Data Reporting Requirements for the Federal Home Loan Banks, 35495-35500 [E6-9756]

Download as PDF sroberts on PROD1PC70 with RULES Federal Register / Vol. 71, No. 119 / Wednesday, June 21, 2006 / Rules and Regulations include $800,700 for marketing development, $290,421 for administration, and $210,000 for research. Budgeted expenses for these items in 2005 were $680,000, $337,014, and $200,000, respectively. Assessable olive receipts for the 2005–06 crop year were 114,761 tons, compared to 85,862 tons for the 2004– 05 crop year. The increased production of assessable olives will yield increased assessment funds, even at the lower rate. These funds, along with unused assessments from the 2005 fiscal year that have been carried into 2006, and interest income, are adequate to cover the increased expenditures. The committee reviewed and unanimously recommended 2006 expenditures of $1,301,121. This reflects increases in the committee’s research and market development budgets and a decrease in the administrative budget compared to the previous year’s budget. The committee recommended a larger research budget intended to further the study of olive fly management and development of a mechanical olive harvesting method. The 2006 marketing program recommendation includes participation in media activities in conjunction with the release of a new diet plan book; translation of some of the committee’s education and nutrition materials into Spanish; and continuation of several outreach activities including cookbook contributions, Web site development, and educational programs for school children. Recommended decreases in the administrative budget are due mainly to personnel changes in the committee’s staff. Prior to arriving at this budget, the committee considered information from various sources, such as the committee’s Executive, Market Development, and Research Subcommittees. Alternate spending levels were discussed by these groups, based upon the relative value of various research and marketing projects to the olive industry and the anticipated olive production. The assessment rate of $11.03 per ton of assessable olives was derived by considering anticipated expenses, the volume of assessable olives, and additional pertinent factors. A review of historical and preliminary information pertaining to the upcoming fiscal year indicates that the grower price for the 2005–06 crop year is estimated to be approximately $714 per ton for canning fruit and $314 per ton for limited-use sizes, leaving the balance as unusable cull fruit. Approximately 76 percent of a ton of olives are canning fruit sizes and 17 percent are limited use sizes, leaving the balance as unusable cull fruit. Total grower VerDate Aug<31>2005 16:35 Jun 20, 2006 Jkt 208001 revenue on 114,761 tons would then be $73,485,966, given the percentage of canning and limited-use sizes and current grower prices for those sizes. Therefore, with an assessment rate decreased from $15.68 to $11.03, the estimated assessment revenue is expected to be approximately 1.72 percent of grower revenue. This action continues in effect the action that decreased the assessment obligation imposed on handlers. Assessments are applied uniformly on all handlers, and some of the costs may be passed on to producers. However, decreasing the assessment rate reduces the burden on handlers, and may reduce the burden on producers. In addition, the committee’s meeting was widely publicized throughout the California olive industry and all interested persons were invited to attend the meeting and participate in committee deliberations on all issues. Like all committee meetings, the December 13, 2005, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. This action imposes no additional reporting or recordkeeping requirements on either small or large California olive handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. AMS is committed to compliance with the Government Paperwork Elimination Act (GPEA), which requires Government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule. An interim final rule concerning this action was published in the Federal Register on March 13, 2006 (71 FR 12614). Copies of the rule were faxed to both olive handlers. Finally, the interim rule was made available through the Internet by USDA and the Office of the Federal Register. A 60-day comment period was provided for interested persons to respond to the interim final rule. The comment period ended on May 12, 2006, and no comments were received. A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/ fv/moab/html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 35495 address in the FOR FURTHER INFORMATION CONTACT section. After consideration of all relevant material presented, including the information and recommendation submitted by the committee and other available information, it is herby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act. List of Subjects in 7 CFR Part 932 Marketing agreements, Olives, Reporting and recordkeeping requirements. PART 932—OLIVES GROWN IN CALIFORNIA Accordingly, the interim final rule amending 7 CFR part 932 that was published at 71 FR 12614 on March 13, 2006, is adopted as a final rule without change. I Dated: June 15, 2006. Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E6–9724 Filed 6–20–06; 8:45 am] BILLING CODE 3410–02–P FEDERAL HOUSING FINANCE BOARD 12 CFR Parts 900, 914, 915, 925, 950, and 955 [No. 2006–10] RIN 3069–AB28 Data Reporting Requirements for the Federal Home Loan Banks AGENCY: Federal Housing Finance Board. ACTION: Final rule. SUMMARY: The Federal Housing Finance Board (Finance Board) is reorganizing the way it imposes certain reporting requirements on the Federal Home Loan Banks (Banks) by removing the requirements from its regulations and issuing them in the Data Reporting Manual (DRM), which is an enforceable order issued pursuant to the Finance Board’s investigatory powers. The Finance Board also is adding a new part 914, which addresses a Bank’s obligation with respect to reporting requirements and making its books and records available to the Finance Board. DATES: Effective Date: This final rule is effective on July 21, 2006. FOR FURTHER INFORMATION CONTACT: Thomas Hearn, Senior Attorney Advisor, Office of General Counsel, by electronic mail at hearnt@fhfb.gov or by telephone at 202–408–2976; Scott L. E:\FR\FM\21JNR1.SGM 21JNR1 35496 Federal Register / Vol. 71, No. 119 / Wednesday, June 21, 2006 / Rules and Regulations Smith, Associate Director, Office of Supervision, by electronic mail at smiths@fhfb.gov or by telephone at 202– 408–2991; or Gary Ternullo, Associate Director, Office of Supervision, by electronic mail at ternullog@fhfb.gov or by telephone at 202–408–2904. You can send regular mail to the Federal Housing Finance Board, 1625 Eye Street, NW., Washington, DC 20006. SUPPLEMENTARY INFORMATION: I. Statutory and Regulatory Background sroberts on PROD1PC70 with RULES A. The Federal Home Loan Bank System (Bank System) The Bank System consists of 12 Banks and the Office of Finance (OF). The Banks are instrumentalities of the United States organized under the authority of the Federal Home Loan Bank Act (Bank Act). 12 U.S.C. 1421 et seq. The Banks also are ‘‘government sponsored enterprises’’ (GSEs), i.e., federally chartered but privately owned institutions created by Congress to support the financing of housing and community lending by their members. See 12 U.S.C. 1422a(a)(3)(B)(ii), 1430(i), and 1430(j). By virtue of their GSE status, the Banks are able to borrow in the capital markets at favorable rates. The Banks are then able to pass along that funding advantage to their members—and ultimately to consumers—by providing advances (secured loans) and other financial services to their members (principally, depository institutions) at rates that the members generally could not obtain elsewhere. The Banks, along with the OF, operate under the supervision of the Finance Board. The primary duty of the Finance Board is to ensure that the Banks operate in a financially safe and sound manner. Consistent with that duty, the Finance Board is required to supervise the Banks, ensure that they carry out their housing finance mission, and ensure that they remain adequately capitalized and able to raise funds in the capital markets. 12 U.S.C. 1422a(a)(3)(A) and (B). B. Finance Board Investigatory Powers Congress has delegated to the Finance Board broad authority to fulfill its statutory mandates. Section 2B of the Bank Act states that the Finance Board has the power ‘‘[t]o supervise the Federal Home Loan Banks and to promulgate and enforce such regulations and orders as are necessary from time to time to carry out the provisions of this chapter [i.e., Chapter 11 of Title 12, codified at 12 U.S.C. 1421–1449].’’ 12 U.S.C. 1422b(a)(1). Section 20 of the Bank Act provides the VerDate Aug<31>2005 16:35 Jun 20, 2006 Jkt 208001 Finance Board with the authority to require, ‘‘from time to time, [but] at least annually,’’ examinations and reports of condition of all the Banks in such form as the Finance Board prescribes. 12 U.S.C. 1440. Section 20 also vests in Finance Board examiners ‘‘the same powers and privileges as are vested in’’ examiners under the National Bank Act and the Federal Reserve Act. These Acts, in turn, provide examiners with sweeping powers, including the power to ‘‘make a thorough examination of all the affairs of the bank.’’ 12 U.S.C. 481. Thus, the Finance Board and its examiners have been vested with broad access to the books, records, and information of the Banks in order to fulfill the statutory mission of the Finance Board. The United States Supreme Court has recognized the importance of this broad access to the ability of financial institution regulators to perform their supervisory functions. In United States v. Philadelphia National Bank, 374 U.S. 321 (1963), the Court stated: [P]erhaps the most effective weapon of federal regulation of banking is the broad visitorial power of federal bank examiners. Whenever the agencies deem it necessary, they may order ‘a thorough examination of all the affairs of the bank’ * * * [citation omitted]. Such examinations are frequent and intensive. In addition, the banks are required to furnish detailed periodic reports of their operations to the supervisory agencies [citation omitted]. In this way the agencies maintain virtually a day-to-day surveillance of the American banking system. And should they discover unsound banking practices, they are equipped with a formidable array of sanctions * * *. As a result of this panoply of sanctions, recommendations by the agencies concerning banking practices tend to be followed by bankers without the necessity of formal compliance proceedings. 1 Davis, Administrative Law (1958), s. 4.04. 374 U.S. at 329 (emphasis added). An agency’s authority to require informational reports stems from its investigatory power, which generally is distinct from, and in addition to, its authority exercised under the Administrative Procedures Act (APA) to engage in rulemaking or to issue adjudicative orders. A principal legislative sponsor of the APA described investigative activity during floor debate in the House of Representatives as follows: This third type of administrative compulsory power may be incidental to either legislative or judicial powers of administrative agencies, or it may be entirely independent of either. I refer to the compulsory action of administrative agencies when they issue subpoenas, require records or reports, or undertake mandatory PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 inspections. These functions are investigatory in nature. 92 Cong. Rec. 5648 (1948), cited in Appeal of FTC Line of Business Report Litigation, 595 F.2d 685, 695–696 (DC Cir.) (per curiam), cert. denied sub nom. Milliken and Co. v. FTC, 439 U.S. 958 (1978). C. Reorganization of Reporting Requirements Historically, the Finance Board has imposed reporting requirements in a variety of ways. Some requirements, such as those related to the call report, have been imposed by informal directives issued by staff. For other requirements, the Finance Board has used its rulemaking authority. 12 U.S.C. 1422b(a)(1). On February 9, 2005, the Board of Directors approved for publication a proposed rule that would reorganize the way the Finance Board imposes reporting requirements by creating a Data Reporting Manual (DRM) that would contain certain reporting requirements currently in regulations or issued by Finance Board staff. See Resolution Number 2005–04 (Feb. 9, 2005), published at 770 FR 9551 (Feb. 28, 2005).1 For each subject matter, the DRM includes instructions addressing data definitions as well as requirements concerning data elements, reporting format, reporting method, e.g., electronic or paper, record retention, timeliness, reporting frequency, and certification. Going forward, changes to the reporting requirements will be made by amendments to the DRM. The proposed rule included substantive regulatory changes that would add a new part 914, which addresses a Bank’s obligation with respect to reporting requirements and making its books and records available to the Finance Board. It also would add a new section to part 917, which imposes on each Bank’s board of directors the obligation to establish policies and procedures with respect to regulatory reporting. In July 2005, the Board of Directors created the DRM and located in it reporting requirements for the Call Report System. See Resolution Number 2005–14 (July 13, 2005). In August 2005, the Finance Board added to the DRM reporting requirements related to Bank members. See Resolution Number 2005–15 (Aug. 10, 2005). The Finance Board is continuing this effort by relocating from regulations to the DRM data reporting requirements 1 Resolutions are available electronically in the FOIA Reading Room of the Finance Board Web site at: http://www.fhfb.gov/ Default.aspx?Page=59&Top=4. E:\FR\FM\21JNR1.SGM 21JNR1 sroberts on PROD1PC70 with RULES Federal Register / Vol. 71, No. 119 / Wednesday, June 21, 2006 / Rules and Regulations concerning: Purchases of Bank stock by member banks (12 CFR 925.20(e)); advances and commitments outstanding to each Bank member (12 CFR 950.4(e)); Acquired Member Assets (AMA) (12 CFR 955.4); and forms related to Bank director eligibility (12 CFR 915.7 and 915.12(a)). In the proposed rule, the Finance Board considered placing in the DRM reporting requirements for a Bank’s strategic business plan (12 CFR 917.5(c)); Advisory Councils (12 CFR 951.4(f)(3)); the Affordable Housing Reserve Fund (12 CFR 951.3(d) and 951.15(b)); and Community Investment Cash Advance (CICA) Programs (12 CFR 952.6(a)). Because these requirements do not involve the periodic reporting of empirical data, we have determined that these requirements are better left in Finance Board regulations. The DRM represents an enforceable order issued pursuant to the Finance Board’s investigatory powers. The reorganization of reporting requirements and the amendments to Finance Board regulations will allow the Finance Board to address problems it has experienced with the timeliness, accuracy, and completeness of data reporting by the Banks. The Bank Act gives the Finance Board enforcement authority to redress, among other things, violations of the Bank Act, or any law, order, rule, or regulation. 12 U.S.C. 1422b(a)(5). The Finance Board will deem data reporting problems as violations of an investigatory order and, where applicable, violations of the regulations being added today in 12 CFR part 914. Reporting requirements imposed pursuant to the Finance Board’s investigatory powers are not subject to the notice and comment provisions of the APA. See Appeal of FTC Line of Business Report Litigation, 595 F.2d at 695–696. Nevertheless, the Finance Board recognizes that changes to reporting requirements can impose regulatory burden. The Finance Board also recognizes the utility of input from the Banks and the public in determining what information is appropriate to collect. Thus, where practicable, Finance Board staff will consult with the Banks and the public with respect to significant changes in the DRM before changes are made. Moreover, information collections that are subject to the Paperwork Reduction Act (PRA), such as those related to the AMA rule, will continue to be published in the Federal Register for comment in accordance with the PRA. VerDate Aug<31>2005 18:03 Jun 20, 2006 Jkt 208001 II. Analysis of the Final Rule A. Part 914 The Finance Board is adding a new part 914 to its regulations that addresses a Bank’s obligation with respect to reporting requirements and makes its books and records available to the Finance Board. Section 914.1 contains a number of provisions directed at how a Bank reports data to the Finance Board and makes its books and records available to Finance Board examiners. Section 914.1(a) defines the term Regulatory Report to mean any report of raw or summary data required to evaluate the safe and sound condition and operations of a Bank or to determine compliance with any: (1) Provision in the Bank Act, or any law, order, rule, or regulation; (2) condition imposed in writing by the Finance Board in connection with the granting of any application or other request by a Bank; or (3) written agreement entered into by the Finance Board and a Bank. Section 914.1(b) provides examples of a Regulatory Report, including the call report and reports of instrument-level data submitted for risk assessment purposes. The term Regulatory Report also includes reports related to a Bank’s housing mission achievement, such as reports related to AMA, a Bank’s Affordable Housing Program (AHP), Community Investment Program (CIP), and other CICA programs. Section 914.2 requires each Bank to file Regulatory Reports with the Finance Board pursuant to the Finance Board’s forms and instructions for the reports. These reports must be filed no later than the deadline established by the Finance Board. In some cases, this will involve reporting at regular intervals; in other cases, it will involve responding to Finance Board requests for information that are in addition to the information submitted at regular intervals. Section 914.3 requires each Bank to make its books and records available upon request by the Finance Board within a reasonable period at a location acceptable to the Finance Board. Section 914.3 establishes presumptions about what the Finance Board considers a reasonable period of time to respond to requests that occur during and outside of an ongoing examination as well as those that occur at other times. C. Parts 915, 925, 950, and 955 The Finance Board is revising various reporting requirements set forth in parts 915, 925, 950, and 955 to refer the reader to forms and instructions issued pursuant to the DRM. PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 35497 III. Comments on the Proposed Rule In response to the February 2005 proposed rule, the Finance Board received four comments—three from Banks and one from a law firm representing a fourth Bank. These comments covered the following areas. Opportunity for Notice and Comment on Reporting Changes The four commenters expressed concern that reporting requirements could be imposed in the future without giving the Banks or the public an opportunity to comment. One commenter requested that the final rule provide procedures by which the Finance Board will determine if an amendment would impose regulatory burden or would constitute a significant change that merits input from the Banks and public through the comment process. As discussed in the proposed rule, reporting requirements imposed pursuant to the Finance Board’s investigatory powers are not subject to the notice and comment provisions of the APA.2 In some cases, new reporting requirements or revisions to existing requirements trigger the notice and comment requirements of the PRA. Other reporting requirements, such as those related to call reports, are not covered by the PRA. The Finance Board recognizes that changes to reporting requirements can impose regulatory burden. The Finance Board also recognizes the utility of input from the Banks and the public in determining what information is appropriate to collect and what is the most efficient way to collect needed information. Thus, as was indicated in the proposed rule, the Finance Board intends, where practicable, to consult with the Banks and the public with respect to substantial changes to reporting requirements, regardless of whether the APA or PRA apply. Reporting Violation as Basis for Enforcement Action Three of the four commenters expressed concern that a violation of a reporting requirement could be the basis for sanctions against a Bank without any additional due process. One commenter indicated that it believes that noncompliance with a reporting requirement alone would not suffice to cause an immediate violation resulting in sanctions. Rather, the commenter believes that non-compliance would 2 The banking agencies have taken the position that changes to reporting requirements for the call report are not covered by the APA. 69 FR 3995, 3998 (Jan. 27, 2004). E:\FR\FM\21JNR1.SGM 21JNR1 35498 Federal Register / Vol. 71, No. 119 / Wednesday, June 21, 2006 / Rules and Regulations sroberts on PROD1PC70 with RULES have to go to a judicial forum to determine whether the agency was entitled to the information it was seeking. The Bank Act authorizes the Finance Board to bring an enforcement action in the face of conduct that violates any order imposed in writing by the Finance Board. 12 U.S.C. 1422b(a)(5). The Finance Board also may bring an enforcement action if a Bank engages in an unsafe or unsound banking practice, and courts have held that frustrating a regulator’s gathering of information constitutes an unsafe or unsound banking practice. See Seidman v. Office of Thrift Supervision, 37 F.3d 911, 936– 937 (3rd Cir. 1994). In any formal enforcement action by the Finance Board related to a data reporting violation, the process will guarantee all constitutional and statutory rights, including a review in a judicial forum before the enforcement action becomes final. Under Finance Board regulations, the Finance Board would initiate an enforcement action by issuing a notice of charges. 12 CFR 908.40. If the Bank, director, or executive officer disputed the charges, a presiding officer would hold a hearing and issue a recommendation to the Finance Board. 12 CFR 908.60 and 908.63. If, after receiving the presiding officer’s recommendation, the Finance Board’s board of directors found that the charges were sustained and issued a cease and desist order or imposed civil money penalties, the affected party would have the option of appealing the action to the United States Court of Appeals for the District of Columbia Circuit. 12 CFR 908.10. Banking Agencies’ Treatment of Reporting Violations Two Banks commented that establishing the DRM as an enforceable order is inconsistent with the approach taken by other federal bank regulators with respect to information gathering. One Bank cited the Office of the Comptroller of the Currency (OCC) Handbook on Bank Supervisory Processes to demonstrate that, in the event of disagreements between examiners and a bank, it is the OCC’s policy to resolve the dispute fairly and expeditiously in an informal, amicable manner. The Bank also made reference to similar publication by the Office of Thrift Supervision. The examples cited by the commenters appear to relate to disagreements that arise during an examination or inquiry of a specific institution. For reporting requirements directed at all institutions within a banking agencies’ purview, such as VerDate Aug<31>2005 16:35 Jun 20, 2006 Jkt 208001 those related to the call report, the banking agencies impose reporting requirements in a manner closely similar to the way the Finance Board has exercised such powers here. For example, call report requirements for insured depository institutions and changes to such requirements are imposed by amending the forms and instructions for the call report. See 12 CFR part 304. These forms and instructions, like the DRM discussed above, represent enforceable orders issued as a proper exercise of an agency’s investigatory powers. When a depository institution fails to comply with a reporting requirement, its primary banking regulator routinely imposes penalties for reporting violations including violations that might seem de minimis. Another Bank commented that other federal banking regulators do not view the various manuals they promulgate as definitive statements carrying the force of law. Instead, the commenter claimed, the manuals of other federal banking regulators are not intended to be strictly binding on either the regulator or the regulated institution. The commenter appears to be confusing a basic principal of administrative law that staff policy guidance, such as those put in manuals at some agencies, ordinarily does not carry the force of law. Here, the data reporting requirements are being issued by the Finance Board’s Board of Directors pursuant to statutory authority to require reports. Compiling the reporting requirements in the DRM is solely a matter of convenience and in no way diminishes the legal authority with which they were adopted and the force of law. One Bank commented that orders usually arise in adjudicatory or investigative proceeding that is specific to a particular entity. The Bank wrote that it is doubtful that the law allows the Finance Board, as part of its regulatory process, to grant itself the power to issue an enforceable order preemptively and with application to all of the Banks particularly in view of the fact that the Banks have the right to challenge a request for privileged or confidential legal advice. Another Bank and the law firm commenter also expressed concerns that the Finance Board might include privileged or confidential material among the information it sought from all Banks or from one particular Bank. As discussed in the proposed rule, case law has long recognized Congress’ authority to give a regulatory agency investigatory powers that include the power to require informational reports. There is no dispute that section 20 gives the PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 Finance Board investigatory power to obtain information reports about the Banks. Where Congress, as here, has given an agency investigatory powers, an agency’s exercise of that power will be upheld if the request for information is ‘‘reasonably relevant.’’ FTC v. Invention Submission Corp., 965 F.2d 1086, 1089 (D.C. Cir. 1992). Courts have said that an agency’s own appraisal of relevancy must be accepted as long as it is not ‘‘obviously wrong.’’ Id. In exercising its authority to create reporting requirements, the Finance Board intends to observe all applicable privileges. Potential for Confusion Between Reporting Requirements and Other Guidance One commenter noted that the Finance Board already has established a process for clarifying regulatory reporting requirements through Advisory Bulletins and other supervisory guidance. The commenter claimed that nothing in the proposed rule stated that the Finance Board would stop issuing Advisory Bulletins or other supervisory letters apart from the DRM. This omission creates the potential, the commenter claimed, for discrepancies between the DRM and other supervisory guidance. The commenter recommended that the Finance Board revise the proposed rule to ensure that no such discrepancies or ambiguities are created in the reporting requirements. Another commenter made a similar comment. A commenter noted that not all data reporting requirements will be contained in the DRM. The Bank suggested that the DRM include an appendix clearly describing which reporting requirements are not in the DRM and where such reporting requirements are located. Without guidance as to when the DRM applies and when to consult the regulations, the commenter argued, the data reporting requirements may, in practice, become more confusing for the Banks. Another commenter expressed a similar point. For reporting requirements that currently are in the Finance Board regulations, the Finance Board will leave a reference that directs a reader to the DRM. The Finance Board will adopt the recommendation of including an appendix to the DRM that lists reporting requirements by topic and indicates where they may be found. Proposed Part 914 Two commenters opposed adopting a presumption in § 914.3 of 1 business day and 3 business days for a reasonable E:\FR\FM\21JNR1.SGM 21JNR1 Federal Register / Vol. 71, No. 119 / Wednesday, June 21, 2006 / Rules and Regulations period for complying with an examiner’s request for documents. These commenters recommended that, when considering whether a Bank complied with an examiner’s request in a reasonable period of time, the Finance Board should consider: (a) Whether the data are available and finalized; (b) whether there are any information technology issues affecting the ability to respond or analyze the response (on either the Finance Board’s or a Bank’s part); (c) whether the applicable business units are able to concentrate on these requests exclusively; (d) whether the applicable committees are available to review and approve the responses; and (e) whether any of the information is privileged. The Finance Board believes that the time periods set out in the proposed rule are reasonable. Because they are only presumptions, a Bank may cite the factors listed by the commenters, or other factors, to demonstrate that in a particular instance, a reasonable period to comply with an examiner’s request is longer than the time periods set out in the regulation. Proposed Addition to Part 917 sroberts on PROD1PC70 with RULES One commenter wrote that it believes that the proposal to amend part 917 to require the board of directors of a Bank to establish policies and procedures with respect to regulatory reporting was redundant given other requirements that require a Bank’s board of directors to ensure compliance generally with the regulatory requirements mandated by the Finance Board. The Finance Board acknowledges that the commenter has raised a valid concern. A Bank’s obligation to provide the Finance Board with information that is accurate, timely, and complete derives from the chapters that have been added to the DRM and in the new part 914 that is recommended for the final rule. Finance Board regulations already make clear that a Bank’s board of directors retains ultimate responsibility for a Bank’s management (12 CFR 917.2(a)). Upon further reflection, the Finance Board believes that adding the proposed part 917 amendment may cause a Bank’s board to focus on a Bank’s processes for regulatory reporting at the expense of focusing on outcomes of whether such reporting is timely, accurate, and complete. Thus, the final rule does not include the proposed § 917.11. IV. Paperwork Reduction Act Final Rule The final rule will have no substantive effect on any collection of VerDate Aug<31>2005 16:35 Jun 20, 2006 Jkt 208001 35499 information covered by the PRA. See 44 U.S.C. 3501 et seq. Therefore, the Finance Board did not submit the proposed regulation to the Office of Management and Budget (OMB) for review. 12 CFR Part 925 AMA Reporting Requirements Credit, Federal home loan banks, Housing, Reporting and recordkeeping requirements. As part of the reorganization of reporting requirements, the Board of Directors added the AMA reporting requirements to the DRM. See Resolution Number 2006–11 (June 14, 2006). The AMA reporting requirements, which are being moved from 12 CFR part 955 (specifically, § 955.4 and Appendices A and B) to the DRM as a result of this final rule, are contained an information collection entitled ‘‘Federal Home Loan Bank Acquired Member Assets, Core Mission Activities, Investments and Advances.’’ The OMB control number for this information collection is 3069–0058, and it is due to expire on March 31, 2007. In November 2005, the Finance Board published a PRA notice soliciting comments on the changes to the AMA reporting requirements. See 70 FR 66413 (Nov. 2, 2005). Elsewhere in this issue of the Federal Register, the Finance Board is publishing the second PRA notice with respect to the AMA reporting requirements and also is submitting the entire information collection, with the AMA reporting changes, to OMB for review and approval of a 3 year extension of the control number. V. Regulatory Flexibility Act The final rule applies only to the Banks, which do not come within the meaning of ‘‘small entities’’ as defined in the Regulatory Flexibility Act (RFA). See 5 U.S.C. 601(6). Thus, in accordance with section 605(b) of the RFA, 5 U.S.C. 605(b), the Finance Board hereby certifies that the final rule will not have a significant economic impact on a substantial number of small entities. List of Subjects Federal home loan banks. 12 CFR Part 914 Federal home loan banks, Reporting and recordkeeping requirements. 12 CFR Part 915 Banks, Banking, Conflicts of interest, Elections, Ethical conduct, Federal home loan banks, Financial disclosure, Reporting and recordkeeping requirements. Frm 00009 Fmt 4700 12 CFR Part 950 12 CFR Part 955 Credit, Federal home loan banks, Reporting and recordkeeping requirements. For the reasons stated in the preamble, the Finance Board revises 12 CFR, chapter IX to read as follows: I PART 900—GENERAL DEFINITIONS APPLYING TO ALL FINANCE BOARD REGULATIONS 1. The authority for part 900 continues to read as follows: I Authority: 12 U.S.C. 1422b(a). 2. Amend § 900.2 by adding in alphabetical order the definition for ‘‘Data Reporting Manual or DRM’’ to read as follows: I § 900.2 Terms relating to Bank operations, mission and supervision. * * * * * Data Reporting Manual or DRM means a manual issued by the Finance Board and amended from time to time containing reporting requirements for the Banks. * * * * * I 3. Add a new part 914 to title 12, chapter IX, Subchapter C, to read as follows: PART 914—DATA AVAILABILITY AND REPORTING Sec. 914.1 914.2 914.3 Regulatory Report defined. Filing Regulatory Reports. Access to books and records. Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), and 1440. § 914.1 12 CFR Part 900 PO 00000 Credit, Federal home loan banks, Reporting and recordkeeping requirements. Sfmt 4700 Regulatory Report defined. (a) Definition. Regulatory Report means any report of raw or summary data needed to evaluate the safe and sound condition and operations of a Bank or to determine compliance with any: (1) Provision in the Act or other law, order, rule, or regulation; (2) Condition imposed in writing by the Finance Board in connection with the granting of any application or other request by a Bank; or (3) Written agreement entered into between the Finance Board and a Bank. E:\FR\FM\21JNR1.SGM 21JNR1 35500 Federal Register / Vol. 71, No. 119 / Wednesday, June 21, 2006 / Rules and Regulations (b) Examples. Regulatory Report includes: (1) Call reports and reports of instrument-level risk modeling data; (2) Reports related to a Bank’s housing mission achievement, such as reports related to AMA, AHP, CIP, and other CICA programs; and (3) Reports submitted in response to requests to one or more Banks for information on a nonrecurring basis. § 914.2 Filing Regulatory Reports. Each Bank shall file Regulatory Reports with the Finance Board in accordance with the forms, instructions, and schedules issued by the Finance Board from time to time. If no regularly scheduled reporting dates are established, Regulatory Reports shall be filed as requested by the Finance Board. § 914.3 Access to books and records. Each Bank shall make its books and records readily available for inspection and other supervisory purposes within a reasonable period upon request by the Finance Board, at a location acceptable to the Finance Board. For requests for documents made during the course of an onsite examination and pursuant to the examination’s scope, a reasonable period is presumed to be no longer than 1 business day. For requests for documents made outside of an onsite examination, a reasonable period is presumed to be 3 business days. PART 915—BANK DIRECTOR ELIGIBILITY, APPOINTMENT, AND ELECTIONS § 915.12 Reporting requirements for Bank directors. I (a) Annual reporting. Each director shall submit to his or her Bank the appropriate executed director eligibility certification, as prescribed in the Data Reporting Manual issued by the Finance Board, as amended from time to time. The Bank shall promptly forward to the Finance Board a copy of the certification filed by each appointive director. * * * * * § 955.4 Reporting requirement for acquired member assets. PART 925—MEMBERS OF THE BANKS 7. The authority citation for part 925 continues to read as follows: I Authority: 12 U.S.C. 1422, 1422a, 1422b, 1423, 1424, 1426, 1430, and 1442. 8. Revise § 925.20(e) to read as follows: I § 925.20 * * * * (e) Reports. The Bank shall make reports to the Finance Board setting forth purchases by institutions approved for membership of their minimum stock requirement pursuant to this section in accordance with the instructions provided in the Data Reporting Manual issued by the Finance Board, as amended from time to time. PART 950—ADVANCES 9. The authority citation for part 950 continues to read as follows: I Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1426, 1429, 1430, 1430b, and 1431. 4. The authority citation for part 915 continues to read as follows: I Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1427, and 1432. § 950.4 I 10. Revise § 950.4(e) to read as follows: 5. Revise § 915.7(a) to read as follows: sroberts on PROD1PC70 with RULES § 915.7 Eligibility requirements for elective directors. (a) Eligibility verification. Based on the information provided on the director eligibility certification form prescribed in the Data Reporting Manual issued by the Finance Board, as amended from time to time, a Bank shall verify that each nominee meets all of the eligibility requirements for elective directors set forth in the Act and this part before placing that nominee on the ballot prepared by the Bank under § 915.8(a). A Bank shall not declare elected a nominee that it has reason to know is ineligible to serve, nor shall it seat a director-elect that it has reason to know is ineligible to serve. * * * * * I 6. Revise § 915.12(a) to read as follows: VerDate Aug<31>2005 18:03 Jun 20, 2006 Jkt 208001 Limitations on access to advances. * * * * * (e) Reporting. (1) Each Bank shall provide the Finance Board with a report of the advances and commitments outstanding to each of its members in accordance with the instructions provided in the Data Reporting Manual issued by the Finance Board, as amended from time to time. (2) Each Bank shall, upon written request from a member’s appropriate federal banking agency or insurer, provide to such entity information on advances and commitments outstanding to the member. * * * * * PART 955—ACQUIRED MEMBER ASSETS 11. The authority citation for part 955 continues to read as follows: I Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1430, 1430b, and 1431. PO 00000 Each Bank shall report information related to AMA in accordance with the instructions provided in the Data Reporting Manual issued by the Finance Board, as amended from time to time. Appendices A and B to Part 955 [Removed] 13. Remove Appendices A and B to part 955. I Dated: June 14, 2006. By the Board of Directors of the Federal Housing Finance Board. Ronald A. Rosenfeld, Chairman. [FR Doc. E6–9756 Filed 6–20–06; 8:45 am] BILLING CODE 6725–01–P Stock purchase. * I 12. Revise § 955.4 to read as follows: Frm 00010 Fmt 4700 Sfmt 4700 DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 23 [Docket No. CE251, Special Condition 23– 191–SC] Special Conditions; Rickenbacker Avionics, EFS–50 EFIS Installation in Rockwell Twin Commander Model 690B; Protection of Systems From High Intensity Radiated Fields (HIRF) Federal Aviation Administration (FAA), DOT. ACTION: Final special conditions; request for comments. AGENCY: SUMMARY: These special conditions are issued to Rickenbacker Avionics, 2820 Bobmeyer Road, Hangar C–6, Hamilton, OH 45015, for a Supplemental Type Certificate for the Rockwell Twin Commander Model 690B airplane. This airplane will have novel and unusual design features when compared to the state of technology envisaged in the applicable airworthiness standards. This novel and unusual design feature will include the installation of a two-tube Bendix/King EFS–50 Electronic Flight Instrument System (EFIS). The installation also includes components associated with this display system. The applicable regulations do not contain adequate or appropriate airworthiness standards for the protection of these systems from the effects of high intensity radiated fields (HIRF). These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing the E:\FR\FM\21JNR1.SGM 21JNR1

Agencies

[Federal Register Volume 71, Number 119 (Wednesday, June 21, 2006)]
[Rules and Regulations]
[Pages 35495-35500]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-9756]


=======================================================================
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FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 900, 914, 915, 925, 950, and 955

[No. 2006-10]
RIN 3069-AB28


Data Reporting Requirements for the Federal Home Loan Banks

AGENCY: Federal Housing Finance Board.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is 
reorganizing the way it imposes certain reporting requirements on the 
Federal Home Loan Banks (Banks) by removing the requirements from its 
regulations and issuing them in the Data Reporting Manual (DRM), which 
is an enforceable order issued pursuant to the Finance Board's 
investigatory powers. The Finance Board also is adding a new part 914, 
which addresses a Bank's obligation with respect to reporting 
requirements and making its books and records available to the Finance 
Board.

DATES: Effective Date: This final rule is effective on July 21, 2006.

FOR FURTHER INFORMATION CONTACT: Thomas Hearn, Senior Attorney Advisor, 
Office of General Counsel, by electronic mail at hearnt@fhfb.gov or by 
telephone at 202-408-2976; Scott L.

[[Page 35496]]

Smith, Associate Director, Office of Supervision, by electronic mail at 
smiths@fhfb.gov or by telephone at 202-408-2991; or Gary Ternullo, 
Associate Director, Office of Supervision, by electronic mail at 
ternullog@fhfb.gov or by telephone at 202-408-2904. You can send 
regular mail to the Federal Housing Finance Board, 1625 Eye Street, 
NW., Washington, DC 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

A. The Federal Home Loan Bank System (Bank System)

    The Bank System consists of 12 Banks and the Office of Finance 
(OF). The Banks are instrumentalities of the United States organized 
under the authority of the Federal Home Loan Bank Act (Bank Act). 12 
U.S.C. 1421 et seq. The Banks also are ``government sponsored 
enterprises'' (GSEs), i.e., federally chartered but privately owned 
institutions created by Congress to support the financing of housing 
and community lending by their members. See 12 U.S.C. 
1422a(a)(3)(B)(ii), 1430(i), and 1430(j). By virtue of their GSE 
status, the Banks are able to borrow in the capital markets at 
favorable rates. The Banks are then able to pass along that funding 
advantage to their members--and ultimately to consumers--by providing 
advances (secured loans) and other financial services to their members 
(principally, depository institutions) at rates that the members 
generally could not obtain elsewhere.
    The Banks, along with the OF, operate under the supervision of the 
Finance Board. The primary duty of the Finance Board is to ensure that 
the Banks operate in a financially safe and sound manner. Consistent 
with that duty, the Finance Board is required to supervise the Banks, 
ensure that they carry out their housing finance mission, and ensure 
that they remain adequately capitalized and able to raise funds in the 
capital markets. 12 U.S.C. 1422a(a)(3)(A) and (B).

B. Finance Board Investigatory Powers

    Congress has delegated to the Finance Board broad authority to 
fulfill its statutory mandates. Section 2B of the Bank Act states that 
the Finance Board has the power ``[t]o supervise the Federal Home Loan 
Banks and to promulgate and enforce such regulations and orders as are 
necessary from time to time to carry out the provisions of this chapter 
[i.e., Chapter 11 of Title 12, codified at 12 U.S.C. 1421-1449].'' 12 
U.S.C. 1422b(a)(1). Section 20 of the Bank Act provides the Finance 
Board with the authority to require, ``from time to time, [but] at 
least annually,'' examinations and reports of condition of all the 
Banks in such form as the Finance Board prescribes. 12 U.S.C. 1440. 
Section 20 also vests in Finance Board examiners ``the same powers and 
privileges as are vested in'' examiners under the National Bank Act and 
the Federal Reserve Act. These Acts, in turn, provide examiners with 
sweeping powers, including the power to ``make a thorough examination 
of all the affairs of the bank.'' 12 U.S.C. 481. Thus, the Finance 
Board and its examiners have been vested with broad access to the 
books, records, and information of the Banks in order to fulfill the 
statutory mission of the Finance Board.
    The United States Supreme Court has recognized the importance of 
this broad access to the ability of financial institution regulators to 
perform their supervisory functions. In United States v. Philadelphia 
National Bank, 374 U.S. 321 (1963), the Court stated:

    [P]erhaps the most effective weapon of federal regulation of 
banking is the broad visitorial power of federal bank examiners. 
Whenever the agencies deem it necessary, they may order `a thorough 
examination of all the affairs of the bank' * * * [citation 
omitted]. Such examinations are frequent and intensive. In addition, 
the banks are required to furnish detailed periodic reports of their 
operations to the supervisory agencies [citation omitted]. In this 
way the agencies maintain virtually a day-to-day surveillance of the 
American banking system. And should they discover unsound banking 
practices, they are equipped with a formidable array of sanctions * 
* *. As a result of this panoply of sanctions, recommendations by 
the agencies concerning banking practices tend to be followed by 
bankers without the necessity of formal compliance proceedings. 1 
Davis, Administrative Law (1958), s. 4.04.

374 U.S. at 329 (emphasis added). An agency's authority to require 
informational reports stems from its investigatory power, which 
generally is distinct from, and in addition to, its authority exercised 
under the Administrative Procedures Act (APA) to engage in rulemaking 
or to issue adjudicative orders. A principal legislative sponsor of the 
APA described investigative activity during floor debate in the House 
of Representatives as follows:

    This third type of administrative compulsory power may be 
incidental to either legislative or judicial powers of 
administrative agencies, or it may be entirely independent of 
either. I refer to the compulsory action of administrative agencies 
when they issue subpoenas, require records or reports, or undertake 
mandatory inspections. These functions are investigatory in nature.

92 Cong. Rec. 5648 (1948), cited in Appeal of FTC Line of Business 
Report Litigation, 595 F.2d 685, 695-696 (DC Cir.) (per curiam), cert. 
denied sub nom. Milliken and Co. v. FTC, 439 U.S. 958 (1978).

C. Reorganization of Reporting Requirements

    Historically, the Finance Board has imposed reporting requirements 
in a variety of ways. Some requirements, such as those related to the 
call report, have been imposed by informal directives issued by staff. 
For other requirements, the Finance Board has used its rulemaking 
authority. 12 U.S.C. 1422b(a)(1).
    On February 9, 2005, the Board of Directors approved for 
publication a proposed rule that would reorganize the way the Finance 
Board imposes reporting requirements by creating a Data Reporting 
Manual (DRM) that would contain certain reporting requirements 
currently in regulations or issued by Finance Board staff. See 
Resolution Number 2005-04 (Feb. 9, 2005), published at 770 FR 9551 
(Feb. 28, 2005).\1\ For each subject matter, the DRM includes 
instructions addressing data definitions as well as requirements 
concerning data elements, reporting format, reporting method, e.g., 
electronic or paper, record retention, timeliness, reporting frequency, 
and certification. Going forward, changes to the reporting requirements 
will be made by amendments to the DRM.
---------------------------------------------------------------------------

    \1\ Resolutions are available electronically in the FOIA Reading 
Room of the Finance Board Web site at: http://www.fhfb.gov/
Default.aspx?Page=59&Top=4.
---------------------------------------------------------------------------

    The proposed rule included substantive regulatory changes that 
would add a new part 914, which addresses a Bank's obligation with 
respect to reporting requirements and making its books and records 
available to the Finance Board. It also would add a new section to part 
917, which imposes on each Bank's board of directors the obligation to 
establish policies and procedures with respect to regulatory reporting. 
In July 2005, the Board of Directors created the DRM and located in it 
reporting requirements for the Call Report System. See Resolution 
Number 2005-14 (July 13, 2005). In August 2005, the Finance Board added 
to the DRM reporting requirements related to Bank members. See 
Resolution Number 2005-15 (Aug. 10, 2005). The Finance Board is 
continuing this effort by relocating from regulations to the DRM data 
reporting requirements

[[Page 35497]]

concerning: Purchases of Bank stock by member banks (12 CFR 925.20(e)); 
advances and commitments outstanding to each Bank member (12 CFR 
950.4(e)); Acquired Member Assets (AMA) (12 CFR 955.4); and forms 
related to Bank director eligibility (12 CFR 915.7 and 915.12(a)).
    In the proposed rule, the Finance Board considered placing in the 
DRM reporting requirements for a Bank's strategic business plan (12 CFR 
917.5(c)); Advisory Councils (12 CFR 951.4(f)(3)); the Affordable 
Housing Reserve Fund (12 CFR 951.3(d) and 951.15(b)); and Community 
Investment Cash Advance (CICA) Programs (12 CFR 952.6(a)). Because 
these requirements do not involve the periodic reporting of empirical 
data, we have determined that these requirements are better left in 
Finance Board regulations.
    The DRM represents an enforceable order issued pursuant to the 
Finance Board's investigatory powers. The reorganization of reporting 
requirements and the amendments to Finance Board regulations will allow 
the Finance Board to address problems it has experienced with the 
timeliness, accuracy, and completeness of data reporting by the Banks. 
The Bank Act gives the Finance Board enforcement authority to redress, 
among other things, violations of the Bank Act, or any law, order, 
rule, or regulation. 12 U.S.C. 1422b(a)(5). The Finance Board will deem 
data reporting problems as violations of an investigatory order and, 
where applicable, violations of the regulations being added today in 12 
CFR part 914.
    Reporting requirements imposed pursuant to the Finance Board's 
investigatory powers are not subject to the notice and comment 
provisions of the APA. See Appeal of FTC Line of Business Report 
Litigation, 595 F.2d at 695-696. Nevertheless, the Finance Board 
recognizes that changes to reporting requirements can impose regulatory 
burden. The Finance Board also recognizes the utility of input from the 
Banks and the public in determining what information is appropriate to 
collect. Thus, where practicable, Finance Board staff will consult with 
the Banks and the public with respect to significant changes in the DRM 
before changes are made. Moreover, information collections that are 
subject to the Paperwork Reduction Act (PRA), such as those related to 
the AMA rule, will continue to be published in the Federal Register for 
comment in accordance with the PRA.

II. Analysis of the Final Rule

A. Part 914

    The Finance Board is adding a new part 914 to its regulations that 
addresses a Bank's obligation with respect to reporting requirements 
and makes its books and records available to the Finance Board. Section 
914.1 contains a number of provisions directed at how a Bank reports 
data to the Finance Board and makes its books and records available to 
Finance Board examiners. Section 914.1(a) defines the term Regulatory 
Report to mean any report of raw or summary data required to evaluate 
the safe and sound condition and operations of a Bank or to determine 
compliance with any: (1) Provision in the Bank Act, or any law, order, 
rule, or regulation; (2) condition imposed in writing by the Finance 
Board in connection with the granting of any application or other 
request by a Bank; or (3) written agreement entered into by the Finance 
Board and a Bank. Section 914.1(b) provides examples of a Regulatory 
Report, including the call report and reports of instrument-level data 
submitted for risk assessment purposes. The term Regulatory Report also 
includes reports related to a Bank's housing mission achievement, such 
as reports related to AMA, a Bank's Affordable Housing Program (AHP), 
Community Investment Program (CIP), and other CICA programs.
    Section 914.2 requires each Bank to file Regulatory Reports with 
the Finance Board pursuant to the Finance Board's forms and 
instructions for the reports. These reports must be filed no later than 
the deadline established by the Finance Board. In some cases, this will 
involve reporting at regular intervals; in other cases, it will involve 
responding to Finance Board requests for information that are in 
addition to the information submitted at regular intervals.
    Section 914.3 requires each Bank to make its books and records 
available upon request by the Finance Board within a reasonable period 
at a location acceptable to the Finance Board. Section 914.3 
establishes presumptions about what the Finance Board considers a 
reasonable period of time to respond to requests that occur during and 
outside of an ongoing examination as well as those that occur at other 
times.

C. Parts 915, 925, 950, and 955

    The Finance Board is revising various reporting requirements set 
forth in parts 915, 925, 950, and 955 to refer the reader to forms and 
instructions issued pursuant to the DRM.

III. Comments on the Proposed Rule

    In response to the February 2005 proposed rule, the Finance Board 
received four comments--three from Banks and one from a law firm 
representing a fourth Bank. These comments covered the following areas.
Opportunity for Notice and Comment on Reporting Changes
    The four commenters expressed concern that reporting requirements 
could be imposed in the future without giving the Banks or the public 
an opportunity to comment. One commenter requested that the final rule 
provide procedures by which the Finance Board will determine if an 
amendment would impose regulatory burden or would constitute a 
significant change that merits input from the Banks and public through 
the comment process.
    As discussed in the proposed rule, reporting requirements imposed 
pursuant to the Finance Board's investigatory powers are not subject to 
the notice and comment provisions of the APA.\2\ In some cases, new 
reporting requirements or revisions to existing requirements trigger 
the notice and comment requirements of the PRA. Other reporting 
requirements, such as those related to call reports, are not covered by 
the PRA.
---------------------------------------------------------------------------

    \2\ The banking agencies have taken the position that changes to 
reporting requirements for the call report are not covered by the 
APA. 69 FR 3995, 3998 (Jan. 27, 2004).
---------------------------------------------------------------------------

    The Finance Board recognizes that changes to reporting requirements 
can impose regulatory burden. The Finance Board also recognizes the 
utility of input from the Banks and the public in determining what 
information is appropriate to collect and what is the most efficient 
way to collect needed information. Thus, as was indicated in the 
proposed rule, the Finance Board intends, where practicable, to consult 
with the Banks and the public with respect to substantial changes to 
reporting requirements, regardless of whether the APA or PRA apply.
Reporting Violation as Basis for Enforcement Action
    Three of the four commenters expressed concern that a violation of 
a reporting requirement could be the basis for sanctions against a Bank 
without any additional due process. One commenter indicated that it 
believes that non-compliance with a reporting requirement alone would 
not suffice to cause an immediate violation resulting in sanctions. 
Rather, the commenter believes that non-compliance would

[[Page 35498]]

have to go to a judicial forum to determine whether the agency was 
entitled to the information it was seeking.
    The Bank Act authorizes the Finance Board to bring an enforcement 
action in the face of conduct that violates any order imposed in 
writing by the Finance Board. 12 U.S.C. 1422b(a)(5). The Finance Board 
also may bring an enforcement action if a Bank engages in an unsafe or 
unsound banking practice, and courts have held that frustrating a 
regulator's gathering of information constitutes an unsafe or unsound 
banking practice. See Seidman v. Office of Thrift Supervision, 37 F.3d 
911, 936-937 (3rd Cir. 1994).
    In any formal enforcement action by the Finance Board related to a 
data reporting violation, the process will guarantee all constitutional 
and statutory rights, including a review in a judicial forum before the 
enforcement action becomes final. Under Finance Board regulations, the 
Finance Board would initiate an enforcement action by issuing a notice 
of charges. 12 CFR 908.40. If the Bank, director, or executive officer 
disputed the charges, a presiding officer would hold a hearing and 
issue a recommendation to the Finance Board. 12 CFR 908.60 and 908.63. 
If, after receiving the presiding officer's recommendation, the Finance 
Board's board of directors found that the charges were sustained and 
issued a cease and desist order or imposed civil money penalties, the 
affected party would have the option of appealing the action to the 
United States Court of Appeals for the District of Columbia Circuit. 12 
CFR 908.10.
Banking Agencies' Treatment of Reporting Violations
    Two Banks commented that establishing the DRM as an enforceable 
order is inconsistent with the approach taken by other federal bank 
regulators with respect to information gathering. One Bank cited the 
Office of the Comptroller of the Currency (OCC) Handbook on Bank 
Supervisory Processes to demonstrate that, in the event of 
disagreements between examiners and a bank, it is the OCC's policy to 
resolve the dispute fairly and expeditiously in an informal, amicable 
manner. The Bank also made reference to similar publication by the 
Office of Thrift Supervision.
    The examples cited by the commenters appear to relate to 
disagreements that arise during an examination or inquiry of a specific 
institution. For reporting requirements directed at all institutions 
within a banking agencies' purview, such as those related to the call 
report, the banking agencies impose reporting requirements in a manner 
closely similar to the way the Finance Board has exercised such powers 
here. For example, call report requirements for insured depository 
institutions and changes to such requirements are imposed by amending 
the forms and instructions for the call report. See 12 CFR part 304. 
These forms and instructions, like the DRM discussed above, represent 
enforceable orders issued as a proper exercise of an agency's 
investigatory powers. When a depository institution fails to comply 
with a reporting requirement, its primary banking regulator routinely 
imposes penalties for reporting violations including violations that 
might seem de minimis.
    Another Bank commented that other federal banking regulators do not 
view the various manuals they promulgate as definitive statements 
carrying the force of law. Instead, the commenter claimed, the manuals 
of other federal banking regulators are not intended to be strictly 
binding on either the regulator or the regulated institution. The 
commenter appears to be confusing a basic principal of administrative 
law that staff policy guidance, such as those put in manuals at some 
agencies, ordinarily does not carry the force of law. Here, the data 
reporting requirements are being issued by the Finance Board's Board of 
Directors pursuant to statutory authority to require reports. Compiling 
the reporting requirements in the DRM is solely a matter of convenience 
and in no way diminishes the legal authority with which they were 
adopted and the force of law.
    One Bank commented that orders usually arise in adjudicatory or 
investigative proceeding that is specific to a particular entity. The 
Bank wrote that it is doubtful that the law allows the Finance Board, 
as part of its regulatory process, to grant itself the power to issue 
an enforceable order preemptively and with application to all of the 
Banks particularly in view of the fact that the Banks have the right to 
challenge a request for privileged or confidential legal advice. 
Another Bank and the law firm commenter also expressed concerns that 
the Finance Board might include privileged or confidential material 
among the information it sought from all Banks or from one particular 
Bank. As discussed in the proposed rule, case law has long recognized 
Congress' authority to give a regulatory agency investigatory powers 
that include the power to require informational reports. There is no 
dispute that section 20 gives the Finance Board investigatory power to 
obtain information reports about the Banks.
    Where Congress, as here, has given an agency investigatory powers, 
an agency's exercise of that power will be upheld if the request for 
information is ``reasonably relevant.'' FTC v. Invention Submission 
Corp., 965 F.2d 1086, 1089 (D.C. Cir. 1992). Courts have said that an 
agency's own appraisal of relevancy must be accepted as long as it is 
not ``obviously wrong.'' Id. In exercising its authority to create 
reporting requirements, the Finance Board intends to observe all 
applicable privileges.
Potential for Confusion Between Reporting Requirements and Other 
Guidance
    One commenter noted that the Finance Board already has established 
a process for clarifying regulatory reporting requirements through 
Advisory Bulletins and other supervisory guidance. The commenter 
claimed that nothing in the proposed rule stated that the Finance Board 
would stop issuing Advisory Bulletins or other supervisory letters 
apart from the DRM. This omission creates the potential, the commenter 
claimed, for discrepancies between the DRM and other supervisory 
guidance. The commenter recommended that the Finance Board revise the 
proposed rule to ensure that no such discrepancies or ambiguities are 
created in the reporting requirements. Another commenter made a similar 
comment.
    A commenter noted that not all data reporting requirements will be 
contained in the DRM. The Bank suggested that the DRM include an 
appendix clearly describing which reporting requirements are not in the 
DRM and where such reporting requirements are located. Without guidance 
as to when the DRM applies and when to consult the regulations, the 
commenter argued, the data reporting requirements may, in practice, 
become more confusing for the Banks. Another commenter expressed a 
similar point. For reporting requirements that currently are in the 
Finance Board regulations, the Finance Board will leave a reference 
that directs a reader to the DRM. The Finance Board will adopt the 
recommendation of including an appendix to the DRM that lists reporting 
requirements by topic and indicates where they may be found.
Proposed Part 914
    Two commenters opposed adopting a presumption in Sec.  914.3 of 1 
business day and 3 business days for a reasonable

[[Page 35499]]

period for complying with an examiner's request for documents. These 
commenters recommended that, when considering whether a Bank complied 
with an examiner's request in a reasonable period of time, the Finance 
Board should consider: (a) Whether the data are available and 
finalized; (b) whether there are any information technology issues 
affecting the ability to respond or analyze the response (on either the 
Finance Board's or a Bank's part); (c) whether the applicable business 
units are able to concentrate on these requests exclusively; (d) 
whether the applicable committees are available to review and approve 
the responses; and (e) whether any of the information is privileged.
    The Finance Board believes that the time periods set out in the 
proposed rule are reasonable. Because they are only presumptions, a 
Bank may cite the factors listed by the commenters, or other factors, 
to demonstrate that in a particular instance, a reasonable period to 
comply with an examiner's request is longer than the time periods set 
out in the regulation.
Proposed Addition to Part 917
    One commenter wrote that it believes that the proposal to amend 
part 917 to require the board of directors of a Bank to establish 
policies and procedures with respect to regulatory reporting was 
redundant given other requirements that require a Bank's board of 
directors to ensure compliance generally with the regulatory 
requirements mandated by the Finance Board.
    The Finance Board acknowledges that the commenter has raised a 
valid concern. A Bank's obligation to provide the Finance Board with 
information that is accurate, timely, and complete derives from the 
chapters that have been added to the DRM and in the new part 914 that 
is recommended for the final rule. Finance Board regulations already 
make clear that a Bank's board of directors retains ultimate 
responsibility for a Bank's management (12 CFR 917.2(a)). Upon further 
reflection, the Finance Board believes that adding the proposed part 
917 amendment may cause a Bank's board to focus on a Bank's processes 
for regulatory reporting at the expense of focusing on outcomes of 
whether such reporting is timely, accurate, and complete. Thus, the 
final rule does not include the proposed Sec.  917.11.

IV. Paperwork Reduction Act

Final Rule

    The final rule will have no substantive effect on any collection of 
information covered by the PRA. See 44 U.S.C. 3501 et seq. Therefore, 
the Finance Board did not submit the proposed regulation to the Office 
of Management and Budget (OMB) for review.

AMA Reporting Requirements

    As part of the reorganization of reporting requirements, the Board 
of Directors added the AMA reporting requirements to the DRM. See 
Resolution Number 2006-11 (June 14, 2006). The AMA reporting 
requirements, which are being moved from 12 CFR part 955 (specifically, 
Sec.  955.4 and Appendices A and B) to the DRM as a result of this 
final rule, are contained an information collection entitled ``Federal 
Home Loan Bank Acquired Member Assets, Core Mission Activities, 
Investments and Advances.'' The OMB control number for this information 
collection is 3069-0058, and it is due to expire on March 31, 2007. In 
November 2005, the Finance Board published a PRA notice soliciting 
comments on the changes to the AMA reporting requirements. See 70 FR 
66413 (Nov. 2, 2005). Elsewhere in this issue of the Federal Register, 
the Finance Board is publishing the second PRA notice with respect to 
the AMA reporting requirements and also is submitting the entire 
information collection, with the AMA reporting changes, to OMB for 
review and approval of a 3 year extension of the control number.

V. Regulatory Flexibility Act

    The final rule applies only to the Banks, which do not come within 
the meaning of ``small entities'' as defined in the Regulatory 
Flexibility Act (RFA). See 5 U.S.C. 601(6). Thus, in accordance with 
section 605(b) of the RFA, 5 U.S.C. 605(b), the Finance Board hereby 
certifies that the final rule will not have a significant economic 
impact on a substantial number of small entities.

List of Subjects

12 CFR Part 900

    Federal home loan banks.

12 CFR Part 914

    Federal home loan banks, Reporting and recordkeeping requirements.

12 CFR Part 915

    Banks, Banking, Conflicts of interest, Elections, Ethical conduct, 
Federal home loan banks, Financial disclosure, Reporting and 
recordkeeping requirements.

12 CFR Part 925

    Credit, Federal home loan banks, Reporting and recordkeeping 
requirements.

12 CFR Part 950

    Credit, Federal home loan banks, Housing, Reporting and 
recordkeeping requirements.

12 CFR Part 955

    Credit, Federal home loan banks, Reporting and recordkeeping 
requirements.


0
For the reasons stated in the preamble, the Finance Board revises 12 
CFR, chapter IX to read as follows:

PART 900--GENERAL DEFINITIONS APPLYING TO ALL FINANCE BOARD 
REGULATIONS

0
1. The authority for part 900 continues to read as follows:

    Authority: 12 U.S.C. 1422b(a).



0
2. Amend Sec.  900.2 by adding in alphabetical order the definition for 
``Data Reporting Manual or DRM'' to read as follows:


Sec.  900.2  Terms relating to Bank operations, mission and 
supervision.

* * * * *
    Data Reporting Manual or DRM means a manual issued by the Finance 
Board and amended from time to time containing reporting requirements 
for the Banks.
* * * * *

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3. Add a new part 914 to title 12, chapter IX, Subchapter C, to read as 
follows:

PART 914--DATA AVAILABILITY AND REPORTING

Sec.
914.1 Regulatory Report defined.
914.2 Filing Regulatory Reports.
914.3 Access to books and records.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), and 1440.


Sec.  914.1  Regulatory Report defined.

    (a) Definition. Regulatory Report means any report of raw or 
summary data needed to evaluate the safe and sound condition and 
operations of a Bank or to determine compliance with any:
    (1) Provision in the Act or other law, order, rule, or regulation;
    (2) Condition imposed in writing by the Finance Board in connection 
with the granting of any application or other request by a Bank; or
    (3) Written agreement entered into between the Finance Board and a 
Bank.

[[Page 35500]]

    (b) Examples. Regulatory Report includes:
    (1) Call reports and reports of instrument-level risk modeling 
data;
    (2) Reports related to a Bank's housing mission achievement, such 
as reports related to AMA, AHP, CIP, and other CICA programs; and
    (3) Reports submitted in response to requests to one or more Banks 
for information on a nonrecurring basis.


Sec.  914.2  Filing Regulatory Reports.

    Each Bank shall file Regulatory Reports with the Finance Board in 
accordance with the forms, instructions, and schedules issued by the 
Finance Board from time to time. If no regularly scheduled reporting 
dates are established, Regulatory Reports shall be filed as requested 
by the Finance Board.


Sec.  914.3  Access to books and records.

    Each Bank shall make its books and records readily available for 
inspection and other supervisory purposes within a reasonable period 
upon request by the Finance Board, at a location acceptable to the 
Finance Board. For requests for documents made during the course of an 
onsite examination and pursuant to the examination's scope, a 
reasonable period is presumed to be no longer than 1 business day. For 
requests for documents made outside of an onsite examination, a 
reasonable period is presumed to be 3 business days.

PART 915--BANK DIRECTOR ELIGIBILITY, APPOINTMENT, AND ELECTIONS

0
4. The authority citation for part 915 continues to read as follows:

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1427, and 
1432.

0
5. Revise Sec.  915.7(a) to read as follows:


Sec.  915.7  Eligibility requirements for elective directors.

    (a) Eligibility verification. Based on the information provided on 
the director eligibility certification form prescribed in the Data 
Reporting Manual issued by the Finance Board, as amended from time to 
time, a Bank shall verify that each nominee meets all of the 
eligibility requirements for elective directors set forth in the Act 
and this part before placing that nominee on the ballot prepared by the 
Bank under Sec.  915.8(a). A Bank shall not declare elected a nominee 
that it has reason to know is ineligible to serve, nor shall it seat a 
director-elect that it has reason to know is ineligible to serve.
* * * * *

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6. Revise Sec.  915.12(a) to read as follows:


Sec.  915.12  Reporting requirements for Bank directors.

    (a) Annual reporting. Each director shall submit to his or her Bank 
the appropriate executed director eligibility certification, as 
prescribed in the Data Reporting Manual issued by the Finance Board, as 
amended from time to time. The Bank shall promptly forward to the 
Finance Board a copy of the certification filed by each appointive 
director.
* * * * *

PART 925--MEMBERS OF THE BANKS

0
7. The authority citation for part 925 continues to read as follows:

    Authority: 12 U.S.C. 1422, 1422a, 1422b, 1423, 1424, 1426, 1430, 
and 1442.


0
8. Revise Sec.  925.20(e) to read as follows:


Sec.  925.20  Stock purchase.

* * * * *
    (e) Reports. The Bank shall make reports to the Finance Board 
setting forth purchases by institutions approved for membership of 
their minimum stock requirement pursuant to this section in accordance 
with the instructions provided in the Data Reporting Manual issued by 
the Finance Board, as amended from time to time.

PART 950--ADVANCES

0
9. The authority citation for part 950 continues to read as follows:

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1426, 1429, 1430, 
1430b, and 1431.


0
10. Revise Sec.  950.4(e) to read as follows:


Sec.  950.4  Limitations on access to advances.

* * * * *
    (e) Reporting. (1) Each Bank shall provide the Finance Board with a 
report of the advances and commitments outstanding to each of its 
members in accordance with the instructions provided in the Data 
Reporting Manual issued by the Finance Board, as amended from time to 
time.
    (2) Each Bank shall, upon written request from a member's 
appropriate federal banking agency or insurer, provide to such entity 
information on advances and commitments outstanding to the member.
* * * * *

PART 955--ACQUIRED MEMBER ASSETS

0
11. The authority citation for part 955 continues to read as follows:

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1430, 1430b, and 
1431.


0
12. Revise Sec.  955.4 to read as follows:


Sec.  955.4  Reporting requirement for acquired member assets.

    Each Bank shall report information related to AMA in accordance 
with the instructions provided in the Data Reporting Manual issued by 
the Finance Board, as amended from time to time.

Appendices A and B to Part 955 [Removed]

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13. Remove Appendices A and B to part 955.

    Dated: June 14, 2006.

    By the Board of Directors of the Federal Housing Finance Board.
Ronald A. Rosenfeld,
Chairman.
[FR Doc. E6-9756 Filed 6-20-06; 8:45 am]
BILLING CODE 6725-01-P