at the time funds are disbursed 
that provide for period(s) of deferral that are not initiated based 
on changes in the creditworthiness of the borrower; or
    (vi) Is in default.
* * * * *
0
5. Amend appendix E, section 12, by
0
(a) Revising paragraph (a);
0
(b) Revising paragraph (c)(1); and
0
(c) Revising paragraph (d) introductory text to read as follows:

Section 12

    (a) Scope. A bank must comply with this section unless it is a 
consolidated subsidiary of a bank holding company or a depository 
institution that is subject to these requirements or of a non-U.S. 
banking organization that is subject to comparable public disclosure 
requirements in its home jurisdiction. A bank must make timely 
disclosures publicly each calendar quarter. If a significant change 
occurs, such that the most recent reporting amounts are no longer 
reflective of the bank's capital adequacy and risk profile, then a 
brief discussion of this change and its likely impact must be 
provided as soon as practicable thereafter. Qualitative disclosures 
that typically do not change each quarter may be disclosed annually, 
provided any significant changes are disclosed in the interim. If a 
bank believes that disclosure of specific commercial or financial 
information would prejudice seriously its position by making public 
certain information that is either proprietary or confidential in 
nature, the bank is not required to disclose these specific items, 
but must disclose more general information about the subject matter 
of the requirement, together with the fact that, and the reason why, 
the specific items of information have not been disclosed. The 
bank's management may provide all of the disclosures required by 
this section in one place on the bank's public Web site or may 
provide the disclosures in more than one public financial report or 
other regulatory reports, provided that the bank

[[Page 43836]]

publicly provides a summary table specifically indicating the 
location(s) of all such disclosures.
* * * * *
    (c) Quantitative disclosures. (1) For each material portfolio of 
covered positions, the bank must provide timely public disclosures 
of the following information at least quarterly:
* * * * *
    (d) Qualitative disclosures. For each material portfolio of 
covered positions, the bank must provide timely public disclosures 
of the following information at least annually after the end of the 
fourth calendar quarter, or more frequently in the event of material 
changes for each portfolio:
* * * * *

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

0
6. The authority citation for part 225 continues to read as follows:

    Authority:  12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-
1, 1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3907, 
and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.

0
7. Amend appendix E, section 2, by revising paragraphs (3)(v)-(vii) and 
adding paragraph (3)(viii) in the definition of ``Covered position'' to 
read as follows:

Appendix E to Part 225--Capital Adequacy Guidelines for Bank Holding 
Companies: Market Risk

Section 2

* * * * *
    (3) * * *
    (v) Any equity position that is not publicly traded, other than 
a derivative that references a publicly traded equity and other than 
a position in an investment company as defined in and registered 
with the SEC under the Investment Company Act of 1940 (15 U.S.C. 80 
a-1 et seq.), provided that all the underlying equities held by the 
investment company are publicly traded;
    (vi) Any equity position that is not publicly traded, other than 
a derivative that references a publicly traded equity and other than 
a position in an entity not domiciled in the United States (or a 
political subdivision thereof) that is supervised and regulated in a 
manner similar to entities described in paragraph (3)(v) of this 
definition;
    (vii) Any position a bank holds with the intent to securitize; 
or
    (viii) Any direct real estate holding.
* * * * *
0
8. Amemd appendix E, section 10, by:
0
(a) Revising paragraph (b)(2)(i)(A), Table 2, and paragraphs 
(b)(2)(i)(B), (C), and (D), and adding paragraph (b)(2)(i)(E);
0
(b) Revising paragraph (b)(2)(iv)(A) and Table 3;
0
(c) Revising paragraph (b)(2)(v), Table 4 and Table 5 to read as 
follows:

Section 10

* * * * *
    (b) Debt and securitization positions.* * *
    (i) Sovereign Debt Positions. (A) In accordance with Table 2, a 
bank must assign a specific risk-weighting factor to a sovereign 
debt position based on the CRC applicable to the sovereign entity 
and, as applicable, the remaining contractual maturity of the 
position, or, if there is no CRC applicable to the sovereign entity, 
based on whether the sovereign entity is a member of the OECD. 
Notwithstanding any other provision in this appendix E, sovereign 
debt positions that are backed by the full faith and credit of the 
United States are treated as having a CRC of 0.

  Table 2--Specific Risk-Weighting Factors for Sovereign Debt Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                     Specific risk-weighting factor
                                              (in percent)
                               -----------------------------------------
CRC:
    0-1.......................                     0.0
                               -----------------------------------------
    2-3.......................  Remaining contractual               0.25
                                 maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
                               -----------------------------------------
    4-6.......................                     8.0
                               -----------------------------------------
    7.........................                    12.0
                               -----------------------------------------
OECD Member with No CRC.......                     0.0
                               -----------------------------------------
Non-OECD Member with No CRC...                     8.0
                               -----------------------------------------
Default by the Sovereign                          12.0
 Entity.
------------------------------------------------------------------------

    (B) Notwithstanding paragraph (b)(2)(i)(A) of this section, a 
bank may assign to a sovereign debt position a specific risk-
weighting factor that is lower than the applicable specific risk-
weighting factor in table 2 if:
    (1) The position is denominated in the sovereign entity's 
currency;
    (2) The bank has at least an equivalent amount of liabilities in 
that currency; and
    (3) The sovereign entity allows banks under its jurisdiction to 
assign the lower specific risk-weighting factor to the same 
exposures to the sovereign entity.
    (C) A bank must assign a 12.0 percent specific risk-weighting 
factor to a sovereign debt position immediately upon determination a 
default has occurred; or if a default has occurred within the 
previous five years.
    (D) A bank must assign a 0.0 percent specific risk-weighting 
factor to a sovereign debt position if the sovereign entity is a 
member of the OECD and does not have a CRC assigned to it, except as 
provided in paragraph (b)(2)(i)(C) of this section.
    (E) A bank must assign an 8.0 percent specific risk-weighting 
factor to a sovereign debt position if the sovereign entity is not a 
member of the OECD and does not have a CRC assigned to it, except as 
provided in paragraph (b)(2)(i)(C) of this section.
* * * * *
    (iv) Depository institution, foreign bank, and credit union debt 
positions. (A) Except as provided in paragraph (b)(2)(iv)(B) of this 
section, a bank must assign a specific risk-weighting factor to a 
debt position that is an exposure to a depository institution, a 
foreign bank, or a credit union in accordance with table 3, based on 
the CRC that corresponds to that entity's sovereign of incorporation 
or the OECD membership status of that entity's sovereign of 
incorporation if there is no CRC applicable to the entity's 
sovereign of incorporation, and, as applicable, the remaining 
contractual maturity of the position.
* * * * *

[[Page 43837]]



  Table 3--Specific Risk-Weighting Factors for Depository Institution,
              Foreign Bank, and Credit Union Debt Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                     Specific risk-weighting factor
                                              (in percent)
                               -----------------------------------------
CRC 0-2 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
                               -----------------------------------------
CRC 3.........................                     8.0
                               -----------------------------------------
CRC 4-7.......................                    12.0
                               -----------------------------------------
Non-OECD Member with No CRC...                     8.0
                               -----------------------------------------
Default by the Sovereign                          12.0
 Entity.
------------------------------------------------------------------------

* * * * *
    (v) PSE debt positions. (A) Except as provided in paragraph 
(b)(2)(v)(B) of this section, a bank must assign a specific risk-
weighting factor to a debt position that is an exposure to a PSE in 
accordance with table 4 and table 5 depending on the position's 
categorization as a general obligation or revenue obligation, based 
on the CRC that corresponds to the PSE's sovereign of incorporation 
or the OECD membership status of the PSE's sovereign of 
incorporation if there is no CRC applicable to the PSE's sovereign 
of incorporation, and, as applicable, the remaining contractual 
maturity of the position.
    (B) A bank may assign a lower specific risk-weighting factor 
than would otherwise apply under tables 4 and 5 to a debt position 
that is an exposure to a foreign PSE if:
    (1) The PSE's sovereign of incorporation allows banks under its 
jurisdiction to assign a lower specific risk-weighting factor to 
such position; and
    (2) The specific risk-weighting factor is not lower than the 
risk weight that corresponds to the PSE's sovereign of incorporation 
in accordance with tables 4 and 5.
    (C) A bank must assign a 12.0 percent specific risk-weighting 
factor to a PSE debt position immediately upon determination that a 
default by the PSE's sovereign of incorporation has occurred or if a 
default by the PSE's sovereign of incorporation has occurred within 
the previous five years.

Table 4--Specific Risk-Weighting Factors for PSE General Obligation Debt
                                Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                    General obligation specific risk-
                                             weighting factor
                                              (in percent)
                               -----------------------------------------
CRC 0-2 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
                               -----------------------------------------
CRC 3.........................                     8.0
                               -----------------------------------------
CRC 4-7.......................                    12.0
                               -----------------------------------------
Non-OECD Member with No CRC...                     8.0
                               -----------------------------------------
Default by the Sovereign                          12.0
 Entity.
------------------------------------------------------------------------


Table 5--Specific Risk-Weighting Factors for PSE Revenue Obligation Debt
                                Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                    Revenue obligation specific risk-
                                             weighting factor
                                              (in percent)
                               -----------------------------------------
CRC 0-1 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
                               -----------------------------------------
CRC 2-3.......................                     8.0
                               -----------------------------------------
CRC 4-7.......................                    12.0
                               -----------------------------------------
Non-OECD Member with No CRC...                     8.0
                               -----------------------------------------
Default by the Sovereign                          12.0
 Entity.
------------------------------------------------------------------------

* * * * *
0
9. Amend appendix E, section 11, by revising paragraph (b)(2) to read 
as follows:

Section 11

* * * * *
    (b) SSFA parameters. * * *

[[Page 43838]]

    (2) Parameter W is expressed as a decimal value between zero and 
one. Parameter W is the ratio of the sum of the dollar amounts of any 
underlying exposures of the securitization that meet any of the 
criteria as set forth in paragraphs (i) through (vi) of this paragraph 
(b)(2) to the balance, measured in dollars, of underlying exposures:
    (i) Ninety days or more past due;
    (ii) Subject to a bankruptcy or insolvency proceeding;
    (iii) In the process of foreclosure;
    (iv) Held as real estate owned;
    (v) Has contractually deferred payments for 90 days or more, other 
than principal or interest payments deferred on:
    (A) Federally-guaranteed student loans, in accordance with the 
terms of those guarantee programs; or
    (B) Consumer loans, including non-federally-guaranteed student 
loans, provided that such payments are deferred pursuant to provisions 
included in the contract at the time funds are disbursed that provide 
for period(s) of deferral that are not initiated based on changes in 
the creditworthiness of the borrower; or
    (vi) Is in default.
* * * * *
0
10. Amend appendix E, section 12, by:
0
(a) Revising paragraph (a);
0
(b) Revising paragraph (c)(1) and;
0
(c) Revising paragraph (d) introductory text to read as follows:

Section 12

    (a) Scope. A bank must comply with this section unless it is a 
consolidated subsidiary of a bank holding company or a depository 
institution that is subject to these requirements or of a non-U.S. 
banking organization that is subject to comparable public disclosure 
requirements in its home jurisdiction. A bank must make timely public 
disclosures each calendar quarter. If a significant change occurs, such 
that the most recent reporting amounts are no longer reflective of the 
bank's capital adequacy and risk profile, then a brief discussion of 
this change and its likely impact must be provided as soon as 
practicable thereafter. Qualitative disclosures that typically do not 
change each quarter may be disclosed annually, provided any significant 
changes are disclosed in the interim. If a bank believes that 
disclosure of specific commercial or financial information would 
prejudice seriously its position by making public certain information 
that is either proprietary or confidential in nature, the bank is not 
required to disclose these specific items, but must disclose more 
general information about the subject matter of the requirement, 
together with the fact that, and the reason why, the specific items of 
information have not been disclosed. The bank's management may provide 
all of the disclosures required by this section in one place on the 
bank's public Web site or may provide the disclosures in more than one 
public financial report or other regulatory reports, provided that the 
bank publicly provides a summary table specifically indicating the 
location(s) of all such disclosures.
* * * * *
    (c) Quantitative disclosures. (1) For each material portfolio of 
covered positions, the bank must provide timely public disclosures of 
the following information at least quarterly:
* * * * *
    (d) Qualitative disclosures. For each material portfolio of covered 
positions, the bank must provide timely public disclosures of the 
following information at least annually after the end of the fourth 
calendar quarter, or more frequently in the event of material changes 
for each portfolio:
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, July 3, 2013.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2013-16434 Filed 7-19-13; 8:45 am]
BILLING CODE P