[Federal Register Volume 80, Number 138 (Monday, July 20, 2015)]
[Notices]
[Pages 42803-42806]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17713]


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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 a proposed 
information collection by the Board of Governors of the Federal Reserve 
System (Board) under the Office of Management and Budget (OMB) 
delegated authority. 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 statement and approved collection of information 
instruments 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

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Officer--Nuha Elmaghrabi--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 extension for 
three years, with revision, of the following information collection:
    Report title: Report of Selected Money Market Rates.
    Agency form number: FR 2420.
    OMB Control number: 7100-0357.
    Effective Date: October 20, 2015, for Part A-Federal Funds, Part 
AA-Selected Borrowings from Non-Exempt Entities, and Part B-
Eurodollars. January 15, 2016, for Part C-Time Deposits and 
Certificates of Deposit.
    Frequency: Daily.
    Reporters: Domestically chartered commercial banks and thrifts that 
have $18 billion or more in total assets, or $5 billion or more in 
assets and meet certain unsecured borrowing activity thresholds; U.S. 
branches and agencies of foreign banks with total third-party assets of 
$2.5 billion or more.
    Estimated annual reporting hours: Commercial banks and thrifts--
34,200 hours; U.S. branches and agencies of foreign banks--35,100 
hours; International Banking Facilities--19,750 hours; Significant 
banking organizations--900 hours.
    Estimated average hours per response: Commercial banks and 
thrifts--1.8 hours; U.S. branches and agencies of foreign banks--1.8 
hours; International Banking Facilities--1.0 hour; Significant banking 
organizations--1.8 hours.
    Number of respondents: Commercial banks and thrifts--76; U.S. 
branches and agencies of foreign banks--78; International Banking 
Facilities--79; Significant banking organizations--2.
    General description of report: The FR 2420 is a mandatory report 
that is authorized by sections 9 and 11 of the Federal Reserve Act (12 
U.S.C. 324 and 248(a)(2)), sections 7(c)(2) and 8(a) of the 
International Banking Act (12 U.S.C. 3105(c)(2) and 3106(a)), and 
section 5(c) of the Bank Holding Company Act (12 U.S.C. 1844(c)(1)(A)). 
Individual respondent data are regarded as confidential under the 
Freedom of Information Act (FOIA) (5 U.S.C. 552(b)(4)).
    Abstract: The FR 2420 is a transaction-based report that currently 
collects daily liability data on federal funds transactions, Eurodollar 
transactions, and certificates of deposit (CD) issuance from (1) 
domestically chartered commercial banks and thrifts that have $26 
billion or more in total assets and (2) U.S. branches and agencies of 
foreign banks with total third-party assets of $900 million or more. FR 
2420 data are used in the analysis of current money market conditions 
and will allow the Federal Reserve Bank of New York (FRBNY) to 
calculate and publish interest rate statistics for selected money 
market instruments.
    Current Actions: On April 7, 2015, the Federal Reserve published a 
notice in the Federal Register (80 FR 18620) requesting public comment 
for 60 days on the extension, with revision, of the FR 2420. The 
comment period for this notice expired on June 8, 2015. The Federal 
Reserve received four comment letters on the proposed revisions of the 
FR 2420; three from trade organizations and one from a U.S. branch of a 
foreign bank. Substantive comments on the data collection are discussed 
in detail below. In addition, several technical comments were received 
and the Federal Reserve will update the final reporting forms and 
instructions for these comments, as appropriate.

Summary of Public Comments

Report Cost-Benefit

    A trade organization asked if the marginal increase in information 
from adding new U.S. bank reporters outweighs the increase in costs and 
burden on these additional institutions affected by the proposal. While 
the Federal Reserve is sensitive to the reporting burden of the 
affected depository institutions, revisions to the data are being made 
to fulfill high-priority policy objectives. First, the expanded and 
enhanced data collection is expected to improve unsecured money market 
monitoring and augment the ability of the Federal Reserve Bank of New 
York, on behalf of the Federal Reserve, to analyze these markets and 
implement monetary policy.
    Second, the data set is expected to provide robust transaction data 
for calculating the effective federal funds rate (EFFR), an improvement 
over the current rate constructed from brokered data. The collection 
also is expected to allow for the calculation of a new overnight bank 
funding rate (OBFR) that uses both federal funds and Eurodollar data. 
Third, data collected under the FR 2420 report also represent an 
important source of information on individual depository institutions' 
borrowing rates, which is expected to allow for more effective 
monitoring of firm-specific liquidity risks for purposes of supervisory 
surveillance.
    Given these critical uses for the data, the Federal Reserve is 
seeking to ensure that the reporting panel captures entities that are 
meaningfully involved in unsecured money markets and that it remains 
robust to changes in borrower composition in these markets. Additional 
U.S. bank reporters are necessary to provide insight into a distinct 
and important segment of the federal funds market. The federal funds 
borrowing in this segment can represent a significant proportion of 
overall activity in certain market environments, and can occur at rates 
that are distinct from funding activity conducted by other 
institutions. However, the Federal Reserve understands the need to 
strike a balance between reporting burden and the collection of 
information required to fulfill its policy objectives. As such, 
adjustments are being made to the asset-size thresholds to reduce 
reporting burden, as discussed below. In addition, exceptions may be 
made for those institutions that meet the asset-size threshold but can 
demonstrate that they have an ongoing business model that results in a 
negligible amount of activity in these markets. The ``Reporting 
Exception'' section below provides more information on how an exception 
may be obtained.

Asset Size and Activity Thresholds

    A trade organization wrote that the asset-size threshold imposes 
costs on institutions that may not have substantial activity and noted 
that, according to Call Report data, institutions with between $15 
billion and $26 billion in assets hold only about five percent of total 
federal funds purchased. This trade organization noted that the 
activity threshold approach is more targeted and should be used for any 
institution to which the Federal Reserve intends to extend reporting 
requirements.
    Asset-size thresholds create a stable panel of reporters, by 
ensuring that banks of meaningful size will be consistently required to 
report activity in a timely manner. This stable panel of banks is 
necessary to effectively analyze trends in unsecured funding markets 
and publish the EFFR and OBFR. The Federal Reserve proposed a lower 
asset-size threshold in order to create a more comprehensive dataset 
that captures an important segment of the federal funds

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market that is not currently covered in the existing criteria. 
Collectively, the federal funds activity of domestic depository 
institutions with assets between $15 billion and $26 billion can be 
notable. Call Report data suggest that the aggregate amount of federal 
funds activity of banks in this asset size varies and has, at times, 
represented more than 10 percent of federal funds activity. In 
addition, in the current market environment, borrowing by these 
institutions often occurs at different rates than seen in the current 
sample and represents an important segment of the market that the 
current FR 2420 report does not capture.
    Activity thresholds, on the other hand, are beneficial for 
providing insight into activity that is outside the scope of the 
regular panel of reporters, and represents an important supplement to 
the asset-size thresholds. However, activity thresholds used alone can 
create gaps in reporting and a more inconsistent panel of banks. These 
thresholds necessarily require a look-back period to measure activity 
and some forward period to prepare for reporting; thus, there is a 
significant lag between the threshold for activity being met and the 
commencement of reporting. The Federal Reserve considered relying more 
heavily on an activity threshold and found that the panel of banks was 
more inconsistent and the data capture was less complete.
    Nonetheless, the Federal Reserve understands the need to find a 
balance between the burden being placed on reporting institutions and 
the achievement of reporting objectives. In light of the burden on 
smaller institutions of FR 2420 reporting, the Federal Reserve will 
retain the asset-size thresholds, but raise the minimum reporting 
threshold for domestically chartered commercial banks and thrifts from 
$15 billion to $18 billion. With this revised criteria, U.S. 
institutions with between $15 billion and $18 billion in assets will 
now only report if they meet the activity threshold. This change in 
threshold will result in a reduction in the number of additional, 
smaller institutions being required to report under the asset-size 
threshold.

Reporting Exception

    A trade organization asked for clarification on how and with what 
frequency institutions with ongoing business models that result in 
negligible activity can apply for exceptions to filing the FR 2420 
report. Institutions can request a review of their reporting 
requirement at any point that they believe the reporting is an 
unreasonable burden. Requests should be made in writing and provide a 
look back of the data for at least two quarters and provide 
justification on why continuing to provide these data causes an undue 
burden.

Implementation Date

    Two trade organizations requested additional time to implement the 
revisions. One organization noted that the proposed timeline would be 
difficult to implement, as the recommended revisions add and redefine 
several elements of the FR 2420 report. This organization stated that 
the current panel of banks would need two quarters after final 
requirements and newly covered institutions would need one year. A 
second organization stated that although the proposal was well-
developed and vetted, it would be difficult to commit systems and 
personnel until the final Federal Register notice. This organization 
asked the Federal Reserve to re-assess the proposed date, with not less 
than 6 months from the final requirements for implementation.
    The revisions to the FR 2420 data are being implemented to meet 
high priority policy objectives. Most of the reporters under the new 
criteria are active reporters under the existing criteria. However, in 
order to provide the lead time for new reporters to prepare for 
reporting and still fulfill these objectives, the initially proposed 
reporting date of September 9, 2015 will be extended to October 20, 
2015 for Part A-Federal Funds, Part AA-Selected Borrowings from Non-
Exempt Entities, and Part B-Eurodollars. The reporting date for Part C-
Time Deposits and Certificates of Deposit will be extended until 
January 15, 2016. This delay will allow reporters to focus on the 
changes applicable to the most time-sensitive parts of the report.

Submission Deadline

    A trade organization noted the 7 a.m. deadline imposes 
administrative costs for covered institutions and these costs are 
magnified, on a relative basis, for smaller institutions, which have 
fewer resources. A second organization stated that banks continue to 
experience challenges in meeting the 7 a.m. deadline for federal funds 
reporting as it conflicts with normal batch processing. This 
organization noted the time will also be a challenge for the expanded 
Eurodollar reporting requirements.
    After considering these comments, the Federal Reserve determined 
that federal funds and Eurodollar data are needed by 7 a.m. each 
business day for the preceding day's reportable transactions to support 
the implementation of monetary policy and daily market monitoring. 
Therefore, the Federal Reserve is retaining the 7 a.m. deadline in the 
final report. The FR 2420 data provide a key insight on the previous 
day's unsecured market activity in the morning when the Federal Reserve 
is monitoring markets for the purposes of implementing monetary policy. 
In addition, in 2016, the data will be used as the source for daily 
calculation of the EFFR and OBFR. The EFFR is published in the morning 
in order to provide the market with a timely view on the previous day's 
activity.

Supervisory Purpose

    A trade organization objected to the broadening of the purpose of 
the reporting form to include a supervisory component. According to 
this organization, the timing and frequency of FR 2420 reporting makes 
it difficult for covered institutions to subject data to proper 
regulatory reporting controls. The trade organization would prefer the 
Federal Reserve to use the supervisory and reporting framework already 
in place to monitor individual firm liquidity conditions. The 
organization requested clarification on the interaction of the FR 2420 
with the FR 2052b, which eliminated the requirement for daily reporting 
from institutions with between $15 to $26 billion in total assets after 
acknowledging through the FR 2052b implementation process that daily 
reporting is burdensome and unnecessary for these institutions. The 
organization also wrote that given significant changes being 
implemented to the FR 2052a, banks do not have enough information to 
comment on whether the FR 2420 report is duplicative or complementary. 
The organization noted that not all institutions that would be required 
to file the FR 2420 are required to file the FR 2052b. Furthermore, 
according to this organization, the FR 2420 collection encompasses 
institutions for whom the Federal Reserve is not the primary regulator, 
and it is unclear by which process the Federal Reserve will coordinate 
with the other banking agencies.
    FR 2420 data are used by the Federal Reserve to carry out both 
monetary policy and supervisory functions. Although daily reporting for 
smaller institutions may not be required for supervisory surveillance 
on the FR 2052b, reporting at a daily frequency is required on the FR 
2420 for analysis of current money market conditions and publication of 
the EFFR and OBFR. Institutions with asset sizes under the

[[Page 42806]]

$26 billion represent an important segment of the federal funds market 
that is not currently captured by the FR 2420 report, and collecting 
their borrowing transactions is necessary for understanding unsecured 
money markets. As noted above, the minimum asset-size threshold for 
reporting by U.S. institutions on the FR 2420 is being raised to $18 
billion in order to balance the need to capture this information with 
the reporting burden on smaller institutions. This higher minimum 
threshold will eliminate the need for daily reporting for many smaller 
institutions. Furthermore, including a supervisory component to the FR 
2420 report is not expected to increase, in itself, the burden on 
institutions required to file an FR 2420 since all report submissions 
are subject to control, audit, and governance protocols.
    Utilization of the FR 2420 report for supervisory purposes will 
complement existing liquidity monitoring reports and allow the Federal 
Reserve to reduce reporting requirements in those reports. 
Specifically, with regard to the interaction between the FR 2420 and FR 
2052, the Federal Reserve has reviewed the current and proposed reports 
and confirms there is no duplicated information or material overlaps 
between these reports. A subset of the FR 2420 pricing data was already 
being collected on the FR 2052a as part of supervisory liquidity 
monitoring. Going forward, information contained on the FR 2420 will 
replace certain information currently gathered on the FR 2052a, as 
these data elements will be dropped from the FR 2052a collection. 
Pricing information on the FR 2052b will not change, as that data is 
not similar to FR 2420 data. However, the amended FR 2420 will offer 
greater insight on the borrowing costs for these firms' liabilities. 
Pricing information, when used in tandem with liquidity data, is an 
area that supervisors review when gauging a firm's overall liquidity 
profile. Rapid changes in pricing can indicate a firm is entering a 
period of constrained market access and subsequent liquidity stress.
    For institutions whose primary regulator is not the Federal Reserve 
and who do not file FR 2052 reports, the FR 2420 data is intended 
primarily for monetary policy purposes. The Federal Reserve does not 
plan to share these data with other agencies.

Clarifications and Other Issues

    One trade organization asked for clarification on several 
definitions, including counterparty types, embedded options on CDS, 
borrowings from GSEs and FHLBs, deposits from non-financial 
corporations, and the office identifier on Part B. Each of these 
definitions will be updated with further clarification in the reporting 
instructions. The organization also asked for a formal process for 
Frequently Asked Questions. The Federal Reserve will have a process to 
document reporting questions and communicate these to reporters. 
Lastly, the organization asked for the Reporting Central application to 
be open for testing as soon as possible. The application will be 
available for testing at least one month before the implementation 
dates.
    One commenter provided additional comments outside the scope of the 
data collection proposal that focused on the calculation of the 
published rates.

    Board of Governors of the Federal Reserve System, July 15, 2015.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2015-17713 Filed 7-17-15; 8:45 am]
 BILLING CODE 6210-01-P