[Federal Register Volume 81, Number 210 (Monday, October 31, 2016)]
[Rules and Regulations]
[Pages 75624-75670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25329]



[[Page 75623]]

Vol. 81

Monday,

No. 210

October 31, 2016

Part III





Department of the Treasury





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31 CFR Part 148





Qualified Financial Contracts Recordkeeping Related to Orderly 
Liquidation Authority; Final Rule

Federal Register / Vol. 81 , No. 210 / Monday, October 31, 2016 / 
Rules and Regulations

[[Page 75624]]


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DEPARTMENT OF THE TREASURY

31 CFR Part 148

RIN 1505-AC46


Qualified Financial Contracts Recordkeeping Related to Orderly 
Liquidation Authority

AGENCY: Department of the Treasury.

ACTION: Final rule.

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SUMMARY: The Secretary of the Treasury (the ``Secretary''), as 
Chairperson of the Financial Stability Oversight Council (the 
``Council''), is adopting final rules (the ``Final Rules'') in 
consultation with the Federal Deposit Insurance Corporation (the 
``FDIC'') to implement the qualified financial contract (``QFC'') 
recordkeeping requirements of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (the ``Dodd-Frank Act'' or the ``Act''). The 
Final Rules require recordkeeping with respect to positions, 
counterparties, legal documentation, and collateral. This information 
is necessary and appropriate to assist the FDIC as receiver to: Fulfill 
its obligations under the Dodd-Frank Act in deciding whether to 
transfer QFCs; assess the consequences of decisions to transfer, 
disaffirm or repudiate, or allow the termination of, QFCs with one or 
more counterparties; determine if any risks to financial stability are 
posed by the transfer, disaffirmance or repudiation, or termination of 
such QFCs; and otherwise exercise its rights under the Act and fulfill 
its obligations under sections 210(c)(8), (9), or (10) of the Act.

DATES: The Final Rules are effective December 30, 2016.

FOR FURTHER INFORMATION CONTACT: Monique Y.S. Rollins, Deputy Assistant 
Secretary for Capital Markets, (202) 622-1745; Jacob Liebschutz, 
Director, Office of Capital Markets, (202) 622-8954; Peter Nickoloff, 
Financial Economist, Office of Capital Markets, (202) 622-1692; Steven 
D. Laughton, Assistant General Counsel (Banking & Finance), (202) 622-
8413; or Stephen T. Milligan, Attorney-Advisor, (202) 622-4051.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Description of the Final Rules
    A. Scope, Purpose, Effective Date, and Compliance Dates
    1. Scope
    2. Purpose
    3. Effective Date and Compliance Dates
    B. General Definitions
    C. Form, Availability, and Maintenance of Records
    1. Form and Availability
    2. Maintenance and Updating
    3. Exemptions
    D. Content of Records
    1. General Information
    2. Appendix Information
III. Administrative Law Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Executive Orders 12866 and 13563
    1. Description of the Need for the Regulatory Action
    2. Literature Review
    3. Baseline
    4. Evaluation of Alternatives
    5. Affected Population
    6. Assessment of Potential Costs and Benefits
    7. Retrospective Analysis
IV. Text of the Final Rules

I. Introduction

    Title II of the Dodd-Frank Act (``Title II'') \1\ generally 
establishes a mechanism for the orderly resolution of a financial 
company whose failure and resolution under otherwise applicable federal 
or state law would have serious adverse effects on financial stability 
in the United States.
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    \1\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010).
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    Section 210(c)(8)(H) of the Act requires the Federal primary 
financial regulatory agencies, as defined in the Act \2\ (the 
``PFRAs''), to jointly prescribe, by July 21, 2012, final or interim 
final regulations that require financial companies to maintain such 
records with respect to QFCs that the PFRAs determine to be necessary 
or appropriate to assist the FDIC as receiver for a covered financial 
company in being able to exercise its rights under the Act and fulfill 
its obligations under sections 210(c)(8), (9), or (10).\3\ Section 
210(c)(8)(H) also requires the regulations to, as appropriate, 
differentiate among financial companies by taking into consideration 
their size, risk, complexity, leverage, frequency and dollar amount of 
QFCs, interconnectedness to the financial system, and any other factors 
deemed appropriate.
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    \2\ 12 U.S.C. 5301(12). See the term ``primary financial 
regulatory agency.''
    \3\ 12 U.S.C. 5390(c)(8)(H).
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    Section 210(c)(8)(H) provides that if the PFRAs do not so prescribe 
such joint regulations by July 21, 2012, the Secretary, as Chairperson 
of the Council, shall prescribe such regulations in consultation with 
the FDIC. As the PFRAs did not prescribe such regulations by the 
statutory deadline, on January 7, 2015, the Secretary, as Chairperson 
of the Council, in consultation with the FDIC, requested public comment 
on proposed rules that would implement section 210(c)(8)(H) (the 
``Proposed Rules'').\4\ The Secretary received comments on the Proposed 
Rules from trade associations, asset managers, insurance companies, 
clearing organizations, a nonprofit organization, and a private 
individual. In general, commenters acknowledged the need for the FDIC 
to have access to appropriate QFC records in order to exercise its role 
as a receiver under Title II of the Dodd-Frank Act but also requested 
relief from aspects of the Proposed Rules that they argued were unduly 
burdensome.\5\ As discussed below, the Secretary has, in consultation 
with the FDIC, made substantial changes in the Final Rules in response 
to the comments received. In making these changes, the Secretary has 
sought to reduce the burden of the rules while still assuring that the 
FDIC will have the records it needs to exercise its rights under the 
Act and fulfill its obligations under sections 210(c)(8), (9), and 
(10).
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    \4\ 80 FR 966 (Jan. 7, 2015).
    \5\ See, e.g., comment letters from The Clearing House 
Association L.L.C., the Securities Industry and Financial Markets 
Association, the American Bankers Association, the Financial 
Services Roundtable, and the Int'l Swaps and Derivatives 
Association, Inc. (April 7, 2015) (the ``TCH et al. letter''), p. 2; 
The Depository Trust & Clearing Corporation (April 7, 2015) (``DTCC 
letter''), pp. 1-2; Sutherland Asbill & Brennan LLP on behalf of The 
Commercial Energy Working Group (April 7, 2015) (``CEWG letter), p. 
2; the Asset Management Group of the Securities Industry and 
Financial Markets Association (April 7, 2015) (``SIFMA AMG 
letter''), p. 1.
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    The substantial constraints imposed by Title II on the FDIC's 
exercise of its rights with respect to QFCs necessitate the detailed, 
standardized recordkeeping requirements adopted in the Final Rules. As 
discussed in greater detail in the Supplementary Information to the 
Proposed Rules,\6\ Title II provides the FDIC as receiver of a covered 
financial company with the authority to (i) transfer the QFCs of the 
covered financial company to another financial institution, including a 
bridge financial company established by the FDIC or (ii) retain the 
QFCs within the receivership, disaffirm or repudiate the QFCs, and pay 
compensatory damages.\7\ The FDIC may also retain the QFCs within the 
receivership and allow the counterparties to terminate the QFCs. In 
deciding whether to transfer, disaffirm or repudiate, or allow 
counterparties to terminate the QFCs of the covered financial company, 
the FDIC must take

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into consideration the requirements of Title II, including those 
discussed below.
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    \6\ A more general summary of the treatment of QFCs under Title 
II and the rights and obligations of the FDIC under the Act was 
provided in section II of the Supplementary Information to the 
Proposed Rules. See 80 FR 966, 968-70.
    \7\ 12 U.S.C. 5390(c)(11).
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    As referenced throughout this Supplementary Information to the 
Final Rules, Title II requires that the FDIC as receiver treat the QFCs 
of a covered financial company with a particular counterparty and that 
counterparty's affiliates consistently. Within certain constraints, the 
FDIC may take different approaches with respect to QFCs with different 
counterparties. However, if the FDIC as receiver desires to transfer 
any QFC with a particular counterparty, it must transfer all QFCs 
between the covered financial company and such counterparty and any 
affiliate of such counterparty to a single financial institution. 
Similarly, if the FDIC desires to disaffirm or repudiate any QFC with a 
particular counterparty, it must disaffirm or repudiate all QFCs 
between the covered financial company and such counterparty and any 
affiliate of such counterparty.\8\
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    \8\ For transfer, see 12 U.S.C. 5390(c)(9)(A); for disaffirmance 
or repudiation, see 12 U.S.C. 5390(c)(11).
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    Furthermore, the FDIC is required to confirm that the aggregate 
amount of liabilities, including QFCs, of the covered financial company 
that are transferred to, or assumed by, the bridge financial company 
from the covered financial company do not exceed the aggregate amount 
of the assets of the covered financial company that are transferred to, 
or purchased by, the bridge financial company from the covered 
financial company.\9\ In addition, in order to repudiate any QFCs of 
the covered financial company, the receiver must first determine that 
the performance of such QFCs would be burdensome and that such 
repudiation will promote the orderly administration of the affairs of 
the covered financial company.\10\ More generally, Title II provides 
that with respect to the disposition of assets of a covered financial 
company, including a repudiation or transfer of QFCs, the FDIC shall, 
to the greatest extent practicable, do so in a way that maximizes value 
and minimizes losses and mitigates the potential for serious adverse 
effects to the financial system.\11\ Finally, the FDIC must make its 
decision as to how to treat the QFCs of the covered financial company 
within a very limited time frame because the stay that prevents 
termination based on the appointment of the receiver lasts only for the 
period between the appointment of the FDIC as receiver and 5 p.m. 
(eastern time) on the business day following the date of the 
appointment.\12\
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    \9\ See 12 U.S.C. 5390(h)(5)(F).
    \10\ See 12 U.S.C. 5390(c)(1).
    \11\ See 12 U.S.C. 5390(a)(9)(E). See also 12 U.S.C. 
5390(a)(1)(B)(iv).
    \12\ See 12 U.S.C. 5390(c)(10)(B)(i).
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    The Secretary has determined that, given these statutory 
constraints, it is necessary and appropriate for the FDIC as receiver 
to have access to detailed, standardized records from the financial 
companies that potentially would be the most likely to be considered 
for orderly liquidation under Title II. Nonetheless, having considered 
the comments received, the Secretary has determined that it is possible 
to reduce the scope of financial companies subject to the rules and the 
extent of recordkeeping required while still requiring the records the 
FDIC would need as receiver in order to exercise its rights under the 
Act and fulfill its obligations under sections 210(c)(8), (9), or (10). 
In particular, the Secretary has made changes in the Final Rules that 
provide for further differentiation among financial companies by:
     Adding to the definition of ``records entity'' new 
thresholds based on the level of a financial company's derivatives 
activity;
     providing an exclusion for insurance companies;
     providing a conditional exemption for clearing 
organizations; and
     providing a de minimis exemption from the recordkeeping 
requirements, other than the requirement to maintain copies of the 
documents that govern QFC transactions, for entities that are party to 
50 or fewer open QFC positions.
    The Final Rules also significantly reduce the burden of the 
required recordkeeping by, among other things:
     Revising the definition of ``records entity'' to identify 
which members of a corporate group are records entities by reference to 
whether they are consolidated under accounting standards;
     replacing the requirement to maintain organizational 
charts of counterparties with a requirement to identify only certain 
information as to each counterparty, such as the ultimate and immediate 
parent entities of the counterparty;
     eliminating the requirement to maintain risk metrics 
information;
     eliminating the requirement to maintain copies of 
additional information with respect to QFCs provided by the records 
entity to other regulators, swap data repositories, and security-based 
swap data repositories;
     eliminating the requirement that copies of QFC agreements 
be searchable;
     eliminating several fields from the required data tables; 
and
     providing for tiered initial compliance dates based on the 
size of the corporate group, with all records entities having 
additional time to comply with the rules.
    The Final Rules also provide for additional fields in the required 
data tables that are not anticipated to impose a significant additional 
burden on records entities, and the proposed requirement that records 
of affiliated records entities be maintained in a form that allows for 
aggregation has been replaced in the Final Rules with the requirement 
that the top-tier parent financial company be capable of aggregating 
such records.

II. Description of the Final Rules

    The following discussion provides a summary of the Proposed Rules, 
the comments received, and the Secretary's responses to those comments, 
including modifications made in the Final Rules. In addition to the 
considerations discussed in this section, the Secretary, in adopting 
these Final Rules, has taken into account the potential costs and 
benefits of the rules discussed in Section III below.

A. Scope, Purpose, Effective Date, and Compliance Dates

    Section 148.1(a) of the Final Rules defines the scope of the rules. 
Section 148.1(b) explains the purpose of the rules. Sections 148.1(c) 
and (d) set forth the rules' effective and compliance dates.
1. Scope
a. Key Definitions
    The scope of the Final Rules is established by certain key 
definitions that determine the entities that would be subject to the 
rules. Specifically, section 148.1(a) of the Final Rules provides that 
the rules apply to any ``financial company'' that is a ``records 
entity'' and, with respect to section 148.3(a), to the ``top-tier 
financial company'' of a ``corporate group,'' as those terms are 
defined in the Final Rules.
    Financial Company: The Final Rules, as did the Proposed Rules, 
incorporate the definition of ``financial company'' set forth in 
section 201(a)(11) of the Dodd-Frank Act.\13\ Entities that are not 
included in the section 201(a)(11) definition of ``financial company'' 
are not included in the definition of ``records entity'' and, 
therefore, are not subject to the rules. Entities that are included in 
the section 201(a)(11) definition of ``financial company'' are subject 
to the rules if they also meet the

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other criteria in the definition of ``records entity.'' In addition, 
the definition of ``covered financial company'' in section 201(a)(8) of 
the Dodd-Frank Act excludes insured depository institutions,\14\ which 
as a result are ineligible for a Title II orderly liquidation. Thus, 
based on the section 201(a)(11) definition of ``financial company'' and 
the section 201(a)(8) definition of ``covered financial company,'' the 
following entities are not required to maintain records under the Final 
Rules:
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    \13\ 12 U.S.C. 5381(a)(11)
    \14\ 12 U.S.C. 5381(a)(8)(B).
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     Financial companies that are not incorporated or organized 
under U.S. federal or state law;
     Farm Credit System institutions;
     Governmental entities, and regulated entities under the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992; 
\15\ and
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    \15\ 12 U.S.C. 4502(20).
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     Insured depository institutions.
    Records Entity: Each records entity is required to maintain records 
with respect to all of its QFCs unless such records entity receives an 
exemption under the rules. The Proposed Rules would have defined 
``records entity'' as a financial company that: Is not an exempt 
entity; is a party to an open QFC, or guarantees, supports, or is 
linked to an open QFC; and meets one of the following requirements: (a) 
Is determined pursuant to section 113 of the Dodd-Frank Act \16\ to be 
an entity that could pose a threat to the financial stability of the 
United States; (b) is designated pursuant to section 804 of the Dodd-
Frank Act \17\ as a financial market utility that is, or is likely to 
become, systemically important; (c) has total assets equal to or 
greater than $50 billion; or (d) is a party to an open QFC or 
guarantees, supports, or is linked to an open QFC of an affiliate and 
is a member of a corporate group within which at least one affiliate 
meets one of the criteria in (a), (b), or (c).
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    \16\ 12 U.S.C. 5323.
    \17\ 12 U.S.C. 5463.
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    As described below, the Secretary has modified the definition of 
``records entity'' in order to further differentiate financial 
companies by reference to certain factors listed in section 
210(c)(8)(H)(iv) and to reduce the costs of complying with the rules. 
This has the effect of substantially narrowing the scope of entities 
subject to the recordkeeping requirements of the Final Rules, as 
discussed more fully below, and thereby reducing the costs imposed by 
the rules. Furthermore, as discussed below, the Secretary has 
eliminated the phrase ``guarantees, supports, or is linked to an open 
QFC'' from the definition of ``records entity'' in the Final Rules.
    Designated nonbank financial companies and financial market 
utilities. The Secretary continues to believe that nonbank financial 
companies subject to a determination by the Council under section 113 
of the Act and financial market utilities designated by the Council 
under section 804 of the Act as, or as likely to become, systemically 
important should be included as records entities. As was noted in the 
Supplementary Information to the Proposed Rules, certain of the factors 
relevant to a designation under both section 113 and section 804 are 
similar to the factors listed in section 210(c)(8)(H)(iv). The Council 
may make a determination under section 113 if it determines that 
material financial distress at the nonbank financial company, or the 
nature, scope, size, scale, concentration, interconnectedness, or mix 
of the activities of the nonbank financial company could pose a threat 
to the financial stability of the United States.\18\ Similarly, in 
making a determination that a financial market utility is or is likely 
to become systemically important, the Council is required to consider 
the effect that the failure of or a disruption to the financial market 
utility would have on critical markets, financial institutions, or the 
broader financial system.\19\ In light of the factors the Council must 
consider in making a determination regarding a nonbank financial 
company under section 113 or a designation of a financial market 
utility under section 804, the Secretary has concluded that these are 
the types of financial companies that potentially would be the most 
likely to be considered for orderly liquidation under Title II \20\ and 
that it is therefore appropriate that they be deemed to be records 
entities. Therefore, the Secretary has retained the inclusion of such 
nonbank financial companies and financial market utilities in the 
definition of ``records entity'' in the Final Rules. However, the 
Secretary has provided a conditional exemption applicable to certain 
financial market utilities as described below.
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    \18\ A determination under section 113 subjects the nonbank 
financial company to supervision by the Board of Governors of the 
Federal Reserve System and to enhanced prudential standards 
established in accordance with Title I of the Act. See 12 U.S.C. 
5365.
    \19\ See 12 U.S.C. 5463(a)(2)(D).
    \20\ In making a determination under section 113, the Council 
may take into consideration each of the factors expressly referenced 
in section 210(c)(8)(H)(iv), including as follows: Leverage of a 
company may be considered under sections 113(a)(2)(A) or 
113(b)(2)(A); complexity may be considered under sections 
113(a)(2)(B) or 113(b)(2)(B); interconnectedness to the financial 
system may be considered under sections 113(a)(2) (C), (G), and (I) 
or 113(b)(2)(C), (G), and (I); size may be considered under sections 
113(a)(2)(B), (D), (E), (G), (I), and (J) or 113(b)(2) (B), (D), 
(E), (G), (I) and (J); frequency and dollar amount of QFCs may be 
considered under sections 113(a)(2)(I) and (J) or 113(b)(2)(I) and 
(J); and risk may be considered throughout sections 113(a)(2) and 
113(b)(2). See also 12 CFR 1310.11 (setting forth the Council's 
considerations in making proposed and final determinations, which 
correspond to the considerations provided in section 113) and 77 FR 
21637 (April 11, 2012) (adopting 12 CFR part 1310 and related 
interpretive guidance). In making a determination under section 804, 
the Council takes into consideration various factors under section 
804(a)(2) and 12 CFR 1320.10 that correspond to the factors 
referenced in section 210(c)(8)(H)(iv). See also 76 FR 44763 (July 
27, 2011) (adopting 12 CFR part 1320).
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    Financial Companies with $50 Billion in Assets; Additional Factors. 
The Proposed Rules would have included as a records entity any 
financial company that is not an exempt entity; is a party to an open 
QFC, or guarantees, supports, or is linked to an open QFC; and has 
total assets equal to or greater than $50 billion. The Secretary 
proposed the $50 billion threshold as a useful means of identifying 
entities that are of a sufficient size that they could potentially be 
considered for orderly liquidation under Title II. In proposing the $50 
billion asset threshold, the Secretary took into consideration the fact 
that it corresponds to the threshold that was established for 
determining which bank holding companies would be subject to enhanced 
supervision and prudential standards under Title I of the Dodd-Frank 
Act \21\ and was also adopted by the Council as an initial threshold 
for identifying nonbank financial companies that merit further 
evaluation as to whether they should be designated under section 113 of 
the Act.\22\
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    \21\ See 12 U.S.C. 5365(a).
    \22\ See Financial Stability Oversight Council Guidance for 
Nonbank Financial Company Determinations, 12 CFR part 1310, app. A., 
III.a.
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    The proposed $50 billion asset threshold received substantial 
attention from commenters. Several commenters stated that reliance on 
this threshold would lead to an overbroad application of the 
recordkeeping requirements and argued for a more tailored approach that 
would focus on those institutions that are more likely to be resolved 
under Title II.\23\ One commenter proposed $250 billion as a more 
appropriate level for an asset threshold.\24\ Several commenters 
recommended that the

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Secretary adopt a multi-factor approach, citing the use of multi-factor 
approaches in other contexts, including the Council's nonbank financial 
holding company determinations process and the methodology used by the 
Board of Governors of the Federal Reserve System (``Federal Reserve'') 
for identifying U.S. global systemically important bank holding 
companies (``G-SIBs'').\25\ One commenter stated that the scope of 
entities subject to the Proposed Rules was too narrow.\26\
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    \23\ See, e.g., TCH et al. letter, p. 7; IIB letter, pp. 5-6; 
ICI letter, pp. 7-9; SIFMA AMG letter, pp. 3-5. The specific 
concerns raised with respect to the application of the $50 billion 
asset threshold to investment companies and investment advisers are 
discussed below.
    \24\ See IIB letter, p. 7.
    \25\ See IIB letter, pp. 3, 11; TCH et al. letter, p. 11; letter 
from Capital One Financial Corporation, Fifth Third Bancorp, The PNC 
Financial Services Group, Inc., Regional Financial Corporation and 
SunTrust Banks, Inc. (April 7, 2015) (the ``Regional Banks 
letter'').
    \26\ See Letter from Better Markets, Inc. (April 7, 2015) 
(``Better Markets letter''), p. 6-10.
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    The Secretary is making two changes to the definition of ``records 
entity'' in the Final Rules that will, by incorporating additional 
factors, substantially reduce the number of entities that will be 
subject to recordkeeping requirements. These measures relate to several 
of the factors specifically enumerated in section 210(c)(8)(H) of the 
Act and allow the Secretary to better limit the financial companies 
included within the scope of records entities to those companies that 
potentially would be the most likely to be considered for orderly 
liquidation under Title II.
    First, the Final Rules specifically include in the definition of 
``records entity'' those entities that are identified as G-SIBs.\27\ 
Since the Proposed Rules were issued, the Federal Reserve has adopted 
rules specifying the criteria by which U.S. bank holding companies are 
identified as G-SIBs.\28\ G-SIBs are required to hold additional 
capital to increase their resiliency in light of the greater threat 
they pose to the financial stability of the United States.\29\ An 
entity is identified as a G-SIB pursuant to the Federal Reserve's rules 
based on its level of twelve systemic indicators as compared to the 
aggregate indicator amounts across other large, global banking 
organizations. These twelve systemic indicators correspond to five 
categories--size, interconnectedness, cross-jurisdictional activity, 
substitutability, and complexity--that correlate with systemic 
importance and overlap with the factors specifically enumerated in 
section 210(c)(8)(H) of the Act, listed above.\30\ Because the G-SIBs 
have been deemed to be the top-tier U.S. bank holding companies with 
the greatest systemic importance, the Secretary has determined that it 
is appropriate that they be included within the definition of ``records 
entity'' under the Final Rules. By incorporating the Federal Reserve's 
multi-factor framework into the definition of ``records entity,'' the 
Secretary has responded to comments to reflect the use of additional 
factors in the definition of ``records entity.''
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    \27\ Sec.  148.2(n)(1)(iii)(C).
    \28\ See 12 CFR part 217, subpart H.
    \29\ See 12 CFR part 217, subpart H; Federal Reserve, Regulatory 
Capital Rules: Implementation of Risk-Based Capital Surcharges for 
Global Systemically Important Bank Holding Companies, 80 FR 49082, 
83 (Aug. 14, 2015).
    \30\ See 12 CFR 217.404. See also 80 FR at 49095-97.
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    However, the Secretary believes that to include only the G-SIBs 
identified by the Federal Reserve, along with designated financial 
market utilities and nonbank financial companies subject to a Council 
determination, within the definition of ``records entity'' would unduly 
limit the entities that would be subject to the recordkeeping rules. 
The G-SIBs identified under the Federal Reserve's rules by definition 
only include U.S. top-tier bank holding companies, whereas other types 
of financial companies potentially would also be among the most likely 
financial companies to be considered for orderly liquidation under 
Title II. Therefore, in addition to adding the G-SIBs to the definition 
of ``records entity,'' the Secretary has chosen to maintain the $50 
billion threshold but supplement it with an additional factor tied to a 
financial company's level of derivatives activity. Specifically, 
section 148.2(n)(iii)(D) of the Final Rules provides that in addition 
to having total consolidated assets equal to or greater than $50 
billion, an entity must on a consolidated basis have either (i) total 
gross notional derivatives outstanding equal to or greater than $250 
billion or (ii) derivative liabilities equal to or greater than $3.5 
billion in order to be deemed a records entity under that prong of the 
definition. As explained below, this approach incorporates the most 
relevant factors into the definition of ``records entity'' by reference 
to metrics that are already generally calculated by financial 
companies.
    Gross notional derivatives outstanding relates directly to three of 
the factors enumerated in section 210(c)(8)(H)(iv)--complexity, 
interconnectedness, and the dollar amount of QFCs. Gross notional 
derivatives outstanding is used in the Federal Reserve's methodology 
for identifying G-SIBs as an indicator of complexity.\31\ Gross 
derivatives exposure is also one metric the Council has taken into 
consideration when assessing the interconnectedness of a nonbank 
financial company under review for a potential determination under 
section 113.\32\ In addition, because derivatives reflected in the 
total gross notional derivatives outstanding metric are all QFCs as 
defined in Title II, this metric relates directly to the importance of 
an institution's maintaining QFC records. Derivatives are among the 
most complex QFCs, and thus the inclusion in the definition of 
``records entity'' of measures of derivatives activity relates directly 
to the objective of the rules, which is to allow the FDIC to make 
informed judgments about complex portfolios of QFCs in a timely manner.
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    \31\ Id.
    \32\ See 12 CFR part 1310, appx. A.II.d.2.
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    Unlike some other potential measures of complexity and 
interconnectedness and unlike the measures of the volume of QFCs 
generally, gross notional derivatives outstanding is a measure that the 
Secretary understands is generally already calculated, and in most 
cases reported or disclosed, by financial companies with assets of $50 
billion or more. Bank holding companies with assets of $50 billion or 
more are required to report to the Federal Reserve the amount of gross 
notional derivatives outstanding quarterly on Schedule H-CL of Form Y-
9C and annually on Schedule D of Form Y-15. Financial companies often 
satisfy the requirement to disclose in their financial statements the 
volume of their derivatives activity by disclosing the amount of gross 
notional derivatives outstanding; \33\ disclosure of gross notional 
derivatives outstanding is also frequently provided by large financial 
companies filing annual and quarterly reports under sections 13 and 
15(d) of the Securities Exchange Act of 1934 (``Exchange Act'') to 
satisfy the requirement of the Securities and Exchange Commission 
(``SEC'') to provide quantitative disclosures about the market risk of 
their derivatives portfolio.\34\ In addition, registered investment 
companies typically disclose notional amounts with respect to certain 
derivatives. The Final Rules define ``total gross notional derivatives 
outstanding'' as the gross notional value of all derivative instruments 
that are outstanding as of the end of the most recent fiscal year as 
recognized and measured in accordance with U.S. generally accepted 
accounting

[[Page 75628]]

principles (``GAAP'') or other applicable accounting standards.
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    \33\ See FASB Accounting Standards Codification Topic 815, 
Derivatives and Hedging ] 10-50-1A.
    \34\ See Item 305 of Regulation S-K, 17 CFR 229.305.
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    Referring to gross notional derivatives outstanding alone, however, 
would not be sufficient to identify financial companies with large 
exposures to derivatives. The Final Rules include the amount of a 
financial company's derivative liabilities as an alternative measure by 
which a financial company may be deemed a records entity. The Final 
Rules define ``derivative liabilities'' as the fair value of derivative 
instruments in a negative position that are outstanding as of the end 
of the most recent fiscal year as recognized and measured in accordance 
with GAAP or other applicable accounting standards, taking into account 
the effects of master netting agreements and cash collateral held with 
the same counterparty on a net basis to the extent reflected on the 
financial company's financial statements. This metric, like total gross 
notional derivatives outstanding, serves as a proxy for 
interconnectedness, as a company that has a greater level of derivative 
liabilities would have higher counterparty exposure throughout the 
financial system. For this reason, derivative liabilities is one of the 
metrics used by the Council for identifying nonbank financial companies 
that may merit further evaluation for a potential determination under 
section 113.\35\ Bank holding companies with assets of $50 billion or 
more are required to report quarterly to the Federal Reserve the net 
negative fair value of their derivatives contracts classified as 
trading liabilities on Schedule HC-D of Form Y-9C. Moreover, large 
financial companies filing annual and quarterly reports under the 
Exchange Act generally disclose the amount of their derivative 
liabilities in the footnotes to their financial statements in 
accordance with GAAP.
---------------------------------------------------------------------------

    \35\ See 12 CFR part 1310, appx. A.III.a.
---------------------------------------------------------------------------

    The inclusion of both the total gross notional amount of 
derivatives outstanding and derivative liabilities thresholds in the 
definition of ``records entity'' will better capture entities that are 
using substantial amounts of derivatives. The amount of total gross 
notional derivatives outstanding is an amount that may not, by itself, 
be fully representative of the interconnection and complexity of an 
entity and its QFC activities. For example, the notional amount of 
interest rate derivatives tends to be significantly larger than the 
notional amount of credit derivatives representing comparable levels of 
fair value risk, yet both types of derivatives are indicative of the 
interconnection and complexity of an entity. In turn, reference to 
derivative liabilities alone could obscure entities' level of 
derivatives activity to the extent a financial company's financial 
statements take into account the effects of netting agreements and cash 
collateral held with the same counterparty on a net basis. Although 
such netting may reduce the risk to the entity from engaging in such 
derivatives, even a derivatives portfolio with a low negative fair 
value after accounting for the effects of master netting agreements and 
cash collateral held with the same counterparty is indicative of 
interconnection and complexity if it is sufficiently large on a gross 
notional basis.
    By including reference to total assets, notional amount of 
derivatives, and derivative liabilities, the Secretary has 
incorporated, as explained above, consideration of size, complexity, 
interconnectedness to the financial system, and the dollar amount of 
QFCs into the definition of ``records entity.'' Size, complexity, and 
interconnectedness to the financial system are, in turn, all indicators 
of risk, particularly risk to financial stability.\36\ The Secretary, 
in adopting the definition of ``records entity,'' also considered the 
other factors listed in section 210(c)(8)(H), i.e., frequency of QFCs 
and leverage. To the extent that the inclusion of frequency of QFCs 
among these factors is intended to serve as a proxy for the extent to 
which QFCs are utilized by a financial company, the Secretary believes 
that the inclusion of the total gross notional amount of derivatives 
outstanding and derivative liabilities achieves the same purpose. In 
addition, the Secretary has considered the frequency of QFCs in 
providing in the Final Rules for the de minimis exemption pursuant to 
which a records entity of any size that is a party to 50 or fewer open 
QFC positions is not required to maintain the records required under 
the rules other than to maintain copies of the documents governing its 
QFC transactions. The Secretary has decided not to reference leverage 
in the definition of ``records entity,'' because the appropriate 
methodology for calculating leverage may vary depending on the type of 
financial company, which would make incorporation of a specific measure 
of leverage difficult, particularly given the wide variety of entities 
that fall within the definition of ``financial company.''
---------------------------------------------------------------------------

    \36\ See, e.g., 80 FR at 49095-49097.
---------------------------------------------------------------------------

    The Final Rules provide for thresholds of $250 billion of total 
gross notional derivatives outstanding and $3.5 billion of total 
derivative liabilities. As noted above, bank holding companies with $50 
billion or more in total consolidated assets report both total gross 
notional derivatives outstanding and derivative liabilities in 
regulatory filings. As of December 31, 2015, all of the G-SIBs were 
above the thresholds for total gross notional amount of derivatives 
outstanding and derivative liabilities and in most cases were 
significantly above the thresholds.\37\ Conversely, most other bank 
holding companies were well below both of these thresholds. In 
addition, calibrating the derivatives thresholds as provided for in the 
Final Rules includes within their scope large, complex, and 
interconnected U.S. subsidiaries of foreign bank organizations that 
have been identified as global systemically important banks in their 
home countries.
---------------------------------------------------------------------------

    \37\ Although each of the eight bank holding companies that 
currently are identified as G-SIBs pursuant to 12 CFR part 217 would 
also qualify as records entities pursuant to Sec.  148.2(n)(iii)(D) 
of the Final Rules because they each have total consolidated assets 
in excess of $50 billion and total gross notional derivatives 
outstanding equal to or greater than $250 billion or derivative 
liabilities equal to or greater than $3.5 billion, it is possible 
that in the future, an entity could be deemed a G-SIB without being 
a records entity under Sec.  148.2(n)(iii)(D) of the Final Rules if 
it does not maintain a large portfolio of derivatives but does have 
comparatively high levels of the other systemic indicators set forth 
in the G-SIB rules. The Secretary has determined that the G-SIBs, 
having been identified as the bank holding companies with the 
greatest systemic importance, should be subject to the recordkeeping 
requirements of the Final Rules regardless of whether they meet the 
other thresholds provided for in the definition of ``records 
entity.''
---------------------------------------------------------------------------

    Another reason for setting the thresholds at these levels is to 
provide for some degree of stability in the set of financial companies 
that are deemed to be records entities. In looking back across the 
previous eight quarters, the bank holding companies with derivative 
liabilities currently at or above the $3.5 billion threshold were at or 
above the threshold in nearly every quarter, while those with total 
derivative liabilities currently below the threshold were below the 
threshold in each quarter. Similarly, for total gross notional 
derivatives outstanding, bank holding companies at or above the $250 
billion threshold were at or above the threshold in nearly every 
quarter over the last eight quarters, while those with total gross 
notional derivatives outstanding currently below the threshold were 
below the threshold in nearly every quarter over the last eight 
quarters.
    Similar trends are evidenced among other public financial companies 
reporting derivative liabilities and total gross notional derivatives 
outstanding

[[Page 75629]]

in their financial statements filed with the SEC. Among the nonbank 
financial companies with greater than $50 billion in total consolidated 
assets that publicly disclose their derivative liabilities or total 
gross notional derivatives outstanding, as of December 31, 2015, 
several reported amounts significantly above one or both thresholds 
while the majority were well below both thresholds. In looking back 
across the previous eight quarters, those with total derivative 
liabilities currently at or above the $3.5 billion threshold were above 
the threshold in every quarter, while those with total derivative 
liabilities currently below the threshold were below the threshold in 
nearly every quarter. Similarly, for total gross notional derivatives 
outstanding, those at or above the $250 billion threshold were above 
the threshold in nearly every quarter over the last eight quarters, 
while those below were below in every quarter over the last eight 
quarters.
    Members of Corporate Groups. The Proposed Rules included within the 
definition of ``records entity'' those financial companies that (i) are 
members of a corporate group in which at least one financial company is 
a nonbank financial company subject to a Council determination or 
financial market utility designated by the Council, is a U.S. G-SIB, or 
meets the $50 billion asset threshold, (ii) are a party to or support a 
QFC, and (iii) are not excluded entities. The Proposed Rules defined 
``corporate group'' of an entity to include all affiliates of that 
entity and ``affiliate'' to include any entity that controls, is 
controlled by, or is under common control with another entity.
    Several commenters stated that the use of the definition of 
``affiliate,'' discussed further below, had the effect of including too 
broad a scope of affiliates within the definition of ``records 
entity.'' \38\ Several commenters argued that only the affiliates that 
reasonably might be subject to resolution under the orderly liquidation 
authority of Title II should be included as records entities.\39\ Other 
commenters proposed that only those affiliates that meet threshold 
minimum asset, QFC activity, and complexity criteria should be 
considered records entities.\40\ One commenter proposed including as 
records entities only entities that are identified as being significant 
to a critical operation or core business line, which, in the case of 
bank holding companies, would be the ``material entities'' identified 
in the resolution plans they are required to prepare.\41\ Another 
commenter proposed that the definition of ``records entity'' only 
include entities that are consolidated for financial reporting purposes 
either on the Federal Reserve's Form FR Y-9C (regarding the financial 
condition of bank holding companies, savings and loan holding 
companies, and securities holding companies) or under any other 
generally applicable reporting rules or regulations applicable to the 
records entity.\42\
---------------------------------------------------------------------------

    \38\ See TCH et al. letter, pp. 8-10; ACLI letter, p. 11-13; ICI 
Letter, pp. 9-10; TIAA-CREF letter, pp. 5-6.
    \39\ See TCH et al. letter, p. 2-3, 8-10, and 13-15; ACLI 
letter, p. 12; CEWG letter, p. 2.
    \40\ See ACLI letter, p. 11; TIAA-CREF letter, p. 7.
    \41\ See TCH et al. letter, p. 15. See also Dodd-Frank Act Sec.  
165(d) (12 U.S.C. 5365); 12 CFR parts 243, 381.
    \42\ See Letter from The Clearing House Association L.L.C. and 
the Asset Management Group of the Securities Industry and Financial 
Markets Association (Nov. 13, 2015) (``TCH/SIFMA letter'').
---------------------------------------------------------------------------

    As discussed further below, the Secretary has adopted the 
suggestion of commenters, noted above, to revise the definition of 
``records entity'' to identify which members of a corporate group are 
records entities by reference to whether they are consolidated under 
accounting standards. This change should have the effect of reducing 
the number of records entities. The Final Rules do not otherwise revise 
the scope of members of a corporate group that are included as records 
entities because the Secretary has decided that it is not possible to 
describe, ex ante, the precise characteristics of a financial company 
that could be placed into receivership under Title II. In particular, 
an entity could be resolved under Title II without the Secretary making 
the determination required under section 203(b) with respect to a 
covered financial company. Title II provides that the FDIC may appoint 
itself as receiver of an entity if it is a ``covered subsidiary'' of a 
covered financial company of which the FDIC has been appointed as 
receiver and it is jointly determined by the FDIC and the Secretary 
that (i) the covered subsidiary is in default or in danger of default, 
(ii) the FDIC's appointment as receiver would avoid or mitigate serious 
adverse effects on the financial stability or economic conditions of 
the United States, and (iii) the FDIC's appointment as receiver would 
facilitate the orderly liquidation of the covered financial 
company.\43\ If the FDIC appoints itself receiver of a covered 
subsidiary, that subsidiary is treated as a covered financial company 
for purposes of Title II, and the FDIC as receiver would have the same 
rights under the Act and the same obligations under sections 210(c)(8), 
(9), or (10) of the Act as it does for other covered financial 
companies.\44\
---------------------------------------------------------------------------

    \43\ See 12 U.S.C. 5390(a)(1)(E)(i). ``Covered subsidiary'' is 
defined as any subsidiary of a covered financial company, other than 
an insured depository institution, an insurance company, or a 
covered broker or dealer. See 12 U.S.C. 5381(a)(9).
    \44\ See 12 U.S.C. 5390(a)(1)(E)(ii).
---------------------------------------------------------------------------

    Moreover, information about QFCs of each of the members of the 
corporate group could be of assistance to the FDIC as receiver in 
deciding whether to transfer the QFCs to a bridge financial company by 
giving the FDIC a full understanding of the impact of any transfer of 
the QFCs on the records entity's corporate group. For example, in the 
case of certain QFCs that the FDIC might otherwise determine to retain 
in the receivership rather than transfer to a bridge financial company 
(to which the equity in all of the records entity's subsidiaries have 
been transferred), if, by reference to a subsidiary's QFC records, the 
FDIC determines that the QFCs are offset by QFCs of the subsidiary with 
another counterparty, the FDIC as receiver may decide to transfer the 
records entity's QFCs to the bridge financial company in order to 
maintain a matched book at the corporate group level with the QFCs of 
the subsidiary.
    The Secretary has, instead of excluding certain types or sizes of 
members of a corporate group from the definition of ``records entity,'' 
differentiated among financial companies by providing the de minimis 
exemption discussed below for records entities that are a party to 50 
or fewer QFCs. As discussed below, the FDIC has advised the Secretary 
that it would be able to review the terms of that number of QFCs on a 
manual basis within the time frame provided by Title II. The de minimis 
exemption included in the Final Rules will, unlike commenters' proposed 
exclusions based on the materiality of the records entity, avoid a 
situation in which the FDIC as receiver will not have the records it 
may need for a particular records entity.
    Requested additional limitations on definition of ``records 
entity.'' Referring to the FDIC's rules at 12 CFR part 371 (``Part 
371''), which require recordkeeping by insured depository institutions 
that are ``in a troubled condition,'' commenters suggested that the 
recordkeeping requirements should apply only to financial companies 
``in a troubled condition'' \45\ or that meet an analogous 
threshold.\46\ Unlike the

[[Page 75630]]

Federal Deposit Insurance Act (the ``FDIA''), which restricts the 
authority of the FDIC to require QFC recordkeeping by insured 
depository institutions to those that are ``in a troubled condition,'' 
\47\ Title II contains no such limitation, and the Secretary believes 
that adding such a limitation to the Final Rules would not be 
appropriate. There is no statutory or other established definition of 
``in a troubled condition'' or of an analogous concept for a financial 
company as there is for an insured depository institution. Although one 
commenter proposed adoption of a condition based on the amount of risk-
based capital at an insurance company,\48\ such a condition would have 
to be appropriately calibrated for each type of financial company 
subject to the rules. More important, the amount of time that records 
entities are anticipated to need in order to come into compliance with 
the rules is such that to allow companies to wait until such a 
condition is met would not provide sufficient time to ensure that the 
relevant records would be available to the FDIC if needed. Several 
commenters requested two years to establish the recordkeeping systems 
required by the Proposed Rules,\49\ and, as discussed below, the 
Secretary has provided for two or more years for all but the largest 
corporate groups to comply with the rules.
---------------------------------------------------------------------------

    \45\ See letter from The Capital Group Companies, Inc. (April 7, 
2015) (the ``Capital Group letter''), p. 3, ICI letter, p. 9.
    \46\ See ACLI letter, p. 17.
    \47\ See section 11(e)(8)(H) of the FDIA (12 U.S.C. 
1821(e)(8)(H)).
    \48\ See ACLI letter, p. 17.
    \49\ See AMG letter, p. 13; Regional Banks letter, p. 4.
---------------------------------------------------------------------------

    Excluded Entity: The Proposed Rules provided that the following 
entities would be exempt from the definition of ``records entity'' and, 
therefore, the scope of the rules:
    (1) An insured depository institution as defined in 12 U.S.C. 
1813(c)(2);
    (2) A subsidiary of an insured depository institution that is not a 
functionally regulated subsidiary as defined in 12 U.S.C. 1844(c)(5), a 
security-based swap dealer as defined in 15 U.S.C. 78c(a)(71), or a 
major security-based swap participant as defined in 15 U.S.C. 
78c(a)(67); or
    (3) A financial company that is not a party to a QFC and controls 
only exempt entities as defined in clause (1) of this definition.
    The Final Rules use the term ``excluded entity'' rather than 
``exempt entity,'' as used in the Proposed Rules, in order to avoid 
confusion with the Secretary's authority to grant exemptive relief from 
the requirements of the Final Rules. Several commenters requested the 
addition of other types of entities to the list of excluded entities, 
as discussed below.
    Insurance companies. Several commenters recommended that the 
Proposed Rules be revised to exclude insurance companies from the 
definition of ``records entity.'' These commenters pointed to section 
203(e) of the Dodd-Frank Act, which requires that the liquidation or 
rehabilitation of an insurance company, as defined in Title II, would 
be conducted as provided under applicable state law, rather than under 
the orderly liquidation authority otherwise provided for under Title 
II.\50\ Citing this provision, these commenters argued that subjecting 
insurance companies to the rules' recordkeeping requirements would not 
be sufficiently justified.\51\
---------------------------------------------------------------------------

    \50\ 12 U.S.C. 5383(e).
    \51\ See ACLI letter, pp. 4-6; letter from New York Life 
Insurance Company, The Northwestern Mutual Life Insurance Company, 
Massachusetts Mutual Life Insurance Company, and The Guardian Life 
Insurance Company of America (April 7, 2015) (the ``Mutual Insurance 
Companies letter''), pp. 3-4; TIAA-CREF letter, p. 4.
---------------------------------------------------------------------------

    Having considered these comments and the requirements of section 
203(e) of the Act, the Secretary is excluding insurance companies from 
the definition of ``records entity'' in the Final Rules. Given that the 
liquidation or rehabilitation of an insurance company under Title II 
would be conducted under state law, to subject insurance companies to 
the requirements of the rules would not assist the FDIC as receiver in 
exercising its rights under the Act or fulfilling its obligations under 
sections 210(c)(8), (9), or (10). As discussed below, a definition of 
``insurance company'' has been added in the Final Rules to ensure 
consistency with the application of section 203(e) of the Act.
    Commenters also requested that certain non-insurance affiliates of 
insurance companies be excluded from the scope of the rules, 
specifically, that non-insurance affiliates within a holding company 
structure that is predominantly engaged in insurance activities be 
excluded from the rules.\52\ Section 203(e) of the Act, however, 
excludes non-insurance company subsidiaries and affiliates from the 
requirement, referenced above, that the liquidation or rehabilitation 
of insurance companies be conducted under state law. Such non-insurance 
company subsidiaries and affiliates could themselves be determined to 
be a covered financial company or covered subsidiary. As these entities 
would be subject to the orderly liquidation authority of Title II, the 
records that would be required to be generated by these entities under 
the rules would assist the FDIC in being able to exercise its rights 
under the Act and fulfill its obligations under sections 210(c)(8), 
(9), or (10) of the Act. The Secretary is therefore not excluding such 
insurance company affiliates from the definition of ``records entity'' 
under the Final Rules. However, the changes to the definition of 
``records entity'' discussed above will reduce the number of corporate 
groups, including those predominantly engaged in insurance activities, 
that are subject to the rules, and the de minimis exemption discussed 
below will substantially eliminate recordkeeping requirements for those 
records entities with minimal QFC activity. A commenter proposed that 
QFCs that are entered into for the benefit of or on behalf of 
affiliated insurance companies be excluded from the rules.\53\ However, 
it is unclear how such QFCs would be distinguished from other QFCs of 
non-insurance company affiliates, and the FDIC has advised that it 
would not necessarily treat such QFCs any differently than the way it 
would treat other QFCs of non-insurance company affiliates.
---------------------------------------------------------------------------

    \52\ See ACLI letter, p. 3; Mutual Insurance Companies letter, 
p. 5.
    \53\ See ACLI letter, p. 10.
---------------------------------------------------------------------------

    Investment companies and investment advisers. A number of 
commenters argued that investment companies and investment advisers 
should not be included as records entities subject to the rules' 
recordkeeping requirements.\54\ Commenters outlined the manner in which 
investment advisers and funds are typically resolved outside the scope 
of Title II \55\ and argued that it would be very unlikely for an 
investment adviser or the funds it manages either to be resolved under 
Title II or be important to the FDIC's consideration of a resolution 
under Title II of a financial company of which the adviser is an 
affiliate.\56\ Commenters argued that regulatory constraints applied to 
registered investment companies, particularly leverage requirements and 
structural features, such as the ability to limit redemptions, mitigate 
the potential use of the orderly liquidation authority of Title II.\57\ 
Additionally, they contended that because each investment adviser and 
investment company is highly substitutable, their assets under

[[Page 75631]]

management could be liquidated or transferred to other managers without 
threatening financial stability.\58\
---------------------------------------------------------------------------

    \54\ See SIFMA AMG letter, pp. 3-4; ICI letter, pp. 7-12
    \55\ See SIFMA AMG letter, p. 7; ICI letter, pp. 4-5.
    \56\ See SIFMA AMG letter, p. 4; ICI letter, pp. 3-4
    \57\ See TIAA-CREF letter, p. 5; ICI letter, p. 4.
    \58\ See SIFMA AMG letter, p. 6.
---------------------------------------------------------------------------

    The definition of ``records entity'' in the Final Rules would 
include only extremely large and interconnected asset management firms, 
and, for the reasons discussed above, investment advisers that are 
members of a corporate group that is subject to the rules. Although 
commenters cited examples of mergers and closures of funds and advisers 
that were conducted in an orderly fashion as demonstrating the 
unlikelihood of the need to resolve such entities under Title II, these 
examples did not address the potential effects of the rapid failure of 
a fund or of an asset management firm or other corporate group of the 
size and complexity that would be subject to the Final Rules.
    The Secretary has made certain other changes in the Final Rules 
that will further reduce their impact on asset management firms. In 
response to the proposal of a commenter that noted that an investment 
adviser may be party to a QFC of one of its funds or clients for the 
limited purpose of providing a representation,\59\ the Secretary 
confirms that an entity will not be considered to be a party to a QFC 
for purposes of the rules if it is only a party to such QFC for the 
limited purpose of providing a representation. In addition, the 
Secretary notes that individual investment funds, including mutual 
funds, would not be deemed to be affiliates of an investment adviser or 
other funds managed by that investment adviser solely by virtue of the 
investment adviser serving in such capacity with respect to the funds. 
Further, the Secretary confirms that, as stated in the Supplementary 
Information to the Proposed Rules,\60\ each series of a series company 
(as defined in Rule 18f-2 under the Investment Company Act) \61\ will 
be deemed to be a separate financial company, which means that an 
individual series would itself have to meet the asset and derivatives 
thresholds in order to be subject to the rules as a ``records entity'' 
and that such an individual series would be able to avail itself of the 
de minimis exemption if it alone was a party to 50 or fewer QFCs.
---------------------------------------------------------------------------

    \59\ Id., p. 10.
    \60\ See 80 FR 966, 975, n. 66.
    \61\ 17 CFR 270.18f-2.
---------------------------------------------------------------------------

    Clearing Organizations. The Proposed Rules' inclusion of designated 
financial market utilities within the definition of ``records entity'' 
would have subjected certain clearing organizations to the 
recordkeeping requirements of the rules. Three commenters recommended 
either excluding or exempting clearing organizations from the scope of 
the Final Rules.\62\ Commenters stated that the requirements of the 
Proposed Rules were not appropriate for clearing organizations because 
they were designed to collect information relevant to bilateral trades 
and that such information is generally irrelevant to, and not collected 
by, clearing organizations.\63\ Commenters stated that there is no need 
to require maintenance of copies of legal agreements as contemplated by 
the Proposed Rules, as a clearing organization's legal relationships 
with its clearing members are governed by its rulebook and not by 
individual contracts with its clearing members.\64\ More generally, 
commenters stated that the recordkeeping requirements under the 
Proposed Rules were not tailored in a manner that would best facilitate 
resolution of a clearing organization.\65\
---------------------------------------------------------------------------

    \62\ See DTCC letter, p. 11, letter from the Options Clearing 
Corporation (April 7, 2015) (``OCC letter''), pp. 6-8; letter from 
the Clearing Division of CME Mercantile Exchange Inc. (April 7, 
2015) (``CME letter''), pp. 5-6.
    \63\ See Letter from the Futures Industry Association (April 10, 
2015), p. 2; DTCC letter, p. 9; OCC letter, p. 8.
    \64\ See DTCC letter, p. 9; OCC letter pp. 11-12. See also CME 
letter, pp. 6-7.
    \65\ See DTCC letter, p. 7; CME letter, p. 6; OCC letter, pp. 8-
13.
---------------------------------------------------------------------------

    Commenters stated that the FDIC should coordinate with the clearing 
organizations' primary regulators (the Commodity Futures Trading 
Commission (``CFTC'') or SEC, as applicable) and utilize to the maximum 
extent practicable the existing reporting regulations, mechanisms, and 
formats already applicable to clearing organizations.\66\ Commenters 
submitted that the records required to be provided under existing 
regulations should be sufficient to allow the FDIC as receiver to 
decide whether to transfer, disaffirm or repudiate, or allow the 
termination of a clearing organization's QFCs.\67\ For example, one 
commenter indicated that a clearing organization can be expected to 
maintain trade records; aggregated trade data by clearing member; 
records of the amount of margin posted by or through clearing members; 
detail on the amount, type, and location of collateral; records of 
variation margin payments; and the terms of each QFC cleared by the 
derivatives clearing organization as provided in its rulebook.\68\
---------------------------------------------------------------------------

    \66\ See DTCC letter, p. 7; OCC letter, pp. 7-8; CME letter, p. 
5.
    \67\ See OCC letter, p. 7.
    \68\ See CME letter, p. 7.
---------------------------------------------------------------------------

    The Secretary acknowledges that all derivatives clearing 
organizations are required by the CFTC to maintain extensive 
records.\69\ In addition, systemically important derivatives clearing 
organizations are required by CFTC rules to have procedures for 
providing the CFTC and FDIC with ``information needed for purposes of 
resolution planning.'' \70\ Likewise, clearing agencies registered with 
the SEC are required to maintain extensive records,\71\ and 
systemically important or covered clearing agencies for which the SEC 
is the supervisory agency under the Dodd-Frank Act are required to 
adopt recovery and wind-down plans.\72\
---------------------------------------------------------------------------

    \69\ See 17 CFR 39.14(e), 39.20.
    \70\ See 17 CFR 39.39(c)(2).
    \71\ See 17 CFR 240.17a-1.
    \72\ See 17 CFR 240.17Ad-22 (e)(3)(ii).
---------------------------------------------------------------------------

    In addition, as commenters noted, the unique nature of derivatives 
clearing organizations make it possible that their existing 
recordkeeping practices would be sufficient to meet the needs of the 
FDIC. The unique characteristics include the following: (i) A clearing 
organization's only counterparties are its clearing members; (ii) it 
enters into, or clears, a prescribed set of QFCs; (iii) it maintains a 
consolidated recordkeeping system to calculate aggregate exposures and 
margin requirements of its clearing members; and (iv) all transactions 
are governed by the rulebook of the clearing organization rather than 
individual legal agreements. The data requirements of the tables 
included in the Proposed Rules and the Final Rules were created with 
the expectation that the FDIC as receiver might need to make decisions 
as to whether to transfer, disaffirm or repudiate, or allow the 
termination of QFCs with a specific counterparty and its affiliates. In 
the case of a clearing organization, in contrast, a significant focus 
of the FDIC would be maintaining the clearing organization's matched 
book of QFCs. In these cases, the most relevant data would be the type 
of data that would be of value to a transferee in managing the 
transferred QFC portfolio, and this is the type of data that clearing 
organizations are required by their primary regulators to maintain and 
report.
    Having considered the foregoing, the Secretary has determined, 
after consulting with the FDIC, that the FDIC would be able to exercise 
its rights under the Act and fulfill its obligations under sections 
210(c)(8), (9), or (10) of the Act if it has access to the records 
currently required to be maintained by clearing organizations. 
Accordingly, the Final Rules provide that a clearing

[[Page 75632]]

organization is exempt from complying with the recordkeeping 
requirements of the Final Rules other than the requirement to designate 
a point of contact if it is (i) in compliance with the recordkeeping 
requirements of the CFTC and the SEC, as applicable, including its 
maintenance of records pertaining to all QFCs cleared by the clearing 
organization and (ii) capable of and not restricted from, whether by 
law, regulation, or agreement, such as the clearing organization's 
rulebook, transmitting electronically directly to the FDIC the records 
maintained under such recordkeeping requirements within 24 hours of 
request of the SEC or CFTC, as applicable, as PFRA for the clearing 
organization. The Secretary has determined that this approach should 
eliminate the burden of duplicative and unnecessary data collection for 
such entities.
    Guaranteed, Supported, or Linked: The Proposed Rules provided 
definitions for ``guaranteed or supported'' and ``linked.'' Under 
section 210(c)(16) of the Act, the FDIC as receiver has additional 
powers with respect to contracts of subsidiaries or affiliates of a 
covered financial company that are guaranteed or otherwise supported by 
or linked to such covered financial company.\73\ Such contracts can be 
enforced by the FDIC as receiver of the covered financial company 
notwithstanding the insolvency, financial condition, or receivership of 
the covered financial company. The terms ``guarantees or supports'' and 
``linked'' in the Proposed Rules were defined in the same way as they 
are defined in the FDIC's regulations implementing section 210(c)(16) 
of the Act. Under the Proposed Rules, a financial company would have 
had to be a party to or have guaranteed or supported or been linked to 
an open QFC in order to be deemed a records entity, and a records 
entity would have been required to have maintained records with respect 
to QFCs that it guaranteed or supported.
---------------------------------------------------------------------------

    \73\ See 12 U.S.C. 5390(c)(16).
---------------------------------------------------------------------------

    The Secretary has decided to simplify the rules by omitting 
references to ``guaranteed or supported'' and ``linked.'' Under the 
Final Rules, a financial company would, in addition to meeting the 
other criteria discussed above, have to be a party to an open QFC in 
order to be a ``records entity,'' and such a records entity would only 
be required to maintain records with respect to its QFCs. This change 
reduces the complexity of the rules but generally would not be expected 
to change significantly which entities would be records entities 
because guarantees and other credit enhancements of QFCs are themselves 
QFCs.\74\ Further, given that the FDIC has adopted regulations 
clarifying that no special action will be required of the receiver to 
preserve enforceability of QFCs that are merely ``linked'' to the 
entity in receivership,\75\ the Secretary has removed all references to 
``linked'' from the Final Rules.
---------------------------------------------------------------------------

    \74\ See 12 U.S.C. 5390(c)(8)(D).
    \75\ See 12 CFR 380.12
---------------------------------------------------------------------------

    Affiliate, Subsidiary, and Control: The Proposed Rules defined the 
terms ``affiliate'' and ``subsidiary'' consistently with the 
definitions given to such terms in the Dodd-Frank Act. Sections 2(1) 
\76\ and 2(18) \77\ of the Dodd-Frank Act provide that these terms will 
have the same meanings as in section 3 of the FDIA. Under section 
3(w)(4) of the FDIA, the term ``subsidiary'' is defined as ``any 
company which is owned or controlled directly or indirectly by another 
company.'' Similarly, the term ``affiliate'' is defined in section 
3(w)(6) of the FDIA by reference to section 2(k) of the Bank Holding 
Company Act of 1956, as amended (``BHC Act'') \78\ as ``any company 
that controls, is controlled by, or is under common control with 
another company.''
---------------------------------------------------------------------------

    \76\ 12 U.S.C. 5301(1).
    \77\ 12 U.S.C. 5301(18).
    \78\ 12 U.S.C. 1841(k).
---------------------------------------------------------------------------

    The FDIA, by reference to section 2 of the BHC Act, provides that 
any company has control over another company if the company directly or 
indirectly or acting through one or more persons owns, controls, or has 
the power to vote 25 percent or more of any class of voting securities 
of the company; the company controls in any manner the election of a 
majority of the directors or trustees of the company; or the Federal 
Reserve determines, after notice and opportunity for hearing, that the 
company directly or indirectly exercises a controlling influence over 
the management or policies of the company. The first two prongs of the 
definition of ``control'' in the Proposed Rules are consistent with the 
BHC Act definition. The third prong of the definition of ``control'' in 
the Proposed Rules, that an entity controls another entity if it must 
consolidate another entity for financial or regulatory purposes, was 
proposed to reflect the fact that, in certain situations, a controlling 
interest may be achieved through arrangements that do not involve 
voting interests and to provide an objective test that does not require 
a determination by the Federal Reserve. In the Proposed Rules, the 
definitions of ``affiliate'' and ``control'' related both to (1) the 
determination of which members of a corporate group would be records 
entities and (2) the information that would be required to be 
maintained by records entities as to the identities of affiliates of 
counterparties.
    One commenter stated that existing recordkeeping and operational 
controls with respect to QFCs are customarily maintained by parent 
companies or other entities that have majority ownership of or are 
otherwise required to consolidate the entities engaging in QFC activity 
for financial and regulatory purposes.\79\ Commenters stated that, in 
contrast, the proposed definition of ``control'' would result in 
records entity status for legal entities, such as joint ventures and 
companies in which other members of the corporate group only have a 
minority interest, that might not be subject to actual governing 
control by the other members of the corporate group. These commenters 
indicated that this would pose difficulties for corporate groups 
attempting to coordinate the compliance of all of their member records 
entities.\80\ This concern would apply in particular to the requirement 
that affiliated records entities use the same unique counterparty 
identifier for each counterparty and the proposed requirement that 
records of affiliated records entities be maintained in a form that 
allows for aggregation, which has been replaced in the Final Rules with 
the requirement that the top-tier parent financial company be capable 
of aggregating such records. As to the Proposed Rules' requirement to 
identify the affiliates of counterparties, one commenter argued that 
non-financial company counterparties' lack of familiarity with the BHC 
Act definition of ``control'' would make it difficult for records 
entities to maintain records as to the identity of such affiliates.\81\
---------------------------------------------------------------------------

    \79\ See ACLI letter, p. 14.
    \80\ See ACLI letter, pp. 13-14; TIAA-CREF letter, p. 6.
    \81\ See TCH et al. letter, p. 16.
---------------------------------------------------------------------------

    The Secretary has determined that the FDIC as receiver in a Title 
II resolution would need to know the identities of the affiliates, as 
defined by reference to the BHC Act definition of ``control,'' of the 
records entity's counterparties. Specifically, as referenced above, 
section 210(c)(9)(A) of the Act provides the FDIC as receiver shall 
transfer to one transferee either all or none of the QFCs of a 
counterparty and the counterparty's ``affiliates,'' as defined by 
reference to the BHC Act definition of ``control.'' \82\ In addition, 
this provision requires that in making any such transfer, the FDIC

[[Page 75633]]

as receiver must also transfer (i) all claims of the counterparty or 
any of its affiliates against the covered financial company under any 
such QFC, (ii) all claims of the covered financial company against the 
counterparty and any of its affiliates under any such QFC, and (iii) 
all property securing or any other credit enhancement for any such QFC. 
In order for the FDIC to comply with these requirements, the FDIC must 
have available to it the information as to affiliates, as defined in 
Title II, of counterparties that is specified in the tables in the 
appendix to the rules.
---------------------------------------------------------------------------

    \82\ See 12 U.S.C. 5390(c)(9)(A).
---------------------------------------------------------------------------

    As discussed below, the Proposed Rules would have required a 
records entity to identify each affiliate of a counterparty by 
maintaining full organizational charts of the corporate group of a QFC 
counterparty. This has been replaced in the Final Rules with a 
requirement in the tables in the appendix to the rules to maintain 
records as to the identity of the immediate and ultimate parent entity 
of each counterparty, which will allow the FDIC to identify affiliated 
counterparties based on their common parent and ultimate parent 
entities. A new term, ``parent entity,'' has been defined for this 
purpose as an entity that controls another entity.
    In addition, the Final Rules have been revised to conform the third 
prong in the definition of ``control'' to that provided in the BHC Act, 
i.e., that control exists if the Federal Reserve has determined, after 
notice and opportunity for hearing, that the company directly or 
indirectly exercises a controlling influence over the management or 
policies of the company.\83\ Including this prong will ensure that in 
the case in which the Federal Reserve has made such a determination, 
the FDIC would have the relevant records with respect to QFCs with that 
entity. Likewise, eliminating the proposed consolidation prong of the 
definition of ``control,'' i.e., that an entity controls another entity 
if it must consolidate another entity for financial or regulatory 
purposes, will avoid the possibility of capturing entities that are not 
affiliates of the counterparty for purposes of Title II.
---------------------------------------------------------------------------

    \83\ See 12 U.S.C. 1841(a)(2)(C).
---------------------------------------------------------------------------

    As to the determination of which members of a corporate group would 
be records entities, the Secretary has adopted the request of 
commenters, referenced above, to define ``records entity'' by reference 
to whether an entity is consolidated under accounting standards. 
Specifically, under the Final Rules, ``records entity'' is defined to 
include a member of a corporate group that consolidates, is 
consolidated with, or is consolidated by the financial company member 
of the corporate group that meets the other criteria of the definition 
of ``records entity,'' e.g., the asset and derivatives thresholds. The 
rules provide that with respect to financial companies that are not 
subject to such accounting principles or standards, for instance 
because they are not required to prepare financial statements, such 
member of the corporate group would be a ``records entity'' if it would 
consolidate, be consolidated by, or be consolidated with such financial 
company if such principles or standards applied.
    This change addresses the concerns identified by commenters that 
members of a corporate group would not have access to the records of a 
minority-owned entity or joint venture and is intended to better align 
the identification of records entities in a way that comports with 
existing recordkeeping practices by corporate groups. The modification 
of the definition of ``records entity'' is also responsive to concerns 
from commenters that the scope of the Proposed Rules would have been 
too broad, given that reference to accounting consolidation generally 
requires a higher level of an affiliation relationship than the 25 
percent voting interest standard of the BHC Act definition of 
``control.''
    Two commenters stated that the definition of ``affiliate'' could 
deem investment companies that are ``seeded'' with an initial capital 
investment by the fund's sponsor to be affiliates of that sponsor 
during the period before such a fund attracted third party 
investors.\84\ The changes made to the definition of ``records entity'' 
in the Final Rules should greatly limit the circumstances in which this 
is likely to arise. In the event that such a seeded fund were to be 
deemed a records entity under the rules, the fund would be able to 
request an exemption from the recordkeeping requirements of the rules 
for the duration of the seeding period.
---------------------------------------------------------------------------

    \84\ See TIAA-CREF letter, p. 6; ICI letter, p. 10.
---------------------------------------------------------------------------

    Non-U.S. Entities: Because the Proposed Rules incorporated the 
Title II definition of ``financial company,'' the Proposed Rules 
applied only to entities incorporated or organized in the United 
States.\85\ One commenter argued that the records of foreign affiliates 
of U.S. broker-dealers should be subject to the recordkeeping 
requirements.\86\ However, the Secretary's authority to adopt 
recordkeeping rules under section 210(c)(8)(H) only extends to 
financial companies as defined in Title II of the Act; therefore, 
entities that are not incorporated or organized within the United 
States, including foreign affiliates of records entities, are not 
subject to the Final Rules.
---------------------------------------------------------------------------

    \85\ See 12 U.S.C. 5381(a)(11)(A).
    \86\ See Better Markets letter, pp. 16-19.
---------------------------------------------------------------------------

b. Scope of Final Rules
    Section 148.1(a) of the Final Rules provides that the recordkeeping 
requirements apply to each financial company that qualifies as a 
records entity and, with respect to section 148.3(a), to the top-tier 
financial company of a corporate group. As discussed above, the 
Secretary received numerous comments on the Proposed Rules pertaining 
to the definition of ``records entity.'' Section 210(c)(8)(H) of the 
Dodd-Frank Act gives the Secretary broad flexibility in determining the 
scope of the recordkeeping requirements as necessary or appropriate in 
order to assist the FDIC as a receiver for a covered financial company 
in being able to exercise its rights under the Act and fulfill its 
obligations under sections 210(c)(8), (9), or (10) of the Act. Section 
210(c)(8)(H) also requires the regulations to differentiate among 
financial companies, as appropriate, by taking into consideration their 
size, risk, complexity, leverage, frequency and dollar amount of QFCs, 
interconnectedness to the financial system, and any other factors 
deemed appropriate. As discussed earlier, the Secretary has complied 
with these requirements and consulted extensively with the FDIC.
    The Secretary anticipates that records entities may include the 
following types of financial companies: \87\ (i) Broker-dealers, 
investment advisers, investment companies, swap dealers, security-based 
swap dealers, major swap participants, major security-based swap 
participants, derivatives clearing organizations, and clearing 
agencies; (ii) bank holding companies or bank holding company 
subsidiaries (that are not insured depository institutions or other 
types of excluded entities); savings and loan

[[Page 75634]]

holding companies or savings and loan holding company subsidiaries 
(that are not insured depository institutions or other types of 
excluded entity); U.S. affiliates of a foreign bank; noninsured state 
member banks; agencies or commercial lending companies other than a 
federal agency; organizations organized and operated under section 25A 
of the Federal Reserve Act or operating under section 25 of the Federal 
Reserve Act; (iii) (A) nonbank financial companies that the Council has 
determined shall be subject to Federal Reserve supervision and enhanced 
prudential standards under section 113 or (B) financial market 
utilities that the Council has designated as, or as likely to become, 
systemically important under section 804; (iv) subsidiaries of State 
non-member insured banks that are not supervised on a consolidated 
basis with the State non-member insured bank, or financial companies 
that are not supervised by a PFRA; and (v) other non-bank financial 
companies satisfying criteria set forth in the Final Rules.
---------------------------------------------------------------------------

    \87\ Not all of these entities would qualify as records entities 
subject to the Final Rules because of conditions in the definition 
of records entity related to asset size and level of derivatives 
activity. ``Financial company'' includes any company that is 
incorporated or organized under any provision of federal law or the 
laws of any state and is predominantly engaged in activities that 
the Board of Governors has determined are financial in nature for 
purposes of section 4(k) of the BHC Act. 12 U.S.C. 5381(a)(11). 
Activities that are ``financial in nature'' include ``providing 
financial, investment, or economic advisory services, including 
advising an investment company'' and ``issuing or selling 
instruments representing interests in pools of assets . . .'' and 
``underwriting, dealing in, or making a market in securities.'' 12 
U.S.C. 1843(k)(4).
---------------------------------------------------------------------------

2. Purpose
    Section 148.1(b) of the Proposed Rules provided that the purpose of 
the rules is to establish QFC recordkeeping requirements for a records 
entity in order to assist the FDIC as receiver for a covered financial 
company. The Secretary did not receive any comments requesting changes 
to this section and has not modified it from the Proposed Rules.
3. Effective Date and Compliance Dates
a. Initial Compliance Dates
    Section 148.1(c) of the Proposed Rules provided that the rules 
would become effective 60 days after publication of the Final Rules in 
the Federal Register. Section 148.1(d)(1) of the Proposed Rules 
provided that each entity that constitutes a records entity on the date 
the rules become effective would be required to provide each of its 
PFRAs and the FDIC a point of contact responsible for recordkeeping 
under the rules and to comply with all the other requirements of the 
rules within 270 days of the effective date. For a records entity that 
becomes subject to the rules after they become effective, compliance 
with the point of contact requirement would have been required within 
60 days after such entity becomes subject to the rules and compliance 
with all the other requirements of the rules would have been required 
within 270 days after such entity becomes subject to the rules.
    Several commenters submitted that the proposed compliance period 
would be an inadequate amount of time for implementation because of the 
significant information systems upgrades and changes in recordkeeping 
practices that commenters said would be required for 
implementation.\88\ Some commenters suggested that the initial 
compliance period should be extended to two years.\89\ Other commenters 
suggested that compliance should be phased in in stages, with staggered 
compliance dates for various types of QFCs \90\ or for entities based 
on the size of their QFC portfolios, with entities with the largest QFC 
portfolios required to comply first under the assumption that they 
would be more likely to have the infrastructure in place to comply with 
the recordkeeping requirements.\91\
---------------------------------------------------------------------------

    \88\ See ACLI letter, pp. 19-20; OCC letter, p. 12; SIFMA AMG 
letter, pp. 13, 22-23.
    \89\ See Regional Banks letter, p. 4; SIFMA AMG letter, p. 13.
    \90\ See TCH et al. letter, p. 23.
    \91\ See ACLI letter, pp. 15-16.
---------------------------------------------------------------------------

    In response to these comments, the Final Rules provide additional 
time to all records entities to comply with the requirements of the 
rules. All records entities will have 90 days after the effective date 
of the rules to comply with the requirement to provide point of contact 
information to their PFRAs and the FDIC; this extension will provide 
additional time to financial companies to determine whether they are 
records entities under the rules. As to the remainder of the 
requirements of the rules, the Final Rules provide staggered compliance 
dates that will provide all records entities with additional time to 
comply with the recordkeeping requirements. The Final Rules provide 
that records entities with $1 trillion or more in total consolidated 
assets and the financial company members of their corporate group will 
have 540 days (approximately 18 months) after the effective date to 
comply with the rules. The Secretary understands that only the four 
largest G-SIBs would meet this threshold on the effective date. The 
Secretary has determined that it is important for data on the largest, 
most systemically important entities to be available as soon as 
reasonably possible. The FDIC has advised that, in general, large 
insured depository institutions subject to the Part 371 recordkeeping 
requirements have been able to comply with those requirements within 
270 days. Although the recordkeeping requirements under the Final Rules 
are more detailed in many respects than those under Part 371, the 
Secretary believes that the extra time allotted for compliance should 
be sufficient to allow the largest financial companies to adapt the 
processes, procedures, and systems to comply with the Final Rules.
    Under the Final Rules, all other records entities will have at 
least two years to comply with the rules' recordkeeping requirements. 
Records entities with total assets equal to or greater than $500 
billion (but less than $1 trillion) and financial company members of 
the corporate group of such entities will have two years from the 
effective date to comply. Records entities with total assets equal to 
or greater than $250 billion (but less than $500 billion) and financial 
company members of the corporate group of such entities will have three 
years from the effective date to comply. All other records entities 
will have four years from the effective date to comply.
    The Final Rules provide for a staggered schedule based on the total 
consolidated assets of the records entities (or other members of their 
corporate group) on the understanding that larger entities will 
generally have greater capacity to apply to the task of coming into 
initial compliance with the rules. In addition, because the Department 
of the Treasury and the FDIC anticipate providing guidance to records 
entities as they work to come into compliance with the rules, the 
staggered compliance schedule will permit staff of the Department of 
the Treasury and the FDIC to allocate their resources to address more 
efficiently requests for guidance from each tier of records entities in 
turn. The commenter's proposal to provide for staggered compliance 
based on type of QFC would mean that the FDIC would not have records 
that would be of meaningful usefulness under Title II until the final 
compliance deadline had been met, given the requirement, discussed 
above, that if the FDIC as receiver decides to (i) transfer any QFC 
with a particular counterparty, it must transfer all QFCs between the 
covered financial company and such counterparty and any affiliate of 
such counterparty to a single financial institution and (ii) disaffirm 
or repudiate any QFC with a particular counterparty, it must disaffirm 
or repudiate all QFCs between the covered financial company and such 
counterparty and any affiliate of such counterparty. In contrast, the 
compliance schedule provided for in the Final Rules would provide the 
FDIC with complete records for a successively larger set of companies.
    The Final Rules provide that a financial company that becomes a 
records entity after the effective date

[[Page 75635]]

must provide point of contact information within 90 days of becoming a 
records entity and must comply with all other applicable requirements 
of the rules within 540 days of becoming a records entity or within the 
remainder of the applicable initial compliance period if it has not yet 
expired, whichever period is longer. The Secretary believes that this 
amount of time will be sufficient given that financial companies 
generally should be able to anticipate meeting the criteria for being 
deemed a records entity in advance of crossing the total assets and 
derivatives thresholds.
b. Subsequent Compliance Dates
    Under Section 148.1(d)(2) of the Proposed Rules, a financial 
company that no longer qualifies as a records entity would have been 
permitted to cease maintaining records one year after it ceases to 
qualify as a records entity. The definition of ``records entity'' in 
section 148.2(n) of the Final Rules provides that a company that is a 
records entity by virtue of exceeding the total assets and derivatives 
exposure thresholds shall remain a records entity until one year after 
it ceases to meet the total assets and derivatives exposure thresholds. 
Financial companies that are members of such a corporate group would be 
subject to the same provision. However, in a change from the Proposed 
Rules, any company that is a records entity because it meets the other 
criteria of the definition shall cease to be a records entity and thus 
shall cease to be subject to the rules immediately upon ceasing to meet 
such criteria. For example, a nonbank financial company with respect to 
which the Council rescinds a determination under section 113 would no 
longer be a records entity upon such rescission.
    The Proposed Rules provided that a financial company that becomes 
subject to the rules again after it had ceased recordkeeping would be 
required to comply with the requirements of the rules within 90 days of 
the date it again becomes subject to the rules. The Final Rules extend 
that period to 365 days, but if a longer period still remains under the 
applicable initial compliance period discussed above, the entity has 
until the end of that longer period to comply with the rules.
c. Extensions of Compliance Dates
    Section 148.1(d)(3) of the Final Rules, consistent with section 
148.3(c)(3) of the Proposed Rules, authorizes the Secretary, in 
consultation with the FDIC, to grant extensions of time with respect to 
compliance with the recordkeeping requirements. As discussed in the 
Supplemental Information to the Proposed Rules, it is anticipated that 
such extensions of time would apply when records entities first become 
subject to the rules and likely would not be used to adjust the time 
periods specified in the maintenance and updating requirements of 
section 148.3(b) of the Final Rules. Extensions of time may also be 
appropriate on a limited basis with respect to a records entity that is 
temporarily incapable of generating records due to unforeseen technical 
issues.
d. Compliance by Top-Tier Financial Company
    Finally, section 148.1(d)(4) of the Final Rules provides that a 
top-tier financial company must comply with the requirement, discussed 
below, to be capable of generating a single, compiled set of records of 
all the members of its corporate group on the same date as the date on 
which the records entity members of the corporate group of which it is 
a member are required to comply with this part.

B. General Definitions

    In addition to the definitions described in detail above in 
reference to the scope of the Proposed Rules, certain additional terms 
were defined in the Proposed Rules to describe a records entity's 
recordkeeping obligations. The Secretary did not receive any comments 
on these definitions.
    The definition of ``primary financial regulatory agency'' has been 
revised to include, with respect to a financial market utility that is 
subject to a designation pursuant to section 804 of the Act, the 
Supervisory Agency for that financial market utility, as defined in 
section 803(8) of the Act, if such financial market utility would not 
otherwise have a PFRA.\92\
---------------------------------------------------------------------------

    \92\ 12 U.S.C. 5462(8).
---------------------------------------------------------------------------

    The term ``total assets,'' which is used both in the definition of 
``records entity'' and for determining a particular records entity's 
compliance date, is defined in the Final Rules by reference to the 
audited consolidated statement of financial condition submitted to the 
financial company's PFRAs or, if no such statement is submitted, to the 
financial company's consolidated balance sheet for the most recent 
fiscal year end, as prepared in accordance with GAAP or other 
applicable accounting standards. This definition is unchanged from the 
Proposed Rules other than the addition of the reference to GAAP or 
other applicable accounting standards. One commenter proposed excluding 
from the definition of ``total assets'' any assets under management, 
even if those assets are included on a balance sheet under applicable 
accounting standards.\93\ The Secretary has decided, for the sake of 
consistency and to allow for ease of determination as to what a 
financial company's total assets are, not to provide such an exclusion. 
However, to the extent assets under management are not reflected on a 
financial company's consolidated statement of financial condition or 
consolidated balance sheet, as applicable, such assets would not be 
included within the definition of ``total assets.''
---------------------------------------------------------------------------

    \93\ See SIFMA AMG letter, p. 10.
---------------------------------------------------------------------------

    The Final Rules also include several additional definitions. A 
definition of ``legal entity identifier,'' previously provided in the 
appendix, has been added to section 148.2. In addition, a definition of 
``parent entity'' has been added because, as discussed below, the 
appendix has been revised in the Final Rules to require information 
regarding the immediate and ultimate parent entity of a counterparty to 
a QFC rather than a full organizational chart for each counterparty. In 
order to align with the definition of ``affiliate'' in Title II, as 
discussed above, ``parent entity'' is defined in the Final Rules as 
``an entity that controls another entity.''
    Because, as discussed above, the Final Rules exclude insurance 
companies from the definition of ``records entity,'' a definition of 
``insurance company'' has been added. In addition to incorporating the 
definition of ``insurance company'' provided in Title II, the 
definition in the Final Rules includes mutual insurance holding 
companies that meet the conditions, specified by the FDIC in part 380 
of its rules, for being treated as an insurance company for the purpose 
of section 203(e) of the Act.\94\ The Final Rules also

[[Page 75636]]

include definitions of ``gross notional amount of derivatives 
outstanding'' and ``derivative liabilities,'' as discussed above, and a 
definition of ``top-tier financial company,'' as discussed below.
---------------------------------------------------------------------------

    \94\ A mutual insurance holding company is created through the 
restructuring of a mutual insurance company into two entities, a 
mutual insurance holding company and a stock insurance company that 
is converted from the original mutual insurance company. The FDIC 
excluded mutual insurance holding companies that meet the conditions 
specified in its rules in order to address concerns that, because, 
under applicable state laws, a mutual insurance holding company 
generally is prohibited from selling policies of insurance, it might 
not fit squarely within a literal reading of the statutory 
definition of insurance company under the Dodd-Frank Act. The FDIC 
also noted that state law generally subjects a mutual insurance 
holding company to liquidation or rehabilitation under the state 
regime if the converted mutual insurance company is placed in 
liquidation or rehabilitation and that in the liquidation of a 
converted mutual insurance company, the assets of the mutual 
insurance holding company generally are included in the estate of 
the converted mutual insurance company being liquidated. See 77 FR 
25349, 25349-50 (April 30, 2012).
---------------------------------------------------------------------------

C. Form, Availability, and Maintenance of Records

1. Form and Availability
    Generally applicable requirements. Section 148.3(a)(1) of the 
Proposed Rules provided that a records entity must maintain all records 
in electronic form in the format set forth in the appendix to the 
Proposed Rules. The Proposed Rules further provided that all affiliated 
records entities in a corporate group must be able to generate data in 
the same data format and use the same unique counterparty identifiers 
to enable the aggregation of data. As explained in the Supplemental 
Information to the Proposed Rules, the FDIC would use the aggregation 
of counterparty positions to determine the effects of termination or 
transfer of QFCs. The Secretary requested comments on whether the rules 
should require that the parent company of a corporate group aggregate 
the records of the records entities of the corporate group.\95\ The 
Secretary, after consulting with the FDIC, has determined that it is 
important that the FDIC be able to receive a single set of compiled 
records from a corporate group in order to allow it to exercise its 
rights under the Act and fulfill its obligations under sections 
210(c)(8), (9), or (10) of the Act under the short time frame provided 
in Title II.
---------------------------------------------------------------------------

    \95\ See 80 FR 966, 975.
---------------------------------------------------------------------------

    Accordingly, section 148.3(a)(1) has been revised in the Final 
Rules to provide that a top-tier financial company, defined as a 
financial company that is a member of a corporate group consisting of 
multiple records entities and that is not itself controlled by another 
financial company, must be able to generate a single, compiled set of 
the records, in electronic form, for all records entities in the 
corporate group that it consolidates or are consolidated with it, in a 
format that allows for aggregation and disaggregation of such data by 
records entity and counterparty. By limiting this requirement to 
records of records entities that are consolidated by or with the top-
tier financial company, the Secretary has sought to avoid circumstances 
in which the top-tier financial company might not have access to the 
records it is required to compile. The top-tier financial company may 
comply with this requirement by providing that any of its affiliates or 
any third-party service provider maintains the capability of generating 
the single, compiled set of the records, in electronic form, for all 
records entities in the corporate group; provided, however, that the 
top-tier financial company shall itself maintain records under this 
part in the event that such affiliate or service provider shall fail to 
maintain such records.\96\ Given that the Proposed Rules would have 
required each records entity in a corporate group to generate data in 
the same format, the Secretary does not anticipate that this will place 
a significant additional burden on records entities. Section 
148.3(a)(2) of the Proposed Rules has been consolidated in the Final 
Rules with section 148.4, as discussed below under section II.D.1.
---------------------------------------------------------------------------

    \96\ It is possible that there could be more than one top-tier 
financial company in a corporate group, particularly in the 
circumstance in which the top-tier parent entity of the group is not 
itself a financial company; in such a case, the top-tier financial 
companies would presumably provide that only one of them, or an 
affiliate or service provider, would maintain the capability of 
generating the single, compiled set of the records for all records 
entities in the corporate group.
---------------------------------------------------------------------------

    Section 148.3(a)(3) of the Proposed Rules provided that each 
records entity designate a point of contact to enable its PFRA and the 
FDIC to contact the records entity with respect to the rules and to 
update this information within 30 days of any change. The Secretary did 
not receive any comments on this subsection, which in the Final Rules 
appears as section 148.3(a)(2), and has not modified it from the 
Proposed Rules, other than by subjecting the top-tier financial company 
of a corporate group to this requirement and by making certain 
technical changes.
    Section 148.3(a)(4) of the Proposed Rules provided that each 
records entity that is regulated by a PFRA be capable of providing all 
QFC records specified in the rules to its PFRA within 24 hours of 
request. This provision has been revised as section 148.3(a)(3) of the 
Final Rules to provide that the records entity is required to be 
capable of providing electronically, within 24 hours of the request of 
the PFRA, all QFC records specified in the rules to both its PFRA and 
the FDIC. This change has been made to ensure that the records will be 
maintained in a format that is compatible with the FDIC's systems and 
to avoid any delay resulting from the records having to be transmitted 
from the PFRA to the FDIC.\97\ This provision also provides that the 
top-tier financial company of a corporate group be required to be 
capable of providing, upon the request of the PFRA, the compiled set of 
records for all records entities of the corporate group to both its 
PFRA and the FDIC.
---------------------------------------------------------------------------

    \97\ One commenter requested that the Secretary provide 
clarification that, given the global nature of many financial 
companies that would be records entities under the rule, a request 
for records made before 5:00 p.m., eastern time on a given day must 
be satisfied by 5:00 p.m. eastern time on the following day. See TCH 
et al. letter, p. 23. This is not the intention of Secretary in 
adopting the 24 hour requirement.
---------------------------------------------------------------------------

    Request for reliance on existing recordkeeping requirements. 
Commenters suggested that the records required under the Proposed Rules 
be made consistent with supervisory recordkeeping or reporting 
requirements for derivatives imposed by other federal regulatory 
agencies.\98\ However, the types of financial contracts included within 
the scope of other derivatives recordkeeping and reporting requirements 
is not as broad as the definition of QFCs under the Dodd-Frank Act.\99\ 
Further, the scope of entities required to maintain records under such 
other recordkeeping and reporting rules is different from that under 
the Final Rules, given their differing purposes. Finally, reliance on a 
collection of records maintained under different recordkeeping and 
reporting regimes would not permit the aggregation of data that will be 
necessary for the receiver to comply with the time frame under which 
the FDIC as receiver must take action with respect to the covered 
financial company's QFCs under the statutory constraints discussed 
above.
---------------------------------------------------------------------------

    \98\ See SIFMA AMG letter, pp. 12-13; DTCC letter, p. 7; ACLI 
letter, p. 20; Capital Group letter, pp. 3-4.
    \99\ For example the CFTC's swap data recordkeeping requirement 
at 17 CFR part 46 covers ``swaps,'' which does not include certain 
contracts such as commodity contracts and margin loans that are 
included in the definition of QFCs under the Dodd-Frank Act.
---------------------------------------------------------------------------

    Request for exclusion of certain types of transactions. One 
commenter proposed that the recordkeeping requirements of the Final 
Rules not apply to QFCs that are for the purchase and sale of 
securities such as typical cash transactions that settle on a delivery-
versus-payment basis or settle within a fixed number of days following 
the transaction date.\100\ The commenter argued that (i) these short-
term transactions are not relevant to the FDIC for the purposes of its 
decision making under Title II, (ii) the significant volume of these 
transactions that would be reported on any given day would overwhelm 
and obscure otherwise relevant data, and (iii) for those transactions 
that are exchange traded, only the settlement system and the

[[Page 75637]]

clearing agency would be listed as direct counterparties, which should 
simplify the FDIC's decisions with respect to such transactions. The 
commenter offered similar arguments with respect to QFCs entered into 
with retail customers or as part of a records entity's retail or 
brokerage account activities.
---------------------------------------------------------------------------

    \100\ See TCH/SIFMA letter.
---------------------------------------------------------------------------

    All QFCs, regardless of their tenor, their volume, and how they are 
settled, are subject to the requirement, discussed above, that if the 
FDIC as receiver determines (i) to transfer any QFC with a particular 
counterparty, it must transfer all QFCs between the covered financial 
company and such counterparty and any affiliate of such counterparty to 
a single financial institution or (ii) to disaffirm or repudiate any 
QFC with a particular counterparty, it must disaffirm or repudiate all 
QFCs between the covered financial company and such counterparty and 
any affiliate of such counterparty. The large volume of these short-
term transactions supports the determination that the QFC information 
required to be provided must be maintained in the standard format 
specified in the rules to ensure rapid aggregation and evaluation of 
the information by the receiver. Whether these transactions are 
exchange traded will not necessarily affect the FDIC's decision as to 
whether to transfer the QFCs in question; rather, the FDIC's decision 
as to whether to transfer a particular counterparty's QFCs will be 
based on an evaluation of the other information required to be 
collected under the Final Rules and on an evaluation of the impact of 
such transfer on the receivership and U.S. financial stability. 
Furthermore, for corporate groups that include members that are subject 
to different recordkeeping regimes, permitting entities to rely on 
their existing records would not be consistent with the requirement for 
the top-tier financial company to be capable of generating a single, 
compiled set of QFC records in a format that allows for aggregation and 
disaggregation of such data. The Secretary notes, however, that under 
the exemptive process provided in the rules and discussed below, a 
records entity may apply for relief from particular requirements as to 
the information to be maintained by a records entity for a particular 
type of QFC or counterparty. Any exemptive relief requested with 
respect to a particular type of QFC or counterparty would need to be 
defined in such a way as to ensure consistency of treatment by each 
records entity.
2. Maintenance and Updating
    Section 148.3(b) of the Proposed Rules would have required that 
each records entity maintain the capacity to produce QFC records on a 
daily basis based on previous end-of-day records and values. The 
Secretary has clarified in the Final Rules that, if records are 
maintained on behalf of a records entity by an affiliate or service 
provider, such records entity shall itself maintain records under this 
part in the event that such affiliate or service provider fails to 
maintain such records. The Secretary confirms that, as was suggested by 
a commenter, the information required to be capable of being provided 
shall be with respect to QFCs as of the end of the day on the date the 
request is provided.\101\
---------------------------------------------------------------------------

    \101\ See TCH et al. letter, p. 23.
---------------------------------------------------------------------------

3. Exemptions
a. Requests for Exemptions
    Section 148.3(c) of the Proposed Rules provided that upon written 
request by a records entity, the FDIC, in consultation with the PFRAs 
for the records entity, may recommend that the Secretary grant a 
specific exemption from compliance with one or more of the requirements 
of the rules. In addition, under the Proposed Rules, the Secretary 
would also have been permitted to issue exemptions that have general 
applicability upon receipt of a recommendation from the FDIC, in 
consultation with the PFRAs for the applicable records entities.
    One commenter suggested that exemptions should be granted by the 
PFRAs for a records entity rather than by the Secretary.\102\ Another 
commenter suggested that exemption recommendations should be made by 
the PFRAs rather than by the FDIC.\103\ A third commenter suggested 
that the exemption process should be streamlined to involve only one 
agency.\104\ After considering these comments, the Secretary is 
adopting the provision for granting exemptions substantially as 
proposed, with certain modifications as described below. The Secretary 
believes that the Act does not authorize the Secretary, as Chairperson 
of the Council, to delegate decision making authority with respect to 
these rules to other agencies. In making any decision regarding 
exemptions, the Secretary continues to believe that it is appropriate 
to obtain a recommendation from the FDIC, prepared in consultation with 
the PFRAs for the relevant records entities. The provision for a 
recommendation from the FDIC is consistent with the requirement that 
the Secretary consult with the FDIC in adopting these rules and 
reflects the fact that the FDIC is the intended user of the QFC 
records. Including the PFRAs for the relevant records entities in the 
exemption process recognizes their familiarity with the operations of 
the records entities. The Final Rules have been modified to clarify 
that, even if the FDIC does not make a recommendation, the Secretary 
nevertheless may make a determination to grant or deny an exemption 
request.
---------------------------------------------------------------------------

    \102\ See Capital Group letter, p. 4.
    \103\ See ICI letter, p. 10.
    \104\ See OCC letter, p. 8.
---------------------------------------------------------------------------

    In addition, the Secretary has simplified the exemption provision 
by consolidating the separate provisions for general and specific 
exemptions and has specified in the Final Rules what a request for an 
exemption must contain. In determining whether to grant any requests 
from records entities for exemptions, the Secretary may take into 
consideration their size, risk, complexity, leverage, frequency and 
dollar amount of QFCs, interconnectedness to the financial system, and 
any other factors deemed appropriate, including whether the application 
of one or more requirements of the rules is not necessary or 
appropriate to achieve the purpose of the rules.
b. De Minimis Exemption
    Several commenters argued that the requirements of the Proposed 
Rules should not apply to records entities that have a minimal level of 
QFC activity. Commenters noted that a financial company might be 
subject to the recordkeeping requirements of the Proposed Rules even if 
it is a party to only a single QFC.\105\ One commenter suggested that 
the definition of ``records entity'' exclude any financial company 
that, over the immediately preceding 12 months, (i) had fewer than 50 
unaffiliated counterparties or entered into fewer than 100 QFC 
transactions with non-affiliates and (ii) entered into QFCs having a 
gross notional value equal to or less than $2.5 billion.\106\ Another 
commenter proposed providing varying de minimis thresholds for each 
type of QFC, with different levels set to reflect the different risks 
associated with each type of QFC.\107\
---------------------------------------------------------------------------

    \105\ See ACLI letter, p. 15; TCH et al. letter, p. 11; TIAA-
CREF letter, p. 7; CWEG letter, pp. 4-5.
    \106\ See TCH/SIFMA letter.
    \107\ See ACLI letter, p. 15.
---------------------------------------------------------------------------

    After consideration of these comments, the Secretary has determined 
that an exemption from the preponderance of the recordkeeping

[[Page 75638]]

requirements of the rules is appropriate for records entities that have 
a minimal level of QFC activity such that if the FDIC were appointed as 
receiver for any such records entity, the FDIC would be in a position 
to make the requisite determinations with respect to the treatment of 
QFCs during the stay period even in the absence of the records required 
to be maintained under the rules. The Secretary considered a number of 
different approaches to setting the threshold for the de minimis 
exemption, including the gross notional value of a records entity's QFC 
portfolio over a defined period, the number of discrete unaffiliated 
QFC counterparties, and the number of open positions. The Secretary 
determined that gross notional value would not be an appropriate metric 
because the gross notional amount of a QFC portfolio is not a good 
proxy for the difficulty the receiver would have in assessing the QFC 
portfolio and in making the requisite determinations with speed and 
accuracy. For instance, a single interest rate swap that exceeds a 
specified threshold may easily be reviewed by the receiver without 
standardized recordkeeping. By contrast, a records entity may have a 
QFC portfolio that falls below the threshold but is comprised of 
hundreds of open positions, such that the portfolio would pose 
challenges for the receiver to review and act upon during the one 
business day stay period and thus would necessitate the advance 
recordkeeping required by the rules. Likewise, the Secretary determined 
that neither the risk each type of QFC might pose, even if that were 
something that could be distinguished for purposes of these rules, nor 
any of the other factors listed in section 210(c)(8)(H)(iv) would be 
relevant to the question of how many QFCs a receiver will be able to 
review during the one business day stay period.
    The recordkeeping requirements of Part 371 of the FDIC's rules 
relax the recordkeeping requirements for institutions with fewer than 
twenty open QFC positions. Based on its experience with Part 371, the 
FDIC advised that a receiver should be able to exercise its statutory 
rights and duties under the Dodd-Frank Act relating to QFCs without 
having access to standardized records for any records entity that is a 
party to no more than 50 open QFC positions. Having considered the 
comments received and the FDIC's experience with evaluating QFC 
portfolios, the Secretary has provided in the Final Rules that any 
records entity that is a party to no more than 50 open QFC positions is 
not required to maintain the records described in section 148.4 other 
than the copies of the documents governing QFC transactions between the 
records entity and each counterparty as provided in section 148.4(i). 
This exemption provides further differentiation among financial 
companies and reduces the burden of the rules without compromising the 
ability of the FDIC to exercise its rights under the Act and fulfill 
its obligations under sections 210(c)(8), (9), and (10).

D. Content of Records

1. General Information
    Section 148.4 of the Final Rules requires each records entity to 
maintain the data listed in the appendix tables, copies of the 
documents that govern QFCs, and lists of vendors directly supporting 
the QFC-related activities of the records entity and the vendors' 
contact information with respect to each QFC to which it is a party. As 
discussed above, the Final Rules have been simplified so as not to 
separately require that a full set of records be maintained with 
respect to the underlying QFCs for which a records entity provides a 
guarantee or other credit enhancement. Instead, as discussed below, 
certain fields specific to the provision by a records entity of a 
guarantee of a QFC or of another type of credit enhancement of a QFC 
have been added to the tables in the Final Rules.
    The Proposed Rules would have also required that records entities 
maintain any written data or information that is not listed in the 
appendix tables that the records entity is required to provide to a 
swap data repository, security-based swap data repository, the CFTC, 
the SEC, or any non-U.S. regulator with respect to any QFC, for any 
period that such data or information is required to be maintained by 
its PFRA. Having considered a comment received indicating that this 
would be unduly burdensome,\108\ the Secretary has chosen to eliminate 
these requirements as not sufficiently significant to the receiver to 
justify the burden they would place on records entities.
---------------------------------------------------------------------------

    \108\ See TCH et al. letter, p. 17.
---------------------------------------------------------------------------

    The Proposed Rules provided that a records entity also would be 
required to maintain electronic, full-text searchable copies of all 
agreements that govern the QFC transactions subject to the rules, as 
well as credit support documents related to such QFC transactions. 
Having considered the comments received indicating that the requirement 
that such electronic documents be full-text searchable would be unduly 
burdensome,\109\ the Secretary has decided to omit this requirement as 
not sufficiently significant to the receiver to justify the burden it 
would place on records entities. No comments were received on the 
proposed requirement that each records entity maintain a list of 
vendors directly supporting the QFC-related activities and the contact 
information for such vendors, and this provision has been retained 
without change in the Final Rules. The Proposed Rules also provided 
that each records entity would be required to maintain information 
about the risk metrics used to monitor the QFC portfolios and contact 
information for each risk manager. The Secretary has decided to 
eliminate this requirement as not sufficiently significant to the 
receiver to justify its burden on records entities.
---------------------------------------------------------------------------

    \109\ See TCH et al. letter, pp. 18-19; ACLI letter, pp. 18-19.
---------------------------------------------------------------------------

2. Appendix Information
    For the receiver to make a well-informed decision that complies 
with the requirements of Title II discussed in section I, the receiver 
must have sufficient information to fully evaluate and model various 
QFC transfer or termination scenarios as well as the potential impact 
of its transfer or retention decisions. To perform this analysis in the 
extremely limited time frame provided by Title II, the receiver must 
have access to data on the QFC positions of the records entity, net QFC 
exposures under applicable netting agreements, detailed and aggregated 
collateral positions of the records entity and of its counterparties, 
and information regarding certain key provisions of the legal 
agreements governing the QFC transactions. Many commenters recognized 
the importance of maintaining detailed records of QFCs for use by the 
FDIC if it were appointed as receiver under Title II; however, several 
commenters expressed concern that the requirements of Tables A-1 
through A-4, as proposed, were overly burdensome and would require 
maintenance of data that is different in content or format from that 
currently tracked or collected in the ordinary course of business or 
for other regulatory purposes.\110\
---------------------------------------------------------------------------

    \110\ See TCH et al. letter, pp. 15, 20; ACLI letter, pp. 17-18; 
SIFMA AMG letter, pp. 12-13; TIAA-CREF letter, p. 2.
---------------------------------------------------------------------------

    The appendix to the Final Rules preserves the basic structure and 
content of the data tables included in the Proposed Rules. However, the 
Secretary has eliminated data fields that the Secretary decided would 
not provide a sufficiently significant benefit to the FDIC as receiver 
to justify the

[[Page 75639]]

burden they would place on records entities. Further, the Final Rules 
add four master data lookup tables, composed largely of requirements 
that previously appeared in the four data tables of the Proposed Rules, 
in order to reduce the burden on records entities and improve the 
tables' functionality for the receiver. These include: (1) A corporate 
organization master data lookup table; (2) a counterparty master data 
lookup table; (3) a booking location master data lookup table; and (4) 
a safekeeping agent master data lookup table.
    The master data lookup tables are cross-referenced to one or more 
of Tables A-1 through A-4 and provide a centralized site for records of 
affiliate, counterparty, booking location, and safekeeping agent data, 
which eliminates the need for a records entity to include duplicative 
data in Tables A-1 through A-4 and thereby makes it easier for a 
records entity to enter and update the data included in those Tables. 
In particular, the records entity members of a corporate group, which 
are required to utilize common identifiers for shared counterparties, 
will be able to use the same counterparty consolidated corporate master 
lookup table for a given counterparty. For example, if there were 
several records entities in a corporate group and each was a party to 
one or more QFCs with a particular counterparty, use of the 
counterparty master lookup table would enable the information as to 
that counterparty to be entered only once. The lookup table format, 
which conforms to customary information technology practices, will also 
allow for smaller file sizes by eliminating repetitive entries, thereby 
reducing the burden of maintaining the records and maintaining the 
capability of transmitting them to the FDIC and the records entity's 
PFRA.
    Each table contains examples and, as relevant, instructions for 
recording the required information and an indication of how the FDIC as 
receiver would apply the required information. A records entity may 
leave an entry blank for any data fields that do not apply to a given 
QFC transaction, agreement, collateral item, or counterparty. For 
example, if a QFC is not collateralized, the data fields that relate to 
collateral may be left blank (in the case of character fields) or given 
a zero value (in the case of numerical fields).
    Several commenters noted that the scope of the recordkeeping 
requirements in the appendix is more extensive than that of the 
recordkeeping requirements in the appendix to Part 371.\111\ As noted 
in the Supplementary Information to the Proposed Rules, the 
recordkeeping requirements of the rules have been informed by the 
FDIC's experience in evaluating multiple QFC portfolios of insured 
depository institutions.
---------------------------------------------------------------------------

    \111\ See TCH et al. letter, p. 20; Capital Group letter, p. 3.
---------------------------------------------------------------------------

a. Table A-1--Position-Level Data
    Table A-1 requires each records entity to maintain detailed 
position-level data to enable the FDIC as receiver to evaluate a 
records entity's QFC exposure to each of its counterparties on a 
position-by-position basis. The records required by the table include 
critical information about the type, terms, and value of each of the 
records entity's QFCs. Position-level information must be available for 
each counterparty, affiliate, and governing netting agreement to allow 
the FDIC as receiver to model the potential impacts of its decisions 
relating to the transfer or retention of positions. This information 
will also enable the FDIC to confirm that the netting-set level data 
provided in Table A-2, such as the market value of all positions in the 
netting set (A2.6), based on the aggregated data from Table A-1, is 
accurate and can be validated across different tables. In addition, 
position-level information will assist the receiver or any transferee 
in complying with the terms of the records entity's QFCs and thereby 
reduce the likelihood of inadvertent defaults.
    In response to comments received, the Secretary has made several 
changes to Table A-1 that will reduce the recordkeeping burden. One 
commenter recommended elimination of the requirement to identify the 
purpose of a QFC position, stating that this could involve a 
complicated analysis and impose a substantial burden on records 
entities. The commenter stated that a QFC position may have multiple 
purposes that may change over time such that any identified purpose 
would be of minimal value to the receiver.\112\ In response to this 
comment, the Secretary has eliminated from Table A-1 the requirement to 
identify the purpose of each QFC.
---------------------------------------------------------------------------

    \112\ See TCH et al. letter, pp. 20-21.
---------------------------------------------------------------------------

    One commenter also recommended eliminating the requirement to 
maintain operational and business-level details relating to QFC 
positions, such as the identification of related inter-affiliate 
positions, trading desk identifiers, and points of contact. The 
commenter stated that such operational and business-level details are 
subject to frequent change that would require frequent updates by 
records entities and submitted that this information would likely be of 
limited value to the receiver.\113\ In consideration of this comment, 
the Secretary has decided to eliminate both the requirement to maintain 
data on related inter-affiliate positions and the requirement to 
maintain contact information for the person at the records entity 
responsible for each position. The Secretary has replaced the inter-
affiliate fields of the Proposed Rules with a narrower requirement to 
link only related positions, if any, to which the records entity itself 
is a party (A1.22). All positions of a particular records entity that 
are reported on Table A-1 and that are related to one another should 
have the same designation in this field. The requirement to identify 
loans related to a QFC position has also been retained (A1.23-24). In 
addition, in recognition that it may be necessary for the FDIC, in 
determining whether to transfer a QFC, to locate the personnel at a 
records entity who are familiar with a particular position and can 
provide the receiver with additional information on the position, the 
Final Rules require a records entity to provide, in the booking 
location master table, identifiers for the booking unit or desk, a 
description of the booking location, and contact information for the 
desk associated with a QFC (BL.3-BL.7).
---------------------------------------------------------------------------

    \113\ See TCH et al. letter, p. 19.
---------------------------------------------------------------------------

    One commenter stated that the requirement to provide information 
based on a classification under GAAP or IFRS may not be appropriate if 
the records entity follows a different accounting standard.\114\ In 
response to this comment, the Secretary has decided to require that 
each records entity maintain the asset classification available under 
any accounting principles or standards used by the records entity 
(A1.18). If no asset classification scheme is available under any 
accounting principles or standards used by a records entity, the 
records entity may leave the entry blank.
---------------------------------------------------------------------------

    \114\ See ACLI letter, p. 18.
---------------------------------------------------------------------------

    To further reduce the burden of Table A-1, the Secretary has 
eliminated the following proposed data fields in the Final Rules: 
Industry code (GIC or SIC code); position standardized contract type; 
and documentation status of the position.
    The Final Rules include two additional fields to Table A-1 based on 
the FDIC's experience with implementing Part 371. The Secretary 
believes that the addition of these fields should impose minimal, if 
any, additional burden on a records entity. The first addition is a 
data field for the

[[Page 75640]]

date that the data maintained in the table was extracted from the 
records of the records entity (A1.1). Because records entities may 
derive data from multiple systems in multiple locations, information on 
the date that data was extracted is necessary to enable the receiver to 
assess whether all recorded information is current. The data extraction 
date field has been included in each of the tables of the appendix.
    A netting agreement counterparty identifier field (A1.10) has also 
been added to the table. Based on the FDIC's experience with the 
implementation of Part 371, the FDIC has advised that it is necessary 
for the rules to address circumstances in which the counterparty to a 
QFC is different from the counterparty securing the QFC (for example, 
if an affiliate of the QFC counterparty is providing collateral for the 
position). In such cases, the netting agreement counterparty identifier 
is necessary to enable the receiver to link certain position-level data 
from Table A-1 to the applicable netting-set level data under Table A-
2.
    In addition certain fields specific to guarantees of QFCs provided 
by the records entity and other credit enhancements of QFCs provided by 
the records entity have been added to the table, including the type of 
QFC covered by the guarantee or other third party credit enhancement 
(A1.7.1) and the underlying QFC obligor identifier (A1.7.2). Further, 
the Final Rules include fields requiring identification of any credit 
enhancement that has been provided by a third party with respect to a 
QFC of the records entity (A1.21.1-.5).
    As in the Proposed Rules, Table A-1 under the Final Rules requires 
that a records entity be identified by its legal entity identifier 
(``LEI''). In order for an LEI to be properly maintained, it must be 
kept current and up to date according to the standards established by 
the Global LEI Foundation. In addition, to the extent a records entity 
uses a global standard unique transaction identifier or unique product 
identifier to identify a QFC for which records are kept under these 
rules, the records entity should use such identifiers in completing 
fields A1.3 and A1.7, respectively. The Secretary has made this change 
in recognition of the ongoing work of the Committee on Payments and 
Market Infrastructures and the Board of the International Organization 
of Securities Commissions to establish such global identifiers.
b. Table A-2--Counterparty Netting Set Data
    Table A-2, which specifies the information to be maintained 
regarding aggregated QFC exposure and collateral data by counterparty, 
has been adopted in the Final Rules substantially as proposed, with 
certain changes discussed below.
    Table A-2 requires a records entity to maintain records of the 
aggregated QFC exposures under each netting agreement between the 
records entity and its counterparty. Table A-2 also requires 
comprehensive information on the collateral exchanged to secure net 
exposures under each netting agreement. Information on collateral 
required by the table includes the market value of collateral, any 
collateral excess or deficiency positions, the identification of the 
collateral safekeeping agent, a notation as to whether the collateral 
posted by a counterparty or a records entity is subject to 
rehypothecation, and the market value of any collateral subject to 
rehypothecation. The information required by Table A-2 must be 
maintained at each level of netting under the relevant governing 
agreement. For example, if a master agreement includes an annex for 
repurchase agreements and an annex for forward exchange transactions 
and requires separate netting under each annex, the information 
required by Table A-2 with respect to the net exposures under each 
annex would need to be maintained separately.
    In evaluating whether to transfer or retain QFCs between a records 
entity and a counterparty, the receiver must be able to assess the 
records entity's net exposure to the counterparty (and the 
counterparty's affiliates), the counterparty's net exposure to the 
records entity, and the amount of collateral securing those exposures. 
Net QFC exposure data will also assist the receiver in aggregating 
exposures under netting agreements with a counterparty and its 
affiliates based on the netting rights of the entire group, in order to 
determine relative concentrations of risk under each applicable netting 
agreement. This information will assist the receiver in modeling 
various transfer or termination scenarios and evaluating the effects 
and potential impact of the FDIC's decision to transfer the covered 
financial company's QFCs, retain and disaffirm or repudiate them, or 
retain them and allow the counterparty to terminate them. Information 
on collateral also ensures that the FDIC as receiver is able to comply 
with its statutory obligation to transfer all collateral securing the 
QFC obligations that it elects to transfer.\115\ In addition, the 
records required to be maintained under Table A-2 will assist the 
receiver in identifying any excess collateral posted by a counterparty 
for possible return to the counterparty should the contracts be 
terminated after the one business day stay period.
---------------------------------------------------------------------------

    \115\ See 12 U.S.C. 5390(c)(9)(A)(i)(IV).
---------------------------------------------------------------------------

    As discussed above, one commenter recommended eliminating the 
requirement to maintain operational and business-level details relating 
to QFC positions, including points of contact and the risk or 
relationship manager for each counterparty.\116\ In addition to the 
changes made to Table A-1 in response to this comment, the Final Rules 
eliminate from Table A-2 the requirement to provide information on a 
counterparty risk or relationship manager at the records entity. 
However, the receiver may need contact information for the counterparty 
to fulfill its statutory notice requirements under section 210(c)(10) 
of the Act. Accordingly, the Final Rules retain the requirement, now in 
Table A-3, to identify a point of contact at the counterparty, but 
provide that the information to be maintained by the records entity is 
limited to the information provided by the counterparty pursuant to the 
notification section of the relevant QFC documentation. Accordingly, a 
records entity is not required to update the counterparty contact 
information unless the counterparty has provided to the records entity 
a notice of a change to this information.
---------------------------------------------------------------------------

    \116\ See TCH et al. letter, p. 19.
---------------------------------------------------------------------------

    The burden of Table A-2 has been further reduced in the Final Rules 
by elimination of the following fields: Industry code (GIC or SIC 
code); master netting agreement for counterparty corporate group; name 
of each master agreement, master netting agreement or other governing 
documentation related to netting among affiliates in a counterparty's 
corporate group; current market value of all inter-affiliate positions 
with the records entity; master netting agreement for records entity's 
corporate group; and name of each master agreement, master netting 
agreement or governing documentation related to netting among records 
entities.
    An additional change was made to Table A-2 relating to the 
requirement in the Proposed Rules for the maintenance of records on the 
current market value of all positions netted under the applicable 
netting agreement. Table A-2 in the Final Rules retains this

[[Page 75641]]

requirement (A2.6) and adds a related requirement to maintain records 
of the aggregate current market values of all positive positions (A2.7) 
and, separately, of all negative positions under the netting agreement 
(A2.8). Providing such valuations should not pose a significant 
additional burden, given that the records entity is required to 
calculate the aggregate current market value of all positions under the 
netting agreement. Such aggregate positive and aggregate negative 
positions can be calculated by summing the applicable position-level 
values provided in Table A-1; however, the FDIC has advised, based on 
its experience implementing Part 371, that inclusion of this 
information in summary format will make this information more useful to 
the receiver in making the determinations necessary to exercise its 
rights and fulfill its obligations within the one business day stay 
period.
    The Proposed Rules would have required that the amount of pending 
margin calls be included in the calculation of collateral positions. 
The Final Rules instead require information on the next margin payment 
date (A2.15) and the next margin payment amount (A2.16) in Table A-2. 
This information will assist the receiver in avoiding any failure to 
make a pending margin call during the one business day stay. Since the 
amount of pending margin calls was required to be calculated under 
Table A-2 as proposed to determine collateral excess or deficiency, 
requiring such information to be capable of being separately provided 
should not impose a significant additional burden.
    In place of the data fields in the Proposed Rules for the legal 
name of any master agreement guarantor and the unique counterparty 
identifier of guarantor, Table A-2 includes a field for third-party 
credit enhancement agreement identifiers (A2.5), which clarifies that 
it covers unaffiliated providers of credit support and encompasses 
forms of support in addition to guarantees. The Final Rules also add 
new fields to Table A-2 (A2.4.1 and A2.5.1-.5) to provide additional 
information as to third-party credit enhancements. The Final Rules also 
add to Table A-2 certain fields necessary to link the data in Table A-2 
to one or more of the other data tables or lookup tables. Finally, the 
Final Rules add to Table A-2 the data extraction date field discussed 
above.
c. Table A-3--Legal Agreement Data
    Table A-3 as adopted is intended to ensure that the FDIC as 
receiver has available to it the legal agreements governing and setting 
forth the terms and conditions of each of the QFCs subject to the 
rules. Table A-3 requires each legal agreement to be identified by name 
and unique identifier (A3.3-A3.4) and requires the maintenance of 
records on key legal terms of the agreement, such as relevant governing 
law (A3.7) and information about any third-party credit enhancement 
agreement (A3.10-12.3).
    In response to comments received on the Proposed Rules, the Final 
Rules include several changes to Table A-3 to reduce the recordkeeping 
burden. Commenters suggested eliminating the proposed requirement in 
Table A-3 to maintain records containing descriptions or excerpts of 
certain cross-default provisions, transfer restrictions, events of 
default, and termination events set forth in each QFC agreement or 
master agreement, arguing that providing this information would be 
extremely burdensome and of limited value to the receiver.\117\ In 
response to this comment, the Secretary has eliminated from Table A-3 
the requirements to provide any information on transfer restrictions 
and substantially reduced the information required as to default 
provisions. As to cross-defaults, the Final Rules require only that a 
records entity indicate whether a QFC contains a default or other 
termination event provision that references another entity that is not 
a party to the QFC and, if so, the identity of such entity (A3.8-A3.9).
---------------------------------------------------------------------------

    \117\ See TCH letter, p. 19; ACLI letter, p. 17.
---------------------------------------------------------------------------

    To further reduce the burden of Table A-3, the Final Rules 
eliminate the following proposed data fields: Basic form of agreement; 
legal name of guarantor of records entity obligations; industry code 
(GIC or SIC code); and legal name of counterparty obligations.
    Other changes to Table A-3 conform to those discussed above with 
respect to other tables, i.e., inclusion of the data extraction date 
field (A3.1), a field for the records entity identifier (A3.2, to link 
the data in Table A-3 to other data tables or look-up tables), an 
agreement date field (A3.5) and a field to identify the underlying QFC 
obligation for QFCs that are guarantees or credit enhancements 
(A3.6.1). In addition, as noted above in the discussion of Table A-2, 
the counterparty contact information that was required under Table A-2 
in the Proposed Rules has been moved to fields A3.13-A3.16.
d. Table A-4--Collateral Detail Data
    Table A-4 requires detailed information, on a counterparty by 
counterparty basis, relating to the collateral received by and the 
collateral posted by the records entity as reported in Table A-2. This 
information includes, for each collateral item, the unique collateral 
identifier (A4.6), information about the value of the collateral (A4.7-
9), a description of the collateral (A4.10), the fair value asset 
classification (A4.11), the collateral segregation status (A4.12), the 
collateral location and jurisdiction (A4.13-14), and whether the 
collateral is subject to rehypothecation (A4.15). This collateral 
detail data, together with the netting-set level collateral data in 
Table A-2, will enable the receiver to more fully assess the type, 
nature, value, and location of the collateral and to model various QFC 
transfer or termination scenarios. Collateral detail information will 
also enable the receiver to ensure that collateral is transferred 
together with any QFCs that it secures, as required by the Act.\118\ 
For cross-border transactions, the comprehensive information on 
collateral will assist the receiver in determining the sufficiency and 
availability of collateral posted outside the United States, as well as 
any close-out risk if the receiver does not arrange for the transfer of 
QFC positions.
---------------------------------------------------------------------------

    \118\ See 12 U.S.C. 5390(c)(9)(A)(i)(IV).
---------------------------------------------------------------------------

    The Secretary did not receive any comments requesting specific 
changes to the requirements of Table A-4. Nevertheless, to reduce the 
burden of Table A-4, the following data fields have been eliminated in 
the Final Rules: Original face amount of collateral item in U.S. 
dollars; current end of day market value amount of collateral item in 
local currency; and collateral code. The Final Rules also eliminate the 
requirement to describe the scope of collateral segregation.
    A collateral posted or received flag has been added to Table A-4 to 
clearly indicate to the receiver whether the collateral was posted or 
received by the records entity (A4.3). This field should impose minimal 
additional burden because a records entity will already need to 
identify all collateral as posted or received in Table A-2, which 
requires separate collateral information for collateral posted and 
collateral received. The Final Rules also adds the data extraction date 
field (A4.1), as discussed above, to Table A-4 as well as certain other 
fields necessary to link the data in Table A-4 to the data maintained 
in one or more of the other data tables or look-up tables (A4.2, A4.4, 
A4.5).

[[Page 75642]]

e. Corporate Organization Master Data Lookup Table
    In the Proposed Rules, information regarding a records entity's 
affiliates was required by section 148.4(a)(7) and Tables A-1 and A-2. 
The Secretary has determined it is appropriate to provide instead for 
the corporate organization information to be maintained in the new 
corporate organization master data lookup table, which is cross-
referenced with Tables A-1 through A-4. The Final Rules require this 
information to be maintained by a records entity with respect to itself 
and all of the members of its corporate group, which includes all of 
the records entities' affiliates. Although, as discussed above, the 
definition of ``records entity'' has been revised in the Final Rules to 
identify which members of a corporate group are records entities by 
reference to whether they are consolidated under accounting standards, 
in the event of a Title II resolution, the FDIC would need the 
information described in the next paragraph for each affiliate, 
irrespective of consolidation, to allow it to exercise its rights and 
obligations under, and ensure compliance with, section 210(c)(16) of 
the Act. As referenced above, under section 210(c)(16) of the Act, the 
contracts of subsidiaries or affiliates of a covered financial company 
that are guaranteed or otherwise supported by or linked to such covered 
financial company can be enforced by the FDIC as receiver of the 
covered financial company notwithstanding the insolvency, financial 
condition, or receivership of the financial company if the FDIC 
transfers the guarantee or other support to a bridge financial company 
or other third party.\119\ The FDIC's decision as to whether to 
transfer such a guarantee or credit support pursuant to sections 
210(c)(9) and (10) of the Act may thus be influenced by the information 
required to be maintained as to a records entities' affiliates. 
Information about affiliates of the records entity will also, as 
discussed below, assist the FDIC with monitoring compliance with the 
rules.
---------------------------------------------------------------------------

    \119\ 12 U.S.C. 5390(c)(16).
---------------------------------------------------------------------------

    The information that each records entity will need to maintain with 
respect to itself and each of its affiliates includes its and its 
affiliates' identifiers and legal name (CO.2-4), identification of 
immediate parent (CO.5-CO.7), the immediate parent's percentage 
ownership (CO.8), the entity type (CO.9), domicile (CO.10), and 
jurisdiction of incorporation or organization (CO.11). This information 
will be easier to provide and to update as part of the corporate 
organization master data lookup table rather than as part of the 
corporate organization chart provided for under the Proposed Rules. Use 
of the corporate organization master data lookup table will also 
facilitate the linking of the data provided in Tables A-1 through A-4 
to key information about the records entity and its affiliates.
    The corporate organization master data lookup table also includes a 
recordkeeping status field (CO.12) that was not included in the 
Proposed Rules. This field, which requires the records entity to 
identify, with respect to each of its affiliates, whether the affiliate 
is (i) a records entity, (ii) a non-financial company, (iii) an 
excluded entity, (iv) a financial company that is not a party to any 
open QFCs, (v) a records entity that is availing itself of the de 
minimis exemption, or (vi) a records entity that is availing itself of 
another exemption, e.g., the conditional exemption for clearing 
organizations provided under the Final Rules. The information provided 
in this field will enable the FDIC as receiver to validate that all 
affiliates that are records entities have provided records to the 
extent appropriate. For example, if an affiliate has not provided QFC 
records, the FDIC will be able to ascertain, by reference to this 
field, whether the affiliate has not provided records because it is not 
a party to any QFCs, has availed itself of the de minimis exemption, or 
is not included within the definition of ``records entity.'' The 
addition of the de minimis exemption in the Final Rules made the need 
for this field more acute; without this information, the FDIC as 
receiver will not be alerted to an entity having availed itself of the 
de minimis exemption such that the FDIC would need to review the QFC 
documentation of that entity manually. Because each member of a 
corporate group for which there is a records entity will make its own 
determination as to whether it is subject to the recordkeeping 
requirements of the rules, the addition of this field should impose 
only a minimal burden.
f. Counterparty Master Data Lookup Table
    In the Proposed Rules, information regarding a records entity's 
non-affiliated QFC counterparties was required by section 148.4(a)(6) 
and in Table A-2. Several commenters suggested that the organizational 
and affiliate information for counterparties not affiliated with the 
records entity that would have been required by the Proposed Rules be 
eliminated or significantly reduced.\120\ These commenters stated that 
the broad definitions of ``affiliate'' and ``control'' would make this 
a complex and difficult analysis.\121\ One commenter noted that most 
financial companies do not ask for or maintain records on affiliations 
between counterparties (other than parent-subsidiary relationships) and 
that these relationships are subject to change, such that even if such 
information were maintained, the records entity would not be in a 
position to verify the accuracy of the information.\122\
---------------------------------------------------------------------------

    \120\ See TCH et al. letter, pp. 16-17; SIFMA AMG letter, p. 11.
    \121\ Id.
    \122\ See TCH et al. letter, p. 16.
---------------------------------------------------------------------------

    Having considered the comments received as to the burden of 
collecting, maintaining, and updating this information, the Secretary 
has determined that information regarding the identity of the immediate 
and ultimate parent of each counterparty is sufficient to enable the 
FDIC as receiver to comply with the requirement, discussed above, that 
the FDIC either (i) transfer all QFCs between the covered financial 
company and a counterparty and any affiliate of such counterparty to a 
single financial institution, (ii) disaffirm or repudiate all such 
QFCs, or (iii) retain all such QFCs. The data required by the 
counterparty master data lookup table includes the counterparty 
identifier (CP.2, which must be the current LEI maintained by the 
counterparty if the counterparty has obtained an LEI), the legal name 
of the counterparty (CP.4), domicile of counterparty (CP.5), 
jurisdiction of incorporation (CP.6), identification of the immediate 
parent of the counterparty (CP.7-CP.9), and identification of the 
ultimate parent of the counterparty (CP.10-CP.12).
g. Booking Location Master Data Lookup Table
    In the Proposed Rules, the maintenance of information related to 
the booking location of a QFC position was required under Table A-1. To 
simplify the tables and facilitate the updating of this information, 
the Secretary has decided that some of this information should be 
maintained in a separate table. The information required by the booking 
location table, which includes the booking location identifier and 
booking unit or desk identifier, description and contact information, 
will enable the receiver to determine where the trade is booked and 
settled and understand the purpose of the position. As noted above, 
Table A-1 as

[[Page 75643]]

proposed had also required information pertaining to a point of contact 
responsible for the position. Based on consideration of comments 
received, the Secretary determined that this information is not 
necessary to the FDIC so long as records entities are required to 
provide current information on the booking location and the booking 
unit or desk pertaining to QFCs.
h. Safekeeping Agent Master Data Lookup Table
    In the Proposed Rules, the maintenance of information relating to 
the safekeeping agent for collateral securing a QFC position was 
required by Table A-2. To simplify the tables and facilitate updating 
this information, the Secretary has decided to maintain the detailed 
information as to safekeeping agent in a separate table. The data 
required by this table includes the safekeeping agent identifier, name, 
and point of contact information (SA.2-SA.7). The information in this 
table must be capable of being provided with respect to each 
safekeeping agent for collateral of QFCs of a records entity, whether 
the safekeeping agent is a third party, the counterparty to the QFC 
secured by such collateral, or the records entity itself.

III. Administrative Law Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (the ``RFA'') (5 U.S.C. 601 et seq.) 
requires an agency to consider whether the rules it promulgates will 
have a significant economic impact on a substantial number of small 
entities. Congress enacted the RFA to address concerns related to the 
effects of agency rules on small entities, and the Secretary is 
sensitive to the impact the Final Rules may impose on small entities. 
The RFA defines a ``small business'' as having the same meaning as 
``small business concern'' under section 3 of the Small Business 
Act,\123\ which is defined as an entity that is ``independently owned 
and operated'' and is ``not dominant in its field of operation.'' \124\ 
In this case, the Secretary believes that the Final Rules likely would 
not have a ``significant economic impact on a substantial number of 
small entities.'' The Dodd-Frank Act mandates that the Secretary 
prescribe regulations requiring financial companies to maintain records 
with respect to QFCs to assist the FDIC as receiver of a covered 
financial company in being able to exercise its rights under the Act 
and to fulfill its obligations under sections 210(c)(8), (9), or (10) 
of the Dodd-Frank Act. As a result, the economic impact on financial 
companies, including any impact on small entities, flows directly from 
the Dodd-Frank Act, and not the Final Rules.
---------------------------------------------------------------------------

    \123\ See 5 U.S.C. 601(3).
    \124\ See 15 U.S.C. 632(a)(1).
---------------------------------------------------------------------------

    The RFA requires agencies either to provide an initial regulatory 
flexibility analysis with a proposed rule or to certify that the 
proposed rule will not have a significant economic impact on a 
substantial number of small entities. As described in the Proposed 
Rules, the Secretary, in accordance with section 3(a) of the RFA, 
reviewed the Proposed Rules and preliminarily concluded that the 
Proposed Rules likely would not have a significant economic impact on a 
substantial number of small entities.\125\ However, because the 
Secretary did not have complete data at that time to certify this 
determination, particularly with regard to affiliated financial 
companies, an Initial Regulatory Flexibility Analysis was prepared in 
accordance with 5 U.S.C. 603.
---------------------------------------------------------------------------

    \125\ See 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    The Secretary certifies, pursuant to 5 U.S.C. 605(b), that the 
Final Rules will not have a significant economic impact on a 
substantial number of small entities under the Small Business 
Administration's (``SBA'') most recently revised standards for small 
entities, which went into effect on February 26, 2016. As discussed 
below, the Secretary has made various changes to reduce the scope and 
burden of the rules. However, even apart from these considerations, the 
Final Rules are not expected to have a significant economic effect on 
any small entities because any entities that would be subject to the 
rules as ``records entities'' that would otherwise meet the standards 
for small entities would be subsidiaries of large corporate groups and 
would therefore not be ``independently owned and operated.''
    In the Initial Regulatory Flexibility Analysis, the Secretary 
requested comment on whether the Proposed Rules would have a 
significant economic impact on a substantial number of small entities 
and whether the costs are the result of the Act itself, and not the 
Proposed Rules. Specifically, the Secretary requested that commenters 
quantify the number of small entities, if any, that would be subject to 
the Proposed Rules, describe the nature of any impact on small 
entities, and provide empirical and other data to illustrate and 
support the number of small entities subject to the Proposed Rules and 
the extent of any impact.
    The Secretary received comments on the Proposed Rules from trade 
associations, asset managers, insurance companies, clearing 
organizations, nonprofit organizations, and a private individual. In 
general, commenters acknowledged the need for the FDIC to have 
appropriate information in order to exercise its role as a receiver 
under Title II of the Dodd-Frank Act.\126\ However, while commenters 
also requested various modifications to or relief from aspects of the 
Proposed Rules that they stated would entail burdens that outweighed 
the benefits to the FDIC, none provided comments, empirical data, or 
other analyses in response to the Initial Regulatory Flexibility 
Analysis or in response to the questions posed by the Secretary 
regarding the economic impact on small entities.\127\ As discussed in 
detail in section II above, after carefully considering all of the 
comments received and consulting with the FDIC, Treasury has adopted 
these Final Rules.
---------------------------------------------------------------------------

    \126\ See, e.g., Better Markets letter, p. 1; TCH et al. letter, 
p. 2; DTCC letter, p. 1-2; CEWG letter, p. 2; SIFMA AMG letter, p. 
1.
    \127\ See, e.g., TIAA-CREF letter, p. 1; ACLI letter, p. 9; TCH 
et al. letter, p. 2. Several commenters also commented on the 
potential impact of the Proposed Rules on affiliates of a corporate 
group, though such affiliates were not identified as small entities. 
See discussion under ``Members of Corporate Groups'' in section 
II.A.1.a above.
---------------------------------------------------------------------------

    The Proposed Rules, rather than requiring all financial companies 
to maintain records with respect to QFCs, would have applied to a 
narrower subset of financial companies. Specifically, the Secretary 
proposed to exclude from the scope of the Proposed Rules financial 
companies that did not meet one of the following three criteria: (1) A 
nonbank financial company subject to a determination by the Council 
pursuant to section 113 of the Act (12 U.S.C. 5323); (2) a financial 
market utility designated pursuant to Section 804 of the Act (12 U.S.C. 
5463) as, or as likely to become, systemically important; or (3) have 
total assets equal to or greater than $50 billion. At the time the 
Proposed Rules were published, each of the financial companies expected 
to be subject to the rules under these criteria had revenues in excess 
of the SBA's revised standards for small entities that went into effect 
on July 22, 2013. The Proposed Rules would also have applied to these 
large financial companies' affiliated financial companies if an 
affiliated financial company otherwise qualified as a ``records 
entity'' and was not an ``exempt entity'' under the Proposed Rules. 
However, such affiliated financial

[[Page 75644]]

companies are not independently owned and operated.
    As discussed in section II.A.1 above, the Secretary, in response to 
comments, determined to make several changes to the definition of 
``records entity'' in the Final Rules in order to substantially reduce 
the number of entities that will be subject to recordkeeping 
requirements. Further, as discussed in section II.C.3 above, the 
Secretary determined to include in the Final Rules a de minimis 
exemption from the preponderance of the recordkeeping requirements for 
certain records entities that have a minimal level of QFC activity. 
These changes have the effect of further reducing the likelihood that 
the rules would affect a substantial number of small entities. In 
addition, the definition of ``records entity'' has been revised in the 
Final Rules to refer to members of a corporate group that are 
consolidated under accounting standards, which should reduce the number 
of entities that would be included as records entities and ensure that 
records entities that are members of a corporate group are able to 
coordinate their compliance with the recordkeeping requirements of the 
rules. The addition in the Final Rules of the requirement that a top-
tier financial company of a corporate group that has multiple records 
entities must be able to generate a single, compiled set of the records 
for all records entities in the corporate group that it consolidates or 
are consolidated with it would not affect the number of small entities 
that are subject to the rule as no such top-tier financial company 
would be a small entity.
    As discussed above, the Final Rules would only affect large 
financial companies and certain of their affiliates that meet the 
definition of a records entity. Previously, the Secretary proposed that 
the recordkeeping requirements in the Proposed Rules would be 
applicable to all affiliated financial companies in a large corporate 
group that meet the definition of ``records entity,'' regardless of 
their size, because excluding records entities, including small 
entities, could significantly impair the FDIC's right to enforce 
certain QFCs of affiliates of covered financial companies under section 
210(c)(16) of the Act. The Secretary has been advised by the FDIC that, 
based on its experience with Part 371, the FDIC as receiver should be 
able to exercise its statutory rights and duties under the Dodd-Frank 
Act relating to QFCs without having access to standardized records for 
any records entity that is a party to 50 or fewer open QFC positions. 
Thus the Secretary has determined that a de minimis exemption from 
maintaining the records described in section 148.4 of the Final Rules, 
other than the records described in section 148.4(i), is appropriate 
for records entities that have such a minimal level of QFC activity. 
This change has the effect of further reducing the likelihood that the 
Final Rules would affect a substantial number of small entities. 
Although it is unlikely that any small entities would be affected 
because affiliated members generally do not meet the definition of 
``small entity,'' this revision will minimize the burden faced by 
affiliated members of a corporate group.
    Based on current information and discussions with staff of several 
of the PFRAs who are familiar with financial company operations and 
have experience supervising financial companies with QFC portfolios, 
the Secretary believes that the large corporate groups that would be 
subject to the Final Rules would likely comply with the rules by 
utilizing a centralized recordkeeping system, whether by adapting an 
existing system or establishing a new system, that would obviate the 
need for each member of such corporate group, including small entity 
members of the corporate group, to maintain its own recordkeeping 
system in order to comply with the rules. This is expected to have the 
effect of substantially reducing the burden of compliance with the 
rules on particular small entity members, if any, of a corporate group 
subject to the rules. The Secretary requested information and comment 
in the Initial Regulatory Flexibility Analysis on the role of entities 
responsible for the centralized recordkeeping systems and whether such 
entities are small entities to which the Proposed Rules would apply. 
While several commenters addressed the impact of the Proposed Rules in 
general on information recordkeeping systems,\128\ none specifically 
addressed the role of entities responsible for such systems and whether 
any such entities are small entities.
---------------------------------------------------------------------------

    \128\ See DTCC letter, p. 10; OCC letter, p. 12; TCH et al. 
letter, pp. 22-23; TIAA letter, p. 2
---------------------------------------------------------------------------

    As discussed in more detail above, the Final Rules impose certain 
recordkeeping requirements on records entities. A records entity is 
required to maintain all records described in section 148.4 of the 
Final Rules, be able to generate data in the format set forth in the 
appendix to the Final Rules, and be capable of transmitting those 
records electronically to the records entity's PFRA and the FDIC. The 
Final Rules include recordkeeping requirements with respect to 
position-level data, counterparty-level data, legal documentation data, 
collateral detail data, corporate organization data, and a list of 
vendors directly supporting QFC-related activities of the records 
entity and the vendors' contact information.
    As discussed in the Initial Regulatory Flexibility Analysis, based 
on discussions with several of the PFRAs that are familiar with 
financial company operations and have experience supervising financial 
companies with QFCs portfolios, the Secretary believes that records 
entities are already maintaining, as part of their ordinary course of 
business, most of the QFC information required to be maintained under 
the Final Rules, which minimizes the potential economic impact.\129\ 
However, the Secretary acknowledges that the Final Rules' form and 
availability requirements may impose additional costs and burdens on 
records entities.
---------------------------------------------------------------------------

    \129\ Registered derivatives clearing organizations and clearing 
agencies, given the nature of their business, do not currently 
maintain much of the required records and have been provided a 
conditional exemption under the Final Rules for the reasons 
discussed under ``Clearing Organizations'' in section II.A.1.a 
above.
---------------------------------------------------------------------------

    The Secretary recognizes that there may be particular types of QFCs 
or counterparties for which more limited information may be sufficient 
to enable the FDIC to exercise its rights under the Act and fulfill its 
obligations under sections 210(c)(8), (9), or (10) of the Act. The 
Final Rules provide the Secretary with the discretion to grant 
conditional or unconditional exemptions from one or more of the 
requirements of the Final Rules, which could include exemptions from 
the recordkeeping requirements regarding particular types of QFCs or 
counterparties. In addition, section 148.1(d)(3) of the Final Rules 
provides the Secretary with the authority to grant extensions of time 
for compliance purposes.
    The Secretary requested in the Initial Regulatory Flexibility 
Analysis information and comment on any costs, compliance requirements, 
or changes in operating procedures arising from application of the 
Proposed Rules on small entities.\130\ Most commenters offered general 
comments on the costs of compliance requirements and changes in 
operating procedures.\131\ These comments have been addressed by the 
Secretary in section II, above. However, none of these commenters 
quantified the costs of compliance by small entities or otherwise 
provided

[[Page 75645]]

empirical data regarding the costs of compliance by small 
entities.\132\ Moreover, the Secretary received no comments on its 
discussion of the impact on small entities in the Initial Regulatory 
Flexibility Analysis. In light of the foregoing and the considerations 
discussed above, the Secretary certifies the Final Rules will not have 
a significant economic effect on a substantial number of small 
entities.
---------------------------------------------------------------------------

    \130\ See 80 FR 966, 986.
    \131\ See, e.g., ACLI letter, pp. 17-19; SIFMA AMG letter, pp. 
11-14.
    \132\ One commenter stated that the Secretary's estimate of the 
cost of initial compliance for most financial groups subject to the 
rules will, on an individual basis, far exceed the Secretary's 
estimation of the total industry-wide compliance cost included in 
the Secretary's Paperwork Reduction Act analysis of the Proposed 
Rules; however, the commenter did not otherwise offer an estimate of 
compliance costs or estimate the costs of compliance by small 
entities specifically. See TCH et al. letter, pp. 3-4.
---------------------------------------------------------------------------

B. Paperwork Reduction Act

    Certain provisions of the Final Rules contain ``collection of 
information requirements'' within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA''). An agency may not conduct or sponsor, 
and a person is not required to respond to, a collection of information 
unless it displays a currently valid control number. The collection of 
information requirements in the Final Rules have been submitted by the 
Secretary to the Office of Management and Budget (``OMB'') for review 
in accordance with the PRA, 44 U.S.C. 3507(d). The title of this 
collection is ``Qualified Financial Contracts Recordkeeping Related to 
Orderly Liquidation Authority.'' The collection of information has been 
assigned OMB Control No. 1505-0256.
    Previously, the Secretary requested comments on the collection of 
information burdens associated with the Proposed Rules. Specifically, 
the Secretary asked for comment concerning:
    (1) Whether the proposed information collection is necessary for 
the proper performance of agency functions, including whether the 
information will have practical utility;
    (2) The accuracy of the estimated burden associated with the 
proposed collection of information, including the validity of the 
methodology and assumptions used;
    (3) How to enhance the quality, utility, and clarity of the 
information required to be maintained;
    (4) How to minimize the burden of complying with the proposed 
information collection, including the application of automated 
collection techniques or other forms of information technology;
    (5) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to maintain the information; and
    (6) Estimates of (i) the number of financial companies subject to 
the Proposed Rules, (ii) the number of records entities that are 
parties to an open QFC or guarantee, support, or are linked to an open 
QFC, and (iii) the number of affiliated financial companies that are 
parties to an open QFC or guarantee, support, or are linked to an open 
QFC of an affiliate.
    Commenters on the Proposed Rules generally acknowledged the need 
for the FDIC to have appropriate information in order to exercise its 
role as a receiver under Title II of the Act. Commenters also requested 
various modifications to or relief from aspects of the Proposed Rules 
that they stated would entail burdens that outweighed the benefits to 
the FDIC. This included recommendations that the records required to be 
maintained under the Proposed Rules be tailored more narrowly to 
require only data that is critical to the FDIC's QFC transfer 
determinations under section 210 of the Act. Several commenters also 
remarked generally that the Proposed Rules would entail significant 
information technology and systems development challenges.\133\ 
However, none of the commenters provided comments, empirical data, 
estimates of costs or benefits, or other analyses directly addressing 
matters pertaining to the PRA discussion.
---------------------------------------------------------------------------

    \133\ See DTCC letter, p. 3, 8-11; OCC letter, p. 12; TCH et al. 
letter, pp. 19, 22; TIAA-CREF letter, p. 2.
---------------------------------------------------------------------------

    The collection of information is required by section 210(c)(8)(H) 
of the Act, which mandates that the Secretary prescribe regulations 
requiring financial companies to maintain records with respect to QFCs 
to assist the FDIC as receiver for a covered financial company in being 
able to exercise its rights under the Act and fulfill its obligations 
under sections 210(c)(8), (9), or (10) of the Act. The Final Rules 
implement these requirements by requiring that a records entity 
maintain records with respect to, among other things, position-level 
data, counterparty data, legal agreement data (including copies of 
agreements governing QFC transactions and open confirmations), 
collateral detail data, corporate organization information, and a list 
of vendors directly supporting QFC-related activities of the records 
entity and the vendors' contact information. The Final Rules require 
that a records entity be capable of providing QFC records to its PFRA 
and the FDIC within 24 hours of the request of such PFRA. For corporate 
groups that have multiple records entities, the top-tier financial 
company of the corporate group must be able to generate a single, 
compiled set of the records specified in the Final Rules for all 
records entities in the corporate group that it consolidates or are 
consolidated with it and provide such set of records to its PFRA and 
the FDIC within 24 hours of the request of such PFRA and in a format 
that allows for aggregation and disaggregation of such data by records 
entity and counterparty.
    The Final Rules also provide that a records entity may request in 
writing an extension of time with respect to the compliance dates 
associated with the recordkeeping requirements. The Final Rules further 
provide that one or more records entities may request in writing an 
exemption from one or more of the recordkeeping requirements. Finally, 
the Final Rules provide a de minimis exemption from maintaining the 
records described in section 148.4 of the Final Rules, other than the 
records described in section 148.4(i), for a records entity that is a 
party to 50 or fewer open QFC positions.
Respondents
    In the PRA discussion in the Proposed Rules, the Secretary 
estimated that approximately 140 large corporate groups and each of 
their respective affiliated financial companies that is a party to an 
open QFC or guarantees, supports or is linked to an open QFC of an 
affiliate and is not an ``exempt entity,'' would meet the proposed 
definition of ``records entity.'' The estimate of 140 large corporate 
groups includes the four nonbank financial companies subject to a 
determination by the Council under section 113 of the Dodd-Frank Act 
and the eight financial market utilities designated by the Council 
under section 804 of the Dodd-Frank Act as systemically important. The 
Proposed Rules also included within the definition of ``records 
entity'' financial companies with assets greater than or equal to $50 
billion. The Federal Financial Institutions Examination Council 
(``FFIEC'') maintains on its public Web site a list of bank holding 
companies with total assets of greater than $10 billion, which was used 
to identify bank holding companies with assets greater than or equal to 
$50 billion. For corporate groups that are not bank holding companies, 
SNL Financial, a private vendor that provides a subscription-access 
database that aggregates publicly available financial information on 
insurance, securities and investment, specialty

[[Page 75646]]

finance, and financial technology companies, as well as financial 
statements filed with the SEC and, for broker-dealers, with the 
Financial Industry Regulatory Authority, were used to identify 
corporate groups with assets greater than or equal to $50 billion as of 
December 31, 2013. By reference to these sources, as well as 
conversations with the PFRAs, 128 additional corporate groups were 
estimated to be subject to the rules.
    For purposes of the PRA discussion in the Proposed Rules, the 
Secretary estimated that each large corporate group was comprised of 
approximately 168 affiliates, resulting in an estimate of 23,325 
affiliated financial companies. As noted above, commenters generally 
did not provide comments, empirical data, or other analyses directly 
addressing the Secretary's estimates in the PRA discussion. As 
discussed in detail in section II above, the Final Rules, as adopted, 
incorporate several changes to the Proposed Rules, including the 
addition to the definition of ``records entity'' of criteria based on 
the level of a financial company's derivatives activity, the exclusion 
of insurance companies, a conditional exemption for derivatives 
clearing organizations, and the inclusion of a de minimis exemption. 
Taken together, these changes substantially reduce the scope of 
financial companies subject to the recordkeeping requirements of the 
Final Rules.
    The Secretary estimates that approximately 30 large corporate 
groups, and each of their respective affiliated financial companies 
that is a party to an open QFC and is not an ``excluded entity,'' will 
meet the definition of ``records entity'' in section 148.2(n) upon the 
effective date of the Final Rules, compared to the estimate in the 
Proposed Rules of 140 large corporate groups. The Secretary estimates 
that collectively these 30 corporate groups had approximately $15 
trillion in total assets, compared to an estimated $25 trillion in 
total assets of the 140 corporate groups that were expected to meet the 
definition of ``records entity'' in the Proposed Rules. These estimates 
were based on the publicly disclosed financial statements of such 
corporate groups as of December 31, 2015 and December 31, 2013, 
respectively.
    The estimate of 30 large corporate groups was calculated as 
follows. There are three categories of financial companies that are 
included within the definition of ``records entity'' in the Final Rules 
without regard to whether they meet the asset or derivatives 
thresholds. The estimate includes the eight U.S. top-tier bank holding 
companies currently identified as G-SIBs. Likewise, the estimate 
includes the two nonbank financial companies currently subject to a 
determination by the Council under section 113 of the Dodd-Frank Act. 
There are currently eight financial market utilities designated by the 
Council under section 804 of the Dodd-Frank Act as systemically 
important. Six of these entities are registered clearing agencies or 
derivatives clearing organizations, for which a conditional exemption 
has been provided under the Final Rules, though their affiliates may be 
subject to the recordkeeping requirements if they are party to open 
QFCs.
    The estimate also includes large corporate groups that would be 
subject to the rules by virtue of the amount of their total 
consolidated assets and level of derivatives activity. For bank holding 
companies, the FFIEC-maintained list, referenced above, of bank holding 
companies with total assets of greater than $10 billion was used to 
identify bank holding companies with assets greater than or equal to 
$50 billion. The amount of total gross notional derivatives outstanding 
and the amount of derivatives liabilities of these bank holding 
companies was obtained by reference to the consolidated financial 
statements filed with the Federal Reserve by such bank holding 
companies on the Federal Reserve's Form FR Y-9C, which are publicly 
available on the Federal Reserve's Web site. For corporate groups that 
are not bank holding companies, the SNL Financial database referenced 
above, as well as financial statements filed with the SEC and, for 
broker-dealers, with the Financial Industry Regulatory Authority were 
used to identify corporate groups having total assets greater than or 
equal to $50 billion and having either greater than or equal to $3.5 
billion in derivatives liabilities or greater than or equal to $250 
billion in total gross notional derivatives outstanding as of December 
31, 2015. By reference to these sources, as well as conversations with 
the PFRAs, twelve additional corporate groups were estimated to be 
subject to the rules. While the number of corporate groups having total 
assets greater than or equal to $50 billion was similar to that 
estimated at the time of the issuance of the Proposed Rules, the 
addition to the definition of ``records entity'' of criteria based on 
the level of a financial company's derivatives activity and the 
exclusion of insurance companies significantly reduced the number of 
corporate groups estimated to be subject to the rules.
    The following table summarizes the calculation of the estimates of 
the number and aggregate size of large corporate groups subject to the 
Proposed Rules and the Final Rules.

               Large Corporate Groups Subject to the Rules
------------------------------------------------------------------------
                                          Proposed rules    Final rules
------------------------------------------------------------------------
Subject to a determination that the                    8               8
 company shall be subject to Federal
 Reserve supervision and enhanced
 prudential standards pursuant to 12
 U.S.C. 5323............................
Subject to a designation as, or as                     4               2
 likely to become, systemically
 important pursuant to 12 U.S.C. 5463...
Identified as a global systemically                  N/A               8
 important bank holding company pursuant
 to 12 CFR Part 217.....................
Corporate group (excluding the above)                128             N/A
 that has, on a consolidated basis,
 greater than $50 billion in total
 assets *...............................
Corporate group (excluding the above)                N/A              12
 that has, on a consolidated basis (1)
 greater than $50 billion in total
 assets and (2)(i) total gross notional
 derivatives outstanding equal to or
 greater than $250 billion or (ii)
 derivative liabilities equal to or
 greater than $3.5 billion *............
                                         -------------------------------
    Total corporate groups..............             140              30
    Aggregate total assets *............          ** $25          ** $15
------------------------------------------------------------------------
* Based on data obtained from FFIEC public Web site; SNL Financial, a
  private vendor that provides a subscription-access database that
  aggregates publicly available financial information on insurance,
  securities and investment, specialty finance, and financial technology
  companies; financial statements filed with the SEC, Financial Industry
  Regulatory Authority, and the Federal Reserve; and conversations with
  the PFRAs.
** Trillion.


[[Page 75647]]

    The Final Rules would also apply to these large corporate groups' 
affiliated financial companies (regardless of their size) if an 
affiliated financial company otherwise qualifies as a ``records 
entity,'' and is not an ``excluded entity.'' In addition, as referenced 
above, the Final Rules will also require the top-tier financial company 
of the corporate group to be capable of generating a single, compiled 
set of the records specified in the Final Rules for all records 
entities in the corporate group that it consolidates or are 
consolidated with it and to be capable of providing such a set of 
records to its PFRA and the FDIC.
    The Secretary estimates that the large corporate groups that will 
be subject to the rules collectively have 5,010 affiliated financial 
companies that may qualify as records entities. The Secretary 
recognizes that, based on a number of factors, the actual total number 
of respondents may differ significantly from this estimate. One such 
factor is that there is no information available to determine how many 
of the affiliated financial companies of a large corporate group are a 
party to an open QFC and thus would qualify as records entities. At the 
same time, the inclusion and availability of the de minimis exemption 
in the Final Rules will have the effect of reducing the number of 
affiliated financial companies in many corporate groups subject to the 
recordkeeping requirements. Finally, as previously noted, commenters 
did not provide requested comments, empirical data, or other analyses 
directly addressing the Secretary's estimates of the total number of 
respondents for purposes of the PRA discussion. For the foregoing 
reasons, the Secretary has concluded it is reasonable to maintain the 
estimate of affiliates per corporate group used in the PRA discussion 
in the Proposed Rules and therefore to assume that a total of 5,010 
affiliated financial companies would qualify as record entities.
    The Secretary's recordkeeping, reporting, data retention, and 
records generation burden estimates are based on discussions with the 
PFRAs regarding their prior experience with initial burden estimates 
for other recordkeeping systems. The Secretary also considered the 
burden estimates in rulemakings with similar recordkeeping and 
reporting requirements.\134\ As noted above, some commenters stated 
that certain aspects of the Proposed Rules entailed burdens that 
outweighed the benefits to the FDIC. Several commenters also provided 
general comments that the recordkeeping requirements of the Proposed 
Rules would involve significant information technology and systems 
development challenges. In general, commenters did not directly address 
the Secretary's estimates and analysis in the PRA discussion. 
Nevertheless, the Secretary has taken all comments into consideration 
and made certain modifications and adjustments to this PRA discussion 
in the Final Rules to reflect those comments. As discussed in section 
II above, the Final Rules incorporate numerous changes in response to 
commenters' concerns, and this PRA discussion reflects those changes.
---------------------------------------------------------------------------

    \134\ See 80 FR 14563 (Mar. 19, 2015); 77 FR 2136 (Jan. 13, 
2012); 76 FR 46960 (Aug. 3, 2011); 76 FR 43851 (July 22, 2011); 73 
FR 78162 (Dec. 22, 2008).
---------------------------------------------------------------------------

    In order to comply with the Final Rules, each of the large 
corporate group respondents will need to set up its network 
infrastructure to collect data in the required format. This will likely 
impose a one-time initial burden on the large corporate group 
respondents in connection with the necessary updates to their 
recordkeeping systems, such as systems development or modifications. 
This initial burden is mitigated to some extent because QFC data is 
likely already retained in some form by each large corporate group 
respondent in the ordinary course of business, but large corporate 
group respondents may need to amend internal procedures, reprogram 
systems, reconfigure data tables, and implement compliance processes. 
Moreover, they may need to standardize the data and create records 
tables to match the format required by the Final Rules. In recognition 
of this, as discussed in section II.A.3 above, the Final Rules provide 
for staggered compliance dates that will provide all records entities 
with additional time to comply with the recordkeeping requirements. 
Under the Final Rules, all but the very largest institutions will have 
at least two years to comply with the rules' requirements.\135\
---------------------------------------------------------------------------

    \135\ All records entities and top-tier financial companies will 
be required to provide point of contact information to their PFRAs 
and the FDIC on the effective date of the rules.
---------------------------------------------------------------------------

    As discussed above, the Final Rules also apply to affiliated 
financial companies of the large corporate group respondents. The Final 
Rules will likely impose a one-time initial burden on the affiliated 
financial companies in connection with necessary updates to their 
recordkeeping systems, such as systems development or modifications. 
These burdens will vary widely among affiliated financial companies. As 
noted herein and as discussed in section II.C.3 above, the Final Rules 
provide a de minimis exemption from the recordkeeping and reporting 
requirements for certain records entities that have a minimal level of 
QFC activity, which the Secretary believes will significantly reduce 
the number of affiliated financial companies subject to the 
recordkeeping and reporting requirements of the Final Rules.
    The Secretary believes that the large corporate groups subject to 
the Final Rules are likely to rely on centralized systems to comply 
with most of the recordkeeping requirements, as set forth herein, for 
the QFC activities of all affiliated members of the corporate group. 
The entity responsible for each large corporate group's centralized 
system will likely operate and maintain a technology shared services 
model with the majority of the technology applications, systems, and 
data shared by the multiple affiliated financial companies within the 
corporate group. Therefore, the majority of the recordkeeping burden 
stemming from the Final Rules will be borne by the entity responsible 
for each large corporate group's centralized systems, while relatively 
little initial and ongoing recordkeeping burden will be imposed on 
their affiliated financial companies. The affiliated financial 
companies will likely have a much lower burden because they can utilize 
the technology and network infrastructure operated and maintained by 
the entity responsible for the centralized system at their respective 
large corporate group. Similarly, the Secretary believes that the 
affiliated financial companies will rely on the entities responsible 
for the centralized systems to perform the requirements under section 
148.3(a)(1)(ii).
    Similarly, the Secretary believes that affiliated financial 
companies will rely on large corporate group respondents to submit any 
requests for extensions of time under section 148.1(d)(3) or requests 
for exemption from one or more requirements of the Final Rules under 
section 148.3(c)(3).
Estimated Paperwork Burden
    Recordkeeping
    Estimated number of respondents
    Estimated number of large corporate groups: 30.
    Estimated number of affiliated financial companies: 5,010.
    Total estimated initial recordkeeping burden
    Estimated average initial burden hours per respondent: 7,200 hours 
for large corporate groups, 0.5 hours for affiliated financial 
companies.

[[Page 75648]]

    Estimated frequency: One-time, spread over applicable compliance 
period.
    Estimated total initial recordkeeping burden: 216,000 hours for 
large corporate groups and 2,505 hours for affiliated financial 
companies.
    Total estimated annual recordkeeping burden
    Estimated average annual burden hours per respondent: 240 hours for 
large corporate groups, 0.5 hours for affiliated financial companies.
    Estimated frequency: Annually.
    Estimated total annual recordkeeping burden: 7,200 hours per year 
for large corporate groups and 2,505 hours per year for affiliated 
financial companies.
    The initial and annual recordkeeping burden is imposed by the Dodd-
Frank Act, which requires that the Secretary prescribe regulations 
requiring financial companies to maintain records with respect to QFCs 
to assist the FDIC as receiver of a covered financial company in being 
able to exercise its rights under the Act and fulfill its obligations 
under sections 210(c)(8), (9), or (10) of the Act.
Reporting
    Estimated number of respondents: 30.
    Total estimated annual reporting burden
    Estimated average annual burden hours per respondent: 50 hours.
    Estimated frequency: Annually.
    Estimated total annual reporting burden: 1,500 hours per year.
    As discussed in more detail in section III.C.6.a below, the 
Secretary estimates the potential total costs of the initial 
recordkeeping burden associated with the Final Rules, including the 
burden hours estimated above plus estimated technology and systems 
development and modification costs, to be $36,631,995. The potential 
total costs of annual recordkeeping and reporting burdens associated 
with the Final Rules, including the burden hours estimated above, are 
estimated to be $1,248,795.\136\
---------------------------------------------------------------------------

    \136\ All cost and wage estimates are in nominal dollars and 
have not been adjusted for inflation.
---------------------------------------------------------------------------

C. Executive Orders 12866 and 13563

    It has been determined that the Final Rules are a significant 
regulation as defined in section 3(f)(1) of Executive Order 12866, as 
amended. Accordingly, the Final Rules have been reviewed by OMB. The 
Regulatory Assessment prepared by the Secretary for the Final Rules is 
provided below.
1. Description of the Need for the Regulatory Action
    The rulemaking is required by the Dodd-Frank Act to implement the 
QFC recordkeeping requirements of section 210(c)(8)(H) of the Act. 
Section 210(c)(8)(H) generally provides that if the PFRAs do not 
prescribe joint final or interim final regulations requiring financial 
companies to maintain records with respect to QFCs within 24 months 
from the date of enactment of the Act, the Chairperson of the Council 
shall prescribe such regulations in consultation with the FDIC. The 
Secretary, as Chairperson of the Council, is adopting the Final Rules 
in consultation with the FDIC because the PFRAs did not prescribe such 
joint final or interim final regulations. The recordkeeping required in 
the Final Rules is necessary and appropriate to assist the FDIC as 
receiver to exercise its rights and fulfill its obligations under 
sections 210(c)(8), (9), and (10) of the Dodd-Frank Act, by enabling it 
to assess the consequences of decisions to transfer, disaffirm or 
repudiate, or allow the termination of QFCs with one or more 
counterparties.
    The recent financial crisis has demonstrated that management of QFC 
positions, including steps undertaken to close out such positions, can 
be an important element of a resolution strategy which, if not handled 
properly, may magnify market instability. Large, interconnected 
financial companies may hold very large positions in QFCs involving 
numerous counterparties. A disorderly unwinding of these QFCs, 
including the mass exercise of QFC default rights and the rapid 
liquidation of collateral, could cause severe negative consequences for 
not only the counterparties themselves but also U.S. financial 
stability. A disorderly unwind could result in rapid liquidations, or 
``fire sales,'' of large volumes of financial assets, such as the 
collateral that secures the contracts, which can in turn weaken and 
cause stress for other firms by lowering the value of similar assets 
that they hold or have pledged as collateral to other counterparties.
    In order for the FDIC to effectuate an orderly liquidation of a 
covered financial company under Title II, the FDIC would need to make 
appropriate decisions regarding whether to transfer QFCs to a bridge 
financial company or other solvent financial institution or leave QFCs 
of the covered financial company in receivership. Determining whether 
to transfer QFCs in a manner that complies with the requirements of 
Title II and ensuring continued performance on any QFCs transferred 
requires detailed and standardized records. It would not be possible 
for the FDIC to fully analyze a large amount of QFC information in the 
short time frame afforded by Title II unless such information is 
readily available to the FDIC in a standardized format designed to 
enable the FDIC to conduct the analysis in an expeditious manner.
    As referenced in section I above, Title II requires the FDIC as 
receiver to exercise its authorities, to the greatest extent 
practicable, in a manner that maximizes value, minimizes losses, and 
mitigates the potential for serious adverse effects to the financial 
system. Title II also requires that the aggregate amount of liabilities 
of a covered financial company that are transferred to a bridge 
financial company from a covered financial company not exceed the 
aggregate amount of the assets of the covered financial company that 
are transferred to the bridge financial company from the covered 
financial company. If it does not have the records required by the 
rules, the FDIC may be unable to assess the financial position 
associated with certain QFCs and thus may not be able to determine how 
the transfers would affect the financial viability of a bridge 
financial company or other transferee institution, how the transfers 
would affect financial stability, whether the transfers would serve to 
maximize value and minimize losses in the disposition of assets of the 
receivership, and whether the transfers would cause the amount of 
aggregate transferred liabilities of the bridge financial company to 
exceed the amount of aggregate transferred assets.
    Furthermore, as discussed in sections I and II above, if the FDIC 
as receiver decides to transfer any QFC with a particular counterparty, 
Title II requires that it must transfer all QFCs between the covered 
financial company and such counterparty and any affiliate of such 
counterparty to a single financial institution, and if the FDIC as 
receiver decides to disaffirm or repudiate any QFC with a particular 
counterparty, it must disaffirm or repudiate all QFCs between the 
covered financial company and such counterparty and any affiliate of 
such counterparty. If the FDIC were to lack information about the 
affiliates of the counterparties to the QFCs of the covered financial 
company, it might not be able to transfer the QFCs given its 
uncertainty as to whether such a transfer would violate this 
requirement.
    The FDIC's inability to effect the transfer of QFCs for any of the 
above reasons could have significant adverse effects on financial 
stability in circumstances in which transferring such QFCs may have 
prevented the unnecessary termination of QFCs and fire sales of 
collateral securing these QFCs. Even after a transfer decision is made, 
the records required by the rule are necessary to ensure that the 
bridge

[[Page 75649]]

financial company and its subsidiaries continue to perform their 
obligations on any QFCs that are transferred. The inadvertent failure 
to perform their obligations under the QFCs, including meeting margin 
requirements and other obligations, could result in counterparties 
terminating QFCs, asset fire sales, and the failure of the bridge 
financial company.
2. Literature Review
    In assessing the need for these recordkeeping requirements, we have 
reviewed two categories of academic literature. As highlighted above, 
one of the potential channels through which the disorderly unwinding of 
QFCs could cause severe negative consequences for both the 
counterparties themselves and U.S. financial stability is through the 
rapid liquidation of collateral. The disorderly failure of a financial 
company with a large QFC portfolio may lead QFC counterparties to 
exercise their contractual remedies and rights by closing out positions 
and liquidating collateral, while also potentially increasing 
uncertainty in both derivatives and asset markets. This could lead to 
lower asset prices, decrease the availability of funding, and increase 
the likelihood that other financial companies also are forced to 
liquidate assets. To assess the potential impact of rapid liquidations, 
we have reviewed economic studies of fire sales among financial 
companies. Second, while there is limited academic literature 
specifically focused on the cost of a disorderly unwinding of a large, 
complex financial company's QFC portfolio, there has been recent 
literature analyzing the cost of the Lehman Brothers bankruptcy in 
2008, which may be illustrative of the potential costs.\137\
---------------------------------------------------------------------------

    \137\ Lehman Brothers Holdings, Inc. (``Lehman Brothers''), 
Lehman Brothers Inc. (the U.S. registered broker-dealer), and Lehman 
Brothers International (Europe) (the UK registered broker-dealer) 
were subject to separate liquidation proceedings.
---------------------------------------------------------------------------

a. Fire Sales Among Financial Institutions
    The economic literature on financial company fire sales offers 
insight into their potential internal and external impacts. While not 
directly addressing QFCs, the fire sale literature can be applied to 
the potential impact of the rapid liquidation of QFC collateral that 
might occur in a disorderly unwinding of a large QFC portfolio. As 
noted above, the recordkeeping required by the Final Rules is necessary 
to assist the FDIC in being able to make decisions regarding whether to 
transfer QFCs of a covered financial company to a bridge financial 
company or other solvent financial institution or to retain the QFCs in 
the covered financial company in receivership. Transferring QFCs, if 
appropriate, may prevent the mass exercise of QFC default rights and a 
corresponding fire sale of assets held as collateral for those QFCs.
    Principles of Fire Sales among Financial Companies. According to 
the literature, a fire sale can occur when a company cannot pay its 
creditors without selling assets. During a fire sale, assets sold may 
be heavily discounted below their fundamental values, depending on the 
market of participating buyers. If buyers are other investors in the 
asset class or classes being sold (``specialists''), prices may decline 
little. However, if the fire sale occurs during a financial crisis when 
uncertainty is higher and many specialists, including financial 
companies, may be constrained by solvency or liquidity pressures, they 
may not participate in the other side of the market. As a result, 
prices may fall substantially, to a level at which buyers who would 
only buy the assets in question at a large discount enter the market. 
Low sale prices may cause other financial companies to reduce the value 
at which they hold similar assets on their books when marking to 
market, which may trigger a downward spiral marked by more firms in 
distress (Shleifer and Vishny, 2011).\138\ In addition, because many 
financial companies rely upon short-term sources of financing, such as 
repurchase agreements, the falling asset prices and heightened 
uncertainty may contribute to liquidity pressures as these financing 
sources withdraw funding or demand more collateral. This may force even 
solvent financial companies to sell assets in order to deleverage, 
decrease the size of their balance sheets, and reduce risk. This self-
reinforcing cycle can result in additional fire sales, and eventually, 
precipitate or magnify a financial crisis.
---------------------------------------------------------------------------

    \138\ Shleifer, A, and Vishny, R. (2011). Fire Sales in Finance 
and Macroeconomics. Journal of Economic Perspectives 25: 29-48.
---------------------------------------------------------------------------

    Shleifer and Vishny (2011) believe that before the September 2008 
Lehman Brothers bankruptcy many specialist buyers, including most 
financial companies, were active in the market, but after the Lehman 
bankruptcy most of them were unwilling to buy assets, causing security 
prices to plunge, and prompting fund withdrawals, collateral calls, and 
self-reinforcing fire sales. This cycle of price collapses and 
deleveraging increased the fragility of the financial system, and 
disrupted financial intermediation.
    At the time of a fire sale both seller and non-seller financial 
companies may curtail their lending, thereby imposing additional social 
costs associated with reduced financial intermediation. Shleifer and 
Vishny (2010) \139\ use a three-period model of bank lending to 
illustrate the dynamics. They show that, in normal times, 
securitization can lead to higher lending volumes and earnings, but 
market sentiment shocks can quickly reverse these outcomes. When banks 
are highly leveraged, they may be more vulnerable to unanticipated 
shocks. A severe shock can lead them to liquidate assets in fire sales, 
fostering industry-wide asset price declines and weakening the banking 
system. In that environment, banks may forego lending, both to meet 
capital requirements and to preserve the capacity to purchase deeply 
discounted assets in the future. This credit contraction may reduce 
economic welfare due to a large number of potentially profitable 
investments that do not receive financing. He et al. (2010) \140\ and 
Ivashina and Scharfstein (2010) \141\ offer evidence that financial 
companies used spare balance sheet capacity to purchase discounted 
securities after the financial crisis rather than to increase lending. 
Hence, foregone lending during a crisis is a potential social cost.
---------------------------------------------------------------------------

    \139\ Shleifer, A. and Vishny, R. (2010). Asset Fire Sales and 
Credit Easing. National Bureau of Economic Research working paper 
15652.
    \140\ He, Z., Khang, I.G., and Krishnamurthy, A. (2010). Balance 
Sheet Adjustments During the 2008 Crisis. IMF Economic Review 58: 
118-156.
    \141\ Ivashina, V. and Scharfstein, D. (2010). Bank Lending 
During the Financial Crisis of 2008. Journal of Financial Economics 
97: 319-338.
---------------------------------------------------------------------------

    Empirical Estimates of the Economic Effects of Fire Sales. The 
literature provides empirical estimates of the economic effects of 
asset fire sales. Research suggests both the potential direct price 
discount effect and the indirect spillover effects of fire sales are 
economically substantial. Although this body of work does not 
necessarily target financial companies, it provides broadly applicable 
insights.
    Coval and Stafford (2007) \142\ compare stock transactions by 
mutual funds under normal conditions and fire sale conditions from 
1980-2004. The study regards high volumes of concurrent capital 
outflows from mutual funds as creating stock fire sale conditions when 
they force several funds to sell substantial amounts of underlying 
stock (the same stocks may be sold by multiple investment funds that 
are

[[Page 75650]]

experiencing similar stresses). It finds a negative 7.9 percent average 
abnormal stock return in the two quarters preceding and including the 
distressed selling of a stock by mutual funds. This stock price dip 
tends to rebound after the high sales volumes dissipate, which the 
authors point out is consistent with fire sale dynamics, as liquidity 
providers earn abnormal positive returns after a crisis period and 
stock prices revert to reflect their fundamental values.
---------------------------------------------------------------------------

    \142\ Coval, J. and Stafford, E. (2007). ``Asset Fire Sales (and 
Purchases) in Equity Markets.'' Journal of Financial Economics 86: 
479-512.
---------------------------------------------------------------------------

    Dinc, Erel, and Liao (2015) \143\ find industry-adjusted distressed 
asset sale discounts of 8 to 9 percent when a firm buys equity shares 
of target firms in distressed industries in the 2000-12 period. The 
model controls for target firm size, liquidity, leverage, and 
profitability, and results are robust to alternative definitions of 
distressed firms, analytic periods, and industry classifications. The 
authors consider the estimated discounts to be a lower-bound for fire 
sale discounts in less liquid assets than equities, such as real assets 
or debt securities, which may be more difficult to sell during periods 
of distress.
---------------------------------------------------------------------------

    \143\ Dinc, S., Erel I., and Liao, R. (2015). ``Fire Sale 
Discount: Evidence from the Sale of Minority Equity Stakes.'' Ohio 
State University Fisher College of Business working paper 2015-03-
11.
---------------------------------------------------------------------------

    While ample research documents the costs of fire sales to 
distressed firms selling assets, little analytic emphasis has been 
placed on the effect of fire sales on asset buyers. A recent study by 
Meier and Servaes (2015) \144\ examines the direct effects of fire sale 
purchases on the stock returns of the acquiring firms. Using data for 
1982-2012, their model finds abnormal stock price increases of roughly 
2 percent among firms buying assets or entire companies under fire sale 
conditions, compared to purchasing during normal economic 
conditions.\145\ The result is robust to model specifications with 
alternative control variables, and buyer returns are inversely 
associated with the level of liquidity in the market and the potential 
for alternative uses for the assets. The authors conclude that when the 
gains to firms buying assets during fire sales are included in the 
estimates, the welfare costs of fire sales may be lower than previously 
expected. However, the study does not consider the negative spillover 
effects of fire sales that may infect other firms in the seller's 
industry, and is not intended to be a full welfare analysis.
---------------------------------------------------------------------------

    \144\ Meier, J.A. and Servaes, H. (2015). ``The Bright Side of 
Fire Sales.'' London Business School working paper.
    \145\ The model uses an event study approach to study a three-
day period starting one day before the transaction announcement.
---------------------------------------------------------------------------

    In contrast to studies of the direct discounts or stock returns 
associated with asset transactions during fire sales, Duarte and 
Eisenbach (2015) \146\ assess the indirect spillover costs of fire 
sales. They develop a model to assess vulnerability to fire sale 
spillovers, and find substantial negative economic effects. Based on 
several assumptions developed by the authors, the model estimates that 
from July 2008 to March 2014, an exogenous 1 percent decline in the 
price of assets financed with repos leads to average fire sale losses 
of 8 percent of total equity capital in the broker-dealer sector. The 
authors conclude that asset fire sale spillovers are an important part 
of overall risk to the financial system.
---------------------------------------------------------------------------

    \146\ Duarte, F. and Eisenbach, T.M. (2015). ``Fire Sale 
Spillovers and Systemic Risk.'' Federal Reserve Bank of New York 
Staff Reports, No. 645.
---------------------------------------------------------------------------

    Potential Effects on Lending. As predicted by the theoretical 
models discussed above, empirical research shows bank lending declined 
sharply during the crisis. Ivashina and Scharfstein (2010) show that in 
August through December 2008, banks that depended more heavily on 
short-term debt (other than insured deposits), reduced their business 
lending by significantly more than banks less dependent on short-term 
debt financing. At the time of the Lehman bankruptcy, the paper 
identifies two channels driving this result that collectively 
constituted a ``run'' on financial companies. First, short-term 
creditors refused to roll over their unsecured commercial paper loans 
and repo lenders increased collateral requirements, which particularly 
constrained financial companies dependent on short-term credit for a 
significant share of their financing. Second, borrowers substantially 
increased draws on their existing credit lines ``to enhance their 
liquidity and financial flexibility during the credit crisis.'' In 
particular, financial companies that co-syndicated credit lines with 
Lehman Brothers were more likely to experience larger credit line 
drawdowns after the Lehman failure, and reduced their new lending more 
than those without co-syndication relationships with Lehman. Ivashina 
and Scharfstein conclude the results are consistent with a decline in 
the supply of funding as a result of the run associated with the Lehman 
event.
    On the borrower side, Campello et al. (2010) \147\ surveyed the 
chief financial officers of 1,050 nonfinancial firms in the United 
States, Europe, and Asia and found that those that identified their 
firms as ``financially constrained'' \148\ during the financial crisis 
cut back more on capital and technology investments compared to those 
that identified their firms as ``financially unconstrained.'' They also 
cut marketing expenditures by significantly greater margins, and shed 
far more employees (financially constrained firms planned to cut 10.9 
percent of their personnel in 2009, while financially unconstrained 
firms planned to shed 2.7 percent). The survey revealed that during the 
crisis, 86 percent of constrained firms reported foregoing attractive 
investments, compared to 44 percent of unconstrained firms. This 
suggests the crisis-related decline in bank credit supply directly 
contributed to the reduction in constrained firms' investments, and 
imposed associated economic effects.
---------------------------------------------------------------------------

    \147\ Campello, M., Graham, J., and Harvey, C. (2010). The Real 
Effects of Financial Constraints: Evidence from a Financial Crisis. 
Journal of Financial Economics 97: 470-487.
    \148\ Derived from survey respondents' self-assessments of their 
financial condition.
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b. Costs of Lehman Brothers Bankruptcy
    Numerous researchers have provided broad estimates of the economic 
costs of the 2007-09 financial crisis (see GAO (2013) \149\ for a 
useful review). This section focuses more narrowly on the terminations 
of derivative contracts associated with the Lehman bankruptcy to help 
illustrate the potential costs of unwinding the derivatives portfolio 
of a large, complex financial company. While this particular example 
occurred under the U.S. Bankruptcy Code rather than as a Title II 
orderly liquidation, the disorderly unwind and disruptions that 
resulted are indicative of the potential negative consequences that 
could result from a situation in which the FDIC as receiver in a Title 
II resolution is unable to make informed decisions as to whether to 
transfer a QFC because it does not have adequate records.
---------------------------------------------------------------------------

    \149\ Government Accountability Office, Financial Regulatory 
Reform: Financial Crisis Losses and Potential Impacts of the Dodd-
Frank Act, GAO-13-180 (January 16, 2013).
---------------------------------------------------------------------------

    The net worth of Lehman Brothers derivative positions at the time 
of bankruptcy on September 15, 2008 totaled $21 billion, with 96 
percent representing over-the-counter (OTC) positions.\150\ The 
portfolio consisted of more than 6,000 OTC derivative

[[Page 75651]]

contracts involving over 900,000 transactions. Fleming and Sarkar's 
(2014) \151\ detailed assessment of the Lehman Brothers bankruptcy 
finds the overall recovery rate of all allowed unsecured claims (not 
limited to QFCs) amounted to roughly 28 percent, a rate the authors 
describe as low relative to both an estimated 59 percent for other 
financial company failures and 40 percent for failures occurring in 
recessions.
---------------------------------------------------------------------------

    \150\ Most derivatives were held in several subsidiaries 
specializing in derivatives and related instruments. Since Lehman 
had numerous subsidiaries with intermingled interests, we simplify 
the discussion by describing them as if they were a single entity, 
except when specificity is necessary for descriptive accuracy.
    \151\ Fleming, M. and Sarkar, A. (2014). The Failure Resolution 
of Lehman Brothers. Economic Policy Review 20(2). Federal Reserve 
Bank of New York.
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    We use a framework that divides costs associated with derivatives 
resolution into private costs and public (external) costs. Private 
costs consist of direct losses to derivatives counterparties from 
unrecovered claims, indirect costs to derivatives counterparties from 
loss of hedged positions, costs to other Lehman Brothers creditors in 
the bankruptcy proceeding due to reductions in recovery values 
resulting from the termination and settlement of OTC derivatives, 
losses to the Lehman estate from excess collateral transfers during 
bulk sales of exchange-traded derivatives, and litigation and 
administrative expenses. While we find no literature that assesses the 
public costs directly attributable to the resolution of Lehman's 
derivatives portfolio, below we examine the literature assessing the 
public impact of Lehman's failure more broadly.
    While rigorous estimates of the value of each cost element listed 
above would be ideal, in reality we are constrained by a lack of 
publicly available data. Therefore, this section combines qualitative 
descriptions of costs with limited quantitative information when 
available, in an effort to provide insight on the costs of resolving 
Lehman's QFC portfolio under the bankruptcy proceedings.
    Private Derivatives Counterparty Costs: Unrecovered Claims. 
Estimates of bankruptcy claim recovery rates of OTC derivative 
counterparties (excluding Lehman affiliate claims) are reported in the 
literature at the Lehman subsidiary level, and vary widely, ranging 
from 31 percent for Lehman Brothers Special Financing (the largest 
Lehman derivatives entity) to 100 percent each for Lehman Brothers OTC 
Derivatives, Lehman Brothers Derivatives Products, and Lehman Brothers 
Financial Products, as of March 27, 2014 (Fleming and Sarkar (2014)). 
Still the authors emphasize that, ``many counterparties of Lehman's OTC 
derivatives suffered substantial losses.''
    Private Derivatives Counterparty Costs: Loss of Hedged Positions. A 
key reason for many counterparties to acquire derivative positions is 
to hedge against potential future market developments. These hedges 
reduce uncertainties and serve as valuable risk management instruments. 
Fleming and Sarkar (2014) suggest Lehman's abrupt bankruptcy took 
counterparties by surprise, and allowed them little time to assess 
their derivative positions facing Lehman, decide whether to terminate 
contracts, and rehedge their positions as needed.\152\ Therefore, many 
counterparties lost their hedged positions within a brief period and 
were unexpectedly exposed to risks until new positions could be 
established. We find no estimates of the costs of these lost hedges in 
the literature.
---------------------------------------------------------------------------

    \152\ Fleming and Sarkar believe the selection of the 
termination date for safe harbor purposes influenced this. They 
write (p. 25), ``Although Lehman filed for bankruptcy protection at 
about 1:00 a.m. on Monday, September 15, 2008, the termination date 
was set as Friday, September 12 for derivatives subject to automatic 
termination. Normally, nondefaulting derivatives counterparties of 
Lehman would have attempted to hedge their positions on Monday to 
mitigate expected losses on their position. However, they could not 
do so since their positions were deemed to have terminated two days 
earlier.''
---------------------------------------------------------------------------

    Private Costs to the Entire Lehman Bankruptcy Estate: Settlement of 
OTC Derivatives. Fleming and Sarkar (2014) note that the settlement of 
Lehman's OTC derivatives claims may have also resulted in significant 
losses to the Lehman bankruptcy estate. Derivatives valuation claims 
are generally based on replacement costs and they note that due to the 
large prevailing bid-ask spreads at the time of Lehman's bankruptcy 
filing, replacement costs may have diverged significantly from fair 
value. During the settlement process the Lehman estate received $11.85 
billion in OTC derivatives receivables by January 10, 2011. It is 
unclear how much in additional receivables may have been ``lost'' by 
Lehman due to the termination and settlement of contracts following its 
bankruptcy filing. The literature notes that the relatively abrupt 
timing of the bankruptcy filing may have also influenced the magnitude 
of losses. Valukas (2010) suggested that Lehman insufficiently planned 
for the possibility of bankruptcy, such that management only began to 
plan seriously for bankruptcy a few days before the bankruptcy filing. 
A bankruptcy court document \153\ cites a ``turnaround specialist'' 
advising Lehman, Bryan Marsal, as telling the court-appointed examiner 
that the sudden bankruptcy resulted in the loss of 70 percent of $48 
billion of receivables from derivatives that could have been unwound. 
Yet, the same document notes that Lehman counsel Harvey Miller did not 
think the rushed filing had an adverse impact on the estate (Valukas 
2010). These accounts appear anecdotal and no information is provided 
on the derivation of the figures cited by Marsal.
---------------------------------------------------------------------------

    \153\ Valukas, A. (2010). ``Report of the Examiner in the 
Chapter 11 Proceedings of Lehman Brothers Holdings Inc.'' March 11. 
Accessed at: http://jenner.com/lehman/.
---------------------------------------------------------------------------

    Private Costs to the Entire Lehman Bankruptcy Estate: Settlement of 
Exchange-traded Derivatives. Wiggins and Metrick (2015) \154\ report 
that three days following the Lehman bankruptcy filing, the derivatives 
exchange holding its accounts sold them through a bulk auction to three 
buyer entities, who assumed the positions taken in the derivatives 
contracts. The transactions included transfer of $2 billion in Lehman 
collateral and clearing deposits to the buyers, which exceeded the 
market value of the obligations by roughly $1.2 billion. This excess 
collateral value was considered a loss to Lehman by the bankruptcy 
examiner.
---------------------------------------------------------------------------

    \154\ Wiggins, R.Z. and Metrick, A. (2015). ``The Lehman 
Brothers Bankruptcy G: The Special Case of Derivatives.'' Yale 
Program on Financial Stability Case Study 2014-3G-V1.
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    Private Costs: Litigation and Administrative. The extended duration 
of the OTC derivatives settlement process included multiple court 
petitions, procedure approvals, settlement mechanisms, and legal 
challenges. While 81 percent of derivative contracts in claims against 
Lehman were terminated by November 13, 2008, the final settlement 
process moved more deliberately due to the multiple steps involved in 
properly addressing the unprecedented scale and complexity of claims 
within the bankruptcy process. Only 84 percent of derivatives claims 
had been settled by the end of 2012. Estimates of litigation and 
administrative expenses for OTC derivatives alone are not available, 
but these expense categories for the full Lehman settlement process 
were estimated to total $3.2 billion as of May 13, 2011 (Fleming and 
Sarkar (2014)).
    Public Costs: Externalities. The event study is a common method of 
estimating the market impact of a particular event. Measured market 
reactions to the Lehman bankruptcy are based on the institution's 
failure event as a whole; they are not reactions to the QFC resolution 
process alone and therefore overstate the impacts of these 
terminations. We may plausibly assume, however, that the market 
reactions to the overall Lehman collapse

[[Page 75652]]

announcement included a component associated with potential costs of 
settling their derivative contracts.\155\
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    \155\ Still, we caution that event study results may produce 
``noisy'' signals. For example, attribution is problematic as the 
period surrounding the Lehman collapse was a particularly active one 
with nearly two dozen significant economic events in September 2008.
---------------------------------------------------------------------------

    Johnson and Mamun (2012) \156\ apply an event study approach to 
assess stock market reactions of a sample of 742 U.S. financial 
institutions--divided into banks, savings and loans, brokers, and 
primary dealers--on the date of the Lehman bankruptcy filing. While 
each group of institutions showed negative abnormal returns, only the 
bank (-3 percent) and primary dealer (-6 percent) coefficients were 
statistically significant. The data strongly support the notion that 
the event had differential impacts by type of financial institution and 
abnormal returns across institution groups.
---------------------------------------------------------------------------

    \156\ Johnson, M.A. and Mamun, A. (2012). The Failure of Lehman 
Brothers and its Impact on Other Financial Institutions. Applied 
Financial Economics 22: 375-385.
---------------------------------------------------------------------------

    Dumontaux and Pop (2012) \157\ apply a similar approach to assess 
stock market reactions of a sample of 382 U.S. financial companies, 
using brief event windows. They report heterogeneous outcomes according 
to institution size and business lines. Among the twenty large 
companies \158\ (excluding Lehman Brothers), cumulative abnormal stock 
price returns were highly significantly negative, ranging from -10 
percent to -18 percent over five distinct event windows of up to five 
days in duration. However, the effects on the full sample were not 
statistically significant, indicating the immediate contagion effect 
was limited to large companies. The results of both event studies 
suggest the Lehman bankruptcy likely imparted immediate negative 
external effects on a subset of financial companies, causing 
substantial drops in their market valuations. However, as noted above, 
it is not clear from these studies the extent to which the change in 
company valuation is driven by the costs of the QFC resolution process. 
We did not find event studies specifically assessing market impacts on 
non-financial firms.
---------------------------------------------------------------------------

    \157\ Dumontaux, N. and Pop, A. (2012). ``Contagion Effects in 
the Aftermath of Lehman's Collapse: Measuring the Collateral 
Damage.'' University of Nantes working paper 2012/27.
    \158\ Large financial companies are defined as those with total 
assets over $1 billion in their last audited report before the event 
date.
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    Domestic Public Support: Federal Reserve Facility. The Federal 
Reserve provided substantial liquidity to the markets during the 2007-
2009 period. Fleming and Sarkar (2014) consider the support to Lehman 
in the first week after the bankruptcy as a critical factor in the 
recovery of claims against at least part of Lehman Brothers, which 
allowed it to keep operating until it was acquired by Barclays. Between 
September 15 and 18, 2008, Lehman Brothers Inc. borrowed $68 billion 
from the Primary Dealer Credit Facility (``PDCF''). Because the 
borrowed funds were fully collateralized and repaid in full with 
interest, the Congressional Budget Office (2010) \159\ estimated that 
total lending through the PDCF involved a negligible subsidy value.
---------------------------------------------------------------------------

    \159\ Congressional Budget Office. (2010). The Budgetary Impact 
and Subsidy Costs of the Federal Reserve's Actions During the 
Financial Crisis.
---------------------------------------------------------------------------

    Global Public Costs: Externalities. The economic literature is rich 
with event studies of market reactions to policy announcements designed 
to alleviate the financial crisis, however, we find no studies focusing 
directly on the global market impacts of the Lehman Brothers bankruptcy 
as an event. We also acknowledge global spillovers as a potential 
public cost; however, we find no studies focusing directly on the 
global impacts of the Lehman Brothers bankruptcy as an event.
c. Conclusion
    The economic literature on financial asset fire sales maintains 
that such events are more systemically harmful when occurring during 
industry-wide periods of distress, making mitigating these costs a 
public policy concern. The Lehman Brothers bankruptcy and the resulting 
QFC terminations occurred during a crisis period, and might have 
imposed widespread private and public costs. We do not compare the 
Lehman bankruptcy costs to the alternative of potential resolution 
costs under a counterfactual case had Title II of the Dodd-Frank Act 
been in effect at the time of the Lehman bankruptcy filing. 
Nonetheless, Fleming and Sarkar (2014) argue that, ``some of the losses 
associated with the failure of Lehman Brothers may have been avoided in 
a more orderly liquidation process.''
3. Baseline
    The FDIC promulgated 12 CFR part 371, Recordkeeping Requirements 
for Qualified Financial Contracts (``Part 371''), pursuant to section 
11(e)(8)(H) of the FDIA.\160\ The FDIC's QFC recordkeeping rule, which 
applies to insured depository institutions that are in a troubled 
condition, was promulgated to enable the FDIC as receiver to make an 
informed decision as to whether to transfer or retain QFCs and thereby 
reduce losses to the deposit insurance fund and minimize the potential 
for market disruptions that could occur with respect to the liquidation 
of QFC portfolios of insured depository institutions. The recordkeeping 
requirements of the Final Rules, which do not apply to insured 
depository institutions, are based, in part, on Part 371. However, the 
information requirements of the Final Rules are more extensive, 
reflecting the FDIC's experience with portfolios of QFCs of insured 
depository institutions subject to Part 371.
---------------------------------------------------------------------------

    \160\ 12 U.S.C. 1821(e)(8)(H).
---------------------------------------------------------------------------

    Based on discussions with the staff of the PFRAs who are familiar 
with financial company operations and have experience supervising 
financial companies with QFC portfolios, the Secretary believes that 
the large corporate groups that would be subject to the Final Rules 
should already be maintaining much of the QFC information required to 
be maintained under the Final Rules as part of their ordinary course of 
business. In order for these large corporate groups to effectively 
manage their QFC portfolios, they need to have robust recordkeeping 
systems in place; for example, large corporate groups that trade 
derivatives out of several distinct legal entities need to have 
detailed records, including counterparty identification, position-level 
data, collateral received and posted, and contractual requirements, in 
order to effectively manage their portfolio, perform on contracts, and 
monitor risks. As noted by commenters, regulated financial companies 
must maintain extensive QFC records pursuant to other regulatory 
requirements.\161\ However, the Secretary understands that these large 
corporate groups are not currently maintaining the QFC records in the 
standardized format prescribed by the Final Rules and as set forth in 
the appendix to the Final Rules such that they may have to modify 
existing recordkeeping systems with respect to QFCs or build new 
systems in order to comply with the rules.
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    \161\ See SIFMA AMG letter, pp. 12-13; ACLI letter, pp. 20-21.
---------------------------------------------------------------------------

4. Evaluation of Alternatives
    The Secretary considered alternatives to implementing the 
recordkeeping requirements of the Final Rules but believes that the 
adopted form is the best available method of achieving both the 
statutory mandate and the regulatory objectives. The assessment of 
alternatives below is organized into three subcategories: The scope of 
the rules; the content of records; and standardized recordkeeping.

[[Page 75653]]

a. Scope of the Final Rules
    The scope of the Final Rules and the reasons for the changes made 
to the scope of the rules as compared to the Proposed Rules is provided 
in section II.A.1, above. The Secretary considered alternative criteria 
in developing the definition of a records entity, such as including 
financial companies that have more than $10 billion in assets. This 
threshold, which would have captured more financial companies that 
potentially might be considered for orderly liquidation under Title II, 
has been used in other regulatory requirements. For example, the Dodd-
Frank Act requires certain financial companies with more than $10 
billion in total consolidated assets to conduct annual stress 
tests.\162\ Additionally, the CFTC's final rule on the end-user 
exemption to the clearing requirement for swaps exempts banks, savings 
associations, farm credit system institutions, and credit unions with 
total assets of $10 billion or less from the definition of ``financial 
entity,'' making such ``smaller'' financial institutions eligible for 
the end-user exception.\163\
---------------------------------------------------------------------------

    \162\ See 12 U.S.C. 5365(i)(2).
    \163\ See 17 CFR 50.50(d).
---------------------------------------------------------------------------

    However, the Secretary determined that while it is possible that 
financial companies with more than $10 billion and less than $50 
billion in total assets would be considered for orderly liquidation 
under Title II, a more appropriate threshold is the $50 billion in 
total consolidated assets, supplemented by the secondary thresholds of 
$250 billion of total gross notional derivatives outstanding or $3.5 
billion of derivative liabilities. Imposing the $50 billion total 
assets threshold by itself or including all financial companies with 
over $10 billion in total assets would substantially increase the 
number of financial companies subject to recordkeeping requirements, 
many of which would likely not be considered for orderly liquidation 
under Title II. Financial companies with total assets of $50 billion or 
more and with a substantial degree of activity in QFCs as indicated by 
total gross notional derivatives outstanding of at least $250 billion 
or derivative liabilities of at least $3.5 billion, potentially would 
be among the most likely to be considered for orderly liquidation under 
Title II. The definition of ``records entity'' in the Final Rules is 
thus designed to reduce recordkeeping burdens on smaller financial 
company groups by only capturing those financial companies that are 
part of a group with a member that it is the type of company for which 
the FDIC is most likely to be appointed as receiver.
b. Content of Records
    The Secretary determined, after consulting with the FDIC, that 
requiring each records entity to maintain the data included in Tables 
A-1 through A-4 and the four master data lookup tables of the appendix 
to the Final Rules is necessary to assist the FDIC in being able to 
effectively exercise its rights under the Act and fulfill its 
obligations under sections 210(c)(8), (9), or (10) of the Act. To 
facilitate the resolution of QFC portfolios, the FDIC, upon being 
appointed as receiver for a covered financial company under Title II, 
would need to analyze such data in order to promptly effectuate 
decisions. The information must be sufficient to allow the FDIC to 
estimate the financial and operational impact on the covered financial 
company and its counterparties, affiliated financial companies, and the 
financial markets as a whole of the FDIC's decision to transfer, retain 
and disaffirm or repudiate, or retain and allow the counterparty to 
terminate the covered financial company's QFCs. It must also allow the 
FDIC to assess the potential impact that such decisions may have on the 
financial markets as a whole, which may inform its transfer decisions. 
The need for the information specified by each table is discussed in 
further detail in section II.D.2 above.
    As indicated above, the recordkeeping requirements of the Final 
Rules are similar to the FDIC's Part 371, rules applicable to insured 
depository institutions in troubled condition but the information 
requirements of the Final Rules (which do not apply to insured 
depository institutions) are more extensive. Previously, in developing 
the Proposed Rules, the Secretary considered the appropriateness of 
reducing the recordkeeping burden by aligning the requirements more 
closely with those of the FDIC's Part 371, but determined, in 
consultation with the FDIC, that additional recordkeeping beyond that 
required by Part 371 would be needed for the FDIC to resolve a 
financial company with significant QFC positions under Title II. The 
Secretary reaffirms in the Final Rules that this determination is 
appropriate and that, in a Title II resolution scenario, the FDIC will 
need the additional information required by the Final Rules to analyze 
the QFC portfolio, decide how to manage the QFCs, and perform their 
obligations under the QFCs, including meeting collateral requirements. 
Furthermore, although applying the Part 371 requirements to records 
entities instead of the requirements of the Final Rules would have 
imposed less of a burden on records entities, even the Part 371 
requirements would require records entities to update their 
recordkeeping systems, including by amending internal procedures, 
reprogramming systems, reconfiguring data tables, and implementing 
compliance processes in similar ways as are expected to be required for 
records entities complying with the Final Rules.
    As an example of the additional information required to be 
maintained under the Final Rules as compared to Part 371, the 
counterparty-level data required in Table A-2 to the appendix of the 
Final Rules includes the next margin payment date and payment amount. 
This will assist the FDIC in ensuring that a covered financial company 
and its subsidiaries perform their QFC obligations, including meeting 
clearing organization margin calls. The Table A-3 legal agreement 
information, which is not included in Part 371, is necessary to enable 
the FDIC as receiver to evaluate the likely treatment of QFCs under 
such contracts, and to inform the FDIC of any third-party credit 
enhancement and the identification of any default or other termination 
event provisions that reference an entity. Table A-4 includes 
additional collateral detail data, such as the location of collateral, 
the collateral segregation status, and whether the collateral may be 
subject to re-hypothecation by the counterparty. These additional data 
are necessary to enable the FDIC to assess risks associated with the 
collateral and improve the FDIC's ability to analyze various QFC 
transfer or termination scenarios. For example, for cross-border 
transactions, this information would help the FDIC evaluate the 
availability of collateral in different jurisdictions and the related 
close-out risks under local law if the receiver cannot arrange for the 
transfer of QFC positions. As noted above, we believe in many cases 
records entities are maintaining the additional information required 
under the rules due to existing business practices or other regulatory 
requirements. However, the Secretary understands that these large 
corporate groups are not currently maintaining the QFC records in the 
standardized format prescribed by the Final Rules and as set forth in 
the appendix to the Final Rules such that the additional information 
required will impose additional burden associated with amending 
internal procedures, reconfiguring data tables,

[[Page 75654]]

and implementing compliance processes.
c. Standardized Recordkeeping
    The Secretary determined that requiring records entities to have 
the capacity to maintain and generate QFC records in the uniform, 
standardized format set forth in the appendix to the Final Rules is 
necessary to assist the FDIC in being able to effectively exercise its 
rights under the Act and fulfill its obligations under sections 
210(c)(8), (9), or (10) of the Act. Specifically, when the FDIC is 
appointed as receiver of a covered financial company, the covered 
financial company's QFC counterparties are prohibited from exercising 
their contractual right of termination until 5 p.m. (eastern time) on 
the first business day following the date of appointment. After its 
appointment as receiver and prior to the close of the aforementioned 5 
p.m. deadline, the FDIC has three options in managing a covered 
financial company's QFC portfolio. Specifically, with respect to all of 
the covered financial company's QFCs with a particular counterparty and 
all its affiliates, the FDIC may: (1) Transfer the QFCs to a financial 
institution, including a bridge financial company established by the 
FDIC; (2) retain the QFCs within the receivership and allow the 
counterparty to exercise contractual remedies to terminate the QFCs; or 
(3) retain the QFCs within the receivership, disaffirm or repudiate the 
QFCs, and pay compensatory damages. If the FDIC transfers the QFCs to a 
financial institution, the counterparty may not terminate the QFCs 
solely because the QFCs were transferred, or by reason of the covered 
financial company's financial condition or insolvency or the 
appointment of the FDIC as receiver. If the FDIC does not transfer the 
QFCs and does not disaffirm or repudiate such QFCs within the one 
business day stay period, the counterparty may exercise contractual 
remedies to terminate the QFCs and assert claims for payment from the 
covered financial company and may have rights to liquidate the 
collateral pledged by the covered financial company.
    Previously, in developing the Proposed Rules, the Secretary 
considered reducing the recordkeeping burden by permitting the 
maintenance of QFC records in non-standardized formats, but determined, 
after consulting with the FDIC, that this alternative would compromise 
the FDIC's flexibility as receiver in managing the QFC portfolio and 
impair its ability as receiver to maximize the value of the assets of 
the covered financial company in the context of orderly 
liquidation.\164\ The Secretary reaffirms in the Final Rules that this 
determination is appropriate in order to ensure that the FDIC, in a 
Title II resolution scenario, has the maximum potential to execute a 
prompt and effective decision regarding the disposition of the QFC 
portfolio of a covered financial company.
---------------------------------------------------------------------------

    \164\ See 12 U.S.C. 5390(a)(1)(B)(iv).
---------------------------------------------------------------------------

    However, while the Final Rules specify a standardized recordkeeping 
format, the Secretary also recognizes that there may be particular 
types of QFC or counterparties for which more limited information may 
be sufficient to enable the FDIC to exercise its rights under the Act 
and fulfill its obligations under sections 210(c)(8), (9), or (10) of 
the Act. The Final Rules provide the Secretary with the discretion to 
grant conditional or unconditional exemptions from compliance with one 
or more of the requirements of the Final Rules, which could include 
exemptions with respect to the information required regarding 
particular types of QFCs or counterparties.
5. Affected Population
    Instead of requiring all financial companies to maintain records 
with respect to QFCs, the Secretary is limiting the scope of the Final 
Rules to a narrow subset of financial companies. Discretion to do so is 
afforded under section 210(c)(8)(H)(iv) of the Act, which requires the 
recordkeeping requirements to differentiate among financial companies 
by taking into consideration, among other things, their size and risk. 
The Secretary is exercising this discretion to define the term 
``records entity'' and thereby include within the scope of the Final 
Rules only those financial companies that: (1) Are identified as U.S. 
G-SIBs; (2) the Council determines could pose a threat to U.S. 
financial stability; (3) the Council designates as systemically 
important financial market utilities; (4) have total consolidated 
assets equal to or greater than $50 billion and either (i) total gross 
notional derivatives outstanding equal to or greater than $250 billion 
or (ii) derivative liabilities equal to or greater than $3.5 billion; 
or (5) are part of the same corporate group in which at least one 
financial company satisfies one or more of the other foregoing 
criteria. The Final Rules would only apply to large corporate groups 
(including a large corporate group's affiliated financial companies, 
regardless of their size, if the affiliated financial company is a 
party to an open QFC and is not an ``excluded entity'' under the Final 
Rules). The types of financial companies that would qualify as records 
entities under the Final Rules include those listed in section 
II.A.1.b, above. The Secretary estimates that 30 large corporate groups 
would be subject to the recordkeeping requirements.
6. Assessment of Potential Costs and Benefits
a. Potential Costs
    Based on discussions with the PFRAs who are familiar with financial 
company operations and have experience supervising financial companies 
with QFC portfolios, the Secretary believes that the costs of 
implementing the Final Rules may be mitigated by the fact that records 
entities should be maintaining most of the QFC information required by 
the Final Rules as part of their ordinary course of business. However, 
the Secretary recognizes that the requirement in the Final Rules for 
records to be maintained in a standardized format, among other 
requirements, may impose costs and burdens on records entities. In 
order to comply with the Final Rules, each of the approximately 30 
large corporate groups that the Secretary estimates would be subject to 
the recordkeeping requirements will need to have network infrastructure 
to maintain data in the required format. The Secretary expects that 
this will likely impose one-time initial costs on each large corporate 
group in connection with necessary updates to their recordkeeping 
systems, such as systems development or modifications. The initial 
costs to set up network infrastructure will depend on whether a large 
corporate group already holds and maintains QFC data in an organized 
electronic format, and if so, whether the data currently reside on 
different systems rather than on one centralized system. Large 
corporate groups may need to amend internal procedures, reprogram 
systems, reconfigure data tables, and implement compliance processes. 
Moreover, they may need to standardize the data and create tables to 
match the format required by the Final Rules. However, the Secretary 
believes that the large corporate groups that would be subject to the 
Final Rules are likely to rely on existing centralized systems for 
recording and reporting QFC activities to perform most of the 
recordkeeping and reporting requirements set forth herein. The entity 
within the corporate group responsible for this centralized system will 
likely operate and maintain a technology shared services model with the 
majority of technology applications,

[[Page 75655]]

systems, and data shared by the affiliated financial companies within 
the large corporate group. In addition, as referenced above, the Final 
Rules will also require the top-tier financial company of the corporate 
group to be capable of generating a single, compiled set of the records 
specified in the Final Rules for all records entities in the corporate 
group that it consolidates or are consolidated with it and to be 
capable of providing such a set of records to its PFRA and the FDIC. 
Therefore, the Final Rules will likely impose the most significant 
costs on the entity or entities within the large corporate group 
responsible for such centralized systems, which is reflected in the 
cost estimates for large corporate groups provided herein; most 
affiliated financial companies within a large corporate group are not 
expected to bear significant costs. The affiliated financial companies 
will likely have much lower costs because they can utilize and rely 
upon the technology and network infrastructure operated and maintained 
by the entity responsible for the centralized system within the large 
corporate group.
    Previously, the Secretary estimated the costs of the initial and 
annual recordkeeping burdens, as well as the annual reporting burden, 
associated with the Proposed Rules in both man-hours and dollar terms 
and requested comment on whether the cost estimates were reasonable. As 
noted above, the Secretary's recordkeeping, reporting, data retention, 
and records generation burden estimates were based on discussions with 
the PFRAs regarding their prior experience with burden estimates for 
other recordkeeping systems. The Secretary also considered the burden 
estimates in rulemakings with similar recordkeeping requirements. For 
example, the initial non-recurring burden estimates provided in 
rulemakings for such recordkeeping requirements varied based on the 
scope of requirements and the type of entity subject to the 
requirements, but included initial burden estimates ranging from 
approximately 100 to 3,300 hours and estimates of required investments 
in technology and infrastructure from $50,000 to $250,000. Although the 
type and amount of data collected and reported for such reporting 
systems are substantively different in both content and format from the 
data that would be recorded under the Final Rules, the estimates from 
these prior rulemakings nevertheless provide some guidance as to the 
scale of system modifications and information technology investments 
that would be required for compliance with the Final Rules. Similarly, 
the types of information technology professionals that will establish 
the recordkeeping and data retention for records entities under the 
final rules are expected to be similar to the professionals involved in 
establishing the other systems referenced above.
    Most commenters offered general comments on the costs associated 
with complying with the Proposed Rules, with several stating that the 
costs--either in general, or as related to certain proposed 
recordkeeping requirements--outweighed the benefits to the FDIC as 
receiver.\165\ Some commenters addressed the impact that the Proposed 
Rules would have on entities' recordkeeping and information systems. 
For example, one commenter stated that the Proposed Rules, if not 
modified, would force market participants to rebuild existing 
recordkeeping systems and protocols and impose significant 
expense.\166\ One commenter directly referenced the Secretary's cost 
estimates in the context of such commenter's request for an extension 
of the proposed initial compliance period, stating that the Secretary's 
estimate of the cost of such work for most financial groups subject to 
the rule will far exceed the Secretary's estimation of the total 
industry-wide compliance cost.\167\ On this basis, the commenter went 
on to request that the initial 270-day compliance period provided for 
in the Proposed Rules be extended to two years and that compliance be 
phased in over a period of years based on the potential criticality of 
QFCs to the FDIC during resolution. However, neither this commenter, 
nor any other commenter on the Proposed Rules, offered quantified 
costs, estimated or otherwise, or other empirical data in support of 
these comments.
---------------------------------------------------------------------------

    \165\ See, e.g., ACLI letter, pp. 17-19; SIFMA AMG letter, p. 4.
    \166\ See TIAA-CREF letter, p. 2. Two other commenters stated 
that the Proposed Rules would have a significant impact on 
information technology and systems development, but these comments 
arose in the context of clearing organizations not having access to 
much of the information required under the Final Rules. See DTCC 
letter, p. 10; OCC letter, p. 12. The Secretary has provided a 
conditional exemption for registered derivatives clearing 
organizations and clearing agencies from the recordkeeping 
requirements of the Final Rules as discussed in section II.A.1.a, 
above.
    \167\ See TCH et al. letter, pp. 3-4.
---------------------------------------------------------------------------

    As discussed in detail in section II above, after carefully 
considering all of the comments received and consulting with the FDIC, 
the Secretary is adopting numerous changes from the Proposed Rules. 
Many of these changes are being adopted in response to comments and are 
intended to limit the scope and mitigate the burdens associated with 
complying with the QFC recordkeeping requirements of the Final Rules. 
In main part, these changes relate to narrowing the scope of the 
definition of ``records entity,'' extending the initial compliance 
period for all records entities, eliminating certain proposed 
recordkeeping requirements, and providing for a de minimis exemption 
from the preponderance of the recordkeeping requirements for certain 
records entities that have a minimal level of QFC activity.
    Taking into consideration the changes made in the Final Rules and 
the comments received as to the burden the rules would place on records 
entities, the Secretary has updated the estimated potential costs. It 
is estimated that the initial recordkeeping burden for all records 
entities (including affiliates) will be approximately 218,505 hours 
with a total one-time initial cost of approximately $36,631,995 (in 
nominal dollars), representing $1,221,000 per large corporate group on 
average. The basis for this estimate, discussed further below, is 
necessarily constrained by the limited availability of relevant 
information, including the lack of quantitative information from 
commenters.
    Specifically, based on staff-level discussions with several of the 
PFRAs, burden estimates in rulemakings with similar recordkeeping 
requirements, and the comments received, it is expected that each of 
the approximately 30 large corporate groups will incur on average 
approximately $500,000 in systems development and modification costs, 
including the purchase of computer software, and that the entity 
responsible for maintaining the centralized system within each large 
corporate group will incur 7,200 initial burden hours at a cost of 
$712,800 to update to their recordkeeping systems. This initial burden 
is mitigated to some extent because QFC data is likely already retained 
in some form by each large corporate group respondent in the ordinary 
course of business, but large corporate group respondents may need to 
amend internal procedures, reprogram systems, reconfigure data tables, 
and implement compliance processes. Moreover, they may need to 
standardize the data and create records tables to match the format 
required by the Final Rules. These costs will likely be borne by the 
entity responsible for maintaining the centralized system within each 
large corporate group. It is expected that the initial burden hours 
will require the work of senior programmers, programmer analysts,

[[Page 75656]]

senior system analysts, compliance managers, compliance clerks, 
directors of compliance, and compliance attorneys. The Secretary has 
estimated that the average hourly wage rate for recordkeepers to comply 
with the initial recordkeeping burden is approximately $99 per hour 
based in part on average hourly wage rate for these occupations in the 
U.S. Department of Labor, Bureau of Labor Statistics' occupational 
employment statistics and wage statistics for financial sector 
occupations, dated May 2015.\168\
---------------------------------------------------------------------------

    \168\ All cost and wage estimates are in nominal dollars and 
have not been adjusted for inflation.
---------------------------------------------------------------------------

    The total estimated one-time cost for all large corporate group 
respondents to comply with the initial recordkeeping burden, is 
approximately $36,384,000, of which $21,384,000 is due to the burden 
hours and $15,000,000 is for systems development and modification 
costs. This is based on the estimated 7,200 initial burden hours for 
each of the 30 large corporate groups multiplied by the estimated 
average hourly wage rate for recordkeepers (216,000 hours multiplied by 
$99/hour) and the $500,000 in systems development and modification 
costs for each of the 30 large corporate groups. Finally, the total 
estimated one-time initial cost includes the estimated cost for the 
5,010 affiliated financial company respondents to comply with the 
initial recordkeeping burden, which is approximately $247,995. This is 
based on an estimated 0.5 initial burden hour for each affiliated 
financial company, 5,010 affiliated financial companies, and the $99 
estimated average hourly wage rate for recordkeepers described above 
(2,505 hours multiplied by $99/hour).
    However, section 148.1(d)(1)(i) of the Final Rules provides for 
compliance periods of between 540 days and four years after the 
effective date of the Final Rules, depending on the total assets of 
records entities. Thus, the initial recordkeeping burden is expected to 
occur over multiple years, resulting in a substantial reduction in the 
annual cost. Information as to how records entities would spread this 
initial cost over the compliance period is not available. However, 
assuming the costs would be incurred evenly over the entire compliance 
period, this would result in annual one-time, initial recordkeeping 
costs ranging from $814,000 for a large corporate group with a 540 day 
compliance period to $305,267 for a large corporate group with a four 
year compliance period.
    Based in part on staff-level discussions with several of the PFRAs, 
burden estimates in rulemakings with similar recordkeeping 
requirements, and the comments received, it is expected that the total 
estimated recurring annual recordkeeping burden necessary to oversee, 
maintain, and utilize the recordkeeping system will be approximately 
240 hours for each large corporate group and 0.5 hours for each 
affiliated financial company. Based on the estimate of 30 large 
corporate groups and 168 affiliates of each corporate group that will 
be subject to the rules, the total estimated annual recordkeeping 
burden for all record entities will be approximately 9,705 hours with a 
total annual cost of approximately $960,795 (9,705 hours multiplied by 
$99/hour). The estimated average hourly wage rate for recordkeepers to 
comply with the annual recordkeeping burden is approximately $99 per 
hour, using the same methodology described above for compliance with 
the initial recordkeeping burden.
    With regard to reporting burdens under the Final Rules, a records 
entity may request in writing an extension of time with respect to 
compliance with the recordkeeping requirements or an exemption from the 
recordkeeping requirements. The annual reporting burden under the Final 
Rules associated with such exemption requests is estimated to be 
approximately 50 hours per large corporate group. The estimated average 
hourly rate for recordkeepers to comply with the annual reporting 
burden is approximately $192 per hour based on the U.S. Department of 
Labor, Bureau of Labor Statistics' occupational employment statistics 
and wage statistics for financial sector occupations, dated May 2015. 
The $192 hourly wage rate is based on the average hourly wage rates for 
compliance managers, directors of compliance, and compliance attorneys 
that will conduct the reporting. The total annual cost of the reporting 
burden under the Final Rules is approximately $288,000 (50 hours 
multiplied by 30 records entities multiplied by $192/hour).
    Based on the total one-time cost (phased in over 540 days to 4 
years), the total annual recordkeeping cost, and the total annual cost 
of the reporting burden, the estimated net present values of the 
estimated potential costs of the Final Rules over the next 10 years are 
approximately $42,103,000 using a discount rate of 3 percent and 
$38,000,000 using a discount rate of 7 percent.
    The estimated potential costs in nominal dollars for the initial 
recordkeeping burden, the annual recordkeeping burden, and the annual 
reporting burden associated with the Final Rules are summarized in the 
following table.

                           QFC Recordkeeping Requirements Final Rule--Potential Costs
----------------------------------------------------------------------------------------------------------------
                                                                   Initial           Annual           Annual
                                                                recordkeeping    recordkeeping      reporting
----------------------------------------------------------------------------------------------------------------
30 Large Corporate Groups:
    Estimated Hours per Group................................            7,200              240               50
    Total Hours..............................................          216,000            7,200            1,500
    Total Cost...............................................      $21,384,000         $712,800         $288,000
5,010 Affiliates:
    Estimated Hours per Affiliate............................              0.5              0.5  ...............
    Total Hours..............................................            2,505            2,505  ...............
    Total Cost...............................................         $247,995         $247,995  ...............
IT Costs:
    Estimated IT Costs per Corporate Group...................         $500,000  ...............  ...............
    Total Cost...............................................      $15,000,000  ...............  ...............
Total:
    Hours....................................................          218,505            9,705            1,500
    Cost.....................................................      $36,631,995         $960,795         $288,000
Memorandum:

[[Page 75657]]

 
    Estimated average hourly wage/rate *.....................              $99              $99             $192
----------------------------------------------------------------------------------------------------------------
* Estimated average hourly rate for recordkeepers to comply with the initial and annual recordkeeping and annual
  reporting requirements, based on the U.S. Department of Labor, Bureau Labor Statistics' occupational
  employment statistics and wage statistics for financial sector occupations, dated May 2015.

b. Potential Benefits
    As noted earlier, QFCs tend to increase the interconnectedness of 
the financial system, and the recent financial crisis demonstrated that 
the management of QFC positions can be an important element of a 
resolution strategy which, if not handled properly, may magnify market 
instability. The recordkeeping requirements of the Final Rules are 
therefore designed to ensure that the FDIC, as receiver of a covered 
financial company, will have comprehensive information about the QFC 
portfolio of such financial company subject to orderly resolution, and 
enable the FDIC to carry out the rapid and orderly resolution of a 
financial company's QFC portfolio in the event of insolvency, for 
example, by transferring QFCs to a bridge financial company within the 
narrow time frame afforded by the Act. Given the short time frame for 
FDIC decisions regarding a QFC portfolio of significant size or 
complexity, the Final Rules require the use of a regularly updated and 
standardized recordkeeping format to allow the FDIC to process the 
large amount of QFC information quickly. In the absence of updated and 
standardized information, for example, the FDIC could leave QFCs in the 
receivership when transferring them to a bridge financial company or 
other solvent financial institution would have been the preferred 
course of action had better information been available. Specifically, 
if the FDIC does not transfer the QFCs and does not disaffirm or 
repudiate such QFCs, counterparties may terminate the QFCs and assert 
claims for payment from the covered financial company and may have 
rights to liquidate the collateral pledged by the covered financial 
company. However, a decision by the FDIC not to transfer the QFCs of a 
large, interconnected financial company must be calculated and based on 
detailed information about the QFC portfolio. Otherwise, the subsequent 
unwinding and termination of QFCs involving numerous counterparties 
risks becoming disorderly, potentially resulting in the rapid 
liquidation of collateral, deterioration in asset values, and severe 
negative consequences for U.S. financial stability. The FDIC as 
receiver may also wish to make sure that affiliates of the covered 
financial company continue to perform their QFC obligations in order to 
preserve the critical operations of the covered financial company and 
its affiliates. In such cases, the FDIC may need to arrange for 
additional liquidity, support, or collateral to the affiliates to 
enable them to meet collateral obligations and generally perform their 
QFC obligations.
    While there could be significant benefits associated with the QFC 
recordkeeping requirements of the Final Rules, such benefits are 
difficult to quantify. The Final Rules are only one component of the 
orderly liquidation authority under Title II of the Act and the 
benefits of the Final Rules will only be realized upon such authority 
being exercised. Moreover, implementation of additional provisions of 
the Dodd-Frank Act has, among other things: (1) Subjected large, 
interconnected financial companies to stronger supervision, and, as a 
result, reduced the likelihood of their failure; and (2) blunted the 
impact of any such failure on U.S. financial stability and the economy. 
For example, bank holding companies with total consolidated assets of 
$50 billion or more and nonbank financial companies supervised by the 
Board are subject to supervisory and company-run stress tests to help 
the Board and the company measure the sufficiency of capital available 
to support the company's operations throughout periods of stress.\169\ 
These financial companies also are or will be subject to more stringent 
prudential standards, including risk-based capital and liquidity 
requirements, which will make their failure less likely. However, if 
such a financial company does fail, the implementation of the Dodd-
Frank Act is also intended to ensure that its failure and resolution 
under the Bankruptcy Code may occur without adverse effects on U.S. 
financial stability. For example, each of these large bank holding 
companies and nonbank financial companies supervised by the Board will 
have in place resolution plans to facilitate their rapid and orderly 
resolution under the Bankruptcy Code in the event of material financial 
distress or failure.\170\ The Title II orderly liquidation authority 
will only be used to resolve a failing financial company if its 
resolution under the Bankruptcy Code would have serious adverse effects 
on U.S. financial stability. In addition, there are substantial 
procedural safeguards to prevent the unwarranted use of the Title II 
orderly liquidation authority.
---------------------------------------------------------------------------

    \169\ See 12 U.S.C. 5365(i); 12 CFR part 252.
    \170\ See 12 U.S.C. 5365(d).
---------------------------------------------------------------------------

    Nevertheless, one way to gauge the potential benefits of the Final 
Rules is to examine the effect of the recent financial crisis on the 
real economy and how the Title II orderly liquidation authority as a 
whole will help reduce the probability or severity of a future 
financial crisis. For example, in a 2013 Government Accountability 
Office (GAO) report, GAO cited research that suggests that U.S. output 
losses associated with the 2007-2009 financial crisis could range from 
several trillion dollars to over $10 trillion.\171\ GAO also surveyed 
financial market regulators, academics, and industry and public 
interest groups who identified, inter alia, the more stringent 
prudential standards discussed above and the orderly liquidation 
authority as not only enhancing financial stability, at least in 
principle, but also helping to reduce the probability or severity of a 
future crisis.\172\
---------------------------------------------------------------------------

    \171\ See Government Accountability Office, Financial Regulatory 
Reform: Financial Crisis Losses and Potential Impacts of the Dodd-
Frank Act, GAO-13-180 at 15-16 (Jan. 16, 2013).
    \172\ Id. at 33-34. GAO added that the experts it surveyed had 
differing views on these provisions but that many expect some or all 
of the provisions to improve the financial system's resilience to 
shocks.
---------------------------------------------------------------------------

    However, as discussed above, even if the benefits of preventing 
future financial crises are significant, it is difficult to quantify 
such benefits and determine what portion would be attributable to any 
single provision of the Dodd-Frank Act, let alone those benefits 
directly attributable to the Final Rules. In addition, as discussed 
above, the benefits associated with the Final Rules would only be 
realized if the Title II orderly liquidation authority is

[[Page 75658]]

exercised and, even if utilized, the Final Rules are only one component 
of the orderly liquidation authority and the resulting benefits.
7. Retrospective Analysis
    Executive Order 13563 also directs the Secretary to develop a plan, 
consistent with law and the Department of the Treasury's resources and 
regulatory priorities, to conduct a periodic retrospective analysis of 
significant regulations to determine whether such regulations should be 
modified, streamlined, expanded, or repealed so as to make the 
regulations more effective and less burdensome. The Secretary expects 
to conduct a retrospective analysis not later than seven years after 
the effective date of the Final Rules. This review will consider 
whether the QFC recordkeeping requirements are necessary or appropriate 
to assist the FDIC as receiver in being able to exercise its rights 
under the Act and fulfill its obligations under sections 210(c)(8), 
(9), or (10) of the Act and may result in proposed amendments to the 
Final Rules. For example, the Secretary will review whether the total 
assets and derivatives thresholds of the definition of ``records 
entity'' should be adjusted and whether the data set forth in Tables A-
1 through A-4 and the master tables in the appendix of the Final Rules 
are necessary or appropriate to assist the FDIC as receiver, and 
whether maintaining different data is necessary or appropriate.

List of Subjects in 31 CFR Part 148

    Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set forth in the preamble, the Department of the 
Treasury adds part 148 to 31 CFR chapter I to read as follows:

Part 148--Qualified Financial Contracts Recordkeeping Related to 
the FDIC Orderly Liquidation Authority

Sec.
148.1 Scope, purpose, effective date, and compliance dates.
148.2 Definitions.
148.3 Form, availability and maintenance of records.
148.4 Content of records.
Appendix A to Part 148--File Structure for Qualified Financial 
Contract Records

    Authority:  31 U.S.C. 321(b) and 12 U.S.C. 5390(c)(8)(H).


Sec.  148.1  Scope, purpose, effective date, and compliance dates.

    (a) Scope. This part applies to each financial company that is a 
records entity and, with respect to Sec.  148.3(a), a top-tier 
financial company of a corporate group as defined in Sec.  148.2.
    (b) Purpose. This part establishes recordkeeping requirements with 
respect to QFCs of records entities in order to assist the Federal 
Deposit Insurance Corporation (``FDIC'') as receiver for a covered 
financial company (as defined in 12 U.S.C. 5381(a)(8)) in being able to 
exercise its rights and fulfill its obligations under 12 U.S.C. 
5390(c)(8), (9), or (10).
    (c) Effective Date. This part shall become effective December 30, 
2016.
    (d) Compliance--(1) Initial compliance dates. (i) A records entity 
subject to this part on the effective date must comply with Sec.  
148.3(a)(2) on the date that is 90 days after the effective date and 
with all other applicable requirements of this part on the date that 
is:
    (A) 540 days after the effective date for a records entity that:
    (1) Has total assets equal to or greater than $1 trillion; or
    (2) Is a member of the corporate group of any such records entity 
described in paragraph (d)(1)(i)(A)(1) of this section;
    (B) Two years after the effective date for any records entity that 
is not subject to the compliance date set forth in paragraph 
(d)(1)(i)(A) of this section and:
    (1) Has total assets equal to or greater than $500 billion; or
    (2) Is a member of the corporate group of any such records entity 
described in paragraph (d)(1)(i)(B)(1) of this section; and
    (C) Three years after the effective date for any records entity 
that is not subject to the compliance date set forth in paragraphs 
(d)(1)(i)(A) or (B) of this section and:
    (1) Has total assets equal to or greater than $250 billion; or
    (2) Is a member of the corporate group of any such records entity 
described in paragraph (d)(1)(i)(C)(1) of this section; and
    (D) Four years after the effective date for any records entity that 
is not subject to the compliance dates set forth in paragraphs 
(d)(1)(i)(A), (B), or (C) of this section.
    (ii) A financial company that becomes a records entity after the 
effective date must comply with Sec.  148.3(a)(2) within 90 days of 
becoming a records entity and with all other applicable requirements of 
this part within 540 days of becoming a records entity or within the 
remainder of the applicable period provided under paragraph (d)(1)(i) 
of this section, whichever period is longer.
    (2) Subsequent compliance dates. If a financial company that at one 
time met the definition of records entity later ceases to meet the 
definition of records entity and thereafter, on any subsequent date, 
again meets the definition of a records entity, such financial company 
must comply with all applicable requirements of this part within 365 
days after such subsequent date, or within the remainder of the 
applicable period provided under paragraph (d)(1)(i) of this section, 
whichever period is longer.
    (3) Extensions of time to comply. The Secretary, in consultation 
with the FDIC, may grant one or more extensions of time for compliance 
with this part. A records entity may request an extension of time by 
submitting a written request to the Department of the Treasury and the 
FDIC at least 30 days prior to the deadline for its compliance provided 
under paragraph (d)(1) of this section. The written request for an 
extension must contain:
    (i) A statement of the reasons why the records entity cannot comply 
by the deadline; and
    (ii) A plan for achieving compliance during the requested extension 
period.
    (4) Compliance by top-tier financial company. A top-tier financial 
company must comply with Sec.  148.3(a)(1)(ii) on the same date as the 
date on which the records entity members of the corporate group of 
which it is the top-tier financial company are required to comply with 
this part.


Sec.  148.2  Definitions.

    For purposes of this part:
    (a) Affiliate means any entity that controls, is controlled by, or 
is under common control with another entity.
    (b) Control. An entity ``controls'' another entity if:
    (1) The entity directly or indirectly or acting through one or more 
other persons owns, controls, or has the power to vote 25 percent or 
more of any class of voting securities of the other entity;
    (2) The entity controls in any manner the election of a majority of 
the directors or trustees of the other entity; or
    (3) The Board of Governors of the Federal Reserve System has 
determined, after notice and opportunity for hearing in accordance with 
12 CFR 225.31, that the entity directly or indirectly exercises a 
controlling influence over the management or policies of the other 
entity.
    (c) Corporate group means an entity and all affiliates of that 
entity.
    (d) Counterparty means any natural person or entity (or separate 
foreign

[[Page 75659]]

branch or division of any entity) that is a party to a QFC with a 
records entity.
    (e) Derivative liabilities means the fair value of derivative 
instruments in a negative position as of the end of the most recent 
fiscal year end, as recognized and measured in accordance with U.S. 
generally accepted accounting principles or other applicable accounting 
standards. Such value shall be adjusted for the effects of master 
netting agreements and cash collateral held with the same counterparty 
on a net basis to the extent such adjustments are reflected on the 
audited consolidated statement of financial condition of the applicable 
financial company filed with its primary financial regulatory agency or 
agencies or, for financial companies not required to file such 
statements, on the consolidated balance sheet of the financial company 
prepared in accordance with U.S. generally accepted accounting 
principles or other applicable accounting standards.
    (f) Excluded entity means:
    (1) An insured depository institution as defined in 12 U.S.C. 
1813(c)(2);
    (2) A subsidiary of an insured depository institution that is not:
    (i) A functionally regulated subsidiary as defined in 12 U.S.C. 
1844(c)(5);
    (ii) A security-based swap dealer as defined in 15 U.S.C. 
78c(a)(71); or
    (iii) A major security-based swap participant as defined in 15 
U.S.C. 78c(a)(67); or
    (3) An insurance company.
    (g) Financial company has the meaning set forth in 12 U.S.C. 
5381(a)(11).
    (h) Insurance company means:
    (1) An insurance company as defined in 12 U.S.C. 5381(a)(13); and
    (2) A mutual insurance holding company that meets the conditions 
set forth in 12 CFR 380.11 for being treated as an insurance company 
for the purpose of section 203(e) of the Dodd-Frank Act, 12 U.S.C. 
5383(e).
    (i) Legal Entity Identifier or LEI for an entity shall mean the 
global legal entity identifier maintained for such entity by a utility 
accredited by the Global LEI Foundation or by a utility endorsed by the 
Regulatory Oversight Committee. As used in this definition:
    (1) Regulatory Oversight Committee means the Regulatory Oversight 
Committee (of the Global LEI System), whose charter was set forth by 
the Finance Ministers and Central Bank Governors of the Group of Twenty 
and the Financial Stability Board, or any successor thereof; and
    (2) Global LEI Foundation means the not-for-profit organization 
organized under Swiss law by the Financial Stability Board in 2014, or 
any successor thereof.
    (j) Parent entity with respect to an entity is an entity that 
controls that entity.
    (k) Position means an individual transaction under or evidenced by 
a QFC and includes the rights and obligations of a party to an 
individual transaction under or evidenced by a QFC.
    (l) Primary financial regulatory agency means:
    (1) With respect to any financial company, the primary financial 
regulatory agency as specified for such financial company in 
subparagraphs (A), (B), (C), and (E) of 12 U.S.C. 5301(12); and
    (2) With respect to a financial market utility that is subject to a 
designation pursuant to 12 U.S.C. 5463 for which there is no primary 
financial regulatory agency under Sec.  148.2(l)(1), the Supervisory 
Agency for that financial market utility as defined in 12 U.S.C. 
5462(8).
    (m) Qualified financial contract or QFC means any qualified 
financial contract defined in 12 U.S.C. 5390(c)(8)(D), including 
without limitation, any ``swap'' defined in section 1a(47) of the 
Commodity Exchange Act (7 U.S.C. 1a(47)) and in any rules or 
regulations issued by the Commodity Futures Trading Commission pursuant 
to such section; any ``security-based swap'' defined in section 3(a) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) and in any rules 
or regulations issued by the Securities and Exchange Commission 
pursuant to such section; and any securities contract, commodity 
contract, forward contract, repurchase agreement, swap agreement, and 
any similar agreement that the FDIC determines by regulation, 
resolution, or order to be a qualified financial contract as provided 
in 12 U.S.C. 5390(c)(8)(D).
    (n) Records entity--
    (1) Records entity means any financial company that:
    (i) Is not an excluded entity as defined in Sec.  148.2(f);
    (ii) Is a party to an open QFC; and
    (iii) (A) Is subject to a determination that the company shall be 
subject to Federal Reserve supervision and enhanced prudential 
standards pursuant to 12 U.S.C. 5323;
    (B) Is subject to a designation as, or as likely to become, 
systemically important pursuant to 12 U.S.C. 5463;
    (C) Is identified as a global systemically important bank holding 
company pursuant to 12 CFR part 217;
    (D)(1) Has total assets on a consolidated basis equal to or greater 
than $50 billion; and
    (2) On a consolidated basis has:
    (i) Total gross notional derivatives outstanding equal to or 
greater than $250 billion; or
    (ii) Derivative liabilities equal to or greater than $3.5 billion; 
or
    (E)(1) Is a member of a corporate group in which at least one 
financial company meets the criteria under one or more of paragraphs 
(n)(1)(iii)(A), (B), (C), or (D) of this section; and
    (2)(i) Consolidates, is consolidated by, or is consolidated with 
such financial company on financial statements prepared in accordance 
with U.S. generally accepted accounting principles or other applicable 
accounting standards; or
    (ii) For financial companies not subject to such principles or 
standards, would consolidate, be consolidated by, or be consolidated 
with such financial company if such principles or standards applied.
    (2) A financial company that qualifies as a records entity pursuant 
to paragraph (n)(1)(iii)(D) will remain a records entity until one year 
after it ceases to meet the criteria set forth in paragraph 
(n)(1)(iii)(D) of this section.
    (o) Secretary means the Secretary of the Treasury or the 
Secretary's designee.
    (p) Subsidiary means any company that is controlled by another 
company.
    (q) Top-tier financial company means a financial company that is a 
member of a corporate group consisting of multiple records entities and 
that is not itself controlled by another financial company.
    (r) Total assets means the total assets reported on the audited 
consolidated statement of financial condition of the applicable 
financial company for the most recent year end filed with its primary 
financial regulatory agency or agencies or, for financial companies not 
required to file such statements, the total assets shown on the 
consolidated balance sheet of the financial company for the most recent 
fiscal year end as prepared in accordance with U.S. generally accepted 
accounting principles or other applicable accounting standards.
    (s) Total gross notional derivatives outstanding means the gross 
notional value of all derivative instruments that are outstanding as of 
the most recent fiscal year end, as recognized and measured in 
accordance with U.S. generally accepted accounting principles or other 
applicable accounting standards.

[[Page 75660]]

Sec.  148.3  Form, availability and maintenance of records.

    (a) Form and availability--(1) Electronic records. (i) Except to 
the extent of any relevant exemption provided under paragraph (c) of 
this section, a records entity is required to maintain the records 
described in Sec.  148.4 in electronic form and, as applicable, in the 
format set forth in the tables in the appendix to this part.
    (ii) A top-tier financial company must be capable of generating a 
single, compiled set of the records required to be maintained by Sec.  
148.4(a)-(h), in a format that allows for aggregation and 
disaggregation of such data by records entity and counterparty, for all 
records entities in its corporate group that are consolidated by or 
consolidated with such top-tier financial company on financial 
statements prepared in accordance with U.S. generally accepted 
accounting principles or other applicable accounting standards or, for 
financial companies not subject to such principles or standards, that 
would be consolidated by or consolidated with such financial company if 
such principles or standards applied.
    (2) Point of contact. Each records entity and top-tier financial 
company must provide a point of contact who is responsible for 
recordkeeping under this part by written notice to its primary 
financial regulatory agency or agencies and the FDIC and must provide 
written notice to its primary financial regulatory agency or agencies 
and the FDIC within 30 days of any change in its point of contact.
    (3) Access to records. Except to the extent of any relevant 
exemption provided under paragraph (c) of this section, a records 
entity and a top-tier financial company that are regulated by a primary 
financial regulatory agency shall be capable of providing 
electronically to such primary financial regulatory agency and the 
FDIC, within 24 hours of request by the primary financial regulatory 
agency:
    (i) In the case of a records entity, the records specified in Sec.  
148.4, and
    (ii) In the case of a top-tier financial company, the set of 
records referenced in paragraph (a)(1)(ii) of this section.
    (b) Maintenance and updating--(1) Daily updating. Except to the 
extent of any relevant exemption provided under paragraph (c) of this 
section, the records maintained under Sec.  148.4 shall be based on 
values and information that are no less current than previous end-of-
day values and information.
    (2) Records maintenance. The records required under Sec.  148.4 and 
the capability of generating the set of records required by paragraph 
(a)(1)(ii) of this section may be maintained on behalf of the records 
entity or top-tier financial company, as applicable, by any affiliate 
of such records entity or top-tier financial company, as applicable, or 
any third-party service provider; provided that such records entity 
shall itself maintain records under this part in the event that such 
affiliate or service provider shall fail to maintain such records and 
such top-tier financial company shall itself maintain the capability of 
generating the set of records required by paragraph (a)(1)(ii) of this 
section in the event that such affiliate or service provider shall fail 
to maintain the capability of doing so.
    (3) Record retention. A records entity shall retain records 
maintained under Sec.  148.4 based on end-of-day values and information 
for the five preceding business days.
    (c) Exemptions--(1) De minimis exemption. A records entity that is 
a party to 50 or fewer open QFC positions is not required to maintain 
the records described in Sec.  148.4, other than the records described 
in Sec.  148.4(i).
    (2) Clearing organizations. A records entity that is a derivatives 
clearing organization registered with the Commodity Futures Trading 
Commission under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-
1) or a clearing agency registered with the Securities and Exchange 
Commission under section 17A of the Securities Exchange Act of 1934 (15 
U.S.C. 78q-1) is not required to maintain the records described in 
Sec.  148.4 if it is:
    (i) In compliance with the recordkeeping requirements of the 
Commodity Futures Trading Commission or the Securities and Exchange 
Commission, as applicable, including its maintenance of records 
pertaining to all QFCs cleared by such records entity; and
    (ii) Capable of and not restricted from, whether by law, 
regulation, or agreement, transmitting electronically to the FDIC the 
records maintained under such recordkeeping requirements within 24 
hours of request of the Commodity Futures Trading Commission or the 
Securities and Exchange Commission, as applicable.
    (3) Requests for exemptions. One or more records entities may 
request an exemption from one or more of the requirements of this part 
by writing to the Department of the Treasury, the FDIC, and its primary 
financial regulatory agency or agencies, if any. The written request 
for an exemption must:
    (i) Identify the records entity or records entities or the types of 
records entities to which the exemption should apply;
    (ii) Specify the requirement(s) under this part from which the 
identified records entities should be exempt;
    (iii) Provide details as to the size, risk, complexity, leverage, 
frequency and dollar amount of qualified financial contracts, and 
interconnectedness to the financial system of each records entity 
identified in paragraph (c)(3)(i) of this section, to the extent 
appropriate, and any other relevant factors; and
    (iv) Specify the reason(s) why granting the exemption will not 
impair or impede the FDIC's ability to exercise its rights or fulfill 
its statutory obligations under 12 U.S.C. 5390(c)(8), (9), and (10).
    (4) Granting exemptions. (i) Upon receipt of a written 
recommendation from the FDIC, prepared in consultation with the primary 
financial regulatory agency or agencies for the applicable records 
entity or entities, that takes into consideration each of the factors 
referenced in 12 U.S.C. 5390(c)(8)(H)(iv) and any other factors the 
FDIC considers appropriate, the Secretary may grant, in whole or in 
part, a conditional or unconditional exemption from compliance with one 
or more of the requirements of this part by issuing an exemption to one 
or more records entities.
    (ii) In determining whether to grant an exemption to one or more 
records entities, including whether to grant a conditional or 
unconditional exemption, the Secretary will consider any factors deemed 
appropriate by the Secretary, including whether application of one or 
more requirements of this part is not necessary to achieve the purpose 
of this part as described in Sec.  148.1(b).
    (iii) If the FDIC does not submit, within 90 days of the date on 
which the FDIC and the Department of the Treasury received the 
exemption request, a written recommendation to the Secretary as to 
whether to grant or deny an exemption request, the Secretary will 
nevertheless determine whether to grant or deny the exemption request.


Sec.  148.4  Content of records.

    Subject to Sec.  148.3(c), a records entity must maintain the 
following records:
    (a) The position level data listed in Table A-1 in appendix A to 
this part with respect to each QFC to which it is a party.
    (b) The counterparty netting set data listed in Table A-2 in 
appendix A to this part for each netting set with respect to each QFC 
to which it is a party.

[[Page 75661]]

    (c) The legal agreements information listed in Table A-3 in 
appendix A to this part with respect to each QFC to which it is a 
party.
    (d) The collateral detail data listed in Table A-4 in appendix A to 
this part with respect to each QFC to which it is a party.
    (e) The corporate organization master data lookup table in appendix 
A to this part for the records entity and each of its affiliates.
    (f) The counterparty master data lookup table in appendix A to this 
part for each non-affiliated counterparty with respect to QFCs to which 
it is a party.
    (g) The booking location master data lookup table in appendix A to 
this part for each booking location used with respect to QFCs to which 
it is a party.
    (h) The safekeeping agent master data lookup table in the appendix 
to this part for each safekeeping agent used with respect to QFCs to 
which it is a party.
    (i) All documents that govern QFC transactions between the records 
entity and each counterparty, including, without limitation, master 
agreements and annexes, schedules, netting agreements, supplements, or 
other modifications with respect to the agreements, confirmations for 
each open QFC position of the records entity that has been confirmed 
and all trade acknowledgments for each open QFC position that has not 
been confirmed, all credit support documents including, but not limited 
to, credit support annexes, guarantees, keep-well agreements, or net 
worth maintenance agreements that are relevant to one or more QFCs, and 
all assignment or novation documents, if applicable, including 
documents that confirm that all required consents, approvals, or other 
conditions precedent for such assignment or novation have been obtained 
or satisfied.
    (j) A list of vendors directly supporting the QFC-related 
activities of the records entity and the vendors' contact information.

Appendix A to Part 148--File Structure for Qualified Financial Contract 
Records

                                         Table A-1--Position-Level Data
----------------------------------------------------------------------------------------------------------------
                                                       Instructions and
                      Field             Example        data application       Definition           Validation
----------------------------------------------------------------------------------------------------------------
A1.1..........  As of date.......  2015-01-05.......  Provide data       YYYY-MM-DD..........  .................
                                                       extraction date.
A1.2..........  Records entity     999999999........  Provide LEI for    Varchar(50).........  Validated against
                 identifier.                           records entity.                          CO.2.
                                                       Information
                                                       needed to review
                                                       position-level
                                                       data by records
                                                       entity.
A1.3..........  Position           20058953.........  Provide a          Varchar(100).         .................
                 identifier.                           position
                                                       identifier.
                                                       Should be used
                                                       consistently
                                                       across all
                                                       record entities
                                                       within the
                                                       corporate group.
                                                       Use the unique
                                                       transaction
                                                       identifier if
                                                       available.
                                                       Information
                                                       needed to
                                                       readily track
                                                       and distinguish
                                                       positions.
A1.4..........  Counterparty       888888888........  Provide a          Varchar(50).........  Validated against
                 identifier.                           counterparty                             CP.2.
                                                       identifier. Use
                                                       LEI if
                                                       counterparty has
                                                       one. Should be
                                                       used
                                                       consistently by
                                                       all record
                                                       entities within
                                                       the corporate
                                                       group.
                                                       Information
                                                       needed to
                                                       identify
                                                       counterparty by
                                                       reference to
                                                       Counterparty
                                                       Master Table.
A1.5..........  Internal booking   New York, New      Provide office     Varchar(50).........  Combination A1.2
                 location           York.              where the                                + A1.5 + A1.6
                 identifier.                           position is                              should have a
                                                       booked.                                  corresponding
                                                       Information                              unique
                                                       needed to                                combination BL.2
                                                       determine system                         + BL.3 + BL.4
                                                       on which the                             entry in Booking
                                                       trade is booked                          Location Master
                                                       and settled.                             Table.
A1.6..........  Unique booking     xxxxxx...........  Provide an         Varchar(50).........  Combination A1.2
                 unit or desk                          identifier for                           + A1.5 + A1.6
                 identifier.                           unit or desk at                          should have a
                                                       which the                                corresponding
                                                       position is                              unique
                                                       booked.                                  combination BL.2
                                                       Information                              + BL.3 + BL.4
                                                       needed to help                           entry in Booking
                                                       determine                                Location Master
                                                       purpose of                               Table.
                                                       position.
A1.7..........  Type of QFC......  Credit, equity,    Provide type of    Varchar (100).        .................
                                    foreign            QFC. Use unique
                                    exchange,          product
                                    interest rate      identifier if
                                    (including cross-  available.
                                    currency), other   Information
                                    commodity,         needed to
                                    securities         determine the
                                    repurchase         nature of the
                                    agreement,         QFC.
                                    securities
                                    lending, loan
                                    repurchase
                                    agreement,
                                    guarantee or
                                    other third
                                    party credit
                                    enhancement of a
                                    QFC.

[[Page 75662]]

 
A1.7.1........  Type of QFC        Credit, equity,    If QFC type is     Varchar(500)........  Only required if
                 covered by         foreign            guarantee or                             QFC type (A1.7)
                 guarantee or       exchange,          other third                              is a guarantee
                 other third        interest rate      party credit                             or other third
                 party credit       (including cross-  enhancement,                             party credit
                 enhancement.       currency), other   provide type of                          enhancement.
                                    commodity,         QFC of the QFC
                                    securities         that is covered
                                    repurchase         by such
                                    agreement,         guarantee or
                                    securities         other third
                                    lending, or loan   party credit
                                    repurchase         enhancement. Use
                                    agreement.         unique product
                                                       identifier if
                                                       available. If
                                                       multiple asset
                                                       classes are
                                                       covered by the
                                                       guarantee or
                                                       credit
                                                       enhancement,
                                                       enter the asset
                                                       classes
                                                       separated by
                                                       comma. If all
                                                       the QFCs of the
                                                       underlying QFC
                                                       obligor
                                                       identifier are
                                                       covered by the
                                                       guarantee or
                                                       other third
                                                       party credit
                                                       enhancement,
                                                       enter ``All''.
A1.7.2........  Underlying QFC     888888888........  If QFC type is     Varchar(50).........  Only required if
                 obligor                               guarantee or                             QFC asset type
                 identifier.                           other third                              (A1.7) is a
                                                       party credit                             guarantee or
                                                       enhancement,                             other third
                                                       provide an                               party credit
                                                       identifier for                           enhancement.
                                                       the QFC obligor                          Validated
                                                       whose obligation                         against CO.2 if
                                                       is covered by                            affiliate or
                                                       the guarantee or                         CP.2 if non-
                                                       other third                              affiliate.
                                                       party credit
                                                       enhancement. Use
                                                       LEI if
                                                       underlying QFC
                                                       obligor has one.
                                                       Complete the
                                                       counterparty
                                                       master table
                                                       with respect to
                                                       a QFC obligor
                                                       that is a non-
                                                       affiliate.
A1.8..........  Agreement          xxxxxxxxx........  Provide an         Varchar(50).........  Validated against
                 identifier.                           identifier for                           A3.3.
                                                       the primary
                                                       governing
                                                       documentation,
                                                       e.g., the master
                                                       agreement or
                                                       guarantee
                                                       agreement, as
                                                       applicable.
A1.9..........  Netting agreement  xxxxxxxxx........  Provide an         Varchar(50).........  Validated against
                 identifier.                           identifier for                           A3.3.
                                                       netting
                                                       agreement. If
                                                       this agreement
                                                       is the same as
                                                       provided in
                                                       A1.8, use same
                                                       identifier.
                                                       Information
                                                       needed to
                                                       identify unique
                                                       netting sets.
A1.10.........  Netting agreement  xxxxxxxxx........  Provide a netting  Varchar(50).........  Validated against
                 counterparty                          agreement                                CP.2.
                 identifier.                           counterparty
                                                       identifier. Use
                                                       same identifier
                                                       as provided in
                                                       A1.4 if
                                                       counterparty and
                                                       netting
                                                       agreement
                                                       counterparty are
                                                       the same. Use
                                                       LEI if netting
                                                       agreement
                                                       counterparty has
                                                       one. Information
                                                       needed to
                                                       identify unique
                                                       netting sets.
A1.11.........  Trade date.......  2014-12-20.......  Provide trade or   YYYY-MM-DD.           .................
                                                       other commitment
                                                       date for the
                                                       QFC. Information
                                                       needed to
                                                       determine when
                                                       the entity's
                                                       rights and
                                                       obligations
                                                       regarding the
                                                       position
                                                       originated.
A1.12.........  Termination date.  2014-03-31.......  Provide date the   YYYY-MM-DD.           .................
                                                       QFC terminates
                                                       or is expected
                                                       to terminate,
                                                       expire, mature,
                                                       or when final
                                                       performance is
                                                       required.
                                                       Information
                                                       needed to
                                                       determine when
                                                       the entity's
                                                       rights and
                                                       obligations
                                                       regarding the
                                                       position are
                                                       expected to end.
A1.13.........  Next call, put,    2015-01-25.......  Provide next       YYYY-MM-DD.           .................
                 or cancellation                       call, put, or
                 date.                                 cancellation
                                                       date.
A1.14.........  Next payment date  2015-01-25.......  Provide next       YYYY-MM-DD.           .................
                                                       payment date.
A1.15.........  Local Currency Of  USD..............  Provide currency   Char(3).              .................
                 Position.                             in which QFC is
                                                       denominated. Use
                                                       ISO currency
                                                       code.

[[Page 75663]]

 
A1.16.........  Current market     995000...........  Provide current    Num (25,5).           .................
                 value of the                          market value of
                 position in                           the position in
                 local currency.                       local currency.
                                                       In the case of a
                                                       guarantee or
                                                       other third
                                                       party credit
                                                       enhancements,
                                                       provide the
                                                       current mark-to-
                                                       market expected
                                                       value of the
                                                       exposure.
                                                       Information
                                                       needed to
                                                       determine the
                                                       current size of
                                                       the obligation
                                                       or benefit
                                                       associated with
                                                       the QFC.
A1.17.........  Current market     995000...........  In the case of a   Num (25,5).           .................
                 value of the                          guarantee or
                 position in U.S.                      other third
                 dollars.                              party credit
                                                       enhancements,
                                                       provide the
                                                       current mark-to-
                                                       market expected
                                                       value of the
                                                       exposure.
                                                       Information
                                                       needed to
                                                       determine the
                                                       current size of
                                                       the obligation/
                                                       benefit
                                                       associated with
                                                       the QFC.
A1.18.........  Asset              1................  Provide fair       Char(1).              .................
                 Classification.                       value asset
                                                       classification
                                                       under GAAP,
                                                       IFRS, or other
                                                       accounting
                                                       principles or
                                                       standards used
                                                       by records
                                                       entity. Provide
                                                       ``1'' for Level
                                                       1, ``2'' for
                                                       Level 2, or
                                                       ``3'' for Level
                                                       3. Information
                                                       needed to assess
                                                       fair value of
                                                       the position.
A1.19.........  Notional or        1000000..........  Provide the        Num (25,5).           .................
                 principal amount                      notional or
                 of the position                       principal
                 in local                              amount, as
                 currency.                             applicable, in
                                                       local currency.
                                                       In the case of a
                                                       guarantee or
                                                       other third
                                                       party credit
                                                       enhancement,
                                                       provide the
                                                       maximum possible
                                                       exposure.
                                                       Information
                                                       needed to help
                                                       evaluate the
                                                       position.
A1.20.........  Notional or        1000000..........  Provide the        Num (25,5).           .................
                 principal amount                      notional or
                 of the position                       principal
                 In U.S. dollars.                      amount, as
                                                       applicable, in
                                                       U.S. dollars. In
                                                       the case of a
                                                       guarantee or
                                                       other third
                                                       party credit
                                                       enhancements,
                                                       provide the
                                                       maximum possible
                                                       exposure.
                                                       Information
                                                       needed to help
                                                       evaluate the
                                                       position.
A1.21.........  Covered by third-  Y/N..............  Indicate whether   Char(1).............  Should be ``Y''
                 party credit                          QFC is covered                           or ``N.
                 enhancement                           by a guarantee
                 agreement (for                        or other third-
                 the benefit of                        party credit
                 the records                           enhancement.
                 entity)?                              Information
                                                       needed to
                                                       determine credit
                                                       enhancement.
A1.21.1.......  Third-party        999999999........  If QFC is covered  Varchar(50).........  Required if A1.21
                 credit                                by a guarantee                           is ``Y''.
                 enhancement                           or other third-                          Validated
                 provider                              party credit                             against CP.2.
                 identifier (for                       enhancement,
                 the benefit of                        provide an
                 the records                           identifier for
                 entity).                              provider. Use
                                                       LEI if
                                                       available.
                                                       Complete the
                                                       counterparty
                                                       master table
                                                       with respect to
                                                       a provider that
                                                       is a non-
                                                       affiliate.
A1.21.2.......  Third-party        4444444..........  If QFC is covered  Varchar(50).........  Required if A1.21
                 credit                                by a guarantee                           is ``Y.''
                 enhancement                           or other third-                          Validated
                 agreement                             party credit                             against A3.3.
                 identifier (for                       enhancement,
                 the benefit of                        provide an
                 the records                           identifier for
                 entity).                              the agreement.
A1.21.3.......  Covered by third-  Y/N..............  Indicate whether   Char(1).............  Should be ``Y''
                 party credit                          QFC is covered                           or ``N.
                 enhancement                           by a guarantee
                 agreement (for                        or other third-
                 the benefit of                        party credit
                 the                                   enhancement.
                 counterparty)?                        Information
                                                       needed to
                                                       determine credit
                                                       enhancement.
A1.21.4.......  Third-party        999999999........  If QFC is covered  Varchar(50).........  Required if
                 credit                                by a guarantee                           A1.21.3 is
                 enhancement                           or other third-                          ``Y''. Validated
                 provider                              party credit                             against CO.2 or
                 identifier (for                       enhancement,                             CP.2.
                 the benefit of                        provide an
                 the                                   identifier for
                 counterparty).                        provider. Use
                                                       LEI if
                                                       available.
                                                       Complete the
                                                       counterparty
                                                       master table
                                                       with respect to
                                                       a provider that
                                                       is a non-
                                                       affiliate.

[[Page 75664]]

 
A1.21.5.......  Third-party        4444444..........  If QFC is covered  Varchar(50).........  Required if
                 credit                                by a guarantee                           A1.21.3 is
                 enhancement                           or other third-                          ``Y''. Validated
                 agreement                             party credit                             against A3.3.
                 identifier (for                       enhancement,
                 the benefit of                        provide an
                 the                                   identifier for
                 counterparty).                        agreement.
A1.22.........  Related position   3333333..........  Use this field to  Varchar(100).         .................
                 of records                            link any related
                 entity.                               positions of the
                                                       records entity.
                                                       All positions
                                                       that are related
                                                       to one another
                                                       should have same
                                                       designation in
                                                       this field.
A1.23.........  Reference number   9999999..........  Provide a unique   Varchar(500).         .................
                 for any related                       reference number
                 loan.                                 for any loan
                                                       held by the
                                                       records entity
                                                       or a member of
                                                       its corporate
                                                       group related to
                                                       the position
                                                       (with multiple
                                                       entries
                                                       delimited by
                                                       commas).
A1.24.........  Identifier of the  999999999........  For any loan       Varchar(500).         .................
                 lender of the                         recorded in
                 related loan.                         A1.23, provide
                                                       identifier for
                                                       records entity
                                                       or member of its
                                                       corporate group
                                                       that holds any
                                                       related loan.
                                                       Use LEI if
                                                       entity has one.
----------------------------------------------------------------------------------------------------------------


                                    Table A-2--Counterparty Netting Set Data
----------------------------------------------------------------------------------------------------------------
                                                       Instructions and
                      Field             Example        data application       Definition           Validation
----------------------------------------------------------------------------------------------------------------
A2.1..........  As of date.......  2015-01-05.......  Data extraction    YYYY-MM-DD.           .................
                                                       date.
A2.2..........  Records entity     999999999........  Provide the LEI    Varchar(50).........  Validated against
                 identifier.                           for the records                          CO.2.
                                                       entity.
A2.3..........  Netting agreement  888888888........  Provide an         Varchar(50).........  Validated against
                 counterparty                          identifier for                           CP.2.
                 identifier.                           the netting
                                                       agreement
                                                       counterparty.
                                                       Use LEI if
                                                       counterparty has
                                                       one.
A2.4..........  Netting agreement  xxxxxxxxx........  Provide an         Varchar(50).........  Validated against
                 identifier.                           identifier for                           A3.3.
                                                       the netting
                                                       agreement.
A2.4.1........  Underlying QFC     888888888........  Provide            Varchar(50).........  Validated against
                 obligor                               identifier for                           CO.2 or CP.2.
                 identifier.                           underlying QFC
                                                       obligor if
                                                       netting
                                                       agreement is
                                                       associated with
                                                       a guarantee or
                                                       other third
                                                       party credit
                                                       enhancement. Use
                                                       LEI if available.
A2.5..........  Covered by third-  Y/N..............  Indicate whether   Char(1).............  Should be ``Y''
                 party credit                          the positions                            or ``N.``
                 enhancement                           subject to the
                 agreement (for                        netting set
                 the benefit of                        agreement are
                 the records                           covered by a
                 entity)?                              third-party
                                                       credit
                                                       enhancement
                                                       agreement.
A2.5.1........  Third-party        999999999........  Use LEI if         Varchar(50).........  Required if A2.5
                 credit                                available.                               is ``Y''.
                 enhancement                           Information                              Validated
                 provider                              needed to                                against CP.2.
                 identifier (for                       identity third-
                 the benefit of                        party credit
                 the records                           enhancement
                 entity).                              provider.
A2.5.2........  Third-party        4444444..........  .................  Varchar(50).........  Required if A2.5
                 credit                                                                         is ``Y''.
                 enhancement                                                                    Validated
                 agreement                                                                      against A3.3.
                 identifier (for
                 the benefit of
                 the records
                 entity).
A2.5.3........  Covered by third-  Y/N..............  Information        Char(1).............  Should be ``Y''
                 party credit                          needed to                                or ``N.
                 enhancement                           determine credit
                 agreement (for                        enhancement.
                 the benefit of
                 the
                 counterparty)?
A2.5.4........  Third-party        999999999........  Use LEI if         Varchar(50).........  Required if
                 credit                                available.                               A2.5.3 is ``Y''.
                 enhancement                           Information                              Should be a
                 provider                              needed to                                valid entry in
                 identifier (for                       identity third-                          the Counterparty
                 the benefit of                        party credit                             Master Table.
                 the                                   enhancement                              Validated
                 counterparty).                        provider.                                against CP.2.
A2.5.5........  Third-party        4444444..........  Information used   Varchar(50).........  Required if
                 credit                                to determine                             A2.5.3 is ``Y''.
                 enhancement                           guarantee or                             Validated
                 agreement                             other third-                             against A3.3.
                 identifier (for                       party credit
                 the benefit of                        enhancement.
                 the
                 counterparty).
A2.6..........  Aggregate current  -1000000.........  Information        Num (25,5)..........  Market value of
                 market value in                       needed to help                           all positions in
                 U.S. dollars of                       evaluate the                             A1 for the given
                 all positions                         positions                                netting
                 under this                            subject to the                           agreement
                 netting                               netting                                  identifier
                 agreement.                            agreement.                               should be equal
                                                                                                to this value.
                                                                                                A2.6 = A2.7 +
                                                                                                A2.8.
A2.7..........  Current market     3000000..........  Information        Num (25,5)..........  Market value of
                 value in U.S.                         needed to help                           all positive
                 dollars of all                        evaluate the                             positions in A1
                 positive                              positions                                for the given
                 positions, as                         subject to the                           netting
                 aggregated under                      netting                                  agreement
                 this netting                          agreement.                               identifier
                 agreement.                                                                     should be equal
                                                                                                to this value.
                                                                                                A2.6 = A2.7 +
                                                                                                A2.8.

[[Page 75665]]

 
A2.8..........  Current market     -4000000.........  Information        Num (25,5)..........  Market value of
                 value in U.S.                         needed to help                           all negative
                 dollars of all                        evaluate the                             positions in A1
                 negative                              positions                                for the given
                 positions, as                         subject to the                           Netting
                 aggregated under                      netting                                  Agreement
                 this netting                          agreement.                               Identifier
                 agreement.                                                                     should be equal
                                                                                                to this value.
                                                                                                A2.6 = A2.7 +
                                                                                                A2.8.
A2.9..........  Current market     950000...........  Information        Num (25,5)..........  Market value of
                 value in U.S.                         needed to                                all collateral
                 dollars of all                        determine the                            posted by
                 collateral                            extent to which                          records entity
                 posted by                             collateral has                           for the given
                 records entity,                       been provided by                         netting
                 as aggregated                         records entity.                          agreement
                 under this                                                                     Identifier
                 netting                                                                        should be equal
                 agreement.                                                                     to sum of all
                                                                                                A4.9 for the
                                                                                                same netting
                                                                                                agreement
                                                                                                identifier in
                                                                                                A4.
A2.10.........  Current market     50000............  Information        Num (25,5)..........  Market value of
                 value in U.S.                         needed to                                all collateral
                 dollars of all                        determine the                            posted by
                 collateral                            extent to which                          counterparty for
                 posted by                             collateral has                           the given
                 counterparty, as                      been provided by                         netting
                 aggregated under                      counterparty.                            agreement
                 this netting                                                                   identifier
                 agreement.                                                                     should be equal
                                                                                                to sum of all
                                                                                                A4.9 for the
                                                                                                same netting
                                                                                                agreement
                                                                                                identifier in
                                                                                                A4.
A2.11.........  Current market     950000...........  Information        Num (25,5).           .................
                 value in U.S.                         needed to
                 dollar of all                         determine the
                 collateral                            extent to which
                 posted by                             collateral has
                 records entity                        been provided by
                 that is subject                       records entity.
                 to re-
                 hypothecation,
                 as aggregated
                 under this
                 netting
                 agreement.
A2.12.........  Current market     950000...........  Information        Num (25,5).           .................
                 value in U.S.                         needed to
                 dollars of all                        determine the
                 collateral                            extent to which
                 posted by                             collateral has
                 counterparty                          been provided by
                 that is subject                       records entity.
                 to re-
                 hypothecation,
                 as aggregated
                 under this
                 netting
                 agreement.
A2.13.........  Records entity     950000...........  Provide records    Num (25,5)..........  Should be less
                 collateral--net.                      entity's                                 than or equal to
                                                       collateral                               A2.9.
                                                       excess or
                                                       deficiency with
                                                       respect to all
                                                       of its
                                                       positions, as
                                                       determined under
                                                       each applicable
                                                       agreement,
                                                       including
                                                       thresholds and
                                                       haircuts where
                                                       applicable.
A2.14.........  Counterparty       950000...........  Provide            Num (25,5)..........  Should be less
                 collateral--net.                      counterparty's                           than or equal to
                                                       collateral                               A2.10.
                                                       excess or
                                                       deficiency with
                                                       respect to all
                                                       of its
                                                       positions, as
                                                       determined under
                                                       each applicable
                                                       agreement,
                                                       including
                                                       thresholds and
                                                       haircuts where
                                                       applicable.
A2.15.........  Next margin        2015-11-05.......  Provide next       YYYY-MM-DD.           .................
                 payment date.                         margin payment
                                                       date for
                                                       position.
A2.16.........  Next margin        150000...........  Use positive       Num (25,5).           .................
                 payment amount                        value if records
                 in U.S. dollars.                      entity is due a
                                                       payment and use
                                                       negative value
                                                       if records
                                                       entity has to
                                                       make the payment.
A2.17.........  Safekeeping agent  888888888........  Provide an         Varchar(50).........  Validated against
                 identifier for                        identifier for                           SA.2.
                 records entity.                       the records
                                                       entity's
                                                       safekeeping
                                                       agent, if any.
                                                       Use LEI if
                                                       safekeeping
                                                       agent has one.
A2.18.........  Safekeeping agent  888888888........  Provide an         Varchar(50).........  Validated against
                 identifier for                        identifier for                           SA.2.
                 counterparty.                         the
                                                       counterparty's
                                                       safekeeping
                                                       agent, if any.
                                                       Use LEI if
                                                       safekeeping
                                                       agent has one.
----------------------------------------------------------------------------------------------------------------


                                                               Table A-3--Legal Agreements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Instructions and data
                                              Field                  Example              application             Definition             Validation
--------------------------------------------------------------------------------------------------------------------------------------------------------
A3.1...............................  As Of Date............  2015-01-05............  Data extraction date.  YYYY-MM-DD.            .....................
A3.2...............................  Records entity          999999999.............  Provide LEI for        Varchar(50)..........  Validated against
                                      identifier.                                     records entity.                               CO.2.
A3.3...............................  Agreement identifier..  xxxxxx................  Provide identifier     Varchar(50).           .....................
                                                                                      for each master
                                                                                      agreement, governing
                                                                                      document, netting
                                                                                      agreement or third-
                                                                                      party credit
                                                                                      enhancement
                                                                                      agreement.

[[Page 75666]]

 
A3.4...............................  Name of agreement or    ISDA Master 1992 or     Provide name of        Varchar(50).           .....................
                                      governing document.     Guarantee Agreement     agreement or
                                                              or Master Netting       governing document.
                                                              Agreement.
A3.5...............................  Agreement date........  2010-01-25............  Provide the date of    YYYY-MM-DD.            .....................
                                                                                      the agreement.
A3.6...............................  Agreement counterparty  888888888.............  Use LEI if             Varchar(50)..........  Validated against
                                      identifier.                                     counterparty has                              field CP.2.
                                                                                      one. Information
                                                                                      needed to identify
                                                                                      counterparty.
A3.6.1.............................  Underlying QFC obligor  888888888.............  Provide underlying     Varchar(50)..........  Validated against
                                      identifier.                                     QFC obligor                                   CO.2 or CP.2.
                                                                                      identifier if
                                                                                      document identifier
                                                                                      is associated with a
                                                                                      guarantee or other
                                                                                      third party credit
                                                                                      enhancement. Use LEI
                                                                                      if underlying QFC
                                                                                      obligor has one.
A3.7...............................  Agreement governing     New York..............  Provide law governing  Varchar(50).           .....................
                                      law.                                            contract disputes.
A3.8...............................  Cross-default           Y/N...................  Specify whether        Char(1)..............  Should be ``Y'' or
                                      provision?                                      agreement includes                            ``N.
                                                                                      default or other
                                                                                      termination event
                                                                                      provisions that
                                                                                      reference an entity
                                                                                      not a party to the
                                                                                      agreement (``cross-
                                                                                      default Entity'').
                                                                                      Information needed
                                                                                      to determine
                                                                                      exposure to
                                                                                      affiliates or other
                                                                                      entities.
A3.9...............................  Identity of cross-      777777777.............  Provide identity of    Varchar(500).........  Required if A3.8 is
                                      default entities.                               any cross-default                             ``Y''. ID should be
                                                                                      entities referenced                           a valid entry in
                                                                                      in A3.8. Use LEI if                           Corporate Org Master
                                                                                      entity has one.                               Table or
                                                                                      Information needed                            Counterparty Master
                                                                                      to determine                                  Table, if
                                                                                      exposure to other                             applicable. Multiple
                                                                                      entities.                                     entries comma
                                                                                                                                    separated.
A3.10..............................  Covered by third-party  Y/N...................  Information needed to  Char(1)..............  Should be ``Y'' or
                                      credit enhancement                              determine credit                              ``N.''
                                      agreement (for the                              enhancement.
                                      benefit of the
                                      records entity)?
A3.11..............................  Third-party credit      999999999.............  Use LEI if available.  Varchar(50)..........  Required if A3.10 is
                                      enhancement provider                            Information needed                            ``Y''. Should be a
                                      identifier (for the                             to identity Third-                            valid entry in the
                                      benefit of the                                  Party Credit                                  Counterparty Master
                                      records entity).                                Enhancement Provider.                         Table. Validated
                                                                                                                                    against CP.2.
A3.12..............................  Associated third-party  33333333..............  Information needed to  Varchar(50)..........  Required if A3.10 is
                                      credit enhancement                              determine credit                              ``Y''. Validated
                                      agreement document                              enhancement.                                  against field A3.3.
                                      identifier (for the
                                      benefit of the
                                      records entity).
A3.12.1............................  Covered by third-party  Y/N...................  Information needed to  Char(1)..............  Should be ``Y'' or
                                      credit enhancement                              determine credit                              ``N.''
                                      agreement (for the                              enhancement.
                                      benefit of the
                                      counterparty)?
A3.12.2............................  Third-party credit      999999999.............  Use LEI if available.  Varchar(50)..........  Required if A3.12.1
                                      enhancement provider                            Information needed                            is ``Y''. Should be
                                      identifier (for the                             to identity Third-                            a valid entry in the
                                      benefit of the                                  Party Credit                                  Counterparty Master.
                                      counterparty).                                  Enhancement Provider.                         Validated against
                                                                                                                                    CP.2.

[[Page 75667]]

 
A3.12.3............................  Associated third-party  33333333..............  Information needed to  Varchar(50)..........  Required if A3.12.1
                                      credit enhancement                              determine credit                              is ``Y''. Validated
                                      agreement document                              enhancement.                                  against field A3.3.
                                      identifier (for the
                                      benefit of the
                                      counterparty).
A3.13..............................  Counterparty contact    John Doe & Co.........  Provide contact name   Varchar(200).          .....................
                                      information: name.                              for counterparty as
                                                                                      provided under
                                                                                      notice section of
                                                                                      agreement.
A3.14..............................  Counterparty contact    123 Main St, City,      Provide contact        Varchar(100).          .....................
                                      information: address.   State Zip code.         address for
                                                                                      counterparty as
                                                                                      provided under
                                                                                      notice section of
                                                                                      agreement.
A3.15..............................  Counterparty contact    1-999-999-9999........  Provide contact phone  Varchar(50).           .....................
                                      information: phone.                             number for
                                                                                      counterparty as
                                                                                      provided under
                                                                                      notice section of
                                                                                      agreement.
A3.16..............................  Counterparty's contact  [email protected]......  Provide contact email  Varchar(100).          .....................
                                      information: email                              address for
                                      address.                                        counterparty as
                                                                                      provided under
                                                                                      notice section of
                                                                                      agreement.
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                        Table A-4--Collateral Detail Data
----------------------------------------------------------------------------------------------------------------
                                                       Instructions and
                      Field             Example        data application       Definition           Validation
----------------------------------------------------------------------------------------------------------------
A4.1..........  As of date.......  2015-01-05.......  Data extraction    YYYY-MM-DD.           .................
                                                       date.
A4.2..........  Records entity     999999999........  Provide LEI for    Varchar(50).........  Validated against
                 identifier.                           records entity.                          CO.2.
A4.3..........  Collateral posted/ P/N..............  Enter ``P'' if     Char(1).              .................
                 collateral                            collateral has
                 received flag.                        been posted by
                                                       the records
                                                       entity. Enter
                                                       ``R'' for
                                                       collateral
                                                       received by
                                                       Records Entity.
A4.4..........  Counterparty       888888888........  Provide            Varchar(50).........  Validated against
                 identifier.                           identifier for                           CP.2.
                                                       counterparty.
                                                       Use LEI if
                                                       counterparty has
                                                       one.
A4.5..........  Netting agreement  xxxxxxxxx........  Provide            Varchar(50).........  Validated against
                 identifier.                           identifier for                           field A3.3.
                                                       applicable
                                                       netting
                                                       agreement.
A4.6..........  Unique collateral  CUSIP/ISIN.......  Provide            Varchar(50).          .................
                 item identifier.                      identifier to
                                                       reference
                                                       individual
                                                       collateral
                                                       posted.
A4.7..........  Original face      1500000..........  Information        Num (25,5)            .................
                 amount of                             needed to
                 collateral item                       evaluate
                 in local                              collateral
                 currency.                             sufficiency and
                                                       marketability.
A4.8..........  Local currency of  USD..............  Use ISO currency   Char(3).              .................
                 collateral item.                      code.
A4.9..........  Market value       850000...........  Information        Num (25,5)..........  Market value of
                 amount of                             needed to                                all collateral
                 collateral item                       evaluate                                 posted by
                 in U.S. dollars.                      collateral                               Records Entity
                                                       sufficiency and                          or Counterparty
                                                       marketability                            A2.9 or A2.10
                                                       and to permit                            for the given
                                                       aggregation                              netting
                                                       across                                   agreement
                                                       currencies.                              identifier
                                                                                                should be equal
                                                                                                to sum of all
                                                                                                A4.9 for the
                                                                                                same netting
                                                                                                agreement
                                                                                                identifier in
                                                                                                A4.
A4.10.........  Description of     U.S. Treasury      Information        Varchar(200).         .................
                 collateral item.   Strip, maturity    needed to
                                    2020/6/30.         evaluate
                                                       collateral
                                                       sufficiency and
                                                       marketability.
A4.11.........  Asset              1................  Provide fair       Char(1).............  Should be ``1''
                 classification.                       value asset                              or ``2'' or
                                                       classification                           ``3.''
                                                       for the
                                                       collateral item
                                                       under GAAP,
                                                       IFRS, or other
                                                       accounting
                                                       principles or
                                                       standards used
                                                       by records
                                                       entity. Provide
                                                       ``1'' for Level
                                                       1, ``2'' for
                                                       Level 2, or
                                                       ``3'' for Level
                                                       3.
A4.12.........  Collateral or      Y/N..............  Specify whether    Char(1).............  Should be ``Y''
                 portfolio                             the specific                             or ``N.''
                 segregation                           item of
                 status.                               collateral or
                                                       the related
                                                       collateral
                                                       portfolio is
                                                       segregated from
                                                       assets of the
                                                       safekeeping
                                                       agent.

[[Page 75668]]

 
A4.13.........  Collateral         ABC broker-dealer  Provide location   Varchar(200).         .................
                 location.          (in safekeeping    of collateral
                                    account of         posted.
                                    counterparty).
A4.14.........  Collateral         New York, New      Provide            Varchar(50).          .................
                 jurisdiction.      York.              jurisdiction of
                                                       location of
                                                       collateral
                                                       posted.
A4.15.........  Is collateral re-  Y/N..............  Information        Char(1).............  Should be ``Y''
                 hypothecation                         needed to                                or ``N.''
                 allowed?                              evaluate
                                                       exposure of the
                                                       records entity
                                                       to the
                                                       counterparty or
                                                       vice-versa for
                                                       re-hypothecated
                                                       collateral.
----------------------------------------------------------------------------------------------------------------


                                     Corporate Organization Master Table \1\
----------------------------------------------------------------------------------------------------------------
                                                       Instructions and
                      Field             Example        data application       Definition           Validation
----------------------------------------------------------------------------------------------------------------
CO.1..........  As of date.......  2015-01-05.......  Data extraction    YYYY-MM-DD.           .................
                                                       date.
CO.2..........  Entity identifier  888888888........  Provide unique     Varchar(50).........  Should be unique
                                                       identifier. Use                          across all
                                                       LEI if                                   record entities.
                                                       available.
                                                       Information
                                                       needed to
                                                       identify entity.
CO.3..........  Has LEI been used  Y/N..............  Specify whether    Char(1).............  Should be ``Y''
                 for entity                            the entity                               or ``N.''
                 identifier?                           identifier
                                                       provided is an
                                                       LEI.
CO.4..........  Legal name of      John Doe & Co....  Provide legal      Varchar(200).         .................
                 entity.                               name of entity.
CO.5..........  Immediate parent   77777777.........  Use LEI if         Varchar(50).          .................
                 entity                                available.
                 identifier.                           Information
                                                       needed to
                                                       complete org
                                                       structure.
CO.6..........  Has LEI been used  Y/N..............  Specify whether    Char(1).............  Should be ``Y''
                 for immediate                         the immediate                            or ``N.''
                 parent entity                         parent entity
                 identifier?                           identifier
                                                       provided is an
                                                       LEI.
CO.7..........  Legal name of      John Doe & Co....  Information        Varchar(200).         .................
                 immediate parent                      needed to
                 entity.                               complete org
                                                       structure.
CO.8..........  Percentage         100.00...........  Information        Num (5,2).            .................
                 ownership of                          needed to
                 immediate parent                      complete org
                 entity in the                         structure.
                 entity.
CO.9..........  Entity type......  Subsidiary,        Information        Varchar(50).          .................
                                    foreign branch,.   needed to
                                   foreign division.   complete org
                                                       structure.
CO.10.........  Domicile.........  New York, New      Enter as city,     Varchar(50).          .................
                                    York.              state or city,
                                                       foreign country.
CO.11.........  Jurisdiction       New York.........  Enter as state or  Varchar(50).          .................
                 under which                           foreign
                 incorporated or                       jurisdiction.
                 organized.
CO.12.........  Reporting status.  REN..............  Indicate one of    Char(3).............  Should be ``REN''
                                                       the following,                           or ``NFC'' or
                                                       as appropriate,                          ``EXC'' or
                                                       given status of                          ``DEM'' or
                                                       entity under the                         ``ZER'' or
                                                       this part.                               ``OTH.''
                                                       Information
                                                       needed to
                                                       validate
                                                       compliance with
                                                       the requirements
                                                       of this part.
                                                      REN = Records
                                                       entity
                                                       (reporting)..
                                                      NFC= Non-
                                                       financial
                                                       company (not
                                                       reporting).
                                                      EXC = Excluded
                                                       entity (not
                                                       reporting).
                                                      ZER = Records
                                                       entity with 0
                                                       QFCs (not
                                                       reporting).
                                                      DEM = Records
                                                       entity de
                                                       minimis
                                                       exemption (not
                                                       reporting).
                                                      OTH = Records
                                                       entity using
                                                       another
                                                       exemption (not
                                                       reporting).
----------------------------------------------------------------------------------------------------------------
\1\ Foreign branches and divisions shall be separately identified to the extent they are identified in an
  entity's reports to its PFRAs.


                                            Counterparty Master Table
----------------------------------------------------------------------------------------------------------------
                                                       Instructions and
                      Field             Example        data application       Definition           Validation
----------------------------------------------------------------------------------------------------------------
CP.1..........  As of date.......  2015-01-05.......  Data extraction    YYYY-MM-DD.           .................
                                                       date.

[[Page 75669]]

 
CP.2..........  Counterparty       888888888........  Use LEI if         Varchar(50).          .................
                 identifier.                           counterparty has
                                                       one. Should be
                                                       used
                                                       consistently
                                                       across all
                                                       records entities
                                                       within a
                                                       corporate group.
                                                       The counterparty
                                                       identifier shall
                                                       be the global
                                                       legal entity
                                                       identifier if
                                                       one has been
                                                       issued to the
                                                       entity. If a
                                                       counterparty
                                                       transacts with
                                                       the records
                                                       entity through
                                                       one or more
                                                       separate foreign
                                                       branches or
                                                       divisions and
                                                       any such branch
                                                       or division does
                                                       not have its own
                                                       unique global
                                                       legal entity
                                                       identifier, the
                                                       records entity
                                                       must include
                                                       additional
                                                       identifiers, as
                                                       appropriate to
                                                       enable the FDIC
                                                       to aggregate or
                                                       disaggregate the
                                                       data for each
                                                       counterparty and
                                                       for each entity
                                                       with the same
                                                       ultimate parent
                                                       entity as the
                                                       counterparty.
CP.3..........  Has LEI been used  Y/N..............  Indicate whether   Char(1).............  Should be ``Y''
                 for counterparty                      the counterparty                         or ``N.''
                 identifier?                           identifier is an
                                                       LEI.
CP.4..........  Legal name of      John Doe & Co....  Information        Varchar(200).         .................
                 counterparty.                         needed to
                                                       identify and, if
                                                       necessary,
                                                       communicate with
                                                       counterparty.
CP.5..........  Domicile.........  New York, New      Enter as city,     Varchar(50).          .................
                                    York.              state or city,
                                                       foreign country.
CP.6..........  Jurisdiction       New York.........  Enter as state or  Varchar(50).          .................
                 under which                           foreign
                 incorporated or                       jurisdiction.
                 organized.
CP.7..........  Immediate parent   77777777.........  Provide an         Varchar(50).          .................
                 entity                                identifier for
                 identifier.                           the parent
                                                       entity that
                                                       directly
                                                       controls the
                                                       counterparty.
                                                       Use LEI if
                                                       immediate parent
                                                       entity has one.
CP.8..........  Has LEI been used  Y/N..............  Indicate whether   Char(1).............  Should be ``Y''
                 for immediate                         the immediate                            or ``N.''
                 parent entity                         parent entity
                 identifier?                           identifier is an
                                                       LEI.
CP.9..........  Legal name of      John Doe & Co....  Information        Varchar(200).         .................
                 immediate parent                      needed to
                 entity.                               identify and, if
                                                       necessary,
                                                       communicate with
                                                       counterparty.
CP.10.........  Ultimate parent    666666666........  Provide an         Varchar(50).........  .................
                 entity                                identifier for
                 identifier.                           the parent
                                                       entity that is a
                                                       member of the
                                                       corporate group
                                                       of the
                                                       counterparty
                                                       that is not
                                                       controlled by
                                                       another entity.
                                                       Information
                                                       needed to
                                                       identify
                                                       counterparty.
                                                       Use LEI if
                                                       ultimate parent
                                                       entity has one.
CP.11.........  Has LEI been used  Y/N..............  Indicate whether   Char(1).............  Should be ``Y''
                 for ultimate                          the ultimate                             or ``N.''
                 parent entity                         parent entity
                 identifier?                           identifier is an
                                                       LEI.
CP.12.........  Legal name of      John Doe & Co....  Information        Varchar(100).         .................
                 ultimate parent                       needed to
                 entity.                               identify and, if
                                                       necessary,
                                                       communicate with
                                                       counterparty.
----------------------------------------------------------------------------------------------------------------


                                          Booking Location Master Table
----------------------------------------------------------------------------------------------------------------
                                                       Instructions and
                      Field             Example        data application       Definition           Validation
----------------------------------------------------------------------------------------------------------------
BL.1..........  As of date.......  2015-01-05.......  Data extraction    YYYY-MM-DD.           .................
                                                       date.
BL.2..........  Records entity     999999999........  Provide LEI......  Varchar(50).........  Should be a valid
                 identifier.                                                                    entry in the
                                                                                                Corporate Org
                                                                                                Master Table.
BL.3..........  Internal booking   New York, New      Provide office     Varchar(50).          .................
                 location           York.              where the
                 identifier.                           position is
                                                       booked.
                                                       Information
                                                       needed to
                                                       determine the
                                                       headquarters or
                                                       branch where the
                                                       position is
                                                       booked,
                                                       including the
                                                       system on which
                                                       the trade is
                                                       booked, as well
                                                       as the system on
                                                       which the trade
                                                       is settled.

[[Page 75670]]

 
BL.4..........  Unique booking     xxxxxx...........  Provide unit or    Varchar(50).          .................
                 unit or desk                          desk at which
                 identifier.                           the position is
                                                       booked.
                                                       Information
                                                       needed to help
                                                       determine
                                                       purpose of
                                                       position.
BL.5..........  Unique booking     North American     Additional         Varchar(50).          .................
                 unit or desk       trading desk.      information to
                 description.                          help determine
                                                       purpose of
                                                       position.
BL.6..........  Booking unit or    1-999-999-9999...  Information        Varchar(50).          .................
                 desk contact--                        needed to
                 phone.                                communicate with
                                                       the booking unit
                                                       or desk.
BL.7..........  Booking unit or    [email protected]....  Information        Varchar(100).         .................
                 desk contact--                        needed to
                 email.                                communicate with
                                                       the booking unit
                                                       or desk.
----------------------------------------------------------------------------------------------------------------


                                         Safekeeping Agent Master Table
----------------------------------------------------------------------------------------------------------------
                                                       Instructions and
                      Field             Example        data application       Definition           Validation
----------------------------------------------------------------------------------------------------------------
SA.1..........  As of date.......  2015-01-05.......  Data extraction    YYYY-MM-DD            .................
                                                       date.
SA.2..........  Safekeeping agent  888888888........  Provide an         Varchar(50).          .................
                 identifier.                           identifier for
                                                       the safekeeping
                                                       agent. Use LEI
                                                       if safekeeping
                                                       agent has one.
SA.3..........  Legal name of      John Doe & Co....  Information        Varchar(200).         .................
                 safekeeping                           needed to
                 agent.                                identify and, if
                                                       necessary,
                                                       communicate with
                                                       the safekeeping
                                                       agent.
SA.4..........  Point of contact-- John Doe.........  Information        Varchar(200).         .................
                 name.                                 needed to
                                                       identify and, if
                                                       necessary,
                                                       communicate with
                                                       the safekeeping
                                                       agent.
SA.5..........  Point of contact-- 123 Main St,       Information        Varchar(100).         .................
                 address.           City, State Zip    needed to
                                    Code.              identify and, if
                                                       necessary,
                                                       communicate with
                                                       the safekeeping
                                                       agent.
SA.6..........  Point of contact-- 1-999-999-9999...  Information        Varchar(50).          .................
                 phone.                                needed to
                                                       identify and, if
                                                       necessary,
                                                       communicate with
                                                       the safekeeping
                                                       agent.
SA.7..........  Point of contact-- [email protected].  Information        Varchar(100).         .................
                 email.                                needed to
                                                       identify and, if
                                                       necessary,
                                                       communicate with
                                                       the safekeeping
                                                       agent.
----------------------------------------------------------------------------------------------------------------


                                               Details of Formats
----------------------------------------------------------------------------------------------------------------
                                                    Additional
         Format             Content in brief       explanation                        Examples
----------------------------------------------------------------------------------------------------------------
YYYY-MM-DD..............  Date...............  YYYY = four digit    2015-11-12
                                                date, MM = 2 digit
                                                month, DD = 2
                                                digit date.
Num (25,5)..............  Up to 25 numerical   Up to 20 numerical   1352.67
                           characters           characters before   12345678901234567890.12345
                           including 5          the decimal point   0
                           decimals.            and up to 5         -20000.25
                                                numerical           -0.257
                                                characters after
                                                the decimal point.
                                                The dot character
                                                is used to
                                                separate decimals.
Char(3).................  3 alphanumeric       The length is fixed  USD
                           characters.          at 3 alphanumeric   X1X
                                                characters.         999
Varchar(25).............  Up to 25             The length is not    asgaGEH3268EFdsagtTRCF543
                           alphanumeric         fixed but limited
                           characters.          at up to 25
                                                alphanumeric
                                                characters.
----------------------------------------------------------------------------------------------------------------


    Dated: October 13, 2016.
Amias Moore Gerety,
Acting Assistant Secretary for Financial Institutions.
[FR Doc. 2016-25329 Filed 10-28-16; 8:45 am]
 BILLING CODE 4810-25-P