Transactions Between Member Banks and Their Affiliates: Exemption for Certain Securities Financing Transactions Between a Member Bank and an Affiliate, 54307-54309 [E8-21792]
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Federal Register / Vol. 73, No. 183 / Friday, September 19, 2008 / Rules and Regulations
duration without the concurrence of
Rural Development. If the IRP funds
have been unused to make loans to
ultimate recipients for 6 months or
more, those funds will be returned to
Rural Development unless Rural
Development provides an exception to
the intermediary. Any exception would
be based on evidence satisfactory to
Rural Development that every effort is
being made by the intermediary to
utilize the IRP funding in conformance
with program objectives.
CHAPTER XLII—RURAL BUSINESSCOOPERATIVE SERVICE AND RURAL
UTILITIES SERVICE, DEPARTMENT OF
AGRICULTURE
PART 4274—DIRECT AND INSURED
LOANMAKING
4. The authority citation for part 4274
continues to read as follows:
■
the annual gross revenue is derived
from legalized gambling activity.
■ 7. Section 4274.338 is amended by
adding paragraph (b)(4)(ii)(D) to read as
follows:
§ 4274.338 Loan agreements between the
Agency and the intermediary.
*
*
*
*
*
(b) * * *
(4) * * *
(ii) * * *
(D) An annual report on the extent to
which increased employment, income
and ownership opportunities are
provided to low-income persons, farm
families, and displaced farm families for
each loan made by such intermediary.
Dated: September 12, 2008.
Ben Anderson,
Administrator, Rural Business-Cooperative
Service.
[FR Doc. E8–22003 Filed 9–18–08; 8:45 am]
BILLING CODE 3410–XY–P
Authority: 5 U.S.C. 301; 7 U.S.C. 1932
note; 7 U.S.C. 1989.
Subpart D—Intermediary Relending
Program (IRP)
FEDERAL RESERVE SYSTEM
5. Section 4274.314 is amended by
revising paragraph (b)(10)(i) and by
adding paragraph (b)(15) to read as
follows:
12 CFR Part 223
■
§ 4274.314
[Regulation W; Docket No. R–1330]
Loan purposes.
*
*
*
*
*
(b) * * *
(10) * * *
(i) The intermediary is responsible for
making prudent lending decisions based
on sound underwriting principles when
considering the restructuring of an
ultimate recipient’s debt; and
*
*
*
*
*
(15) Aquaculture-based rural small
businesses.
■ 6. Section 4274.319 is amended by
revising paragraphs (c) and (d) and by
adding paragraphs (m) and (n) to read as
follows:
§ 4274.319
Ineligible loan purposes.
yshivers on PROD1PC62 with RULES
*
*
*
*
*
(c) Charitable institutions, that would
not have revenue from sales, fees, or
stable revenue to support the operation
and repay the loan, and fraternal
organizations.
(d) Assistance to Federal government
employees, active duty military
personnel, employees of the
intermediary, or any organization for
which such persons are directors or
officers or have 20 percent or more
ownership.
*
*
*
*
*
(m) For any line of credit.
(n) For any legitimate business
activity when more than 10 percent of
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15:21 Sep 18, 2008
Jkt 214001
Transactions Between Member Banks
and Their Affiliates: Exemption for
Certain Securities Financing
Transactions Between a Member Bank
and an Affiliate
Board of Governors of the
Federal Reserve System (Board).
ACTION: Interim final rule with request
for public comment.
AGENCY:
SUMMARY: In light of the continuing
unusual and exigent circumstances in
the financial markets, the Board has
adopted, on an interim final basis, a
regulatory exemption for member banks
from certain provisions of section 23A
of the Federal Reserve Act and the
Board’s Regulation W. The exemption
increases the capacity of member banks,
subject to certain conditions designed to
help ensure the safety and soundness of
the banks, to enter into securities
financing transactions with affiliates.
DATES: The interim final rule became
effective on September 14, 2008.
Comments must be received on or
before October 31, 2008.
ADDRESSES: You may submit comments,
identified by Docket No. R–1330, by any
of the following methods:
Agency Web Site: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
PO 00000
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54307
Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
E-mail:
regs.comments@federalreserve.gov.
Include docket number in the subject
line of the message.
Fax: (202) 452–3819 or (202) 452–
3102.
Mail: Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551.
All public comments are available
from the Board’s Web site at https://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons.
Accordingly, your comments will not be
edited to remove any identifying or
contact information.
Public comments may also be viewed
electronically or in paper form in Room
MP–500 of the Board’s Martin Building
(20th and C Streets, NW.) between 9
a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT:
Mark E. Van Der Weide, Assistant
General Counsel, (202) 452–2263, Legal
Division, or Norah M. Barger, Deputy
Director, (202) 452–2402, Division of
Banking Supervision and Regulation,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551. For the deaf, hard of hearing,
and speech impaired only,
teletypewriter (TTY), (202) 263–4869.
SUPPLEMENTARY INFORMATION: In light of
the ongoing dislocations in the financial
markets, and the potential impact of
such dislocations on the functioning of
the U.S. tri-party repurchase agreement
market, the Board has adopted on an
interim basis the following exemption
from section 23A of the Federal Reserve
Act (12 U.S.C. 371c) and the Board’s
Regulation W (12 CFR part 223). The
exemption will facilitate the ability of
an affiliate of a member bank (such as
an SEC-registered broker-dealer) to
obtain financing, if needed, for
securities or other assets that the
affiliate ordinarily would have financed
through the U.S. tri-party repurchase
agreement market. The exemption is
subject to several conditions designed to
protect the safety and soundness of the
member bank.
First, the member bank may use the
exemption to finance only those asset
types that the affiliate currently finances
in the U.S. tri-party repurchase
agreement market.
Second, the transactions must be
marked to market daily and subject to
daily margin maintenance requirements,
E:\FR\FM\19SER1.SGM
19SER1
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54308
Federal Register / Vol. 73, No. 183 / Friday, September 19, 2008 / Rules and Regulations
and the member bank must be at least
as over-collateralized in its securities
financing transactions with the affiliate
as the affiliate’s clearing bank was in its
U.S. tri-party repurchase agreement
transactions with the affiliate on
September 12, 2008. The Board expects
the member bank and its affiliate to use
standard industry documentation for the
exempt securities financing transactions
(which would, among other things,
qualify the transactions as securities
contracts or repurchase agreements for
purposes of U.S. bankruptcy law).
Third, to ensure that member banks
use the exemption in a manner
consistent with its purpose—that is, to
help provide liquidity to the U.S. triparty repurchase agreement market—the
aggregate risk profile of the exempt
securities financing transactions must
be no greater than the aggregate risk
profile of the affiliate’s U.S. tri-party
repurchase agreement transactions on
September 12, 2008. The exemption,
therefore, permits an affiliate to obtain
financing from its affiliated member
bank for securities positions that the
affiliate did not own or finance in the
U.S. tri-party repurchase agreement
market on September 12, 2008, but only
if the new positions in the aggregate do
not increase the overall risk profile of
the affiliate’s portfolio.
Fourth, the member bank’s top-tier
holding company must guarantee the
obligations of the affiliate under the
securities financing transactions (or
must provide other security to the bank
that is acceptable to the Board). Any
member bank that intends to use a form
of credit enhancement other than a
parent company guarantee must consult
in advance with Board staff. An
example of the type of other security
arrangement that may be acceptable to
the Board would be a pledge by the
affiliate or parent holding company to
the member bank of a sufficient amount
of additional liquid, high-quality
collateral.
Fifth, a member bank may use the
exemption only if the bank has not been
specifically informed by the Board, after
consultation with the bank’s appropriate
Federal banking agency, that the bank
may not use this exemption. If the Board
believes, after such consultation, that
the exempt securities financing
transactions pose an unacceptable level
of risk to the bank, the Board may
withdraw the exemption for the bank or
may impose supplemental conditions
on the bank’s use of the exemption.
Consistent with its purpose to
ameliorate potential temporary
dislocations in the U.S. tri-party
repurchase agreement market, the
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15:21 Sep 18, 2008
Jkt 214001
exemption will expire on January 30,
2009, unless extended by the Board.
The Board notes that any securities
financing transactions between the
member bank and an affiliate are subject
to the market terms requirement of
section 23B of the Federal Reserve Act
(12 U.S.C. 371c–1). Section 23B requires
that financial transactions between a
bank and its affiliate be on terms and
under circumstances (including credit
standards) that are substantially the
same, or at least as favorable to the
bank, as those prevailing at the time for
comparable transactions with or
involving nonaffiliates. Among other
things, section 23B would require the
member bank to apply collateral
haircuts to its affiliated securities
financing transaction counterparty that
are at least as strict as the bank would
apply to comparable unaffiliated
securities financing transaction
counterparties.
Administrative Procedure Act
Pursuant to sections 553(b) and (d) of
the Administrative Procedure Act (5
U.S.C. 553(b) and (d)), the Board finds
that there is good cause for making the
exemption effective immediately on
September 14, 2008, and that it is
impracticable, unnecessary, or contrary
to the public interest to issue a notice
of proposed rulemaking and provide an
opportunity to comment before the
effective date. The Board has adopted
the exemption in light of, and to help
address, the continuing unusual and
exigent circumstances in the financial
markets. The exemption will provide
immediate relief to participants in the
U.S. tri-party repurchase agreement
market affected by the current turmoil.
The Board is soliciting comment on all
aspects of the exemption and will make
such changes that it considers to be
appropriate or necessary after review of
any comments received.
Regulatory Flexibility Act
The Regulatory Flexibility Act
requires an agency that is issuing a final
rule to prepare and make available a
regulatory flexibility analysis that
describes the impact of the final rule on
small entities. 5 U.S.C. 603(a). The
Regulatory Flexibility Act provides that
an agency is not required to prepare and
publish a regulatory flexibility analysis
if the agency certifies that the final rule
will not have a significant economic
impact on a substantial number of small
entities. 5 U.S.C. 605(b).
Pursuant to section 605(b), the Board
certifies that this interim final rule will
not have a significant economic impact
on a substantial number of small
entities. The rule reduces regulatory
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burden on large and small insured
depository institutions by granting an
exemption from the Federal transactions
with affiliates regime for insured
depository institutions that engage in
securities financing transactions with
affiliates.
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act (44 U.S.C. 3506; 5 CFR
1320 Appendix A.1), the Board has
reviewed the interim final rule under
authority delegated to the Board by the
Office of Management and Budget. The
rule contains no collections of
information pursuant to the Paperwork
Reduction Act.
Plain Language
Section 722 of the Gramm-LeachBliley Act requires the Board to use
‘‘plain language’’ in all proposed and
final rules. In light of this requirement,
the Board has sought to present the
interim final rule in a simple and
straightforward manner. The Board
invites comment on whether the Board
could take additional steps to make the
rule easier to understand.
List of Subjects in 12 CFR Part 223
Banks, Banking, Federal Reserve
System.
Authority and Issuance
For the reasons set forth in the
preamble, Chapter II of Title 12 of the
Code of Federal Regulations is amended
as follows:
■
PART 223—TRANSACTIONS
BETWEEN MEMBER BANKS AND
THEIR AFFILIATES (REGULATION W)
1. The authority citation for part 223
continues to read as follows:
■
Authority: 12 U.S.C. 371c and 371c–1.
2. In § 223.42, add paragraph (n) to
read as follows:
■
§ 223.42 What covered transactions are
exempt from the quantitative limits,
collateral requirements, and low-quality
asset prohibition?
*
*
*
*
*
(n) Securities financing transactions.
(1) From September 15, 2008, until
January 30, 2009 (unless further
extended by the Board), securities
financing transactions with an affiliate,
if:
(i) The security or other asset financed
by the member bank in the transaction
is of a type that the affiliate financed in
the U.S. tri-party repurchase agreement
market at any time during the week of
September 8–12, 2008;
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Federal Register / Vol. 73, No. 183 / Friday, September 19, 2008 / Rules and Regulations
(ii) The transaction is marked to
market daily and subject to daily
margin-maintenance requirements, and
the member bank is at least as overcollateralized in the transaction as the
affiliate’s clearing bank was overcollateralized in comparable
transactions with the affiliate in the U.S.
tri-party repurchase agreement market
on September 12, 2008;
(iii) The aggregate risk profile of the
securities financing transactions under
this exemption is no greater than the
aggregate risk profile of the securities
financing transactions of the affiliate in
the U.S. tri-party repurchase agreement
market on September 12, 2008;
(iv) The member bank’s top-tier
holding company guarantees the
obligations of the affiliate under the
securities financing transactions (or
provides other security to the bank that
is acceptable to the Board); and
(v) The member bank has not been
specifically informed by the Board, after
consultation with the member bank’s
appropriate Federal banking agency,
that the member bank may not use this
exemption.
(2) For purposes of this exemption:
(i) Securities financing transaction
means:
(A) A purchase by a member bank
from an affiliate of a security or other
asset, subject to an agreement by the
affiliate to repurchase the asset from the
member bank;
(B) A borrowing of a security by a
member bank from an affiliate on a
collateralized basis; or
(C) A secured extension of credit by
a member bank to an affiliate.
(ii) U.S. tri-party repurchase
agreement market means the U.S.
market for securities financing
transactions in which the counterparties
use custodial arrangements provided by
JPMorgan Chase Bank or Bank of New
York or another financial institution
approved by the Board.
By order of the Board of Governors of the
Federal Reserve System, September 14, 2008.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E8–21792 Filed 9–18–08; 8:45 am]
ACTION:
Correcting Amendments.
SUMMARY: This document contains a
correction to §§ 1231.3 and 1231.4 of the
interim final regulation concerning
Golden Parachute Payments and
Indemnification Payments published in
the Federal Register on Tuesday,
September 16, 2008. These sections
should read ‘‘Reserved.’’
DATES:
Effective Date: September 19,
2008.
FOR FURTHER INFORMATION CONTACT:
Alfred M. Pollard, General Counsel
(OFHEO), telephone (202) 414–3788 or
Christopher Curtis, General Counsel
(FHFB), telephone (202) 408–2802 (not
toll-free numbers), Federal Housing
Finance Agency, Fourth Floor, 1700 G
Street, NW., Washington, DC 20552. The
telephone number for the
Telecommunications Device for the Deaf
is (800) 877–8339.
Need for Correction
As published on September 16, 2008,
the interim final regulation contained
clerical errors, which these amendments
correct.
List of Subjects in 12 CFR Part 1231
Golden Parachutes, GovernmentSponsored Enterprises, Indemnification.
Accordingly, part 1231 of Title 12
CFR Chapter XII is corrected by making
the following correcting amendments:
■
PART 1231—GOLDEN PARACHUTE
PAYMENTS AND INDEMNIFICATION
PAYMENTS
1. The authority citation for part 1231
continues to read as follows:
■
Authority: 12 U.S.C. 4518(e).
§ 1231.3
[Reserved]
2. Section 1231.3 is removed and
reserved.
■
§ 1231.4
[Reserved]
3. Section 1231.4 is removed and
reserved.
■
BILLING CODE 6210–01–P
12 CFR Part 1231
Dated: September 15, 2008.
James B. Lockhart, III,
Director, Federal Housing Finance Agency.
[FR Doc. E8–21903 Filed 9–16–08; 11:15 am]
RIN 2590–AA08
BILLING CODE 8070–01–P
yshivers on PROD1PC62 with RULES
FEDERAL HOUSING FINANCE
AGENCY
Golden Parachute Payments and
Indemnification Payments
AGENCY:
Federal Housing Finance
Agency.
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15:21 Sep 18, 2008
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54309
DEPARTMENT OF HOMELAND
SECURITY
U.S. Customs and Border Protection
DEPARTMENT OF THE TREASURY
19 CFR Part 12
[Docket No. USCBP–2008–0076; CBP Dec.
08–40]
RIN 1505–AB99
Extension of Import Restrictions
Imposed on Archaeological Material
From Cambodia
U.S. Customs and Border
Protection, Department of Homeland
Security; Department of the Treasury.
ACTION: Final rule.
AGENCIES:
SUMMARY: This document amends
Customs and Border Protection (CBP)
regulations to reflect both continuing
and new import restrictions on certain
archaeological material from Cambodia.
Import restrictions that were previously
imposed by CBP Decision 03–28 on
certain stone, metal, and ceramic
archaeological materials that are due to
expire on September 19, 2008, are
extended. The Assistant Secretary for
Educational and Cultural Affairs, United
States Department of State, has made
the requisite determination for the
extension of import restrictions that
previously existed and for amending the
agreement so that it applies also to
archaeological material of the Bronze
and Iron Ages. Accordingly, these
import restrictions will remain in effect
until September 19, 2013, and title 19 of
the CBP regulations is being amended to
reflect this amended bilateral
agreement. These restrictions are being
extended pursuant to determinations of
the United States Department of State
made under the terms of the 1970
Convention on Cultural Property
Implementation Act in accordance with
the United Nations Educational,
Scientific and Cultural Organization
(UNESCO) Convention on the Means of
Prohibiting and Preventing the Illicit
Import, Export and Transfer of
Ownership of Cultural Property. This
document also contains the amended
Designated List of Archaeological
Material that describes the articles to
which the restrictions apply, including
the new categories of objects (glass and
bone) and the additional subcategories
of stone and metal objects from the
Bronze and Iron Age.
DATES: Effective Date: This final rule is
effective on September 19, 2008.
FOR FURTHER INFORMATION CONTACT: For
legal aspects, George F. McCray, Esq.,
E:\FR\FM\19SER1.SGM
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]]>Agencies
[Federal Register Volume 73, Number 183 (Friday, September 19, 2008)]
[Rules and Regulations]
[Pages 54307-54309]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-21792]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 223
[Regulation W; Docket No. R-1330]
Transactions Between Member Banks and Their Affiliates: Exemption
for Certain Securities Financing Transactions Between a Member Bank and
an Affiliate
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Interim final rule with request for public comment.
-----------------------------------------------------------------------
SUMMARY: In light of the continuing unusual and exigent circumstances
in the financial markets, the Board has adopted, on an interim final
basis, a regulatory exemption for member banks from certain provisions
of section 23A of the Federal Reserve Act and the Board's Regulation W.
The exemption increases the capacity of member banks, subject to
certain conditions designed to help ensure the safety and soundness of
the banks, to enter into securities financing transactions with
affiliates.
DATES: The interim final rule became effective on September 14, 2008.
Comments must be received on or before October 31, 2008.
ADDRESSES: You may submit comments, identified by Docket No. R-1330, by
any of the following methods:
Agency Web Site: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: https://www.regulations.gov. Follow the
instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket number in
the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, NW.,
Washington, DC 20551.
All public comments are available from the Board's Web site at
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information.
Public comments may also be viewed electronically or in paper form
in Room MP-500 of the Board's Martin Building (20th and C Streets, NW.)
between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Mark E. Van Der Weide, Assistant
General Counsel, (202) 452-2263, Legal Division, or Norah M. Barger,
Deputy Director, (202) 452-2402, Division of Banking Supervision and
Regulation, Board of Governors of the Federal Reserve System, 20th
Street and Constitution Avenue, NW., Washington, DC 20551. For the
deaf, hard of hearing, and speech impaired only, teletypewriter (TTY),
(202) 263-4869.
SUPPLEMENTARY INFORMATION: In light of the ongoing dislocations in the
financial markets, and the potential impact of such dislocations on the
functioning of the U.S. tri-party repurchase agreement market, the
Board has adopted on an interim basis the following exemption from
section 23A of the Federal Reserve Act (12 U.S.C. 371c) and the Board's
Regulation W (12 CFR part 223). The exemption will facilitate the
ability of an affiliate of a member bank (such as an SEC-registered
broker-dealer) to obtain financing, if needed, for securities or other
assets that the affiliate ordinarily would have financed through the
U.S. tri-party repurchase agreement market. The exemption is subject to
several conditions designed to protect the safety and soundness of the
member bank.
First, the member bank may use the exemption to finance only those
asset types that the affiliate currently finances in the U.S. tri-party
repurchase agreement market.
Second, the transactions must be marked to market daily and subject
to daily margin maintenance requirements,
[[Page 54308]]
and the member bank must be at least as over-collateralized in its
securities financing transactions with the affiliate as the affiliate's
clearing bank was in its U.S. tri-party repurchase agreement
transactions with the affiliate on September 12, 2008. The Board
expects the member bank and its affiliate to use standard industry
documentation for the exempt securities financing transactions (which
would, among other things, qualify the transactions as securities
contracts or repurchase agreements for purposes of U.S. bankruptcy
law).
Third, to ensure that member banks use the exemption in a manner
consistent with its purpose--that is, to help provide liquidity to the
U.S. tri-party repurchase agreement market--the aggregate risk profile
of the exempt securities financing transactions must be no greater than
the aggregate risk profile of the affiliate's U.S. tri-party repurchase
agreement transactions on September 12, 2008. The exemption, therefore,
permits an affiliate to obtain financing from its affiliated member
bank for securities positions that the affiliate did not own or finance
in the U.S. tri-party repurchase agreement market on September 12,
2008, but only if the new positions in the aggregate do not increase
the overall risk profile of the affiliate's portfolio.
Fourth, the member bank's top-tier holding company must guarantee
the obligations of the affiliate under the securities financing
transactions (or must provide other security to the bank that is
acceptable to the Board). Any member bank that intends to use a form of
credit enhancement other than a parent company guarantee must consult
in advance with Board staff. An example of the type of other security
arrangement that may be acceptable to the Board would be a pledge by
the affiliate or parent holding company to the member bank of a
sufficient amount of additional liquid, high-quality collateral.
Fifth, a member bank may use the exemption only if the bank has not
been specifically informed by the Board, after consultation with the
bank's appropriate Federal banking agency, that the bank may not use
this exemption. If the Board believes, after such consultation, that
the exempt securities financing transactions pose an unacceptable level
of risk to the bank, the Board may withdraw the exemption for the bank
or may impose supplemental conditions on the bank's use of the
exemption.
Consistent with its purpose to ameliorate potential temporary
dislocations in the U.S. tri-party repurchase agreement market, the
exemption will expire on January 30, 2009, unless extended by the
Board.
The Board notes that any securities financing transactions between
the member bank and an affiliate are subject to the market terms
requirement of section 23B of the Federal Reserve Act (12 U.S.C. 371c-
1). Section 23B requires that financial transactions between a bank and
its affiliate be on terms and under circumstances (including credit
standards) that are substantially the same, or at least as favorable to
the bank, as those prevailing at the time for comparable transactions
with or involving nonaffiliates. Among other things, section 23B would
require the member bank to apply collateral haircuts to its affiliated
securities financing transaction counterparty that are at least as
strict as the bank would apply to comparable unaffiliated securities
financing transaction counterparties.
Administrative Procedure Act
Pursuant to sections 553(b) and (d) of the Administrative Procedure
Act (5 U.S.C. 553(b) and (d)), the Board finds that there is good cause
for making the exemption effective immediately on September 14, 2008,
and that it is impracticable, unnecessary, or contrary to the public
interest to issue a notice of proposed rulemaking and provide an
opportunity to comment before the effective date. The Board has adopted
the exemption in light of, and to help address, the continuing unusual
and exigent circumstances in the financial markets. The exemption will
provide immediate relief to participants in the U.S. tri-party
repurchase agreement market affected by the current turmoil. The Board
is soliciting comment on all aspects of the exemption and will make
such changes that it considers to be appropriate or necessary after
review of any comments received.
Regulatory Flexibility Act
The Regulatory Flexibility Act requires an agency that is issuing a
final rule to prepare and make available a regulatory flexibility
analysis that describes the impact of the final rule on small entities.
5 U.S.C. 603(a). The Regulatory Flexibility Act provides that an agency
is not required to prepare and publish a regulatory flexibility
analysis if the agency certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.
5 U.S.C. 605(b).
Pursuant to section 605(b), the Board certifies that this interim
final rule will not have a significant economic impact on a substantial
number of small entities. The rule reduces regulatory burden on large
and small insured depository institutions by granting an exemption from
the Federal transactions with affiliates regime for insured depository
institutions that engage in securities financing transactions with
affiliates.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3506; 5
CFR 1320 Appendix A.1), the Board has reviewed the interim final rule
under authority delegated to the Board by the Office of Management and
Budget. The rule contains no collections of information pursuant to the
Paperwork Reduction Act.
Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the Board to use
``plain language'' in all proposed and final rules. In light of this
requirement, the Board has sought to present the interim final rule in
a simple and straightforward manner. The Board invites comment on
whether the Board could take additional steps to make the rule easier
to understand.
List of Subjects in 12 CFR Part 223
Banks, Banking, Federal Reserve System.
Authority and Issuance
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For the reasons set forth in the preamble, Chapter II of Title 12 of
the Code of Federal Regulations is amended as follows:
PART 223--TRANSACTIONS BETWEEN MEMBER BANKS AND THEIR AFFILIATES
(REGULATION W)
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1. The authority citation for part 223 continues to read as follows:
Authority: 12 U.S.C. 371c and 371c-1.
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2. In Sec. 223.42, add paragraph (n) to read as follows:
Sec. 223.42 What covered transactions are exempt from the
quantitative limits, collateral requirements, and low-quality asset
prohibition?
* * * * *
(n) Securities financing transactions. (1) From September 15, 2008,
until January 30, 2009 (unless further extended by the Board),
securities financing transactions with an affiliate, if:
(i) The security or other asset financed by the member bank in the
transaction is of a type that the affiliate financed in the U.S. tri-
party repurchase agreement market at any time during the week of
September 8-12, 2008;
[[Page 54309]]
(ii) The transaction is marked to market daily and subject to daily
margin-maintenance requirements, and the member bank is at least as
over-collateralized in the transaction as the affiliate's clearing bank
was over-collateralized in comparable transactions with the affiliate
in the U.S. tri-party repurchase agreement market on September 12,
2008;
(iii) The aggregate risk profile of the securities financing
transactions under this exemption is no greater than the aggregate risk
profile of the securities financing transactions of the affiliate in
the U.S. tri-party repurchase agreement market on September 12, 2008;
(iv) The member bank's top-tier holding company guarantees the
obligations of the affiliate under the securities financing
transactions (or provides other security to the bank that is acceptable
to the Board); and
(v) The member bank has not been specifically informed by the
Board, after consultation with the member bank's appropriate Federal
banking agency, that the member bank may not use this exemption.
(2) For purposes of this exemption:
(i) Securities financing transaction means:
(A) A purchase by a member bank from an affiliate of a security or
other asset, subject to an agreement by the affiliate to repurchase the
asset from the member bank;
(B) A borrowing of a security by a member bank from an affiliate on
a collateralized basis; or
(C) A secured extension of credit by a member bank to an affiliate.
(ii) U.S. tri-party repurchase agreement market means the U.S.
market for securities financing transactions in which the
counterparties use custodial arrangements provided by JPMorgan Chase
Bank or Bank of New York or another financial institution approved by
the Board.
By order of the Board of Governors of the Federal Reserve
System, September 14, 2008.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E8-21792 Filed 9-18-08; 8:45 am]
BILLING CODE 6210-01-P
