[Federal Register Volume 83, Number 15 (Tuesday, January 23, 2018)]
[Notices]
[Pages 3141-3145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01153]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

AGENCY: Board of Governors of the Federal Reserve System.

SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
is adopting a proposal to revise, without extension, the Annual Report 
of Foreign Banking Organizations (FR Y-7). The revisions to the 
mandatory FR Y-7 information collection are effective beginning with FR 
Y-7 reports for fiscal year-ends that end on or after March 1, 2018.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance 
Officer--Nuha Elmaghrabi--Office of the Chief Data Officer, Board of 
Governors of the Federal Reserve System, Washington, DC 20551 (202) 
452-3829. Telecommunications Device for the Deaf (TDD) users may 
contact (202) 263-4869, Board of Governors of the Federal Reserve 
System, Washington, DC 20551.
    OMB Desk Officer--Shagufta Ahmed--Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503 
or by fax to (202) 395-6974.

SUPPLEMENTARY INFORMATION: On June 15, 1984, the Office of Management 
and Budget (OMB) delegated to the Board

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authority under the Paperwork Reduction Act (PRA) to approve of and 
assign OMB control numbers to collection of information requests and 
requirements conducted or sponsored by the Board. Board-approved 
collections of information are incorporated into the official OMB 
inventory of currently approved collections of information. Copies of 
the Paperwork Reduction Act Submission, supporting statements and 
approved collection of information instrument(s) are placed into OMB's 
public docket files. The Federal Reserve may not conduct or sponsor, 
and the respondent is not required to respond to, an information 
collection that has been extended, revised, or implemented on or after 
October 1, 1995, unless it displays a currently valid OMB control 
number.
    Final approval under OMB delegated authority of the revision of the 
following information collection:
    Report Titles: Annual Report of Holding Companies; Annual Report of 
Foreign Banking Organizations; Report of Changes in Organizational 
Structure; Supplement to the Report of Changes in Organizational 
Structure.
    Agency Form Numbers: FR Y-6; FR Y-7 (with revision); FR Y-10; FR Y-
10E.
    OMB Control Number: 7100-0297.
    Effective Date: Beginning with fiscal year-ends that end and for 
reports submitted on or after March 1, 2018.
    Frequency: FR Y-6: Annual; \1\ FR Y-7: Annual; \2\ FR Y-10: Event-
generated; \3\ FR Y-10E: Event-generated.\4\
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    \1\ The FR Y-6 is submitted annually, no later than 90 calendar 
days after the end of the respondent's fiscal year. Individual 
respondent data are available to the public upon request through the 
appropriate Reserve Bank. Under certain circumstances, however, 
respondents may request confidential treatment.
    \2\ All FBOs that are qualifying file the FR Y-7 annually as of 
the end of the FBO's fiscal year; the data are due no later than 
four months after the report date. Individual respondent data are 
available to the public upon request through the appropriate Reserve 
Bank. Under certain circumstances, however, respondents may request 
confidential treatment.
    \3\ The FR Y-10 is event-generated, and the data are submitted 
within 30 calendar days of a reportable transaction or event. 
Individual respondent data are available to the public upon request 
through the appropriate Reserve Bank. Under certain circumstances, 
however, respondents may request confidential treatment. Limited 
data from the FR Y-10 are published on the National Information 
Center's public website.
    \4\ The FR Y-10E is event-generated and the data are submitted 
on an ad-hoc basis as needed.
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    Respondent: Bank holding companies (BHCs) and savings and loan 
holding companies, securities holding companies, and intermediate 
holding companies (collectively, holding companies (HCs)), foreign 
banking organizations (FBOs), state member banks unaffiliated with a 
BHC, Edge Act and agreement corporations, and nationally chartered 
banks that are not controlled by a BHC (with regard to their foreign 
investments only).
    Number of Respondents: FR Y-6 initial: 13; FR Y-6 ongoing: 4,827; 
FR Y-7: 243; FR Y-10: 5,298; FR Y-10E: 5,298.
    Estimated Average Hours per Response: FR Y-6 initial: 10 hours; FR 
Y-6 ongoing: 5.5 hours; FR Y-7: 6 hours; FR Y-10: 2.5 hours; FR Y-10E: 
0.5 hour.
    Estimated Annual Burden Hours: FR Y-6 initial: 130 hours; FR Y-6 
ongoing: 26,549 hours; FR Y-7: 1,458 hours; FR Y-10: 39,735 hours; FR 
Y-10E: 2,649 hours.
    General Description of Report: The FR Y-6 is an annual information 
collection submitted by top-tier domestic HCs and FBOs that are non-
qualifying. It collects financial data, an organization chart, 
verification of domestic branch data, and information about 
shareholders. The Federal Reserve uses the data to monitor HC 
operations and determine HC compliance with the provisions of the BHC 
Act, Regulation Y (12 CFR 225), the Home Owners' Loan Act (HOLA), 
Regulation LL (12 CFR 238), and Regulation YY (12 CFR 252).
    The FR Y-7 is an annual information collection submitted by FBOs 
that are qualifying to update their financial and organizational 
information with the Federal Reserve. The FR Y-7 collects financial, 
organizational, shareholder, and managerial information. The Federal 
Reserve uses the information to assess an FBO's ability to be a 
continuing source of strength to its U.S. operations and to determine 
compliance with U.S. laws and regulations.
    The FR Y-10 is an event-generated information collection submitted 
by FBOs; top-tier HCs; securities holding companies as authorized under 
Section 618 of the Dodd-Frank Act (12 U.S.C. 1850a(c)(1)); state member 
banks unaffiliated with a BHC; Edge and agreement corporations that are 
not controlled by a member bank, a domestic BHC, or an FBO; and 
nationally chartered banks that are not controlled by a BHC (with 
regard to their foreign investments only) to capture changes in their 
regulated investments and activities. The Federal Reserve uses the data 
to monitor structure information on subsidiaries and regulated 
investments of these entities engaged in banking and nonbanking 
activities.
    The FR Y-10E is an event-driven supplement that may be used to 
collect additional structural information deemed to be critical and 
needed in an expedited manner.
    Legal authorization and confidentiality: These information 
collections are mandatory as follows:
    FR Y-6: Section 5(c)(1)(A) of the Bank Holding Company Act (BHC 
Act) (12 U.S.C. 1844(c)(1)(A)); sections 8(a) and 13(a) of the 
International Banking Act (IBA) (12 U.S.C. 3106(a) and 3108(a)); 
sections 11(a)(1), 25, and 25A of the Federal Reserve Act (FRA) (12 
U.S.C. 248(a)(1), 602, and 611a); and sections 113, 165, 312, 618, and 
809 of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) (12 U.S.C. 5361, 5365, 5412, 1850a(c)(1), and 
5468(b)(1)).
    FR Y-7: Sections 8(a) and 13(a) of the IBA (12 U.S.C. 3106(a) and 
3108(a)); sections 113, 165, 312, 618, and 809 of the Dodd-Frank Act 
(12 U.S.C. 5361, 5365, 5412, 1850a(c)(1), and 5468(b)(1)).
    FR Y-10 and FR Y-10E: Sections 4(k) and 5(c)(1)(A) of the BHC Act 
(12 U.S.C. 1843(k), and 1844(c)(1)(A)); section 8(a) of the IBA (12 
U.S.C. 3106(a)); sections 11(a)(1), 25(7), and 25A of the FRA (12 
U.S.C. 248(a)(1), 321, 601, 602, 611a, 615, and 625); sections 113, 
165, 312, 618, and 809 of the Dodd-Frank Act (12 U.S.C. 5361, 5365, 
5412, 1850a(c)(1), and 5468(b)(1)); and section 10(c)(2)(H) of the Home 
Owners' Loan Act (HOLA) (12 U.S.C. 1467a(c)(2)(H)).
    Except as discussed below, the data collected in the FR Y-6, FR Y-
7, FR Y-10, and FR Y-10E are generally not considered confidential. 
With regard to information that a banking organization may deem 
confidential, the institution may request confidential treatment of 
such information under one or more of the exemptions in the Freedom of 
Information Act (FOIA) (5 U.S.C. 552). The most likely case for 
confidential treatment will be based on FOIA exemption 4, which permits 
an agency to exempt from disclosure ``trade secrets and commercial or 
financial information obtained from a person and privileged and 
confidential'' (5 U.S.C. 552(b)(4)). To the extent an institution can 
establish the potential for substantial competitive harm, such 
information would be protected from disclosure under the standards set 
forth in National Parks & Conservation Association v. Morton, 498 F.2d 
765 (D.C. Cir. 1974). In particular, the disclosure of the responses to 
the certification questions on the FR Y-7 may interfere with home 
country regulators' administration, execution, and disclosure of their 
stress test regime and its results, and may cause substantial 
competitive harm to the FBO providing the information, and thus this 
information may be protected from

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disclosure under FOIA exemption 4. Exemption 6 of FOIA might also apply 
with regard to the respondents' submission of non-public personal 
information of owners, shareholders, directors, officers and employees 
of respondents. Exemption 6 covers ``personnel and medical files and 
similar files the disclosure of which would constitute a clearly 
unwarranted invasion of personal privacy'' (5 U.S.C. 552(b)(6)). All 
requests for confidential treatment would need to be reviewed on a 
case-by-case basis and in response to a specific request for 
disclosure.
    Current Actions: On December 2, 2015, the Board published a notice 
in the Federal Register (80 FR 75457) requesting public comment for 60 
days on the proposal to revise, with extension, of the FR Y-6, FR Y-7, 
FR Y-10, and FR Y-10E. In the notice, the Board proposed revisions to 
the FR Y-7 reporting form to require an FBO to indicate its compliance 
with Regulation YY by certifying that it meets, does not meet, or is 
not subject to the relevant U.S. risk committee certification 
requirement and to indicate that it meets, does not meet, or is not 
subject to the relevant home country stress testing requirement. The 
notice also included revisions to the instructions to the FR Y-7 
reporting form to describe the requirements and the scope of 
applicability of the report to FBOs. The comment period for this notice 
expired on February 1, 2016. The Federal Reserve received two comment 
letters, one from an industry association and one from a banking 
organization. One comment letter requested clarification on certain of 
the requirements of Regulation YY, including the requirement to form a 
U.S. risk committee, while the other comment letter requested 
clarification on the instructions for the FR Y-6 and the FR Y-10 
reports. The Board is adopting the revisions as proposed except that 
(i) the Board is extending the effective date to be effective beginning 
with FR Y-7 reports submitted for fiscal year-ends that end on or after 
March 1, 2018, and (ii) the Board is not adopting the proposed 
extensions of the FR Y-6, FR Y-7, FR Y-10, and FR Y-10E. The Board is 
also clarifying several of the issues raised by commenters in response 
to the December 2, 2015, Federal Register notice, as further discussed 
below.
    Section 165 of the Dodd-Frank Act directs the Board to establish 
enhanced prudential standards for BHCs and FBOs with total consolidated 
assets of $50 billion or more and nonbank financial companies that the 
Financial Stability Oversight Council has designated for supervision by 
the Board. In addition, the Dodd-Frank Act directs the Board to issue 
regulations applying certain standards to BHCs and FBOs with total 
consolidated assets of $10 billion or more. In particular, the Board is 
directed to require publicly traded BHCs and FBOs with total 
consolidated assets of $10 billion or more to establish risk 
committees.\5\ In addition, section 165 requires the Board to issue 
regulations imposing company-run stress test requirements on BHCs, 
FBOs, state member banks, and savings and loan holding companies with 
total consolidated assets of more than $10 billion.\6\
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    \5\ See 12 CFR 252.132(a) and 252.144(a).
    \6\ See 12 U.S.C. 5365(i).
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    In February of 2014, the Board adopted enhanced prudential 
standards for FBOs, including risk committee and stress testing 
requirements for FBOs with total consolidated assets of more than $10 
billion. These standards are contained in the Board's Regulation YY, 
which applies different requirements to FBOs depending on their asset 
size. The risk committee and stress testing requirements are located in 
the following subparts:
     Subpart L establishes stress testing requirements for FBOs 
with total consolidated assets of more than $10 billion;
     Subpart M establishes risk committee requirements for 
publicly traded FBOs with total consolidated assets between $10-$50 
billion;
     Subpart N establishes enhanced prudential standards 
(including risk committee and stress testing requirements) for FBOs 
with total consolidated assets of $50 billion or more but combined U.S. 
assets of less than $50 billion; and
     Subpart O establishes enhanced prudential standards 
(including risk committee and stress testing requirements) for FBOs 
with total consolidated assets of $50 billion or more and combined U.S. 
assets of $50 billion or more.
    With regard to risk committee requirements, an FBO subject to 
subpart M or N of Regulation YY is required to certify that it has a 
risk committee that oversees the risk management practices of the 
combined U.S. operations of the company and has at least one member 
with appropriate risk expertise.\7\ This certification must be filed on 
an annual basis with the Board concurrently with the FR Y-7. An FBO 
subject to subpart O of Regulation YY is subject to additional U.S. 
risk committee requirements that are more prescriptive and must employ 
a U.S. chief risk officer in the United States.\8\
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    \7\ The combined U.S. operations of an FBO include its U.S. 
branches and agencies and U.S. subsidiaries (other than any company 
held under section 2(h)(2) of the BHC Act, if applicable).
    \8\ FBOs subject to subpart O are not required to certify that 
they have a U.S. risk committee because the Board expects to gain 
sufficient information through the supervisory process to evaluate 
whether the U.S. risk committee meets the requirements of this 
section.
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    With regard to stress testing, an FBO subject to subpart L, N, or O 
of Regulation YY must be subject to a consolidated capital stress 
testing regime administered or reviewed by the FBO's home country 
supervisor, meet the home country supervisor's minimum standards, and, 
in some cases, provide information to the Board about the results of 
home country stress testing or face additional requirements in the 
United States. In particular, the U.S. branches and agencies of the FBO 
become subject to an asset maintenance requirement, and the FBO 
generally must conduct an annual stress test of its U.S. subsidiaries. 
An FBO subject to subpart O also must stress test any U.S. IHC.
    The revisions to the FR Y-7 implement the U.S. risk committee 
certification requirement in Regulation YY and provide FBOs with a 
standardized way to indicate compliance with the home country stress 
testing requirements (and thus, avoid being subject to additional 
requirements in the U.S.). The revisions to the FR Y-7 also better 
describe the risk committee requirements in Regulation YY and the scope 
of applicability of the report to FBOs.

Detailed Discussion of Public Comments

    The following is a detailed discussion of the two comments received 
regarding the FR Y-7 proposal and the responses related to the changes 
in the FR Y-7 proposal. Although no comments were received on the 
reporting burden estimates, the Board has reconsidered the estimates 
given the clarifications provided to Regulation YY. Thus, the Board 
increased the estimated hourly burden from 4 hours to 6 hours per 
response.
    A commenter requested a number of clarifications regarding the 
provisions in Regulation YY that require an FBO to maintain a committee 
of its global board of directors (or equivalent thereof) that oversees 
the risk-management policies of the combined U.S. operations of the 
FBO.\9\ Each of these questions are matters of interpretation of the 
requirements of Regulation YY and are

[[Page 3144]]

not related to the reporting requirements in the FR Y-7.
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    \9\ See 12 CFR 252.132(a) and 252.144(a).
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    First, the commenter requested clarification on whether the 
committee that oversees U.S. risk must be composed entirely of members 
of the FBO's global board or may be configured in other ways that take 
into account the size, scale, and complexity of an FBO's combined U.S. 
operations and more effectively utilize the expertise of personnel 
familiar with the risk of these operations.
    In response to this comment, to certify compliance with sections 
252.132(a) and 252.144(a), the FBO is not required to form a special 
U.S. risk committee comprised of members of the FBO's board of 
directors. Rather, the FBO must ensure that the FBO's board of 
directors or a committee comprised of members of the FBO's board of 
directors has primary responsibility for oversight of the risks of the 
combined U.S. operations. The committee that oversees U.S. risk for an 
FBO subject to Regulation YY is not required to (though it may) 
directly administer the FBO's U.S. risk management policies; rather, 
the FBO may designate specific senior management officials from the 
FBO's U.S. operations to be responsible for administering the U.S. risk 
management policies and for providing regular reports directly to the 
FBO's board of directors or risk committee.\10\ The rule is intended to 
allow an FBO flexibility in establishing its oversight function so long 
as the FBO's board of directors is informed about and provides the 
appropriate level of guidance about the risks of the combined U.S. 
operations of the FBO. However the FBO designs its oversight function, 
the FBO must also take appropriate measures to ensure that the risk 
management policies for its combined U.S. operations are implemented 
and that the risk committee is provided sufficient information on the 
combined U.S. operations to allow it to carry out its 
responsibilities.\11\
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    \10\ See 79 FR 17284 (March 27, 2014).
    \11\ See 12 CFR 252.132(c) and 252.144(c).
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    The same commenter requested clarification regarding how the 
requirement in Regulation YY for an FBO to have a committee that 
oversees U.S. risk would apply to an FBO with a two-tier board 
structure. The two-tier board structure is a common feature of FBOs in 
European countries, and generally consists of a supervisory board 
independent from management that sets the direction of the company and 
oversees the company's senior management, and a management/executive 
board that implements the company's strategies and risk management. The 
purpose of the risk committee requirements in Regulation YY is to 
ensure that the FBO parent is aware of and takes responsibility for the 
oversight of the risks of its combined U.S. operations. This oversight 
function can be integrated into various board structures that currently 
exist in different foreign countries. In a two-tier board structure, a 
committee of either the supervisory board or the management/executive 
board (or a combination thereof) could be considered a committee of the 
FBO board of directors for purposes of complying with the requirement 
under Regulation YY for an FBO to maintain a committee that oversees 
U.S. risk. Both tiers of a two-tier board are typically involved in 
evaluating risk management at an FBO with the same goals as those of a 
single board of directors in the United States.
    The same commenter requested clarification regarding various 
requirements in Regulation YY relating to capital stress testing and 
liquidity stress testing.\12\ To be exempt from additional U.S. capital 
stress testing requirements, Regulation YY requires an FBO to be 
subject on a consolidated basis to an annual capital stress testing 
regime in its home country that meets certain requirements and to 
actually meet any minimum stress testing standards set by the FBO's 
home country supervisor.\13\ In reporting Item 5 of the FR Y-7, an FBO 
is expected to evaluate the stress testing regime to which it is 
subject and make a reasonable conclusion about whether this regime 
meets the home country stress testing criteria in Regulation YY.
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    \12\ See 12 CFR 252.122(a), 12 CFR 252.145(a), 12 CFR 
252.146(b), and 12 CFR 252.158(b).
    \13\ The capital stress testing regime must include: (i) An 
annual supervisory capital stress test conducted by the relevant 
home country supervisor or an annual evaluation and review by the 
home country supervisor of an internal capital adequacy stress test 
conducted by the FBO; and (ii) requirements for governance and 
controls of stress testing practices by relevant management and the 
board of directors (or equivalent thereof).
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    Moreover, the same commenter requested clarification as to whether 
an FBO would meet the home country stress test requirements upon a 
satisfactory completion of an Internal Capital Adequacy Assessment 
Process (ICAAP). If an ICAAP satisfies the underlying requirements for 
a capital stress test, including all applicable information 
requirements in Regulation YY, satisfactory completion of the ICAAP 
would be sufficient to satisfy these requirements.
    Regulation YY requires an FBO to report on an annual basis the 
results of an internal liquidity stress test for either the 
consolidated operations of the FBO or the FBO's combined U.S. 
operations. In either case, the liquidity stress test must incorporate 
three specified planning horizons. The same commenter requested 
guidance on how an FBO should report when the FBO's home country uses 
fewer or different planning horizons.
    In the event that an FBO is not required to conduct an internal 
liquidity stress test for its consolidated operations using the three 
specified planning horizons in Regulation YY or chooses not to do so, 
the FBO may instead choose to provide an internal liquidity stress test 
for just the combined U.S. operations. Under Regulation YY, if an FBO 
does not comply with the internal liquidity stress testing reporting 
requirements, it must limit the net aggregate amount owed by the parent 
or other non-U.S. affiliates to the U.S. operations to 25 percent or 
less of the third party liabilities of the combined U.S. operations.
    In addition, although Regulation YY does not prescribe the 
information that must be reported to the Board regarding the internal 
liquidity stress tests, given the diversity in liquidity reporting 
requirements across jurisdictions, FBOs are expected to provide 
sufficient information in the internal liquidity stress test to allow 
the Board to assess the liquidity position of the FBO.\14\
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    \14\ See 79 FR 17239, 17301 (March 27, 2014).
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    The same commenter requested guidance on an FBO's compliance with 
the stress testing requirement when annual stress testing is not 
required by the FBO's home country supervisor. Regulation YY requires 
an FBO to be subject to a stress testing regime that includes an annual 
supervisory stress test or annual supervisory evaluation of the FBO's 
internal stress test. A bi-annual stress test, for example, would not 
satisfy this requirement.
    The same commenter requested guidance on whether an FBO would be 
deemed to satisfy the requirement to report and certify compliance with 
its home country capital adequacy requirements by completing the FR Y-
7Q. In addition, the commenter requested confirmation of the as-of date 
and frequency of the certification of the FR Y-7Q. Regulation YY 
requires an FBO to report compliance with capital adequacy measures 
that are consistent with the Basel Capital Framework (as defined in 12 
CFR 252.143(a) and 252.154(a)) concurrently with filing the FR Y-7Q; 
however, Regulation YY does not specify the frequency or the as-of date 
for an FBO's certification of

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compliance with its home country capital requirements. On December 2, 
2016, the Board approved a final notice to amend the FR Y-7Q to expand 
reporting regarding an FBO's home country capital ratios consistent 
with Regulation YY. An FBO's completion of the FR Y-7Q on a quarterly 
basis would satisfy both the requirement to report and the requirement 
to certify to the Board its compliance with capital adequacy measures 
that are consistent with the Basel Capital Framework. If an FBO is 
unable to report that it is in compliance with such capital adequacy 
measures, the Board may impose requirements, conditions, and 
restrictions relating to the U.S. operations of the FBO.\15\
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    \15\ See 12 CFR 252.143(c) and 252.154(c).
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    A second commenter requested clarification on the definition of an 
inactive company when an entity is in the liquidation process. 
Respondents should refer to the definition of ``Liquidation'' in the 
Banking, Savings and Loan, and Nonbanking Schedules in the FR Y-10 
instructions on how to classify an entity during the liquidation 
process. Specifically, the instructions state ``liquidation refers to 
final distribution of assets, satisfaction of liabilities, and closing 
of capital accounts of a company, as opposed to sale or transfer of the 
company.''
    The same commenter also requested that the instructions be expanded 
on reporting when a nonbanking company is a functionally regulated 
subsidiary since the mere registration with a functional regulator does 
not necessarily qualify a company as being functionally regulated for 
these purposes. In response to the commenter's request, the Board notes 
that respondents should refer to the definition of ``Functionally 
Regulated Subsidiary'' in the FR Y-10 instructions, which provides that 
certain companies may be required to be registered with one of the 
enumerated regulators without necessarily qualifying as being 
functionally regulated by that regulator; for example, publicly held 
companies may be required to be registered with the U.S. Securities and 
Exchange Commission (SEC) without necessarily qualifying as 
functionally regulated by the SEC as a securities broker-dealer, 
investment adviser, investment company, or company that engages in 
commodity futures trading.

    Board of Governors of the Federal Reserve System, January 18, 
2018.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
[FR Doc. 2018-01153 Filed 1-22-18; 8:45 am]
 BILLING CODE 6210-01-P