Risk-Based Capital Guidelines; Market Risk, 43829-43838 [2013-16434]
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Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Proposed Rules
information prior to making a final
determination on this matter.
In accordance with the Paperwork
Reduction Act of 1995, (44 U.S.C.
Chapter 35), the information collection
requirements being terminated were
approved previously by the Office of
Management and Budget (OMB) and
assigned OMB No. 0581–0178, Generic
Vegetable and Specialty Crops.
Termination of the reporting
requirements under the marketing order
would reduce the reporting and
recordkeeping burden on California and
Oregon potato handlers by 316.42 hours,
and should further reduce industry
expenses.
Since handlers would no longer be
required to file forms with the
Committee, this proposed rule would
not impose any additional reporting or
recordkeeping requirements on either
small or large entities.
In addition, USDA has not identified
any relevant Federal rules that
duplicate, overlap or conflict with this
rule.
AMS is committed to complying with
the E-Government Act, to promote the
use of the Internet and other
information technologies to provide
increased opportunities for citizen
access to Government information and
services, and for other purposes.
The Committee’s meeting was widely
publicized throughout the OregonCalifornia potato industry, and all
interested persons were invited to
attend the meeting and participate in
the Committee’s deliberations. Like all
Committee meetings, the March 7, 2013,
meeting was a public meeting, and all
entities, both large and small, were able
to express their views on this issue.
Additionally, interested persons are
invited to submit information on the
regulatory and informational impacts of
this action on small businesses.
A small business guide on complying
with fruit, vegetable, and specialty crop
marketing agreements and orders may
be viewed at: www.ams.usda.gov/
MarketingOrdersSmallBusinessGuide.
Any questions about the compliance
guide should be sent to Jeffrey Smutny
at the previously mentioned address in
the FOR FURTHER INFORMATION CONTACT
section.
This proposal invites comments on
the termination of Marketing Order No.
947, which regulates the handling of
Irish potatoes grown in Modoc and
Siskiyou Counties, California, and in all
counties in Oregon, except Malheur
County. All written comments received
in a timely manner will be considered
before a final determination is made on
this matter.
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Based on the foregoing, and pursuant
to § 608c(16)(A) of the Act and § 947.71
of the order, USDA is considering
termination of the order. If USDA
decides to terminate the order, trustees
would be appointed to conclude and
liquidate the affairs of the Committee,
and would continue in that capacity
until discharged by USDA. In addition,
USDA would notify Congress 60 days in
advance of termination pursuant to
§ 608c(16)(A) of the Act.
List of Subjects in 7 CFR Part 947
Marketing agreements, Potatoes,
Reporting and recordkeeping
requirements.
PART 947—[REMOVED]
For the reasons set forth in the
preamble, under the authority of 7
U.S.C. 601–674, 7 CFR part 947 is
proposed to be removed.
■
Dated: July 16, 2013.
Rex A. Barnes,
Associate Administrator, Agricultural
Marketing Service.
[FR Doc. 2013–17464 Filed 7–19–13; 8:45 am]
BILLING CODE 3410–02–P
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H, Q, and Y; Docket No. R–
1459]
RIN 7100 AD–98
Risk-Based Capital Guidelines; Market
Risk
Board of Governors of the
Federal Reserve System.
ACTION: Notice of proposed rulemaking
(NPR).
AGENCY:
The Board of Governors of the
Federal Reserve System (Board)
proposes to revise its market risk capital
rule (market risk rule) to address recent
changes to the Country Risk
Classifications (CRCs) published by the
Organization for Economic Cooperation
and Development (OECD), which are
referenced in the Board’s market risk
rule; to clarify the treatment of certain
traded securitization positions; to make
a technical amendment to the definition
of covered position; and to clarify the
timing of the required market risk
disclosures. These changes would
conform the Board’s current market risk
rule to the requirements in the Board’s
new capital framework and thereby
allow the current market risk rule to
serve as a bridge until the new capital
framework becomes fully effective for
all banking organizations.
SUMMARY:
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Comments must be submitted on
or before September 3, 2013.
ADDRESSES: Comments should be
directed to:
When submitting comments, please
consider submitting your comments by
email or fax because paper mail in the
Washington, DC area and at the Board
may be subject to delay. You may
submit comments, identified by Docket
No. R–1459 and RIN No. 7100 AD–98,
by any of the following methods:
• Agency Web site: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Email:
regs.comments@federalreserve.gov.
Include the Docket and RIN numbers in
the subject line of the message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Robert deV. Frierson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW., Washington,
DC 20551.
All public comments are available
from the Board’s Web site at https://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons.
Accordingly, your comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper form in Room MP–500 of the
Board’s Martin Building (20th and C
Street NW., Washington, DC 20551)
between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT:
Constance Horsley, Manager, (202) 452–
5239, or Tim Geishecker, Senior
Supervisory Financial Analyst, (202)
475–6353, Capital and Regulatory
Policy, Division of Banking Supervision
and Regulation; or Benjamin
McDonough, Senior Counsel, (202) 452–
2036, or Mark Buresh, Attorney (202)
452–5270, Legal Division, Board of
Governors of the Federal Reserve
System, 20th and C Streets NW.,
Washington, DC 20551. For the hearing
impaired only, Telecommunication
Device for the Deaf (TDD), (202) 263–
4869.
DATES:
SUPPLEMENTARY INFORMATION:
I. Background
On August 30, 2012, the Office of the
Comptroller of the Currency (OCC), the
Board of Governors of the Federal
Reserve System (Board), and the Federal
Deposit Insurance Corporation (FDIC)
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(collectively, the agencies) published a
final rule to revise their respective
market risk rules (the August 2012 final
rule).1 The rule revised the market risk
rule to better capture positions for
which the market risk rule is
appropriate; reduce pro-cyclicality;
enhance the rules’ sensitivity to risks
that were not adequately captured under
the existing methodologies; and increase
transparency through enhanced
disclosures.
As described in more detail in the
August 2012 final rule, the revisions to
the market risk rule were designed to
incorporate features of documents
published by the Basel Committee on
Bank Supervision (BCBS) and the
International Organizations of Securities
Commissions (IOSCO) in 2005, 2009,
and 2010 that revised the market risk
framework,2 and to implement certain
provisions of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (the Dodd-Frank Act), including the
prohibition against including references
to credit ratings in Federal regulations
set forth in section 939A.3
Revisions to the market risk
framework from both 2005 and 2009
included provisions that reference
1 77 FR 53060 (August 30, 2012). The agencies’
market risk rules are at 12 CFR part 3, appendix B
(OCC); 12 CFR parts 208 and 225, appendix E
(Board); and 12 CFR part 325, appendix C (FDIC).
2 The BCBS published a revised capital
framework in 2004 entitled International
Convergence of Capital Measurement and Capital
Standards: A Revised Framework (Basel II Accord)
(available at https://www.bis.org/publ/bcbs107.htm)
and, between 2005 and 2010, made revisions
included in the 2005 publication of The
Application of Basel II to Trading Activities and the
Treatment of Double Default Effects (available at
https://www.bis.org/publ/bcbs111.htm); the 2009
publications of Revisions to the Basel II Market Risk
Framework (available at https://www.bis.org/publ/
bcbs158.htm), Guidelines for Computing Capital for
Incremental Risk in the Trading Book (available at
https://www.bis.org/publ/bcbs159.htm), and
Enhancements to the Basel II Framework (available
at https://www.bis.org/publ/bcbs/
basel2enh0901.htm); and the 2010 publication that
established a floor on the risk-based capital
requirement for modeled correlation trading
positions (available at https://www.bis.org/press/
p100618/annex.pdf). The agencies provided
additional detail on this history in the preamble to
the August 2012 final rule. See, 77 FR 53060,
53060–53062 (August 30, 2012).
3 Public Law 111–203, 124 Stat. 1376 (July 21,
2010). Section 939A(a) of the Dodd-Frank Act
provides that not later than 1 year after the date of
enactment, each Federal agency shall: (1) Review
any regulation issued by such agency that requires
the use of an assessment of the credit-worthiness of
a security or money market instrument; and (2) any
references to or requirements in such regulations
regarding credit ratings. Section 939A further
provides that each such agency ‘‘shall modify any
such regulations identified by the review under
subsection (a) to remove any reference to or
requirement of reliance on credit ratings and to
substitute in such regulations such standard of
credit-worthiness as each respective agency shall
determine as appropriate for such regulations.’’ See
15 U.S.C. 78o–7 note.
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credit ratings. The 2005 revisions also
expanded the ‘‘government’’ category of
debt positions to include all sovereign
debt and changed the standardized
specific risk-weighting factor for
sovereign debt from 0 percent to a range
of between 0 and 12 percent based on
the credit rating of the obligor and the
remaining contractual maturity of the
debt position.
In the United States, section 939A the
Dodd-Frank Act prevents the agencies
from implementing those aspects of the
BCBS revisions that relied on the use of
credit ratings. Instead, the agencies
developed alternative standards of
creditworthiness and, in a joint notice of
proposed rulemaking (NPR) published
in December 2011, the agencies
proposed to incorporate the non-credit
rating based standards into the market
risk rule’s calculation of specific risk
capital requirements for sovereign debt
positions, certain other covered debt
positions, and securitization positions.4
The August 2012 final rule incorporated
those non-credit ratings based standards
for measuring specific risk capital
requirements.
In this NPR, the Board is proposing to
revise its market risk rule to address
recent changes to the country risk
classifications (CRCs) published by the
Organization for Economic Cooperation
and Development (OECD); clarify the
treatment of certain traded
securitization positions; make a
technical amendment to the definition
of covered position; and clarify the
timing of required market risk
disclosures. These proposed changes
would conform the Board’s current
market risk rule to the material
requirements in the Board’s new capital
framework and thereby allow the
current market risk rule to serve as a
bridge until the new capital framework
becomes fully effective for all banking
organizations.
II. Description of Proposed Revisions to
the Market Risk Rule
A. Sovereign Debt Positions
Under the current market risk rule, a
sovereign entity is defined as a central
government (including the U.S.
government) or an agency, department,
ministry, or central bank of a central
government. The specific risk capital
requirement for a sovereign debt
position that is not backed by the full
faith and credit of the United States is
determined, in part, using CRCs based
on the OECD’s CRC methodology. The
OECD’s CRCs are an assessment of
country risk, used to set interest rates
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4 76
FR 79380 (December 21, 2011).
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for transactions covered by the OECD
arrangement on export credits.
The OECD’s CRC methodology was
established in 1999 and classifies
countries into categories based on the
application of two basic components: (1)
the country risk assessment model
(CRAM), which is an econometric
model that produces a quantitative
assessment of country credit risk; and
(2) the qualitative assessment of the
CRAM results, which integrates political
risk and other risk factors not fully
captured by the CRAM. The two
components of the CRC methodology
are combined and result in countries
being classified into one of eight risk
categories (0–7), with countries assigned
to the 0 category having the lowest
possible risk assessment and countries
assigned to the 7 category having the
highest. The OECD regularly updates
CRCs for over 150 countries.5 Also,
CRCs are recognized by the BCBS as an
alternative to credit ratings.6
As noted in the preamble to the
August 2012 final rule, the agencies
determined that the use of CRCs to
measure sovereign risk for purposes of
their respective risk-based capital
regulations is permissible under section
939A of the Dodd-Frank Act, because
section 939A was not intended to apply
to assessments made by organizations
such as the OECD. Additionally, the
agencies noted that the use of the CRCs
was limited in scope.
Following the publication of the
August 2012 final rule, the OECD
determined that it will no longer
classify certain high-income countries
that previously received a CRC of zero.
Under the August 2012 final rule,
sovereign debt positions without a CRC
generally receive a specific riskweighting factor of 8 percent (the
equivalent of a 100 percent risk weight).
According to the OECD, the CRAM was
not used to categorize high-income
OECD and Euro Area countries,
therefore, the OECD determined that
applying a CRC to such countries was
no longer appropriate.7 However, the
OECD stated that such countries ‘‘will
remain subject to the same market credit
risk pricing disciplines that are applied
to all Category Zero countries. This
5 Please refer to https://www.oecd.org/document/
49/
0,3343,en_2649_34169_1901105_1_1_1_1,00.html
for more information on the OECD CRC
methodology.
6 See, Basel II: International Convergence of
Capital Measurement and Capital Standards: A
Revised Framework—Comprehensive Version (June
2006). See paragraph 55 at page 20. Available at
https://www.bis.org/publ/bcbs128b.pdf.
7 ‘‘Changes agree to the Participant Country Risk
Classification System,’’ available at: http//
www.oecd.org/tad/xcred/cat0.htm.
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means that the change will have no
practical impact on the rules that apply
to the provision of official export
credits.’’ 8
In light of these changes and
recognizing that CRCs have certain
limitations, the Board continues to
believe that referencing CRCs in its
market risk rule is appropriate and
represents a reasonable alternative to
credit ratings for sovereign exposures.
Moreover, the CRC methodology is more
granular and risk-sensitive than the
previous risk-weighting methodology,
which was based solely on a sovereign
entity’s OECD membership.
Furthermore, referencing CRCs poses
moderate additional burden for banking
organizations, because the OECD
regularly updates CRCs and makes the
assessments available on its public Web
site. Additionally, the use of CRCs is
consistent with the treatment of
sovereign debt positions in the Basel II
Accord.9
Consistent with the August 2012 final
rule, the proposal would map the risk
weights to CRCs in a manner consistent
with the Basel II standardized approach,
which provides risk weights for
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exposures to foreign sovereigns based
on CRCs. This proposal would amend
the Board’s market risk rule to allow
exposures to OECD member countries
that are covered positions and that no
longer receive a CRC to continue to
receive a zero percent specific riskweighting factor (except in cases of
default by the sovereign entity). The
revised specific risk-weighting factors
for sovereign debt positions, with the
new category for OECD members with
no CRC rating, are set forth in Table 1.
TABLE 1—SPECIFIC RISK-WEIGHTING FACTORS FOR SOVEREIGN DEBT POSITIONS
Remaining contractual maturity
Sovereign CRC:
0–1 .....................................................................................
2–3 .....................................................................................
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4–6 .....................................................................................
7 .........................................................................................
OECD Member with No CRC ...................................................
Non-OECD Member with No CRC ...........................................
Sovereign Default .....................................................................
A banking organization may assign to
a sovereign debt position a specific riskweighting factor lower than the
applicable specific risk-weighting factor
in Table 1 if the position is
denominated in the sovereign entity’s
currency, the banking organization has
at least an equivalent amount of
liabilities in that foreign currency, and
the sovereign entity allows banks under
its jurisdiction to assign the lower
specific risk-weighting factor to the
same exposures to the sovereign entity.
The Board notes that the specific riskweighting factors for debt positions that
are exposures to a public sector entity
(PSE), depository institution, foreign
bank, or credit union will continue to be
tied to the CRC of the applicable
sovereign entity. Therefore, under the
proposed changes to the market risk
rule, a banking organization must assign
a specific risk-weighting factor of 0.25,
1.0, or 1.6 percent (depending on the
remaining contractual maturity of the
position), to a debt position that is an
exposure to a PSE, depository
institution, foreign bank, or credit
union, if the applicable sovereign entity
does not have a CRC but is a member
of the OECD, unless the sovereign debt
position must otherwise be assigned a
higher specific risk-weighting factor (for
example, in the case of default by the
sovereign entity). For each applicable
table of specific risk-weighting factors in
the rule, the Board proposes to add an
‘‘OECD Member with No CRC’’ category
and to revise the current ‘‘No CRC’’
category to read ‘‘Non-OECD Member
with No CRC,’’ each with appropriate
corresponding specific risk-weighting
factors. This additional category would
address those situations, discussed
above, where a sovereign entity that had
received a CRC of zero will no longer
receive a CRC going forward. This
approach to an exposure to a sovereign
entity, PSE, depository institution,
foreign bank, or credit union is
consistent with the approach that the
agencies are finalizing in their new
comprehensive capital framework.
Following the publication of the
August 2012 final rule and the three
interagency proposals to revise the
agencies’ risk-based capital rules
consistent with the Basel III Accord and
with the Dodd-Frank Act, some
commenters contended that the OECD’s
CRC methodology unduly benefits
certain jurisdictions with unstable fiscal
positions, because certain countries that
restructured their sovereign debt due to
financial distress were able to retain
their preferential CRC.10 This concern is
8 Id.
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...................................................................................................
6 months or less ......................................................................
Greater than 6 months and up to and including 24 months ...
Exceeds 24 months .................................................................
...................................................................................................
...................................................................................................
...................................................................................................
...................................................................................................
...................................................................................................
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Risk-weighting
factor
(in percent)
0
0.25
1.0
1.6
8.0
12.0
0.0
8.0
12.0
misplaced, however, because the August
2012 final rule requires a banking
organization to apply a higher 12
percent specific risk-weighting factor
(the equivalent of a 150 percent risk
weight) to sovereign debt positions
upon determining that an event of
sovereign default has occurred during
the previous five years. Under the
proposal, the Board’s market risk rule
will retain this treatment for defaulted
sovereign exposures. Under the
proposal, as under the current rule,
default by a sovereign entity would be
defined as noncompliance by the
sovereign entity with its external debt
service obligations or the inability or
unwillingness of a sovereign
government to service an existing loan
according to its original terms, as
evidenced by failure to pay principal
and interest timely and fully, arrearages,
or restructuring. A default includes a
voluntary or involuntary restructuring
that results in a sovereign not servicing
an existing obligation in accordance
with the obligation’s original terms.
B. Securitization Positions—Simplified
Supervisory Formula Approach
The August 2012 final rule removed
the option for banking organizations to
use an internal model to measure the
10 77 FR 52793 (August 30, 2012); 77 FR 52888
(August 30, 2012); 77 FR 52978 (August 30, 2012).
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specific risk of most securitization
positions and instead provided that a
banking organization subject to the
market risk rule generally must assign a
100 percent specific risk-weighting
factor to its securitization positions or
apply the so-called Simplified
Supervisory Formula Approach (SSFA),
which takes into account the nature and
quality of the underlying collateral of
the securitization and was designed to
apply relatively higher capital
requirements to the more risky junior
tranches of a securitization that are the
first to absorb losses and relatively
lower requirements to the most senior
positions. This NPR would clarify the
treatment of certain securitization
positions under the SSFA with regard to
determining the delinquency of the
underlying exposures as discussed
below.
Among the inputs to the SSFA is a
parameter designed to increase the
capital requirements for a securitization
exposure when delinquencies in the
underlying assets of the securitization
grow. In the SSFA, this is labeled as the
‘‘W’’ parameter. This parameter W
equals the ratio of (1) the sum of the
dollar amounts of any underlying
exposures of the securitization that meet
certain criteria to (2) the balance,
measured in dollars, of underlying
exposures. The criteria are that the
underlying exposure is 90 days or more
past due, subject to a bankruptcy or
insolvency proceeding, in the process of
foreclosure, held as real estate owned,
in default, or has contractually deferred
interest payments for 90 days or more.
Since the issuance of the August 2012
final rule, banking organizations subject
to the rule have commented that the
criteria could be read to include
deferrals of interest that are unrelated to
the performance of the loan or the
borrower and may inappropriately
include certain federally guaranteed
student loans. The Board did not intend
for parameter W to be interpreted in this
manner. Instead, the August 2012 final
rule was intended to capture contractual
provisions present in certain
instruments that permit borrowers to
defer payments due to financial
difficulties and, therefore, may conceal
credit quality deterioration in the assets
underlying a securitization exposure.
Accordingly, the Board proposes to
clarify parameter W in its market risk
rule to ensure that parameter W
excludes loans with contractual
provisions that allow deferral of
principal and interest on federallyguaranteed student loans, in accordance
with the terms of those guarantee
programs, or on consumer loans
including non-federally-guaranteed
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student loans, provided that such
payments are deferred pursuant to
provisions included in the contract at
the time funds are disbursed that
provide for periods of deferral that are
not initiated based on changes in the
creditworthiness of the borrower. This
clarification would help to avoid
regulatory disincentives for banking
organizations to invest in
securitizations, particularly
securitizations of federally-guaranteed
student loans, where the underlying
exposures include provisions that allow
for the deferral of certain payments for
non-credit related reasons. This
clarification is consistent with the
approach that the agencies are finalizing
in their new comprehensive capital
framework.
C. Definition of Covered Position
The Board proposes to make a
technical amendment to the market risk
rule with respect to the definition of
‘‘covered position.’’ Currently, this
definition excludes equity positions that
are not publicly traded. The Board
proposes to refine this exception such
that a covered position may include a
position in an investment company, as
defined in and registered with the SEC
under the Investment Company Act of
1940 (15 U.S.C. 80 a–1 et seq.) (or its
non-U.S. equivalent), that is not
publicly traded, provided that all the
underlying equities held by the
investment company are publicly
traded. The Board believes that a ‘‘lookthrough’’ approach is appropriate in
these circumstances because of the
liquidity of the underlying positions, so
long as the other conditions of a covered
position are satisfied. This modification
to the definition of ‘‘covered position’’
is consistent with the approach that the
agencies are finalizing in their new
comprehensive capital framework.
D. Timing of Market Risk Disclosures
The Board proposes to clarify when a
banking organization subject to the
market risk rule must make its required
market risk disclosures. These changes
would conform the current market risk
rule to the final comprehensive capital
framework and are consistent with the
expectation that public disclosures
should be made in a timely manner.
Under the proposal, a banking
organization would be required to
provide timely quantitative disclosures
after each calendar quarter. In addition,
the proposal would clarify that a
banking organization would be required
to provide timely qualitative disclosures
at least annually, after the end of the
fourth calendar quarter, provided any
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significant changes must be disclosed in
the interim.
The Board acknowledges that the
timing of disclosures that are required
by the federal banking agencies may not
always coincide with the timing of
disclosures required under other federal
laws, including disclosures required
under the federal securities laws and
their implementing regulations by the
SEC. For calendar quarters that do not
correspond to fiscal year-end, the Board
would consider those disclosures that
are made within 45 days of the end of
the calendar quarter (or within 60 days
for the limited purpose of the banking
organization’s first reporting period in
which it is subject to the rule) as timely.
In general, where a banking
organization’s fiscal year-end coincides
with the end of a calendar quarter, the
Board would consider disclosures to be
timely if they are made no later than the
applicable SEC disclosure deadline for
the corresponding Form 10–K annual
report. In cases where an institution’s
fiscal year-end does not coincide with
the end of a calendar quarter, the
primary federal supervisor would
consider the timeliness of disclosures
on a case-by-case basis. In some cases,
a banking organization’s management
may determine that a significant change
has occurred, such that the most recent
reported amounts do not reflect the
banking organization’s capital adequacy
and risk profile. In those cases, a
banking organization would be required
to disclose the general nature of these
changes and briefly describe how they
are likely to affect public disclosures
going forward.
III. Solicitation of Comments
The Board solicits comments on the
proposed changes to the determination
of specific risk-weighting factors for
sovereign debt and related positions, the
proposed revisions to parameter W in
the SSFA, the proposed amendments to
the definition of ‘‘covered position,’’
and the proposed clarifications
regarding the timing of disclosures
under the market risk rule. In particular,
the Board solicits comments on whether
the proposed revisions to parameter W
and the definition of ‘‘covered position’’
appropriately cover the types of loans
and entities (for example, investment
companies that are not publicly traded),
respectively, that the Board intends to
cover by these revisions, as discussed in
this preamble. In addition, the Board
solicits comments on whether, for
purposes of any final rule, the Board
should adopt any necessary conforming
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changes to subpart F of the Board’s new
capital framework.11
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IV. Regulatory Analysis
A. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act, 5
U.S.C. 601 et seq. (RFA) requires an
agency to provide an initial regulatory
flexibility analysis with a proposed rule
or to certify that the rule will not have
a significant economic impact on a
substantial number of small entities
(defined for purposes of the RFA
beginning on July 22, 2013, to include
banks with assets less than or equal to
$500 million) 12 and publish its
certification and a short, explanatory
statement in the Federal Register along
with the proposed rule.
The Board is providing an initial
regulatory flexibility analysis with
respect to this NPR. As discussed above,
this NPR is designed to enhance the
safety and soundness of entities with
substantial trading activities that the
Board supervises. Under regulations
issued by the Small Business
Administration, a small entity includes
a depository institution or bank holding
company with total assets of $500
million or less (a small banking
organization). As of March 31, 2013,
there were 636 small state member
banks. As of December 31, 2012, there
were approximately 3,802 small bank
holding companies.
The proposal would apply only to
banking organizations supervised by the
Board with aggregate trading assets and
trading liabilities (as reported in the
banking organizations’ most recent
quarterly regulatory reporting form)
equal to 10 percent or more of quarterend assets or $1 billion or more.
Currently, no small state member bank
or small banking holding company
would meet these threshold criteria, so
there would be no additional projected
compliance requirements imposed on
small banking organizations supervised
by the Board. The Board is aware of no
other Federal rules that duplicate,
overlap, or conflict with the proposed
rule. The Board believes that the
proposed rule will not have a significant
economic impact on small banking
organizations supervised by the Board
and therefore believes that there are no
significant alternatives to the proposed
rule that would reduce the economic
impact on small banking organizations
supervised by the Board.
11 To
be codified at 12 CFR part 217, subpart F.
12 See 13 CFR 121.201. Effective July 22, 2013, the
Small Business Administration revised the size
standards for banking organizations to $500 million
in assets from $175 million in assets. 78 FR 37409
(June 20, 2013).
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The Board welcomes comment on all
aspects of its analysis. A final regulatory
flexibility analysis will be conducted
after consideration of comments
received during the public comment
period.
B. Solicitation of Comments on Use of
Plain Language
Section 722 of the GLBA required the
Federal banking agencies to use plain
language in all proposed and final rules
published after January 1, 2000. The
federal banking agencies invite
comment on how to make this proposed
rule easier to understand. For example:
• Have we organized the material to
suit your needs? If not, how could the
rule be more clearly stated?
• Are the requirements in the rule
clearly stated? If not, how could the rule
be more clearly stated?
• Do the regulations contain technical
language or jargon that is not clear? If
so, which language requires
clarification?
• Would a different format (grouping
and order of sections, use of headings,
paragraphing) make the regulation
easier to understand? If so, what
changes would make the regulation
easier to understand?
• Would more, but shorter, sections
be better? If so, which sections should
be changed?
• What else could we do to make the
regulation easier to understand?
Reporting and recordkeeping
requirements, Securities.
Board of Governors of the Federal
Reserve System
12 CFR CHAPTER II
Authority and Issuance
For the reasons set forth in the
preamble, parts 208 and 225 of chapter
II of title 12 of the Code of Federal
Regulations are proposed to be amended
as follows:
PART 208—MEMBERSHIP OF STATE
BANKING INSTITUTIONS IN THE
FEDERAL RESERVE SYSTEM
(REGULATION H)
1. The authority citation for part 208
continues to read as follows:
■
Authority: 12 U.S.C. 24, 36, 92a, 93a,
248(a), 248(c), 321–338a, 371d, 461, 481–486,
601, 611, 1814, 1816, 1818, 1820(d)(9),
1833(j), 1828(o), 1831, 1831o, 1831p–1,
1831r–1, 1831w, 1831x, 1835a, 1882, 2901–
2907, 3105, 3310, 3331–3351, 3905–3909,
and 5371; 15 U.S.C. 78b, 78I(b), 78l(i), 780–
4(c)(5), 78q, 78q–1, and 78w, 1681s, 1681w,
6801, and 6805; 31 U.S.C. 5318; 42 U.S.C.
4012a, 4104a, 4104b, 4106 and 4128.
2. Amend appendix E, section 2, by
revising paragraphs (3)(v)–(vii) and
adding paragraph (3) (viii) in the
definition of ‘‘Covered position’’ to read
as follows:
■
Appendix E to Part 208—Risk-Based
Capital Guidelines; Market Risk
C. Paperwork Reduction Act
*
In accordance with the Paperwork
Reduction Act of 1995, the agencies
reviewed this notice of proposed
rulemaking regarding revisions to the
market risk rule for exposures to
sovereign entities, the criteria used for
purposes of the calculation of the SSFA
parameter W factor for certain
securitization exposures, the definition
of ‘‘covered position,’’ and the timing of
market risk disclosures.13 No additional
collections of information pursuant to
the Paperwork Reduction Act are
contained in this notice of proposed
rulemaking.
Section 2. Definitions
List of Subjects
12 CFR Part 208
Confidential business information,
Crime, Currency, Federal Reserve
System, Mortgages, reporting and
recordkeeping requirements, Securities.
Administrative practice and
procedure, Banks, banking, Federal
Reserve System, Holding companies,
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U.S.C. 3501 et seq.
Frm 00007
Fmt 4702
*
Sfmt 4702
*
*
*
*
*
*
Covered position * * *
(3) * * *
(v) Any equity position that is not publicly
traded, other than a derivative that references
a publicly traded equity and other than a
position in an investment company as
defined in and registered with the SEC under
the Investment Company Act of 1940 (15
U.S.C. 80 a–1 et seq.), provided that all the
underlying equities held by the investment
company are publicly traded;
(vi) Any equity position that is not publicly
traded, other than a derivative that references
a publicly traded equity and other than a
position in an entity not domiciled in the
United States (or a political subdivision
thereof) that is supervised and regulated in
a manner similar to entities described in
paragraph (3)(v) of this definition;
(vii) Any position a bank holds with the
intent to securitize; or
(viii) Any direct real estate holding.
*
*
*
*
*
3. Amend appendix E, section 10, by
(a) Revising paragraph (b)(2)(i)(A),
Table 2, and paragraphs (b)(2)(i)(B), (C),
and (D), and adding paragraph
(b)(2)(i)((E);
■ (b) Revising paragraph (b)(2)(iv)(A)
and Table 3;
■
■
12 CFR Part 225
13 44
*
*
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Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Proposed Rules
(c) Revising paragraph (b)(2)(v), Table
4 and Table 5 to read as follows:
■
Section 10. Standardized Measurement
Method for Specific Risk
*
*
*
*
*
(b) Debt and securitization positions.* * *
(2) * * *
(i) Sovereign Debt Positions. (A) In
accordance with Table 2, a bank must assign
a specific risk-weighting factor to a sovereign
debt position based on the CRC applicable to
the sovereign entity and, as applicable, the
remaining contractual maturity of the
position, or, if there is no CRC applicable to
the sovereign entity, based on whether the
sovereign entity is a member of the OECD.
Notwithstanding any other provision in this
appendix E, sovereign debt positions that are
backed by the full faith and credit of the
United States are treated as having a CRC of
0.
TABLE 2—SPECIFIC RISK-WEIGHTING FACTORS FOR SOVEREIGN DEBT POSITIONS
Specific risk-weighting factor
(in percent)
CRC:
0–1 .....................................................................................
0.0
2–3 .....................................................................................
Remaining contractual maturity of 6 months or less ...............
Remaining contractual maturity of greater than 6 and up to
and including 24 months.
Remaining contractual maturity exceeds 24 months ...............
4–6 .....................................................................................
12.0
OECD Member with No CRC ...................................................
0.0
Non-OECD Member with No CRC ...........................................
8.0
Default by the Sovereign Entity ................................................
1.6
8.0
7 .........................................................................................
0.25
1.0
12.0
(B) Notwithstanding paragraph (b)(2)(i)(A)
of this section, a bank may assign to a
sovereign debt position a specific riskweighting factor that is lower than the
applicable specific risk-weighting factor in
table 2 if:
(1) The position is denominated in the
sovereign entity’s currency;
(2) The bank has at least an equivalent
amount of liabilities in that currency; and
(3) The sovereign entity allows banks
under its jurisdiction to assign the lower
specific risk-weighting factor to the same
exposures to the sovereign entity.
(C) A bank must assign a 12.0 percent
specific risk-weighting factor to a sovereign
debt position immediately upon
determination a default has occurred; or if a
default has occurred within the previous five
years.
(D) A bank must assign a 0.0 percent
specific risk-weighting factor to a sovereign
debt position if the sovereign entity is a
member of the OECD and does not have a
CRC assigned to it, except as provided in
paragraph (b)(2)(i)(C) of this section.
(E) A bank must assign an 8.0 percent
specific risk-weighting factor to a sovereign
debt position if the sovereign entity is not a
member of the OECD and does not have a
CRC assigned to it, except as provided in
paragraph (b)(2)(i)(C) of this section.
(iv) Depository institution, foreign bank,
and credit union debt positions. (A) Except
as provided in paragraph (b)(2)(iv)(B) of this
section, a bank must assign a specific riskweighting factor to a debt position that is an
exposure to a depository institution, a foreign
bank, or a credit union in accordance with
table 3, based on the CRC that corresponds
to that entity’s sovereign of incorporation or
the OECD membership status of that entity’s
sovereign of incorporation if there is no CRC
applicable to the entity’s sovereign of
incorporation, and, as applicable, the
remaining contractual maturity of the
position.
*
*
*
*
*
*
*
*
*
*
TABLE 3—SPECIFIC RISK-WEIGHTING FACTORS FOR DEPOSITORY INSTITUTION, FOREIGN BANK, AND CREDIT UNION DEBT
POSITIONS
Specific risk-weighting factor
(in percent)
CRC 0–2 or OECD Member with No CRC ..............................
Remaining contractual maturity of 6 months or less ...............
Remaining contractual maturity of greater than 6 and up to
and including 24 months.
Remaining contractual maturity exceeds 24 months ...............
12.0
Non-OECD Member with No CRC ...........................................
8.0
Default by the Sovereign Entity ................................................
1.6
8.0
CRC 4–7 ...................................................................................
ehiers on DSK2VPTVN1PROD with PROPOSALS-1
CRC 3 .......................................................................................
0.25
1.0
12.0
*
*
*
*
*
(v) PSE debt positions. (A) Except as
provided in paragraph (b)(2)(v)(B) of this
section, a bank must assign a specific risk-
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weighting factor to a debt position that is an
exposure to a PSE in accordance with table
4 and table 5 depending on the position’s
categorization as a general obligation or
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
revenue obligation, based on the CRC that
corresponds to the PSE’s sovereign of
incorporation or the OECD membership
status of the PSE’s sovereign of incorporation
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if there is no CRC applicable to the PSE’s
sovereign of incorporation, and, as
applicable, the remaining contractual
maturity of the position.
(B) A bank may assign a lower specific
risk-weighting factor than would otherwise
apply under tables 4 and 5 to a debt position
that is an exposure to a foreign PSE if:
(1) The PSE’s sovereign of incorporation
allows banks under its jurisdiction to assign
a lower specific risk-weighting factor to such
position; and
(2) The specific risk-weighting factor is not
lower than the risk weight that corresponds
to the PSE’s sovereign of incorporation in
accordance with tables 4 and 5.
43835
(C) A bank must assign a 12.0 percent
specific risk-weighting factor to a PSE debt
position immediately upon determination
that a default by the PSE’s sovereign of
incorporation has occurred or if a default by
the PSE’s sovereign of incorporation has
occurred within the previous five years.
TABLE 4—SPECIFIC RISK-WEIGHTING FACTORS FOR PSE GENERAL OBLIGATION DEBT POSITIONS
General obligation specific risk-weighting factor
(in percent)
CRC 0–2 or OECD Member with No CRC ..............................
Remaining contractual maturity of 6 months or less ...............
Remaining contractual maturity of greater than 6 and up to
and including 24 months.
Remaining contractual maturity exceeds 24 months ...............
CRC 3 .......................................................................................
12.0
Non-OECD Member with No CRC ...........................................
8.0
Default by the Sovereign Entity ................................................
1.6
8.0
CRC 4–7 ...................................................................................
0.25
1.0
12.0
TABLE 5—SPECIFIC RISK-WEIGHTING FACTORS FOR PSE REVENUE OBLIGATION DEBT POSITIONS
Revenue obligation specific risk-weighting factor
(in percent)
CRC 0–1 or OECD Member with No CRC ..............................
Remaining contractual maturity of 6 months or less ...............
Remaining contractual maturity of greater than 6 and up to
and including 24 months.
Remaining contractual maturity exceeds 24 months ...............
CRC 2–3 ...................................................................................
12.0
Non-OECD Member with No CRC ...........................................
8.0
Default by the Sovereign Entity ................................................
12.0
*
*
*
*
*
4. Amend appendix E, section 11, by
revising paragraph (b)(2) to read as
follows:
■
Section 11
*
ehiers on DSK2VPTVN1PROD with PROPOSALS-1
1.6
8.0
CRC 4–7 ...................................................................................
0.25
1.0
*
*
*
*
(b) SSFA parameters. * * *
(2) Parameter W is expressed as a decimal
value between zero and one. Parameter W is
the ratio of the sum of the dollar amounts of
any underlying exposures of the
securitization that meet any of the criteria as
set forth in paragraphs (i) through (vi) of this
paragraph (b)(2) to the balance, measured in
dollars, of underlying exposures:
(i) Ninety days or more past due;
(ii) Subject to a bankruptcy or insolvency
proceeding;
(iii) In the process of foreclosure;
(iv) Held as real estate owned;
(v) Has contractually deferred payments for
90 days or more, other than principal or
interest payments deferred on:
(A) Federally-guaranteed student loans, in
accordance with the terms of those guarantee
programs; or
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17:41 Jul 19, 2013
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(B) Consumer loans, including nonfederally-guaranteed student loans, provided
that such payments are deferred pursuant to
provisions included in the contract at the
time funds are disbursed that provide for
period(s) of deferral that are not initiated
based on changes in the creditworthiness of
the borrower; or
(vi) Is in default.
*
*
*
*
*
5. Amend appendix E, section 12, by
(a) Revising paragraph (a);
(b) Revising paragraph (c)(1); and
(c) Revising paragraph (d)
introductory text to read as follows:
■
■
■
■
Section 12
(a) Scope. A bank must comply with this
section unless it is a consolidated subsidiary
of a bank holding company or a depository
institution that is subject to these
requirements or of a non-U.S. banking
organization that is subject to comparable
public disclosure requirements in its home
jurisdiction. A bank must make timely
disclosures publicly each calendar quarter. If
a significant change occurs, such that the
PO 00000
Frm 00009
Fmt 4702
Sfmt 4702
most recent reporting amounts are no longer
reflective of the bank’s capital adequacy and
risk profile, then a brief discussion of this
change and its likely impact must be
provided as soon as practicable thereafter.
Qualitative disclosures that typically do not
change each quarter may be disclosed
annually, provided any significant changes
are disclosed in the interim. If a bank
believes that disclosure of specific
commercial or financial information would
prejudice seriously its position by making
public certain information that is either
proprietary or confidential in nature, the
bank is not required to disclose these specific
items, but must disclose more general
information about the subject matter of the
requirement, together with the fact that, and
the reason why, the specific items of
information have not been disclosed. The
bank’s management may provide all of the
disclosures required by this section in one
place on the bank’s public Web site or may
provide the disclosures in more than one
public financial report or other regulatory
reports, provided that the bank
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Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Proposed Rules
publicly provides a summary table
specifically indicating the location(s) of all
such disclosures.
*
*
*
*
*
(c) Quantitative disclosures. (1) For each
material portfolio of covered positions, the
bank must provide timely public disclosures
of the following information at least
quarterly:
*
*
*
*
*
(d) Qualitative disclosures. For each
material portfolio of covered positions, the
bank must provide timely public disclosures
of the following information at least annually
after the end of the fourth calendar quarter,
or more frequently in the event of material
changes for each portfolio:
*
*
*
*
*
PART 225—BANK HOLDING
COMPANIES AND CHANGE IN BANK
CONTROL (REGULATION Y)
6. The authority citation for part 225
continues to read as follows:
■
Authority: 12 U.S.C. 1817(j)(13), 1818,
1828(o), 1831i, 1831p–1, 1843(c)(8), 1844(b),
1972(1), 3106, 3108, 3310, 3331–3351, 3907,
and 3909; 15 U.S.C. 1681s, 1681w, 6801 and
6805.
7. Amend appendix E, section 2, by
revising paragraphs (3)(v)–(vii) and
adding paragraph (3)(viii) in the
definition of ‘‘Covered position’’ to read
as follows:
(viii) Any direct real estate holding.
■
Appendix E to Part 225—Capital
Adequacy Guidelines for Bank Holding
Companies: Market Risk
Section 2
*
*
*
*
*
(3) * * *
(v) Any equity position that is not publicly
traded, other than a derivative that references
a publicly traded equity and other than a
position in an investment company as
defined in and registered with the SEC under
the Investment Company Act of 1940 (15
U.S.C. 80 a–1 et seq.), provided that all the
underlying equities held by the investment
company are publicly traded;
(vi) Any equity position that is not publicly
traded, other than a derivative that references
a publicly traded equity and other than a
position in an entity not domiciled in the
United States (or a political subdivision
thereof) that is supervised and regulated in
a manner similar to entities described in
paragraph (3)(v) of this definition;
(vii) Any position a bank holds with the
intent to securitize; or
*
*
*
*
*
8. Amemd appendix E, section 10, by:
■ (a) Revising paragraph (b)(2)(i)(A),
Table 2, and paragraphs (b)(2)(i)(B), (C),
and (D), and adding paragraph
(b)(2)(i)(E);
■ (b) Revising paragraph (b)(2)(iv)(A)
and Table 3;
■ (c) Revising paragraph (b)(2)(v), Table
4 and Table 5 to read as follows:
■
Section 10
*
*
*
*
*
(b) Debt and securitization positions.* * *
(i) Sovereign Debt Positions. (A) In
accordance with Table 2, a bank must assign
a specific risk-weighting factor to a sovereign
debt position based on the CRC applicable to
the sovereign entity and, as applicable, the
remaining contractual maturity of the
position, or, if there is no CRC applicable to
the sovereign entity, based on whether the
sovereign entity is a member of the OECD.
Notwithstanding any other provision in this
appendix E, sovereign debt positions that are
backed by the full faith and credit of the
United States are treated as having a CRC
of 0.
TABLE 2—SPECIFIC RISK-WEIGHTING FACTORS FOR SOVEREIGN DEBT POSITIONS
Specific risk-weighting factor
(in percent)
CRC:
0–1 .....................................................................................
0.0
2–3 .....................................................................................
Remaining contractual maturity of 6 months or less ...............
Remaining contractual maturity of greater than 6 and up to
and including 24 months.
Remaining contractual maturity exceeds 24 months ...............
12.0
OECD Member with No CRC ...................................................
0.0
Non-OECD Member with No CRC ...........................................
8.0
Default by the Sovereign Entity ................................................
1.6
8.0
7 .........................................................................................
ehiers on DSK2VPTVN1PROD with PROPOSALS-1
4–6 .....................................................................................
0.25
1.0
12.0
(B) Notwithstanding paragraph (b)(2)(i)(A)
of this section, a bank may assign to a
sovereign debt position a specific riskweighting factor that is lower than the
applicable specific risk-weighting factor in
table 2 if:
(1) The position is denominated in the
sovereign entity’s currency;
(2) The bank has at least an equivalent
amount of liabilities in that currency; and
(3) The sovereign entity allows banks
under its jurisdiction to assign the lower
specific risk-weighting factor to the same
exposures to the sovereign entity.
(C) A bank must assign a 12.0 percent
specific risk-weighting factor to a sovereign
debt position immediately upon
determination a default has occurred; or if a
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default has occurred within the previous five
years.
(D) A bank must assign a 0.0 percent
specific risk-weighting factor to a sovereign
debt position if the sovereign entity is a
member of the OECD and does not have a
CRC assigned to it, except as provided in
paragraph (b)(2)(i)(C) of this section.
(E) A bank must assign an 8.0 percent
specific risk-weighting factor to a sovereign
debt position if the sovereign entity is not a
member of the OECD and does not have a
CRC assigned to it, except as provided in
paragraph (b)(2)(i)(C) of this section.
*
*
*
*
section, a bank must assign a specific riskweighting factor to a debt position that is an
exposure to a depository institution, a foreign
bank, or a credit union in accordance with
table 3, based on the CRC that corresponds
to that entity’s sovereign of incorporation or
the OECD membership status of that entity’s
sovereign of incorporation if there is no CRC
applicable to the entity’s sovereign of
incorporation, and, as applicable, the
remaining contractual maturity of the
position.
*
*
*
(iv) Depository institution, foreign bank,
and credit union debt positions. (A) Except
as provided in paragraph (b)(2)(iv)(B) of this
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*
*
*
Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Proposed Rules
43837
TABLE 3—SPECIFIC RISK-WEIGHTING FACTORS FOR DEPOSITORY INSTITUTION, FOREIGN BANK, AND CREDIT UNION DEBT
POSITIONS
Specific risk-weighting factor
(in percent)
CRC 0–2 or OECD Member with No CRC ..............................
Remaining contractual maturity of 6 months or less ...............
Remaining contractual maturity of greater than 6 and up to
and including 24 months.
Remaining contractual maturity exceeds 24 months ...............
CRC 3 .......................................................................................
12.0
Non-OECD Member with No CRC ...........................................
8.0
Default by the Sovereign Entity ................................................
1.6
8.0
CRC 4–7 ...................................................................................
0.25
1.0
12.0
*
*
*
*
*
(v) PSE debt positions. (A) Except as
provided in paragraph (b)(2)(v)(B) of this
section, a bank must assign a specific riskweighting factor to a debt position that is an
exposure to a PSE in accordance with table
4 and table 5 depending on the position’s
categorization as a general obligation or
revenue obligation, based on the CRC that
corresponds to the PSE’s sovereign of
incorporation or the OECD membership
status of the PSE’s sovereign of incorporation
if there is no CRC applicable to the PSE’s
sovereign of incorporation, and, as
applicable, the remaining contractual
maturity of the position.
(B) A bank may assign a lower specific
risk-weighting factor than would otherwise
apply under tables 4 and 5 to a debt position
that is an exposure to a foreign PSE if:
(1) The PSE’s sovereign of incorporation
allows banks under its jurisdiction to assign
a lower specific risk-weighting factor to such
position; and
(2) The specific risk-weighting factor is not
lower than the risk weight that corresponds
to the PSE’s sovereign of incorporation in
accordance with tables 4 and 5.
(C) A bank must assign a 12.0 percent
specific risk-weighting factor to a PSE debt
position immediately upon determination
that a default by the PSE’s sovereign of
incorporation has occurred or if a default by
the PSE’s sovereign of incorporation has
occurred within the previous five years.
TABLE 4—SPECIFIC RISK-WEIGHTING FACTORS FOR PSE GENERAL OBLIGATION DEBT POSITIONS
General obligation specific risk-weighting factor
(in percent)
CRC 0–2 or OECD Member with No CRC ..............................
Remaining contractual maturity of 6 months or less ...............
Remaining contractual maturity of greater than 6 and up to
and including 24 months.
Remaining contractual maturity exceeds 24 months ...............
CRC 3 .......................................................................................
12.0
Non-OECD Member with No CRC ...........................................
8.0
Default by the Sovereign Entity ................................................
1.6
8.0
CRC 4–7 ...................................................................................
0.25
1.0
12.0
TABLE 5—SPECIFIC RISK-WEIGHTING FACTORS FOR PSE REVENUE OBLIGATION DEBT POSITIONS
Revenue obligation specific risk-weighting factor
(in percent)
CRC 0–1 or OECD Member with No CRC ..............................
Remaining contractual maturity of 6 months or less ...............
Remaining contractual maturity of greater than 6 and up to
and including 24 months.
Remaining contractual maturity exceeds 24 months ...............
8.0
CRC 4–7 ...................................................................................
ehiers on DSK2VPTVN1PROD with PROPOSALS-1
CRC 2–3 ...................................................................................
12.0
Non-OECD Member with No CRC ...........................................
8.0
Default by the Sovereign Entity ................................................
12.0
*
*
*
VerDate Mar<15>2010
*
*
14:53 Jul 19, 2013
9. Amend appendix E, section 11, by
revising paragraph (b)(2) to read as
follows:
■
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Sfmt 4702
Section 11
*
*
*
*
*
(b) SSFA parameters. * * *
E:\FR\FM\22JYP1.SGM
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1.0
1.6
43838
Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Proposed Rules
ehiers on DSK2VPTVN1PROD with PROPOSALS-1
(2) Parameter W is expressed as a
decimal value between zero and one.
Parameter W is the ratio of the sum of
the dollar amounts of any underlying
exposures of the securitization that meet
any of the criteria as set forth in
paragraphs (i) through (vi) of this
paragraph (b)(2) to the balance,
measured in dollars, of underlying
exposures:
(i) Ninety days or more past due;
(ii) Subject to a bankruptcy or
insolvency proceeding;
(iii) In the process of foreclosure;
(iv) Held as real estate owned;
(v) Has contractually deferred
payments for 90 days or more, other
than principal or interest payments
deferred on:
(A) Federally-guaranteed student
loans, in accordance with the terms of
those guarantee programs; or
(B) Consumer loans, including nonfederally-guaranteed student loans,
provided that such payments are
deferred pursuant to provisions
included in the contract at the time
funds are disbursed that provide for
period(s) of deferral that are not
initiated based on changes in the
creditworthiness of the borrower; or
(vi) Is in default.
*
*
*
*
*
■ 10. Amend appendix E, section 12, by:
■ (a) Revising paragraph (a);
■ (b) Revising paragraph (c)(1) and;
■ (c) Revising paragraph (d)
introductory text to read as follows:
Section 12
(a) Scope. A bank must comply with
this section unless it is a consolidated
subsidiary of a bank holding company
or a depository institution that is subject
to these requirements or of a non-U.S.
banking organization that is subject to
comparable public disclosure
requirements in its home jurisdiction. A
bank must make timely public
disclosures each calendar quarter. If a
significant change occurs, such that the
most recent reporting amounts are no
longer reflective of the bank’s capital
adequacy and risk profile, then a brief
discussion of this change and its likely
impact must be provided as soon as
practicable thereafter. Qualitative
disclosures that typically do not change
each quarter may be disclosed annually,
provided any significant changes are
disclosed in the interim. If a bank
believes that disclosure of specific
commercial or financial information
would prejudice seriously its position
by making public certain information
that is either proprietary or confidential
in nature, the bank is not required to
disclose these specific items, but must
disclose more general information about
VerDate Mar<15>2010
14:53 Jul 19, 2013
Jkt 229001
the subject matter of the requirement,
together with the fact that, and the
reason why, the specific items of
information have not been disclosed.
The bank’s management may provide all
of the disclosures required by this
section in one place on the bank’s
public Web site or may provide the
disclosures in more than one public
financial report or other regulatory
reports, provided that the bank publicly
provides a summary table specifically
indicating the location(s) of all such
disclosures.
*
*
*
*
*
(c) Quantitative disclosures. (1) For
each material portfolio of covered
positions, the bank must provide timely
public disclosures of the following
information at least quarterly:
*
*
*
*
*
(d) Qualitative disclosures. For each
material portfolio of covered positions,
the bank must provide timely public
disclosures of the following information
at least annually after the end of the
fourth calendar quarter, or more
frequently in the event of material
changes for each portfolio:
*
*
*
*
*
By order of the Board of Governors of the
Federal Reserve System, July 3, 2013.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2013–16434 Filed 7–19–13; 8:45 am]
BILLING CODE P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2013–0056; Directorate
Identifier 2012–NE–48–AD
RIN 2120–AA64
Airworthiness Directives; Hamilton
Sundstrand Corporation Propellers
Federal Aviation
Administration (FAA), DOT.
ACTION: Proposed rule; withdrawal.
AGENCY:
The FAA is withdrawing a
notice of proposed rulemaking (NPRM).
The NPRM proposed a new
airworthiness directive (AD) that had
applied to certain Hamilton Sundstrand
Corporation 14SF–7, 14SF–15, and
14SF–23 series propellers. The NPRM
had applied to those propellers using
certain Hamilton Sundstrand
Corporation auxiliary pumps and
motors (auxiliary feathering pumps).
The proposed action would have
required removal of certain serial
SUMMARY:
PO 00000
Frm 00012
Fmt 4702
Sfmt 4702
numbers (S/Ns) of auxiliary feathering
pumps from service. Since we issued
the NPRM, we attended a meeting
sponsored by Hamilton Sundstrand
Corporation, which provided additional
information regarding the unsafe
condition. The information included
results from bond strength tests that
predicts a significantly lower fleet risk
than the prior qualitative analysis.
Accordingly, we withdraw the proposed
rule.
FOR FURTHER INFORMATION CONTACT:
Michael Schwetz, Aerospace Engineer,
Boston Aircraft Certification Office,
FAA, Engine & Propeller Directorate, 12
New England Executive Park,
Burlington, MA 01803; phone: 781–
238–7761; fax: 781–238–7170; email:
michael.schwetz@faa.gov.
The FAA
proposed to amend 14 CFR part 39 with
a proposed AD (78 FR 9001, February 7,
2013). The proposed AD had applied to
Hamilton Sundstrand Corporation
14SF–7, 14SF–15, and 14SF–23 series
propellers using certain Hamilton
Sundstrand Corporation auxiliary
feathering pumps. The NPRM proposed
to require removing certain
S/Ns of auxiliary feathering pumps from
service. The proposed action was
prompted by a report of a propeller not
moving into the feathering position after
an engine in-flight shutdown. The
unsafe condition had applied to certain
Hamilton Sundstrand Corporation
14SF–7, 14SF–15, and 14SF–23 series
propellers using certain Hamilton
Sundstrand Corporation auxiliary
pumps and motors (auxiliary feathering
pumps). The proposed actions intended
to prevent propellers from failing to
move into the feathering position after
an engine in-flight shutdown.
Since we issued the NPRM (78 FR
9001, February 7, 2013), additional
information became available after the
public comment period closed on March
25, 2013.
Upon further consideration, we
hereby withdraw the proposed rule for
the following reasons:
• Auxiliary feathering pump motors
returned to Hamilton Sundstrand
Corporation were tested to measure the
bonding strength holding the magnets to
the motor housing.
• The test results did not substantiate
the initial qualitative risk assessment.
• The data gathered was then used for
a more representative quantitative risk
analysis.
• The results from the bond strength
tests predicts a significantly lower fleet
risk than the prior qualitative analysis.
Withdrawal of the NPRM (78 FR 9001,
February 7, 2013) constitutes only such
SUPPLEMENTARY INFORMATION:
E:\FR\FM\22JYP1.SGM
22JYP1
]]>Agencies
[Federal Register Volume 78, Number 140 (Monday, July 22, 2013)]
[Proposed Rules]
[Pages 43829-43838]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16434]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H, Q, and Y; Docket No. R-1459]
RIN 7100 AD-98
Risk-Based Capital Guidelines; Market Risk
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed rulemaking (NPR).
-----------------------------------------------------------------------
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
proposes to revise its market risk capital rule (market risk rule) to
address recent changes to the Country Risk Classifications (CRCs)
published by the Organization for Economic Cooperation and Development
(OECD), which are referenced in the Board's market risk rule; to
clarify the treatment of certain traded securitization positions; to
make a technical amendment to the definition of covered position; and
to clarify the timing of the required market risk disclosures. These
changes would conform the Board's current market risk rule to the
requirements in the Board's new capital framework and thereby allow the
current market risk rule to serve as a bridge until the new capital
framework becomes fully effective for all banking organizations.
DATES: Comments must be submitted on or before September 3, 2013.
ADDRESSES: Comments should be directed to:
When submitting comments, please consider submitting your comments
by email or fax because paper mail in the Washington, DC area and at
the Board may be subject to delay. You may submit comments, identified
by Docket No. R-1459 and RIN No. 7100 AD-98, by any of the following
methods:
Agency Web site: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Email: regs.comments@federalreserve.gov. Include the
Docket and RIN numbers in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Robert deV. Frierson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue NW.,
Washington, DC 20551.
All public comments are available from the Board's Web site at
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper form in Room MP-500 of the Board's Martin Building (20th and C
Street NW., Washington, DC 20551) between 9 a.m. and 5 p.m. on
weekdays.
FOR FURTHER INFORMATION CONTACT: Constance Horsley, Manager, (202) 452-
5239, or Tim Geishecker, Senior Supervisory Financial Analyst, (202)
475-6353, Capital and Regulatory Policy, Division of Banking
Supervision and Regulation; or Benjamin McDonough, Senior Counsel,
(202) 452-2036, or Mark Buresh, Attorney (202) 452-5270, Legal
Division, Board of Governors of the Federal Reserve System, 20th and C
Streets NW., Washington, DC 20551. For the hearing impaired only,
Telecommunication Device for the Deaf (TDD), (202) 263-4869.
SUPPLEMENTARY INFORMATION:
I. Background
On August 30, 2012, the Office of the Comptroller of the Currency
(OCC), the Board of Governors of the Federal Reserve System (Board),
and the Federal Deposit Insurance Corporation (FDIC)
[[Page 43830]]
(collectively, the agencies) published a final rule to revise their
respective market risk rules (the August 2012 final rule).\1\ The rule
revised the market risk rule to better capture positions for which the
market risk rule is appropriate; reduce pro-cyclicality; enhance the
rules' sensitivity to risks that were not adequately captured under the
existing methodologies; and increase transparency through enhanced
disclosures.
---------------------------------------------------------------------------
\1\ 77 FR 53060 (August 30, 2012). The agencies' market risk
rules are at 12 CFR part 3, appendix B (OCC); 12 CFR parts 208 and
225, appendix E (Board); and 12 CFR part 325, appendix C (FDIC).
---------------------------------------------------------------------------
As described in more detail in the August 2012 final rule, the
revisions to the market risk rule were designed to incorporate features
of documents published by the Basel Committee on Bank Supervision
(BCBS) and the International Organizations of Securities Commissions
(IOSCO) in 2005, 2009, and 2010 that revised the market risk
framework,\2\ and to implement certain provisions of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act),
including the prohibition against including references to credit
ratings in Federal regulations set forth in section 939A.\3\
---------------------------------------------------------------------------
\2\ The BCBS published a revised capital framework in 2004
entitled International Convergence of Capital Measurement and
Capital Standards: A Revised Framework (Basel II Accord) (available
at https://www.bis.org/publ/bcbs107.htm) and, between 2005 and 2010,
made revisions included in the 2005 publication of The Application
of Basel II to Trading Activities and the Treatment of Double
Default Effects (available at https://www.bis.org/publ/bcbs111.htm);
the 2009 publications of Revisions to the Basel II Market Risk
Framework (available at https://www.bis.org/publ/bcbs158.htm),
Guidelines for Computing Capital for Incremental Risk in the Trading
Book (available at https://www.bis.org/publ/bcbs159.htm), and
Enhancements to the Basel II Framework (available at https://www.bis.org/publ/bcbs/basel2enh0901.htm); and the 2010 publication
that established a floor on the risk-based capital requirement for
modeled correlation trading positions (available at https://www.bis.org/press/p100618/annex.pdf). The agencies provided
additional detail on this history in the preamble to the August 2012
final rule. See, 77 FR 53060, 53060-53062 (August 30, 2012).
\3\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010). Section
939A(a) of the Dodd-Frank Act provides that not later than 1 year
after the date of enactment, each Federal agency shall: (1) Review
any regulation issued by such agency that requires the use of an
assessment of the credit-worthiness of a security or money market
instrument; and (2) any references to or requirements in such
regulations regarding credit ratings. Section 939A further provides
that each such agency ``shall modify any such regulations identified
by the review under subsection (a) to remove any reference to or
requirement of reliance on credit ratings and to substitute in such
regulations such standard of credit-worthiness as each respective
agency shall determine as appropriate for such regulations.'' See 15
U.S.C. 78o-7 note.
---------------------------------------------------------------------------
Revisions to the market risk framework from both 2005 and 2009
included provisions that reference credit ratings. The 2005 revisions
also expanded the ``government'' category of debt positions to include
all sovereign debt and changed the standardized specific risk-weighting
factor for sovereign debt from 0 percent to a range of between 0 and 12
percent based on the credit rating of the obligor and the remaining
contractual maturity of the debt position.
In the United States, section 939A the Dodd-Frank Act prevents the
agencies from implementing those aspects of the BCBS revisions that
relied on the use of credit ratings. Instead, the agencies developed
alternative standards of creditworthiness and, in a joint notice of
proposed rulemaking (NPR) published in December 2011, the agencies
proposed to incorporate the non-credit rating based standards into the
market risk rule's calculation of specific risk capital requirements
for sovereign debt positions, certain other covered debt positions, and
securitization positions.\4\ The August 2012 final rule incorporated
those non-credit ratings based standards for measuring specific risk
capital requirements.
---------------------------------------------------------------------------
\4\ 76 FR 79380 (December 21, 2011).
---------------------------------------------------------------------------
In this NPR, the Board is proposing to revise its market risk rule
to address recent changes to the country risk classifications (CRCs)
published by the Organization for Economic Cooperation and Development
(OECD); clarify the treatment of certain traded securitization
positions; make a technical amendment to the definition of covered
position; and clarify the timing of required market risk disclosures.
These proposed changes would conform the Board's current market risk
rule to the material requirements in the Board's new capital framework
and thereby allow the current market risk rule to serve as a bridge
until the new capital framework becomes fully effective for all banking
organizations.
II. Description of Proposed Revisions to the Market Risk Rule
A. Sovereign Debt Positions
Under the current market risk rule, a sovereign entity is defined
as a central government (including the U.S. government) or an agency,
department, ministry, or central bank of a central government. The
specific risk capital requirement for a sovereign debt position that is
not backed by the full faith and credit of the United States is
determined, in part, using CRCs based on the OECD's CRC methodology.
The OECD's CRCs are an assessment of country risk, used to set interest
rates for transactions covered by the OECD arrangement on export
credits.
The OECD's CRC methodology was established in 1999 and classifies
countries into categories based on the application of two basic
components: (1) the country risk assessment model (CRAM), which is an
econometric model that produces a quantitative assessment of country
credit risk; and (2) the qualitative assessment of the CRAM results,
which integrates political risk and other risk factors not fully
captured by the CRAM. The two components of the CRC methodology are
combined and result in countries being classified into one of eight
risk categories (0-7), with countries assigned to the 0 category having
the lowest possible risk assessment and countries assigned to the 7
category having the highest. The OECD regularly updates CRCs for over
150 countries.\5\ Also, CRCs are recognized by the BCBS as an
alternative to credit ratings.\6\
---------------------------------------------------------------------------
\5\ Please refer to https://www.oecd.org/document/49/0,3343,en_2649_34169_1901105_1_1_1_1,00.html for more information on the
OECD CRC methodology.
\6\ See, Basel II: International Convergence of Capital
Measurement and Capital Standards: A Revised Framework--
Comprehensive Version (June 2006). See paragraph 55 at page 20.
Available at https://www.bis.org/publ/bcbs128b.pdf.
---------------------------------------------------------------------------
As noted in the preamble to the August 2012 final rule, the
agencies determined that the use of CRCs to measure sovereign risk for
purposes of their respective risk-based capital regulations is
permissible under section 939A of the Dodd-Frank Act, because section
939A was not intended to apply to assessments made by organizations
such as the OECD. Additionally, the agencies noted that the use of the
CRCs was limited in scope.
Following the publication of the August 2012 final rule, the OECD
determined that it will no longer classify certain high-income
countries that previously received a CRC of zero. Under the August 2012
final rule, sovereign debt positions without a CRC generally receive a
specific risk-weighting factor of 8 percent (the equivalent of a 100
percent risk weight). According to the OECD, the CRAM was not used to
categorize high-income OECD and Euro Area countries, therefore, the
OECD determined that applying a CRC to such countries was no longer
appropriate.\7\ However, the OECD stated that such countries ``will
remain subject to the same market credit risk pricing disciplines that
are applied to all Category Zero countries. This
[[Page 43831]]
means that the change will have no practical impact on the rules that
apply to the provision of official export credits.'' \8\
---------------------------------------------------------------------------
\7\ ``Changes agree to the Participant Country Risk
Classification System,'' available at: http//www.oecd.org/tad/xcred/cat0.htm.
\8\ Id.
---------------------------------------------------------------------------
In light of these changes and recognizing that CRCs have certain
limitations, the Board continues to believe that referencing CRCs in
its market risk rule is appropriate and represents a reasonable
alternative to credit ratings for sovereign exposures. Moreover, the
CRC methodology is more granular and risk-sensitive than the previous
risk-weighting methodology, which was based solely on a sovereign
entity's OECD membership. Furthermore, referencing CRCs poses moderate
additional burden for banking organizations, because the OECD regularly
updates CRCs and makes the assessments available on its public Web
site. Additionally, the use of CRCs is consistent with the treatment of
sovereign debt positions in the Basel II Accord.\9\
---------------------------------------------------------------------------
\9\ See footnote 2.
---------------------------------------------------------------------------
Consistent with the August 2012 final rule, the proposal would map
the risk weights to CRCs in a manner consistent with the Basel II
standardized approach, which provides risk weights for exposures to
foreign sovereigns based on CRCs. This proposal would amend the Board's
market risk rule to allow exposures to OECD member countries that are
covered positions and that no longer receive a CRC to continue to
receive a zero percent specific risk-weighting factor (except in cases
of default by the sovereign entity). The revised specific risk-
weighting factors for sovereign debt positions, with the new category
for OECD members with no CRC rating, are set forth in Table 1.
Table 1--Specific Risk-Weighting Factors for Sovereign Debt Positions
------------------------------------------------------------------------
Risk-weighting
Remaining contractual factor (in
maturity percent)
------------------------------------------------------------------------
Sovereign CRC:
0-1....................... ...................... 0
2-3....................... 6 months or less...... 0.25
Greater than 6 months 1.0
and up to and
including 24 months.
Exceeds 24 months..... 1.6
4-6....................... ...................... 8.0
7......................... ...................... 12.0
OECD Member with No CRC....... ...................... 0.0
Non-OECD Member with No CRC... ...................... 8.0
Sovereign Default............. ...................... 12.0
------------------------------------------------------------------------
A banking organization may assign to a sovereign debt position a
specific risk-weighting factor lower than the applicable specific risk-
weighting factor in Table 1 if the position is denominated in the
sovereign entity's currency, the banking organization has at least an
equivalent amount of liabilities in that foreign currency, and the
sovereign entity allows banks under its jurisdiction to assign the
lower specific risk-weighting factor to the same exposures to the
sovereign entity.
The Board notes that the specific risk-weighting factors for debt
positions that are exposures to a public sector entity (PSE),
depository institution, foreign bank, or credit union will continue to
be tied to the CRC of the applicable sovereign entity. Therefore, under
the proposed changes to the market risk rule, a banking organization
must assign a specific risk-weighting factor of 0.25, 1.0, or 1.6
percent (depending on the remaining contractual maturity of the
position), to a debt position that is an exposure to a PSE, depository
institution, foreign bank, or credit union, if the applicable sovereign
entity does not have a CRC but is a member of the OECD, unless the
sovereign debt position must otherwise be assigned a higher specific
risk-weighting factor (for example, in the case of default by the
sovereign entity). For each applicable table of specific risk-weighting
factors in the rule, the Board proposes to add an ``OECD Member with No
CRC'' category and to revise the current ``No CRC'' category to read
``Non-OECD Member with No CRC,'' each with appropriate corresponding
specific risk-weighting factors. This additional category would address
those situations, discussed above, where a sovereign entity that had
received a CRC of zero will no longer receive a CRC going forward. This
approach to an exposure to a sovereign entity, PSE, depository
institution, foreign bank, or credit union is consistent with the
approach that the agencies are finalizing in their new comprehensive
capital framework.
Following the publication of the August 2012 final rule and the
three interagency proposals to revise the agencies' risk-based capital
rules consistent with the Basel III Accord and with the Dodd-Frank Act,
some commenters contended that the OECD's CRC methodology unduly
benefits certain jurisdictions with unstable fiscal positions, because
certain countries that restructured their sovereign debt due to
financial distress were able to retain their preferential CRC.\10\ This
concern is misplaced, however, because the August 2012 final rule
requires a banking organization to apply a higher 12 percent specific
risk-weighting factor (the equivalent of a 150 percent risk weight) to
sovereign debt positions upon determining that an event of sovereign
default has occurred during the previous five years. Under the
proposal, the Board's market risk rule will retain this treatment for
defaulted sovereign exposures. Under the proposal, as under the current
rule, default by a sovereign entity would be defined as noncompliance
by the sovereign entity with its external debt service obligations or
the inability or unwillingness of a sovereign government to service an
existing loan according to its original terms, as evidenced by failure
to pay principal and interest timely and fully, arrearages, or
restructuring. A default includes a voluntary or involuntary
restructuring that results in a sovereign not servicing an existing
obligation in accordance with the obligation's original terms.
---------------------------------------------------------------------------
\10\ 77 FR 52793 (August 30, 2012); 77 FR 52888 (August 30,
2012); 77 FR 52978 (August 30, 2012).
---------------------------------------------------------------------------
B. Securitization Positions--Simplified Supervisory Formula Approach
The August 2012 final rule removed the option for banking
organizations to use an internal model to measure the
[[Page 43832]]
specific risk of most securitization positions and instead provided
that a banking organization subject to the market risk rule generally
must assign a 100 percent specific risk-weighting factor to its
securitization positions or apply the so-called Simplified Supervisory
Formula Approach (SSFA), which takes into account the nature and
quality of the underlying collateral of the securitization and was
designed to apply relatively higher capital requirements to the more
risky junior tranches of a securitization that are the first to absorb
losses and relatively lower requirements to the most senior positions.
This NPR would clarify the treatment of certain securitization
positions under the SSFA with regard to determining the delinquency of
the underlying exposures as discussed below.
Among the inputs to the SSFA is a parameter designed to increase
the capital requirements for a securitization exposure when
delinquencies in the underlying assets of the securitization grow. In
the SSFA, this is labeled as the ``W'' parameter. This parameter W
equals the ratio of (1) the sum of the dollar amounts of any underlying
exposures of the securitization that meet certain criteria to (2) the
balance, measured in dollars, of underlying exposures. The criteria are
that the underlying exposure is 90 days or more past due, subject to a
bankruptcy or insolvency proceeding, in the process of foreclosure,
held as real estate owned, in default, or has contractually deferred
interest payments for 90 days or more.
Since the issuance of the August 2012 final rule, banking
organizations subject to the rule have commented that the criteria
could be read to include deferrals of interest that are unrelated to
the performance of the loan or the borrower and may inappropriately
include certain federally guaranteed student loans. The Board did not
intend for parameter W to be interpreted in this manner. Instead, the
August 2012 final rule was intended to capture contractual provisions
present in certain instruments that permit borrowers to defer payments
due to financial difficulties and, therefore, may conceal credit
quality deterioration in the assets underlying a securitization
exposure. Accordingly, the Board proposes to clarify parameter W in its
market risk rule to ensure that parameter W excludes loans with
contractual provisions that allow deferral of principal and interest on
federally-guaranteed student loans, in accordance with the terms of
those guarantee programs, or on consumer loans including non-federally-
guaranteed student loans, provided that such payments are deferred
pursuant to provisions included in the contract at the time funds are
disbursed that provide for periods of deferral that are not initiated
based on changes in the creditworthiness of the borrower. This
clarification would help to avoid regulatory disincentives for banking
organizations to invest in securitizations, particularly
securitizations of federally-guaranteed student loans, where the
underlying exposures include provisions that allow for the deferral of
certain payments for non-credit related reasons. This clarification is
consistent with the approach that the agencies are finalizing in their
new comprehensive capital framework.
C. Definition of Covered Position
The Board proposes to make a technical amendment to the market risk
rule with respect to the definition of ``covered position.'' Currently,
this definition excludes equity positions that are not publicly traded.
The Board proposes to refine this exception such that a covered
position may include a position in an investment company, as defined in
and registered with the SEC under the Investment Company Act of 1940
(15 U.S.C. 80 a-1 et seq.) (or its non-U.S. equivalent), that is not
publicly traded, provided that all the underlying equities held by the
investment company are publicly traded. The Board believes that a
``look-through'' approach is appropriate in these circumstances because
of the liquidity of the underlying positions, so long as the other
conditions of a covered position are satisfied. This modification to
the definition of ``covered position'' is consistent with the approach
that the agencies are finalizing in their new comprehensive capital
framework.
D. Timing of Market Risk Disclosures
The Board proposes to clarify when a banking organization subject
to the market risk rule must make its required market risk disclosures.
These changes would conform the current market risk rule to the final
comprehensive capital framework and are consistent with the expectation
that public disclosures should be made in a timely manner. Under the
proposal, a banking organization would be required to provide timely
quantitative disclosures after each calendar quarter. In addition, the
proposal would clarify that a banking organization would be required to
provide timely qualitative disclosures at least annually, after the end
of the fourth calendar quarter, provided any significant changes must
be disclosed in the interim.
The Board acknowledges that the timing of disclosures that are
required by the federal banking agencies may not always coincide with
the timing of disclosures required under other federal laws, including
disclosures required under the federal securities laws and their
implementing regulations by the SEC. For calendar quarters that do not
correspond to fiscal year-end, the Board would consider those
disclosures that are made within 45 days of the end of the calendar
quarter (or within 60 days for the limited purpose of the banking
organization's first reporting period in which it is subject to the
rule) as timely. In general, where a banking organization's fiscal
year-end coincides with the end of a calendar quarter, the Board would
consider disclosures to be timely if they are made no later than the
applicable SEC disclosure deadline for the corresponding Form 10-K
annual report. In cases where an institution's fiscal year-end does not
coincide with the end of a calendar quarter, the primary federal
supervisor would consider the timeliness of disclosures on a case-by-
case basis. In some cases, a banking organization's management may
determine that a significant change has occurred, such that the most
recent reported amounts do not reflect the banking organization's
capital adequacy and risk profile. In those cases, a banking
organization would be required to disclose the general nature of these
changes and briefly describe how they are likely to affect public
disclosures going forward.
III. Solicitation of Comments
The Board solicits comments on the proposed changes to the
determination of specific risk-weighting factors for sovereign debt and
related positions, the proposed revisions to parameter W in the SSFA,
the proposed amendments to the definition of ``covered position,'' and
the proposed clarifications regarding the timing of disclosures under
the market risk rule. In particular, the Board solicits comments on
whether the proposed revisions to parameter W and the definition of
``covered position'' appropriately cover the types of loans and
entities (for example, investment companies that are not publicly
traded), respectively, that the Board intends to cover by these
revisions, as discussed in this preamble. In addition, the Board
solicits comments on whether, for purposes of any final rule, the Board
should adopt any necessary conforming
[[Page 43833]]
changes to subpart F of the Board's new capital framework.\11\
---------------------------------------------------------------------------
\11\ To be codified at 12 CFR part 217, subpart F.
---------------------------------------------------------------------------
IV. Regulatory Analysis
A. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA) requires
an agency to provide an initial regulatory flexibility analysis with a
proposed rule or to certify that the rule will not have a significant
economic impact on a substantial number of small entities (defined for
purposes of the RFA beginning on July 22, 2013, to include banks with
assets less than or equal to $500 million) \12\ and publish its
certification and a short, explanatory statement in the Federal
Register along with the proposed rule.
---------------------------------------------------------------------------
\12\ See 13 CFR 121.201. Effective July 22, 2013, the Small
Business Administration revised the size standards for banking
organizations to $500 million in assets from $175 million in assets.
78 FR 37409 (June 20, 2013).
---------------------------------------------------------------------------
The Board is providing an initial regulatory flexibility analysis
with respect to this NPR. As discussed above, this NPR is designed to
enhance the safety and soundness of entities with substantial trading
activities that the Board supervises. Under regulations issued by the
Small Business Administration, a small entity includes a depository
institution or bank holding company with total assets of $500 million
or less (a small banking organization). As of March 31, 2013, there
were 636 small state member banks. As of December 31, 2012, there were
approximately 3,802 small bank holding companies.
The proposal would apply only to banking organizations supervised
by the Board with aggregate trading assets and trading liabilities (as
reported in the banking organizations' most recent quarterly regulatory
reporting form) equal to 10 percent or more of quarter-end assets or $1
billion or more. Currently, no small state member bank or small banking
holding company would meet these threshold criteria, so there would be
no additional projected compliance requirements imposed on small
banking organizations supervised by the Board. The Board is aware of no
other Federal rules that duplicate, overlap, or conflict with the
proposed rule. The Board believes that the proposed rule will not have
a significant economic impact on small banking organizations supervised
by the Board and therefore believes that there are no significant
alternatives to the proposed rule that would reduce the economic impact
on small banking organizations supervised by the Board.
The Board welcomes comment on all aspects of its analysis. A final
regulatory flexibility analysis will be conducted after consideration
of comments received during the public comment period.
B. Solicitation of Comments on Use of Plain Language
Section 722 of the GLBA required the Federal banking agencies to
use plain language in all proposed and final rules published after
January 1, 2000. The federal banking agencies invite comment on how to
make this proposed rule easier to understand. For example:
Have we organized the material to suit your needs? If not,
how could the rule be more clearly stated?
Are the requirements in the rule clearly stated? If not,
how could the rule be more clearly stated?
Do the regulations contain technical language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes would make the regulation easier to
understand?
Would more, but shorter, sections be better? If so, which
sections should be changed?
What else could we do to make the regulation easier to
understand?
C. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995, the
agencies reviewed this notice of proposed rulemaking regarding
revisions to the market risk rule for exposures to sovereign entities,
the criteria used for purposes of the calculation of the SSFA parameter
W factor for certain securitization exposures, the definition of
``covered position,'' and the timing of market risk disclosures.\13\ No
additional collections of information pursuant to the Paperwork
Reduction Act are contained in this notice of proposed rulemaking.
---------------------------------------------------------------------------
\13\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------
List of Subjects
12 CFR Part 208
Confidential business information, Crime, Currency, Federal Reserve
System, Mortgages, reporting and recordkeeping requirements,
Securities.
12 CFR Part 225
Administrative practice and procedure, Banks, banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
Board of Governors of the Federal Reserve System
12 CFR CHAPTER II
Authority and Issuance
For the reasons set forth in the preamble, parts 208 and 225 of
chapter II of title 12 of the Code of Federal Regulations are proposed
to be amended as follows:
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
0
1. The authority citation for part 208 continues to read as follows:
Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-
338a, 371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9),
1833(j), 1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x,
1835a, 1882, 2901-2907, 3105, 3310, 3331-3351, 3905-3909, and 5371;
15 U.S.C. 78b, 78I(b), 78l(i), 780-4(c)(5), 78q, 78q-1, and 78w,
1681s, 1681w, 6801, and 6805; 31 U.S.C. 5318; 42 U.S.C. 4012a,
4104a, 4104b, 4106 and 4128.
0
2. Amend appendix E, section 2, by revising paragraphs (3)(v)-(vii) and
adding paragraph (3) (viii) in the definition of ``Covered position''
to read as follows:
Appendix E to Part 208--Risk-Based Capital Guidelines; Market Risk
* * * * *
Section 2. Definitions
* * * * *
Covered position * * *
(3) * * *
(v) Any equity position that is not publicly traded, other than
a derivative that references a publicly traded equity and other than
a position in an investment company as defined in and registered
with the SEC under the Investment Company Act of 1940 (15 U.S.C. 80
a-1 et seq.), provided that all the underlying equities held by the
investment company are publicly traded;
(vi) Any equity position that is not publicly traded, other than
a derivative that references a publicly traded equity and other than
a position in an entity not domiciled in the United States (or a
political subdivision thereof) that is supervised and regulated in a
manner similar to entities described in paragraph (3)(v) of this
definition;
(vii) Any position a bank holds with the intent to securitize;
or
(viii) Any direct real estate holding.
* * * * *
0
3. Amend appendix E, section 10, by
0
(a) Revising paragraph (b)(2)(i)(A), Table 2, and paragraphs
(b)(2)(i)(B), (C), and (D), and adding paragraph (b)(2)(i)((E);
0
(b) Revising paragraph (b)(2)(iv)(A) and Table 3;
[[Page 43834]]
0
(c) Revising paragraph (b)(2)(v), Table 4 and Table 5 to read as
follows:
Section 10. Standardized Measurement Method for Specific Risk
* * * * *
(b) Debt and securitization positions.* * *
(2) * * *
(i) Sovereign Debt Positions. (A) In accordance with Table 2, a
bank must assign a specific risk-weighting factor to a sovereign
debt position based on the CRC applicable to the sovereign entity
and, as applicable, the remaining contractual maturity of the
position, or, if there is no CRC applicable to the sovereign entity,
based on whether the sovereign entity is a member of the OECD.
Notwithstanding any other provision in this appendix E, sovereign
debt positions that are backed by the full faith and credit of the
United States are treated as having a CRC of 0.
Table 2--Specific Risk-Weighting Factors for Sovereign Debt Positions
------------------------------------------------------------------------
------------------------------------------------------------------------
Specific risk-weighting factor
(in percent)
-----------------------------------------
CRC:
0-1....................... 0.0
-----------------------------------------
2-3....................... Remaining contractual 0.25
maturity of 6 months
or less.
Remaining contractual 1.0
maturity of greater
than 6 and up to and
including 24 months.
Remaining contractual 1.6
maturity exceeds 24
months.
-----------------------------------------
4-6....................... 8.0
-----------------------------------------
7......................... 12.0
-----------------------------------------
OECD Member with No CRC....... 0.0
-----------------------------------------
Non-OECD Member with No CRC... 8.0
-----------------------------------------
Default by the Sovereign 12.0
Entity.
------------------------------------------------------------------------
(B) Notwithstanding paragraph (b)(2)(i)(A) of this section, a
bank may assign to a sovereign debt position a specific risk-
weighting factor that is lower than the applicable specific risk-
weighting factor in table 2 if:
(1) The position is denominated in the sovereign entity's
currency;
(2) The bank has at least an equivalent amount of liabilities in
that currency; and
(3) The sovereign entity allows banks under its jurisdiction to
assign the lower specific risk-weighting factor to the same
exposures to the sovereign entity.
(C) A bank must assign a 12.0 percent specific risk-weighting
factor to a sovereign debt position immediately upon determination a
default has occurred; or if a default has occurred within the
previous five years.
(D) A bank must assign a 0.0 percent specific risk-weighting
factor to a sovereign debt position if the sovereign entity is a
member of the OECD and does not have a CRC assigned to it, except as
provided in paragraph (b)(2)(i)(C) of this section.
(E) A bank must assign an 8.0 percent specific risk-weighting
factor to a sovereign debt position if the sovereign entity is not a
member of the OECD and does not have a CRC assigned to it, except as
provided in paragraph (b)(2)(i)(C) of this section.
* * * * *
(iv) Depository institution, foreign bank, and credit union debt
positions. (A) Except as provided in paragraph (b)(2)(iv)(B) of this
section, a bank must assign a specific risk-weighting factor to a
debt position that is an exposure to a depository institution, a
foreign bank, or a credit union in accordance with table 3, based on
the CRC that corresponds to that entity's sovereign of incorporation
or the OECD membership status of that entity's sovereign of
incorporation if there is no CRC applicable to the entity's
sovereign of incorporation, and, as applicable, the remaining
contractual maturity of the position.
* * * * *
Table 3--Specific Risk-Weighting Factors for Depository Institution,
Foreign Bank, and Credit Union Debt Positions
------------------------------------------------------------------------
------------------------------------------------------------------------
Specific risk-weighting factor
(in percent)
-----------------------------------------
CRC 0-2 or OECD Member with No Remaining contractual 0.25
CRC. maturity of 6 months
or less.
Remaining contractual 1.0
maturity of greater
than 6 and up to and
including 24 months.
Remaining contractual 1.6
maturity exceeds 24
months.
-----------------------------------------
CRC 3......................... 8.0
-----------------------------------------
CRC 4-7....................... 12.0
-----------------------------------------
Non-OECD Member with No CRC... 8.0
-----------------------------------------
Default by the Sovereign 12.0
Entity.
------------------------------------------------------------------------
* * * * *
(v) PSE debt positions. (A) Except as provided in paragraph
(b)(2)(v)(B) of this section, a bank must assign a specific risk-
weighting factor to a debt position that is an exposure to a PSE in
accordance with table 4 and table 5 depending on the position's
categorization as a general obligation or revenue obligation, based
on the CRC that corresponds to the PSE's sovereign of incorporation
or the OECD membership status of the PSE's sovereign of
incorporation
[[Page 43835]]
if there is no CRC applicable to the PSE's sovereign of
incorporation, and, as applicable, the remaining contractual
maturity of the position.
(B) A bank may assign a lower specific risk-weighting factor
than would otherwise apply under tables 4 and 5 to a debt position
that is an exposure to a foreign PSE if:
(1) The PSE's sovereign of incorporation allows banks under its
jurisdiction to assign a lower specific risk-weighting factor to
such position; and
(2) The specific risk-weighting factor is not lower than the
risk weight that corresponds to the PSE's sovereign of incorporation
in accordance with tables 4 and 5.
(C) A bank must assign a 12.0 percent specific risk-weighting
factor to a PSE debt position immediately upon determination that a
default by the PSE's sovereign of incorporation has occurred or if a
default by the PSE's sovereign of incorporation has occurred within
the previous five years.
Table 4--Specific Risk-Weighting Factors for PSE General Obligation Debt
Positions
------------------------------------------------------------------------
------------------------------------------------------------------------
General obligation specific risk-
weighting factor
(in percent)
-----------------------------------------
CRC 0-2 or OECD Member with No Remaining contractual 0.25
CRC. maturity of 6 months
or less.
Remaining contractual 1.0
maturity of greater
than 6 and up to and
including 24 months.
Remaining contractual 1.6
maturity exceeds 24
months.
-----------------------------------------
CRC 3......................... 8.0
-----------------------------------------
CRC 4-7....................... 12.0
-----------------------------------------
Non-OECD Member with No CRC... 8.0
-----------------------------------------
Default by the Sovereign 12.0
Entity.
------------------------------------------------------------------------
Table 5--Specific Risk-Weighting Factors for PSE Revenue Obligation Debt
Positions
------------------------------------------------------------------------
------------------------------------------------------------------------
Revenue obligation specific risk-
weighting factor
-----------------------------------------
(in percent)
-----------------------------------------
CRC 0-1 or OECD Member with No Remaining contractual 0.25
CRC. maturity of 6 months
or less.
Remaining contractual 1.0
maturity of greater
than 6 and up to and
including 24 months.
Remaining contractual 1.6
maturity exceeds 24
months.
-----------------------------------------
CRC 2-3....................... 8.0
-----------------------------------------
CRC 4-7....................... 12.0
-----------------------------------------
Non-OECD Member with No CRC... 8.0
-----------------------------------------
Default by the Sovereign 12.0
Entity.
------------------------------------------------------------------------
* * * * *
0
4. Amend appendix E, section 11, by revising paragraph (b)(2) to read
as follows:
Section 11
* * * * *
(b) SSFA parameters. * * *
(2) Parameter W is expressed as a decimal value between zero and
one. Parameter W is the ratio of the sum of the dollar amounts of
any underlying exposures of the securitization that meet any of the
criteria as set forth in paragraphs (i) through (vi) of this
paragraph (b)(2) to the balance, measured in dollars, of underlying
exposures:
(i) Ninety days or more past due;
(ii) Subject to a bankruptcy or insolvency proceeding;
(iii) In the process of foreclosure;
(iv) Held as real estate owned;
(v) Has contractually deferred payments for 90 days or more,
other than principal or interest payments deferred on:
(A) Federally-guaranteed student loans, in accordance with the
terms of those guarantee programs; or
(B) Consumer loans, including non-federally-guaranteed student
loans, provided that such payments are deferred pursuant to
provisions included in the contract at the time funds are disbursed
that provide for period(s) of deferral that are not initiated based
on changes in the creditworthiness of the borrower; or
(vi) Is in default.
* * * * *
0
5. Amend appendix E, section 12, by
0
(a) Revising paragraph (a);
0
(b) Revising paragraph (c)(1); and
0
(c) Revising paragraph (d) introductory text to read as follows:
Section 12
(a) Scope. A bank must comply with this section unless it is a
consolidated subsidiary of a bank holding company or a depository
institution that is subject to these requirements or of a non-U.S.
banking organization that is subject to comparable public disclosure
requirements in its home jurisdiction. A bank must make timely
disclosures publicly each calendar quarter. If a significant change
occurs, such that the most recent reporting amounts are no longer
reflective of the bank's capital adequacy and risk profile, then a
brief discussion of this change and its likely impact must be
provided as soon as practicable thereafter. Qualitative disclosures
that typically do not change each quarter may be disclosed annually,
provided any significant changes are disclosed in the interim. If a
bank believes that disclosure of specific commercial or financial
information would prejudice seriously its position by making public
certain information that is either proprietary or confidential in
nature, the bank is not required to disclose these specific items,
but must disclose more general information about the subject matter
of the requirement, together with the fact that, and the reason why,
the specific items of information have not been disclosed. The
bank's management may provide all of the disclosures required by
this section in one place on the bank's public Web site or may
provide the disclosures in more than one public financial report or
other regulatory reports, provided that the bank
[[Page 43836]]
publicly provides a summary table specifically indicating the
location(s) of all such disclosures.
* * * * *
(c) Quantitative disclosures. (1) For each material portfolio of
covered positions, the bank must provide timely public disclosures
of the following information at least quarterly:
* * * * *
(d) Qualitative disclosures. For each material portfolio of
covered positions, the bank must provide timely public disclosures
of the following information at least annually after the end of the
fourth calendar quarter, or more frequently in the event of material
changes for each portfolio:
* * * * *
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
0
6. The authority citation for part 225 continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-
1, 1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3907,
and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.
0
7. Amend appendix E, section 2, by revising paragraphs (3)(v)-(vii) and
adding paragraph (3)(viii) in the definition of ``Covered position'' to
read as follows:
Appendix E to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Market Risk
Section 2
* * * * *
(3) * * *
(v) Any equity position that is not publicly traded, other than
a derivative that references a publicly traded equity and other than
a position in an investment company as defined in and registered
with the SEC under the Investment Company Act of 1940 (15 U.S.C. 80
a-1 et seq.), provided that all the underlying equities held by the
investment company are publicly traded;
(vi) Any equity position that is not publicly traded, other than
a derivative that references a publicly traded equity and other than
a position in an entity not domiciled in the United States (or a
political subdivision thereof) that is supervised and regulated in a
manner similar to entities described in paragraph (3)(v) of this
definition;
(vii) Any position a bank holds with the intent to securitize;
or
(viii) Any direct real estate holding.
* * * * *
0
8. Amemd appendix E, section 10, by:
0
(a) Revising paragraph (b)(2)(i)(A), Table 2, and paragraphs
(b)(2)(i)(B), (C), and (D), and adding paragraph (b)(2)(i)(E);
0
(b) Revising paragraph (b)(2)(iv)(A) and Table 3;
0
(c) Revising paragraph (b)(2)(v), Table 4 and Table 5 to read as
follows:
Section 10
* * * * *
(b) Debt and securitization positions.* * *
(i) Sovereign Debt Positions. (A) In accordance with Table 2, a
bank must assign a specific risk-weighting factor to a sovereign
debt position based on the CRC applicable to the sovereign entity
and, as applicable, the remaining contractual maturity of the
position, or, if there is no CRC applicable to the sovereign entity,
based on whether the sovereign entity is a member of the OECD.
Notwithstanding any other provision in this appendix E, sovereign
debt positions that are backed by the full faith and credit of the
United States are treated as having a CRC of 0.
Table 2--Specific Risk-Weighting Factors for Sovereign Debt Positions
------------------------------------------------------------------------
------------------------------------------------------------------------
Specific risk-weighting factor
(in percent)
-----------------------------------------
CRC:
0-1....................... 0.0
-----------------------------------------
2-3....................... Remaining contractual 0.25
maturity of 6 months
or less.
Remaining contractual 1.0
maturity of greater
than 6 and up to and
including 24 months.
Remaining contractual 1.6
maturity exceeds 24
months.
-----------------------------------------
4-6....................... 8.0
-----------------------------------------
7......................... 12.0
-----------------------------------------
OECD Member with No CRC....... 0.0
-----------------------------------------
Non-OECD Member with No CRC... 8.0
-----------------------------------------
Default by the Sovereign 12.0
Entity.
------------------------------------------------------------------------
(B) Notwithstanding paragraph (b)(2)(i)(A) of this section, a
bank may assign to a sovereign debt position a specific risk-
weighting factor that is lower than the applicable specific risk-
weighting factor in table 2 if:
(1) The position is denominated in the sovereign entity's
currency;
(2) The bank has at least an equivalent amount of liabilities in
that currency; and
(3) The sovereign entity allows banks under its jurisdiction to
assign the lower specific risk-weighting factor to the same
exposures to the sovereign entity.
(C) A bank must assign a 12.0 percent specific risk-weighting
factor to a sovereign debt position immediately upon determination a
default has occurred; or if a default has occurred within the
previous five years.
(D) A bank must assign a 0.0 percent specific risk-weighting
factor to a sovereign debt position if the sovereign entity is a
member of the OECD and does not have a CRC assigned to it, except as
provided in paragraph (b)(2)(i)(C) of this section.
(E) A bank must assign an 8.0 percent specific risk-weighting
factor to a sovereign debt position if the sovereign entity is not a
member of the OECD and does not have a CRC assigned to it, except as
provided in paragraph (b)(2)(i)(C) of this section.
* * * * *
(iv) Depository institution, foreign bank, and credit union debt
positions. (A) Except as provided in paragraph (b)(2)(iv)(B) of this
section, a bank must assign a specific risk-weighting factor to a
debt position that is an exposure to a depository institution, a
foreign bank, or a credit union in accordance with table 3, based on
the CRC that corresponds to that entity's sovereign of incorporation
or the OECD membership status of that entity's sovereign of
incorporation if there is no CRC applicable to the entity's
sovereign of incorporation, and, as applicable, the remaining
contractual maturity of the position.
* * * * *
[[Page 43837]]
Table 3--Specific Risk-Weighting Factors for Depository Institution,
Foreign Bank, and Credit Union Debt Positions
------------------------------------------------------------------------
------------------------------------------------------------------------
Specific risk-weighting factor
(in percent)
-----------------------------------------
CRC 0-2 or OECD Member with No Remaining contractual 0.25
CRC. maturity of 6 months
or less.
Remaining contractual 1.0
maturity of greater
than 6 and up to and
including 24 months.
Remaining contractual 1.6
maturity exceeds 24
months.
-----------------------------------------
CRC 3......................... 8.0
-----------------------------------------
CRC 4-7....................... 12.0
-----------------------------------------
Non-OECD Member with No CRC... 8.0
-----------------------------------------
Default by the Sovereign 12.0
Entity.
------------------------------------------------------------------------
* * * * *
(v) PSE debt positions. (A) Except as provided in paragraph
(b)(2)(v)(B) of this section, a bank must assign a specific risk-
weighting factor to a debt position that is an exposure to a PSE in
accordance with table 4 and table 5 depending on the position's
categorization as a general obligation or revenue obligation, based
on the CRC that corresponds to the PSE's sovereign of incorporation
or the OECD membership status of the PSE's sovereign of
incorporation if there is no CRC applicable to the PSE's sovereign
of incorporation, and, as applicable, the remaining contractual
maturity of the position.
(B) A bank may assign a lower specific risk-weighting factor
than would otherwise apply under tables 4 and 5 to a debt position
that is an exposure to a foreign PSE if:
(1) The PSE's sovereign of incorporation allows banks under its
jurisdiction to assign a lower specific risk-weighting factor to
such position; and
(2) The specific risk-weighting factor is not lower than the
risk weight that corresponds to the PSE's sovereign of incorporation
in accordance with tables 4 and 5.
(C) A bank must assign a 12.0 percent specific risk-weighting
factor to a PSE debt position immediately upon determination that a
default by the PSE's sovereign of incorporation has occurred or if a
default by the PSE's sovereign of incorporation has occurred within
the previous five years.
Table 4--Specific Risk-Weighting Factors for PSE General Obligation Debt
Positions
------------------------------------------------------------------------
------------------------------------------------------------------------
General obligation specific risk-
weighting factor
(in percent)
-----------------------------------------
CRC 0-2 or OECD Member with No Remaining contractual 0.25
CRC. maturity of 6 months
or less.
Remaining contractual 1.0
maturity of greater
than 6 and up to and
including 24 months.
Remaining contractual 1.6
maturity exceeds 24
months.
-----------------------------------------
CRC 3......................... 8.0
-----------------------------------------
CRC 4-7....................... 12.0
-----------------------------------------
Non-OECD Member with No CRC... 8.0
-----------------------------------------
Default by the Sovereign 12.0
Entity.
------------------------------------------------------------------------
Table 5--Specific Risk-Weighting Factors for PSE Revenue Obligation Debt
Positions
------------------------------------------------------------------------
------------------------------------------------------------------------
Revenue obligation specific risk-
weighting factor
(in percent)
-----------------------------------------
CRC 0-1 or OECD Member with No Remaining contractual 0.25
CRC. maturity of 6 months
or less.
Remaining contractual 1.0
maturity of greater
than 6 and up to and
including 24 months.
Remaining contractual 1.6
maturity exceeds 24
months.
-----------------------------------------
CRC 2-3....................... 8.0
-----------------------------------------
CRC 4-7....................... 12.0
-----------------------------------------
Non-OECD Member with No CRC... 8.0
-----------------------------------------
Default by the Sovereign 12.0
Entity.
------------------------------------------------------------------------
* * * * *
0
9. Amend appendix E, section 11, by revising paragraph (b)(2) to read
as follows:
Section 11
* * * * *
(b) SSFA parameters. * * *
[[Page 43838]]
(2) Parameter W is expressed as a decimal value between zero and
one. Parameter W is the ratio of the sum of the dollar amounts of any
underlying exposures of the securitization that meet any of the
criteria as set forth in paragraphs (i) through (vi) of this paragraph
(b)(2) to the balance, measured in dollars, of underlying exposures:
(i) Ninety days or more past due;
(ii) Subject to a bankruptcy or insolvency proceeding;
(iii) In the process of foreclosure;
(iv) Held as real estate owned;
(v) Has contractually deferred payments for 90 days or more, other
than principal or interest payments deferred on:
(A) Federally-guaranteed student loans, in accordance with the
terms of those guarantee programs; or
(B) Consumer loans, including non-federally-guaranteed student
loans, provided that such payments are deferred pursuant to provisions
included in the contract at the time funds are disbursed that provide
for period(s) of deferral that are not initiated based on changes in
the creditworthiness of the borrower; or
(vi) Is in default.
* * * * *
0
10. Amend appendix E, section 12, by:
0
(a) Revising paragraph (a);
0
(b) Revising paragraph (c)(1) and;
0
(c) Revising paragraph (d) introductory text to read as follows:
Section 12
(a) Scope. A bank must comply with this section unless it is a
consolidated subsidiary of a bank holding company or a depository
institution that is subject to these requirements or of a non-U.S.
banking organization that is subject to comparable public disclosure
requirements in its home jurisdiction. A bank must make timely public
disclosures each calendar quarter. If a significant change occurs, such
that the most recent reporting amounts are no longer reflective of the
bank's capital adequacy and risk profile, then a brief discussion of
this change and its likely impact must be provided as soon as
practicable thereafter. Qualitative disclosures that typically do not
change each quarter may be disclosed annually, provided any significant
changes are disclosed in the interim. If a bank believes that
disclosure of specific commercial or financial information would
prejudice seriously its position by making public certain information
that is either proprietary or confidential in nature, the bank is not
required to disclose these specific items, but must disclose more
general information about the subject matter of the requirement,
together with the fact that, and the reason why, the specific items of
information have not been disclosed. The bank's management may provide
all of the disclosures required by this section in one place on the
bank's public Web site or may provide the disclosures in more than one
public financial report or other regulatory reports, provided that the
bank publicly provides a summary table specifically indicating the
location(s) of all such disclosures.
* * * * *
(c) Quantitative disclosures. (1) For each material portfolio of
covered positions, the bank must provide timely public disclosures of
the following information at least quarterly:
* * * * *
(d) Qualitative disclosures. For each material portfolio of covered
positions, the bank must provide timely public disclosures of the
following information at least annually after the end of the fourth
calendar quarter, or more frequently in the event of material changes
for each portfolio:
* * * * *
By order of the Board of Governors of the Federal Reserve
System, July 3, 2013.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2013-16434 Filed 7-19-13; 8:45 am]
BILLING CODE P
