Calculation of Maximum Obligation Limitation, 37554-37558 [2012-15310]
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Federal Register / Vol. 77, No. 121 / Friday, June 22, 2012 / Rules and Regulations
possesses and is publicly available, by
any of the following methods:
• Federal Rulemaking Web Site: Go to
https://www.regulations.gov and search
for Docket ID NRC–2011–0161.
• NRC’s Agencywide Documents
Access and Management System
(ADAMS): You may access publicly
available documents online in the NRC
Library at https://www.nrc.gov/readingrm/adams.html. To begin the search,
select ‘‘ADAMS Public Documents’’ and
then select ‘‘Begin Web-based ADAMS
Search.’’ For problems with ADAMS,
please contact the NRC’s Public
Document Room (PDR) reference staff at
1–800–397–4209, 301–415–4737, or by
email to pdr.resource@nrc.gov. The
ADAMS accession number for each
document referenced in this notice (if
that document is available in ADAMS)
is provided the first time that a
document is referenced.
• NRC’s PDR: You may examine and
purchase copies of public documents at
the NRC’s PDR, Room O1–F21, One
White Flint North, 11555 Rockville
Pike, Rockville, Maryland 20852.
FOR FURTHER INFORMATION CONTACT:
Emily Robbins, Office of
Administration, U.S. Nuclear Regulatory
Commission, Washington, DC 20555–
0001; telephone: 301–492–3524, email:
Emily.Robbins@nrc.gov.
SUPPLEMENTARY INFORMATION: On May 3,
2012 (77 FR 26149), the NRC published
a direct final rule amending its
regulations at Title 10 of the Code of
Federal Regulations (10 CFR) part 11,
‘‘Criteria and Procedures for
Determining Eligibility for Access to or
Control Over Special Nuclear Material,’’
and 10 CFR part 25, ‘‘Access
Authorization.’’ The NRC amended its
access authorization fees charged to
licensees for work performed under the
MAAP and the IAAP. The amended cost
is the result of an increase in the review
time for each application for access
authorization. The formula for
calculating fees remains based on
current Office of Personnel Management
(OPM) billing rates for personnel
background investigations. The NRC
designed the formula to recover the full
cost of processing a request for access
authorization from the licensee. The use
of the fee assessment formula tied to
current OPM billing rates eliminates the
need for the NRC to update its access
authorization fee schedules through
regular rulemaking. In the direct final
rule, the NRC stated that, if it received
no significant adverse comments, the
direct final rule would become final on
June 22, 2012.
The NRC did not receive any
comments on the direct final rule.
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Therefore, this rule will become
effective as scheduled.
Dated at Rockville, Maryland, this 19th day
of June 2012.
For the Nuclear Regulatory Commission.
Cindy K. Bladey,
Chief, Rules, Announcements, and Directives
Branch, Office of Administration.
[FR Doc. 2012–15274 Filed 6–21–12; 8:45 am]
BILLING CODE 7590–01–P
Treasury
Lance Auer, Deputy Assistant
Secretary (Financial Institution Policy),
at (202) 622–1262; Monique Rollins,
Senior Policy Advisor (Office of Capital
Markets), at (202) 622–1745; Peter A.
Bieger, Assistant General Counsel
(Banking and Finance), at (202) 622–
0480; and Steven D. Laughton, Senior
Counsel, Office of General Counsel, at
(202) 622–8413.
SUPPLEMENTARY INFORMATION:
FEDERAL DEPOSIT INSURANCE
CORPORATION
The Dodd-Frank Act
12 CFR Part 380
RIN 3064–AD84
DEPARTMENT OF THE TREASURY
31 CFR Part 149
RIN 1505–AC36
Calculation of Maximum Obligation
Limitation
Federal Deposit Insurance
Corporation; Departmental Offices,
Department of the Treasury.
ACTION: Final rule.
AGENCY:
The Federal Deposit
Insurance Corporation (the ‘‘FDIC’’) and
the Departmental Offices of the
Department of the Treasury (the
‘‘Treasury’’) (collectively, the
‘‘Agencies’’) are issuing the final rule
(‘‘Final Rule’’) to implement applicable
provisions of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (the ‘‘Dodd-Frank Act’’).1 The Final
Rule governs the calculation of the
maximum obligation limitation
(‘‘MOL’’), as specified in the DoddFrank Act. The MOL limits the aggregate
amount of outstanding obligations that
the FDIC may issue or incur in
connection with the orderly liquidation
of a covered financial company.
DATES: The effective date of the Final
Rule is July 23, 2012.
FOR FURTHER INFORMATION CONTACT:
SUMMARY:
FDIC
Arthur D. Murphy, Senior Financial
Analyst, Division of Finance (703) 562–
6177 or amurphy@fdic.gov; Henry R.F.
Griffin, Assistant General Counsel, Legal
Division (703) 562–6404 or
hgriffin@fdic.gov; or Randy W. Thomas,
Counsel, Legal Division (703) 562–6454
or ranthomas@fdic.gov.
1 Dodd-Frank Wall Street Reform and Consumer
Protection Act, Public Law 111–203, 12 U.S.C. 5301
et seq. (2010).
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I. Background
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Title II of the Dodd-Frank Act
establishes an Orderly Liquidation
Authority (‘‘OLA’’) to resolve a large
interconnected financial company upon
a determination that its failure and
resolution under otherwise applicable
law would have serious adverse effects
on financial stability in the United
States and the use of OLA would avoid
or mitigate such adverse effects. Under
the process set forth in the Dodd-Frank
Act, certain designated Federal
agencies,2 on their own initiative or at
the request of the Secretary of the
Treasury (‘‘Secretary’’), may recommend
that the Secretary appoint the FDIC as
receiver of a financial company. Any
written recommendation from the
designated Federal agencies that the
Secretary should appoint the FDIC as
receiver for a financial company must
include a number of specific findings,
which are enumerated in section
203(a)(2) of the Dodd-Frank Act.3 Then,
2 The Board of Governors of the Federal Reserve
System (‘‘FRB’’) and the Securities and Exchange
Commission (‘‘SEC’’) will make the
recommendation if the company or its largest U.S.
subsidiary is a broker or a dealer. The FRB and the
Director of the Treasury’s Federal Insurance Office
will make the recommendation and provide
affirmative approval, respectively, if the company
or its largest U.S. subsidiary is an insurance
company, and the FRB and the FDIC will make the
recommendation in all other cases. In cases
involving the FRB and FDIC, the recommendation
must be approved by at least 2⁄3 of the members of
the FRB then serving and at least 2⁄3 of the members
of the FDIC Board of Directors then serving.
3 Section 203(a)(2) of the Dodd-Frank Act
provides that all written recommendations from the
designated Federal agencies to the Secretary must
include the following:
(1) An evaluation of whether the financial
company is in default or in danger of default;
(2) A description of the effect that the default of
the financial company would have on financial
stability in the United States;
(3) A description of the effect that the default of
the financial company would have on economic
conditions or financial stability for low income,
minority, or underserved communities;
(4) A recommendation regarding the nature and
the extent of actions to be taken under Title II of
the Dodd-Frank Act regarding the financial
company;
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based on the written recommendation of
the appropriate agencies, the Secretary,
in consultation with the President, must
determine whether the conditions in
section 203(b) of the Dodd-Frank Act
have been satisfied so that the Secretary
can seek the appointment of the FDIC as
receiver for the financial company.4 In
making that determination, the
Secretary must document any
determination and retain such
documentation. This procedure is very
similar to the way that systemic risk
determinations are made under section
13 of the Federal Deposit Insurance Act
(the ‘‘FDIA’’).5 Under section 201(a)(8)
of the Dodd-Frank Act, a ‘‘covered
financial company’’ is a ‘‘financial
company’’ 6 for which a determination
(5) An evaluation of the likelihood of a private
sector alternative to prevent the default of the
financial company;
(6) An evaluation of why a case under the
Bankruptcy Code is not appropriate for the financial
company;
(7) An evaluation of the effects on creditors,
counterparties, and shareholders of the financial
company and other market participants; and
(8) An evaluation of whether the company
satisfies the definition of a financial company under
section 201 of the Dodd-Frank Act.
4 Section 203(b) of the Dodd-Frank Act requires
the Secretary of Treasury to determine that:
(1) The financial company is in default or in
danger of default;
(2) The failure of the financial company and its
resolution under otherwise applicable Federal or
State law would have serious adverse effects on
financial stability in the United States;
(3) No viable private sector alternative is available
to prevent the default of the financial company;
(4) Any effect on the claims or interests of
creditors, counterparties, and shareholders of the
financial company and other market participants as
a result of actions taken under Title II of the DoddFrank Act is appropriate, given the impact that any
action taken under Title II of the Dodd-Frank Act
would have on financial stability in the United
States;
(5) Any action under section 204 would avoid or
mitigate such adverse effects, taking into
consideration the effectiveness of the action in
mitigating potential adverse effects on the financial
system, the cost to the general fund of the Treasury,
and the potential to increase excessive risk taking
on the part of creditors, counterparties and
shareholders in the financial company;
(6) A Federal regulatory agency has ordered the
financial company to convert all of its convertible
debt instruments that are subject to the regulatory
order; and
(7) The company satisfies the definition of a
financial company under section 201.
5 12 U.S.C. 1823(c)(4).
6 Section 201(a)(11) of the Dodd Frank Act
defines the term ‘‘financial company’’ to mean any
company that:
(A) Is incorporated or organized under any
provision of Federal law or the laws of any State;
(B) Is—
(i) A bank holding company, as defined in section
2(a) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(a));
(ii) A nonbank financial company supervised by
the FRB;
(iii) Any company that is predominantly engaged
in activities that the FRB has determined are
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has been made pursuant to section
203(b) of the Dodd-Frank Act but does
not include an insured depository
institution.
Once the Secretary makes the
determination, the Secretary can seek
the appointment of the FDIC as receiver
of the covered financial company. If the
board of directors (or similar governing
body) of the company consents to the
appointment, the Secretary shall
appoint the FDIC as receiver. If the
company’s governing body does not
consent, section 202 of the Dodd-Frank
Act requires the Secretary to petition the
United States District Court for the
District of Columbia for an order
authorizing the Secretary to appoint the
FDIC as receiver. In determining
whether to grant the petition, the court
will determine whether two of the
Secretary’s seven determinations—that
the covered financial company is in
default or in danger of default and that
it meets the definition of financial
company under Title II—are arbitrary
and capricious.7 If the court upholds the
two reviewable determinations of the
Secretary, the court will issue an order
authorizing the Secretary to appoint the
FDIC as receiver. If the court does not
make a determination within twentyfour hours of receiving the Secretary’s
petition, then the appointment of the
FDIC as receiver takes effect by
operation of law.
The OLA in the Dodd-Frank Act is
intended as a limited exception to
bankruptcy or other applicable
insolvency laws for purposes of
ensuring that the resolution of a failing
non-depository financial company does
not have serious adverse effects on U.S.
financial stability. Section 204(a) of the
Dodd-Frank Act expressly provides that
the purpose of the OLA is to provide the
means ‘‘to liquidate failing financial
companies that pose a significant risk to
the financial stability of the United
States in a manner that mitigates such
risk and minimizes moral hazard.’’
financial in nature or incidental thereto for
purposes of section 4(k) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(k)) other than
a company described in clause (i) or (ii); or
(iv) Any subsidiary of any company described in
any of clauses (i) through (iii) that is predominantly
engaged in activities that the FRB has determined
are financial in nature or incidental thereto for
purposes of section 4(k) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(k)) (other
than a subsidiary that is an insured depository
institution or an insurance company); and
(C) Is not a Farm Credit System institution
chartered under and subject to the provisions of the
Farm Credit Act of 1971, as amended (12 U.S.C.
2001 et seq.), a governmental entity, or a regulated
entity, as defined under section 1303(20) of the
Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4502(20)).
7 Dodd Frank Act, section 202(a)(1)(A)(iii).
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Section 214(a) expressly provides that
‘‘[a]ll financial companies put into
receivership under this title shall be
liquidated. No taxpayer funds shall be
used to prevent the liquidation of any
financial company under this title.’’
Moreover, section 214(b) provides that
‘‘[a]ll funds expended in the liquidation
of a financial company under this title
shall be recovered from the disposition
of assets of such financial company, or
shall be the responsibility of the
financial sector, through assessments.’’
Finally, section 214(c) provides that
‘‘[t]axpayers shall bear no losses from
the exercise of any authority under this
title.’’
To achieve the orderly liquidation of
financial companies, the FDIC is given
broad authority under the Dodd-Frank
Act to: transfer assets or liabilities to a
bridge financial company; operate or
liquidate businesses; sell assets; and
resolve the liabilities of a covered
financial company, just after the FDIC’s
appointment as receiver or as soon as
conditions make this appropriate.8 This
authority enables the FDIC to act
immediately to sell any assets or
liabilities of the covered financial
company to another entity, or, if that is
not possible or consistent with
maximizing the value of the assets of the
covered financial company, to transfer
assets and liabilities to a bridge
financial company established by the
FDIC and sell the assets or liabilities
over time while maintaining critical
functions. Oftentimes, in administering
a receivership, it is necessary to
continue key operations, services, and
transactions that will maximize the
value of the firm’s assets and avoid a
disorderly collapse in the marketplace.
8 Section 210 of the Dodd-Frank Act prescribes
the FDIC’s powers and duties once it is appointed
as receiver of a covered financial company,
including, inter alia, its powers and duties to: (1)
Succeed to all rights, titles, powers and privileges
of the covered financial company and its assets, and
of any stockholder, member, officer or director of
such company; (2) take over the assets and operate
the covered financial company with all the powers
of the shareholders, members, directors and
officers, and conduct all business of the covered
financial company; (3) liquidate the covered
financial company through the sale of assets and
liabilities or the transfer of assets and liabilities to
a bridge financial company, as provided under
section 210(h) of the Dodd-Frank Act; (4) merge the
covered financial company with another company
or transfer assets or liabilities; (5) pay valid
obligations that come due, to the extent that funds
are available; (6) exercise subpoena powers; (7) use
private sector services to manage and dispose of
assets; (8) terminate rights and claims of
stockholders and creditors (except for the right to
payment of claims consistent with the priority of
claims provision); and (9) determine and pay
claims. However, a receivership of an insurance
company would generally be conducted in
accordance with state law.
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Federal Register / Vol. 77, No. 121 / Friday, June 22, 2012 / Rules and Regulations
Section 210(n) of the Dodd-Frank Act
establishes an Orderly Liquidation Fund
(‘‘OLF’’) in the U.S. Treasury that will
be available to the FDIC to carry out its
responsibilities as receiver of a covered
financial company and pay the costs of
actions authorized under Title II of the
Dodd-Frank Act. These responsibilities
include: the orderly liquidation of
covered financial companies; the
payment of administrative expenses;
and the payment of principal and
interest by the FDIC on obligations
issued under section 210(n)(5) of the
Dodd-Frank Act. The OLF will be
comprised of amounts received by the
FDIC, including: the proceeds of
obligations issued to Treasury pursuant
to section 210(n)(5); assessments
received under section 210(o); interest
and other earnings from investments;
and repayments to the FDIC by covered
financial companies.9
In order for the FDIC to fulfill its
obligations as receiver of a covered
financial company, it may be necessary
for the FDIC to borrow funds from the
Treasury. Under section 210(n)(5) of the
Dodd-Frank Act, the FDIC is authorized
to issue obligations to Treasury upon
the FDIC’s appointment as receiver, and
Treasury may purchase any such
obligations, ‘‘upon such terms and
conditions as to yield a return at a rate
determined by the Secretary, taking into
consideration the current average yield
on outstanding marketable obligations
of the United States of comparable
maturity, plus an interest rate surcharge
to be determined by the Secretary,
which shall be greater than the
difference between—(i) the current
average rate on an index of corporate
obligations of comparable maturity; and
(ii) the current average rate on
outstanding marketable obligations of
the United States of comparable
maturity.’’ Section 210(n)(9) of the
Dodd-Frank Act provides that the FDIC
must develop an Orderly Liquidation
Plan (‘‘OLP’’) that is acceptable to the
Secretary for each covered financial
company for which the FDIC is
appointed receiver, prior to funds in the
OLF being made available to the FDIC
with regard to such covered financial
company. The FDIC may amend any
OLP at any time with the concurrence
of the Secretary. Section 210(n)(9)
further requires that a mandatory
repayment plan between the FDIC and
Treasury be agreed to and in effect
before Treasury may provide certain
amounts to the FDIC within the limits
defined in section 210(n)(6)(B) of the
Dodd-Frank Act.
9 Dodd
Frank Act, section 210(n)(2).
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The Maximum Obligation Limitation
(‘‘MOL’’), as set forth in section
210(n)(6) of the Dodd-Frank Act, limits
the aggregate amount of outstanding
obligations that the FDIC may issue or
incur in connection with the orderly
liquidation of a covered financial
company. Specifically, the statute
provides as follows:
The [FDIC] may not, in connection with
the orderly liquidation of a covered financial
company, issue or incur any obligation, if,
after issuing or incurring the obligation, the
aggregate amount of such obligations
outstanding under this subsection, for each
covered financial company would exceed—
(A) an amount that is equal to 10 percent
of the total consolidated assets of the covered
financial company, based on the most recent
financial statement available, during the 30day period immediately following the date of
appointment of the [FDIC] as receiver (or a
shorter time period if the [FDIC] has
calculated the amount described under
subparagraph (B)); and
(B) the amount that is equal to 90 percent
of the fair value of the total consolidated
assets of each covered financial company that
are available for repayment, after the time
period described in subparagraph (A).
On November 25, 2011, the Agencies
issued a notice of proposed rulemaking
regarding the calculation of the MOL as
specified in section 210(n)(6) of the
Dodd-Frank Act (76 FR 72645,
November 25, 2011). The purpose of the
proposed rule (the ‘‘Proposed Rule’’)
was to define certain key terms and
describe the manner in which the FDIC
would calculate the MOL in the event
that one or more covered financial
companies are placed into receivership.
The notice of proposed rulemaking
published in the Federal Register
requested comments on all aspects of
the Proposed Rule as well as comments
relating to certain specific questions.
The comment period ended on January
24, 2012.
II. Summary of Comments on the
Proposed Rule
The Agencies received two comments
in response to the Proposed Rule. The
first commenter was supportive of the
Proposed Rule, noting that it is in close
alignment with the statutory language of
the Dodd-Frank Act. The commenter
agreed with the proposed definitions,
particularly the definitions of ‘‘fair
value’’ and ‘‘obligation.’’ Further, this
commenter observed that during
extended periods of economic distress it
may not be possible to credibly or
reasonably determine ‘‘fair value’’ for
some assets and that the Agencies
should consider appropriate
contingencies and responses. The
Agencies acknowledge this point and
believe that the definition of ‘‘fair
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value’’ in the Final Rule provides the
FDIC with sufficient flexibility to
implement the rule in a wide range of
economic and market environments,
including during periods of severe
economic distress. This approach will
enable the determination of the fair
value of assets to be adapted to a variety
of circumstances that may be
encountered but that cannot be foreseen
at present.
The second commenter questioned
why brokered deposits are immediately
paid off by the FDIC and suggested that
brokered deposits be transferred to the
acquiring institution as a zero-cost
deposit. This comment addresses issues
which are outside the scope of the
Proposed Rule.
III. The Final Rule
A. Overview
Section 210(n)(7) of the Dodd-Frank
Act requires the Agencies, in
consultation with the Financial Stability
Oversight Council (‘‘FSOC’’), to jointly
prescribe regulations governing the
calculation of the MOL. In accordance
with this section, the Agencies
consulted with the FSOC, considered
the two comments received, and have
decided to adopt regulations that closely
follow the statutory language for
calculating the MOL, while defining
certain terms referenced in the statute.
Because the two comments received did
not suggest any changes to the
regulatory text, the Final Rule is
identical to the Proposed Rule. The
terms in the Final Rule are defined
solely for the purpose of calculating the
MOL and are not applicable to any other
statutory or regulatory requirements.
B. Section-by-Section Analysis of the
Final Rule
Definitions. In the Proposed Rule, the
Agencies defined terms that are
necessary to calculate the MOL. The
Proposed Rule defined the terms ‘‘fair
value,’’ ‘‘most recent financial statement
available,’’ ‘‘obligation’’ and ‘‘total
consolidated assets of each covered
financial company that are available for
repayment.’’ The Dodd-Frank Act does
not define these terms. The Agencies
did not receive any comments that
requested changes to the definitions. As
a result, the definitions in the Final Rule
are unchanged.
Only one comment was received on
these definitions. That comment agreed
with the proposed definitions,
particularly the definitions of ‘‘fair
value’’ and ‘‘obligation.’’ That comment
also observed that it may not be possible
to reasonably determine fair values
during a systemic crisis and
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Federal Register / Vol. 77, No. 121 / Friday, June 22, 2012 / Rules and Regulations
recommended that the Agencies prepare
appropriate contingencies. The
Agencies believe that the comment is
generally in accord with the discussion
of ‘‘fair value’’ in the Proposed Rule
insofar as it noted the FDIC’s authority
to conduct an orderly liquidation in
order to maximize the value of assets of
a covered financial company over a
three-to five-year period. As noted
above, the Agencies believe that the
definition of ‘‘fair value’’ in the Final
Rule provides the Agencies with
sufficient flexibility to implement the
rule in a wide range of economic and
market environments, including during
periods of severe economic distress.
This approach will enable the
determination of fair value of assets to
be adapted to a variety of circumstances
that may be encountered but that cannot
be foreseen at present.
Maximum Obligation Limitation. In
the Proposed Rule, the Agencies closely
followed the statutory language in
section 210(n)(6) of the Dodd-Frank Act
for calculating the MOL. The Agencies
did not receive any comments that
suggested changes to the MOL. As a
result, the MOL in the Final Rule is
unchanged.
IV. Regulatory Analysis and Procedure
A. The Paperwork Reduction Act
The Final Rule provides, in part, the
manner in which the Agencies will
implement the maximum obligation
limitation for FDIC borrowings from
Treasury to fund the Orderly
Liquidation Fund in the event that one
or more covered financial companies are
placed into receivership. The Final Rule
will not involve any new collections of
information pursuant to the Paperwork
Reduction Act (44 U.S.C. 3501 et seq.).
Consequently, no information collection
was submitted to the Office of
Management and Budget for review. No
comments were received in connection
with the Paperwork Reduction Act
analysis published as part of the
Proposed Rule.
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B. The Regulatory Flexibility Act
Pursuant to section 605(b) of the
Regulatory Flexibility Act (5 U.S.C.
605(b)), the Agencies hereby certify that
the Final Rule will not have a
significant economic impact on a
substantial number of small entities and
therefore a regulatory flexibility analysis
is not required. The Final Rule governs
the manner in which the FDIC will
calculate the MOL for obligations
incurred or issued by the FDIC in
connection with the orderly liquidation
of a covered financial company under
Title II of the Dodd-Frank Act. Under
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Small Business Administration (SBA)
size standards defining small entities,
financial companies are generally
considered small entities if their annual
receipts do not exceed $7 million or
their total assets do not exceed $175
million.10 The Agencies do not expect
that the OLA in the Dodd-Frank Act will
be used to resolve financial companies
that qualify as small entities, because
the failure of such companies would be
unlikely to have serious adverse effects
on financial stability in the United
States. No comments were received in
connection with the Agencies’
Regulatory Flexibility Act analysis
published as part of the Proposed Rule.
C. Plain Language
Each Federal banking agency, such as
the FDIC, is required to use plain
language in all proposed and final rules
published after January 1, 2000. 12
U.S.C. 4809. In addition, in 1998, the
President issued a memorandum
directing each agency in the Executive
branch, such as Treasury, to use plain
language for all new proposed and final
rulemaking documents issued on or
after January 1, 1999. The Agencies
sought to present the Proposed Rule in
a simple and straightforward manner.
The Agencies received no comments on
the use of plain language, and the Final
Rule is identical to the Proposed Rule.
D. Executive Orders 12866 and 13563
Executive Orders 12866 and 13563
direct Treasury to assess costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. This Final
Rule has been designated a ‘‘significant
regulatory action’’ although not
economically significant, under section
3(f) of Executive Order 12866.
Accordingly, the rule has been reviewed
by the Office of Management and
Budget.
E. Small Business Regulatory
Enforcement Fairness Act
The Office of Management and Budget
has determined that the Final Rule is
not a ‘‘major rule’’ within the meaning
of the relevant sections of the Small
Business Regulatory Enforcement
10 13
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Fairness Act of 1996 (SBREFA) (5 U.S.C.
801, et seq.).
As required by SBREFA, the FDIC and
Treasury will file the appropriate
reports with Congress and the
Government Accountability Office so
that the final rule may be reviewed.
List of Subjects
12 CFR Part 380
Accounting, administrative practice
and procedure, finance, and loan
programs.
31 CFR Part 149
Accounting, administrative practice
and procedure, finance, and loan
programs.
Federal Deposit Insurance Corporation
Authority and Issuance
For the reasons stated above, the
Board of Directors of the Federal
Deposit Insurance Corporation amends
part 380 of title 12 of the Code of
Federal Regulations as follows:
PART 380—ORDERLY LIQUIDATION
AUTHORITY
1. The authority citation for part 380
continues to read as follows:
■
Authority: 12 U.S.C. 5301 et seq.
■
2. Add § 380.10 to read as follows:
§ 380.10
Maximum Obligation Limitation
(a) General rule. The FDIC shall not,
in connection with the orderly
liquidation of a covered financial
company, issue or incur any obligation,
if, after issuing or incurring the
obligation, the aggregate amount of such
obligations outstanding for each covered
financial company would exceed—
(1) An amount that is equal to 10
percent of the total consolidated assets
of the covered financial company, based
on the most recent financial statement
available, during the 30-day period
immediately following the date of
appointment of the FDIC as receiver (or
a shorter time period if the FDIC has
calculated the amount described under
paragraph (a)(2) of this section); and
(2) The amount that is equal to 90
percent of the fair value of the total
consolidated assets of each covered
financial company that are available for
repayment, after the time period
described in paragraph (a)(1) of this
section.
(b) Definitions: For purposes of
paragraph (a) of this section:
(1) The term ‘‘fair value’’ means the
expected total aggregate value of each
asset, or group of assets that are
managed within a portfolio, of a covered
financial company on a consolidated
E:\FR\FM\22JNR1.SGM
22JNR1
37558
Federal Register / Vol. 77, No. 121 / Friday, June 22, 2012 / Rules and Regulations
basis if such asset, or group of assets,
was sold or otherwise disposed of in an
orderly transaction.
(2) The term ‘‘most recent financial
statement available’’ means a covered
financial company’s:
(i) Most recent financial statement
filed with the Securities and Exchange
Commission or any other regulatory
body;
(ii) Most recent financial statement
audited by an independent CPA firm; or
(iii) Other available financial
statements. The FDIC and the Treasury
will jointly determine the most
pertinent of the above financial
statements, taking into consideration the
timeliness and reliability of the
statements being considered.
(3) The term ‘‘obligation’’ means, with
respect to any covered financial
company:
(i) Any guarantee issued by the FDIC
on behalf of the covered financial
company;
(ii) Any amount borrowed pursuant to
section 210(n)(5)(A) of the Dodd-Frank
Act; and
(iii) Any other obligation with respect
to the covered financial company for
which the FDIC has a direct or
contingent liability to pay any amount.
(4) The term ‘‘total consolidated assets
of each covered financial company that
are available for repayment’’ means the
difference between:
(i) The total assets of the covered
financial company on a consolidated
basis that are available for liquidation
during the operation of the receivership;
and
(ii) To the extent included in (b)(4)(i)
of this section, all assets that are
separated from, or made unavailable to,
the covered financial company by a
statutory or regulatory barrier that
prevents the covered financial company
from possessing or selling assets and
using the proceeds from the sale of such
assets.
Department of the Treasury
Authority and Issuance
For the reasons set forth in the
preamble, Treasury amends Title 31,
Chapter I of the Code of Federal
Regulations by adding part 149 to read
as follows:
wreier-aviles on DSK7SPTVN1PROD with RULES
■
PART 149—CALCULATION OF
MAXIMUM OBLIGATION LIMITATION
Sec.
149.1
149.2
149.3
Authority and purpose.
Definitions.
Maximum obligation limitation.
Authority: 31 U.S.C. 321 and 12 U.S.C.
5390.
VerDate Mar<15>2010
14:17 Jun 21, 2012
Jkt 226001
§ 149.1
Authority and purpose.
(a) Authority. This part is issued by
the Federal Deposit Insurance
Corporation (FDIC) and the Secretary of
the Department of the Treasury
(Treasury) under section 210(n)(7) of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act (Act).
(b) Purpose. The purpose of this part
is to issue implementing regulations as
required by the Act. The part governs
the calculation of the maximum
obligation limitation which limits the
aggregate amount of outstanding
obligations the FDIC may issue or incur
in connection with the orderly
liquidation of a covered financial
company.
§ 149.2
Definitions.
As used in this part:
Fair value. The term ‘‘fair value’’
means the expected total aggregate value
of each asset, or group of assets that are
managed within a portfolio of a covered
financial company on a consolidated
basis if such asset, or group of assets,
was sold or otherwise disposed of in an
orderly transaction.
Most recent financial statement
available. (1) The term ‘‘most recent
financial statement available’’ means a
covered financial company’s—
(i) Most recent financial statement
filed with the Securities and Exchange
Commission or any other regulatory
body;
(ii) Most recent financial statement
audited by an independent CPA firm; or
(iii) Other available financial
statements.
(2) The FDIC and the Treasury will
jointly determine the most pertinent of
the above financial statements, taking
into consideration the timeliness and
reliability of the statements being
considered.
Obligation. The term ‘‘obligation’’
means, with respect to any covered
financial company—
(1) Any guarantee issued by the FDIC
on behalf of the covered financial
company;
(2) Any amount borrowed pursuant to
section 210(n)(5)(A) of the Act; and
(3) Any other obligation with respect
to the covered financial company for
which the FDIC has a direct or
contingent liability to pay any amount.
Total consolidated assets of each
covered financial company that are
available for repayment. The term ‘‘total
consolidated assets of each covered
financial company that are available for
repayment’’ means the difference
between:
(1) The total assets of the covered
financial company on a consolidated
basis that are available for liquidation
PO 00000
Frm 00006
Fmt 4700
Sfmt 4700
during the operation of the receivership;
and
(2) To the extent included in
paragraph (1) of this definition, all
assets that are separated from, or made
unavailable to, the covered financial
company by a statutory or regulatory
barrier that prevents the covered
financial company from possessing or
selling assets and using the proceeds
from the sale of such assets.
§ 149.3
Maximum obligation limitation.
The FDIC shall not, in connection
with the orderly liquidation of a covered
financial company, issue or incur any
obligation, if, after issuing or incurring
the obligation, the aggregate amount of
such obligations outstanding for each
covered financial company would
exceed—
(a) An amount that is equal to 10
percent of the total consolidated assets
of the covered financial company, based
on the most recent financial statement
available, during the 30-day period
immediately following the date of
appointment of the FDIC as receiver (or
a shorter time period if the FDIC has
calculated the amount described under
paragraph (b) of this section); and
(b) The amount that is equal to 90
percent of the fair value of the total
consolidated assets of each covered
financial company that are available for
repayment, after the time period
described in paragraph (a) of this
section.
Dated at Washington, DC, this 23rd day of
April 2012.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
Dated: June 15, 2012.
By the Department of the Treasury.
Rebecca H. Ewing,
Executive Secretary.
Dated: June 15, 2012.
[FR Doc. 2012–15310 Filed 6–21–12; 8:45 am]
BILLING CODE 6714–01–P; 4810–25–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Chapter X
[Docket No. CFPB–2011–0040]
Disclosure of Certain Credit Card
Complaint Data
Bureau of Consumer Financial
Protection.
ACTION: Notice of final policy statement.
AGENCY:
The Bureau of Consumer
Financial Protection (the ‘‘Bureau’’) is
SUMMARY:
E:\FR\FM\22JNR1.SGM
22JNR1
]]>Agencies
[Federal Register Volume 77, Number 121 (Friday, June 22, 2012)]
[Rules and Regulations]
[Pages 37554-37558]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15310]
=======================================================================
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 380
RIN 3064-AD84
DEPARTMENT OF THE TREASURY
31 CFR Part 149
RIN 1505-AC36
Calculation of Maximum Obligation Limitation
AGENCY: Federal Deposit Insurance Corporation; Departmental Offices,
Department of the Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Deposit Insurance Corporation (the ``FDIC'') and
the Departmental Offices of the Department of the Treasury (the
``Treasury'') (collectively, the ``Agencies'') are issuing the final
rule (``Final Rule'') to implement applicable provisions of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank
Act'').\1\ The Final Rule governs the calculation of the maximum
obligation limitation (``MOL''), as specified in the Dodd-Frank Act.
The MOL limits the aggregate amount of outstanding obligations that the
FDIC may issue or incur in connection with the orderly liquidation of a
covered financial company.
---------------------------------------------------------------------------
\1\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 12 U.S.C. 5301 et seq. (2010).
---------------------------------------------------------------------------
DATES: The effective date of the Final Rule is July 23, 2012.
FOR FURTHER INFORMATION CONTACT:
FDIC
Arthur D. Murphy, Senior Financial Analyst, Division of Finance
(703) 562-6177 or amurphy@fdic.gov; Henry R.F. Griffin, Assistant
General Counsel, Legal Division (703) 562-6404 or hgriffin@fdic.gov; or
Randy W. Thomas, Counsel, Legal Division (703) 562-6454 or
ranthomas@fdic.gov.
Treasury
Lance Auer, Deputy Assistant Secretary (Financial Institution
Policy), at (202) 622-1262; Monique Rollins, Senior Policy Advisor
(Office of Capital Markets), at (202) 622-1745; Peter A. Bieger,
Assistant General Counsel (Banking and Finance), at (202) 622-0480; and
Steven D. Laughton, Senior Counsel, Office of General Counsel, at (202)
622-8413.
SUPPLEMENTARY INFORMATION:
I. Background
The Dodd-Frank Act
Title II of the Dodd-Frank Act establishes an Orderly Liquidation
Authority (``OLA'') to resolve a large interconnected financial company
upon a determination that its failure and resolution under otherwise
applicable law would have serious adverse effects on financial
stability in the United States and the use of OLA would avoid or
mitigate such adverse effects. Under the process set forth in the Dodd-
Frank Act, certain designated Federal agencies,\2\ on their own
initiative or at the request of the Secretary of the Treasury
(``Secretary''), may recommend that the Secretary appoint the FDIC as
receiver of a financial company. Any written recommendation from the
designated Federal agencies that the Secretary should appoint the FDIC
as receiver for a financial company must include a number of specific
findings, which are enumerated in section 203(a)(2) of the Dodd-Frank
Act.\3\ Then,
[[Page 37555]]
based on the written recommendation of the appropriate agencies, the
Secretary, in consultation with the President, must determine whether
the conditions in section 203(b) of the Dodd-Frank Act have been
satisfied so that the Secretary can seek the appointment of the FDIC as
receiver for the financial company.\4\ In making that determination,
the Secretary must document any determination and retain such
documentation. This procedure is very similar to the way that systemic
risk determinations are made under section 13 of the Federal Deposit
Insurance Act (the ``FDIA'').\5\ Under section 201(a)(8) of the Dodd-
Frank Act, a ``covered financial company'' is a ``financial company''
\6\ for which a determination has been made pursuant to section 203(b)
of the Dodd-Frank Act but does not include an insured depository
institution.
---------------------------------------------------------------------------
\2\ The Board of Governors of the Federal Reserve System
(``FRB'') and the Securities and Exchange Commission (``SEC'') will
make the recommendation if the company or its largest U.S.
subsidiary is a broker or a dealer. The FRB and the Director of the
Treasury's Federal Insurance Office will make the recommendation and
provide affirmative approval, respectively, if the company or its
largest U.S. subsidiary is an insurance company, and the FRB and the
FDIC will make the recommendation in all other cases. In cases
involving the FRB and FDIC, the recommendation must be approved by
at least \2/3\ of the members of the FRB then serving and at least
\2/3\ of the members of the FDIC Board of Directors then serving.
\3\ Section 203(a)(2) of the Dodd-Frank Act provides that all
written recommendations from the designated Federal agencies to the
Secretary must include the following:
(1) An evaluation of whether the financial company is in default
or in danger of default;
(2) A description of the effect that the default of the
financial company would have on financial stability in the United
States;
(3) A description of the effect that the default of the
financial company would have on economic conditions or financial
stability for low income, minority, or underserved communities;
(4) A recommendation regarding the nature and the extent of
actions to be taken under Title II of the Dodd-Frank Act regarding
the financial company;
(5) An evaluation of the likelihood of a private sector
alternative to prevent the default of the financial company;
(6) An evaluation of why a case under the Bankruptcy Code is not
appropriate for the financial company;
(7) An evaluation of the effects on creditors, counterparties,
and shareholders of the financial company and other market
participants; and
(8) An evaluation of whether the company satisfies the
definition of a financial company under section 201 of the Dodd-
Frank Act.
\4\ Section 203(b) of the Dodd-Frank Act requires the Secretary
of Treasury to determine that:
(1) The financial company is in default or in danger of default;
(2) The failure of the financial company and its resolution
under otherwise applicable Federal or State law would have serious
adverse effects on financial stability in the United States;
(3) No viable private sector alternative is available to prevent
the default of the financial company;
(4) Any effect on the claims or interests of creditors,
counterparties, and shareholders of the financial company and other
market participants as a result of actions taken under Title II of
the Dodd-Frank Act is appropriate, given the impact that any action
taken under Title II of the Dodd-Frank Act would have on financial
stability in the United States;
(5) Any action under section 204 would avoid or mitigate such
adverse effects, taking into consideration the effectiveness of the
action in mitigating potential adverse effects on the financial
system, the cost to the general fund of the Treasury, and the
potential to increase excessive risk taking on the part of
creditors, counterparties and shareholders in the financial company;
(6) A Federal regulatory agency has ordered the financial
company to convert all of its convertible debt instruments that are
subject to the regulatory order; and
(7) The company satisfies the definition of a financial company
under section 201.
\5\ 12 U.S.C. 1823(c)(4).
\6\ Section 201(a)(11) of the Dodd Frank Act defines the term
``financial company'' to mean any company that:
(A) Is incorporated or organized under any provision of Federal
law or the laws of any State;
(B) Is--
(i) A bank holding company, as defined in section 2(a) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841(a));
(ii) A nonbank financial company supervised by the FRB;
(iii) Any company that is predominantly engaged in activities
that the FRB has determined are financial in nature or incidental
thereto for purposes of section 4(k) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1843(k)) other than a company described in clause
(i) or (ii); or
(iv) Any subsidiary of any company described in any of clauses
(i) through (iii) that is predominantly engaged in activities that
the FRB has determined are financial in nature or incidental thereto
for purposes of section 4(k) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(k)) (other than a subsidiary that is an insured
depository institution or an insurance company); and
(C) Is not a Farm Credit System institution chartered under and
subject to the provisions of the Farm Credit Act of 1971, as amended
(12 U.S.C. 2001 et seq.), a governmental entity, or a regulated
entity, as defined under section 1303(20) of the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C.
4502(20)).
---------------------------------------------------------------------------
Once the Secretary makes the determination, the Secretary can seek
the appointment of the FDIC as receiver of the covered financial
company. If the board of directors (or similar governing body) of the
company consents to the appointment, the Secretary shall appoint the
FDIC as receiver. If the company's governing body does not consent,
section 202 of the Dodd-Frank Act requires the Secretary to petition
the United States District Court for the District of Columbia for an
order authorizing the Secretary to appoint the FDIC as receiver. In
determining whether to grant the petition, the court will determine
whether two of the Secretary's seven determinations--that the covered
financial company is in default or in danger of default and that it
meets the definition of financial company under Title II--are arbitrary
and capricious.\7\ If the court upholds the two reviewable
determinations of the Secretary, the court will issue an order
authorizing the Secretary to appoint the FDIC as receiver. If the court
does not make a determination within twenty-four hours of receiving the
Secretary's petition, then the appointment of the FDIC as receiver
takes effect by operation of law.
---------------------------------------------------------------------------
\7\ Dodd Frank Act, section 202(a)(1)(A)(iii).
---------------------------------------------------------------------------
The OLA in the Dodd-Frank Act is intended as a limited exception to
bankruptcy or other applicable insolvency laws for purposes of ensuring
that the resolution of a failing non-depository financial company does
not have serious adverse effects on U.S. financial stability. Section
204(a) of the Dodd-Frank Act expressly provides that the purpose of the
OLA is to provide the means ``to liquidate failing financial companies
that pose a significant risk to the financial stability of the United
States in a manner that mitigates such risk and minimizes moral
hazard.'' Section 214(a) expressly provides that ``[a]ll financial
companies put into receivership under this title shall be liquidated.
No taxpayer funds shall be used to prevent the liquidation of any
financial company under this title.'' Moreover, section 214(b) provides
that ``[a]ll funds expended in the liquidation of a financial company
under this title shall be recovered from the disposition of assets of
such financial company, or shall be the responsibility of the financial
sector, through assessments.'' Finally, section 214(c) provides that
``[t]axpayers shall bear no losses from the exercise of any authority
under this title.''
To achieve the orderly liquidation of financial companies, the FDIC
is given broad authority under the Dodd-Frank Act to: transfer assets
or liabilities to a bridge financial company; operate or liquidate
businesses; sell assets; and resolve the liabilities of a covered
financial company, just after the FDIC's appointment as receiver or as
soon as conditions make this appropriate.\8\ This authority enables the
FDIC to act immediately to sell any assets or liabilities of the
covered financial company to another entity, or, if that is not
possible or consistent with maximizing the value of the assets of the
covered financial company, to transfer assets and liabilities to a
bridge financial company established by the FDIC and sell the assets or
liabilities over time while maintaining critical functions. Oftentimes,
in administering a receivership, it is necessary to continue key
operations, services, and transactions that will maximize the value of
the firm's assets and avoid a disorderly collapse in the marketplace.
---------------------------------------------------------------------------
\8\ Section 210 of the Dodd-Frank Act prescribes the FDIC's
powers and duties once it is appointed as receiver of a covered
financial company, including, inter alia, its powers and duties to:
(1) Succeed to all rights, titles, powers and privileges of the
covered financial company and its assets, and of any stockholder,
member, officer or director of such company; (2) take over the
assets and operate the covered financial company with all the powers
of the shareholders, members, directors and officers, and conduct
all business of the covered financial company; (3) liquidate the
covered financial company through the sale of assets and liabilities
or the transfer of assets and liabilities to a bridge financial
company, as provided under section 210(h) of the Dodd-Frank Act; (4)
merge the covered financial company with another company or transfer
assets or liabilities; (5) pay valid obligations that come due, to
the extent that funds are available; (6) exercise subpoena powers;
(7) use private sector services to manage and dispose of assets; (8)
terminate rights and claims of stockholders and creditors (except
for the right to payment of claims consistent with the priority of
claims provision); and (9) determine and pay claims. However, a
receivership of an insurance company would generally be conducted in
accordance with state law.
---------------------------------------------------------------------------
[[Page 37556]]
Section 210(n) of the Dodd-Frank Act establishes an Orderly
Liquidation Fund (``OLF'') in the U.S. Treasury that will be available
to the FDIC to carry out its responsibilities as receiver of a covered
financial company and pay the costs of actions authorized under Title
II of the Dodd-Frank Act. These responsibilities include: the orderly
liquidation of covered financial companies; the payment of
administrative expenses; and the payment of principal and interest by
the FDIC on obligations issued under section 210(n)(5) of the Dodd-
Frank Act. The OLF will be comprised of amounts received by the FDIC,
including: the proceeds of obligations issued to Treasury pursuant to
section 210(n)(5); assessments received under section 210(o); interest
and other earnings from investments; and repayments to the FDIC by
covered financial companies.\9\
---------------------------------------------------------------------------
\9\ Dodd Frank Act, section 210(n)(2).
---------------------------------------------------------------------------
In order for the FDIC to fulfill its obligations as receiver of a
covered financial company, it may be necessary for the FDIC to borrow
funds from the Treasury. Under section 210(n)(5) of the Dodd-Frank Act,
the FDIC is authorized to issue obligations to Treasury upon the FDIC's
appointment as receiver, and Treasury may purchase any such
obligations, ``upon such terms and conditions as to yield a return at a
rate determined by the Secretary, taking into consideration the current
average yield on outstanding marketable obligations of the United
States of comparable maturity, plus an interest rate surcharge to be
determined by the Secretary, which shall be greater than the difference
between--(i) the current average rate on an index of corporate
obligations of comparable maturity; and (ii) the current average rate
on outstanding marketable obligations of the United States of
comparable maturity.'' Section 210(n)(9) of the Dodd-Frank Act provides
that the FDIC must develop an Orderly Liquidation Plan (``OLP'') that
is acceptable to the Secretary for each covered financial company for
which the FDIC is appointed receiver, prior to funds in the OLF being
made available to the FDIC with regard to such covered financial
company. The FDIC may amend any OLP at any time with the concurrence of
the Secretary. Section 210(n)(9) further requires that a mandatory
repayment plan between the FDIC and Treasury be agreed to and in effect
before Treasury may provide certain amounts to the FDIC within the
limits defined in section 210(n)(6)(B) of the Dodd-Frank Act.
The Maximum Obligation Limitation (``MOL''), as set forth in
section 210(n)(6) of the Dodd-Frank Act, limits the aggregate amount of
outstanding obligations that the FDIC may issue or incur in connection
with the orderly liquidation of a covered financial company.
Specifically, the statute provides as follows:
The [FDIC] may not, in connection with the orderly liquidation
of a covered financial company, issue or incur any obligation, if,
after issuing or incurring the obligation, the aggregate amount of
such obligations outstanding under this subsection, for each covered
financial company would exceed--
(A) an amount that is equal to 10 percent of the total
consolidated assets of the covered financial company, based on the
most recent financial statement available, during the 30-day period
immediately following the date of appointment of the [FDIC] as
receiver (or a shorter time period if the [FDIC] has calculated the
amount described under subparagraph (B)); and
(B) the amount that is equal to 90 percent of the fair value of
the total consolidated assets of each covered financial company that
are available for repayment, after the time period described in
subparagraph (A).
On November 25, 2011, the Agencies issued a notice of proposed
rulemaking regarding the calculation of the MOL as specified in section
210(n)(6) of the Dodd-Frank Act (76 FR 72645, November 25, 2011). The
purpose of the proposed rule (the ``Proposed Rule'') was to define
certain key terms and describe the manner in which the FDIC would
calculate the MOL in the event that one or more covered financial
companies are placed into receivership. The notice of proposed
rulemaking published in the Federal Register requested comments on all
aspects of the Proposed Rule as well as comments relating to certain
specific questions. The comment period ended on January 24, 2012.
II. Summary of Comments on the Proposed Rule
The Agencies received two comments in response to the Proposed
Rule. The first commenter was supportive of the Proposed Rule, noting
that it is in close alignment with the statutory language of the Dodd-
Frank Act. The commenter agreed with the proposed definitions,
particularly the definitions of ``fair value'' and ``obligation.''
Further, this commenter observed that during extended periods of
economic distress it may not be possible to credibly or reasonably
determine ``fair value'' for some assets and that the Agencies should
consider appropriate contingencies and responses. The Agencies
acknowledge this point and believe that the definition of ``fair
value'' in the Final Rule provides the FDIC with sufficient flexibility
to implement the rule in a wide range of economic and market
environments, including during periods of severe economic distress.
This approach will enable the determination of the fair value of assets
to be adapted to a variety of circumstances that may be encountered but
that cannot be foreseen at present.
The second commenter questioned why brokered deposits are
immediately paid off by the FDIC and suggested that brokered deposits
be transferred to the acquiring institution as a zero-cost deposit.
This comment addresses issues which are outside the scope of the
Proposed Rule.
III. The Final Rule
A. Overview
Section 210(n)(7) of the Dodd-Frank Act requires the Agencies, in
consultation with the Financial Stability Oversight Council (``FSOC''),
to jointly prescribe regulations governing the calculation of the MOL.
In accordance with this section, the Agencies consulted with the FSOC,
considered the two comments received, and have decided to adopt
regulations that closely follow the statutory language for calculating
the MOL, while defining certain terms referenced in the statute.
Because the two comments received did not suggest any changes to the
regulatory text, the Final Rule is identical to the Proposed Rule. The
terms in the Final Rule are defined solely for the purpose of
calculating the MOL and are not applicable to any other statutory or
regulatory requirements.
B. Section-by-Section Analysis of the Final Rule
Definitions. In the Proposed Rule, the Agencies defined terms that
are necessary to calculate the MOL. The Proposed Rule defined the terms
``fair value,'' ``most recent financial statement available,''
``obligation'' and ``total consolidated assets of each covered
financial company that are available for repayment.'' The Dodd-Frank
Act does not define these terms. The Agencies did not receive any
comments that requested changes to the definitions. As a result, the
definitions in the Final Rule are unchanged.
Only one comment was received on these definitions. That comment
agreed with the proposed definitions, particularly the definitions of
``fair value'' and ``obligation.'' That comment also observed that it
may not be possible to reasonably determine fair values during a
systemic crisis and
[[Page 37557]]
recommended that the Agencies prepare appropriate contingencies. The
Agencies believe that the comment is generally in accord with the
discussion of ``fair value'' in the Proposed Rule insofar as it noted
the FDIC's authority to conduct an orderly liquidation in order to
maximize the value of assets of a covered financial company over a
three-to five-year period. As noted above, the Agencies believe that
the definition of ``fair value'' in the Final Rule provides the
Agencies with sufficient flexibility to implement the rule in a wide
range of economic and market environments, including during periods of
severe economic distress. This approach will enable the determination
of fair value of assets to be adapted to a variety of circumstances
that may be encountered but that cannot be foreseen at present.
Maximum Obligation Limitation. In the Proposed Rule, the Agencies
closely followed the statutory language in section 210(n)(6) of the
Dodd-Frank Act for calculating the MOL. The Agencies did not receive
any comments that suggested changes to the MOL. As a result, the MOL in
the Final Rule is unchanged.
IV. Regulatory Analysis and Procedure
A. The Paperwork Reduction Act
The Final Rule provides, in part, the manner in which the Agencies
will implement the maximum obligation limitation for FDIC borrowings
from Treasury to fund the Orderly Liquidation Fund in the event that
one or more covered financial companies are placed into receivership.
The Final Rule will not involve any new collections of information
pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Consequently, no information collection was submitted to the Office of
Management and Budget for review. No comments were received in
connection with the Paperwork Reduction Act analysis published as part
of the Proposed Rule.
B. The Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 605(b)), the Agencies hereby certify that the Final Rule will
not have a significant economic impact on a substantial number of small
entities and therefore a regulatory flexibility analysis is not
required. The Final Rule governs the manner in which the FDIC will
calculate the MOL for obligations incurred or issued by the FDIC in
connection with the orderly liquidation of a covered financial company
under Title II of the Dodd-Frank Act. Under Small Business
Administration (SBA) size standards defining small entities, financial
companies are generally considered small entities if their annual
receipts do not exceed $7 million or their total assets do not exceed
$175 million.\10\ The Agencies do not expect that the OLA in the Dodd-
Frank Act will be used to resolve financial companies that qualify as
small entities, because the failure of such companies would be unlikely
to have serious adverse effects on financial stability in the United
States. No comments were received in connection with the Agencies'
Regulatory Flexibility Act analysis published as part of the Proposed
Rule.
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\10\ 13 CFR 121.201.
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C. Plain Language
Each Federal banking agency, such as the FDIC, is required to use
plain language in all proposed and final rules published after January
1, 2000. 12 U.S.C. 4809. In addition, in 1998, the President issued a
memorandum directing each agency in the Executive branch, such as
Treasury, to use plain language for all new proposed and final
rulemaking documents issued on or after January 1, 1999. The Agencies
sought to present the Proposed Rule in a simple and straightforward
manner. The Agencies received no comments on the use of plain language,
and the Final Rule is identical to the Proposed Rule.
D. Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct Treasury to assess costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility.
This Final Rule has been designated a ``significant regulatory action''
although not economically significant, under section 3(f) of Executive
Order 12866. Accordingly, the rule has been reviewed by the Office of
Management and Budget.
E. Small Business Regulatory Enforcement Fairness Act
The Office of Management and Budget has determined that the Final
Rule is not a ``major rule'' within the meaning of the relevant
sections of the Small Business Regulatory Enforcement Fairness Act of
1996 (SBREFA) (5 U.S.C. 801, et seq.).
As required by SBREFA, the FDIC and Treasury will file the
appropriate reports with Congress and the Government Accountability
Office so that the final rule may be reviewed.
List of Subjects
12 CFR Part 380
Accounting, administrative practice and procedure, finance, and
loan programs.
31 CFR Part 149
Accounting, administrative practice and procedure, finance, and
loan programs.
Federal Deposit Insurance Corporation
Authority and Issuance
For the reasons stated above, the Board of Directors of the Federal
Deposit Insurance Corporation amends part 380 of title 12 of the Code
of Federal Regulations as follows:
PART 380--ORDERLY LIQUIDATION AUTHORITY
0
1. The authority citation for part 380 continues to read as follows:
Authority: 12 U.S.C. 5301 et seq.
0
2. Add Sec. 380.10 to read as follows:
Sec. 380.10 Maximum Obligation Limitation
(a) General rule. The FDIC shall not, in connection with the
orderly liquidation of a covered financial company, issue or incur any
obligation, if, after issuing or incurring the obligation, the
aggregate amount of such obligations outstanding for each covered
financial company would exceed--
(1) An amount that is equal to 10 percent of the total consolidated
assets of the covered financial company, based on the most recent
financial statement available, during the 30-day period immediately
following the date of appointment of the FDIC as receiver (or a shorter
time period if the FDIC has calculated the amount described under
paragraph (a)(2) of this section); and
(2) The amount that is equal to 90 percent of the fair value of the
total consolidated assets of each covered financial company that are
available for repayment, after the time period described in paragraph
(a)(1) of this section.
(b) Definitions: For purposes of paragraph (a) of this section:
(1) The term ``fair value'' means the expected total aggregate
value of each asset, or group of assets that are managed within a
portfolio, of a covered financial company on a consolidated
[[Page 37558]]
basis if such asset, or group of assets, was sold or otherwise disposed
of in an orderly transaction.
(2) The term ``most recent financial statement available'' means a
covered financial company's:
(i) Most recent financial statement filed with the Securities and
Exchange Commission or any other regulatory body;
(ii) Most recent financial statement audited by an independent CPA
firm; or
(iii) Other available financial statements. The FDIC and the
Treasury will jointly determine the most pertinent of the above
financial statements, taking into consideration the timeliness and
reliability of the statements being considered.
(3) The term ``obligation'' means, with respect to any covered
financial company:
(i) Any guarantee issued by the FDIC on behalf of the covered
financial company;
(ii) Any amount borrowed pursuant to section 210(n)(5)(A) of the
Dodd-Frank Act; and
(iii) Any other obligation with respect to the covered financial
company for which the FDIC has a direct or contingent liability to pay
any amount.
(4) The term ``total consolidated assets of each covered financial
company that are available for repayment'' means the difference
between:
(i) The total assets of the covered financial company on a
consolidated basis that are available for liquidation during the
operation of the receivership; and
(ii) To the extent included in (b)(4)(i) of this section, all
assets that are separated from, or made unavailable to, the covered
financial company by a statutory or regulatory barrier that prevents
the covered financial company from possessing or selling assets and
using the proceeds from the sale of such assets.
Department of the Treasury
Authority and Issuance
0
For the reasons set forth in the preamble, Treasury amends Title 31,
Chapter I of the Code of Federal Regulations by adding part 149 to read
as follows:
PART 149--CALCULATION OF MAXIMUM OBLIGATION LIMITATION
Sec.
149.1 Authority and purpose.
149.2 Definitions.
149.3 Maximum obligation limitation.
Authority: 31 U.S.C. 321 and 12 U.S.C. 5390.
Sec. 149.1 Authority and purpose.
(a) Authority. This part is issued by the Federal Deposit Insurance
Corporation (FDIC) and the Secretary of the Department of the Treasury
(Treasury) under section 210(n)(7) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Act).
(b) Purpose. The purpose of this part is to issue implementing
regulations as required by the Act. The part governs the calculation of
the maximum obligation limitation which limits the aggregate amount of
outstanding obligations the FDIC may issue or incur in connection with
the orderly liquidation of a covered financial company.
Sec. 149.2 Definitions.
As used in this part:
Fair value. The term ``fair value'' means the expected total
aggregate value of each asset, or group of assets that are managed
within a portfolio of a covered financial company on a consolidated
basis if such asset, or group of assets, was sold or otherwise disposed
of in an orderly transaction.
Most recent financial statement available. (1) The term ``most
recent financial statement available'' means a covered financial
company's--
(i) Most recent financial statement filed with the Securities and
Exchange Commission or any other regulatory body;
(ii) Most recent financial statement audited by an independent CPA
firm; or
(iii) Other available financial statements.
(2) The FDIC and the Treasury will jointly determine the most
pertinent of the above financial statements, taking into consideration
the timeliness and reliability of the statements being considered.
Obligation. The term ``obligation'' means, with respect to any
covered financial company--
(1) Any guarantee issued by the FDIC on behalf of the covered
financial company;
(2) Any amount borrowed pursuant to section 210(n)(5)(A) of the
Act; and
(3) Any other obligation with respect to the covered financial
company for which the FDIC has a direct or contingent liability to pay
any amount.
Total consolidated assets of each covered financial company that
are available for repayment. The term ``total consolidated assets of
each covered financial company that are available for repayment'' means
the difference between:
(1) The total assets of the covered financial company on a
consolidated basis that are available for liquidation during the
operation of the receivership; and
(2) To the extent included in paragraph (1) of this definition, all
assets that are separated from, or made unavailable to, the covered
financial company by a statutory or regulatory barrier that prevents
the covered financial company from possessing or selling assets and
using the proceeds from the sale of such assets.
Sec. 149.3 Maximum obligation limitation.
The FDIC shall not, in connection with the orderly liquidation of a
covered financial company, issue or incur any obligation, if, after
issuing or incurring the obligation, the aggregate amount of such
obligations outstanding for each covered financial company would
exceed--
(a) An amount that is equal to 10 percent of the total consolidated
assets of the covered financial company, based on the most recent
financial statement available, during the 30-day period immediately
following the date of appointment of the FDIC as receiver (or a shorter
time period if the FDIC has calculated the amount described under
paragraph (b) of this section); and
(b) The amount that is equal to 90 percent of the fair value of the
total consolidated assets of each covered financial company that are
available for repayment, after the time period described in paragraph
(a) of this section.
Dated at Washington, DC, this 23rd day of April 2012.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
Dated: June 15, 2012.
By the Department of the Treasury.
Rebecca H. Ewing,
Executive Secretary.
Dated: June 15, 2012.
[FR Doc. 2012-15310 Filed 6-21-12; 8:45 am]
BILLING CODE 6714-01-P; 4810-25-P
