[Federal Register Volume 82, Number 235 (Friday, December 8, 2017)]
[Proposed Rules]
[Pages 57886-57888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26465]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 82, No. 235 / Friday, December 8, 2017 / 
Proposed Rules  

[[Page 57886]]



FEDERAL RESERVE SYSTEM

12 CFR Part 201

[Docket No. R-1585; RIN 7100-AE 90]


Regulation A: Extensions of Credit by Federal Reserve Banks

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Board of Governors of the Federal Reserve System 
(``Board'') is proposing to amend its Regulation A to; revise the 
provisions regarding the establishment of the primary credit rate in a 
financial emergency, and to delete the provisions relating to the use 
of credit ratings for collateral for extensions of credit under the 
former Term Asset-Backed Securities Loan Facility (TALF). The proposed 
amendments are intended to allow the regulation to address 
circumstances in which the Federal Open Market Committee has 
established a target range for the federal funds rate rather than a 
single target rate, and to reflect the expiration of the TALF program.

DATES: Comments must be received no later than January 8, 2018.

ADDRESSES: You may submit comments, identified by Docket Number R-1585; 
RIN 7100 AE-90, by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include docket 
number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm, as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room 3515, 1801 K Street NW. (between 18th and 19th 
Street NW.), between 9:00 a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Special Counsel, 
(202-452-3565), Legal Division, or Lyle Kumasaka, Senior Financial 
Analyst, 202-452-2382), Division of Monetary Affairs; for users of 
Telecommunications Device for the Deaf (TDD) only, contact 202/263-
4869; Board of Governors of the Federal Reserve System, 20th and C 
Streets, NW., Washington, DC 20551.

SUPPLEMENTARY INFORMATION: The Federal Reserve Banks make primary, 
secondary, and seasonal credit available to depository institutions 
subject to rules and regulations prescribed by the Board. The primary, 
secondary, and seasonal credit rates are the interest rates that the 
twelve Federal Reserve Banks charge for extensions of credit under 
these programs. Under the primary credit program, Federal Reserve Banks 
may extend credit on a very short-term basis, typically overnight, to 
depository institutions that are in generally sound condition in the 
judgment of the Federal Reserve Bank. In accordance with the Federal 
Reserve Act, the primary credit rate is established by the boards of 
directors of the Federal Reserve Banks, subject to the review and 
determination of the Board. The primary credit rate is set forth in 
section 201.51 of Regulation A.

I. Primary Credit Rate in a Financial Emergency

    Regulation A currently provides a procedure for establishing the 
primary credit rate in a financial emergency. Section 201.51(d) of 
Regulation A currently provides that the primary credit rate at a 
Federal Reserve Bank is ``the target federal funds rate of the Federal 
Open Market Committee'' if two conditions are met.\1\ First, in a 
financial emergency the Reserve Bank must have established the primary 
credit rate at that rate.\2\ Second, the chairman of the Board of 
Governors (or, in the chairman's absence, the chairman's designee) must 
certify that a quorum of the Board is not available to act on the 
Reserve Bank's rate establishment.\3\ Finally, Regulation A defines a 
``financial emergency'' as ``a significant disruption to the U.S. money 
markets resulting from an act of war, military or terrorist attack, 
natural disaster, or other catastrophic event.'' \4\
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    \1\ Section 201.51(d)(1) of Regulation A, 12 CFR 201.51(d)(1).
    \2\ Section 201.51(d)(1)(i) of Regulation A, 12 CFR 
201.51(d)(1)(i).
    \3\ Section 201.51(d)(1)(ii) of Regulation A, 12 CFR 
201.51(d)(1)(ii).
    \4\ Section 201.51(d)(2) of Regulation A, 12 CFR 201.51(d)(2).
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    The Federal Open Market Committee (FOMC) currently establishes a 
target range for the federal funds rate. Accordingly, the Board 
proposes to amend section 201.51(d)(1) of Regulation A to provide that, 
in a financial emergency, the primary credit rate is the target federal 
funds rate or, if the FOMC has established a target range for the 
federal funds rate, a rate corresponding to the top of the target 
range.

II. Credit Ratings for TALF

    On November 25, 2008, the Board and Treasury announced the 
establishment of the TALF. The TALF was intended to assist financial 
markets in accommodating the credit needs of consumers and businesses 
of all sizes during the financial crisis by facilitating the issuance 
of asset-backed securities (``ABS'') collateralized by a variety of 
consumer and business loans; it was also intended to improve market 
conditions for ABS more generally. The Board authorized the TALF 
pursuant to the then-current provisions of section 13(3) of the Federal 
Reserve Act.\5\ All TALF loans were extended by the Federal Reserve 
Bank of New York (``FRBNY'').\6\
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    \5\ Former 12 U.S.C. 343.
    \6\ The U.S. Treasury Department--under the Troubled Assets 
Relief Program (TARP) of the Emergency Economic Stabilization Act of 
2008--provided $20 billion of credit protection to the FRBNY in 
connection with the TALF. See https://www.federalreserve.gov/monetarypolicy/talf.htm.
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    On December 9, 2009, the Board adopted an amendment to Regulation A 
to provide a process by which the FRBNY could determine the eligibility 
of credit rating agencies and the ratings

[[Page 57887]]

they issue for use in the TALF, for which the Board had expressly set a 
particular credit rating requirement for collateral offered by the 
borrower.\7\ The purpose of the amendment was to provide the FRBNY with 
a consistent framework for determining the eligibility of ratings 
issued by individual credit rating agencies when used in conjunction 
with a separate asset-level risk assessment process. Pursuant to this 
process, FRBNY determined that ratings from five credit ratings 
agencies became eligible for use in TALF.
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    \7\ 74 FR 65014 (December 9, 2009).
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    On June 30, 2010, the TALF was closed for new loan extensions, and 
the final outstanding TALF loan was repaid in full in October 2014.\8\ 
Accordingly, the Board proposes to delete current section 201.3(d) of 
Regulation A as its provisions are no longer necessary.
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    \8\ https://www.federalreserve.gov/monetarypolicy/talf.htm.
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III. Administrative Law Matters

A. Regulatory Flexibility Act

    Congress enacted the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
et seq.) to address concerns related to the effects of agency rules on 
small entities and the Board is sensitive to the impact its rules may 
impose on small entities. 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. Under regulations 
issued by the Small Business Administration (SBA), a depository 
institution is a ``small entity'' if it is an institution with assets 
of $550 million or less, determined by averaging the assets reported on 
its four quarterly financial statements for the preceding year. A 
credit rating agency is a ``small entity'' if it is a credit rating 
agency with $15 million or less in assets.
1. Description of Small Entities Affected
    Section 201.51(d) of Regulation A. The proposed amendment to 
section 201.51(d) of Regulation A would affect depository institutions 
that are able to request primary credit from a Federal Reserve Bank and 
that have $550 million or less in assets, determined by averaging the 
assets reported on its four quarterly financial statements for the 
preceding year.\9\ Currently, there are 1,567 depository institutions 
that are able to request primary credit that meet the definition of 
``small'' business entity, out of a total of 2,808 institutions that 
are able to request primary credit.
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    \9\ U.S. Small Business Administration, Table of Small Business 
Size Standards (eff. Oct. 1, 2017) at 28 (NAICS Codes 52110 
(Commercial Banking), 52120 (Savings Institutions), 52130 (Credit 
Unions), and 52190) (Other Depository Credit Intermediation); see 
id. at 41 n. 8 (calculation of asset size).
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    Section 201.3(d) of Regulation A. The proposed amendment to section 
201.3(d) of Regulation A, relates to use of credit ratings for 
borrowers under the TALF program. A small credit rating agency is one 
with $15.0 million or less in assets.\10\
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    \10\ U.S. Small Business Administration, Table of Small Business 
Size Standards (eff. Oct. 1, 2017) at 33 (NAICS Code 561450 (Credit 
Bureaus)).
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2. Economic Impacts on Small Entities
    The Board certifies that the proposed amendments will have no 
economic impacts on any small entities.
    Section 201.51(d) of Regulation A. The proposed amendments to 
section 201.51(d) of Regulation A relate to the establishment of a rate 
for primary credit in a financial emergency. The proposed amendments 
make a ministerial amendment to conform the provision to the current 
operating framework of the FOMC in establishing a target range for the 
federal funds rate. The provision subject to the proposed amendments 
affects the actions of the Federal Reserve Banks and the Board, and 
requires no action or changes in procedures for any depository 
institution, large or small, and so there are no costs associated with 
the proposed amendments. In addition, the proposed amendments clarify 
the operation of the provision for reducing the primary credit rate in 
a financial emergency from its current level to a lower level based on 
the target federal funds rate or the target range for the federal funds 
rate. Any economic impact of the proposed amendment on small entities 
would be beneficial because, if the emergency provision took effect, 
they would be able to obtain primary credit at an interest rate that 
would be lower than the existing primary credit rate. Accordingly, the 
Board believes that a reasonable basis exists for assuming costs would 
be de minimis or insignificant for small entities affected by the 
proposed amendment.
    Section 201.3(d) of Regulation A. The proposed amendments to 
section 201.3(d) of Regulation A relate to deleting obsolete provisions 
applicable to credit extended under the TALF program. Since the TALF 
program no longer exists, the deletion of regulatory provisions 
governing the use of credit ratings in it will have no impact, economic 
or otherwise, on any credit ratings agency. Accordingly, the Board 
believes that a reasonable basis exists for assuming costs would be de 
minimis or insignificant for small entities affected by the proposed 
amendment.

B. Paperwork Reduction Act Analysis

    Office of Management and Budget (OMB) regulations implementing the 
Paperwork Reduction Act (PRA) state that agencies must submit 
``collections of information'' contained in proposed rules published 
for public comment in the Federal Register in accordance with OMB 
regulations. OMB regulations define a ``collection of information'' as 
obtaining, causing to be obtained, soliciting, or requiring the 
disclosure to an agency, third parties or the public of information by 
or for an agency ``by means of identical questions posed to, or 
identical reporting, recordkeeping, or disclosure requirements imposed 
on, ten or more persons, whether such collection of information is 
mandatory, voluntary, or required to obtain or retain a benefit.''
    In accordance with the PRA, the Board reviewed the proposed rule 
under the authority delegated to the Board by OMB.
    Section 201.51(d) of Regulation A. The proposed amendments to 
section 201.51(d) contain no requirements subject to the PRA. 
Specifically, the proposed amendments do not require any change to any 
collection of information related to the primary credit program under 
Regulation A, but apply only to the process by which the Federal 
Reserve Banks and the Board establish the primary credit rate in a 
financial emergency.
    Section 201.3(d) of Regulation A. The proposed amendments to 
section 201.3(d) of Regulation A contain no requirements subject to the 
PRA.

C. Plain Language

    Each Federal banking agency, including the Board, is required to 
use plain language in all proposed and final rulemakings published 
after January 1, 2000. 12 U.S.C. 4809. The Board has sought to present 
the proposed amendments, to the extent possible, in a simple and 
straightforward manner. The Board invites comment on whether there are 
additional steps that could be taken to make the proposed amendments 
easier to understand, such as with respect to the organization of the 
materials or the clarity of the presentation.

List of Subjects in 12 CFR Part 201

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

[[Page 57888]]

Authority and Issuance

    For the reasons set forth in the preamble, the Board proposes to 
amend 12 CFR Chapter II as follows:

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

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

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


Sec.  201.3   [Amended]

0
2. Section 201.3 is amended by removing paragraph (e).

0
3. Section 201.51 is amended by revising paragraph (d)(1) introductory 
text to read as follows:


Sec.  201.51   Interest rates applicable to credit extended by a 
Federal Reserve Bank.

* * * * *
    (d) * * *
    (1) The primary credit rate at a Federal Reserve Bank is the target 
federal funds rate of the Federal Open Market Committee or, if the 
Federal Open Market Committee has set a target range for the federal 
funds rate, the rate corresponding to the top of the target range, if:
* * * * *

    By the Board of Governors of the Federal Reserve System, 
December 1, 2017.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2017-26465 Filed 12-7-17; 8:45 am]
 BILLING CODE 6210-01-P