[Federal Register Volume 79, Number 158 (Friday, August 15, 2014)]
[Notices]
[Pages 48158-48167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-19323]
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FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Announcement of Board
Approval Under Delegated Authority and Submission to OMB
AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: Notice is hereby given of the final approval of proposed
information collections by the Board of Governors of the Federal
Reserve System (Board) under OMB delegated authority, as per 5 CFR
1320.16 (OMB Regulations on Controlling Paperwork Burdens on the
Public). Board-approved collections of information are incorporated
into the official OMB inventory of currently approved collections of
information. Copies of the Paperwork Reduction Act Submission,
supporting statements and approved collection of information
instrument(s) are placed into OMB's public docket files. The Federal
Reserve may not conduct or sponsor, and the respondent is not required
to respond to, an information collection that has been extended,
revised, or implemented on or after October 1, 1995, unless it displays
a currently valid OMB control number.
FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance
Officer, Cynthia Ayouch, Office of the Chief Data Officer, Board of
Governors of the Federal Reserve System, Washington, DC 20551 (202)
452-3829. Telecommunications Device for the Deaf (TDD) users may
contact (202) 263-4869, Board of Governors of the Federal Reserve
System, Washington, DC 20551.
OMB Desk Officer, Shagufta Ahmed, Office of Information and
Regulatory Affairs, Office of Management and Budget, New Executive
Office Building, Room 10235, 725 17th Street NW., Washington, DC 20503.
Final approval under OMB delegated authority of the implementation
of the following information collection:
Report title: Complex Institution Liquidity Monitoring Report and
Liquidity Monitoring Report.
Agency form number: FR 2052a and FR 2052b.
OMB control number: 7100-to be assigned.
Frequency: FR 2052a: Daily, twice a month, and on occasion. FR
2052b: Monthly and quarterly.
Effective dates: FR 2052a: September 11, 2014.
FR 2052b: November 30, 2014, for monthly reporters and December 31,
2014, for quarterly reporters.
Respondents: FR 2052a: U.S. Bank Holding Companies (BHCs) that the
Financial Stability Board designated as
[[Page 48159]]
Global Systematically Important Banks (G-SIBs) \1\ and foreign banking
organizations (FBOs) with U.S. broker-dealer assets > $100 billion. FR
2052b: U.S. BHCs (excluding G-SIBs) with total consolidated assets >
$50 billion (including FBO subsidiaries) and U.S. BHCs (not controlled
by FBOs) with total consolidated assets of $10 billion-$50 billion.
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\1\ A list of G-SIBs is available at http://www.financialstabilityboard.org/publications/r_131111.pdf.
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Estimated annual reporting hours: FR 2052a: 433,280 hours. FR
2052b: 62,640 hours.
Estimated average hours per response: FR 2052a: One-time
implementation, 160 hours; U.S. BHCs that the Financial Stability Board
designated as G-SIBs, 200 hours; FBOs with U.S. broker-dealer assets >
$100 billion complete form, 200 hours; FBOs with U.S. broker-dealer
assets > $100 billion abbreviated form, 60 hours; Ad-Hoc, 100 hours.
FR 2052b: One-time implementation, 480 hours; U.S. BHCs (excluding
G-SIBs) with total consolidated assets > $50 billion (including FBO
subsidiaries), 60 hours; U.S. BHCs (not controlled by FBOs) with total
consolidated assets of $10 billion-$50 billion, 60 hours.
Number of respondents: FR 2052a: U.S. BHCs that the Financial
Stability Board designated as G-SIBs, 8; FBOs with U.S. broker-dealer
assets > $100 billion complete form, 8; FBOs with U.S. broker-dealer
assets > $100 billion abbreviated form, 8; Ad-Hoc, 16.
FR 2052b: U.S. BHCs (excluding G-SIBs with total consolidated
assets > $50 billion (including FBO subsidiaries), 24; U.S. BHCs (not
controlled by FBOs) with total consolidated assets of $10 billion-$50
billion, 47.
General description of report: This information collection is
authorized pursuant to section 5 of the Bank Holding Company Act (12
U.S.C. 1844), section 8 of the International Banking Act (12 U.S.C.
3106) and section 165 of the Dodd-Frank Act (12 U.S.C. 5365) and are
mandatory. Section 5(c) of the Bank Holding Company Act authorizes the
Board to require BHCs to submit reports to the Board regarding their
financial condition. Section 8(a) of the International Banking Act
subjects FBOs to the provisions of the Bank Holding Company Act.
Section 165 of the Dodd-Frank Act requires the Board to establish
prudential standards for certain BHCs and FBOs; these standards include
liquidity requirements. The individual financial institution
information provided by each respondent would be accorded confidential
treatment under exemption 8 of the Freedom of Information Act (5 U.S.C.
552(b)(8)). In addition, the institution information provided by each
respondent would not be otherwise available to the public and is
entitled to confidential treatment under the authority of exemption 4
of the Freedom of Information Act (5 U.S.C. 552(b)(4)), which protects
from disclosure trade secrets and commercial or financial information.
Abstract: The FR 2052a and FR 2052b reports collect quantitative
information on selected assets, liabilities, funding activities, and
contingent liabilities on a consolidated basis and by material entity
subsidiary. These reports will be used to monitor the overall liquidity
profile of certain U.S. BHCs and FBOs, with the frequency and form of
collection determined by the asset size of the organization. These data
will also provide detailed information on the liquidity risks within
different business lines (e.g., financing of securities positions and
prime brokerage activities). In particular, this information will serve
as part of the Federal Reserve's supervisory surveillance program in
its liquidity risk management area and will provide timely information
on firm-specific liquidity risks during periods of stress. Analysis of
both systemic and idiosyncratic liquidity risk issues will then be used
to inform the Federal Reserve's supervisory processes, including the
preparation of analytical reports that detail funding vulnerabilities.
Current Actions: On September 19, 2013, the Federal Reserve
published a notice in the Federal Register (78 FR 57634) requesting
public comment for 60 days on the implementation of the FR 2052a and FR
2052b. The comment period expired on November 18, 2013. The Federal
Reserve received eight comment letters addressing the proposed
implementation of this information collection. The comments are
summarized and addressed below.
Summary of Public Comments
The Federal Reserve received eight comment letters on the proposed
implementation of the FR 2052a and FR 2052b: Two from trade
organizations, four from commercial banks, and two from FBOs. In
general, comments focused on scope of application (respondent panel
threshold), the implementation schedule, frequency of reporting,
certification requirements, confidentiality, burden, interaction with
provisions of other existing information collections, proposed ad-hoc
data collection, and future initiatives. The substantive comments are
discussed in detail below. In addition, the Federal Reserve has revised
the reporting forms and instructions, as appropriate, in response to
technical comments received.
A. Proposed Scope of Application (Respondent Panel Threshold)
1. Thresholds for U.S. BHCs and FBOs
The Federal Reserve proposed the following thresholds.
The following entities would submit the FR 2052a:
[cir] U.S. BHCs that the Financial Stability Board has designated
as Global Systemically Important Banks (G-SIBs).
[cir] FBOs with U.S. broker-dealer assets greater than $100
billion.
The following entities would submit the FR 2052b:
[cir] U.S. BHCs (excluding G-SIBs) with total consolidated assets
greater than $50 billion.
[cir] U.S. BHCs with total consolidated assets equal to $10 billion
or more, but no greater than $50 billion.
[cir] FBOs with total U.S. assets greater than $50 billion and U.S.
broker-dealer assets less than $100 billion.
For research purposes and anticipated future enhancements
of the FR 2052a, additional ad-hoc reporting of items not included on
the proposed FR 2052a would have been requested of up to 16 respondents
with a reporting schedule provided 30 days prior to the first data
submission.
A commenter requested further clarification on the calculation of
total broker-dealer assets for determining whether an FBO would be
subject to the FR 2052a or the FR 2052b, and also when and how the FBO
must inform the Federal Reserve about the size of the broker-dealer
assets as it gets closer to the threshold. Another commenter requested
that the Federal Reserve confirm that the reporting thresholds
specified in the proposal refer to a broker-dealer's total consolidated
assets. The Federal Reserve clarified the FR 2052a instructions to note
that the asset threshold for FBOs to report on the FR 2052a is based on
the total consolidated assets of an FBO's U.S. broker-dealer
subsidiaries. In addition, the Federal Reserve clarified that all asset
thresholds for the reporting forms would be based on total consolidated
assets for all U.S. BHCs and total U.S. assets for FBOs. These
clarifications are consistent with other reporting and regulatory
requirements and with the intent of the proposed requirements.
One commenter requested that the Federal Reserve delay the
effective date
[[Page 48160]]
for application of the reporting requirements to the U.S. intermediate
holding companies (IHCs) that FBOs will be required to form under
Regulation YY.\2\ This commenter asserted that FBOs would need
additional time to take the necessary actions to ensure compliance with
the FR 2052 reporting requirements as applied to IHCs. This commenter
also requested that the Federal Reserve publish for comment a proposal
incorporating IHCs into the FR 2052 reporting regime after issuance of
the final rule requiring IHCs. IHCs are not required to submit FR 2052
reports at this time. As noted below, the Federal Reserve anticipates
modifying the liquidity reporting requirements to align, as
appropriate, with any final liquidity regulatory requirements, public
disclosure requirements, and with the recently finalized enhanced
prudential standards in Regulation YY, including potential reporting
requirements for IHCs. As such, the Federal Reserve will not delay the
effective date for application of the reporting requirements to FBOs.
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\2\ 79 FR 17240 (March 27, 2014). FBOs with $50 billion or more
in global consolidated assets and with $50 billion or more in U.S.
assets are required to establish an IHC to hold the FBOs entire
ownership interest in all U.S. subsidiaries, including bank and
broker-dealer subsidiaries.
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One commenter asserted that it is not appropriate to include U.S.
BHCs with total consolidated assets of $10 billion to $50 billion in
the scope of the reporting requirements, particularly since these BHCs
were excluded from the scope of the Federal Reserve's proposal to
establish a minimum liquidity coverage ratio (LCR) requirement for BHCs
with $50 billion or more in total consolidated assets. The commenter
requested that the Federal Reserve remove these entities from the scope
of the information request. The Federal Reserve notes that, while some
data elements required to construct the LCR metric may appear in the FR
2052b report, the FR 2052b report is not currently designed for LCR
implementation, calculation, or reporting, but was designed to enable
supervisors to monitor liquidity risk. The Federal Reserve believes
that the FR 2052b would serve as an important part of the Federal
Reserve's supervisory surveillance program in its liquidity risk
management area and provide timely information on firm-specific
liquidity risks during periods of stress for institutions of this size.
Therefore, the Federal Reserve will not exclude U.S. BHCs (that are not
controlled by FBOs) with total consolidated assets of $10 billion to
$50 billion from the requirement to report on the FR 2052b.
The Federal Reserve anticipates making significant changes to the
liquidity reporting requirements in the near-to-medium term following
finalization of the FR 2052a and FR 2052b. For this reason, only FBOs
with more than $100 billion in U.S. broker-dealer assets will be
subject to the FR 2052a reporting requirements as their greater
systemic importance in the U.S. financial system necessitates regular
liquidity reporting from their U.S. operations. All other FBOs will be
relieved from the requirement to submit the FR 2052b at this time, but
would continue to provide supervisors with information regarding their
liquidity position through the examination process upon request.
Additionally, the Federal Reserve will not require the FR 2052b report
from U.S. BHCs with total consolidated assets of $10 to $50 billion
that are controlled by FBOs at this time, pending further development
and observation of the liquidity reporting regime.
In addition, the Federal Reserve may exempt a banking organization
(or one of its subsidiaries that is required to report) from reporting
on the FR 2052a or FR 2052b, based on the liquidity risk profile of the
organization. The Federal Reserve continues to believe that, in
general, the proposed scope of application for both reports is
appropriate with respect to the size, complexity, and activities of the
banking organizations that would be subject to the reporting
requirements, both for the purpose of monitoring the safety and
soundness of the individual institutions as well as for monitoring any
systemic risk associated with their liquidity positions and liquidity
management. Therefore staff does not anticipate recommending additional
exemptions in the near future.
In summary, the Federal Reserve is adopting the following
thresholds in response to the comments:
The following entities would submit the FR 2052a:
[cir] U.S. BHCs designated as G-SIBs.
[cir] FBOs with U.S. broker-dealer assets over $100 billion.
The following entities would submit the FR 2052b:
[cir] U.S. BHCs (excluding G-SIBs) with total consolidated assets
greater than $50 billion (including FBO subsidiaries).
[cir] U.S. BHCs (not controlled by FBOs) with total consolidated
assets of between $10 billion and $50 billion.
For research purposes and anticipated future enhancements
of the FR 2052a, additional ad-hoc reporting of items not included on
the proposed FR 2052a would be requested of up to 16 respondents with a
reporting schedule provided 30 days prior to the first data submission.
2. Consolidation
The proposed FR 2052a instructions indicated that FBOs would report
for their consolidated U.S. operations as well as material entities
managed from the United States. Some commenters asked that the Federal
Reserve clarify how the proposed reporting requirements would apply to
U.S. operations of FBOs. Commenters also requested that the Federal
Reserve provide more specificity on which operations would be
``material'' U.S. operations and thus within the scope of the reporting
requirements. A commenter recommended that the asset size of a U.S.
broker-dealer subsidiary of an FBO that is required to report on the FR
2052b be given strong weight in determining whether the subsidiary
should be treated as a material entity.\3\ One commenter requested that
the Federal Reserve clarify whether a reporting FBO would be required
to submit a single FR 2052a or FR 2052b that would include the entirety
of the FBO's U.S. operations within the scope, or if separate reports
would be required for each entity, and further whether each reporting
entity would be considered a material entity. This commenter noted that
the submission of an all-inclusive report presents greater challenges
and burdens to the institution than submission of separate reports for
each material entity. This commenter further requested that, if the
Federal Reserve requires a single filing, the FBO be given the option
of having its material entities each file separately.
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\3\ One commenter observed that the draft instructions for the
FR 2052a, which refer to filing requirements for the FR 2052b, did
not reference the assets of a U.S. broker-dealer subsidiary as part
of the criteria for identifying FR 2052b reporting FBOs and
suggested that the omission was inadvertent. The commenter requested
that the Federal Reserve set forth the scope of the FR 2052a
reporting requirements in the final FR 2052a instructions rather
than noting it in FR 2052b instructions. The final FR 2052
instructions include comprehensive requirements for each set of
instructions, eliminating reference to other forms, as appropriate.
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SR letter 10-06 established a general supervisory expectation that
institutions should actively monitor and control liquidity risks at the
level of individual legal entities, and the group as a whole,
incorporating processes that aggregate data across multiple systems in
order to develop a group-wide view of liquidity risk exposures.
Therefore, banking organizations should have the reporting
[[Page 48161]]
capability to cover the entirety of their U.S. operations as well as
individual entities. However, FBOs will not be required to report the
entirety of their U.S. operations on a consolidated basis at this time,
in anticipation that many FBOs may reorganize their U.S. operations to
form an IHC in connection with the implementation of Regulation YY. In
addition, the liquidity positions and funding activities of each
material entity are distinct, and funding is often segregated due to
legal restrictions, so that supervisors would need the ability to
monitor the liquidity of these entities separately. Thus the final
reporting requirements have been clarified to note that FBOs must
submit separate reports for each material reporting entity. FBOs with
more than $100 billion in U.S. broker-dealer assets are required to
submit separate reports for each material entity in their U.S.
operations and for their consolidated U.S. operations, excluding U.S.
BHCs.
In addition, the final reporting requirements have been clarified
to note that material entities (including material foreign branches)
are entities that pose liquidity risk, provide liquidity support to, or
depend on liquidity support from, affiliates. The Federal Reserve does
not consider the asset size of the entity to be the determining factor
of whether the subsidiary should be treated as material for purposes of
liquidity risk monitoring. Institutions will be required to consult
with supervisors to determine which entities are material for purposes
of the liquidity reporting requirements.
The proposed FR 2052b instructions indicated that FBO branch
network activities managed from the United States (e.g., activities in
the Cayman Islands and Nassau) should be reported in the ``consolidated
tab.'' \4\ One commenter requested that the Federal Reserve clarify
whether these branch network activities are the same as what was
referred to in the proposed instructions as ``offices fully or
partially managed by U.S.-based operations.'' As noted above, FBOs that
would have been within the proposed scope of application for the
FR2052b are not required to submit reports on the FR 2052b under final
reporting requirements. However, FBOs that are required to report on
the FR 2052a should also report on their Cayman and Nassau branches.
Cayman and Nassau branches will report under the final reporting
requirements as stand-alone entities due to their role in funding
transactions for U.S. operations.
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\4\ Institutions should report total positions of the
consolidated entity on the FR 2052b, e.g. top tier BHC.
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One of the commenters asked for clarification on which offices
outside the United States would be relevant for determining who is an
``external counterparty.'' This commenter also requested that the
Federal Reserve confirm that intercompany transactions be eliminated
regardless of the scope of the U.S. operations included in the reports.
A commenter also requested confirmation that the assets of offshore
branches managed or controlled by a U.S. branch or agency should not be
included in the calculation of the $50 billion threshold.\5\ In
addition, a commenter also requested clarification as to whether the
Board intends for covered companies to report FR 2052 data on a
transactional or aggregate basis.
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\5\ FBOs with U.S. broker-dealer assets over $100 billion that
are required to submit the FR 2052a would have more than $50 billion
in non-branch and agency assets. As a result, the question of
whether to include U.S. branch and agency assets is no longer
relevant because no other FBOs would be subject to reporting
requirements at this time.
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The Federal Reserve clarified the FR 2052a and FR 2052b
instructions to note that, for FBOs, an ``external counterparty'' is a
third party that does not have any relationship to the firm. For FBOs,
intercompany transactions should capture transactions between the FBO's
U.S. entities and all affiliates globally. For FBOs, non-U.S. entities
and related Cayman and Nassau entities are considered external
counterparties. In general, non-U.S. entities are not required to
report on the FR 2052 reports. However, as noted above, related Cayman
and Nassau entities will report under the final reporting requirements
as stand-alone entities. All other entities that are affiliated with
the FBO, but are non-U.S. entities, are also considered external
counterparties and are not covered by the reporting requirements.
For purposes of reporting on the U.S. ``Consolidated'' entity, as
defined in the FR 2052a and FR 2052b instructions, transactions between
entities within the consolidated framework will not be reported.
However, transactions with external counterparties will be reported. In
response to the comment on intercompany transactions, FBOs are not
required to report transactions between the entities within the
consolidated framework. As noted above, U.S. BHCs controlled by FBOs
are considered to be individual reporting entities and, as such,
transactions between U.S. ``Consolidated'' entities and U.S. BHCs will
be reported. Outside of the ``Consolidated'' entity report, individual
reporting entities as defined for the submission will report all
transactions between other entities as well as external third party
transactions. In addition, companies should report the FR 2052a and FR
2052b data on an aggregate, rather than transactional basis. The
Federal Reserve clarified the FR 2052a and FR 2052b instructions to
note that eliminating intercompany transactions entirely would not
present an accurate depiction of a reporting firm's liquidity profile.
3. Transitions Between FR 2052a and FR 2052b
One commenter requested clarification of the reporting criteria
threshold and timeframe when an FBO transitions from the FR 2052b
report to the FR 2052a. The commenter further requests that the Federal
Reserve clarify whether an FBO that begins filing the abbreviated FR
2052a would be permitted to transition back to filing the FR 2052b if
the assets of its U.S. broker-dealer subsidiary falls below the $100
billion threshold.
The Federal Reserve clarified the FR 2052a and FR 2052b
instructions to note that once an FBO or a U.S. BHC reaches or exceeds
the threshold and begins filing a particular FR 2052 report, it should
continue to file that FR 2052 report going forward unless the total
U.S. assets of the FBO or the total consolidated assets of the U.S. BHC
subsequently fall to and consistently remain below the threshold for
four consecutive quarters. This is similar to the calculation
methodology for determining when an institution is subject to the
enhanced prudential requirements under Regulation YY.\6\
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\6\ See 79 FR 17240 (March 27, 2014). FBOs or U.S. BHCs that
reach the relevant threshold as of June 30, 2014 for one of the FR
2052 reports must begin reporting going forward. Generally,
supervisors will review the reporting status of a banking
organization during the examination process.
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B. Implementation Schedule and Frequency of Reporting
1. Implementation Schedule and Submission Deadlines
The Federal Reserve proposed the following implementation schedule:
U.S. G-SIBs reporting on the FR 2052a would report daily,
submitting their first report on January 3, 2014, with an initial as-of
date of December 31, 2013.
FBOs reporting on the FR 2052a would report the complete
FR 2052a on occasion and an abbreviated FR 2052a twice a month,
submitting their first report on January 17, 2014, with an initial as-
of date of January 15, 2014.
[[Page 48162]]
U.S. BHCs (excluding G-SIBs) with total assets of greater
than $50 billion reporting on the FR 2052b would report monthly,
submitting their first report on January 10, 2014, with an initial as-
of date of December 31, 2013.
U.S. BHCs with total assets of $10 billion to $50 billion
would report on the FR 2052b quarterly, submitting their first report
on July 10, 2014, with an initial as-of date of June 30, 2014.
FBOs with total U.S. assets greater than $50 billion and
less than $100 billion in U.S. broker-dealer assets would report on the
FR 2052b on occasion.
Several commenters raised concerns that there would be insufficient
time to implement the reporting requirements, observing that much of
the required data lies outside the systems currently used for
regulatory reporting. The commenters asserted that enhancing internal
systems to include additional data elements takes time in order to
secure internal funding for new systems, develop the systems required,
and source the data elements and ensure they are in a properly
controlled environment. They also noted that implementation would not
be able to begin until the scope of reporting has been clarified and
specific requirements have been finalized. One commenter also claimed
that development of new systems are in suspension in connection with
undertaking regular year-end reporting, which would make it more
difficult to meet the proposed timeframe. While some commenters
requested additional time for implementation of the requirements, one
commenter requested that the Federal Reserve suspend implementation of
the FR 2052a permanently and focus on anticipated new liquidity
reporting requirements that will reflect the anticipated final
liquidity regulations, or in the alternative, delay implementation
until December 31, 2014, to permit organizations additional time to
address new reporting and certification requirements. This commenter
also requested that the Federal Reserve revise the proposed reporting
time deadlines for daily reports and for the certified month-end
report. Another commenter requested that to the extent the Federal
Reserve intends for the FR 2052 reports to be complementary to the
information required by anticipated liquidity regulations, the Federal
Reserve consider delaying the effectiveness of the information
collection until the liquidity regulations (including relevant
definitions) have been finalized and reporting requirements related to
the liquidity regulations have been published for comment.
One commenter noted that the draft FR 2052a instructions do not
discuss the ``as-of'' date that applies to the FR 2052a report, nor do
the draft instructions specify the first submission date for either the
FR 2052a or FR 2052b reports. The commenter requested that the final
instructions provide this information. One commenter requested that the
Federal Reserve provide a rationale for requiring submission of the
first abbreviated FR 2052a two days after the proposed January 15,
2014, as-of date or for requiring such reporting on a twice-a-month
basis. This commenter also suggested phasing in the reporting
requirement by initially requiring submission of the FR 2052a on a
monthly basis then increasing to twice-a-month reporting. One commenter
stated that it does not believe the proposed 30-day lead-time for new
ad-hoc reporting requirements will be sufficient.
The Federal Reserve notes that these reports will replace liquidity
data that is currently collected with an expanded and more standardized
data collection. The Federal Reserve believes that much of the FR 2052a
and FR 2052b data are already being collected for most of the covered
institutions with a similar submission date, on a similar frequency.
However, because the FR 2052b is substantively more expansive than data
currently collected from large and regional institutions and to reduce
reporting burden on the institutions, the first monthly submission date
will be December 15, 2014, for data, with an as-of date of November 30,
2014 and the first quarterly submission date will be January 15, 2015,
for data, with an as-of date of December 31, 2014. The proposed 30-day
lead-time for FR 2052a ad-hoc reporting will be retained as proposed.
As discussed above, the Federal Reserve believes the requested data
should be readily available in the systems of reporting institutions
and therefore the 30-day lead-time should be sufficient for
institutions to produce the reports. Due to administrative oversight,
the proposed as-of dates and submission dates were provided only in the
FR 2052 OMB supporting statement.
FBOs that do not currently report liquidity data similar to what is
required on the FR 2052a and FR 2052b would have to build new reporting
systems to comply with the proposed requirements. As noted above, the
Federal Reserve modified the scope of FBO reporting to help alleviate
reporting burden. To the extent individual U.S. BHCs that are
subsidiaries of FBOs and that meet the threshold for application of the
final reporting requirements have not been regularly submitting similar
liquidity information to its supervisors, the Federal Reserve will
consider individual requests for extensions of time prior to the first
required submission, in order to allow institutions to submit the
reports without undue burden.
One commenter noted that while the firms required to file the
proposed FR 2052a may have the systems, processes, and capabilities to
provide relevant data on a daily basis, monthly FR 2052b filers may not
be similarly situated and may be unable to aggregate and submit the
required data only 10 days after it is collected, as required by the
proposal. This commenter noted that companies would likely be in a
position to populate the monthly FR 2052b using archived data that may
not be available until the 15th day of each month and requested that
covered companies be permitted to submit the monthly FR 2052b on the
20th day of each month. The Federal Reserve notes that institutions
have been submitting similar liquidity information between 10 and 15
calendar days after the cut-off date every month. As such, the Federal
Reserve continues to believe that 15 calendar days is a reasonable
timeframe for institutions to submit FR 2052b reports.
Two commenters requested that, in order to reduce operational
burden, submissions be structured as ``off-cycle'' or on non-quarter-
end months so that it would not coincide with the timing of other
regulatory reporting and that they be based on data collected and
submitted during the second quarter of the calendar year. The Federal
Reserve believes that ``off-cycle'' reporting of liquidity data would
be inconsistent with the objectives of the data collection. Information
gathered on the FR 2052 forms will serve as part of the Federal
Reserve's supervisory surveillance program for liquidity risk
management and provide timely information on firm-specific liquidity
risks during periods of stress. The Federal Reserve believes the data
collection is a critical component of the Federal Reserve supervisory
process and would not be available through existing regulatory reports.
Moreover, many of the firms that are subject to the reporting
requirements have been providing substantively similar information to
supervisors on a regular basis. Therefore, the Federal Reserve believes
that the FR 2052 reporting could not be effectively imposed ``off-
cycle''.
[[Page 48163]]
Because the process for finalizing the reporting requirements has
extended beyond the proposed implementation dates and to respond to
concerns raised by commenters, the Federal Reserve has adopted the
implementation schedule set forth below. This modified implementation
schedule should reduce burden and allow sufficient time for respondents
to modify or refine their systems in order to meet the reporting
requirements:
U.S. G-SIBs must file their first FR 2052a submission by
September 15, 2014, with an initial as of date of September 11, 2014.
U.S. BHCs (excluding G-SIBs) with total consolidated
assets of greater than $50 billion must file their first FR 2052b
submission by December 15, 2014, with an initial as of date of November
30, 2014.
U.S. BHCs (not controlled by FBOs) with total consolidated
assets of between $10 billion and $50 billion must file their first FR
2052b submission by January 15, 2015 with an initial as of date of
December 31, 2014.
FBOs with U.S. broker-dealer assets greater than $100
billion must file their first abbreviated FR 2052a by September 15,
2014, with an initial as of date of September 11, 2014. These FBOs file
a complete FR 2052a on occasion, with advanced notice from supervisors.
FR 2052a ad-hoc reports will be provided with a reporting
schedule 30 days prior to the first data submission.
SR letter 10-06 established the general expectation that
institutions may be required to provide the daily computation of
regular liquidity risk reports and supplemental information to
supervisors as conditions warrant, through the examination process.
More frequent and detailed reporting may be necessary for effective
supervision during times of increasing liquidity stress. As such, the
Federal Reserve reminds institutions that the Federal Reserve may
adjust the frequency of liquidity reporting as market conditions and
supervisory needs in order to carry out effective continuous liquidity
monitoring. If institutions (domestic or foreign) are asked to report
additional data due to heightened supervisory needs, the notification
may be sent to the firm less than 30 days in advance and the data
collection would be expedited.
2. Frequency of Reporting
One commenter requested that the Federal Reserve specify the
required frequency of reporting in the instructions. A commenter
requested that the Board clarify whether it contemplates requiring
submission of a complete FR 2052a on a more frequent basis based on the
circumstances of a particular FBO or market conditions. The commenter
requested that the Board provide these FBOs with adequate advanced
notice and that the Board accept these reports on an uncertified basis.
A commenter stated that it would be appropriate to base annual FR 2052b
reporting on the same timeframe as the submission of the complete FR
2052a for FBOs.
The Federal Reserve clarified the FR 2052a instructions to note
that FBOs with U.S. broker-dealer assets over $100 billion will submit
the complete FR 2052a on occasion, after 30 days prior notice from
supervisors. The Federal Reserve clarified the FR 2052a instructions to
note that ``on occasion'' reporting would not necessarily result in
annual reporting. The Federal Reserve may request FBOs to complete the
FR 2052a more or less often than once a year as part of specific
supervisory review or changes in liquidity risk positions. A request
for a complete FR 2052a report would be sent to reporting institutions
at least 90 days in advance. Appropriate frequency of reporting is
important to ensure that supervisors receive timely information about
the liquidity risk and position of banking organizations commensurate
with their risk profile and activities. Due to the complexity,
differences in the size of reporting institutions, as well as the
differences in the supervisory programs, the Federal Reserve believes
that synchronizing the submissions of the FR 2052a and FR 2052b would
not be appropriate and is adopting the proposed reporting frequency, as
described above. Additionally, the Federal Reserve notes that the
proposed frequency of reporting coincides, in many cases, with
liquidity information already provided to supervisors, which should
result in a minimal to modest increase in burden.
C. Certification Requirements and Confidentiality
1. Certification Requirements
The Federal Reserve proposed that daily data submissions on the FR
2052a would be provided on a best-efforts basis; however, the month-end
submission would be required to be certified. FBOs submitting the
FR2052a abbreviated report twice a month would not have been required
to certify those submissions, but would have been expected to certify
the complete FR2052a that is submitted on an occasional basis. The FR
2052b reports submitted monthly, quarterly, and on an occasional basis
would have been required to be certified.
Two commenters expressed concerns about the costs associated with
certification, which may further increase the burden on institutions.
One of these commenters noted that these costs are difficult to
estimate due to an imprecise understanding of the requirements and that
the estimated costs may be greatly increased if the certification
process needs to be automated and institutionalized. Lastly, two
commenters requested that the certification cover only items that are
historical in nature and that forward-looking information will either
be exempt from certification or that the instructions note that any
forward-looking information and estimated data will reflect reasonable
accuracy. One of these commenters requested that, if certification
covers the entire report, the Federal Reserve include cautionary
language regarding forward-looking information similar to that used in
reports submitted to the Securities and Exchange Commission.
Several commenters requested that the certification process be
delayed until institutions fully understand the new reporting
requirements and are able to build and refine their reporting
infrastructure to resolve ambiguities and implement control procedures.
In addition, one commenter requested that the Federal Reserve extend
the certified report submission time for G-SIBs to accommodate firms on
the West Coast. Another commenter recommended that the timing for
submission of certified reports be extended toward the end of the month
because the comparison point for certification would not yet be
completed by the 10th calendar day. One commenter suggested that the
Federal Reserve consider phasing in the certification requirement to
take into account the different reporting capabilities of different
covered companies. Another commenter suggested that the introduction of
new requests not be integrated into, or subject to, certification
requirements of the FR 2052a until organizations have been given a
reasonable amount of time to implement new reporting protocols for the
new data elements.
With regard to the certification instructions, one commenter
requested that the certification requirements and the precise language
of the certification be set forth directly in the relevant reporting
instructions. The commenter recommended that the standard for
submission of uncertified reports be set forth directly in the
instructions to each form and that this standard call for the
submission of ``reasonable estimates'' on
[[Page 48164]]
a ``best efforts'' basis. This commenter also requested that the
Federal Reserve clarify the identity of the individual required to
certify the reports.
The Federal Reserve removed the proposed certification requirements
for FR 2052a and FR 2052b reports at this time. The reporting
requirements are new and based on information submitted to supervisors
through new systems. Furthermore, as discussed above, the Federal
Reserve anticipates revising the reporting requirements in the near
future, which would require additional systems changes. Therefore, the
Federal Reserve believes that the additional operational burden that
may be imposed as part of a certification requirement would likely be
of limited benefit at this time. Institutions will be expected to
submit high quality data without any material errors. The Federal
Reserve notes that it is a federal violation to enter false information
in a BHC's reports with the intent to defraud or deceive the Board.\7\
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\7\ See 15 U.S.C. 1005.
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2. Confidentiality
One commenter requested that the final instructions address the
confidentiality of the FR 2052 reports. The commenter also requested
clarification of which items would be considered individual financial
information, and thus protected as confidential supervisory
information, and which items would be considered institution
information and thus protected as trade secrets or commercial or
financial information. This commenter also requested that the Federal
Reserve clarify why all items are not protected as confidential
supervisory information. The Federal Reserve notes that because the
information collected on the reports is used for supervisory
monitoring, all information submitted by respondents would be treated
as confidential supervisory information and has clarified the final
instructions.
D. Burden and Alignment With Existing Information Collections
One commenter estimated that the man hours per year that would be
required to produce the required information would be 6,000 man hours
more than the estimate provided by the Federal Reserve. The commenter
also estimated that gains from automation would reduce the effort to
2,000 man hours per year. The commenter estimated that it would incur
approximately $2.5 million for IT development, $600,000 to run a
tactical reporting solution for the first year and an ongoing $200,000
per year for staff to improve systems to comply with the FR 2052
reports. The commenter noted that these costs are incremental to those
that will be incurred if the Report of Selected Money Market Rates (FR
2420; OMB No. 7100-0357) reporting is implemented as proposed. Another
commenter asserted that the cost involved with the proposed data
collection would be almost double what was estimated in the proposal.
In response, the Federal Reserve has increased the ongoing burden and
cost estimates, adding implementation costs, for both the FR 2052a and
FR 2052b.
Several commenters raised concerns about the additional burden
imposed by the proposed reporting requirements. The commenters asked
whether the FR 2052 reports would be additional reports, or if they
would replace the current supervisory liquidity data requests. Another
commenter observed that there are inconsistencies between the data
points proposed to be collected by the FR 2052a and noted that
supervisors have regularly requested and questioned whether these
differences were intentional. As mentioned above the FR 2052a and FR
2052b reports would replace current supervisory data requests for
similar information and any differences between the proposed reporting
forms and past supervisory requests were intended.
A commenter requested that the Federal Reserve clarify whether the
scope of the U.S. operations that should be included in the FR 2052a
report equates with the scope of the U.S. operations that FBOs will be
required to report on the recently revised Form FR Y-7Q (OMB No. 7100-
0125). The Federal Reserve reviewed the FR 2052a and the FR Y-7Q and
concluded that in general, the FR 2052a does not align with the FR Y-7Q
or other regulatory filings. The Federal Reserve notes that information
collected on the FR Y-7Q is used to assess an FBO's ability to be a
continuing source of strength to its U.S. banking operations and to
determine compliance with U.S. laws and regulations. The FR 2052
reports require a different combination of financial information to
assist supervisors in effectively monitoring the liquidity position and
risk management of significant U.S. operations of FBOs.
One commenter requested that the Federal Reserve take steps to
avoid the imposition of duplicative and redundant liquidity reporting
requirements. Another commenter requested that the Federal Reserve
consider the cumulative impact of the various data collection
initiatives and reporting requirements to which FBOs are or potentially
will be subject, observing that these institutions face substantial
practical challenges in developing and implementing the systems and
governance mechanisms needed to comply with the various reporting
requirements. The commenter observed that many of the FBOs subject to
this proposal also control U.S. bank holding company subsidiaries that
are now subject to new requirements to file the Capital Assessments and
Stress Testing information collection (FR Y-14; OMB No. 7100-0341) and
the Banking Organization Systemic Risk Report (FR Y-15; OMB No. 7100-
0352), which demand time and resources, and noted that the same
personnel involved in this reporting would also be involved in the FR
2052 reporting process.
Several commenters asked whether the proposed liquidity reports
would align with recent rulemakings, such as the proposed LCR and
Regulation YY, and raised concerns about potential burden implications
if the reports were not aligned with those regulations. Two commenters
requested that the Federal Reserve clarify the relationship between the
FR 2052 reports and future reporting requirements related to the LCR
proposal. Several commenters expressed concern that certain terminology
and definitions in the FR 2052 reports do not fully align with the LCR
proposal and that they may incur material initial set-up expenses to
upgrade their systems while the proposal is still in the rulemaking
process. Commenters requested that the Federal Reserve ensure that
definitions and instructions align with current reporting requirements
as well as the new proposals, and one commenter requested that the
Federal Reserve clarify the basis for divergence between the
categorization schemes in the FR 2052 reports and the proposed LCR.
A commenter requested clarification of the intended relationship
between the proposed reports and any anticipated liquidity stress
testing reporting that would be required with respect to Regulation YY,
including the degree to which it is contemplated that the items
included in the FR 2052 reports would be included in the determination
of the liquidity buffer as reported pursuant to that rule. This
commenter noted that with respect to the proposed IHC requirement in
Regulation YY, it believes newly created IHC's would be ``material
entities'' that would be within the scope of the FR 2052 reporting
requirements. This commenter also anticipates that formation of an IHC
will require modifications to reporting systems and governance
structures and processes put in place under the
[[Page 48165]]
proposal or the development of new systems structures and processes.
As discussed above, the Federal Reserve has reviewed the regulatory
burden, including reporting requirements, and subsequently modified the
scope of application. The Federal Reserve notes that the FR 2052 forms
are supervisory data collections to monitor the liquidity risk and
positions of the banking organizations that would be subject to the
requirements. In addition, the reporting forms as proposed were not
intended to align directly with regulatory requirements that are, or
have been, in development and that are not fully implemented. The
Federal Reserve notes that any future FR 2052 reporting requirements to
ensure consistency with the final LCR rule and Regulation YY as fully
implemented would be proposed at a later date. As discussed above,
material entities would be defined in the FR 2052 as entities that pose
liquidity risk, provide liquidity support to, or depend on liquidity
support from affiliates.
Further, the Federal Reserve believes that other data collections
mentioned as potentially duplicative by commenters, such as the Federal
Financial Institutions Examination Council (FFIEC) Consolidated Reports
of Condition and Income (Call Reports) (FFIEC 031 & 041; OMB No. 7100-
0036), or the Consolidated Financial Statements for Holding Companies
(FR Y-9C; OMB No. 7100-0128), do not provide sufficient granularity or
classification structures needed to provide an in depth view of a
firm's liquidity profile. Furthermore, the Federal Reserve notes that
FR 2052 data will be shared with the Office of the Comptroller of the
Currency and the Federal Deposit Insurance Corporation (FDIC) to
prevent potential duplicative data requests from those agencies.
One commenter noted that the ``Asset Category Table'' in Appendix B
to the FR 2052a instructions identifies various categories of
collateral for purposes of classifying and reporting securities finance
transactions. The commenter asserted that these categories are not used
in the financial services marketplace, thus making compliance complex
and confusing. The commenter recommended that the Federal Reserve use a
more generic categorization scheme that conforms to existing
regulations and market practice, and aligns the definitions among
various information collections. The Federal Reserve acknowledges that
the categories of collateral in Appendix B are not standard terms;
however, institutions are using those categories in the current data
submission and any further modification may pose a significant burden
to those institutions. The Federal Reserve notes that, where
appropriate, the terminology or categories in future FR 2052 reports
would be made consistent with other regulatory reports; however,
difference may still exist due to data definitions. As discussed above,
other regulatory reports do not provide sufficient granularity or the
classification structure needed to provide an in depth view of
liquidity.
A commenter observed that there appear to be redundancies between
the FR 2052a and FR 2052b and the FR 2420. A commenter claimed that the
FR 2420 report poses a significant burden, especially to institutions
required to submit the daily FR 2052a report, and suggested that the
Federal Reserve adopt a reporting template that meets its needs across
its market and supervisory functions and that it use this as baseline
data during regulatory examinations. The Federal Reserve recognizes the
potential for overlap or duplicated data between the FR 2420 and FR
2052 with respect to several line items. However, the FR 2420 and FR
2052 reports are, or would be, issued under separate, non-overlapping
authorities where the purpose and use of the reports are also
completely separate. Therefore, the Federal Reserve will retain the FR
2052a ``Funding Pricing'' information (section 16) and will endeavor to
reduce reporting burden wherever possible in the future. As such, the
Federal Reserve has removed from the FR 2052b the ``Wholesale Funding
Pricing'' information (section 20) to alleviate reporting burden and
because the Federal Reserve not believe collecting this information
from FR 2052b filers is essential for monitoring their liquidity risk.
E. Ad-Hoc Reporting and Future Anticipated Initiatives
Three commenters requested clarification on the implementation and
advanced notification of the ad-hoc requests. Commenters also requested
that the Federal Reserve clarify its expectations as to the standard to
which reporters will be held when providing responses, and also
inquired as to certification requirements of ad-hoc requests. One
commenter also noted that it was unclear whether there was a
relationship between the FR 2052a report, the ad-hoc reporting, the
quantitative impact study (QIS) \8\ process, and supervisory requests
for liquidity information. One commenter requested that the Federal
Reserve clarify the scope of operations that must be included in
response to each ad-hoc request. This commenter stated that
introduction of any new data requests should be determined after
consultation with the industry and consideration of the volume and
complexity of the new requests. One commenter requested that any ad-hoc
requests be subject to a notice and comment process.
---------------------------------------------------------------------------
\8\ Basel Committee on Banking Supervision (BCBS) quantitative
impact study (QIS) for the international version of the Liquidity
Coverage Ratio (LCR).
---------------------------------------------------------------------------
The Federal Reserve notes that the initial Federal Register notice
requested comment on the Federal Reserve's intention to make ad-hoc
requests, included the approximate number of burden hours that would be
involved, and indicated that institutions would be given notice prior
to the collection with an opportunity to respond. As proposed, the
Federal Reserve will make requests for additional liquidity risk
information on an ad-hoc basis, used to develop modifications to the FR
2052a for future proposals. The Federal Reserve believes these
potential modifications could allow for more comprehensive and
effective liquidity risk monitoring going forward and assist with
aligning the reports with any final LCR regulations, as appropriate.
The Federal Reserve notes that the construct of the Basel QIS template
is different than the FR 2052a. Although there are some similar data
elements utilized in the Basel QIS and the FR 2052a, the methodology
and definitions for the Basel QIS has changed to reflect the Basel III
Revised Liquidity Framework.\9\
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\9\ ``Basel III: The Liquidity Coverage Ratio and liquidity risk
monitoring tools'' (January 2013), available at http://www.bis.org/publ/bcbs238.htm.
---------------------------------------------------------------------------
Furthermore, the scope of the ad-hoc requests would be tailored to
individual institutions. For domestic BHCs, it would include global
operations with a separate report for material legal entities. For FBOs
it would include U.S. operations of the FBO with separate reports for
the material legal entities. Material entities in both cases would be
defined as entities that pose liquidity risk, provide liquidity
support, or depend on liquidity support from affiliates. In response to
any new data requests and ad-hoc requests, the Federal Reserve
anticipates revising the FR2052a to incorporate additional liquidity
reporting requirements as they are developed with observations gained
from the ad-hoc reporting. Thus, the ad-hoc reporting process will be
implemented as proposed.
[[Page 48166]]
Specific Data Item Comments
Definitions
There were various questions from commenters regarding definitions
or requests for expanded instructions. Most of the questions related to
line item definitions in the FR 2052 reports and a few questions
related to sizing of material entities for liquidity reporting. In
response, the Federal Reserve reviewed data definitions and have
adjusted or clarified data items and associated instructions, as
appropriate. As discussed above, definitions used on the reports would
align with other U.S. rules as they are finalized to minimize any
potential overlap. Also, the Federal Reserve notes that some data items
in the proposed FR 2052b form are not reported through the current
collection of the Large and Regional Institutions Liquidity Monitoring
Report, such as ``Deposit Balances'' and ``Undrawn Commitments and
Contingent Liquidity Needs.'' Therefore, the Federal Reserve is
temporarily exempting FR 2052b filers from reporting most of the
``Deposit Balances'' and entire ``Undrawn Commitments and Contingent
Liquidity Needs'' sections \10\ until the proposed LCR is finalized, at
which time the Federal Reserve anticipates proposing that the FR 2052b
instructions for these data items be modified to closely align with a
final LCR rule.
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\10\ At this time, respondents that file the 2052b are not
required complete line items 10.1 through 10.3, and items 12.1
through 12.5.
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One commenter requested clarification on whether data item FHLB
Borrowing (item 2.20 in the FR 2052a, and 5.1 in the FR 2052b) should
be reported at book value or par value. The Federal Reserve clarified
the instructions to note that FHLB Borrowing should be reported as the
amount of borrowing outstanding based on remaining contractual
maturity. This definition is similar to the definition of Federal Home
Loan Bank Advances in item RC-M 5.a of the FFIEC 031 and 041 (Call
Reports).
One commenter requested clarification on whether Long Term Debt
Structured, Not Structured, and Govt. Supported (items 8.4-8.6 in the
FR 2052a, and 7.3 in the FR 2052b) should include any fair value hedges
associated with long-term debt, in order that the debt would be
reported at fair value, not face value. The Federal Reserve clarified
the instructions to note that institutions should not include fair
value hedges in the reporting of long-term debt so that the debt is
reported at fair value. Values reported as Long Term Debt Structured,
Not Structured and Govt. Supported (items 8.4 through 8.6 in the FR
2052a, and 7.3 in the FR 2052b) should represent the undiscounted cash
repayment obligation due, and should be reported in the maturity column
that corresponds with the timing of the contractual repayment
obligation. In addition, if specific derivative transactions, excluding
those related to fair value hedging, have cash flow characteristics
equivalent to long term debt (e.g., a bullet cash repayment obligation
at maturity) and are classified as debt under U.S. Generally accepted
accounting principles, institutions should report the cash repayment
obligation associated with the derivative in the appropriate maturity
column.
FR 2052b Items
One commenter requested that the Federal Reserve confirm that an
FBO would limit its responses to the information requested in the
consolidated reporting tab and not provide any of the information
requested in either the parent company only or contingency-pricing
reporting tabs. As noted above, FBOs that do not meet the FR 2052b
criteria are not required submit the FR 2052b report.
A commenter requested clarification on the specific types of
transactions included in section 6 \11\ of the FR 2052b, and whether
customer and counterparty repurchase transactions, which may have
different behavioral characteristics, should be reported in separate
line items. One commenter suggested that section 6 segregate repurchase
transactions that are a part of a customer relationship where deposit
balances in excess of customer needs are swept into a repurchase
transaction. The commenter stated that this would distinguish between
wholesale repurchase agreements initiated by a bank with a large
counterparty to meet overall funding needs and repurchase transactions
that arise during the ordinary course of business through customer
needs. Another commenter noted that many firms that would be required
to file the FR 2052b engage in relatively low volumes of repurchase and
reverse repurchase transactions and do not have the system capabilities
to report those transactions with the granularity required by the
information request. The commenter requested that the Federal Reserve
consider exempting firms that would be required to file the FR 2052b
that engage in de minimis amounts of these transactions or consider a
more tailored approach that would not impose significant cost for lower
benefit. The Federal Reserve recognizes the difference in profile of
such transactions, but does not believe the difference is significant
enough to justify creating two categories. Furthermore, the Federal
Reserve recognizes not all firms that would be required to file the FR
2052b engage in significant amounts of repurchase and reverse
repurchase transactions and that the monitoring of the activity is
relevant to the liquidity monitoring of the firms. Having considered
the comments carefully, the Federal Reserve believes that the
granularity required in Section 6 is appropriate.
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\11\ Section 6 ``Repurchase Transactions'' in Consolidated Tab.
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One commenter requested clarification on whether to report Secured
Deposits (item 5.3) in FR 2052b net of deposits covered by FDIC
insurance. The Federal Reserve clarified the FR 2052b instructions to
note that an institution should report only the portion of public
deposits that are secured by collateral. For example, if a portion of a
deposit account is covered by FDIC insurance, and thus not secured by
collateral, institutions should not include that portion of the deposit
in Secured Deposits.
Several commenters requested clarification on the reporting of
loans and leases (items 4.1 through 4.9) in the FR 2052b that could be
monetized within a reasonable period. First, commenters requested that
the Federal Reserve clarify where to report loan amounts that may be
eligible to be pledged to the FHLB or Federal Reserve, but have not
been pledged, and thus no actual borrowing capacity yet been created.
The Federal Reserve notes, as specified in the instructions, that
reported amounts would be limited to collateral-based borrowing
capacity actually created (assets already pledged), and companies would
not include assets based only on the fact that they could create
borrowing capacity at the FHLB or Federal Reserve in the FHLB and
Central Bank Borrowing columns. Firms required to file the FR 2052b are
welcome to report the potential secured borrowing capacity of such
assets in the ``notes'' section or in the ``Available for Sale,
Securitization and/or Repo'' section if the loans could reasonably be
expected to create such capacity within a reasonable amount of time,
generally in 3 months or less.
One commenter suggested it could be overly burdensome to establish
an accurate market value for loan and lease assets that should be
valued for inclusion in the ``Available for Sale'' or ``Other Secured
Financing'' columns.
[[Page 48167]]
The proposed instructions for the FR 2052b definition state that ``the
market value can be interpreted as the book value less a haircut for
the sale.'' The Federal Reserve modified the FR 2052b definition to
note that the haircut applied to loans and leases can be a based on
readily available market-based metrics for the general asset type. For
example, publicly available loan and lease haircuts provided by the
FHLB or Discount Window could be used as a benchmark as a reasonable
estimate. The expectation is not that a bank's entire loan book be
valued and included in section 4, rather, that reporting be limited to
those assets targeted for potential monetization within a 90-day
period, under normal market conditions.
One commenter requested clarification regarding the method required
to calculate the lendable value of unencumbered securities (items 3.1
through 3.9) in the FR 2052b. The commenter has noted that determining
the ``Lendable value'' would be dependent upon the source providing
liquidity for the security. The Federal Reserve believes that some
judgment is involved as assets can be utilized in multiple different
markets. Lendable value should be a combination of the market value
less applicable `haircuts.' Haircuts should consider factors such as
liquidity, credit and market risks of the securities, firm specific
sources available for securitized borrowing, current market haircuts
and firm specific factors which may decrease or increase current market
haircuts.
Two commenters noted that it is impractical for mid-sized banks to
report pricing on unsecured funding issued and outstanding such that
banks would report pricing on that debt over its life through maturity
(section 21 of the FR 2052b). One of these commenters recommended that
the requirement for banks with total consolidated assets less than $50
billion to provide a funding curve be eliminated. Another commenter
recommended that this section ask for indications for unsecured
wholesale term debt transactions only. The Federal Reserve recognizes
the challenges of calculating weighted average funding in a wide time
horizon (section 20 of the FR 2052b) and has modified the maturity
bucket in the unsecured funding pricing section to 5 years.
Other Items
Two commenters noted that it is not easy for institutions with
assets between $10 billion and $50 billion to segregate the categories
of retail, Small and Medium Enterprises (SME), financial institution,
and non-financial institution, and requested confirmation that
reasonable segmentation approaches would be sufficient for these
institutions (section 10 of the FR 2052b). One of these commenters also
noted that the requirement to identify stable versus less stable
deposits may require data not widely available at institutions of this
size. A commenter requested that this flexibility be included in the
instructions for mid-sized institutions as it could reduce
implementation expense. The commenter recommended that these mid-sized
banks be allowed to satisfy the requirements on a best efforts basis
through reasonable use of their existing deposit product and existing
line of business or segment reporting definitions without the penalty
of defaulting to the worst category. The commenter also requested
clarification of the meaning of interest in the category of ``term
deposits with a withdrawal penalty greater than loss of interest'' and
recommended that a more comprehensive definition of the withdrawal
penalty criteria be provided. The Federal Reserve notes that some
sections and data items in the proposed FR 2052b are not collected
through the current version of the Large and Regional Institutions
Liquidity Monitoring Report, such as ``Deposit Balances'' and ``Undrawn
Commitments and Contingent Liquidity Needs.'' Therefore, as mentioned
above, the Federal Reserve is temporarily exempting FR 2052b filers
from reporting most of the ``Deposit Balances'' and the entire
``Undrawn Commitments and Contingent Liquidity Needs'' sections \12\
until the proposed LCR is finalized, at which time the Federal Reserve
anticipates the FR 2052b instructions for these data items would be
proposed for modification to closely align with a final LCR rule.
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\12\ FR 2052b filers will not be required fill out items 10.1
through 10.3, and items 12.1 through 12.5 at this time.
---------------------------------------------------------------------------
One commenter noted that banks with less than $50 billion in total
consolidated assets may not have an existing reporting infrastructure
to measure the segregations of unfunded commitments precisely as
defined (section 12 of the FR 2052b). The Federal Reserve observes that
the proposed definitions in the FR 2052b did not explicitly address the
case of comingled facility types. The commenter recommended that the FR
2052 reporting forms, proposed LCR and other liquidity-related
regulations share an equivalent and more detailed definition of
liquidity facility. The commenter recommended that the Federal Reserve
avoid encouraging a blending of liquidity and credit facilities into a
single facility categorization. The commenter also recommended that the
Federal Reserve allow flexibility for mid-sized organizations in
reporting SME versus commercial. This commenter requested that mid-
sized organizations be permitted to use a manual tracking process or be
provided upfront investment in training and infrastructure to track the
exposures by category. Another commenter noted that undrawn credit
facilities and undrawn liquidity facilities are not mutually exclusive
product categories provided to clients and that it may be impossible to
distinguish between them (section 12 of the FR 2052b). The commenter
requested that the Federal Reserve provide further guidance on undrawn
commitment segmentation and also allow permit the institutions the
flexibility to categorize commitments based on either existing line of
business segmentation or existing data at that institution. The Federal
Reserve agrees with the comments and, as mentioned above, is
temporarily exempting FR 2052b filers from reporting the entire
``Undrawn Commitments and Contingent Liquidity Needs'' section until
the proposed LCR is finalized, at which time the Federal Reserve
anticipates that modification of the FR 2052b instructions for these
data items would be proposed to closely align with a final LCR rule.
Board of Governors of the Federal Reserve System, August 11,
2014.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014-19323 Filed 8-14-14; 8:45 am]
BILLING CODE 6210-01-P