[Federal Register Volume 85, Number 5 (Wednesday, January 8, 2020)]
[Notices]
[Pages 895-901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00058]
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FEDERAL DEPOSIT INSURANCE CORPORATION
Agency Information Collection Activities: Submission for OMB
Review; Comment Request (OMB No. 3064-0029; -0030; -0070; -0104; -0204)
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Agency information collection activities: Submission for OMB
review; comment request.
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SUMMARY: The FDIC, as part of its obligations under the Paperwork
Reduction Act of 1995, invites the general public and other Federal
agencies to take this opportunity to comment on the renewal of the
existing information collections described below. On October 29, 2019,
the FDIC requested comment for 60 days on a proposal to renew these
information collections. No comments were received. The FDIC hereby
gives notice of its plan to submit to OMB a request to approve the
renewal of these information collections, and again invites comment on
their renewal.
DATES: Comments must be submitted on or before February 7, 2020.
ADDRESSES: Interested parties are invited to submit written comments to
the FDIC by any of the following methods:
https://www.FDIC.gov/regulations/laws/federal.
Email: [email protected]. Include the name and number of
the collection in the subject line of the message.
Mail: Manny Cabeza (202-898-3767), Regulatory Counsel, MB-
3128, Federal Deposit Insurance Corporation, 550 17th Street NW,
Washington, DC 20429.
Hand Delivery: Comments may be hand-delivered to the guard
station at the rear of the 17th Street Building (located on F Street),
on business days between 7:00 a.m. and 5:00 p.m.
All comments should refer to the relevant OMB control number. A
copy of the comments may also be submitted to the OMB desk officer for
the FDIC: Office of Information and Regulatory Affairs, Office of
Management and Budget, New Executive Office Building, Washington, DC
20503.
FOR FURTHER INFORMATION CONTACT: Manny Cabeza, Regulatory Counsel, 202-
898-3767, [email protected], MB-3128, Federal Deposit Insurance
Corporation, 550 17th Street NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Proposal to renew the following currently approved collections of
information:
1. Title: Notification of Performance of Bank Services.
OMB Number: 3064-0029.
Form Number: 6120/06.
Affected Public: Insured state nonmember banks and state savings
associations.
Burden Estimate:
[[Page 896]]
Summary of Annual Burden
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Estimated Estimated
Estimated Estimated frequency of time per annual
Information collection description Type of burden Obligation to respond number of responses response burden
respondents (minutes) (hours)
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Notification of Performance of Bank Reporting............... Mandatory.............. 650 On Occasion............ 30 325
Services (FDIC Form 6120/06).
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Total Estimated Annual Burden.... ........................ ....................... ........... ....................... ........... 325
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General Description of Collection: Insured state nonmember banks
are required to notify the FDIC, under section 7 of the Bank Service
Company Act (12 U.S.C. 1867), of the relationship with a bank service
company. The Form FDIC 6120/06, Notification of Performance of Bank
Services, may be used by banks to satisfy the notification requirement.
There is no change in the method or substance of the collection.
The estimated number of respondents is estimated to increase based on
the response rate observed over the last three years. The estimated
time per response and the frequency of responses is expected to remain
the same.
2. Title: Securities of Insured Nonmember Bank Services.
OMB Number: 3064-0030.
Affected Public: Insured state nonmember banks and state savings
associations.
Burden Estimate:
Summary of Annual Burden
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Estimated Estimated Estimated
Estimated frequency time per annual
Information collection description Type of burden Obligation to respond number of of response burden
responses responses (hours) (hours)
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Form 3--Initial Statement of Beneficial Reporting................... Mandatory.................. 58 1 1 58
Ownership.
Form 4--Statement of Changes in Reporting................... Mandatory.................. 297 4 0.5 594
Beneficial Ownership.
Form 5--Annual Statement of Beneficial Reporting................... Mandatory.................. 69 1 1 69
Ownership.
Form 8-A................................. Reporting................... Mandatory.................. 2 2 3 12
Form 8-C................................. Reporting................... Mandatory.................. 2 1 2 4
Form 8-K................................. Reporting................... Mandatory.................. 21 4 2 168
Form 10.................................. Reporting................... Mandatory.................. 2 1 215 430
Form 10-C................................ Reporting................... Mandatory.................. 1 1 1 1
Form10-K................................. Reporting................... Mandatory.................. 21 1 140 2,940
Form 10-Q................................ Reporting................... Mandatory.................. 21 3 100 6,300
Form 12b-25.............................. Reporting................... Mandatory.................. 6 1 3 18
Form 15.................................. Reporting................... Mandatory.................. 2 1 1 2
Form 25.................................. Reporting................... Mandatory.................. 2 1 1 2
Schedule 13D............................. Reporting................... Mandatory.................. 2 1 3 6
Schedule 13E-3........................... Reporting................... Mandatory.................. 2 1 3 6
Schedule 13G............................. Reporting................... Mandatory.................. 2 1 3 6
Schedule 14A............................. Reporting................... Mandatory.................. 21 1 40 840
Schedule 14C............................. Reporting................... Mandatory.................. 2 1 40 80
Schedule 14D-1 (Schedule TO)............. Reporting................... Mandatory.................. 2 1 5 10
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Total Estimated Annual Burden........ ............................ ........................... ........... ........... ........... 11,546
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General Description of Collection: Section 12(i) of the Securities
Exchange Act of 1934 (Exchange Act) grants authority to the Federal
banking agencies to administer and enforce sections 10A(m), 12, 13,
14(a), 14(c), 14(d), 14(f), and 16 of the Exchange Act and Sections
302, 303, 304, 306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act
of 2002. Pursuant to section 12(i), the FDIC has the authority,
including rulemaking authority, to administer and enforce these
enumerated provisions as may be necessary with respect to state
nonmember banks and state savings associations over which it has been
designated the appropriate Federal banking agency. Section 12(i)
generally requires the FDIC to issue regulations substantially similar
to those issued by the Securities and Exchange Commission (SEC)
regulations to carry out these responsibilities. Thus, part 335 of the
FDIC regulations incorporates by cross-reference the SEC rules and
regulations regarding the disclosure and filing requirements of
registered securities of state nonmember banks and state savings
associations.
This information collection includes the following:
Beneficial Ownership Forms: FDIC Forms 3, 4, and 5 (FDIC Form
Numbers 6800/03, 6800/04, and 6800/05). Pursuant to section 16 of the
Exchange Act, every director, officer, and owner of more than ten
percent of a class of equity securities registered with the FDIC under
section 12 of the Exchange Act must file with the FDIC a statement of
ownership regarding such securities. The initial filing is on Form 3
and changes are reported on Form 4. The Annual Statement of beneficial
ownership of securities is on Form 5. The forms contain information on
the reporting person's relationship to the company and on purchases and
sales of such equity securities. 12 CFR 335.601 through 336.613 of the
FDIC's regulations, which cross-reference 17 CFR 240.16a of the SEC's
regulations, provide the FDIC form requirements for FDIC Forms 3, 4,
and 5 in lieu of SEC Forms 3, 4, and 5, which are described at 17 CFR
249.103 (Form 3), 249.104 (Form 4), and 249.105 (Form 5).
Forms 8-A and 8-C for Registration of Certain Classes of
Securities. Form 8-A is used for registration pursuant to section 12(b)
or (g) of the Exchange Act of any class of securities of any issuer
which is required to file reports pursuant to section 13 or 15(d) of
that Act or pursuant to an order exempting the exchange on which the
issuer has securities listed from registration as a national securities
exchange. Form 8-C has been replaced by Form 8-A. Form 8-A is described
at 17 CFR 249.208a. There is no actual ``Form 8-A'' as filers must
produce a customized narrative
[[Page 897]]
document in compliance with the requirements in accordance with the
filer's particular circumstances.
Form 8-K: Current Report. This is the current report that is used
to report the occurrence of any material events or corporate changes
that are of importance to investors or security holders and have not
been reported previously by the registrant. It provides more current
information on certain specified events than would Forms 10-Q and 10-K.
The form description is at 17 CFR 249.308. There is no actual ``Form 8-
K'' as filers must produce a customized narrative document in
compliance with the requirements in accordance with the filer's
particular circumstances.
Forms 10 and 10-C: Forms for Registration of Securities. Form 10 is
the general reporting form for registration of securities pursuant to
section 12(b) or (g) of the Exchange Act of classes of securities of
issuers for which no other reporting form is prescribed. It requires
certain business and financial information about the issuer. Form 10-C
has been replaced by Form 10. Form 10 is described at 17 CFR 249.210.
There is no actual ``Form 10'' as filers must produce a customized
narrative document in compliance with the requirements in accordance
with the filer's particular circumstances.
Form 10-K: Annual Report. This annual report is used by issuers
registered under the Exchange Act to provide information described in
Regulation S-K, 17 CFR 229. The form is described at 17 CFR 249.310.
There is no actual ``Form 10-K'' as filers must produce a customized
narrative document in compliance with the requirements in accordance
with the filer's particular circumstances.
Form 10-Q: Quarterly Reports. The Form 10-Q is a report filed
quarterly by most reporting companies. It includes unaudited financial
statements and provides a continuing overview of major changes in the
company's financial position during the year, as compared to the prior
corresponding period. The report must be filed for each of the first
three fiscal quarters of the company's fiscal year and is due within 40
or 45 days of the close of the quarter, depending on the size of the
reporting company. The description of Form 10-Q is at 17 CFR 249.308a.
There is no actual ``Form 10-Q'' as filers must produce a customized
narrative document in compliance with the requirements in accordance
with the filer's particular circumstances.
Form 12b-25: Notification of Late Filing. This notification extends
the reporting deadlines for filing quarterly and annual reports for
qualifying companies. There is no FDIC Form 12b-25. The form is
described at 17 CFR 249.322.
Form 15: Certification and Notice of Termination of Registration.
This form is filed by each issuer to certify that the number of holders
of record of a class of security registered under section 12(g) of the
Exchange Act is reduced to a specified level in order to terminate the
registration of the class of security. For a bank, the number of
holders of record of a class of registered security must be reduced to
less than 1,200 persons. For a savings association, the number of
record holders of a class of registered security must be reduced to (1)
less than 300 persons or (2) less than 500 persons and the total assets
of the issuer have not exceeded $10 million on the last day of each of
the issuer's most recent three fiscal years. In general, registration
terminates 90 days after the filing of the certification. There is no
FDIC Form 15. This form is described at 17 CFR 249.323.
Schedule 13D: Certain Beneficial Ownership Changes. This Schedule
discloses beneficial ownership of certain registered equity securities.
Any person or group of persons who acquire a beneficial ownership of
more than 5 percent of a class of registered equity securities of
certain issuers must file a Schedule 13D reporting such acquisition
together with certain other information within ten days after such
acquisition. Moreover, any material changes in the facts set forth in
the Schedule generally precipitates a duty to promptly file an
amendment on Schedule 13D. The SEC's rules define the term beneficial
owner to be any person who directly or indirectly shares voting power
or investment power (the power to sell the security). There is no FDIC
form for Schedule 13D. This schedule is described at 17 CFR 240.13d-
101.
Schedule 13E-3: Going Private Transactions by Certain Issuers or
Their Affiliates. This schedule must be filed if an issuer engages in a
solicitation subject to Regulation 14A or a distribution subject to
Regulation 14C, in connection with a going private merger with its
affiliate. An affiliate and an issuer may be required to complete,
file, and disseminate a Schedule 13E-3, which directs that each person
filing the schedule state whether it reasonably believes that the Rule
13e-3 transaction is fair or unfair to unaffiliated security holders.
There is no FDIC form for Schedule 13E-3. This schedule is described at
17 CFR 240.13e-100.
Schedule 13G: Certain Acquisitions of Stock. Certain acquisitions
of stock that are over than 5 percent of an issuer must be reported to
the public. Schedule 13G is a much abbreviated version of Schedule 13D
that is only available for use by a limited category of persons (such
as banks, broker/dealers, and insurance companies) and even then only
when the securities were acquired in the ordinary course of business
and not with the purpose or effect of changing or influencing the
control of the issuer. There is no FDIC form for Schedule 13G. This
schedule is described at 17 CFR 240.13d-102.
Schedule 14A: Proxy Statements. State law governs the circumstances
under which shareholders are entitled to vote. When a shareholder vote
is required and any person solicits proxies with respect to securities
registered under section 12 of the Exchange Act, that person generally
is required to furnish a proxy statement containing the information
specified by Schedule 14A. The proxy statement is intended to provide
shareholders with the proxy information necessary to enable them to
vote in an informed manner on matters intended to be acted upon at
shareholders' meetings, whether the traditional annual meeting or a
special meeting. Typically, a shareholder is also provided with a proxy
card to authorize designated persons to vote his or her securities on
the shareholder's behalf in the event the holder does not vote in
person at the meeting. Copies of preliminary and definitive (final)
proxy statements and proxy cards are filed with the FDIC. There is no
FDIC form for Schedule 14A. The description of this schedule is at 17
CFR 240.14a-101.
Schedule 14C: Information Required in Information Statements. An
information statement prepared in accordance with the requirements of
the SEC's Regulation 14C is required whenever matters are submitted for
shareholder action at an annual or special meeting when there is no
proxy solicitation under the SEC's Regulation 14A. There is no FDIC
form for Schedule 14C. This schedule is described at 17 CFR 240.14c-
101.
Schedule 14D-1: Tender Offer. This schedule is also known as
Schedule TO. Any person, other than the issuer itself, making a tender
offer for certain equity securities registered pursuant to section 12
of the Exchange Act is required to file this schedule if acceptance of
the offer would cause that person to own over 5 percent of that class
of the securities. This schedule must be filed and sent to various
parties, such as the issuer and any competing bidders. In addition, the
SEC's Regulation 14D sets forth certain requirements that must be
complied with in connection with a tender offer. This schedule is
described
[[Page 898]]
at 17 CFR 240.14d-100. There is no actual form for Schedule 14D-1 as
filers must produce a customized narrative document in compliance with
the requirements in accordance with the filer's particular
circumstances.
There is no change in the method or substance of the collection.
The estimated number of respondents, as well as the estimated time per
response and the frequency of response, is expected to remain the same.
3. Title: Application for a Bank to Establish a Branch or Move its
Main Office or a Branch.
OMB Number: 3064-0070.
Affected Public: Insured state nonmember banks and state savings
associations.
Burden Estimate:
Summary of Annual Burden
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Estimated Estimated
Estimated Estimated frequency of time per annual
Information collection description Type of burden Obligation to respond number of responses response burden
respondents (hours) (hours)
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Application to Establish a Branch, Reporting............... Mandatory.............. 718 On Occasion............ 5 3,590
Move Main Office or Move Branch.
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Total Estimated Annual Burden.... ........................ ....................... ........... ....................... ........... 3,590
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General Description of Collection: Section 18(d) of the Federal
Deposit Insurance Act (12 U.S.C. 1828(d) (FDI Act) provides that no
FDIC insured state nonmember bank or state savings association shall
establish and operate any new domestic branch or move its main office
or any such branch from one location to another without the prior
written consent of the FDIC. In granting or withholding consent to the
applicant, FDIC considers: (a) The financial history and condition of
the depository institution; (b) the adequacy of its capital structure;
(c) its future earnings prospects; (d) the general character and
fitness of its management; (e) the risk presented by the depository
institution to the Deposit Insurance Fund; (f) the convenience and
needs of the community to be served; and (g) whether its corporate
powers are consistent with the purposes of the FDI Act. FDIC
regulations found at 12 CFR 303, subpart C, specify the steps that
respondents must take to comply with the statutory mandate.
There is no change in the method or substance of the collection.
The estimated number of respondents has been revised based on the
number of responses recorded over the last three years. The estimated
time per response and the frequency of responses is expected to remain
the same.
4. Title: Activities and Investments of Savings Associations.
OMB Number: 3064-0104.
Affected Public: Insured state savings associations.
Burden Estimate:
Summary of Annual Burden
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Estimated Estimated
Estimated Estimated frequency of time per annual
Information collection description Type of burden Obligation to respond number of responses response burden
respondents (hours) (hours)
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Application for Exemption--Sec. 28 Reporting............... Mandatory.............. 18 On Occasion............ 12 216
and Subsidiary Notice--Sec. 18(m).
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Total Estimated Annual Burden.... ........................ ....................... ........... ....................... ........... 216
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General Description of Collection: Section 28 of the FDI Act limits
the powers of state savings associations to acquire or retain equity
investments of a type or amount not permitted for a federal savings
association. Section 28 also prohibits insured state savings
associations and their subsidiaries from engaging as principal in any
activity of a type or in an amount that is not permitted for a federal
savings association or its subsidiaries. Section 28 charges the FDIC
with the responsibility of enforcing the restrictions and filing
requirements, and permits the FDIC to grant exceptions under certain
circumstances.
12 CFR part 362 details the activities that state savings
associations and/or their subsidiaries may engage in, under certain
criteria and conditions, and identifies the information that banks must
furnish to the FDIC in order to obtain the FDIC's approval or non-
objection.
There is no change in the method or substance of the collection.
The estimated number of respondents has been revised upward based on
the number of responses recorded over the last three years. The
estimated time per response and the frequency of responses is expected
to remain the same.
5. Title: Margin and Capital Requirements for Covered Swap
Entities.
OMB Number: 3064-0204.
Affected Public: Any FDIC-insured state-chartered bank that is not
a member of the Federal Reserve System or FDIC-insured state-chartered
savings association that is registered as a swap dealer, major swap
participant, security-based swap dealer, or major security-based swap
participant.
Burden Estimate:
[[Page 899]]
Summary of Annual Burden
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Estimated Estimated Estimated
Estimated frequency time per annual
Information collection description Type of burden Obligation to respond number of of response burden
respondents responses (hours) (hours)
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Sec. 349.1(d)(1), (d)(2) Meeting Reporting................... Mandatory.................. 1 1 1,000 1,000
criteria for exemption.
Sec. 349.1(h).......................... Disclosure.................. Mandatory.................. 1 1 10 10
Sec. 349.2 Definition of ``Eligible Recordkeeping............... Mandatory.................. 1 1 5 5
Master Netting Agreement,'' paragraphs
(4)(i) and (ii).
Sec. 349.8(g) Documentation............
Sec. 349.10 Documentation of Margin
Matters..
349.5(c)(2)(i) Required Margin........... Recordkeeping............... Mandatory.................. 1 1 4 4
Sec. 349.7(c) Custody Agreement........ Recordkeeping............... Mandatory.................. 1 1 100 100
Sec. 349.8(c) and (d) Initial Margin Reporting................... Mandatory.................. 1 1 240 240
Model.
Sec. 349.8(e) Periodic Review.......... Recordkeeping............... Mandatory.................. 1 1 40 40
Sec. 349.8(f) Control, Oversight, and
Validation Mechanisms..
Sec. 349.8(f)(3) Initial Margin Reporting................... Mandatory.................. 1 1 50 50
Modeling Report.
Sec. 349.8(h) Escalation Procedures.... Recordkeeping............... Mandatory.................. 1 1 20 20
Sec. 349.9(e) Requests for Reporting................... Mandatory.................. 1 3 10 30
Determinations.
Sec. 349.11(b)(1) Posting Initial Recordkeeping............... Mandatory.................. 1 250 1 250
Margin.
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Total Estimated Annual Burden........ ............................ ........................... ........... ........... ........... 1,749
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General Description of Collection: The Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act) required the Office
of the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System, the FDIC, the Farm Credit Administration, and
Federal Home Finance Agency (each, an agency, and collectively, the
agencies) to jointly adopt rules that establish capital and margin
requirements for swap entities that are prudentially regulated by one
of the agencies (covered swap entities).\1\ These capital and margin
requirements apply to swaps that are not cleared by a registered
derivatives clearing organization or a registered clearing agency (non-
cleared swaps).\2\ The agencies published regulations that require swap
dealers and security-based swap dealers under the agencies' respective
jurisdictions to exchange margin with their counterparties for swaps
that are not centrally cleared (Swap Margin Rule or Rule). First issued
in 2015, the Swap Margin Rule includes a phased compliance schedule
from 2016 to 2020 and generally applies only to a non-cleared swap
entered into on or after the applicable compliance date. A non-cleared
swap entered into prior to an entity's applicable compliance date is
``grandfathered'' by this regulatory provision and is generally not
subject to the margin requirements in the Swap Margin Rule (legacy
swap) unless it is amended or novated on or after the applicable
compliance date. The FDIC's Swap Margin Rule and its reporting,
recordkeeping and disclosure requirements under the PRA can be found at
12 CFR part 349.
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\1\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010). See 7 U.S.C. 6s; 15
U.S.C. 78o-10. Sections 731 and 764 of the Dodd-Frank Act added a
new section 4s to the Commodity Exchange Act of 1936, as amended,
and a new section 15F to the Exchange Act, as amended, respectively,
which require registration with the Commodity Futures Trading
Commission (CFTC) of swap dealers and major swap participants and
the SEC of security-based swap dealers and major security-based swap
participants (each a swap entity and, collectively, swap entities).
Section 1a (39) of the Commodity Exchange Act of 1936, as amended,
defines the term ``prudential regulator'' for purposes of the margin
requirements applicable to swap dealers, major swap participants,
security-based swap dealers and major security-based swap
participants. See 7 U.S.C. 1a(39).
\2\ A ``swap'' is defined in section 721 of the Dodd-Frank Act
to include, among other things, an interest rate swap, commodity
swap, equity swap, and credit default swap, and a security-based
swap is defined in section 761 of the Dodd-Frank Act to include a
swap based on a single security or loan or on a narrow-based
security index. See 7 U.S.C. 1a(47); 15 U.S.C. 78c(a)(68).
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Section 349.1(d) refers to statutory provisions that set forth
conditions for an exemption from clearing. Section 349.1(d)(1) provides
an exemption for non-cleared swaps if one of the counterparties to the
swap is not a financial entity, is using swaps to hedge or mitigate
commercial risk, and notifies the CFTC of how it generally meets its
financial obligations associated with entering into non-cleared swaps.
Section 349.1(d)(2) provides an exemption for security-based swaps if
the counterparty notifies the SEC of how it generally meets its
financial obligations associated with entering into non-cleared
security-based swaps. Section 349.1(h) contains the disclosure
requirements for transfers of legacy swaps initiated by a covered swap
entity's counterparty that fall outside the scope of the Swap Margin
Rule.
Section 349.2 defines terms used in part 349, including the
definition of ``eligible master netting agreement,'' which provides
that a covered swap entity that relies on the agreement for purpose of
calculating the required margin must: (1) Conduct sufficient legal
review of the agreement to conclude with a well-founded basis that the
agreement meets specified criteria; and (2) establish and maintain
written procedures for monitoring relevant changes in law and to ensure
that the agreement continues to satisfy the requirements of this
section. The term ``eligible master netting agreement'' is used
elsewhere in part 349 to specify instances in which a covered swap
entity may: (1) Calculate variation margin on an aggregate basis across
multiple non-cleared swaps and security-based swaps and (2) calculate
initial margin requirements under an initial margin model for one or
more swaps and security-based swaps.
Section 349.5(c)(2)(i) specifies that a covered swap entity shall
not be deemed to have violated its obligation to collect or post margin
from or to a counterparty if the covered swap entity has made the
necessary efforts to collect or post the required margin, including the
timely initiation and continued pursuit of formal dispute resolution
mechanisms, or has otherwise demonstrated upon request to the
satisfaction of the agency that it has made appropriate efforts to
collect or post the required margin.
Section 349.7 generally requires a covered swap entity to ensure
that any initial margin collateral that it collects or posts is held at
a third-party custodian. Section 349.7(c) requires the custodian to act
pursuant to a custody agreement that: (1) Prohibits the custodian from
rehypothecating, repledging, reusing, or otherwise transferring
(through securities lending, securities borrowing, repurchase
agreement, reverse repurchase
[[Page 900]]
agreement or other means) the collateral held by the custodian, except
that cash collateral may be held in a general deposit account with the
custodian if the funds in the account are used to purchase an asset
held in compliance with Sec. 349.7, and such purchase takes place
within a time period reasonably necessary to consummate such purchase
after the cash collateral is posted as initial margin and (2) is a
legal, valid, binding, and enforceable agreement under the laws of all
relevant jurisdictions, including in the event of bankruptcy,
insolvency, or a similar proceeding. A custody agreement may permit the
posting party to substitute or direct any reinvestment of posted
collateral held by the custodian under certain conditions.
With respect to collateral collected by a covered swap entity
pursuant to Sec. 349.3(a) or posted by a covered swap entity pursuant
to Sec. 349.3(b), the agreement must require the posting party to
substitute only funds or other property that would qualify as eligible
collateral under Sec. 349.6 and for which the amount net of applicable
discounts described in Appendix B would be sufficient to meet the
requirements of Sec. 349.3 and direct reinvestment of funds only in
assets that would qualify as eligible collateral under Sec. 349.6.
Section 349.8 establishes standards for the use of initial margin
models. These standards include: (1) A requirement that the covered
swap entity receive prior approval from the relevant Agency based on
demonstration that the initial margin model meets specific requirements
(Sec. Sec. 349.8(c)(1) and 349.8(c)(2)); (2) a requirement that a
covered swap entity notify the relevant Agency in writing 60 days
before extending use of the model to additional product types, making
certain changes to the initial margin model, or making material changes
to modeling assumptions (Sec. 349.8(c)(3)); and (3) a variety of
quantitative requirements, including requirements that the covered swap
entity validate and demonstrate the reasonableness of its process for
modeling and measuring hedging benefits, demonstrate to the
satisfaction of the relevant Agency that the omission of any risk
factor from the calculation of its initial margin is appropriate,
demonstrate to the satisfaction of the relevant Agency that
incorporation of any proxy or approximation used to capture the risks
of the covered swap entity's non-cleared swaps or noncleared security-
based swaps is appropriate, periodically review and, as necessary,
revise the data used to calibrate the initial margin model to ensure
that the data incorporate an appropriate period of significant
financial stress (Sec. Sec. 349.8(d)(5), 349.8(d)(10), 349.8(d)(11),
349.8(d)(12), and 349.8(d)(13)). Also, if the validation process
reveals any material problems with the initial margin model, the
covered swap entity must promptly notify the Agency of the problems,
describe to the Agency any remedial actions being taken, and adjust the
initial margin model to ensure an appropriately conservative amount of
required initial margin is being calculated (Sec. 349.8(f)(3)).
Section 349.8 also establishes requirements for the ongoing review and
documentation of initial margin models. These standards include: (1) A
requirement that a covered swap entity review its initial margin model
annually (Sec. 349.8(e)); (2) a requirement that the covered swap
entity validate its initial margin model at the outset and on an
ongoing basis, describe to the relevant Agency any remedial actions
being taken, and report internal audit findings regarding the
effectiveness of the initial margin model to the covered swap entity's
board of directors or a committee thereof (Sec. Sec. 349.8(f)(2),
349.8(f)(3), and 349.8(f)(4)); (3) a requirement that the covered swap
entity adequately document all material aspects of its initial margin
model (Sec. 349.8(g)); and (4) that the covered swap entity must
adequately document internal authorization procedures, including
escalation procedures, that require review and approval of any change
to the initial margin calculation under the initial margin model,
demonstrable analysis that any basis for any such change is consistent
with the requirements of this section, and independent review of such
demonstrable analysis and approval (Sec. 349.8(h)).
Section 349.9 addresses the treatment of cross-border transactions
and, in certain limited situations, will permit a covered swap entity
to comply with a foreign regulatory framework for noncleared swaps (as
a substitute for compliance with the prudential regulators' rule) if
the prudential regulators jointly determine that the foreign regulatory
framework is comparable to the requirements in the prudential
regulators' rule. Section 349.9(e) allows a covered swap entity to
request that the prudential regulators make a substituted compliance
determination and must provide the reasons therefore and other required
supporting documentation. A request for a substituted compliance
determination must include: (1) A description of the scope and
objectives of the foreign regulatory framework for non-cleared swaps
and non-cleared security-based swaps; (2) the specific provisions of
the foreign regulatory framework for non-cleared swaps and security-
based swaps (scope of transactions covered; determination of the amount
of initial and variation margin required; timing of margin
requirements; documentation requirements; forms of eligible collateral;
segregation and rehypothecation requirements; and approval process and
standards for models); (3) the supervisory compliance program and
enforcement authority exercised by a foreign financial regulatory
authority or authorities in such system to support its oversight of the
application of the non-cleared swap and security-based swap regulatory
framework; and (4) any other descriptions and documentation that the
prudential regulators determine are appropriate. A covered swap entity
may make a request under this section only if directly supervised by
the authorities administering the foreign regulatory framework for non-
cleared swaps and non-cleared security-based swaps.
Section 349.10 requires a covered swap entity to execute trading
documentation with each counterparty that is either a swap entity or
financial end user regarding credit support arrangements that: (1)
Provides the contractual right to collect and post initial margin and
variation margin in such amounts, in such form, and under such
circumstances as are required and (2) specifies the methods,
procedures, rules, and inputs for determining the value of each non-
cleared swap or noncleared security-based swap for purposes of
calculating variation margin requirements and the procedures for
resolving any disputes concerning valuation.
Section 349.11(b)(1) provides that the requirement for a covered
swap entity to post initial margin under Sec. 349.3(b) does not apply
with respect to any noncleared swap or non-cleared security based swap
with a counterparty that is an affiliate. A covered swap entity shall
calculate the amount of initial margin that would be required to be
posted to an affiliate that is a financial end user with material swaps
exposure pursuant to Sec. 349.3(b) and provide documentation of such
amount to each affiliate on a daily basis.
There is no change in the method or substance of the collection.
The FDIC currently does not supervise any institutions that are subject
to this information collection but is reporting one respondent as a
placeholder to
[[Page 901]]
preserve the burden estimates. For clarity, the burden presentation has
been changed to correspond to the burden presentation made by the other
agencies in their respective information collections. There is no
change in the total estimated annual burden.
Request for Comment
Comments are invited on: (a) Whether the collection of information
is necessary for the proper performance of the FDIC's functions,
including whether the information has practical utility; (b) the
accuracy of the estimates of the burden of the information collection,
including the validity of the methodology and assumptions used; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology. All
comments will become a matter of public record.
Federal Deposit Insurance Corporation.
Dated at Washington, DC, on January 2, 2020.
Annmarie H. Boyd,
Assistant Executive Secretary.
[FR Doc. 2020-00058 Filed 1-7-20; 8:45 am]
BILLING CODE 6714-01-P