Information Sharing Among Federal Home Loan Banks, 60347-60352 [2010-24578]

Download as PDF Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules such as a negotiable order of withdrawal (‘‘NOW’’) account, money-market deposit account, or Interest on Lawyers Trust Account (‘‘IOLTA’’), even if checks may be drawn on the account. The temporary full insurance coverage of ‘‘noninterest-bearing transaction accounts’’ expires on December 31, 2012. After December 31, 2012, funds in noninterestbearing transaction accounts will be insured under the FDIC’s general deposit insurance rules, subject to the Standard Maximum Deposit Insurance Amount of $250,000. For more information about FDIC insurance coverage of transaction accounts, visit http://www.fdic.gov. (2) Institutions participating in the FDIC’s Transaction Account Guarantee Program on December 31, 2010, must provide a notice by mail to depositors with negotiable order of withdrawal accounts that are protected in full as of that date under the Transaction Account Guarantee Program and to depositors with Interest on Lawyer Trust Accounts that, as of January 1, 2011, such accounts no longer will be eligible for unlimited protection, but instead will be insured under the general insurance rules up to the SMDIA of $250,000. This notice must be provided to such depositors no later than December 31, 2010. (3) If an institution uses sweep arrangements, modifies the terms of an account, or takes other actions that result in funds no longer being eligible for full coverage under this section, the institution must notify affected customers and clearly advise them, in writing, that such actions will affect their deposit insurance coverage. By order of the Board of Directors. Dated at Washington DC, this 27th day of September 2010. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. 2010–24594 Filed 9–29–10; 8:45 am] BILLING CODE 6714–01–P FEDERAL HOUSING FINANCE BOARD 12 CFR Part 914 FEDERAL HOUSING FINANCE AGENCY jdjones on DSK8KYBLC1PROD with PROPOSALS-1 12 CFR Part 1260 RIN 2590–AA35 Information Sharing Among Federal Home Loan Banks Federal Housing Finance Agency. ACTION: Notice of proposed rulemaking; request for comments. AGENCY: VerDate Mar<15>2010 15:10 Sep 29, 2010 Jkt 220001 Section 1207 of the Housing and Economic Recovery Act of 2008 (HERA) amended the Federal Home Loan Bank Act (Bank Act) to require the Federal Housing Finance Agency (FHFA) to make available to each Federal Home Loan Bank (Bank) information relating to the financial condition of all other Banks. Section 1207 also requires FHFA to promulgate regulations to facilitate the sharing of such information among the Banks. This proposed rule would implement those HERA provisions, and also would transfer to new part 1260, without substantive change, existing regulations of the former Federal Housing Finance Board (Finance Board) relating to the filing of regulatory reports by the Banks. DATES: Written comments must be received on or before November 29, 2010. ADDRESSES: You may submit your comments, identified by regulatory information number (RIN) 2590–AA35, by any of the following methods: • E-mail: Comments to Alfred M. Pollard, General Counsel may be sent by e-mail to RegComments@fhfa.gov. Please include ‘‘RIN 2590–AA35’’ in the subject line of the message. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. If you submit your comment to the Federal eRulemaking Portal, please also send it by e-mail to FHFA at RegComments@fhfa.gov to ensure timely receipt by FHFA. Please include ‘‘RIN 2590–AA35’’ in the subject line of the message. • U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service: The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590–AA35, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. • Hand Delivered/Courier: The hand delivery address is: Alfred M. Pollard, General Counsel, Attention: Comments/ RIN 2590–AA35, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The package should be logged at the Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m. FOR FURTHER INFORMATION CONTACT: Eric M. Raudenbush, Assistant General Counsel, Office of General Counsel, eric.raudenbush@fhfa.gov, (202) 414– 6421 (this is not a toll-free number); Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552; Daniel E. Coates, Associate Director, Division of FHLBank Regulation, SUMMARY: PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 60347 daniel.coates@fhfa.gov, (202) 408–2959 (this is not a toll-free number), Federal Housing Finance Agency, 1625 Eye Street, NW., Washington, DC 20006. The telephone number for the Telecommunications Device for the Hearing Impaired is (800) 877–8339. SUPPLEMENTARY INFORMATION: I. Comments FHFA invites comments on all aspects of the proposed rule and will take all comments into consideration before issuing the final rule. Copies of all comments will be posted without change, including any personal information you provide, such as your name and address, on FHFA’s Internet Web site at http://www.fhfa.gov. In addition, copies of all comments received will be available for examination by the public on business days between the hours of 10 a.m. and 3 p.m. at the Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. To make an appointment to inspect comments, please call the Office of General Counsel at (202) 414–6924. II. 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 Federal Home Loan Bank Act (Bank Act). See 12 U.S.C. 1423, 1432(a). The Banks are cooperatives; only members of a Bank may purchase its capital stock, and only members or certain eligible housing associates (such as state housing finance agencies) may obtain access to secured loans, known as advances, or other products provided by a Bank. See 12 U.S.C. 1426(a)(4), 1430(a), 1430b. Each Bank is managed by its own board of directors and serves the public interest by enhancing the availability of residential mortgage and community lending credit through its member institutions. See 12 U.S.C. 1427. Any eligible institution (generally a federally insured depository institution or state-regulated insurance company) may become a member of a Bank if it satisfies certain criteria and purchases a specified amount of the Bank’s capital stock. See 12 U.S.C. 1424; 12 CFR part 1263. B. New Statutory Provision Requiring the Sharing of Bank Information Section 1207 of HERA added a new section 20A to the Bank Act, 12 U.S.C. 1440a, that requires FHFA to make available to each Bank such reports, E:\FR\FM\30SEP1.SGM 30SEP1 60348 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules jdjones on DSK8KYBLC1PROD with PROPOSALS-1 records, or other information as may be available, relating to the condition of any other Bank in order to enable each Bank to evaluate the financial condition of the other Banks and the Bank System as a whole. The underlying objective for that requirement is that such information will better enable each Bank to assess the likelihood that it may be required to make payments on behalf of another Bank under the joint and several liability on the Banks’ Consolidated Obligations (COs), as well as to comply with its disclosure obligations under the Securities Exchange Act of 1934 (1934 Act) (both of which are discussed in detail below). See 12 U.S.C. 1440a(a). Section 20A further requires FHFA to promulgate regulations to facilitate the sharing of such financial information among the Banks. See 12 U.S.C. 1440a(b)(1). Section 20A permits a Bank to request that FHFA determine that particular information that may otherwise be made available is proprietary and that the public interest requires that such information not be shared. See 12 U.S.C. 1440a(b)(2). Finally, section 20A provides that it does not affect the obligations of the Banks under the 1934 Act and related regulations of the Securities and Exchange Commission (SEC), and that the sharing of Bank information thereunder shall not cause FHFA to waive any privilege applicable to the shared information. See 12 U.S.C. 1440a(c), (d). C. Banks’ Joint and Several Liability and Disclosure Requirements on COs The Banks fund their operations principally through the issuance of the COs, which are debt instruments issued on behalf of the Banks by the OF, a joint office of the Banks, pursuant to section 11 of the Bank Act, 12 U.S.C. 1431, and part 966 of the regulations of the Finance Board, 12 CFR part 966.1 Under these regulations, the COs may be issued only through OF as agent for the Banks and the Banks are jointly and severally liable for the timely payment of principal and interest on all COs when due. See 12 CFR 966.2(b), 966.9(a). Accordingly, even when COs are issued with one Bank being the primary obligor, the ultimate liability for the timely payment of principal and interest thereon remains with all of the Banks collectively. By virtue of their status as government-sponsored 1 HERA amended certain aspects of section 11 of the Bank Act, relating to the issuance of consolidated obligations and the role of the OF in that process. FHFA intends to make conforming revisions to the regulations now located at part 966, and to relocate those provisions to an appropriate place in FHFA’s regulations. VerDate Mar<15>2010 15:10 Sep 29, 2010 Jkt 220001 enterprises (GSEs) and the soundness of the Banks’ secured lending (advances) business over many years, the Banks typically can borrow funds in the capital markets at favorable rates. The Banks pass along a portion of their GSE funding advantage to their member institutions—and ultimately to consumers—by providing advances and other financial services at rates that may not otherwise be available to their members. Although the COs themselves are not registered securities under the federal securities laws, the Finance Board adopted regulations in 2004 requiring each Bank to register a class of its common stock (which is issued only to its member institutions) with the SEC under section 12(g) of the 1934 Act, 15 U.S.C. 78l(g). See 69 FR 38811 (June 29, 2004), codified at 12 CFR part 998. Each Bank subsequently registered a class of its common stock with the SEC in compliance with that regulation. Separately, HERA included a provision requiring the Banks to register their common stock under section 12(g) of the 1934 Act, and to maintain that registration. See 15 U.S.C. 78oo(b). Accordingly, each Bank remains subject to the periodic disclosure requirements established under the 1934 Act, as interpreted and administered by the SEC. D. Considerations of Differences Between the Banks and the Enterprises Section 1201 of HERA amended the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to add a new section 1313(f), which requires the Director of FHFA, when promulgating regulations relating to the Banks, to consider the differences between the Banks and the Enterprises (Fannie Mae and Freddie Mac) as they relate to: the Banks’ cooperative ownership structure; the mission of providing liquidity to members; the affordable housing and community development mission; their capital structure; and their joint and several liability on consolidated obligations. See HERA, section 1201, Public Law 110–289, 122 Stat. 2782–83 (amending 12 U.S.C. 4513). The Director also may consider any other differences that are deemed appropriate. In preparing this proposed rule, FHFA considered the differences between the Banks and the Enterprises as they relate to the above factors. FHFA requests comments from the public about whether differences related to these factors should result in any revisions to the proposal. PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 III. The Proposed Rule The proposed rule would add a new part 1260 to the regulations of FHFA to govern the handling of Bank records, reports, and other information. It would transfer material relating to Bank regulatory reports from part 914 of the regulations of the Finance Board to new part 1260 and would remove part 914. It would also create new provisions within part 1260 to govern the sharing of information among Banks, as required by section 20A of the Bank Act. The substance of each provision of the proposed rule is described in the following paragraphs. Section 1260.1—Definitions Proposed § 1260.1 would include a series of definitions, most of which would relate to the provisions to be relocated from part 914 of the regulations of the Finance Board. The definitions of the acronyms ‘‘AHP,’’ ‘‘AMA,’’ ‘‘CICA,’’ and ‘‘CIP’’ (which are used in § 1260.2, discussed below) would be substantively identical to the definitions of those terms set forth in 12 CFR part 900, which applies to 12 CFR chapter IX, including current part 914. In addition, the proposed rule would transfer to § 1260.1, without substantive change, the definition of the term ‘‘Regulatory Report’’ that is currently set forth in 12 CFR 914.1. Finally, § 1260.1 would also contain definitions for the short forms ‘‘Bank,’’ ‘‘Bank Act,’’ and ‘‘FHFA.’’ Section 1260.2—Filing Regulatory Reports The proposed rule would transfer to § 1260.2 from § 914.2 of the Finance Board’s regulations a provision requiring each Bank to file regulatory reports with FHFA, as requested by the agency. As defined in § 1260.1, these regulatory reports would include any report of data needed to evaluate the safety and soundness of the Bank’s operations or its compliance with statutory requirements, or with regulations, orders or other requirements imposed by FHFA. Proposed § 1260.2 is identical to current § 914.2, except that § 1260.2 would expressly refer to FHFA as regulator of the Banks instead of the former Finance Board. Section 1260.3—Sharing of Information Among the Banks Paragraph (a) of proposed § 1260.3 sets forth the operative provisions of the regulation that implement section 20A of the Bank Act, which identify the information to be shared and describe the manner in which FHFA will share that information. The information to be E:\FR\FM\30SEP1.SGM 30SEP1 jdjones on DSK8KYBLC1PROD with PROPOSALS-1 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules shared will include the final report of examination for each Bank, along with any other supervisory reports that FHFA presents to the board of directors of any Bank. Documents that are related to the reports of examination but are not part of the report, such as work programs, conclusions memoranda, and findings memoranda, would not be included among the materials to be distributed to the Banks. FHFA is proposing to distribute the reports of examination to each of the other Banks and OF as a matter of routine, rather than in response to individual requests, and to do so soon after the report has been finalized and presented to the board of directors of the subject Bank. Because OF is a joint office of the Banks and because it is charged with preparing the combined financial reports for the Bank System, FHFA is proposing to distribute to OF copies of the reports for all of the Banks. Although OF is examined by FHFA in the same manner as the Banks, FHFA is not proposing to distribute to the Banks the report of examination for OF because all twelve Bank presidents sit on OF’s board of directors and, therefore, would already have access to the report.2 Paragraph (a) also notes that the distribution of information under this provision is subject to the requirements set forth in paragraphs (b) through (d) of the proposal, which reflect the statutory provisions relating to the withholding of certain proprietary information. Section 20A of the Bank Act reflects a determination by Congress that providing greater access to financial information relating to all of the other Banks will help each Bank assess its potential exposure to joint and several liability on the COs, as well as the accuracy of its disclosure documents under the 1934 Act. At present, each Bank already has access to a significant amount of information about the financial condition of the other Banks. That information includes the quarterly and annual reports that each Bank files with the SEC under the 1934 Act, which reports must disclose all material business and financial information about the particular Bank. It also includes the call reports that each Bank files with FHFA, as well as the quarterly certifications that each Bank must file with FHFA attesting to its ability to make full and timely payments on its current obligations during the next 2 FHFA also reviews the annual combined Bank System financial statements prepared by OF on behalf of the Banks. The agency then issues a letter to the OF board of directors that provides recommendations for enhanced disclosures. This also would not be distributed to the Banks under the proposed rule, for the same reason. VerDate Mar<15>2010 15:10 Sep 29, 2010 Jkt 220001 quarter. See 12 CFR 966.9(b)(1), (2). The Banks also have access to FHFA’s Annual Report to Congress (required under 12 U.S.C. 4521(a)), which summarizes the conclusions set forth in each Bank’s report of examination. FHFA believes that by providing each Bank with access to the actual reports of examination and other supervisory reports presented to the boards of directors of the other Banks, the proposed rule would enable each Bank to better evaluate the other financial information already available and thus make a more informed assessment about the financial condition of each of the other Banks. The reports of examination and other supervisory reports would include more detailed information than is currently available to the Banks. Among other things, the report of examination typically sets forth the examiners’ assessment of the strength of the Bank’s corporate governance, its management of market risk, credit risk and operational risk, and its overall financial condition and performance. Based on these assessments, the report also may enumerate matters that require corrective action by, or under the supervision of, the Bank’s board of directors and the dates by which such corrective action is to be completed. The Banks are well-suited to evaluate the information contained in a report of examination as a result of their own experience with the examination process. Although FHFA believes that its distribution of the reports of examination and other supervisory reports will provide the Banks with the type of information contemplated by the statute, FHFA requests comments on whether other types of documents also should be made available under this regulation. FHFA also requests comments on whether the rule should allow FHFA to expand the categories of information to be distributed to the Banks without undertaking a subsequent rulemaking, i.e., whether the Director or his designee may expand the categories of information to be disseminated through a less formal means, such as by order or staff action. FHFA believes that the approach embodied in the proposed rule, i.e., where FHFA provides supervisory information directly to each of the Banks rather than requiring the Banks to share supervisory information among themselves, is consistent with the requirements of section 20A and will achieve its objectives. Section 20A(a) generally directs FHFA to make available to all of the Banks information relating to the financial condition of all of the other Banks. Section 20A(b) PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 60349 separately directs FHFA to adopt regulations to facilitate the sharing of the information made available under section 20A(a) directly among the Banks. That latter provision appears to reflect a presumption that FHFA would implement the HERA amendments by requiring each Bank to provide copies of its report of examination and other supervisory reports directly to all of the other Banks. Because FHFA is proposing to distribute the reports of examination and other supervisory reports directly to all of the Banks, FHFA believes that the rule need not include a provision dealing with Bankto-Bank sharing of the reports of examination and other supervisory reports that FHFA presents to the board of directors. Moreover, as noted previously, the Banks currently share various types of other information among themselves on a voluntary basis, which suggests that there is no compelling need to mandate Bank-toBank sharing of particular categories of other information. FHFA requests comments on whether the rule should retain this approach. By statute, FHFA is required to conduct an on-site examination of each Bank at least annually to determine the condition of the entity for the purpose of ensuring its safety and soundness. See 12 U.S.C. 1440, 4517(a)–(b). Upon completion of each annual or special examination, FHFA examiners prepare a written report of examination for the Director of FHFA (as required by section 20 of the Bank Act, 12 U.S.C. 1440), which is subsequently presented to the board of directors of the particular Bank. The report of examination is prepared for the Director of FHFA and, by regulation, remains the property of FHFA even when in the possession of a Bank, OF, a Bank member, or another government agency. See 12 U.S.C. 1440; 12 CFR 911.3(c)(3). Accordingly, these reports, as well as any other supervisory correspondence, are subject to the restrictions on the disclosure of unpublished information set out in part 911 of the regulations of the former Finance Board (which remain in effect until superseded by action of FHFA). Currently, the Banks are prohibited by regulation from sharing their reports of examination among themselves, or with any other outside party, except pursuant to the written consent of FHFA. See 12 CFR 911.3(c)(1). In 2006, the Finance Board issued an Advisory Bulletin that permitted the Banks to disclose the factual content of a report of examination in the preparation of its SEC disclosure documents, but continued to prohibit the Banks from releasing the report of examination E:\FR\FM\30SEP1.SGM 30SEP1 jdjones on DSK8KYBLC1PROD with PROPOSALS-1 60350 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules itself, or any portion of the report. See Federal Housing Finance Board Advisory Bulletin 2006–AB–03 (July 18, 2006) (available online at http:// www.fhfa.gov/webfiles/13094/2006-AB03.pdf). The Advisory Bulletin specifically prohibited the sharing of reports of examination among the Banks even for the purpose of assessing the likelihood of having to make a payment on COs for which another Bank is the primary obligor. If FHFA adopts a final rule that requires it to provide examination reports to all of the Banks, FHFA also will consider whether any revisions to the Advisory Bulletin are necessary, such as to ensure that the Bulletin remains consistent with purposes of HERA while also ensuring that the Banks do not share the reports of examination that they receive from FHFA with any other parties. In the rule, FHFA is proposing to distribute only the final reports of examination, along with any other supervisory reports that FHFA has presented to a Bank’s board of directors, and to do so as a matter of course after each report has been finalized and presented to the Bank’s board, rather than making the reports available only upon the request of individual Banks. FHFA views the proposed distribution of the reports to all of the Banks as a matter of course as preferable to providing the reports only in response to a specific request from one or more of the Banks. First, the proposed approach would ensure that all Banks receive and use the same information in assessing their potential joint and several liability and in preparing their disclosure documents. Further, this approach would result in a more efficient and regular process for FHFA to administer and would establish a clear and standard timeframe for each Bank to review its own report of examination for any proprietary information that it believes should be withheld under the statutory standards of section 20A of the Bank Act. FHFA requests comments on whether the proposed distribution as a matter of course is the most appropriate means of providing information to the Banks. Paragraph (b) of proposed § 1260.3 would implement the statutory requirement that each Bank be afforded the opportunity to request that the Director of FHFA not disclose particular information because the information is proprietary and the public interest requires that the information not be shared. Paragraph (b)(1) generally restates the statutory standard, which is a two-part test and requires that both parts must be satisfied in order for the Director or his designee to determine VerDate Mar<15>2010 15:10 Sep 29, 2010 Jkt 220001 that the information should not be disclosed. Paragraph (b)(1) also would give each Bank a brief period of time within which to ask that FHFA not disclose certain information within the report of examination to the other Banks. In order to make such a request, a Bank must file a written request with FHFA that particular information contained in its report of examination or other supervisory report be redacted from the copy of the report to be distributed to the other Banks. Each entity would be required to file its request no later than the close of business on the tenth business day following the date on which FHFA presented the final report of examination or the supervisory report to the entity’s board of directors. FHFA believes that ten (10) business days is sufficient time for a Bank to review its report of examination or any other supervisory reports for proprietary information that it believes meets the standards for being withheld. First, through the receipt of draft reports and other supervisory correspondence, the Bank most likely will already be familiar with most of the contents of the reports well before they are presented to the Bank’s board of directors. Second, a final report of examination typically is not a lengthy document, and therefore should not require a lengthy period of time to review for proprietary information. The same should be true for other types of supervisory reports. Finally, in order for this process to achieve the statutory objectives, these reports of examination must be reasonably current, so that the recipients can evaluate them together with other current information relating to the financial condition of the Bank. FHFA requests comments on whether the final rule should allow each entity a different length of time within which to review its report of examination for proprietary information that it believes should not be disclosed. Paragraph (b)(2) of proposed § 1260.3 would require the Director of FHFA, or such other FHFA officer as the Director may designate, to determine promptly whether to grant all or part of a request to withhold proprietary information that a Bank has made in accordance with the requirements of paragraph (b)(1). Any determination made by the Director or his designee under this paragraph would be final. Proposed § 1260.3(c) describes the process by which FHFA would distribute reports to the other Banks. The rule would require FHFA to distribute a report of examination or other supervisory report after the ten (10) business-day period noted above PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 has expired without a request to withhold proprietary information, or after the Director or his designee has made a determination in response to such a request. If the Director or his designee determines that the report includes proprietary information that should not be disclosed, FHFA will distribute an appropriately redacted version of the report. The proposed rule would allow reports of examination and other supervisory reports to be distributed in either tangible or electronic form, as deemed appropriate on either an ongoing, or case-by-case, basis by FHFA. Section 20A(d) of the Bank Act states that the Director of FHFA shall not be deemed to have waived any privilege applicable to any information concerning a Bank by sharing information as required under section 20A(a) of the statute. As mentioned above, reports of examination and other supervisory correspondence are considered to be privileged unpublished information that are subject to the restrictions on disclosure set forth in part 911 of the regulations of the Finance Board, which remains in effect. See 12 CFR 911.1, 911.3(c)(3). Proposed § 1260.3(d) would make clear that reports of examination or any other privileged information that may be made available under § 1260.3 would remain subject to the restrictions set forth in part 911 of this title, or any future regulatory provisions dealing with the same subject matter that may be promulgated by FHFA. Proposed § 1260.3(d) would operate in parallel with 12 CFR 911.3(a), which provides that possession or control of unpublished information by any entity, including the Banks and OF, does not constitute a waiver by FHFA of any privilege, or of its right to control, supervise, or impose limitations on the subsequent use and disclosure of the information. Because FHFA conducts examinations at various times over the course of a year, examination reports for different Banks are generated at different times during the year. Thus, if the rule were to apply only to reports of examination and supervisory reports that were prepared after the rule takes effect, it could take nearly one year for FHFA to distribute the reports for all twelve of the Banks. FHFA believes that a better approach would be to include in the rule a transition provision that allows FHFA to distribute the then-current reports of examination to all of the Banks and OF soon after the rule takes effect. Accordingly, proposed § 1260.3(e) includes a transition provision that would require FHFA to E:\FR\FM\30SEP1.SGM 30SEP1 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules distribute to each Bank and OF a copy of the most recent report of examination for each Bank as of the effective date of the final rule. Each Bank would be given ten (10) business days from the effective date of the final rule to submit to FHFA a written request to withhold proprietary information contained in the report of examination, in the manner described in paragraph (b)(1). Following the expiration of this review period, the reports of examination would be distributed as provided in paragraphs (b)(2) and (c) of proposed § 1260.3. FHFA requests comments regarding whether the transition provision should require the distribution of any reports of examination other than the most current report as of the effective date of the final rule, and, if so, to what extent, and whether any other types of documents should be provided as part of the initial distribution. CHAPTER IX—FEDERAL HOUSING FINANCE BOARD IV. Paperwork Reduction Act Authority: 12 U.S.C. 1440, 1440a, 4511, 4514, and 4517. The proposed rule does not contain any collections of information pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). Therefore, FHFA has not submitted any information to the Office of Management and Budget for review. § 1260.1 V. Regulatory Flexibility Act The proposed 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). Therefore, in accordance with section 605(b) of the RFA, FHFA certifies that this proposed rule, if promulgated as a final rule, will not have significant economic impact on a substantial number of small entities. List of Subjects 12 CFR Part 914 Federal home loan banks, Reporting and recordkeeping requirements. 12 CFR Part 1260 jdjones on DSK8KYBLC1PROD with PROPOSALS-1 Confidential business information, Federal home loan banks, Reporting and recordkeeping requirements. Accordingly, for the reasons stated in the preamble and under the authority of 12 U.S.C. 4526, the Federal Housing Finance Agency proposes to amend subchapter C of chapter IX and subchapter D of chapter XII of title 12 of the Code of Federal Regulations as follows: VerDate Mar<15>2010 15:10 Sep 29, 2010 Jkt 220001 SUBCHAPTER C—GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS PART 914—[REMOVED] 1. Remove part 914. CHAPTER XII—FEDERAL HOUSING FINANCE AGENCY SUBCHAPTER D—FEDERAL HOME LOAN BANKS 2. Add part 1260 to subchapter D to read as follows: 60351 (iii) Written agreement entered into between FHFA and a Bank; and (2) Includes, without limitation: (i) Call reports and reports of instrument-level risk modeling data; (ii) Reports related to a Bank’s housing mission achievement, such as reports related to AMA, AHP, CIP, and other CICA programs; and (iii) Reports submitted in response to requests to one or more Banks for information on a nonrecurring basis. § 1260.2 Filing Regulatory Reports. PART 1260—FILING OF REGULATORY REPORTS AND SHARING OF INFORMATION Sec. 1260.1 Definitions. 1260.2 Filing Regulatory Reports. 1260.3 Sharing of information among Banks. Each Bank shall file Regulatory Reports with FHFA in accordance with the forms, instructions, and schedules issued by FHFA from time to time. If no regularly scheduled reporting dates are established, Regulatory Reports shall be filed as requested by FHFA. § 1260.3 Banks. Definitions. As used in this part: AHP means the Affordable Housing Program, the CICA program that each Bank is required to establish pursuant to section 10(j) of the Bank Act (12 U.S.C. 1430(j)) and part 1291 of this chapter. AMA means those assets that may be acquired by a Bank under part 955 of this title. Bank, written in title case, means a Federal Home Loan Bank established under section 12 of the Bank Act (12 U.S.C. 1432). Bank Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 1421 through 1449). CICA means any advance made through a program offered by a Bank under section 10 of the Bank Act (12 U.S.C. 1430), part 952 of this title, and part 1291 of this chapter to provide funding for targeted community lending and affordable housing. CIP means the Community Investment Program, an advance program under CICA required to be offered pursuant to section 10(i) of the Bank Act (12 U.S.C. 1430(i)). FHFA means the Federal Housing Finance Agency. Regulatory Report means—(1) Any report to FHFA of raw or summary data needed to evaluate the safe and sound condition and operations of a Bank or to determine compliance with any: (i) Provision in the Bank Act or other law, order, rule, or regulation; (ii) Condition imposed in writing by FHFA in connection with the granting of any application or other request by a Bank; or PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 Sharing of information among (a) In general. In order to enable each Bank to evaluate the financial condition of any one or more of the other Banks and the Bank System, FHFA periodically shall distribute to each Bank and to the Office of Finance the final reports of examination (or such portions thereof that FHFA deems appropriate) of all other Banks, as well as any other supervisory reports that FHFA presents to the board of directors of a Bank, subject to the requirements set forth in paragraphs (b) through (d) of this section. (b) Requests to withhold proprietary information.—(1) After FHFA has presented a Bank’s report of examination or other supervisory report to its board of directors, the Bank shall have ten (10) business days within which to request in writing that particular information contained therein be withheld from disclosure because it is proprietary and the public interest requires that it not be shared. (2) After receiving a timely written request made under paragraph (b)(1) of this section, the Director or his designee shall promptly determine whether to redact any information from the report of examination or other supervisory report prior to distributing it to the other Banks and the Office of Finance. Such a determination shall be final. (c) Distribution of Information. After the expiration of the review period established under paragraph (b)(1) of this section without a request from the affected Bank, or after the Director or his designee has made a determination under paragraph (b)(2) of this section, FHFA shall distribute a copy of the report of examination or other supervisory report to each Bank and the Office of Finance in either tangible or E:\FR\FM\30SEP1.SGM 30SEP1 60352 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules electronic form, as FHFA shall deem appropriate. (d) No waiver of privilege. The release of information under this section does not constitute a waiver by FHFA of any privilege, or its right to control, supervise, or impose limitations on, the subsequent use and disclosure of any information concerning a Bank. To the extent that any reports of examination or other materials provided to a Bank or the Office of Finance pursuant to this section otherwise qualify as Unpublished Information under § 911.1 of this title or any successor provision, those materials shall continue to qualify as such and shall continue to be subject to the restrictions on disclosure set forth in part 911 of this title, or any successor provisions. (e) Transition provision. Following the effective date of this section, FHFA will distribute promptly to each Bank and the Office of Finance a copy of the most recent report of examination of all other Banks. Each Bank shall have ten (10) business days following the effective date of this section within which to submit a written request to withhold information as described in paragraph (b)(1) of this section. Upon the expiration of the time period described in the preceding sentence, the distribution of the initial reports of examination shall proceed in accordance with paragraphs (b)(2) and (c) of this section. Dated: September 24, 2010. Edward J. DeMarco, Acting Director, Federal Housing Finance Agency. [FR Doc. 2010–24578 Filed 9–29–10; 8:45 am] BILLING CODE 8070–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 Proposed Modification of the Seattle, WA, Class B Airspace Area; Public Meetings Federal Aviation Administration (FAA), DOT. ACTION: Notice of meetings. AGENCY: This notice announces three fact-finding informal airspace meetings to solicit information from airspace users and others concerning a proposal to revise the Class B airspace area at Seattle, WA. The purpose of these meetings is to provide interested parties an opportunity to present views, recommendations, and comments on the proposal. All comments received during jdjones on DSK8KYBLC1PROD with PROPOSALS-1 SUMMARY: VerDate Mar<15>2010 17:56 Sep 29, 2010 Jkt 220001 these meetings will be considered prior to any revision or issuance of a notice of proposed rulemaking. DATES: The informal airspace meetings will be held on Thursday, December 9, 2010, from 6:30 p.m.–9 p.m.; Tuesday, December 14, 2010, from 6:30 p.m.– 9 p.m.; and Thursday, December 16, 2010, from 6:30 p.m.–9 p.m. Comments must be received on or before January 31, 2011. ADDRESSES: (1) The meeting on Thursday, December 9, 2010, will be held at Snohomish County Auditorium, 2320 California Street, Everett, WA 98201. (2) The meeting on Tuesday, December 14, 2010, will be held at the Highline Performing Arts Center, 401 South 152nd Street, Burien, WA 98148. (3) The meeting on Thursday, December 16, 2010, will be held at The Theater at Auburn Mountainview, 28900 124 Avenue South East, Auburn, WA, 98092. Comments: Send comments on the proposal, in triplicate, to: Clark Desing, Manager, Operations Support Group, AJV–W2, Western Service Center, Air Traffic Organization, Federal Aviation Administration, 1601 Lind Avenue, SW., Renton WA 98057. FOR FURTHER INFORMATION CONTACT: To obtain details including a graphic depiction regarding this proposal, please contact Everett Paul Delay, FAA Support Manager Seattle TRACON, SeaTac International Airport, 825 South 160th Street, Burien, WA 98148, (206) 214–4620. SUPPLEMENTARY INFORMATION: Meeting Procedures (a) Doors open 30 minutes prior to the beginning of each meeting. The meetings will be informal in nature and will be conducted by one or more representatives of the FAA. A representative from the FAA will present a briefing on the planned modification to the Class B airspace at Seattle, WA. Each participant will be given an opportunity to deliver comments or make a presentation, although a time limit may be imposed. Only comments concerning the plan to modify the Class B airspace area at Seattle WA, will be accepted. (b) The meetings will be open to all persons on a space-available basis. There will be no admission fee or other charge to attend and participate. (c) Any person wishing to make a presentation to the FAA panel will be asked to sign in and estimate the amount of time needed for such presentation. This will permit the panel to allocate an appropriate amount of time for each presenter. These meetings PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 will not be adjourned until everyone on the list has had an opportunity to address the panel. (d) Position papers or other handout material relating to the substance of these meetings will be accepted. Participants wishing to submit handout material should present an original and two copies (3 copies total) to the presiding officer. There should be additional copies of each handout available for other attendees. (e) These meetings will not be formally recorded. However, a summary of comments made at the meeting will be filed in the docket. Agenda for the Meetings —Sign-in. —Presentation of meeting procedures. —FAA explanation of the planned Class B airspace area modifications. —Solicitation of public comments. —Closing comments. Issued in Washington, DC, on September 21, 2010. Paul Gallant, Acting Manager, Airspace and Rules Group. [FR Doc. 2010–24543 Filed 9–29–10; 8:45 am] BILLING CODE P FEDERAL TRADE COMMISSION 16 CFR Part 321 [RIN 3084-AB18] Notice of Proposed Rulemaking: Mortgage Acts and Practices – Advertising Rule Federal Trade Commission (FTC or Commission). ACTION: Notice of proposed rulemaking; request for comment. AGENCY: Pursuant to the 2009 Omnibus Appropriations Act (Omnibus Appropriations Act), as clarified by the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act), the Commission issues a Notice of Proposed Rulemaking (NPRM) relating to unfair or deceptive acts and practices that may occur with regard to mortgage advertising, the Mortgage Acts and Practices (MAP) – Advertising Rule (proposed rule). The proposed rule published for comment, among other things, would prohibit any misrepresentation in any commercial communication regarding any term of any mortgage credit product; and impose recordkeeping requirements. DATES: Comments must be received by November 15, 2010. ADDRESSES: Interested parties are invited to submit written comments SUMMARY: E:\FR\FM\30SEP1.SGM 30SEP1

Agencies

[Federal Register Volume 75, Number 189 (Thursday, September 30, 2010)]
[Proposed Rules]
[Pages 60347-60352]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-24578]


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FEDERAL HOUSING FINANCE BOARD

12 CFR Part 914

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1260

RIN 2590-AA35


Information Sharing Among Federal Home Loan Banks

AGENCY: Federal Housing Finance Agency.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: Section 1207 of the Housing and Economic Recovery Act of 2008 
(HERA) amended the Federal Home Loan Bank Act (Bank Act) to require the 
Federal Housing Finance Agency (FHFA) to make available to each Federal 
Home Loan Bank (Bank) information relating to the financial condition 
of all other Banks. Section 1207 also requires FHFA to promulgate 
regulations to facilitate the sharing of such information among the 
Banks. This proposed rule would implement those HERA provisions, and 
also would transfer to new part 1260, without substantive change, 
existing regulations of the former Federal Housing Finance Board 
(Finance Board) relating to the filing of regulatory reports by the 
Banks.

DATES: Written comments must be received on or before November 29, 
2010.

ADDRESSES: You may submit your comments, identified by regulatory 
information number (RIN) 2590-AA35, by any of the following methods:
     E-mail: Comments to Alfred M. Pollard, General Counsel may 
be sent by e-mail to RegComments@fhfa.gov. Please include ``RIN 2590-
AA35'' in the subject line of the message.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by e-
mail to FHFA at RegComments@fhfa.gov to ensure timely receipt by FHFA. 
Please include ``RIN 2590-AA35'' in the subject line of the message.
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA35, Federal 
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, 
DC 20552.
     Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA35, 
Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. The package should be logged at the Guard Desk, 
First Floor, on business days between 9 a.m. and 5 p.m.

FOR FURTHER INFORMATION CONTACT: Eric M. Raudenbush, Assistant General 
Counsel, Office of General Counsel, eric.raudenbush@fhfa.gov, (202) 
414-6421 (this is not a toll-free number); Federal Housing Finance 
Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552; Daniel 
E. Coates, Associate Director, Division of FHLBank Regulation, 
daniel.coates@fhfa.gov, (202) 408-2959 (this is not a toll-free 
number), Federal Housing Finance Agency, 1625 Eye Street, NW., 
Washington, DC 20006. The telephone number for the Telecommunications 
Device for the Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Comments

    FHFA invites comments on all aspects of the proposed rule and will 
take all comments into consideration before issuing the final rule. 
Copies of all comments will be posted without change, including any 
personal information you provide, such as your name and address, on 
FHFA's Internet Web site at http://www.fhfa.gov. In addition, copies of 
all comments received will be available for examination by the public 
on business days between the hours of 10 a.m. and 3 p.m. at the Federal 
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, 
DC 20552. To make an appointment to inspect comments, please call the 
Office of General Counsel at (202) 414-6924.

II. 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 Federal Home Loan Bank Act (Bank Act). See 12 U.S.C. 1423, 
1432(a). The Banks are cooperatives; only members of a Bank may 
purchase its capital stock, and only members or certain eligible 
housing associates (such as state housing finance agencies) may obtain 
access to secured loans, known as advances, or other products provided 
by a Bank. See 12 U.S.C. 1426(a)(4), 1430(a), 1430b. Each Bank is 
managed by its own board of directors and serves the public interest by 
enhancing the availability of residential mortgage and community 
lending credit through its member institutions. See 12 U.S.C. 1427. Any 
eligible institution (generally a federally insured depository 
institution or state-regulated insurance company) may become a member 
of a Bank if it satisfies certain criteria and purchases a specified 
amount of the Bank's capital stock. See 12 U.S.C. 1424; 12 CFR part 
1263.

B. New Statutory Provision Requiring the Sharing of Bank Information

    Section 1207 of HERA added a new section 20A to the Bank Act, 12 
U.S.C. 1440a, that requires FHFA to make available to each Bank such 
reports,

[[Page 60348]]

records, or other information as may be available, relating to the 
condition of any other Bank in order to enable each Bank to evaluate 
the financial condition of the other Banks and the Bank System as a 
whole. The underlying objective for that requirement is that such 
information will better enable each Bank to assess the likelihood that 
it may be required to make payments on behalf of another Bank under the 
joint and several liability on the Banks' Consolidated Obligations 
(COs), as well as to comply with its disclosure obligations under the 
Securities Exchange Act of 1934 (1934 Act) (both of which are discussed 
in detail below). See 12 U.S.C. 1440a(a). Section 20A further requires 
FHFA to promulgate regulations to facilitate the sharing of such 
financial information among the Banks. See 12 U.S.C. 1440a(b)(1). 
Section 20A permits a Bank to request that FHFA determine that 
particular information that may otherwise be made available is 
proprietary and that the public interest requires that such information 
not be shared. See 12 U.S.C. 1440a(b)(2). Finally, section 20A provides 
that it does not affect the obligations of the Banks under the 1934 Act 
and related regulations of the Securities and Exchange Commission 
(SEC), and that the sharing of Bank information thereunder shall not 
cause FHFA to waive any privilege applicable to the shared information. 
See 12 U.S.C. 1440a(c), (d).

C. Banks' Joint and Several Liability and Disclosure Requirements on 
COs

    The Banks fund their operations principally through the issuance of 
the COs, which are debt instruments issued on behalf of the Banks by 
the OF, a joint office of the Banks, pursuant to section 11 of the Bank 
Act, 12 U.S.C. 1431, and part 966 of the regulations of the Finance 
Board, 12 CFR part 966.\1\ Under these regulations, the COs may be 
issued only through OF as agent for the Banks and the Banks are jointly 
and severally liable for the timely payment of principal and interest 
on all COs when due. See 12 CFR 966.2(b), 966.9(a). Accordingly, even 
when COs are issued with one Bank being the primary obligor, the 
ultimate liability for the timely payment of principal and interest 
thereon remains with all of the Banks collectively. By virtue of their 
status as government-sponsored enterprises (GSEs) and the soundness of 
the Banks' secured lending (advances) business over many years, the 
Banks typically can borrow funds in the capital markets at favorable 
rates. The Banks pass along a portion of their GSE funding advantage to 
their member institutions--and ultimately to consumers--by providing 
advances and other financial services at rates that may not otherwise 
be available to their members.
---------------------------------------------------------------------------

    \1\ HERA amended certain aspects of section 11 of the Bank Act, 
relating to the issuance of consolidated obligations and the role of 
the OF in that process. FHFA intends to make conforming revisions to 
the regulations now located at part 966, and to relocate those 
provisions to an appropriate place in FHFA's regulations.
---------------------------------------------------------------------------

    Although the COs themselves are not registered securities under the 
federal securities laws, the Finance Board adopted regulations in 2004 
requiring each Bank to register a class of its common stock (which is 
issued only to its member institutions) with the SEC under section 
12(g) of the 1934 Act, 15 U.S.C. 78l(g). See 69 FR 38811 (June 29, 
2004), codified at 12 CFR part 998. Each Bank subsequently registered a 
class of its common stock with the SEC in compliance with that 
regulation. Separately, HERA included a provision requiring the Banks 
to register their common stock under section 12(g) of the 1934 Act, and 
to maintain that registration. See 15 U.S.C. 78oo(b). Accordingly, each 
Bank remains subject to the periodic disclosure requirements 
established under the 1934 Act, as interpreted and administered by the 
SEC.

D. Considerations of Differences Between the Banks and the Enterprises

    Section 1201 of HERA amended the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 to add a new section 
1313(f), which requires the Director of FHFA, when promulgating 
regulations relating to the Banks, to consider the differences between 
the Banks and the Enterprises (Fannie Mae and Freddie Mac) as they 
relate to: the Banks' cooperative ownership structure; the mission of 
providing liquidity to members; the affordable housing and community 
development mission; their capital structure; and their joint and 
several liability on consolidated obligations. See HERA, section 1201, 
Public Law 110-289, 122 Stat. 2782-83 (amending 12 U.S.C. 4513). The 
Director also may consider any other differences that are deemed 
appropriate. In preparing this proposed rule, FHFA considered the 
differences between the Banks and the Enterprises as they relate to the 
above factors. FHFA requests comments from the public about whether 
differences related to these factors should result in any revisions to 
the proposal.

III. The Proposed Rule

    The proposed rule would add a new part 1260 to the regulations of 
FHFA to govern the handling of Bank records, reports, and other 
information. It would transfer material relating to Bank regulatory 
reports from part 914 of the regulations of the Finance Board to new 
part 1260 and would remove part 914. It would also create new 
provisions within part 1260 to govern the sharing of information among 
Banks, as required by section 20A of the Bank Act. The substance of 
each provision of the proposed rule is described in the following 
paragraphs.

Section 1260.1--Definitions

    Proposed Sec.  1260.1 would include a series of definitions, most 
of which would relate to the provisions to be relocated from part 914 
of the regulations of the Finance Board. The definitions of the 
acronyms ``AHP,'' ``AMA,'' ``CICA,'' and ``CIP'' (which are used in 
Sec.  1260.2, discussed below) would be substantively identical to the 
definitions of those terms set forth in 12 CFR part 900, which applies 
to 12 CFR chapter IX, including current part 914. In addition, the 
proposed rule would transfer to Sec.  1260.1, without substantive 
change, the definition of the term ``Regulatory Report'' that is 
currently set forth in 12 CFR 914.1. Finally, Sec.  1260.1 would also 
contain definitions for the short forms ``Bank,'' ``Bank Act,'' and 
``FHFA.''

Section 1260.2--Filing Regulatory Reports

    The proposed rule would transfer to Sec.  1260.2 from Sec.  914.2 
of the Finance Board's regulations a provision requiring each Bank to 
file regulatory reports with FHFA, as requested by the agency. As 
defined in Sec.  1260.1, these regulatory reports would include any 
report of data needed to evaluate the safety and soundness of the 
Bank's operations or its compliance with statutory requirements, or 
with regulations, orders or other requirements imposed by FHFA. 
Proposed Sec.  1260.2 is identical to current Sec.  914.2, except that 
Sec.  1260.2 would expressly refer to FHFA as regulator of the Banks 
instead of the former Finance Board.

Section 1260.3--Sharing of Information Among the Banks

    Paragraph (a) of proposed Sec.  1260.3 sets forth the operative 
provisions of the regulation that implement section 20A of the Bank 
Act, which identify the information to be shared and describe the 
manner in which FHFA will share that information. The information to be

[[Page 60349]]

shared will include the final report of examination for each Bank, 
along with any other supervisory reports that FHFA presents to the 
board of directors of any Bank. Documents that are related to the 
reports of examination but are not part of the report, such as work 
programs, conclusions memoranda, and findings memoranda, would not be 
included among the materials to be distributed to the Banks. FHFA is 
proposing to distribute the reports of examination to each of the other 
Banks and OF as a matter of routine, rather than in response to 
individual requests, and to do so soon after the report has been 
finalized and presented to the board of directors of the subject Bank. 
Because OF is a joint office of the Banks and because it is charged 
with preparing the combined financial reports for the Bank System, FHFA 
is proposing to distribute to OF copies of the reports for all of the 
Banks. Although OF is examined by FHFA in the same manner as the Banks, 
FHFA is not proposing to distribute to the Banks the report of 
examination for OF because all twelve Bank presidents sit on OF's board 
of directors and, therefore, would already have access to the 
report.\2\ Paragraph (a) also notes that the distribution of 
information under this provision is subject to the requirements set 
forth in paragraphs (b) through (d) of the proposal, which reflect the 
statutory provisions relating to the withholding of certain proprietary 
information.
---------------------------------------------------------------------------

    \2\ FHFA also reviews the annual combined Bank System financial 
statements prepared by OF on behalf of the Banks. The agency then 
issues a letter to the OF board of directors that provides 
recommendations for enhanced disclosures. This also would not be 
distributed to the Banks under the proposed rule, for the same 
reason.
---------------------------------------------------------------------------

    Section 20A of the Bank Act reflects a determination by Congress 
that providing greater access to financial information relating to all 
of the other Banks will help each Bank assess its potential exposure to 
joint and several liability on the COs, as well as the accuracy of its 
disclosure documents under the 1934 Act. At present, each Bank already 
has access to a significant amount of information about the financial 
condition of the other Banks. That information includes the quarterly 
and annual reports that each Bank files with the SEC under the 1934 
Act, which reports must disclose all material business and financial 
information about the particular Bank. It also includes the call 
reports that each Bank files with FHFA, as well as the quarterly 
certifications that each Bank must file with FHFA attesting to its 
ability to make full and timely payments on its current obligations 
during the next quarter. See 12 CFR 966.9(b)(1), (2). The Banks also 
have access to FHFA's Annual Report to Congress (required under 12 
U.S.C. 4521(a)), which summarizes the conclusions set forth in each 
Bank's report of examination.
    FHFA believes that by providing each Bank with access to the actual 
reports of examination and other supervisory reports presented to the 
boards of directors of the other Banks, the proposed rule would enable 
each Bank to better evaluate the other financial information already 
available and thus make a more informed assessment about the financial 
condition of each of the other Banks. The reports of examination and 
other supervisory reports would include more detailed information than 
is currently available to the Banks. Among other things, the report of 
examination typically sets forth the examiners' assessment of the 
strength of the Bank's corporate governance, its management of market 
risk, credit risk and operational risk, and its overall financial 
condition and performance. Based on these assessments, the report also 
may enumerate matters that require corrective action by, or under the 
supervision of, the Bank's board of directors and the dates by which 
such corrective action is to be completed. The Banks are well-suited to 
evaluate the information contained in a report of examination as a 
result of their own experience with the examination process.
    Although FHFA believes that its distribution of the reports of 
examination and other supervisory reports will provide the Banks with 
the type of information contemplated by the statute, FHFA requests 
comments on whether other types of documents also should be made 
available under this regulation. FHFA also requests comments on whether 
the rule should allow FHFA to expand the categories of information to 
be distributed to the Banks without undertaking a subsequent 
rulemaking, i.e., whether the Director or his designee may expand the 
categories of information to be disseminated through a less formal 
means, such as by order or staff action.
    FHFA believes that the approach embodied in the proposed rule, 
i.e., where FHFA provides supervisory information directly to each of 
the Banks rather than requiring the Banks to share supervisory 
information among themselves, is consistent with the requirements of 
section 20A and will achieve its objectives. Section 20A(a) generally 
directs FHFA to make available to all of the Banks information relating 
to the financial condition of all of the other Banks. Section 20A(b) 
separately directs FHFA to adopt regulations to facilitate the sharing 
of the information made available under section 20A(a) directly among 
the Banks. That latter provision appears to reflect a presumption that 
FHFA would implement the HERA amendments by requiring each Bank to 
provide copies of its report of examination and other supervisory 
reports directly to all of the other Banks. Because FHFA is proposing 
to distribute the reports of examination and other supervisory reports 
directly to all of the Banks, FHFA believes that the rule need not 
include a provision dealing with Bank-to-Bank sharing of the reports of 
examination and other supervisory reports that FHFA presents to the 
board of directors. Moreover, as noted previously, the Banks currently 
share various types of other information among themselves on a 
voluntary basis, which suggests that there is no compelling need to 
mandate Bank-to-Bank sharing of particular categories of other 
information. FHFA requests comments on whether the rule should retain 
this approach.
    By statute, FHFA is required to conduct an on-site examination of 
each Bank at least annually to determine the condition of the entity 
for the purpose of ensuring its safety and soundness. See 12 U.S.C. 
1440, 4517(a)-(b). Upon completion of each annual or special 
examination, FHFA examiners prepare a written report of examination for 
the Director of FHFA (as required by section 20 of the Bank Act, 12 
U.S.C. 1440), which is subsequently presented to the board of directors 
of the particular Bank. The report of examination is prepared for the 
Director of FHFA and, by regulation, remains the property of FHFA even 
when in the possession of a Bank, OF, a Bank member, or another 
government agency. See 12 U.S.C. 1440; 12 CFR 911.3(c)(3). Accordingly, 
these reports, as well as any other supervisory correspondence, are 
subject to the restrictions on the disclosure of unpublished 
information set out in part 911 of the regulations of the former 
Finance Board (which remain in effect until superseded by action of 
FHFA).
    Currently, the Banks are prohibited by regulation from sharing 
their reports of examination among themselves, or with any other 
outside party, except pursuant to the written consent of FHFA. See 12 
CFR 911.3(c)(1). In 2006, the Finance Board issued an Advisory Bulletin 
that permitted the Banks to disclose the factual content of a report of 
examination in the preparation of its SEC disclosure documents, but 
continued to prohibit the Banks from releasing the report of 
examination

[[Page 60350]]

itself, or any portion of the report. See Federal Housing Finance Board 
Advisory Bulletin 2006-AB-03 (July 18, 2006) (available online at 
http://www.fhfa.gov/webfiles/13094/2006-AB-03.pdf). The Advisory 
Bulletin specifically prohibited the sharing of reports of examination 
among the Banks even for the purpose of assessing the likelihood of 
having to make a payment on COs for which another Bank is the primary 
obligor. If FHFA adopts a final rule that requires it to provide 
examination reports to all of the Banks, FHFA also will consider 
whether any revisions to the Advisory Bulletin are necessary, such as 
to ensure that the Bulletin remains consistent with purposes of HERA 
while also ensuring that the Banks do not share the reports of 
examination that they receive from FHFA with any other parties.
    In the rule, FHFA is proposing to distribute only the final reports 
of examination, along with any other supervisory reports that FHFA has 
presented to a Bank's board of directors, and to do so as a matter of 
course after each report has been finalized and presented to the Bank's 
board, rather than making the reports available only upon the request 
of individual Banks. FHFA views the proposed distribution of the 
reports to all of the Banks as a matter of course as preferable to 
providing the reports only in response to a specific request from one 
or more of the Banks. First, the proposed approach would ensure that 
all Banks receive and use the same information in assessing their 
potential joint and several liability and in preparing their disclosure 
documents. Further, this approach would result in a more efficient and 
regular process for FHFA to administer and would establish a clear and 
standard timeframe for each Bank to review its own report of 
examination for any proprietary information that it believes should be 
withheld under the statutory standards of section 20A of the Bank Act. 
FHFA requests comments on whether the proposed distribution as a matter 
of course is the most appropriate means of providing information to the 
Banks.
    Paragraph (b) of proposed Sec.  1260.3 would implement the 
statutory requirement that each Bank be afforded the opportunity to 
request that the Director of FHFA not disclose particular information 
because the information is proprietary and the public interest requires 
that the information not be shared. Paragraph (b)(1) generally restates 
the statutory standard, which is a two-part test and requires that both 
parts must be satisfied in order for the Director or his designee to 
determine that the information should not be disclosed. Paragraph 
(b)(1) also would give each Bank a brief period of time within which to 
ask that FHFA not disclose certain information within the report of 
examination to the other Banks. In order to make such a request, a Bank 
must file a written request with FHFA that particular information 
contained in its report of examination or other supervisory report be 
redacted from the copy of the report to be distributed to the other 
Banks. Each entity would be required to file its request no later than 
the close of business on the tenth business day following the date on 
which FHFA presented the final report of examination or the supervisory 
report to the entity's board of directors.
    FHFA believes that ten (10) business days is sufficient time for a 
Bank to review its report of examination or any other supervisory 
reports for proprietary information that it believes meets the 
standards for being withheld. First, through the receipt of draft 
reports and other supervisory correspondence, the Bank most likely will 
already be familiar with most of the contents of the reports well 
before they are presented to the Bank's board of directors. Second, a 
final report of examination typically is not a lengthy document, and 
therefore should not require a lengthy period of time to review for 
proprietary information. The same should be true for other types of 
supervisory reports. Finally, in order for this process to achieve the 
statutory objectives, these reports of examination must be reasonably 
current, so that the recipients can evaluate them together with other 
current information relating to the financial condition of the Bank. 
FHFA requests comments on whether the final rule should allow each 
entity a different length of time within which to review its report of 
examination for proprietary information that it believes should not be 
disclosed.
    Paragraph (b)(2) of proposed Sec.  1260.3 would require the 
Director of FHFA, or such other FHFA officer as the Director may 
designate, to determine promptly whether to grant all or part of a 
request to withhold proprietary information that a Bank has made in 
accordance with the requirements of paragraph (b)(1). Any determination 
made by the Director or his designee under this paragraph would be 
final.
    Proposed Sec.  1260.3(c) describes the process by which FHFA would 
distribute reports to the other Banks. The rule would require FHFA to 
distribute a report of examination or other supervisory report after 
the ten (10) business-day period noted above has expired without a 
request to withhold proprietary information, or after the Director or 
his designee has made a determination in response to such a request. If 
the Director or his designee determines that the report includes 
proprietary information that should not be disclosed, FHFA will 
distribute an appropriately redacted version of the report. The 
proposed rule would allow reports of examination and other supervisory 
reports to be distributed in either tangible or electronic form, as 
deemed appropriate on either an ongoing, or case-by-case, basis by 
FHFA.
    Section 20A(d) of the Bank Act states that the Director of FHFA 
shall not be deemed to have waived any privilege applicable to any 
information concerning a Bank by sharing information as required under 
section 20A(a) of the statute. As mentioned above, reports of 
examination and other supervisory correspondence are considered to be 
privileged unpublished information that are subject to the restrictions 
on disclosure set forth in part 911 of the regulations of the Finance 
Board, which remains in effect. See 12 CFR 911.1, 911.3(c)(3). Proposed 
Sec.  1260.3(d) would make clear that reports of examination or any 
other privileged information that may be made available under Sec.  
1260.3 would remain subject to the restrictions set forth in part 911 
of this title, or any future regulatory provisions dealing with the 
same subject matter that may be promulgated by FHFA. Proposed Sec.  
1260.3(d) would operate in parallel with 12 CFR 911.3(a), which 
provides that possession or control of unpublished information by any 
entity, including the Banks and OF, does not constitute a waiver by 
FHFA of any privilege, or of its right to control, supervise, or impose 
limitations on the subsequent use and disclosure of the information.
    Because FHFA conducts examinations at various times over the course 
of a year, examination reports for different Banks are generated at 
different times during the year. Thus, if the rule were to apply only 
to reports of examination and supervisory reports that were prepared 
after the rule takes effect, it could take nearly one year for FHFA to 
distribute the reports for all twelve of the Banks. FHFA believes that 
a better approach would be to include in the rule a transition 
provision that allows FHFA to distribute the then-current reports of 
examination to all of the Banks and OF soon after the rule takes 
effect. Accordingly, proposed Sec.  1260.3(e) includes a transition 
provision that would require FHFA to

[[Page 60351]]

distribute to each Bank and OF a copy of the most recent report of 
examination for each Bank as of the effective date of the final rule. 
Each Bank would be given ten (10) business days from the effective date 
of the final rule to submit to FHFA a written request to withhold 
proprietary information contained in the report of examination, in the 
manner described in paragraph (b)(1). Following the expiration of this 
review period, the reports of examination would be distributed as 
provided in paragraphs (b)(2) and (c) of proposed Sec.  1260.3.
    FHFA requests comments regarding whether the transition provision 
should require the distribution of any reports of examination other 
than the most current report as of the effective date of the final 
rule, and, if so, to what extent, and whether any other types of 
documents should be provided as part of the initial distribution.

IV. Paperwork Reduction Act

    The proposed rule does not contain any collections of information 
pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.). Therefore, FHFA has not submitted any information to the Office 
of Management and Budget for review.

V. Regulatory Flexibility Act

    The proposed 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). Therefore, in accordance 
with section 605(b) of the RFA, FHFA certifies that this proposed rule, 
if promulgated as a final rule, will not have significant economic 
impact on a substantial number of small entities.

List of Subjects

12 CFR Part 914

    Federal home loan banks, Reporting and recordkeeping requirements.

12 CFR Part 1260

    Confidential business information, Federal home loan banks, 
Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble and under the 
authority of 12 U.S.C. 4526, the Federal Housing Finance Agency 
proposes to amend subchapter C of chapter IX and subchapter D of 
chapter XII of title 12 of the Code of Federal Regulations as follows:

CHAPTER IX--FEDERAL HOUSING FINANCE BOARD

SUBCHAPTER C--GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS

PART 914--[REMOVED]

    1. Remove part 914.

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER D--FEDERAL HOME LOAN BANKS

    2. Add part 1260 to subchapter D to read as follows:

PART 1260--FILING OF REGULATORY REPORTS AND SHARING OF INFORMATION

Sec.
1260.1 Definitions.
1260.2 Filing Regulatory Reports.
1260.3 Sharing of information among Banks.

    Authority: 12 U.S.C. 1440, 1440a, 4511, 4514, and 4517.


Sec.  1260.1  Definitions.

    As used in this part:
    AHP means the Affordable Housing Program, the CICA program that 
each Bank is required to establish pursuant to section 10(j) of the 
Bank Act (12 U.S.C. 1430(j)) and part 1291 of this chapter.
    AMA means those assets that may be acquired by a Bank under part 
955 of this title.
    Bank, written in title case, means a Federal Home Loan Bank 
established under section 12 of the Bank Act (12 U.S.C. 1432).
    Bank Act means the Federal Home Loan Bank Act, as amended (12 
U.S.C. 1421 through 1449).
    CICA means any advance made through a program offered by a Bank 
under section 10 of the Bank Act (12 U.S.C. 1430), part 952 of this 
title, and part 1291 of this chapter to provide funding for targeted 
community lending and affordable housing.
    CIP means the Community Investment Program, an advance program 
under CICA required to be offered pursuant to section 10(i) of the Bank 
Act (12 U.S.C. 1430(i)).
    FHFA means the Federal Housing Finance Agency.
    Regulatory Report means--(1) Any report to FHFA of raw or summary 
data needed to evaluate the safe and sound condition and operations of 
a Bank or to determine compliance with any:
    (i) Provision in the Bank Act or other law, order, rule, or 
regulation;
    (ii) Condition imposed in writing by FHFA in connection with the 
granting of any application or other request by a Bank; or
    (iii) Written agreement entered into between FHFA and a Bank; and
    (2) Includes, without limitation:
    (i) Call reports and reports of instrument-level risk modeling 
data;
    (ii) Reports related to a Bank's housing mission achievement, such 
as reports related to AMA, AHP, CIP, and other CICA programs; and
    (iii) Reports submitted in response to requests to one or more 
Banks for information on a nonrecurring basis.


Sec.  1260.2  Filing Regulatory Reports.

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


Sec.  1260.3  Sharing of information among Banks.

    (a) In general. In order to enable each Bank to evaluate the 
financial condition of any one or more of the other Banks and the Bank 
System, FHFA periodically shall distribute to each Bank and to the 
Office of Finance the final reports of examination (or such portions 
thereof that FHFA deems appropriate) of all other Banks, as well as any 
other supervisory reports that FHFA presents to the board of directors 
of a Bank, subject to the requirements set forth in paragraphs (b) 
through (d) of this section.
    (b) Requests to withhold proprietary information.--(1) After FHFA 
has presented a Bank's report of examination or other supervisory 
report to its board of directors, the Bank shall have ten (10) business 
days within which to request in writing that particular information 
contained therein be withheld from disclosure because it is proprietary 
and the public interest requires that it not be shared.
    (2) After receiving a timely written request made under paragraph 
(b)(1) of this section, the Director or his designee shall promptly 
determine whether to redact any information from the report of 
examination or other supervisory report prior to distributing it to the 
other Banks and the Office of Finance. Such a determination shall be 
final.
    (c) Distribution of Information. After the expiration of the review 
period established under paragraph (b)(1) of this section without a 
request from the affected Bank, or after the Director or his designee 
has made a determination under paragraph (b)(2) of this section, FHFA 
shall distribute a copy of the report of examination or other 
supervisory report to each Bank and the Office of Finance in either 
tangible or

[[Page 60352]]

electronic form, as FHFA shall deem appropriate.
    (d) No waiver of privilege. The release of information under this 
section does not constitute a waiver by FHFA of any privilege, or its 
right to control, supervise, or impose limitations on, the subsequent 
use and disclosure of any information concerning a Bank. To the extent 
that any reports of examination or other materials provided to a Bank 
or the Office of Finance pursuant to this section otherwise qualify as 
Unpublished Information under Sec.  911.1 of this title or any 
successor provision, those materials shall continue to qualify as such 
and shall continue to be subject to the restrictions on disclosure set 
forth in part 911 of this title, or any successor provisions.
    (e) Transition provision. Following the effective date of this 
section, FHFA will distribute promptly to each Bank and the Office of 
Finance a copy of the most recent report of examination of all other 
Banks. Each Bank shall have ten (10) business days following the 
effective date of this section within which to submit a written request 
to withhold information as described in paragraph (b)(1) of this 
section. Upon the expiration of the time period described in the 
preceding sentence, the distribution of the initial reports of 
examination shall proceed in accordance with paragraphs (b)(2) and (c) 
of this section.

    Dated: September 24, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2010-24578 Filed 9-29-10; 8:45 am]
BILLING CODE 8070-01-P