[Federal Register Volume 84, Number 224 (Wednesday, November 20, 2019)]
[Proposed Rules]
[Pages 64031-64035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24966]


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FEDERAL RESERVE SYSTEM

12 CFR Part 252

[Regulation YY; Docket No. R-1534]
RIN 7100-AE 38


Single-Counterparty Credit Limits for Bank Holding Companies and 
Foreign Banking Organizations

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Notice of proposed rule to modify compliance dates.

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SUMMARY: The Board is proposing to amend the compliance dates for 
Single-Counterparty Credit Limits for Bank Holding Companies and 
Foreign Banking Organizations, which it

[[Page 64032]]

finalized in a rule (final SCCL rule), published in the Federal 
Register on August 6, 2018. The Board is requesting comment on a 
proposed amendment that would modify these initial compliance dates to 
July 1, 2021, and January 1, 2022, respectively, regarding the single-
counterparty credit limits applicable to a foreign banking 
organization's combined U.S. operations only. The Board is not 
proposing at this time any amendment that would modify the initial 
compliance dates in the final rule for, or otherwise amend the 
application of, single-counterparty credit limits applicable to any 
U.S. intermediate holding company of a foreign banking organization.

DATES: Comments must be received on or before December 20, 2019.

ADDRESSES: You may submit comments, identified by Docket No. R-1534 and 
RIN 7100-AE 38, by any of the following methods:
     Agency website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Email: [email protected]. Include docket 
number and RIN 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 website at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons or to remove 
personally identifiable information at the commenter's request. 
Accordingly, comments will not be edited to remove any identifying or 
contact information. Public comments may also be viewed electronically 
or in paper in Room 146, 1709 New York Avenue NW, Washington, DC 20006, 
between 9:00 a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Constance M. Horsley, Deputy Associate 
Director, (202) 452-5239; Juan C. Climent, Manager, (202) 872-7526; 
Lesley Chao, Lead Financial Institution Policy Analyst, (202) 974-7063; 
or Donald Gabbai, Lead Financial Institution Policy Analyst, (202) 452-
3358, Division of Supervision and Regulation; or Laurie Schaffer, 
Associate General Counsel, (202) 452-2272; Benjamin W. McDonough, 
Assistant General Counsel, (202) 452-2036; Chris Callanan, Counsel, 
(202) 452-3594; Lucy Chang, Counsel, (202) 475-6331; or Jeffery Zhang, 
Attorney, (202) 736-1968, Legal Division, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.

SUPPLEMENTARY INFORMATION: 

I. Discussion

    On August 6, 2018,at 83 FR 38460, the Board published in the 
Federal Register a final rule to establish single-counterparty credit 
limits (SCCL) for bank holding companies and foreign banking 
organizations (FBOs) with total consolidated assets of at least $250 
billion, pursuant to section 165(e) of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (final SCCL rule).\1\ The rule was 
amended as part of the Board's recent rule establishing risk-based 
categories for determining prudential standards for large U.S. banking 
organizations and foreign banking organizations.\2\ For FBOs, the 
amended final rule establishes separate SCCL applicable to (1) the 
combined U.S. operations of an FBO that is subject to Category II or 
III standards or that has total global consolidated assets of $250 
billion or more, and (2) any U.S. intermediate holding company (IHC) 
that is subject to Category II or III standards. With respect to the 
SCCL applicable to the combined U.S. operations of an FBO, the final 
SCCL rule establishes different compliance dates based on whether the 
FBO has the characteristics of a global systemically important banking 
organization (GSIB). An FBO that has the characteristics of a GSIB must 
comply with these SCCL beginning on January 1, 2020, while an FBO that 
does not have the characteristics of a GSIB must comply beginning on 
July 1, 2020, unless that time is extended by the Board in writing.\3\
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    \1\ See 12 U.S.C. 5365(e).
    \2\ 84 FR 59032 (Nov. 1, 2019).
    \3\ 12 CFR 252.170(c).
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    The final SCCL rule allows an FBO to comply with the SCCL 
applicable to its combined U.S. operations by certifying to the Board 
that it meets, on a consolidated basis, SCCL standards established by 
its home country supervisor that are consistent with the large 
exposures framework published by the Basel Committee on Banking 
Supervision in 2014 (BCBS Large Exposure Standard). The BCBS Large 
Exposure Standard is consistent with the Board's final rule.\4\
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    \4\ 12 CFR 252.172(d).
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    Since finalization of the final SCCL rule, many foreign banks and 
their trade associations have noted that, although efforts are underway 
in many jurisdictions to implement the BCBS Large Exposure Standard, 
the framework may not be fully implemented in the home countries of 
FBOs before the initial compliance dates of the final rule. Foreign 
banks indicated that it would be significantly burdensome to build 
systems to permit their combined U.S. operations to report compliance 
with the Board's final SCCL rule solely for use during the 
implementation gap period, since those FBOs will eventually be subject 
instead to a home-country large exposures framework consistent with the 
BCBS Large Exposure Standard on a consolidated basis. Foreign banks 
have requested that the Board consider either (1) allowing an FBO 
subject to the Board's final rule to comply through certification if 
its home country supervisor is ``working towards'' a framework 
consistent with the BCBS Large Exposure Standard, or (2) granting 
temporary relief to an FBO whose home country jurisdiction is working 
towards a framework consistent with the BCBS Large Exposure Standard.
    The home countries of the FBOs whose combined U.S. operations are 
subject to the Board's SCCL rule are China, Switzerland, Canada, Japan, 
and member states of the European Union. Those countries generally have 
made progress over the past year on implementing the BCBS Large 
Exposure Standard. At this time, China and Switzerland have final 
frameworks that have become effective, and Canada finalized an SCCL 
framework that will become effective on November 1, 2019.\5\ The 
European Union recently finalized an SCCL framework that will become 
effective on June 28, 2021.\6\ Japan does not yet have a final 
effective framework. Staff expects that the United Kingdom

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will follow the European Union's final framework.\7\
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    \5\ See FINMA Circular 2013/7 ``Intragroup exposure--banks'' and 
Circular 2019/1 ``Risk diversification--banks'' (effective as of 
Jan. 1, 2019); IMF, Peoples Republic of China: Detailed Assessment 
of Observance of Basel Core Principles for Effective Banking 
Supervision, IMF Country Report No. 17/403 (Dec. 2017); OSFI 
Guideline B-2, Large Exposure Limits (effective as of Nov. 1, 2019). 
Although Canada's framework is effective as of November 1, 2019, 
implementation by Canadian banks will begin in Q1 2020.
    \6\ See Regulation (EU) 2019/876 of the European Parliament and 
of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 
as regards the leverage ratio, the net stable funding ratio, 
requirements for own funds and eligible liabilities, counterparty 
credit risk, market risk, exposures to central counterparties, 
exposures to collective investment undertakings, large exposures, 
reporting and disclosure requirements, and Regulation (EU) No 648/
2012.
    \7\ Correspondence from Stephanie Webster, General Counsel, 
Institute of International Bankers, to Lucy Chang, Counsel, Board of 
Governors of the Federal Reserve System (Apr. 1, 2019); 
Correspondence from Briget Polichene, Chief Executive Officer, 
Institute of International Bankers, to Lucy Chang, Counsel, Board of 
Governors of the Federal Reserve System (Oct. 9, 2019).
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    In adopting the final rule, the Board agreed to defer to home 
country compliance with the BCBS Large Exposure Standard to prevent 
application of two nearly redundant SCCL frameworks to the combined 
U.S. operations of FBOs.\8\
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    \8\ 83 FR at 38487.
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    For these reasons, the Board proposes to amend the final SCCL rule 
to extend the initial compliance dates for the combined U.S. operations 
of FBOs by 18 months. The Board believes this timeframe would provide a 
reasonable period for firms to come into compliance with the final SCCL 
rule, either through direct compliance with the rule or certification. 
The proposed initial compliance dates applicable to the combined U.S. 
operations of an FBO would be July 1, 2021, for an FBO that has the 
characteristics of a GSIB and January 1, 2022, for any other FBO. The 
Board does not propose to amend the final SCCL rule to extend the 
initial compliance dates under the final SCCL rule with respect to the 
SCCL applicable to any U.S. IHC of an FBO. Any U.S. IHC of an FBO is 
expected to comply with the final SCCL rule on January 1, 2020, or July 
1, 2020, as applicable, unless that time is separately extended by the 
Board in writing.
    The Board invites comment on all aspects of this proposal.
    Question 1: Are the proposed extensions of the compliance dates for 
an FBO to meet the SCCL applicable to its combined U.S. operations 
appropriate? Why or why not?
    Question 2: Should the Board consider any shorter or longer 
extension of the compliance dates for an FBO to meet the SCCL 
applicable to its combined U.S. operations? If so, what time period 
should the Board consider and why?
    Question 3: Under what circumstances, if any, should the Board 
consider providing additional extensions of the compliance dates 
related to specific events or circumstances that would apply to a 
subset of firms? Should the Board consider any alternate arrangements 
to address such specific events or circumstances, and, if so, why?

II. Administrative Law Matters

A. Paperwork Reduction Act

    Certain provisions of the proposed rule contain ``collections of 
information'' within the meaning of the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3501-3521). The Board may not conduct or sponsor, and 
a respondent is not required to respond to, an information collection 
unless it displays a currently valid Office of Management and Budget 
(OMB) control number. The Board reviewed the proposed rule under the 
authority delegated to the Board by OMB.
    The proposed rule contains revisions to the compliance date for the 
reporting and recordkeeping requirements subject to the PRA. To 
implement these requirements, the Board proposes to revise the Single-
Counterparty Credit Limits (FR 2590; OMB No. 7100-NEW).
    Comments are invited on:
    (a) Whether the proposed collections of information are necessary 
for the proper performance of the Board's functions, including whether 
the information has practical utility;
    (b) The accuracy of the estimates of the burden of the proposed 
information collections, including the validity of the methodology and 
assumptions used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (e) Estimates of capital or startup costs and costs of operation, 
maintenance, and purchase of services to provide information.

Proposed Revision, With Extension, of the Following Information 
Collection

    Report title: Single-Counterparty Credit Limits.
    Agency form number: FR 2590.
    OMB control number: 7100-NEW.
    Frequency: Quarterly, annual, and event-generated.
    Affected Public: Businesses or other for-profit.
    Respondents: U.S. global systemically important bank holding 
companies (G-SIBs) and other U.S. bank holding companies (BHCs) or 
savings and loan holding companies (SLHCs) that are subject to Category 
I, II, or III standards; foreign banking organizations (FBOs) that are 
subject to Category II or III standards or that have $250 billion or 
more in total global consolidated assets; and U.S. intermediate holding 
companies (IHCs) that are subject to Category II or III standards.
    Estimated number of respondents: 75.
    Estimated average hours per response:

Reporting

    One-time implementation: 1,273 hours.
    Ongoing: 254 hours.
    Requests for temporary relief: 10 hours.

Recordkeeping

    Recordkeeping: 0.25 hours.
    Estimated annual burden hours:

Reporting

    One-time implementation: 95,475 hours.
    Ongoing: 76,200 hours.
    Requests for temporary relief: 30 hours.

Recordkeeping

    Recordkeeping: 75 hours.
    General description of report: The FR 2590 is being implemented in 
connection with the Board's single-counterparty credit limits rule 
(SCCL rule),\9\ which has been codified in the Board's Regulation YY--
Enhanced Prudential Standards (12 CFR part 252).\10\
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    \9\ 83 FR 38460 (Aug. 6, 2018).
    \10\ See 12 CFR 252, subparts H and Q.
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    The information collected by the Single-Counterparty Credit Limits 
reporting form (FR 2590 report) will allow the Board to monitor a 
covered company's or a covered foreign entity's compliance with the 
SCCL rule. As amended by the Board's final tailoring rule, a covered 
company is any U.S. bank holding company (BHC) or savings and loan 
holding company (SLHC) that is subject to Category I, II, or III 
standards.\11\ A covered foreign entity is any foreign banking 
organization (FBO) that is subject to Categories II or III standards or 
that has total global consolidated assets that equal or exceed $250 
billion and any U.S. intermediate holding company (IHC) that is subject 
to Category II or III standards.\12\ In addition to the reporting form, 
the FR 2590 information collection incorporates notice requirements 
pertaining to requests that may be made by a covered company or covered 
foreign entity to request temporary relief from specific requirements 
of the SCCL rule. A respondent must retain one exact copy of each 
completed FR 2590 in electronic form, and these records must be kept 
for at least three years.
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    \11\ 12 CFR 252.70, 252.170; see also 84 FR 59032 (Nov. 1, 
2019).
    \12\ Id.
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    Legal authorization and confidentiality: The FR 2590 is authorized 
pursuant to section 5(c) of

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the Bank Holding Company Act of 1956 (BHC Act) (12 U.S.C. 1844(c)) for 
BHCs and section 10(b) of the Home Owners' Loan Act (12 U.S.C. 
1467a(b)). With respect to FBOs and their subsidiary IHCs, the FR 2590 
is authorized pursuant to section 5(c) of the BHC Act, in conjunction 
with section 8 of the International Banking Act of 1978 (12 U.S.C. 
3106). The FR 2590 is mandatory.
    The data collected on the FR 2590 form will be kept confidential 
under exemption 4 of the Freedom of Information Act (FOIA), which 
protects from disclosure trade secrets and commercial or financial 
information (5 U.S.C. 552(b)(4)), and exemption 8 of FOIA, which 
protects from disclosure information related to the supervision or 
examination of a regulated financial institution (5 U.S.C. 552(b)(8)).
    Regarding notices associated with requests for temporary relief 
from specific requirements of the SCCL rule, a firm may request 
confidential treatment under the Board's rules regarding confidential 
treatment of information at 12 CFR 261.15. The Board will consider 
whether such information may be kept confidential in accordance with 
exemption 4 of FOIA (5 U.S.C. 552(b)(4)) or any other applicable FOIA 
exemption.
    Current Actions: The final SCCL rule had an effective date of 
October 5, 2018, and an initial compliance date of January 1, 2020, for 
a foreign banking organization that has the characteristics of a global 
systemically important banking organization, and July 1, 2020, for any 
other foreign banking organization subject to the rule, unless that 
time is extended by the Board in writing. The Board proposes to modify 
these initial compliance dates to July 1, 2021, and January 1, 2022, 
respectively, regarding the SCCL applicable to such a foreign banking 
organization's combined U.S. operations only. The Board is not 
proposing any amendment at this time that would modify the initial 
compliance dates in the final rule for, or otherwise amend the 
application of, single-counterparty credit limits applicable to any 
U.S. intermediate holding company of a foreign banking organization 
subject to the rule. There are no proposed changes to the reporting or 
recordkeeping requirements for such entities, and the burden hours 
would remain the same.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
generally requires an agency, in connection with a proposed rule, to 
prepare and make available for public comment an initial regulatory 
flexibility analysis that describes the impact of a proposed rule on 
small entities. However, a regulatory flexibility analysis is not 
required if the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The Small Business Administration (SBA) has defined ``small entities'' 
to include banking organizations with total assets of less than or 
equal to $600 million.\13\ The Board has considered the potential 
impact of the proposal on small entities in accordance with the RFA. 
The Board believes that the proposal will not have a significant 
economic impact on a substantial number of small entities.
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    \13\ See 13 CFR 121.201. Effective August 19, 2019, the Small 
Business Administration revised the size standards for banking 
organizations to $600 million in assets from $550 million in assets. 
See 84 FR 34261 (July 18, 2019). Consistent with the General 
Principles of Affiliation in 13 CFR 121.103, the Board counts the 
assets of all domestic and foreign affiliates when determining if 
the Board should classify a Board-supervised institution as a small 
entity.
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    As discussed in the SUPPLEMENTARY INFORMATION, the final SCCL rule 
generally applies to U.S. bank holding companies subject to Category I, 
II, or III standards, and foreign banking organizations that are 
subject to Category II or III standards or that have total global 
consolidated assets of at least $250 billion. Companies that are 
subject to the final SCCL rule have consolidated assets that 
substantially exceed the $600 million asset threshold at which a 
banking organization is considered a ``small entity'' under SBA 
regulations. Because the final SCCL rule does not apply to any small 
entities for purposes of the RFA, the proposed amendments to the rule 
to extend the initial compliance dates applicable to FBOs subject to 
SCCL with respect to their combined U.S. operations would not affect 
any small entity for purposes of the RFA. The Board's proposed rule 
would not impose any new recordkeeping, reporting, or compliance 
requirements. The Board does not believe that the proposal duplicates, 
overlaps, or conflicts with any other Federal rules. The Board does not 
believe that there are any significant alternatives to the proposal 
which accomplish its stated objectives. In light of the foregoing, the 
Board does not believe that proposal, if adopted in final form, would 
have a significant economic impact on a substantial number of small 
entities. Nonetheless, the Board seeks comment on whether the proposal 
would impose undue burdens on, or have unintended consequences for, 
small banking organizations and whether there are ways such potential 
burdens or consequences could be minimized in a manner consistent with 
the purpose of the proposal.

C. Solicitation of Comments on the Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The Board has sought to present the 
proposed amendments to the rule in a simple and straightforward manner 
and invites comment on the use of plain language.

List of Subjects in 12 CFR Part 252

    Administrative practice and procedure, Banks, banking, Federal 
Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Securities.

    Authority and Issuance  For the reasons stated in the preamble, 
the Board of Governors of the Federal Reserve System proposes to 
amend 12 CFR part 252 as follows:

PART 252--ENHANCED PRUDENTIAL STANDARDS (REGULATION YY).


Sec.  252.170   Applicability and general provisions.

0
1. The authority citation for part 252 continues to read as follows:

    Authority:  12 U.S.C. 321-338a, 481-486, 1818, 1828, 1831n, 
1831o, 1831p-l, 1831w, 1835, 1844(b), 1844(c), 3101 et seq., 3101 
note, 3904, 3906-3909, 4808, 5361, 5362, 5365, 5366, 5367, 5368, 
5371.

0
2. Amend Sec.  252.170 by revising paragraphs (c)(1)(i) and (ii) to 
read as follows:
* * * * *
    (c) * * * (1) * * * (i) A foreign banking organization that is a 
covered foreign entity as of October 5, 2018, must comply with the 
requirements of this subpart, including but not limited to Sec.  
252.172, beginning on January 1, 2022, unless that time is extended by 
the Board in writing.
    (ii) Notwithstanding paragraph (c)(1)(i) of this section, a foreign 
banking organization that is a major foreign banking organization as of 
October 5, 2018, must comply with the requirements of this subpart, 
including but not limited to Sec.  252.172, beginning on July 1, 2021, 
unless that time is extended by the Board in writing.
* * * * *


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    By order of the Board of Governors of the Federal Reserve 
System, November 8, 2019.
Ann Misback,
Secretary of the Board.
[FR Doc. 2019-24966 Filed 11-19-19; 8:45 am]
 BILLING CODE 6210-01-P