[Federal Register Volume 85, Number 103 (Thursday, May 28, 2020)]
[Rules and Regulations]
[Pages 31949-31952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09665]
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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: Final rule to extend compliance dates.
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SUMMARY: The Board is adopting a final rule to amend the compliance
dates related to Single-Counterparty Credit Limits for Bank Holding
Companies and Foreign Banking Organizations (final SCCL rule). The
final rule revises the final SCCL rule to modify the initial compliance
dates 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 final SCCL rule to July 1, 2021, and
January 1, 2022, respectively, regarding the SCCL applicable to a
foreign banking organization's combined U.S. operations only.
DATES: The final rule is effective on May 28, 2020.
FOR FURTHER INFORMATION CONTACT: Constance M. Horsley, Deputy Associate
Director, (202) 452-5239; Kathryn Ballintine, Manager, (202) 452-2555;
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,
Deputy 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, 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
[[Page 31950]]
rule).\1\ The rule was amended as part of the Board's recent tailoring
rule establishing risk-based categories for determining prudential
standards for large U.S. banking organizations and FBOs.\2\ For FBOs,
the amended final SCCL rule established 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 established 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\ 83 FR 38460 (Aug. 6, 2019). See also 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). Because the BCBS
Large Exposure Standard is consistent with the Board's final SCCL rule,
this approach reduces burden.\4\
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\4\ 12 CFR 252.172(d).
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Following the Board's adoption of the final SCCL rule, many foreign
banks and their trade associations 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 SCCL
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.
The home countries of the FBOs whose combined U.S. operations are
subject to the Board's final SCCL rule are China, Canada, Switzerland,
Japan, the United Kingdom, 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,
Canada, and Switzerland have final frameworks that have become
effective.\5\ The European Union has finalized an SCCL framework that
will become effective on June 28, 2021.\6\ Japan does not yet have a
final effective framework. The United Kingdom is expected to 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 was 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\ An 11-month transition period, due to end on December 31,
2020 was established after the UK formally left the European Union
on January 31, 2020. During this 11-month period, the UK will
continue to follow all of the European Union's rules and its trading
relationship will remain the same.
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In adopting the final SCCL rule, the Board agreed to defer to home
country compliance with the BCBS Large Exposure Standard to prevent
application of two largely redundant SCCL frameworks to the combined
U.S. operations of FBOs.\8\ For the above reasons, on November 20,
2019, the Board issued a proposed rule to modify the initial compliance
dates regarding the SCCL applicable to an FBO's combined U.S.
operations by 18 months to July 1, 2021, for an FBO that has the
characteristics of a GSIB, and January 1, 2022, for any other FBO
subject to the final SCCL rule, unless that time is extended by the
Board in writing.
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\8\ 83 FR at 38487.
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The comment period for the Board's proposal to modify the final
SCCL rule's initial compliance dates as described above ended on
December 20, 2019. The Board received four comment letters on the
proposed extension, three of which supported the proposed 18-month
extension of time, and one of which was not directly relevant to the
proposal. No commenter requested any alternate or additional extension
of time for specific events or circumstances, although one commenter
suggested that, to the extent certain home countries need additional
time to implement the BCBS Large Exposure Standard, the Board should
allow individual FBOs to seek reasonable, limited extensions beyond the
proposed 18-month period.
Having considered these comments, the Board is adopting the rule as
proposed. The 18-month period takes into account the effective date of
the EU's framework, and the Board believes it provides a reasonable
period for firms to come into compliance with the final SCCL rule,
either through direct compliance or certification of compliance with a
home-country framework consistent with the BCBS Large Exposure
Standard. To the extent an individual FBO believes its specific
circumstances warrant an additional, limited extension of time, that
FBO may request an extension of time from the Board in writing. The
Board will consider such requests on a case-by-case basis.
II. Administrative Law Matters
A. Administrative Procedure Act
The Board is issuing the final rule without the delayed effective
date ordinarily prescribed by the Administrative Procedure Act
(APA).\9\ The APA requires a 30-day delayed effective date, except for
(1) substantive rules which grant or recognize an exemption or relieve
a restriction; (2) interpretative rules and statements of policy; or
(3) as otherwise provided by the agency for good cause.\10\ Because the
rule relieves a restriction, the final rule is exempt from the APA's
delayed effective date requirement.\11\
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\9\ 5 U.S.C. 553.
\10\ 5 U.S.C. 553(d).
\11\ 5 U.S.C. 553(d)(1).
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B. Paperwork Reduction Act
Certain provisions of the final 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 final rule under the
authority delegated to the Board by OMB. The Board did not receive any
specific comments on the PRA for the proposal.
[[Page 31951]]
The final rule contains revisions to the compliance date for the
reporting and recordkeeping requirements subject to the PRA. To
implement these requirements, the Board is revising the Single-
Counterparty Credit Limits (FR 2590; OMB No. 7100-NEW).
Adopted Revision, With Extension, of the Following Information
Collection
Report Title: Single-Counterparty Credit Limits.
Agency Form Number: FR 2590.
OMB Control Number: 7100-0377.
Frequency: Quarterly, annual, and event-generated.
Affected Public: Businesses or other for-profit.
Respondents: U.S. global systemically important bank holding
companies (GSIBs) 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
(final SCCL rule),\12\ which has been codified in the Board's
Regulation YY--Enhanced Prudential Standards (12 CFR part 252).\13\
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\12\ 83 FR 38460 (Aug. 6, 2018).
\13\ See 12 CFR part 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
final 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.\14\ 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.\15\ 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 final 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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\14\ 12 CFR 252.70, 252.170; see also 84 FR 59032 (Nov. 1,
2019).
\15\ Id.
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Legal authorization and confidentiality: The FR 2590 is authorized
pursuant to section 5(c) of the Bank Holding Company Act of 1956 (BHC
Act) (12 U.S.C. 1844(c)), section 165(e) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (12 U.S.C. 5365(e)), 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 is modifying 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.\16\ There are no proposed
changes to the reporting or recordkeeping requirements for such
entities, and the burden hours would remain the same.
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\16\ The Board is not providing 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.
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C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.),
generally requires an agency, in connection with a final rulemaking, to
prepare and make available for public comment a final regulatory
flexibility analysis that describes the impact of a proposed rule on
small entities. However, a final regulatory flexibility analysis is not
required if the agency certifies that the final 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.\17\ The Board has considered the potential
impact of the final rule on small entities in accordance with the RFA.
Based on its analysis, and for the reasons stated below, the Board
certifies that the rule will not have a significant economic impact on
a substantial number of small entities.\18\
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\17\ See 13 CFR 121.201; 84 FR 34261 (July 18, 2019).
\18\ 5 U.S.C. 605.
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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
[[Page 31952]]
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 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 final
rule would not impose any new recordkeeping, reporting, or other
compliance requirements. In light of the foregoing, the Board believes
that the final rule would not have a significant economic impact on a
substantial number of small entities.
D. Solicitation of Comments on the Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113
Stat. 1338, 1471, 12 U.S.C. 4809) requires the Federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. The Board sought to present the final rule in a simple
and straightforward manner and did not receive any comments 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 amends 12 CFR part 252 as follows:
PART 252--ENHANCED PRUDENTIAL STANDARDS (REGULATION YY)
0
1. The authority citation for part 252 continues to read as follows:
Authority: 12 U.S.C. 321-338a, 481-486, 1467a, 1818, 1828,
1831n, 1831o, 1831p-1, 1831w, 1835, 1844(b), 1844(c), 3101 et seq.,
3101 note, 3904, 3906-3909, 4808, 5361, 5362, 5365, 5366, 5367,
5368, 5371.
0
2. Section 252.170(c)(1) is revised to read as follows:
Sec. 252.170 Applicability and general provisions.
* * * * *
(c) Applicability of this subpart--(1) Foreign banking
organizations. (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.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, May 1, 2020.
Ann Misback,
Secretary of the Board.
[FR Doc. 2020-09665 Filed 5-27-20; 8:45 am]
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