[Federal Register Volume 87, Number 106 (Thursday, June 2, 2022)]
[Rules and Regulations]
[Pages 33423-33435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-11582]


-----------------------------------------------------------------------

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1240

RIN 2590-AB18


Enterprise Regulatory Capital Framework--Public Disclosures for 
the Standardized Approach

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Agency (FHFA or the Agency) is 
adopting a final rule (final rule) that amends the Enterprise 
Regulatory Capital Framework (ERCF) by introducing new public 
disclosure requirements for the Federal National Mortgage Association 
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie 
Mac, and with Fannie Mae, each an Enterprise). The requirements include 
quantitative and qualitative disclosures related to risk management, 
corporate governance, capital structure, and capital requirements and 
buffers under the standardized approach.

DATES: This rule is effective August 1, 2022.

FOR FURTHER INFORMATION CONTACT: Andrew Varrieur, Senior Associate 
Director, Office of Capital Policy, (202) 649-3141, 
[email protected]; Christopher Vincent, Senior Financial 
Analyst, Office of Capital Policy, (202) 649-3685, 
[email protected]; or James Jordan, Associate General 
Counsel, Office of General Counsel, (202) 649-3075, 
[email protected] (these are not toll-free numbers); Federal 
Housing Finance Agency, 400 7th Street SW, Washington, DC 20219. For 
TTY/TRS users with hearing and speech disabilities, dial 711 and ask to 
be connected to any of the contact numbers above.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Overview of the Final Rule
III. General Overview of Comments on the Proposed Rule
IV. Public Disclosure Requirements
    A. General Requirements
    B. Standardized Approach
    C. Market Risk
V. Frequency of Disclosures
VI. Compliance Dates
VII. Location of Disclosures and Audit Requirements
VIII. Proprietary and Confidential Information
IX. Paperwork Reduction Act
X. Regulatory Flexibility Act

[[Page 33424]]

XI. Congressional Review Act

I. Introduction

    On November 3, 2021, FHFA published in the Federal Register a 
notice of proposed rulemaking (proposed rule) seeking comments on 
amendments to the ERCF that would implement new public disclosure 
requirements for the Enterprises.\1\ FHFA proposed these amendments to 
improve market discipline and encourage sound risk-management practices 
at the Enterprises by ensuring that market participants have access to 
sufficient information with which they can assess an Enterprise's 
material risks and capital adequacy and make informed investment 
decisions. Public disclosures that are clear, comprehensive, useful, 
consistent over time, and comparable across Enterprises will facilitate 
such analyses and will therefore contribute to the safety and soundness 
of the Enterprises, decreasing risk to U.S. taxpayers. FHFA is now 
adopting in this final rule the proposed amendments, substantially as 
proposed, with minor modifications as discussed in the relevant 
sections of this preamble.
---------------------------------------------------------------------------

    \1\ 86 FR 60589.
---------------------------------------------------------------------------

    The public disclosure requirements in the final rule align with 
many of the public disclosure requirements for large banking 
organizations under the regulatory capital framework adopted by United 
States banking regulators (U.S. banking framework). Modern bank 
disclosure requirements were initially contemplated by the Basel 
Committee on Banking Supervision (BCBS) under Pillar 3 of Basel II in 
order to complement the minimum capital requirements and the 
supervisory review process and were later expanded with additional 
requirements in Basel III. In much the same way, the public disclosure 
requirements in the final rule will bolster the ERCF as it aims to 
ensure that each Enterprise operates in a safe and sound manner and is 
positioned to fulfill its statutory mission to provide stability and 
ongoing assistance to the secondary mortgage market across the economic 
cycle, in particular during periods of financial stress.\2\
---------------------------------------------------------------------------

    \2\ 85 FR 82150.
---------------------------------------------------------------------------

II. Overview of the Final Rule

    The final rule implements quantitative and qualitative disclosure 
requirements related to risk management, corporate governance, capital 
structure, statutory capital requirements, supplemental capital 
requirements, including risk-weighted assets calculated under the 
standardized approach, and capital buffers. In contrast to the U.S. 
banking framework, which has fewer requirements and buffers under the 
standard approach than under the advanced approaches, the ERCF requires 
the Enterprises to satisfy the same capital buffers and leverage 
requirements under the standard approach and under the advanced 
approaches. Therefore, the final rule adapts the public disclosure 
requirements in the U.S. banking framework to reflect the ERCF's 
standardized approach, blending elements from the U.S. banking 
framework's standardized and advanced approaches. While the final rule 
implements disclosure requirements for the ERCF's standardized approach 
only, FHFA may in the future consider additional disclosure 
requirements related to the advanced approaches.
    In general, the final rule requires quarterly quantitative 
disclosures and annual qualitative disclosures, provided the 
Enterprises disclose any material changes to disclosure items as soon 
as practicable, and no later than the end of the next calendar quarter. 
As discussed below, Enterprises will publish on their websites their 
first public disclosure reports under the final rule in the first 
quarter of 2023. This timeframe will allow the Enterprises to establish 
the internal reporting and governance functions necessary to fulfill 
the disclosure requirements and will minimize duplicative reporting by 
aligning the schedule of annual qualitative disclosures with the 
Securities and Exchange Commission's (SEC) reporting schedule for Form 
10-K.
    The final rule balances the potential costs of disclosures with the 
many benefits, including the benefits of increased market discipline of 
the Enterprises. By allowing market participants to assess key 
information about the Enterprises' risk profiles and associated levels 
of capital, the final rule will promote transparency, increase the 
amount of information available to the public, and encourage sound risk 
management practices at the Enterprises. In doing so, the final rule 
will foster financial stability at the Enterprises and in the broader 
housing finance market both during and after the Enterprisers' 
conservatorships. However, enhanced public disclosures could be costly 
for the Enterprises. The final rule strikes an appropriate balance 
between the market benefits of disclosure and the additional financial 
burden to the Enterprises by permitting the Enterprises to fulfill many 
of the disclosure requirements by relying on similar disclosures made 
in accordance with accounting standards or SEC mandates. When an 
Enterprise fulfills a disclosure requirement using information provided 
in a different regulatory report, the Enterprise must provide a summary 
table that specifically indicates where the cross-referenced 
disclosures may be found and provide a reconciliation of regulatory 
capital elements as they relate to its balance sheet in any audited 
consolidated financial statements should there be differences between 
the accounting or other disclosures and the disclosures required under 
the final rule.
    As proposed, the final rule also introduces a materiality concept 
for items not explicitly identified as required disclosures. The 
materiality concept is designed to ensure that improvements in public 
disclosures come not only from regulatory standards, but also as a 
result of efforts made by management at the Enterprises to communicate 
advances in risk management processes and internal reporting systems to 
public shareholders and other market participants. In a manner similar 
to the requirements for U.S. banking organizations, the final rule 
requires an Enterprise to decide which additional disclosures are 
relevant based on this materiality concept. Information is material if 
its omission or misstatement could change or influence the assessment 
or decision of a user relying on that information for the purpose of 
making investment decisions. Similarly, the final rule requires an 
Enterprise to have a formal disclosure policy approved by its board of 
directors that addresses the Enterprise's approach for determining 
which disclosures are necessary and appropriate. The policy must 
address internal controls, disclosure controls, and procedures.

III. General Overview of Comments on the Proposed Rule

    FHFA received six public comment letters on the proposed rule.\3\ 
In general, commenters were very supportive of the proposed disclosure 
requirements. Most commenters recommended FHFA adopt the amendments to 
the ERCF as proposed, with a few specific recommendations which are 
discussed in the relevant sections below.
---------------------------------------------------------------------------

    \3\ See comments on Amendments to the Enterprise Regulatory 
Capital Framework Rule--Public Disclosures for the Standardized 
Approach, available at https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Comment-List.aspx?RuleID=710. The comment period for the 
proposed rule closed on January 3, 2022.
---------------------------------------------------------------------------

    However, one commenter expressed only measured support for the

[[Page 33425]]

disclosure requirements due to the Enterprises being in 
conservatorships. The commenter stated that without more certainty 
regarding the future of the Enterprises, a rule requiring the 
Enterprises to devote substantial time and resources to developing and 
producing these disclosures seems to be premature. FHFA maintains that 
requirements that encourage sound risk-management practices, such as 
comprehensive, consistent, and comparable public disclosures, serve an 
important function at the Enterprises regardless of an Enterprise's 
conservatorship status.
    In addition to comments directly related to the proposed 
amendments, FHFA also received several comments on other matters, such 
as the magnitude of funds remitted to the U.S. Department of the 
Treasury by the Enterprises relative to cumulative draws, the costs of 
owning or renting a home in the U.S., and the implications of mortgage 
originators selling their debt to other financial institutions. FHFA 
acknowledges the importance of these topics and will thoroughly 
consider the public's feedback on these issues when relevant 
rulemakings and policy decisions are under consideration.

IV. Public Disclosure Requirements

A. General Requirements

    The proposed rule would implement general requirements related to a 
formal disclosure policy, the concept of materiality, and fulfilling 
disclosure requirements by relying on other required public reports.
    Market participants consider many factors when making their 
assessment of an Enterprise, including the Enterprise's risk profile 
and the techniques it uses to identify, measure, monitor, and control 
the risks to which the Enterprise is exposed. Accordingly, the proposed 
rule would require an Enterprise to have a formal disclosure policy 
approved by its board of directors that addresses the Enterprise's 
approach for determining which disclosures are necessary and 
appropriate. The policy would be required to address internal controls, 
disclosure controls, and procedures. The board of directors and senior 
management would ensure the appropriate review of the disclosures and 
that effective internal controls, disclosure controls, and procedures 
are maintained. One or more senior officers of the Enterprise would be 
required to attest that the disclosures meet the requirements of the 
proposed rule. The final rule adopts the requirements related to a 
formal disclosure policy as proposed.
    For items not explicitly identified as required disclosures, the 
proposed rule would require an Enterprise to decide which additional 
disclosures are relevant based on a materiality concept. Information is 
material if its omission or misstatement could change or influence the 
assessment or decision of a user relying on that information for the 
purpose of making investment decisions. Through the implementation of a 
materiality concept, FHFA would encourage the management of each 
Enterprise to regularly review its public disclosures and enhance these 
disclosures, where appropriate, to clearly identify all significant 
risk exposures and their effects on the Enterprise's financial 
condition and performance, cash flow, and earnings potential. The final 
rule adopts the requirements related to the materiality concept as 
proposed.
    To help mitigate the financial burden of public disclosures, the 
proposed rule would allow an Enterprise to fulfill some of the 
disclosure requirements by relying on similar disclosures made in 
accordance with accounting standards or SEC mandates. In addition, an 
Enterprise could use information provided in regulatory reports to 
fulfill the disclosure requirements. In these situations, an Enterprise 
would be required to provide a reconciliation of regulatory capital 
elements as they relate to its balance sheet in any audited 
consolidated financial statements should there be differences between 
the accounting or other disclosures and the disclosures required under 
the proposed rule. In addition, an Enterprise would be required to 
provide a summary table that specifically indicates where all the 
cross-referenced disclosures may be found. The final rule adopts, 
without change, the proposed requirements related to fulfilling 
disclosure requirements by relying on other required reports.

B. Standardized Approach

    The proposed rule would require public disclosures related to the 
ERCF standardized approach across eleven categories, with each category 
containing qualitative disclosures and quantitative disclosures, with 
one exception. The categories are: (1) Capital structure; (2) capital 
adequacy; (3) capital buffers; (4) credit risk: general disclosures; 
(5) general disclosure for counterparty credit risk-related exposures; 
(6) credit risk mitigation; (7) credit risk transfers (CRT) and 
securitization; (8) equities; (9) interest rate risk for non-trading 
activities; (10) operational risk; and (11) tier 1 leverage ratio. The 
first 10 categories would require both quantitative and qualitative 
disclosures, while the required disclosures related to the tier 1 
leverage ratio would be quantitative only. Many of the disclosures 
described within the categories are identical to the disclosures 
applicable to U.S. banking organizations subject to the standardized 
approach. Others have been modified to reflect the ERCF, such as those 
referring to statutory core capital and statutory total capital, 
adjusted total capital, the prescribed capital conservation buffer 
amount (PCCBA), and CRT. In addition, FHFA has excluded several 
disclosure items that are included in the U.S. banking framework for 
activities or categorizations not relevant in the ERCF, such as 
exposures to foreign banks, statutory multifamily mortgages, and high 
volatility commercial real estate (HVCRE).
    The standardized approach in the ERCF differs broadly from the U.S. 
banking standardized approach in its inclusion of risk-weighted assets 
for operational risk and market risk, in its application of capital 
buffers, and in its application of leverage ratio requirements. In 
contrast to capital requirements for banking organizations subject to 
the standardized approach in the U.S. banking framework, the 
standardized approach in the ERCF requires an Enterprise to capitalize 
operational and market risks, to apply every component of the PCCBA 
including the countercyclical capital buffer, and to apply the same 
leverage ratio requirements and prescribed leverage buffer amount 
(PLBA) regardless of approach. Accordingly, the proposed rule would 
require an Enterprise to publicly disclose qualitative and quantitative 
information related to these items in the standardized approach.
    Several of the proposed rule's qualitative disclosure requirements 
for operational risk pertain to the advanced measurement approach 
(AMA). These disclosures would include a description of the AMA, as 
well as a discussion of relevant internal and external factors 
considered in the Enterprise's measurement approach. Because the 
Enterprises are not required to implement the AMA approach until at 
least January 1, 2025, FHFA would expect the AMA-related disclosures to 
begin at the same time. Until then, the Enterprises are required to 
adhere to an operational risk capital requirement of 15 basis points of 
adjusted total assets.
    Advanced approaches banking organizations must disclose information 
related to total leverage exposure (TLE) and the supplementary leverage 
ratio,

[[Page 33426]]

while standardized approach banking institutions are not required to do 
so. The ERCF analog to the concept of TLE is adjusted total assets, and 
the analog to the concept of the supplementary leverage ratio is the 
tier 1 leverage ratio. In contrast to the U.S. banking framework, the 
ERCF tier 1 leverage ratio requirement is the same for an Enterprise 
operating under the standardized or advanced approaches. In addition, 
under the ERCF the PCCBA is based on adjusted total assets, while the 
capital conservation buffer in the U.S. banking framework is based on 
risk-weighted assets. For these reasons, FHFA included disclosures 
related to the leverage ratio and adjusted total assets within the 
disclosure requirements for the standardized approach.
    Many of the disclosure requirements for the standardized approach 
are also applicable to the advanced approach. For example, the 
disclosure items described within the categories for capital structure, 
PCCBA, PLBA, operational risk, and leverage would not differ 
conditional on whether an Enterprise's total risk-weighted assets are 
higher under the standardized approach or the advanced approach. 
Because these items are applicable to the standardized approach, the 
proposed rule would include disclosures related to these items within 
the disclosure requirements for the standardized approach.
    The proposed rule would require an Enterprise to make the required 
disclosures publicly available for each of the last three years or such 
shorter time period beginning when the disclosure requirements come 
into effect. The public disclosure requirements are designed to provide 
important information to market participants on capital, risk 
exposures, risk assessment processes, and, thus, the capital adequacy 
of an Enterprise. Although the disclosure requirements are categorized 
into tables, the substantive content is the focus of the disclosure 
requirements, not the tables themselves. The proposed rule would 
require an Enterprise to make the disclosures described in tables 1 
through 11 to Sec.  1240.63.
    Table 1 disclosures, ``Capital Structure,'' would provide summary 
information on the terms and conditions of the main features of 
regulatory capital instruments, which would allow for an evaluation of 
the quality of the capital available to absorb losses within an 
Enterprise. An Enterprise also would disclose the total amount of 
common equity tier 1, core, tier 1, total, and adjusted total capital, 
with separate disclosures for deductions and adjustments to capital.
    Table 2 disclosures, ``Capital Adequacy,'' would provide 
information on an Enterprise's approach for categorizing and risk-
weighting its exposures, as well as the amount of total risk-weighted 
assets. The table would also include common equity tier 1, tier 1, and 
adjusted total risk-based capital ratios.
    Table 3 disclosures, ``Capital Buffers,'' would require an 
Enterprise to disclose the PCCBA, the PLBA, eligible retained income, 
and any limitations on capital distributions and certain discretionary 
bonus payments, as applicable.
    One commenter recommended FHFA either clarify or remove the 
proposed requirement that an Enterprise discuss the differential 
effects, if any, the buffers have on an Enterprise's business by 
geographic breakdown. The commenter noted that the ERCF buffers are 
applied at the Enterprise-level, not by business line, and are based on 
adjusted total assets rather than risk-weighted assets. For these 
reasons, items that do vary by geographic region, such as house price 
appreciation, should have no differential impact on the capital 
buffers. In light of the commenter's recommendation and rationale, FHFA 
removed from the final rule the Table 3 line (a) requirement to discuss 
the differential effects, if any, the buffers have on an Enterprise's 
business by geographic breakdown.
    Tables 4, 5, and 6 disclosures, related to credit risk, 
counterparty credit risk, and credit risk mitigation, respectively, 
would provide market participants with insight into different types and 
concentrations of credit risk to which an Enterprise is exposed and the 
techniques it uses to measure, monitor, and mitigate those risks. These 
disclosures are intended to enable market participants to assess the 
credit risk exposures of the Enterprise without revealing proprietary 
information.
    Table 7 disclosures, ``CRT and Securitization,'' would provide 
information to market participants on the amount of credit risk 
transferred and retained by an Enterprise through CRT and 
securitization transactions, the types of products securitized by the 
Enterprise, the risks inherent in the Enterprise's securitized assets, 
the Enterprise's policies regarding credit risk mitigation, and the 
names of any entities that provide external credit assessments of a 
securitization. These disclosures would provide for a better 
understanding of how securitization transactions impact the credit risk 
of an Enterprise. To further facilitate that understanding, 
securitization transactions in which the originating Enterprise does 
not retain any securitization exposure would be shown separately and 
would only be reported for the year of inception.
    One commenter recommended that certain required market risk 
disclosures from proposed Sec. Sec.  1240.205(d)(7) and (d)(8) be 
relocated to this Table 7. These disclosures relate to the monitoring 
of changes in the credit risk of securitization positions and to the 
policy governing the use of credit risk mitigation to mitigate the 
risks of securitization and resecuritization positions. While FHFA 
agrees that these required disclosures are more appropriate to Table 7, 
FHFA determined that no additions to the table in the final rule were 
necessary given disclosure items (a)(4) and (a)(5) of Table 7, which 
adequately cover these topics.
    Table 8 disclosures, ``Equities,'' would provide market 
participants with an understanding of the types of equity securities 
held by the Enterprise and how they are valued. The table would also 
provide information on the capital allocated to different equity 
products and the amount of unrealized gains and losses. (In comparison 
with bank holding companies subject to the Federal Reserve Board's 
Regulation Q, on which the proposed regulation was based, the types of 
equity securities that may be held by the Enterprises are limited. 
Their capital treatment is governed by 12 CFR 1240.51 and 1240.52.)
    Table 9 disclosures, ``Interest Rate Risk for Non-trading 
Activities,'' would require an Enterprise to provide certain 
quantitative and qualitative disclosures regarding the Enterprise's 
management of interest rate risks.
    Table 10 disclosures, ``Operational Risk,'' would require an 
Enterprise to provide certain qualitative disclosures regarding the 
advanced measurement approach, when applicable, and a description of 
the use of insurance for the purpose of mitigating operational risk. 
These disclosures would include a description of the AMA, as well as a 
discussion of relevant internal and external factors considered in the 
Enterprise's measurement approach.
    Table 11 disclosures, ``Tier 1 Leverage Ratio,'' would provide 
information related to an Enterprise's adjusted total assets, including 
adjustments for fiduciary assets, derivative exposures, repo-style 
transactions, and off-balance sheet exposures. The table would also 
include an Enterprise's tier 1 leverage ratio. These disclosures are 
intended to enable market participants to assess the aggregate exposure 
to risk at an

[[Page 33427]]

Enterprise and to consider that risk against the Enterprise's capital 
backstop.
    The final rule adopts the disclosure requirements for the 
standardized approach substantially as proposed, with one adjustment to 
Table 3, as discussed above.

C. Market Risk

    In Sec.  1240.205, the proposed rule would require an Enterprise to 
make public disclosures related to market risk for covered positions 
under the standardized approach. These disclosures would provide 
quantitative and qualitative information related to an Enterprise's 
market risk profile, market risk valuation strategies, internal 
controls, and disclosure controls and procedures. The quantitative 
disclosures would detail exposure amounts and risk-weighted assets for 
material portfolios of covered positions, as well as on-balance sheet 
and off-balance sheet securitization positions by exposure type.
    The proposed rule's market risk disclosure requirements would 
include a formal disclosure policy approved by an Enterprise's board of 
directors that addresses the Enterprise's approach for determining its 
market risk disclosures. The policy would address the associated 
internal controls and disclosure controls and procedures and would 
contain requirements related to the verification and attestation of 
disclosures and the maintaining of effective controls and procedures. 
The requirements would also include quarterly quantitative disclosures 
for each material portfolio of covered positions related to exposure 
and risk-weighted asset amounts as well as the aggregate amount of on-
balance sheet and off-balance sheet securitization positions by 
exposure type.
    In addition, an Enterprise would be required to make annual public 
disclosures for each material portfolio of covered positions related 
generally to portfolio composition and valuation policies, procedures, 
and methodologies. These disclosures would include, among other things, 
key valuation assumptions and information on significant changes, model 
characteristics used to calculate risk-weighted assets for market risk, 
and a description of the approaches used for validating and evaluating 
the accuracy of internal models and modeling processes. In addition, 
the annual disclosures would include a description of the Enterprise's 
processes for monitoring changes in the market risk of securitization 
positions.
    As discussed above, one commenter recommended that certain credit 
risk disclosures in proposed Sec. Sec.  1240.205(d)(7) and (d)(8) be 
relocated to a more appropriate section. FHFA determined that these 
disclosures, related to the monitoring of changes in the credit risk of 
securitization positions and to the policy governing the use of credit 
risk mitigation to mitigate the risks of securitization and 
resecuritization positions, were already present in Table 7 of Sec.  
1240.63. As a result, FHFA has removed reference to credit risk from 
proposed Sec.  1240.205(d)(7) and deleted proposed Sec.  
1240.205(d)(8).
    The final rule adopts the disclosure requirements for market risk 
under the standardized approach substantially as proposed, with 
adjustments to proposed Sec. Sec.  1240.205(d)(7) and (d)(8), as 
discussed above.

V. Frequency of Disclosures

    The proposed rule would require the Enterprises to make 
quantitative disclosures on a quarterly basis, consistent with the 
disclosure requirements for most regulated financial institutions and 
frequently enough to capture most changes in risk profiles. The 
proposed rule would also require the Enterprises to make qualitative 
disclosures that provide a general summary of an Enterprise's risk-
management objectives and policies, reporting system, and definitions 
may be disclosed annually. However, if a material change occurs, where 
for the purpose of these disclosure requirements a material change 
means a change such that the omission or misstatement of which could 
change or influence the assessment or decision of a user relying on 
that information for the purpose of making investment decisions, the 
proposed rule would require the Enterprises to disclose a brief 
discussion of this change and its likely impact as soon as practicable, 
and no later than the end of the next calendar quarter.
    The proposed rule would also require that the disclosures be 
timely. As described above, an Enterprise may be able to fulfill some 
of the proposed disclosure requirements by relying on similar 
disclosures made in accordance with accounting standards or SEC 
mandates. FHFA acknowledges that timing of disclosures required under 
other federal laws, including disclosures required under the federal 
securities laws and their implementing regulations by the SEC, may not 
always align with the timing of required Enterprise disclosures. For 
this reason, the proposed rule described timely disclosures as being no 
later than the applicable SEC disclosure deadlines for the 
corresponding Form 10-K annual report at the end of a fiscal year and 
the corresponding Form 10-Q at the end of other calendar quarters. In 
cases where an Enterprise's fiscal year-end does not coincide with the 
end of a calendar quarter, FHFA would consider the timeliness of 
disclosures on a case-by-case basis. In some cases, management may 
determine that a material change has occurred, such that the most 
recent reported amounts do not reflect the Enterprise's capital 
adequacy and risk profile. In those cases, an Enterprise would need to 
disclose the general nature of these changes and briefly describe how 
they are likely to affect public disclosures going forward. An 
Enterprise would make these interim disclosures as soon as practicable 
after the determination that a material change has occurred.
    The concept of timely disclosures was described in the preamble to 
the proposed rule, but not explicitly in the proposed rule itself. FHFA 
has determined to formalize the concept of timely disclosures in the 
final rule by adopting similar disclosure deadlines as those discussed 
above, while adding a short buffer of 10 business days. Therefore, the 
final rule adopts, without change, the proposed requirements related to 
the frequency of public disclosures and requires the proposed 
disclosure requirements to be made in a timely manner no later than 10 
business days after an Enterprise files its corresponding Annual Report 
or Quarterly report on SEC Form 10-K or Form 10-Q, respectively.

VI. Compliance Dates

    The compliance date for the disclosure requirements under the 
proposed rule would be six months from the date of publication of the 
final rule in the Federal Register. In addition, the proposed rule 
would generally require qualitative disclosures to be made annually 
``after the end of the fourth calendar quarter.'' One commenter 
recommended that FHFA reconsider this compliance date to align the 
required annual qualitative public disclosures, and in particular an 
Enterprise's first public disclosures under the final rule which must 
be made after the end of the fourth calendar quarter, with the more 
comprehensive annual qualitative disclosures included in an 
Enterprise's Annual Report on the SEC's Form 10-K. The commenter 
recommended this alignment because the required public disclosures 
under the final rule would likely reference disclosures made on Form 
10-K.

[[Page 33428]]

    Upon consideration of the commenter's recommendation, the final 
rule adopts a compliance date for the new standardized approach 
disclosure requirements in Sec. Sec.  1240.61 to 1240.63 and Sec.  
1240.205 of no later than 10 business days after an Enterprise files 
its Annual Report on SEC Form 10-K for the fiscal year ending December 
31, 2022. This compliance date will align the new public disclosures 
with the reporting cycle for the Enterprises' Annual Reports, while 
providing a short buffer for the publication of an Enterprise's first 
disclosure report. Further, FHFA has determined that the costs to an 
Enterprise of producing a public disclosure report containing extensive 
qualitative disclosures one quarter before the Enterprise produces a 
public disclosure report where many of the same qualitative disclosures 
will likely be included by reference outweigh the benefits to investors 
and market participants of having the report one quarter earlier, in 
particular given the Enterprises' current significant capital deficits 
relative to capital requirements and buffers under the ERCF.
    The proposed rule would also amend the reporting requirement 
compliance dates in Sec.  1240.4(b) to remove references to parts of 
the ERCF that do not contain reporting requirements. Specifically, the 
proposed rule would remove references to compliance dates for reporting 
requirements in subparts C and G of 12 CFR 1240, Sec. Sec.  1240.162(d) 
and 1240.204, as these parts do not contain reporting requirements. The 
proposed rule would retain without modification the January 1, 2022 
compliance dates for reporting requirements outlined in Sec. Sec.  
1240.1(f) and 1240.41.
    The final rule adopts, without change, the proposed amendments to 
other reporting requirement compliance dates in the ERCF.

VII. Location of Disclosures and Audit Requirements

    The proposed rule would require an Enterprise to ensure that 
required disclosures are publicly available (for example, included on a 
public website) for each of the last three years or such shorter time 
period beginning when the proposed rule, if adopted as a final rule, 
comes into effect. In general, management of an Enterprise would have 
some discretion to determine the appropriate medium and location of the 
disclosures, provided the Enterprise meets the requirements related to 
cross-referencing described below. Furthermore, an Enterprise would 
have flexibility in formatting its public disclosures unless otherwise 
ordered by FHFA under its general authority to follow specific 
reporting guidelines or procedures, including potentially utilizing 
specified templates for certain quantitative disclosure elements. For 
example, FHFA may determine that standardizing the way the Enterprises 
present a subset of the required quantitative disclosures would 
facilitate the ability of market participants to compare attributes or 
results across Enterprises and better assess the risk profile and 
capital adequacy of each Enterprise. Conversely, there may be aspects 
of the required disclosures that cannot easily be standardized or where 
comparison across Enterprises may be less meaningful to market 
participants, such as descriptions of an Enterprise's risk management 
practices or certain analyses that contain bespoke risk metrics.
    FHFA encourages each Enterprise to make all required disclosures 
available in one place on the Enterprise's public website, the address 
of which should be communicated in the Enterprise's regulatory report. 
However, the proposed rule would permit an Enterprise to provide the 
disclosures in more than one place, such as in its public financial 
reports (for example, in Management's Discussion and Analysis included 
in SEC filings) or other regulatory reports, as long as the Enterprise 
also provides a summary table on its public website that specifically 
indicates where all the disclosures may be found (for example, 
regulatory report schedules, page numbers in annual reports).
    The proposed rule would require an Enterprise to reconcile 
disclosures of regulatory capital elements as the elements relate to an 
Enterprise's balance sheet in any audited consolidated financial 
statements. However, disclosures under the proposed rule which are not 
included in the footnotes to the audited financial statements would not 
be subject to external audit reports for financial statements or 
internal control reports from management and the external auditor. 
Therefore, the proposed rule would not introduce any new audit 
requirements, and under the proposed rule, the audit requirements for 
an Enterprise's required public disclosures would be identical to the 
audit requirements for a banking organization's required public 
disclosures in the U.S. banking framework.
    The final rule adopts, without change, the proposed requirements 
related to the location of disclosures and audit requirements.

VIII. Proprietary and Confidential Information

    FHFA believes that the proposed disclosure requirements strike an 
appropriate balance between the need for meaningful disclosure and the 
protection of proprietary and confidential information. Accordingly, 
FHFA believes that an Enterprise would be able to provide all these 
disclosures without revealing proprietary and confidential information. 
Only in rare circumstances might the required disclosure of certain 
items of information compel an Enterprise to reveal confidential and 
proprietary information. In these unusual situations, FHFA proposed 
that if an Enterprise believes that disclosure of specific commercial 
or financial information would compromise its position by making public 
information that is either proprietary or confidential in nature, the 
Enterprise need not disclose those specific items. Instead, the 
Enterprise must disclose more general information about the subject 
matter of the requirement, together with the fact that, and the reason 
why, the specific items of information have not been disclosed. This 
provision would apply only to those disclosures included in the 
proposed rule and would not apply to disclosure requirements imposed by 
accounting standards or other regulatory agencies.
    The final rule adopts the requirements related to proprietary and 
confidential information as proposed.

IX. Paperwork Reduction Act

    The Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.) requires 
that regulations involving the collection of information receive 
clearance from the Office of Management and Budget (OMB). The final 
rule contains no such collection of information requiring OMB approval 
under the PRA. Therefore, no information has been submitted to OMB for 
review.

X. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. FHFA need not undertake such an 
analysis if the agency has certified that the regulation will not have 
a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the final 
rule under the

[[Page 33429]]

Regulatory Flexibility Act. FHFA certifies that the final rule will not 
have a significant economic impact on a substantial number of small 
entities because the final rule is applicable only to the Enterprises, 
which are not small entities for purposes of the Regulatory Flexibility 
Act.

XI. Congressional Review Act

    In accordance with the Congressional Review Act (5 U.S.C. 801 et 
seq.), FHFA has determined that this final rule is a major rule and has 
verified this determination with the Office of Information and 
Regulatory Affairs of OMB.

List of Subjects for 12 CFR Part 1240

    Capital, Credit, Enterprise, Investments, Reporting and 
recordkeeping requirements.

Authority and Issuance

    For the reasons stated in the Preamble, under the authority of 12 
U.S.C. 4511, 4513, 4513b, 4514, 4515-17, 4526, 4611-4612, 4631-36, FHFA 
amends part 1240 of title 12 of the Code of Federal Regulation as 
follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER C--ENTERPRISES

PART 1240--CAPITAL ADEQUACY OF ENTERPRISES

0
1. The authority citation for part 1240 is revised to read as follows:

    Authority: 12 U.S.C. 4511, 4513, 4513b, 4514, 4515, 4517, 4526, 
4611-4612, 4631-36.


0
2. Amend Sec.  1240.4 by revising paragraph (b) to read as follows:


Sec.  1240.4  Transition.

* * * * *
    (b) Reporting requirements. (1) For any reporting requirement under 
Sec.  1240.1(f) or Sec.  1240.41, the compliance date will be January 
1, 2022.
    (2) For any reporting requirement under Sec. Sec.  1240.61 through 
1240.63, the compliance date will be no later than 10 business days 
after an Enterprise files its Annual Report on SEC Form 10-K for the 
fiscal year ending December 31, 2022.
    (3) For any reporting requirement under Sec.  1240.205, the 
compliance date will be no later than 10 business days after an 
Enterprise files its Annual Report on SEC Form 10-K for the fiscal year 
ending December 31, 2022.
* * * * *

0
3. Add Sec. Sec.  1240.61 through 1240.63 to Subpart D to read as 
follows:

Subpart D--Risk-Weighted Assets--Standardized Approach

* * * * *
Sec.
1240.61 Purpose and scope.
1240.62 Disclosure requirements.
1240.63 Disclosures.
* * * * *


Sec.  1240.61   Purpose and scope.

    Sections 1240.61 through 1240.63 of this subpart establish public 
disclosure requirements related to the capital requirements and buffers 
described in subpart B and subpart G.


Sec.  1240.62   Disclosure requirements.

    (a) An Enterprise must provide timely public disclosures each 
calendar quarter of the information in the applicable tables in Sec.  
1240.63, where for the purpose of these disclosure requirements timely 
means no later than 10 business days after an Enterprise files its 
corresponding Annual Report on SEC Form 10-K at the end of a fiscal 
year or its corresponding Quarterly Report on SEC Form 10-Q at the end 
of other calendar quarters. If a material change occurs, where for the 
purpose of these disclosure requirements a material change means a 
change such that the omission or misstatement of which could change or 
influence the assessment or decision of a user relying on that 
information for the purpose of making investment decisions, then an 
Enterprise must disclose a brief discussion of this change and its 
likely impact as soon as practicable thereafter, and no later than the 
end of the next calendar quarter. Qualitative disclosures that have not 
changed from the prior quarter may be omitted from the next quarterly 
disclosure but must be disclosed at least annually after the end of the 
fourth calendar quarter.
    (b) Unless otherwise directed by FHFA, the Enterprise's management 
may provide all of the disclosures required by Sec. Sec.  1240.61 
through 1240.63 in one place on the Enterprise's public website or may 
provide the disclosures in more than one public financial report or 
other regulatory reports, provided that the Enterprise publicly 
provides a summary table specifically indicating the location(s) of all 
such disclosures.
    (c) An Enterprise must have a formal disclosure policy approved by 
the board of directors that addresses its approach for determining the 
disclosures it makes. The policy must address the associated internal 
controls and disclosure controls and procedures.
    (d) The Enterprise's board of directors and senior management are 
responsible for establishing and maintaining an effective internal 
control structure over the disclosures required by this subpart, and 
must ensure that appropriate review of the disclosures takes place. The 
Chief Risk Officer and the Chief Financial Officer of the Enterprise 
must attest that the disclosures meet the requirements of this subpart.
    (e) If an Enterprise believes that disclosure of specific 
commercial or financial information would prejudice seriously its 
position by making public certain information that is either 
proprietary or confidential in nature, the Enterprise is not required 
to disclose these specific items but must disclose more general 
information about the subject matter of the requirement, together with 
the fact that, and the reason why, the specific items of information 
have not been disclosed.


Sec.  1240.63   Disclosures.

    (a) Except as provided in Sec.  1240.62, an Enterprise must make 
the disclosures described in Tables 1 through 11 of this section 
publicly available for each of the last three years (that is, twelve 
quarters) or such shorter period until an Enterprise has made twelve 
quarterly disclosures pursuant to this part beginning with the 
disclosure for the quarter ending December 31, 2022.
    (b) An Enterprise must publicly disclose each quarter the 
following:
    (1) Regulatory capital ratios for common equity tier 1 capital, 
additional tier 1 capital, tier 1 capital, tier 2 capital, total 
capital, core capital, and adjusted total capital, including the 
regulatory capital elements and all the regulatory adjustments and 
deductions needed to calculate the numerator of such ratios;
    (2) Total risk-weighted assets, including the different regulatory 
adjustments and deductions needed to calculate total risk-weighted 
assets; and
    (3) A reconciliation of regulatory capital elements as they relate 
to its balance sheet in any audited consolidated financial statements.

[[Page 33430]]



             Table 1 to Paragraph (b)(3)--Capital Structure
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) Summary information on the terms
                                     and conditions of the main features
                                     of all regulatory capital
                                     instruments.
Quantitative disclosures..........  (b) The amount of common equity tier
                                     1 capital, with separate disclosure
                                     of:
                                       (1) Common stock and related
                                        surplus;
                                       (2) Retained earnings;
                                       (3) AOCI (net of tax) and other
                                        reserves; and
                                       (4) Regulatory adjustments and
                                        deductions made to common equity
                                        tier 1 capital.
                                    (c) The amount of core capital, with
                                     separate disclosure of:
                                       (1) The par or stated value of
                                        outstanding common stock;
                                       (2) The par or stated value of
                                        outstanding perpetual,
                                        noncumulative preferred stock;
                                       (3) Paid-in capital; and
                                       (4) Retained earnings.
                                    (d) The amount of tier 1 capital,
                                     with separate disclosure of:
                                       (1) Additional tier 1 capital
                                        elements, including additional
                                        tier 1 capital instruments and
                                        tier 1 minority interest not
                                        included in common equity tier 1
                                        capital; and
                                       (2) Regulatory adjustments and
                                        deductions made to tier 1
                                        capital.
                                    (e) The amount of total capital,
                                     with separate disclosure of:
                                       (1) The general allowance for
                                        foreclosure losses; and
                                       (2) Other amounts from sources of
                                        funds available to absorb losses
                                        incurred by the Enterprise that
                                        the Director by regulation
                                        determines are appropriate to
                                        include in determining total
                                        capital.
                                    (f) The amount of adjusted total
                                     capital, with separate disclosure
                                     of:
                                       (1) Tier 2 capital elements,
                                        including tier 2 capital
                                        instruments; and
                                       (2) Regulatory adjustments and
                                        deductions made to adjusted
                                        total capital.
------------------------------------------------------------------------


              Table 2 to Paragraph (b)(3)--Capital Adequacy
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) A summary discussion of the
                                     Enterprise's approach to assessing
                                     the adequacy of its capital to
                                     support current and future
                                     activities.
Quantitative disclosures..........  (b) Risk-weighted assets for:
                                       (1) Exposures to sovereign
                                        entities;
                                       (2) Exposures to certain
                                        supranational entities and MDBs;
                                       (3) Exposures to GSEs;
                                       (4) Exposures to depository
                                        institutions and credit unions;
                                       (5) Exposures to PSEs;
                                       (6) Corporate exposures;
                                       (7) Aggregate single-family
                                        mortgage exposures categorized
                                        by:
                                         (i) Performing loans;
                                         (ii) Non-modified re-performing
                                          loans;
                                         (iii) Modified re-performing
                                          loans;
                                         (iv) Non-performing loans;
                                       (8) Aggregate multifamily
                                        mortgage exposures categorized
                                        by:
                                         (i) Multifamily fixed-rate
                                          exposures;
                                         (ii) Multifamily adjustable-
                                          rate exposures;
                                       (9) Past due loans;
                                       (10) Other assets;
                                       (11) Insurance assets;
                                       (12) Off-balance sheet exposures;
                                       (13) Cleared transactions;
                                       (14) Default fund contributions;
                                       (15) Unsettled transactions;
                                       (16) CRT and other securitization
                                        exposures; and
                                       (17) Equity exposures.
                                    (c) Standardized market risk-
                                     weighted assets as calculated under
                                     subpart F of this part.
                                    (d) Risk-weighted assets for
                                     operational risk.
                                    (e) Common equity tier 1, tier 1,
                                     and adjusted total risk-based
                                     capital ratios.
                                    (f) Total standardized risk-weighted
                                     assets.
------------------------------------------------------------------------


              Table 3 to Paragraph (b)(3)--Capital Buffers
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) A summary discussion of the
                                     Enterprise's capital buffers.
Quantitative disclosures..........  (b) At least quarterly, the
                                     Enterprise must calculate and
                                     publicly disclose the prescribed
                                     capital conservation buffer amount
                                     and all its components as described
                                     under Sec.   1240.11.
                                    (c) At least quarterly, the
                                     Enterprise must calculate and
                                     publicly disclose the prescribed
                                     leverage buffer amount as described
                                     under Sec.   1240.11.
                                    (d) At least quarterly, the
                                     Enterprise must calculate and
                                     publicly disclose the eligible
                                     retained income of the Enterprise,
                                     as described under Sec.   1240.11.
                                    (e) At least quarterly, the
                                     Enterprise must calculate and
                                     publicly disclose any limitations
                                     it has on distributions and
                                     discretionary bonus payments
                                     resulting from the capital buffer
                                     framework described under Sec.
                                     1240.11, including the maximum
                                     payout amount for the quarter.
------------------------------------------------------------------------


[[Page 33431]]

    (c) For each separate risk area described in Tables 4 through 9, 
the Enterprise must, as a general qualitative disclosure requirement, 
describe its risk management objectives and policies, including: 
Strategies and processes; the structure and organization of the 
relevant risk management function; the scope and nature of risk 
reporting and/or measurement systems; policies for hedging and/or 
mitigating risk and strategies and processes for monitoring the 
continuing effectiveness of hedges and/or mitigants.

     Table 4 to Paragraph (c) \1\--Credit Risk: General Disclosures
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) The general qualitative
                                     disclosure requirement with respect
                                     to credit risk (excluding
                                     counterparty credit risk disclosed
                                     in accordance with Table 5 of this
                                     section), including the:
                                       (1) Policy for determining past
                                        due or delinquency status;
                                       (2) Policy for placing loans on
                                        nonaccrual;
                                       (3) Policy for returning loans to
                                        accrual status;
                                       (4) Description of the
                                        methodology that the Enterprise
                                        uses to estimate its adjusted
                                        allowance for credit losses,
                                        including statistical methods
                                        used where applicable;
                                       (5) Policy for charging-off
                                        uncollectible amounts; and
                                       (6) Discussion of the
                                        Enterprise's credit risk
                                        management policy.
Quantitative disclosures..........  (b) Total credit risk exposures and
                                     average credit risk exposures,
                                     after accounting offsets in
                                     accordance with GAAP, without
                                     taking into account the effects of
                                     credit risk mitigation techniques
                                     (for example, collateral and
                                     netting not permitted under GAAP),
                                     over the period categorized by
                                     major types of credit exposure. For
                                     example, the Enterprises could use
                                     categories similar to that used for
                                     financial statement purposes. Such
                                     categories might include, for
                                     instance:
                                       (1) Loans, off-balance sheet
                                        commitments, and other non-
                                        derivative off-balance sheet
                                        exposures;
                                       (2) Debt securities; and
                                       (3) OTC derivatives.
                                    (c) Geographic distribution of
                                     exposures, categorized in
                                     significant areas by major types of
                                     credit exposure.\2\
                                    (d) Industry or counterparty type
                                     distribution of exposures,
                                     categorized by major types of
                                     credit exposure.
                                    (e) By major industry or
                                     counterparty type:
                                       (1) Amount of loans not past due
                                        or past due less than 30 days;
                                       (2) Amount of loans past due 30
                                        days but less than 90 days;
                                       (3) Amount of loans past due 90
                                        days and on nonaccrual;
                                       (4) Amount of loans past due 90
                                        days and still accruing; \3\
                                       (5) The balance in the adjusted
                                        allowance for credit losses at
                                        the end of each period,
                                        disaggregated on the basis of
                                        loans not past due or past due
                                        less than 30 days, loans past
                                        due 30 days but less than 90
                                        days, loans past due 90 days and
                                        on nonaccrual, and loans past
                                        due 90 days and still accruing;
                                        and
                                       (6) Charge-offs during the
                                        period.
                                    (f) Amount of past due loans
                                     categorized by significant
                                     geographic areas including, if
                                     practical, the amounts of
                                     allowances related to each
                                     geographical area,\4\ further
                                     categorized as required by GAAP.
                                    (g) Reconciliation of changes in the
                                     adjusted allowance for credit
                                     losses.\5\
                                    (h) Remaining contractual maturity
                                     delineation (for example, one year
                                     or less) of the whole portfolio,
                                     categorized by credit exposure.
------------------------------------------------------------------------
\1\ Table 4 does not cover equity exposures, which should be reported in
  Table 8 of this section.
\2\ Geographical areas consist of areas within the United States and
  territories. An Enterprise might choose to define the geographical
  areas based on the way the Enterprise's portfolio is geographically
  managed. The criteria used to allocate the loans to geographical areas
  must be specified.
\3\ An Enterprise may, but is not required to, also provide an analysis
  of the aging of past-due loans.
\4\ The portion of the general allowance that is not allocated to a
  geographical area should be disclosed separately.
\5\ The reconciliation should include the following: A description of
  the allowance; the opening balance of the allowance; charge-offs taken
  against the allowance during the period; amounts provided (or
  reversed) for estimated expected credit losses during the period; any
  other adjustments (for example, exchange rate differences, business
  combinations, acquisitions, and disposals of subsidiaries), including
  transfers between allowances; and the closing balance of the
  allowance. Charge-offs and recoveries that have been recorded directly
  to the income statement should be disclosed separately.


  Table 5 to Paragraph (c)--General Disclosure for Counterparty Credit
                         Risk-Related Exposures
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) The general qualitative
                                     disclosure requirement with respect
                                     to OTC derivatives, eligible margin
                                     loans, and repo-style transactions,
                                     including a discussion of:
                                       (1) The methodology used to
                                        assign credit limits for
                                        counterparty credit exposures;
                                       (2) Policies for securing
                                        collateral, valuing and managing
                                        collateral, and establishing
                                        credit reserves;
                                       (3) The primary types of
                                        collateral taken; and
                                       (4) The impact of the amount of
                                        collateral the Enterprise would
                                        have to provide given a
                                        deterioration in the
                                        Enterprise's own
                                        creditworthiness.
Quantitative Disclosures..........  (b) Gross positive fair value of
                                     contracts, collateral held
                                     (including type, for example, cash,
                                     government securities), and net
                                     unsecured credit exposure.\1\ An
                                     Enterprise also must disclose the
                                     notional value of credit derivative
                                     hedges purchased for counterparty
                                     credit risk protection and the
                                     distribution of current credit
                                     exposure by exposure type.\2\
                                    (c) Notional amount of purchased and
                                     sold credit derivatives, segregated
                                     between use for the Enterprise's
                                     own credit portfolio and in its
                                     intermediation activities,
                                     including the distribution of the
                                     credit derivative products used,
                                     categorized further by protection
                                     bought and sold within each product
                                     group.
------------------------------------------------------------------------
\1\ Net unsecured credit exposure is the credit exposure after
  considering both the benefits from legally enforceable netting
  agreements and collateral arrangements without taking into account
  haircuts for price volatility, liquidity, etc.
\2\ This may include interest rate derivative contracts, foreign
  exchange derivative contracts, equity derivative contracts, credit
  derivatives, commodity or other derivative contracts, repo-style
  transactions, and eligible margin loans.


[[Page 33432]]


        Table 6 to Paragraph (c)--Credit Risk Mitigation \1\ \2\
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) The general qualitative
                                     disclosure requirement with respect
                                     to credit risk mitigation,
                                     including:
                                       (1) Policies and processes for
                                        collateral valuation and
                                        management;
                                       (2) A description of the main
                                        types of collateral taken by the
                                        Enterprise;
                                       (3) The main types of guarantors/
                                        credit derivative counterparties
                                        and their creditworthiness; and
                                       (4) Information about (market or
                                        credit) risk concentrations with
                                        respect to credit risk
                                        mitigation.
Quantitative Disclosures..........  (b) For each separately disclosed
                                     credit risk portfolio, the total
                                     exposure that is covered by
                                     eligible financial collateral, and
                                     after the application of haircuts.
                                    (c) For each separately disclosed
                                     portfolio, the total exposure that
                                     is covered by guarantees/credit
                                     derivatives and the risk-weighted
                                     asset amount associated with that
                                     exposure.
------------------------------------------------------------------------
\1\ At a minimum, an Enterprise must provide the disclosures in Table 6
  in relation to credit risk mitigation that has been recognized for the
  purposes of reducing capital requirements under this subpart. Where
  relevant, the Enterprises may give further information about mitigants
  that have not been recognized for that purpose.
\2\ Credit derivatives that are treated, for the purposes of this
  subpart, as synthetic securitization exposures should be excluded from
  the credit risk mitigation disclosures and included within those
  relating to securitization (Table 7 of this section).


            Table 7 to Paragraph (c)--CRT and Securitization
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) The general qualitative
                                     disclosure requirement with respect
                                     to a securitization (including
                                     synthetic securitizations),
                                     including a discussion of:
                                       (1) The Enterprise's objectives
                                        for securitizing assets,
                                        including the extent to which
                                        these activities transfer credit
                                        risk of the underlying exposures
                                        away from the Enterprise to
                                        other entities and including the
                                        type of risks assumed and
                                        retained with resecuritization
                                        activity; \1\
                                       (2) The nature of the risks
                                        (e.g., liquidity risk) inherent
                                        in the securitized assets;
                                       (3) The roles played by the
                                        Enterprise in the securitization
                                        process \2\ and an indication of
                                        the extent of the Enterprise's
                                        involvement in each of them;
                                       (4) The processes in place to
                                        monitor changes in the credit
                                        and market risk of
                                        securitization exposures
                                        including how those processes
                                        differ for resecuritization
                                        exposures;
                                       (5) The Enterprise's policy for
                                        mitigating the credit risk
                                        retained through securitization
                                        and resecuritization exposures;
                                        and
                                       (6) The risk-based capital
                                        approaches that the Enterprise
                                        follows for its securitization
                                        exposures including the type of
                                        securitization exposure to which
                                        each approach applies.
                                    (b) A list of:
                                       (1) The type of securitization
                                        SPEs that the Enterprise, as
                                        sponsor, uses to securitize
                                        third-party exposures. The
                                        Enterprise must indicate whether
                                        it has exposure to these SPEs,
                                        either on- or off-balance sheet;
                                        and
                                       (2) Affiliated entities:
                                         (i) That the Enterprise manages
                                          or advises; and
                                         (ii) That invest either in the
                                          securitization exposures that
                                          the Enterprise has securitized
                                          or in securitization SPEs that
                                          the Enterprise sponsors.\3\
                                    (c) Summary of the Enterprise's
                                     accounting policies for CRT and
                                     securitization activities,
                                     including:
                                       (1) Whether the transactions are
                                        treated as sales (i.e., sale
                                        accounting has been obtained) or
                                        financings;
                                       (2) Recognition of gain-on-sale;
                                       (3) Methods and key assumptions
                                        applied in valuing retained or
                                        purchased interests;
                                       (4) Changes in methods and key
                                        assumptions from the previous
                                        period for valuing retained
                                        interests and impact of the
                                        changes;
                                       (5) Treatment of synthetic
                                        securitizations;
                                       (6) How exposures intended to be
                                        securitized are valued and
                                        whether they are recorded under
                                        subpart D of this part; and
                                       (7) Policies for recognizing
                                        liabilities on the balance sheet
                                        for arrangements that could
                                        require the Enterprise to
                                        provide financial support for
                                        securitized assets.
                                    (d) An explanation of significant
                                     changes to any quantitative
                                     information since the last
                                     reporting period.
Quantitative Disclosures..........  (e) The total outstanding exposures
                                     securitized by the Enterprise in
                                     securitizations that meet the
                                     operational criteria provided in
                                     Sec.   1240.41 (categorized into
                                     traditional and synthetic
                                     securitizations), by exposure type,
                                     separately for securitizations of
                                     third-party exposures for which the
                                     bank acts only as sponsor.\4\
                                    (f) For exposures securitized by the
                                     Enterprise in securitizations that
                                     meet the operational criteria in
                                     Sec.   1240.41:
                                       (1) Amount of securitized assets
                                        that are past due categorized by
                                        exposure type; and
                                       (2) Losses recognized by the
                                        Enterprise during the current
                                        period categorized by exposure
                                        type.\5\
                                    (g) The total amount of outstanding
                                     exposures intended to be
                                     securitized categorized by exposure
                                     type.
                                    (h) Aggregate amount of:
                                       (1) On-balance sheet
                                        securitization exposures
                                        retained or purchased
                                        categorized by exposure type;
                                        and
                                       (2) Off-balance sheet
                                        securitization exposures
                                        categorized by exposure type.
                                    (i)(1) Aggregate amount of
                                     securitization exposures retained
                                     or purchased and the associated
                                     capital requirements for these
                                     exposures, categorized between
                                     securitization and resecuritization
                                     exposures, further categorized into
                                     a meaningful number of risk weight
                                     bands and by risk-based capital
                                     approach (e.g., CRTA, SSFA); and
                                    (2) Aggregate amount disclosed
                                     separately by type of underlying
                                     exposure in the pool of any:
                                       (i) After-tax gain-on-sale on a
                                        securitization that has been
                                        deducted from common equity tier
                                        1 capital; and
                                       (ii) Credit-enhancing interest-
                                        only strip that is assigned a
                                        1,250 percent risk weight.

[[Page 33433]]

 
                                       (j) Summary of current year's
                                        securitization activity,
                                        including the amount of
                                        exposures securitized (by
                                        exposure type), and recognized
                                        gain or loss on sale by exposure
                                        type.
                                       (k) Aggregate amount of
                                        resecuritization exposures
                                        retained or purchased
                                        categorized according to:
                                       (1) Exposures to which credit
                                        risk mitigation is applied and
                                        those not applied; and
                                       (2) Exposures to guarantors
                                        categorized according to
                                        guarantor creditworthiness
                                        categories or guarantor name.
------------------------------------------------------------------------
\1\ The Enterprise should describe the structure of resecuritizations in
  which it participates; this description should be provided for the
  main categories of resecuritization products in which the Enterprise
  is active.
\2\ For example, these roles may include originator, investor, servicer,
  provider of credit enhancement, sponsor, liquidity provider, or swap
  provider.
\3\ Such affiliated entities may include, for example, money market
  funds, to be listed individually, and personal and private trusts, to
  be noted collectively.
\4\ ``Exposures securitized'' include underlying exposures originated by
  the Enterprise, whether generated by them or purchased, and recognized
  in the balance sheet, from third parties, and third-party exposures
  included in sponsored transactions. Securitization transactions
  (including underlying exposures originally on the Enterprise's balance
  sheet and underlying exposures acquired by the Enterprise from third-
  party entities) in which the originating Enterprise does not retain
  any securitization exposure should be shown separately but need only
  be reported for the year of inception. Enterprises are required to
  disclose exposures regardless of whether there is a capital charge
  under this part.
\5\ For example, charge-offs/allowances (if the assets remain on the
  Enterprise's balance sheet) or credit-related write-off of interest-
  only strips and other retained residual interests, as well as
  recognition of liabilities for probable future financial support
  required of the bank with respect to securitized assets.


                   Table 8 to Paragraph (c)--Equities
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures...........  (a) The general qualitative
                                     disclosure requirement with respect
                                     to equity risk for equities,
                                     including:
                                    (1) Differentiation between holdings
                                     on which capital gains are expected
                                     and those taken under other
                                     objectives including for
                                     relationship and strategic reasons;
                                     and
                                    (2) Discussion of important policies
                                     covering the valuation of and
                                     accounting for equity holdings.
                                     This includes the accounting
                                     techniques and valuation
                                     methodologies used, including key
                                     assumptions and practices affecting
                                     valuation as well as significant
                                     changes in these practices.
Quantitative Disclosures..........  (b) Carrying value disclosed on the
                                     balance sheet of investments, as
                                     well as the fair value of those
                                     investments; for securities that
                                     are publicly traded, a comparison
                                     to publicly-quoted share values
                                     where the share price is materially
                                     different from fair value.
                                    (c) The types and nature of
                                     investments, including the amount
                                     that is:
                                       (1) Publicly traded; and
                                       (2) Non publicly traded.
                                    (d) The cumulative realized gains
                                     (losses) arising from sales and
                                     liquidations in the reporting
                                     period.
                                    (e)(1) Total unrealized gains
                                     (losses) recognized on the balance
                                     sheet but not through earnings.
                                     (2) Total unrealized gains (losses)
                                     not recognized either on the
                                     balance sheet or through earnings.
                                     (3) Any amounts of the above
                                     included in tier 1 or tier 2
                                     capital.
                                    (f) Capital requirements categorized
                                     by appropriate equity groupings,
                                     consistent with the Enterprise's
                                     methodology, as well as the
                                     aggregate amounts and the type of
                                     equity investments subject to any
                                     supervisory transition regarding
                                     regulatory capital requirements.\1\
------------------------------------------------------------------------
\1\ This disclosure must include a breakdown of equities that are
  subject to the 0 percent, 20 percent, 100 percent, 300 percent, 400
  percent, and 600 percent risk weights, as applicable.


 Table 9 to Paragraph (c)--Interest Rate Risk for Non-Trading Activities
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) The general qualitative
                                     disclosure requirement, including
                                     the nature of interest rate risk
                                     for non-trading activities and key
                                     assumptions, including assumptions
                                     regarding loan prepayments and
                                     frequency of measurement of
                                     interest rate risk for non-trading
                                     activities.
Quantitative disclosures..........  (b) The increase (decline) in
                                     earnings or economic value (or
                                     relevant measure used by
                                     management) for upward and downward
                                     rate shocks according to
                                     management's method for measuring
                                     interest rate risk for non-trading
                                     activities, categorized by currency
                                     (as appropriate).
------------------------------------------------------------------------


               Table 10 to Paragraph (c)--Operational Risk
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures...........  (a) The general qualitative
                                     disclosure requirement for
                                     operational risk.
                                    (b) Description of the AMA, when
                                     applicable, including a discussion
                                     of relevant internal and external
                                     factors considered in the
                                     Enterprise's measurement approach.
                                    (c) A description of the use of
                                     insurance for the purpose of
                                     mitigating operational risk.
------------------------------------------------------------------------


            Table 11 to Paragraph (c)--Tier 1 Leverage Ratio
------------------------------------------------------------------------
                                             Dollar amounts in thousands
                                           -----------------------------
                                             Tril    Bil    Mil    Thou
------------------------------------------------------------------------
   Part 1: Summary comparison of accounting assets and adjusted total
                                 assets
------------------------------------------------------------------------
1 Total consolidated assets as reported in
 published financial statements.
2 Adjustment for fiduciary assets
 recognized on balance sheet but excluded
 from total leverage exposure.
3 Adjustment for derivative exposures.....

[[Page 33434]]

 
4 Adjustment for repo-style transactions..
5 Adjustment for off-balance sheet
 exposures (that is, conversion to credit
 equivalent amounts of off-balance sheet
 exposures).
6 Other adjustments.......................
7 Adjusted total assets (sum of lines 1 to
 6).
------------------------------------------------------------------------
                      Part 2: Tier 1 leverage ratio
------------------------------------------------------------------------
        On-balance sheet exposures
------------------------------------------------------------------------
1 On-balance sheet assets (excluding on-
 balance sheet assets for repo-style
 transactions and derivative exposures,
 but including cash collateral received in
 derivative transactions).
2 LESS: Amounts deducted from tier 1
 capital.
3 Total on-balance sheet exposures
 (excluding on-balance sheet assets for
 repo-style transactions and derivative
 exposures, but including cash collateral
 received in derivative transactions) (sum
 of lines 1 and 2).
------------------------------------------------------------------------
                          Derivative exposures
------------------------------------------------------------------------
4 Current exposure for derivative
 exposures (that is, net of cash variation
 margin).
5 Add-on amounts for potential future
 exposure (PFE) for derivative exposures.
6 Gross-up for cash collateral posted if
 deducted from the on-balance sheet
 assets, except for cash variation margin.
7 LESS: Deductions of receivable assets
 for cash variation margin posted in
 derivative transactions, if included in
 on-balance sheet assets.
8 LESS: Exempted CCP leg of client-cleared
 transactions.
9 Effective notional principal amount of
 sold credit protection.
10 LESS: Effective notional principal
 amount offsets and PFE adjustments for
 sold credit protection.
11 Total derivative exposures (sum of
 lines 4 to 10).
------------------------------------------------------------------------
                         Repo-style transactions
------------------------------------------------------------------------
12 On-balance sheet assets for repo-style
 transactions, except include the gross
 value of receivables for reverse
 repurchase transactions. Exclude from
 this item the value of securities
 received in a security-for-security repo-
 style transaction where the securities
 lender has not sold or re-hypothecated
 the securities received. Include in this
 item the value of securities that
 qualified for sales treatment that must
 be reversed.
13 LESS: Reduction of the gross value of
 receivables in reverse repurchase
 transactions by cash payables in
 repurchase transactions under netting
 agreements.
14 Counterparty credit risk for all repo-
 style transactions.
15 Exposure for repo-style transactions
 where a banking organization acts as an
 agent.
16 Total exposures for repo-style
 transactions (sum of lines 12 to 15).
------------------------------------------------------------------------
                    Other off-balance sheet exposures
------------------------------------------------------------------------
17 Off-balance sheet exposures at gross
 notional amounts.
18 LESS: Adjustments for conversion to
 credit equivalent amounts.
19 Off-balance sheet exposures (sum of
 lines 17 and 18).
------------------------------------------------------------------------
                    Capital and adjusted total assets
------------------------------------------------------------------------
20 Tier 1 capital.........................
21 Adjusted total assets (sum of lines 3,
 11, 16, and 19).
------------------------------------------------------------------------
                          Tier 1 leverage ratio
------------------------------------------------------------------------
22 Tier 1 leverage ratio..................          (in percent)
------------------------------------------------------------------------


0
4. Add Sec.  1240.205 to Subpart F to read as follows:

Subpart F--Risk-weighted Assets--Market Risk

* * * * *


Sec.  1240.205   Market risk disclosures.

    (a) Scope. An Enterprise must make timely public disclosures each 
calendar quarter, where for the purpose of these disclosure 
requirements timely means no later than 10 business days after an 
Enterprise files its corresponding Annual Report on SEC Form 10-K at 
the end of a fiscal year or its corresponding Quarterly Report on SEC 
Form 10-Q at the end of other calendar quarters. If a significant 
change occurs, such that the most recent reporting amounts are no 
longer reflective of the Enterprise's capital adequacy and risk 
profile, then a brief discussion of this change and its likely impact 
must be provided as soon as practicable thereafter. Qualitative 
disclosures that typically do not change each quarter may be disclosed 
annually, provided any material changes are disclosed as soon as 
practicable thereafter, and no later than the end of the next calendar 
quarter, where for the purpose of these disclosure requirements a 
material change means a

[[Page 33435]]

change such that the omission or misstatement of which could change or 
influence the assessment or decision of a user relying on that 
information for the purpose of making investment decisions. If an 
Enterprise believes that disclosure of specific commercial or financial 
information would prejudice seriously its position by making public 
certain information that is either proprietary or confidential in 
nature, the Enterprise is not required to disclose these specific items 
but must disclose more general information about the subject matter of 
the requirement, together with the fact that, and the reason why, the 
specific items of information have not been disclosed.
    (b) Location. The Enterprise's management may provide all of the 
disclosures required by this section in one place on the Enterprise's 
public website or may provide the disclosures in more than one public 
financial report or other regulatory reports, provided that the 
Enterprise publicly provides a summary table specifically indicating 
the location(s) of all such disclosures.
    (c) Disclosure policy. The Enterprise must have a formal disclosure 
policy approved by the board of directors that addresses the 
Enterprise's approach for determining its market risk disclosures. The 
policy must address the associated internal controls and disclosure 
controls and procedures. The board of directors and senior management 
must ensure that appropriate verification of the disclosures takes 
place and that effective internal controls and disclosure controls and 
procedures are maintained. The Chief Risk Officer and the Chief 
Financial Officer of the Enterprise must attest that the disclosures 
meet the requirements of this subpart, and the board of directors and 
senior management are responsible for establishing and maintaining an 
effective internal control structure over the disclosures required by 
this section.
    (d) Quantitative disclosures. (1) For each material portfolio of 
covered positions, the Enterprise must provide timely public 
disclosures of the following information at least quarterly:
    (i) Exposure amounts for each product type included in covered 
positions as described in Sec.  1240.202; and
    (ii) Risk-weighted assets for each product type included in covered 
positions as described in Sec.  1240.202.
    (2) In addition, the Enterprise must disclose publicly the 
aggregate amount of on-balance sheet and off-balance sheet 
securitization positions by exposure type at least quarterly.
    (e) Qualitative disclosures. For each material portfolio of covered 
positions as identified using the definitions in Sec.  1240.202, the 
Enterprise must provide timely public disclosures of the following 
information at least annually after the end of the fourth calendar 
quarter, or more frequently in the event of material changes for each 
portfolio:
    (1) The composition of material portfolios of covered positions;
    (2) The Enterprise's valuation policies, procedures, and 
methodologies for covered positions including, for securitization 
positions, the methods and key assumptions used for valuing such 
positions, any significant changes since the last reporting period, and 
the impact of such change;
    (3) The characteristics of the internal models used for purposes of 
this subpart;
    (4) A description of the approaches used for validating and 
evaluating the accuracy of internal models and modeling processes for 
purposes of this subpart;
    (5) For each market risk category (that is, interest rate risk, 
credit spread risk, equity price risk, foreign exchange risk, and 
commodity price risk), a description of the stress tests applied to the 
positions subject to the factor;
    (6) The results of the comparison of the Enterprise's internal 
estimates for purposes of this subpart with actual outcomes during a 
sample period not used in model development; and
    (7) A description of the Enterprise's processes for monitoring 
changes in the market risk of securitization positions, including how 
those processes differ for resecuritization positions.


Sandra L. Thompson,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2022-11582 Filed 6-1-22; 8:45 am]
BILLING CODE 8070-01-P