[Federal Register Volume 79, Number 3 (Monday, January 6, 2014)]
[Proposed Rules]
[Pages 615-620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31025]


=======================================================================
-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

12 CFR Part 201

[Regulation A; Docket No. R-1476]
RIN 7100-AE08


Extensions of Credit by Federal Reserve Banks

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of proposed rulemaking; request for public comment.

-----------------------------------------------------------------------

SUMMARY: The Board invites public comment on proposed amendments to 
Regulation A (Extensions of Credit by Federal Reserve Banks) that would 
implement sections 1101 and 1103 of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act of 2010 (the ``Dodd-Frank Act''). These 
provisions of the Dodd-Frank Act amend the emergency lending authority 
of the Federal Reserve Banks under section 13(3) of the Federal Reserve 
Act (the ``FRA''), and require the Board, in consultation with the 
Secretary of the Treasury, to establish by regulation certain policies 
and procedures with respect to emergency lending under that section.

DATES: Comments must be submitted by March 7, 2014.

ADDRESSES: You may submit comments, identified by Docket No. R-1476, by 
any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     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.
     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/apps/foia/proposedregs.aspx as submitted, 
unless modified for technical reasons. Accordingly, your comments will 
not be edited to remove any identifying or contact information. Public 
comments may also be viewed electronically or in paper form in Room MP-
500 of the Board's Martin Building (20th and C Street NW.,) between 
9:00 a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Laurie S. Schaffer, Associate General 
Counsel (202) 452-2272, Sophia H. Allison, Senior Counsel (202) 452-
3565, or Jay R. Schwarz, Counsel (202) 452-2970, Legal Division; for 
users of Telecommunications Device for the Deaf (TDD) only, contact 
(202) 263-4869; Board of Governors of the Federal Reserve System, 20th 
Street and Constitution Ave. NW., Washington, DC 20551.

SUPPLEMENTARY INFORMATION:

I. Background

    Prior to 2010, section 13(3) of the FRA (12 U.S.C. 343) provided 
that the Board may authorize any Federal Reserve Bank (``Reserve 
Bank'') to extend credit to any individual, partnership, or corporation 
subject to four principal conditions set forth in that section. These 
conditions required that (1) credit be extended only in unusual and 
exigent circumstances; (2) the Board act by the affirmative vote of at 
least five of its members; (3) the lending Reserve Bank obtain evidence 
before extending the credit that the borrower is unable to secure 
adequate accommodations from other banking institutions; and (4) the 
extension of credit be indorsed or otherwise secured to the 
satisfaction of the Reserve Bank. This statutory authority to extend 
credit in unusual and exigent circumstances was enacted by Congress in 
1932 to

[[Page 616]]

enable the Federal Reserve, as the nation's central bank, to provide 
liquidity in times of financial stress.
    Effective on July 21, 2010, the Dodd-Frank Act (Pub. L. 111-203, 
124 Stat. 1376) made extensive amendments to section 13(3) of the FRA. 
In particular, section 1101 of the Dodd-Frank Act amended section 13(3) 
of the FRA to:
     Remove the general authority to lend to an individual, 
partnership, or corporation and limit the Federal Reserve's emergency 
lending authority to extending credit to participants in a program or 
facility with broad-based eligibility;
     require the Board to obtain the approval of the Secretary 
of the Treasury prior to extending emergency credit under section 13(3) 
of the FRA;
     provide that a program or facility that is structured to 
remove assets from the balance sheet of a single and specific company, 
or that is established for the purpose of assisting a single and 
specific company avoid bankruptcy, resolution under title II of the 
Dodd-Frank Act, or any other Federal or State insolvency proceeding, 
would not be considered a program or facility with broad-based 
eligibility; and
     require the Board, in consultation with the Secretary of 
the Treasury, to adopt by regulation policies and procedures that are 
designed to ensure that:
    [cir] Any emergency lending program or facility is for the purpose 
of providing liquidity to the financial system, and not to aid a 
failing financial company;
    [cir] the security for emergency loans is sufficient to protect 
taxpayers from losses;
    [cir] any such program or facility is terminated in a timely and 
orderly fashion;
    [cir] a Reserve Bank assigns, consistent with sound risk management 
practices and to ensure protection for the taxpayer, a lendable value 
to all collateral for emergency loans; and
    [cir] borrowing by insolvent borrowers is prohibited.
    The revisions made to section 13(3) by the Dodd-Frank Act focus 
this emergency lending authority on programs and facilities that 
relieve liquidity pressures in financial markets through broad-based 
liquidity facilities. The Dodd-Frank Act did not change the 
requirements already contained in section 13(3) that the Board 
authorize lending under that section only in unusual and exigent 
circumstances and upon a vote of at least five of its members, the 
Reserve Bank be secured to its satisfaction, and the Reserve Bank 
obtain evidence that other bank credit accommodations are not generally 
available.
    Because these rules establish procedures governing lending 
activity, the Board does not believe that the Administrative Procedure 
Act requires publication of the proposed rule or impedes lending in 
accordance with the statutory provisions of section 13(3) as amended by 
the Dodd-Frank Act prior to adoption of the final rule. Nevertheless, 
the Board also believes that there is significant value in obtaining 
public comment on the proposed rule in this instance. Consequently, the 
Board invites comment on all aspects of the proposed amendments to 
Regulation A set forth below to implement the requirements of the Dodd-
Frank Act. As required by the Dodd-Frank Act, the Board consulted with 
the Secretary of the Treasury in the development of the proposed 
amendments.

II. Section by Section Summary of Proposed Rule

A. Section 201.4(d)--Emergency Credit for Others

1. Authorization To Extend Credit
    Section 201.4(d)(1) of the proposed rule sets forth the process 
that the Board must undertake to authorize a Reserve Bank to extend 
credit under section 13(3) of the FRA. First, section 201.4(d)(1)(i) 
provides that the Board may authorize credit under section 13(3) of the 
FRA only if it determines that unusual and exigent circumstances exist 
upon the affirmative vote of not less than five members of the Board 
unless fewer are authorized pursuant to section 11(r) of the FRA. This 
requirement in section 13(3) was not changed by the Dodd-Frank Act. 
Section 201.4(d)(1)(ii) of the proposed rule provides that the Board 
may not establish a program or facility under section 13(3) without the 
prior approval of the Secretary of the Treasury.
    Section 201.4(d)(1)(i) of the proposed rule also provides that 
credit may be extended by any Reserve Bank only through a program or 
facility with broad-based eligibility. This requirement conforms the 
regulation with the limitations in the Dodd-Frank Act. In addition, 
section 201.4(d)(1)(i) provides that any credit extended under section 
13(3) of the FRA is subject to such other conditions as the Board may 
determine.
    Section 201.4(d)(1)(iii) of the proposed rule provides that the 
Board must, at the time of the authorization or as soon thereafter as 
is reasonably practicable, document the justification for its 
authorization, including describing the unusual and exigent 
circumstances that exist and the intended effect of the program or 
facility. Section 201.4(d)(1)(iii) of the proposed rule further 
requires that the Board (and the authorized Reserve Bank or Reserve 
Banks, as appropriate) make publicly available, as soon as is 
reasonably practicable, a description of the program or facility and 
the terms and conditions for participation in the program or facility.
2. Definitions of Broad-Based Eligibility and Insolvency
    Section 201.4(d)(2) of the proposed rule sets forth the definition 
of a program or facility ``with broad-based eligibility.'' As part of 
this definition, it also sets forth the definition of ``insolvent.''
    Proposed section 201.4(d)(2)(i) incorporates three requirements 
established by the Dodd-Frank Act for a program or facility to have 
``broad-based eligibility'' for purposes of section 13(3) of the FRA. 
Under subparagraph (A) of proposed section 201.4(d)(2)(i), in order for 
a program or facility to have ``broad-based eligibility,'' it must be 
designed to provide liquidity to a market or sector of the financial 
system. As required by the Dodd-Frank Act, proposed section 
201.4(d)(2)(i)(B) provides that a program or facility must not be for 
the purpose of aiding a failing financial company and must not be 
structured to remove assets from the balance sheet of a single and 
specific company. In addition, proposed section 201.4(d)(2)(i)(C) 
incorporates the requirement of the Dodd-Frank Act that a program or 
facility not be established for the purpose of assisting a single and 
specific company to avoid bankruptcy, resolution under Title II of the 
Dodd-Frank Act, or any other Federal or State insolvency proceeding.
    Proposed section 201.4(d)(2)(ii) authorizes the Board to determine 
the type of facility used to extend credit, so long as the facility is 
broad-based. For example, liquidity facilities may extend credit 
directly to participants in those facilities in some cases, or through 
a special purpose vehicle in other cases.
    As noted above, section 1101 of the Dodd-Frank Act requires the 
Board to ``establish procedures to prohibit borrowing from programs and 
facilities by borrowers that are insolvent.'' Section 1101 also 
provides that a borrower ``shall be considered insolvent'' if the 
borrower ``is in bankruptcy, resolution under Title II of [the Dodd-
Frank Act], or any other

[[Page 617]]

Federal or State insolvency proceeding.'' \1\
---------------------------------------------------------------------------

    \1\ 124 Stat. 1376 at 2113-15.
---------------------------------------------------------------------------

    The proposed rule adopts these statutory provisions. Accordingly, 
proposed section 201.4(d)(2)(iii) provides that a Reserve Bank must not 
extend credit through a program or facility established under section 
13(3) of the FRA to any person or entity that is in bankruptcy, 
resolution under Title II of the Dodd-Frank Act, or any other Federal 
or State insolvency proceeding.
    As provided by the Dodd-Frank Act, the proposed rule includes a 
certification process for establishing that a person or entity is not 
``insolvent'' for purposes of the rule. Proposed section 
201.4(d)(2)(iii)(B) provides that a Reserve Bank may rely on a written 
certification from the person, the chief executive officer of the 
entity or another authorized officer of the entity, at the time the 
person or entity initially borrows under a program or facility, that 
the person or entity is not in bankruptcy or in a resolution or other 
insolvency proceeding. As also provided in section 1101 of the Dodd-
Frank Act, the proposed rule provides that a person or entity that 
submits a written certification must immediately notify the lending 
Reserve Bank if the information in the certification changes. Section 
201.4(d)(2)(iii)(C) of the proposed rule provides that a participant 
that is or has become insolvent would be prohibited from receiving any 
new extension of credit under the program or facility.
3. Indorsement or Other Security
    Prior to the Dodd-Frank Act, section 13(3) provided that any 
extension of credit under that section must be ``indorsed or otherwise 
secured to the satisfaction of the Federal Reserve bank.'' \2\ The 
Dodd-Frank Act retained this provision of the original statute and 
added two further requirements. First, the Dodd-Frank Act directs that 
the Board's policies and procedures ``be designed to ensure . . . that 
the security for emergency loans is sufficient to protect taxpayers 
from losses.'' \3\ Second, the Dodd-Frank Act requires that the Board's 
policies and procedures ``require that a Federal reserve bank assign, 
consistent with sound risk management practices and to ensure 
protection for the taxpayer, a lendable value to all collateral for a 
loan executed'' under section 13(3) of the FRA.\4\
---------------------------------------------------------------------------

    \2\ See 12 U.S.C. 343, 47 Stat. 715.
    \3\ Dodd-Frank Act Section 1101(a)(6).
    \4\ Id.
---------------------------------------------------------------------------

    Section 201.4(d)(3) of the proposed rule incorporates both of these 
requirements. Section 201.4(d)(3) provides that all credit extended 
under emergency lending programs and facilities must be indorsed or 
otherwise secured to the satisfaction of the lending Reserve Bank and 
that the Reserve Bank must, at the time the credit is initially 
extended, assign a lendable value to all collateral for the program or 
facility, consistent with sound risk management practices and to ensure 
protection for the taxpayer. As in section 13(3) of the FRA as amended, 
proposed section 201.4(d)(3)(ii) applies specifically to 
``collateral.''
    The Reserve Banks have long assigned a lendable value to collateral 
at the time credit is extended by reviewing the collateral and applying 
discounts or ``haircuts'' to the value of the collateral. The Reserve 
Banks then determine, based on the lendable value of any collateral 
posted, the financial strength of the borrower, the presence of any 
indorsement, and other factors, whether the credit is satisfactorily 
secured. The haircuts applied to collateral are described in the 
Federal Reserve Discount Window & Payment System Risk Collateral 
Margins Table and the Federal Reserve Collateral Guidelines, available 
on the Federal Reserve Discount Window & Payment System Risk Web 
site.\5\ The Board believes that these provisions of proposed section 
201.4(d)(3) address the statutory requirement for policies and 
procedures that are designed to ensure protection for the taxpayer.
---------------------------------------------------------------------------

    \5\ http://www.frbdiscountwindow.org/index.cfm.
---------------------------------------------------------------------------

4. Termination of Program or Facility
    The Dodd-Frank Act requires that the Board's policies and 
procedures with respect to section 13(3) extensions of credit be 
designed to ensure that any such program is terminated in a timely and 
orderly fashion.\6\ In order to address this requirement, Section 
201.4(d)(4) of the proposed rule provides that the Board will 
periodically review whether each emergency lending program should be 
terminated. The proposed rule further provides that, in conducting this 
review, the Board will consider such factors as the continued existence 
of unusual and exigent circumstances; the extent of usage of the 
program or facility; the extent to which the continuing authorization 
of the program or facility facilitates restoring or sustaining 
confidence in financial markets; economic and market conditions; the 
functioning of financial markets; the ongoing need for the liquidity 
support provided by such program or facility; and other appropriate 
factors. The Board will generally seek to terminate programs or 
facilities when their identified goals have been reached or once the 
Board determines that conditions have otherwise changed to warrant the 
termination of the program or facility.
---------------------------------------------------------------------------

    \6\ Dodd-Frank Act Section 1101(a)(6).
---------------------------------------------------------------------------

5. Evidence Regarding Unavailability of Adequate Credit Accommodation
    Section 13(3) has always required that a Reserve Bank, prior to 
extending credit to any participant in a program or facility under that 
section, obtain evidence that such participant is unable to secure 
adequate credit accommodations from other banking institutions. The 
proposed rule incorporates this requirement that the Reserve Bank 
obtain evidence of the inability of participants to secure adequate 
credit accommodations, and recognizes that this evidence may include 
evidence based on economic conditions in the market or markets 
addressed by the program or facility or evidence obtained from other 
sources, including facility or market participants.
6. Reporting Requirements
    The Dodd-Frank Act contains detailed reporting requirements with 
respect to section 13(3) extensions of credit.\7\ The Board intends to 
comply with these statutory requirements as enacted. Therefore, the 
proposed rule provides that the Board will comply with 12 U.S.C. 248(s) 
and 12 U.S.C. 343(3)(C) pursuant to their terms.
---------------------------------------------------------------------------

    \7\ Dodd-Frank Act Sections 1101(a)(6) and 1103(b).
---------------------------------------------------------------------------

7. No Obligation To Extend Credit
    Section 201.4(d)(7) of the proposed rule recognizes that Reserve 
Banks have no obligation to extend credit to any particular person or 
entity through an emergency lending program or facility. This provision 
mirrors the provision applicable to lending to depository institutions 
set forth in section 201.3(b) of Regulation A.
 8. Short-Term Emergency Credit Secured Solely by United States or 
Agency Obligations
    Section 201.4(d)(8) of the proposed rule retains, but relocates, an 
authorization already included in Regulation A that authorizes a 
Reserve Bank to extend credit under section 13(13) of the FRA if the 
collateral used to secure the credit consists solely of obligations of, 
or obligations fully guaranteed as to principal and interest by, the 
United States or an agency of the

[[Page 618]]

United States. As under the current rule, under the proposed rule, the 
Reserve Bank would be authorized to extend credit under section 13(13) 
of the FRA in unusual and exigent circumstances, after consultation 
with the Board, and if the Reserve Bank has obtained evidence that 
credit is not available from other sources and failure to obtain credit 
would adversely affect the economy. As set forth in section 13(13) of 
the FRA, section 201.4(d)(8) of the proposed rule also provides that 
credit extended under this provision may not be extended for a term 
exceeding 90 days. Section 201.4(d)(8) retains the provision in current 
section 201.4(d) of Regulation A that extensions of credit under this 
section be at a rate above the highest rate in effect for advances to 
depository institutions.

B. Section 201.3(b)--No obligation to make advances or discounts

    Section 201.3(b) of the proposed rule reflects a technical change 
to conform the language of that section with the language of section 
201.4(d)(7) of the proposed rule.
    The Board invites comments on all aspects of its proposed rule.

III. Administrative Law Matters

A. Regulatory Flexibility Act

    In accordance with section 3(a) of the Regulatory Flexibility Act 
(5 U.S.C. 601 et seq.) (``RFA''), the Board is publishing an initial 
regulatory flexibility analysis of the proposed rule. The RFA requires 
an agency either to provide an initial regulatory flexibility analysis 
with a proposed rule for which a general notice of proposed rulemaking 
is required or to certify that the proposed rule will not have a 
significant economic impact on a substantial number of small entities. 
Based on its analysis and for the reasons stated below, the Board 
believes that this proposed 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. A final 
regulatory flexibility analysis will be conducted after comments 
received during the public comment period have been considered.
    In accordance with section 1101 and 1103 of the Dodd-Frank Act, the 
Board is proposing amendments to Regulation A (12 CFR part 201 et seq.) 
to establish policies and procedures for emergency lending under 
section 13(3) of the FRA. The reasons and justification for the 
proposed rule are described in the Supplementary Information. The Board 
does not believe that the proposed rule duplicates, overlaps, or 
conflicts with any other Federal rules. 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 $35.5 million or less in assets to $500 million or 
less in assets. 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 and the vast majority of emergency loans under section 13(3) 
during the recent financial crisis were extended to such firms. 
Consequently, financial firms with asset sizes of $175 million or less 
are small entities for purposes of the RFA.
    As discussed in the Supplementary Information, the proposed rule 
would apply to any participant in an emergency lending program or 
facility with broad-based eligibility. To the extent that small 
entities are participants in these programs or facilities, they would 
be receiving emergency loans from the Federal Reserve. It is not 
possible to ascertain at this time the number of small entities that 
might participate in these programs and facilities or what requirements 
will be imposed on them if they do so. At a minimum, it is likely that 
participants would be required to pay interest on loans extended to 
them and to keep records of the use of loan proceeds. However, the 
positive economic impact of receiving such a loan is likely to 
substantially outweigh any economic burden of participating in the 
program or facility.
    In light of the foregoing, the Board does not believe that the 
proposed rule, if adopted in final form, would have a significant 
negative economic impact on a substantial number of small entities. 
Nonetheless, the Board invites comment on whether (a) the Finance and 
Insurance sector constitutes a reasonable universe of firms for 
establishing the definition of ``small entity'' and (b) the proposed 
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 
sections 1101 and 1103 of the Dodd-Frank Act.

B. Paperwork Reduction Act Analysis

    Office of Management and Budget (OMB) regulations implementing the 
Paperwork Reduction Act (PRA) state that agencies must submit 
``collections of information'' contained in proposed rules published 
for public comment in the Federal Register in accordance with OMB 
regulations.\8\ OMB regulations define a ``collection of information'' 
as obtaining, causing to be obtained, soliciting, or requiring the 
disclosure to an agency, third parties or the public of information by 
or for an agency ``by means of identical questions posed to, or 
identical reporting, recordkeeping, or disclosure requirements imposed 
on, ten or more persons, whether such collection of information is 
mandatory, voluntary, or required to obtain or retain a benefit.'' \9\
---------------------------------------------------------------------------

    \8\ 5 CFR 1320.11. The PRA is codified at 44 U.S.C. 3506 et seq.
    \9\ 5 CFR 1320.11(c).
---------------------------------------------------------------------------

    In accordance with the PRA, the Board reviewed the proposed rule 
under the authority delegated to the Board by the Office of Management 
and Budget (OMB). The Federal Reserve may not conduct or sponsor, and a 
respondent is not required to respond to, an information collection 
unless it displays a currently valid OMB control number.
    The collection of information that would be required by this notice 
of proposed rulemaking is found in section 201.4(d)(2)(iii)(B). Under 
this section a Reserve Bank may rely on a written certification from 
the person, the chief executive officer of the entity or another 
authorized officer of the entity, at the time the person or entity 
initially borrows under a program or facility, that the person or 
entity is not in bankruptcy or in a resolution or other insolvency 
proceeding. In addition, a person or entity that submits such a written 
certification must immediately notify the lending Reserve Bank if the 
information in the certification changes. The Federal Reserve believes 
that compliance with this requirement should require minimal effort on 
the part of the respondent, thus the burden associated would be 
considered negligible.
    Comments are invited regarding (a) whether the proposed collection 
of information is 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 collection, including the cost of 
compliance; (c) ways to enhance the quality, utility, and clarity of 
the information to be collected; and (d) ways to minimize the burden of 
information collection on respondents, including through the use of 
automated collection techniques or other forms of information 
technology. Comments on the collection of information should be sent to 
Secretary, Board of Governors of the Federal Reserve System,

[[Page 619]]

Washington, DC 20551, with copies of such comments to be sent to the 
Office of Management and Budget, Paperwork Reduction Project, 
Washington, DC 20503.

C. Invitation for Comments on Use of Plain Language

    Section 722 of the Gramm-Leach Bliley Act of 1999 requires the 
Federal banking agencies to use plain language in all proposed and 
final rules published after January 1, 2000.\10\ The Board invites 
comment on whether the proposed rule is clearly stated and effectively 
organized, and how the Board might make the text of the rule easier to 
understand.
---------------------------------------------------------------------------

    \10\ 12 U.S.C. 4809.
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 201

    Banks, Banking, Federal Reserve System, Reporting and recordkeeping 
requirements.

Authority and Issuance

    For the reasons set forth in the preamble, the Board is proposing 
to amend 12 CFR Part 201 (Regulation A) as follows:

PART 201--EXTENSIONS OF CREDIT BY FEDERAL RESERVE BANKS (REGULATION 
A)

0
1. The authority citation for part 201 is revised to read as follows:

    Authority:  12 U.S.C. 248(i)-(j) and (s), 343 et seq., 347a, 
347b, 347c, 348 et seq., 357, 374, 374a, and 461.

0
2. Section 201.3 paragraph (b) is revised to read as follows:


Sec.  201.3  Extensions of credit generally.

* * * * *
    (b) No obligation to make advances or discounts. This section does 
not entitle any person or entity to obtain credit from a Federal 
Reserve Bank.
* * * * *
0
3. Section 201.4 paragraph (d) is revised to read as follows:


Sec.  201.4  Availability and terms of credit.

* * * * *
    (d) Emergency credit for others.--(1) Authorization to extend 
credit. (i) In unusual and exigent circumstances, the Board, by the 
affirmative vote of not less than five members,\1\ may authorize any 
Federal Reserve Bank, subject to such conditions and during such 
periods as the Board may determine, to extend credit to any participant 
in a program or facility with broad-based eligibility established and 
operated in accordance with this section at rates established in 
accordance with the provisions of section 14, subdivision (d) of the 
Federal Reserve Act (12 U.S.C. 357).
---------------------------------------------------------------------------

    \1\ Unless fewer are authorized pursuant to section 11(r) of the 
Federal Reserve Act. 12 U.S.C. 248(r).
---------------------------------------------------------------------------

    (ii) The Board may not establish any program or facility under this 
section without obtaining the prior approval of the Secretary of the 
Treasury.
    (iii) At the time of any authorization under paragraph (d)(1)(i) of 
this section or as soon thereafter as is reasonably practicable, the 
Board will document the justification for its authorization, including 
a description of the unusual and exigent circumstances that exist and 
the intended effect of the program or facility. The Board and the 
authorized Federal Reserve Bank or Federal Reserve Banks, as 
appropriate, will make publicly available a description of the program 
or facility and the terms and conditions for participation in the 
program or facility as soon as is reasonably practicable.
    (2) Broad-based eligibility; insolvency. (i) A program or facility 
established under this section must have broad-based eligibility in 
accordance with terms established by the Board. For purposes of this 
section, a program or facility has broad-based eligibility only if the 
program or facility--
    (A) Is designed to provide liquidity to an identifiable market or 
sector of the financial system;
    (B) Is not for the purpose of aiding a failing financial company 
and is not structured to remove assets from the balance sheet of a 
single and specific company; and
    (C) Is not established for the purpose of assisting a single and 
specific company to avoid bankruptcy, resolution under Title II of 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-
203, 12 U.S.C. 5381 et seq.), or any other Federal or State insolvency 
proceeding.
    (ii) A Federal Reserve Bank may extend credit through a program or 
facility with broad-based eligibility established under this section 
through such mechanism or vehicle as the Board determines would 
facilitate the extension of such credit.
    (iii) A Federal Reserve Bank may not extend credit through a 
program or facility established under this section to any person or 
entity that is insolvent.
    (A) A person or entity is ``insolvent'' for purposes of this 
section if the person or entity is in bankruptcy, resolution under 
Title II of Public Law 111-203 (12 U.S.C. 5381 et seq.) or any other 
Federal or State insolvency proceeding.
    (B) In determining for purposes of this section whether a person or 
entity is insolvent, a Federal Reserve Bank may rely on a written 
certification from the person or from the chief executive officer or 
other authorized officer of the entity, at the time the person or 
entity initially borrows under a program or facility hereunder, that 
the person or entity is not in bankruptcy or in a resolution or other 
insolvency proceeding described in paragraph (d)(2)(iii)(A) of this 
section. The person or entity submitting such a written certification 
must immediately notify the lending Federal Reserve Bank if the 
information in the certification changes.
    (C) Upon a finding by the Federal Reserve Bank that a participant, 
including a participant that has provided a certification under 
paragraph (d)(2)(iii)(B) of this section, is or has become insolvent, 
that participant is not eligible for any new extension of credit from a 
program or facility established under this section until such time as 
the Federal Reserve Bank determines that such participant is no longer 
insolvent.
    (3) Indorsement or other security. (i) All credit extended under a 
program or facility established under this section must be indorsed or 
otherwise secured to the satisfaction of the lending Federal Reserve 
Bank.
    (ii) In determining whether an extension of credit under any 
program or facility established under this section is secured to its 
satisfaction, a Federal Reserve Bank must, prior to or at the time the 
credit is initially extended, assign a lendable value to all collateral 
for the program or facility, consistent with sound risk management 
practices and to ensure protection for the taxpayer.
    (4) Termination of program or facility. To ensure that the program 
or facility under this section is terminated in a timely and orderly 
fashion, the Board will periodically review the existence of unusual 
and exigent circumstances; the extent of usage of the program or 
facility; the extent to which the continuing authorization of the 
program or facility facilitates restoring or sustaining confidence in 
financial markets; economic and market conditions; the functioning of 
financial markets; the ongoing need for the liquidity support provided 
by such program or facility; and such other factors as the Board may 
deem to be appropriate.
    (5) Evidence regarding unavailability of adequate credit 
accommodation. Each lending Federal Reserve Bank must obtain evidence 
that, under the prevailing circumstances, participants in a program or 
facility established under this section are unable to secure adequate 
credit accommodations from other banking institutions. This evidence 
may be based on economic

[[Page 620]]

conditions in the market or markets intended to be addressed by the 
program or facility, or other evidence from participants, or other 
sources.
    (6) Reporting requirements. The Board will comply with the 
reporting requirements of 12 U.S.C. 248(s) and 12 U.S.C. 343(3)(C) 
pursuant to their terms.
    (7) No obligation to extend credit. This section does not entitle 
any person or entity to obtain credit from a Federal Reserve Bank.
    (8) Short-term emergency credit secured solely by United States or 
agency obligations. In unusual and exigent circumstances and after 
consultation with the Board, a Federal Reserve Bank may extend credit 
under section 13(13) of the Federal Reserve Act if the collateral used 
to secure such credit consists solely of obligations of, or obligations 
fully guaranteed as to principal and interest by, the United States or 
an agency thereof. Prior to extending credit under this paragraph, the 
Federal Reserve Bank must obtain evidence that credit is not available 
from other sources and failure to obtain such credit would adversely 
affect the economy. Credit extended under this paragraph may not be 
extended for a term exceeding 90 days, must be extended at a rate above 
the highest rate in effect for advances to depository institutions as 
determined in accordance with section 14(d) of the Federal Reserve Act, 
and is subject to such limitations and conditions as provided by the 
Board.

    By order of the Board of Governors of the Federal Reserve 
System, December 23, 2013.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2013-31025 Filed 1-3-14; 8:45 am]
BILLING CODE 6210-01-P