[Federal Register Volume 85, Number 225 (Friday, November 20, 2020)]
[Rules and Regulations]
[Pages 74257-74259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24900]



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 Rules and Regulations
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
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  Federal Register / Vol. 85, No. 225 / Friday, November 20, 2020 / 
Rules and Regulations  

[[Page 74257]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 324

RIN 3064-AF66


Regulatory Capital Rule: Changes to Applicability Thresholds for 
Regulatory Capital and Liquidity Requirements; Correction

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Correcting amendment.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) published an 
interagency final rule in the Federal Register on November 1, 2019, 
that revises the criteria for determining the applicability of 
regulatory capital and liquidity requirements for large U.S. banking 
organizations and the U.S. intermediate holding companies of certain 
foreign banking organizations. This final rule aligns the applicability 
of the enhanced supplementary leverage ratio for purposes of the prompt 
corrective action provisions in the FDIC's capital rule to its intended 
scope.

DATES:  Effective Date: November 20, 2020.

FOR FURTHER INFORMATION CONTACT: Michael Phillips, Counsel, 
[email protected], (202) 898-3581; Catherine Wood, Counsel, 
[email protected], (202) 898-3788; Francis Kuo, Counsel, [email protected], 
(202) 898-6654; Supervision and Legislation Branch, Legal Division, 
Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, 
DC 20429. For the hearing impaired only, Telecommunication Device for 
the Deaf (TDD), (800) 925-4618.

SUPPLEMENTARY INFORMATION: The Federal Deposit Insurance Corporation, 
along with the Office of the Comptroller of the Currency and the Board 
of Governors of the Federal Reserve System (collectively, the agencies) 
published a final rule in the Federal Register on November 1, 2019, 
that revises the criteria for determining the applicability of 
regulatory capital and liquidity requirements for large U.S. banking 
organizations and the U.S. intermediate holding companies of certain 
foreign banking organizations (tailoring rule).\1\ Under the tailoring 
rule, the supplementary leverage ratio of 3 percent applies to certain 
banking organizations and their subsidiaries, while global systemically 
important banking organizations (GSIBs) and their subsidiaries are 
subject to the enhanced supplementary leverage ratio. Under the 
agencies' prompt corrective action (PCA) provisions of the capital 
rule, depository institution subsidiaries of GSIBs must maintain a 
supplementary leverage ratio of 6 percent or greater for purposes of 
the ``well capitalized'' PCA category.\2\
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    \1\ Regulatory Capital Rule: Changes to Applicability Thresholds 
for Regulatory Capital and Liquidity Requirements, 84 FR 59230 (Nov. 
1, 2020).
    \2\ See 12 CFR part 324, subpart H.
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    In promulgating the tailoring rule, the agencies stated in the 
preamble that the enhanced supplementary leverage ratio is a Category I 
capital standard, which is applicable only to U.S. GSIBs and their 
depository institution subsidiaries. Specifically, the preamble to the 
tailoring final rule provides that the final rule maintains the capital 
requirements applicable to U.S. GSIBs and their depository institution 
subsidiaries. These requirements generally reflect agreements reached 
by the BCBS. U.S. GSIBs and their depository institution subsidiaries 
must calculate risk-based capital ratios using both the advanced 
approaches and the standardized approach and are subject to the U.S. 
leverage ratio. As stated in the preamble, such banking organizations 
are also subject to the requirement to recognize elements of AOCI in 
regulatory capital; the requirement to expand the capital conservation 
buffer by the amount of the countercyclical capital buffer, if 
applicable; and enhanced supplementary leverage ratio standards.\3\ In 
addition, U.S. GSIBs are subject to the GSIB surcharge. Application of 
these Category I capital requirements will continue to strengthen the 
capital positions of U.S. GSIBs and reduce risks to financial 
stability.
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    \3\ 84 FR 59230, 59277.
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    In promulgating the tailoring rule, the agencies, however, 
inadvertently omitted amending the PCA provisions of the capital rule 
to reflect the tailoring rule, including the well capitalized PCA 
category. This PCA provision currently states that beginning on January 
1, 2018 and thereafter, an FDIC-supervised institution that is a 
subsidiary of a covered BHC will be deemed to be well capitalized if 
the FDIC-supervised institution satisfies 12 CFR 324.403(b)(1)(i)(A) 
through (E) and has a supplementary leverage ratio of 6.0 percent or 
greater. For purposes of 12 CFR 324.403(b)(1)(ii), a covered BHC means 
a U.S. top-tier bank holding company with more than $700 billion in 
total assets as reported on the company's most recent Consolidated 
Financial Statement for Bank Holding Companies (Form FR Y-9C) or more 
than $10 trillion in assets under custody as reported on the company's 
most recent Banking Organization Systemic Risk Report (Form FR Y-
15).\4\
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    \4\ 12 CFR 324.403(b)(1)(ii).
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    This final rule aligns the applicability of the enhanced 
supplementary leverage ratio to its intended scope covering only global 
systemically important banking organizations and their subsidiaries as 
described in the preamble to the tailoring rule. Specifically, this 
final rule revises Sec.  324.403(b)(1)(ii) by removing the definition 
of covered BHC and provides that an FDIC-supervised institution that is 
a subsidiary of a global systemically important bank holding company as 
defined in 12 CFR 217.402 will be considered well-capitalized for 
purposes of the PCA provisions of the capital rule if it satisfies 
certain capital requirements and has a supplementary leverage ratio of 
6.0 percent or greater.

A. Administrative Procedure Act

    The FDIC is issuing this final rule without prior notice, the 
opportunity for public comment, and the 30-day delayed effective date 
ordinarily prescribed by the Administrative Procedure Act (APA).\5\ 
Pursuant to section 553(b)(B) of the APA, general notice and the 
opportunity for public comment are not required with respect to a 
rulemaking when an ``agency for good cause finds (and incorporates the

[[Page 74258]]

finding and a brief statement of reasons therefor in the rules issued) 
that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \6\
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    \5\ 5 U.S.C. 553.
    \6\ 5 U.S.C. 553(b)(B).
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    The FDIC finds that the public interest is best served by 
implementing this final rule as of the date of Federal Register 
publication. This final rule's technical correction will correct the 
applicability of the enhanced supplementary leverage ratio to remove 
any potential confusion about the regulatory capital requirements 
applicable to the largest insured depository institutions so that such 
institutions can focus their attention on the continued intermediation 
of credit. For purposes of the well capitalized PCA category, this 
final rule aligns the applicability of the enhanced supplementary 
leverage ratio to its intended scope covering only global systemically 
important banking organizations and their subsidiaries as described in 
the preamble to the tailoring rule. The FDIC finds that there is good 
cause consistent with the public interest to issue this final rule 
without notice and comment.
    Additionally, 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.\7\ 
Because the final rule relieves a restriction, the final rule is also 
exempt from the APA's delayed effective date requirement.\8\ 
Additionally, the FDIC finds good cause to publish the final rule 
correction with an immediate effective date for the same reasons set 
forth above under the discussion of section 553(b)(B) of the APA.
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    \7\ 5 U.S.C. 553(d).
    \8\ 5 U.S.C. 553(d)(1).
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B. Congressional Review Act

    For purposes of Congressional Review Act, the Office of Management 
and Budget (OMB) makes a determination as to whether a final rule 
constitutes a ``major'' rule.\9\ If a rule is deemed a ``major rule'' 
by the OMB, the Congressional Review Act generally provides that the 
rule may not take effect until at least 60 days following its 
publication.\10\
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    \9\ 5 U.S.C. 801 et seq.
    \10\ 5 U.S.C. 801(a)(3).
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    The Congressional Review Act defines a ``major rule'' as any rule 
that the Administrator of the Office of Information and Regulatory 
Affairs of the OMB finds has resulted in or is likely to result in (A) 
an annual effect on the economy of $100,000,000 or more; (B) a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies or geographic regions; or 
(C) significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets.\11\
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    \11\ 5 U.S.C. 804(2).
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    The delayed effective date required by the Congressional Review Act 
does not apply to any rule for which an agency for good cause finds 
(and incorporates the finding and a brief statement of reasons therefor 
in the rule issued) that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.\12\
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    \12\ 5 U.S.C. 808.
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    For the same reasons set forth above, the FDIC adopts this final 
rule without the delayed effective date generally prescribed under the 
Congressional Review Act. Given the importance of aligning the PCA 
provisions of the capital rule to the tailoring rule, the FDIC believes 
that delaying the effective date of this final rule would be contrary 
to the public interest. As required by the Congressional Review Act, 
the FDIC will submit the final rule and other appropriate reports to 
Congress and the Government Accountability Office for review.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA) 
states that no agency may conduct or sponsor, nor is the respondent 
required to respond to, an information collection unless it displays a 
currently valid OMB control number. This final rule correction does not 
contain any information collection requirements therefore the FDIC will 
make no submissions to OMB in connection with this final rule.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \13\ requires an agency to 
consider whether the rules it proposes will have a significant economic 
impact on a substantial number of small entities.\14\ The RFA applies 
only to rules for which an agency publishes a general notice of 
proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed 
previously, consistent with section 553(b)(B) of the APA, the FDIC has 
determined general notice and opportunity for public comment is 
impracticable and contrary to the public's interest, and therefore good 
cause exists to not issue a notice of proposed rulemaking. Accordingly, 
the FDIC has concluded that the RFA's requirements relating to initial 
and final regulatory flexibility analysis do not apply to this final 
rule.
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    \13\ 5 U.S.C. 601 et seq.
    \14\ Under regulations issued by the Small Business 
Administration, a small entity includes a depository institution, 
bank holding company, or savings and loan holding company with total 
assets of $600 million or less and trust companies with total assets 
of $41.5 million or less. See 13 CFR 121.201.
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E. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\15\ in determining the effective 
date and administrative compliance requirements for new regulations 
that impose additional reporting, disclosure, or other requirements on 
insured depository institutions (IDIs), each Federal banking agency 
must consider, consistent with the principle of safety and soundness 
and the public interest, any administrative burdens that such 
regulations would place on depository institutions, including small 
depository institutions, and customers of depository institutions, as 
well as the benefits of such regulations. In addition, section 302(b) 
of RCDRIA requires new regulations and amendments to regulations that 
impose additional reporting, disclosures, or other new requirements on 
IDIs generally to take effect on the first day of a calendar quarter 
that begins on or after the date on which the regulations are published 
in final form, with certain exceptions, including for good cause.\16\
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    \15\ 12 U.S.C. 4802(a).
    \16\ 12 U.S.C. 4802.
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    As stated above, this final rule's technical correction will 
correct the applicability of the enhanced supplementary leverage ratio 
to remove any potential confusion about the regulatory capital 
requirements applicable to the largest insured depository institutions 
so that such institutions can focus their attention on the continued 
intermediation of credit. In addition, for purposes of the well 
capitalized PCA category, this final rule aligns the applicability of 
the enhanced supplementary leverage ratio to its intended scope 
covering only global systemically important banking organizations and 
their subsidiaries as described in the preamble to the tailoring rule. 
As such, this final rule does not impose any additional reporting, 
disclosures, or other new requirements on IDIs. Therefore, the FDIC 
finds that the requirements of

[[Page 74259]]

RCDRIA do not apply and this final rule will be published with an 
immediate effective date.

F. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \17\ requires the Federal 
banking agencies to use ``plain language'' in all proposed and final 
rules published after January 1, 2000. In light of this requirement, 
the FDIC has sought to present the final rule in a simple and 
straightforward manner.
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    \17\ Pub. L. 106-102, sec. 722, 113 Stat. 1338, 1471 (1999), 12 
U.S.C. 4809.
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List of Subjects in 12 CFR Part 324

    Administrative practice and procedure, Banks, Banking, Capital, 
Capital adequacy, Reporting and recordkeeping requirements, Risk, 
Savings associations.

12 CFR Chapter III

Authority and Issuance

    For the reasons set forth in the preamble, the FDIC corrects 
chapter III of title 12 of the Code of Federal Regulations by making 
the following correcting amendment:

PART 324--CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS

0
1. The authority citation for part 324 continues to read as follows:

    Authority:  12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233, 
105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 
105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 
2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, 
as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 
note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note), 
Pub. L. 115-174; section 4014, Pub. L. 116-136, 134 Stat. 281 (15 
U.S.C. 9052).


0
2. Section 324.403 is amended by revising paragraph (b)(1)(ii) to read 
as follows:


Sec.  324.403  Capital measures and capital category definitions.

* * * * *
    (b) * * *
    (1) * * *
    (ii) An FDIC-supervised institution that is a subsidiary of a 
global systemically important bank holding company will be deemed to be 
well capitalized if the FDIC-supervised institution satisfies 
paragraphs (b)(1)(i)(A) through (E) of this section and has a 
supplementary leverage ratio of 6.0 percent or greater. For purposes of 
this paragraph (b)(1)(ii), global systemically important bank holding 
company has the same meaning as in 12 CFR 217.402.
* * * * *

Federal Deposit Insurance Corporation.

    Dated at Washington, DC, on November 4, 2020.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2020-24900 Filed 11-19-20; 8:45 am]
BILLING CODE 6714-01-P