Regulatory Capital Rules: Advanced Approaches Risk-Based Capital Rule, Proposed Revisions to the Definition of Eligible Guarantee, 24618-24623 [2014-09452]
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Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules
TABLE 13 TO § 324.173 SUPPLEMENTARY LEVERAGE RATIO—Continued
Dollar amounts in thousands
Tril
15
16
Bil
Mil
Thou
Exposure for repo-style transactions where a banking organization acts as an agent.
Total exposures for repo-style transactions (sum of lines 12 to 15).
Other off-balance sheet exposures
17
18
19
Off-balance sheet exposures at gross notional amounts.
LESS: Adjustments for conversion to credit equivalent amounts.
Off-balance sheet exposures (sum of lines 17 and 18).
Capital and total leverage exposure
20
21
Tier 1 capital.
Total leverage exposure (sum of lines 3, 11, 16 and 19).
Supplementary leverage ratio
22
Supplementary leverage ratio ..................................................................................................
Dated: April 8, 2014.
Thomas J. Curry,
Comptroller of the Currency.
By Order of the Board of Governors of the
Federal Reserve System, April 10, 2014.
Robert deV. Frierson,
Secretary of the Board.
Dated at Washington, DC, this 8th day of
April, 2014.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
DEPARTMENT OF TREASURY
[FR Doc. 2014–09357 Filed 4–30–14; 8:45 am]
RIN 7100 AE17
BILLING CODE P
FEDERAL DEPOSIT INSURANCE
CORPORATION
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket ID OCC–2014–0012]
RIN 1557–AD83
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Docket No. R–1488; Regulation Q]
12 CFR Part 324
RIN 3064–AE13
Regulatory Capital Rules: Advanced
Approaches Risk-Based Capital Rule,
Proposed Revisions to the Definition
of Eligible Guarantee
Office of the Comptroller of the
Currency, Treasury; the Board of
Governors of the Federal Reserve
System; and the Federal Deposit
Insurance Corporation.
ACTION: Joint notice of proposed
rulemaking.
AGENCY:
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)
(collectively, the agencies) are seeking
comment on a notice of proposed
rulemaking (proposed rule) that would
revise the definition of eligible
guarantee as incorporated into the
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SUMMARY:
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(in percent)
agencies’ advanced approaches riskbased capital rule, adopted in the
agencies’ July 2013 regulatory capital
rule (2013 capital rule).
The agencies inadvertently limited
the recognition of guarantees of
wholesale exposures under the
advanced approaches risk-based capital
rule as incorporated into subpart E of
the 2013 capital rule (advanced
approaches). To address this matter, the
proposed rule would remove the
requirement that an eligible guarantee
be made by an eligible guarantor for
purposes of calculating the riskweighted assets of an exposure (other
than a securitization exposure) under
the advanced approaches. The proposed
change to the definition of eligible
guarantee would apply to all banks,
savings associations, bank holding
companies, and savings and loan
holding companies that are subject to
the advanced approaches.
DATES: Comments must be received no
later than June 13, 2014.
ADDRESSES: Comments should be
directed to:
OCC: Because paper mail in the
Washington, DC area and at the OCC is
subject to delay, commenters are
encouraged to submit comments by the
Federal eRulemaking Portal or email, if
possible. Please use the title ‘‘Regulatory
Capital Rules: Regulatory Capital,
Proposed Revisions to the Definition of
Eligible Guarantee’’ to facilitate the
organization and distribution of the
comments. You may submit comments
by any of the following methods:
• Federal eRulemaking Portal—
‘‘regulations.gov’’: Go to https://
www.regulations.gov. Enter ‘‘Docket ID
OCC–2014–0012’’ in the Search Box and
click ‘‘Search’’. Results can be filtered
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Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules
using the filtering tools on the left side
of the screen. Click on ‘‘Comment Now’’
to submit public comments.
• Click on the ‘‘Help’’ tab on the
Regulations.gov home page to get
information on using Regulations.gov,
including instructions for submitting
public comments.
• Email: regs.comments@
occ.treas.gov.
• Mail: Legislative and Regulatory
Activities Division, Office of the
Comptroller of the Currency, 400 7th
Street SW., Suite 3E–218, Mail Stop
9W–11, Washington, DC 20219.
• Hand Delivery/Courier: 400 7th
Street SW., Suite 3E–218, Mail Stop
9W–11, Washington, DC 20219.
• Fax: (571) 465–4326.
Instructions: You must include
‘‘OCC’’ as the agency name and ‘‘Docket
ID OCC–2014–0012’’ in your comment.
In general, OCC will enter all comments
received into the docket and publish
them on the Regulations.gov Web site
without change, including any business
or personal information that you
provide such as name and address
information, email addresses, or phone
numbers. Comments received, including
attachments and other supporting
materials, are part of the public record
and subject to public disclosure. Do not
enclose any information in your
comment or supporting materials that
you consider confidential or
inappropriate for public disclosure.
You may review comments and other
related materials that pertain to this
rulemaking action by any of the
following methods:
• Viewing Comments Electronically:
Go to https://www.regulations.gov. Enter
‘‘Docket ID OCC–2014–0012’’ in the
Search box and click ‘‘Search’’.
Comments can be filtered by Agency
using the filtering tools on the left side
of the screen.
• Click on the ‘‘Help’’ tab on the
Regulations.gov home page to get
information on using Regulations.gov,
including instructions for viewing
public comments, viewing other
supporting and related materials, and
viewing the docket after the close of the
comment period.
• Viewing Comments Personally: You
may personally inspect and photocopy
comments at the OCC, 400 7th Street,
SW., Washington, DC. For security
reasons, the OCC requires that visitors
make an appointment to inspect
comments. You may do so by calling
(202) 649–6700. Upon arrival, visitors
will be required to present valid
government-issued photo identification
and to submit to security screening in
order to inspect and photocopy
comments.
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• Docket: You may also view or
request available background
documents and project summaries using
the methods described above.
Board: 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–1488, RIN 7100 AE17, 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 docket
number in the subject line of the
message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Robert de V. 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 9:00 a.m. and 5:00 p.m. on
weekdays.
FDIC: You may submit comments,
identified by RIN 3064–AE13, by any of
the following methods:
Agency Web site: https://www.fdic.gov/
regulations/laws/federal/propose.html.
Follow instructions for submitting
comments on the Agency Web site.
• Email: Comments@fdic.gov. Include
the RIN 3064–AE13 on the subject line
of the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW., Washington, DC 20429.
• Hand Delivery: Comments may be
hand delivered to the guard station at
the rear of the 550 17th Street Building
(located on F Street) on business days
between 7:00 a.m. and 5:00 p.m.
Public Inspection: All comments
received must include the agency name
and RIN 3064–AE13 for this rulemaking.
All comments received will be posted
without change to https://www.fdic.gov/
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regulations/laws/federal/propose.html,
including any personal information
provided. Paper copies of public
comments may be ordered from the
FDIC Public Information Center, 3501
North Fairfax Drive, Room E–1002,
Arlington, VA 22226 by telephone at
(877) 275–3342 or (703) 562–2200.
FOR FURTHER INFORMATION CONTACT:
OCC: Margot Schwadron, Senior Risk
Expert, (202) 649–6982; or Roger Tufts,
Senior Economic Advisor, (202) 649–
6981, Capital Policy; or Carl Kaminski,
Counsel, Legislative and Regulatory
Activities Division, (202) 649–5490, for
persons who are deaf or hard of hearing,
TTY, (202) 649–5597, Office of the
Comptroller of the Currency, 400 7th
Street SW., Washington, DC 20219.
Board: Anna Lee Hewko, Deputy
Associate Director, (202) 530–6260;
Constance M. Horsley, Assistant
Director, (202) 452–5239; Thomas
Boemio, Manager, (202) 452–2982;
Andrew Willis, Senior Financial
Analyst, (202) 912–4323; or Justyna
Milewski, Financial Analyst, (202) 452–
3607, Capital and Regulatory Policy,
Division of Banking Supervision and
Regulation; or Benjamin McDonough,
Senior Counsel, (202) 452–2036; April
C. Snyder, Senior Counsel, (202) 452–
3099; Christine Graham, Counsel, 202
452 3005; 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.
FDIC: Bobby R. Bean, Associate
Director, bbean@fdic.gov; Ryan
Billingsley, Chief, Capital Policy
Section, rbillingsley@fdic.gov; Benedetto
Bosco, Capital Markets Policy Analyst,
bbosco@fdic.gov, Capital Markets
Branch, Division of Risk Management
Supervision, regulatorycapital@fdic.gov
or (202) 898–6888; or Mark Handzlik,
Counsel, mhandzlik@fdic.gov; Michael
Phillips, Counsel, mphillips@fdic.gov;
or Rachel Ackmann, Attorney,
rackmann@fdic.gov; Supervision
Branch, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Proposed Rule
In 2013, 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)
(collectively, the agencies)
comprehensively revised and
strengthened the capital regulations
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applicable to banking organizations
(2013 capital rule).1 Among other
changes, the 2013 capital rule revised
the methodologies for calculating riskweighted assets, including aspects of the
standardized approach for calculating
risk-weighted assets established by the
Basel Committee on Banking
Supervision (BCBS) through its
international framework for regulatory
capital in subpart D of the 2013 capital
rule (standardized approach). The
agencies amended the advanced
approaches risk-based capital rule
consistent with agreements reached by
the BCBS, and incorporated the
advanced approaches rule into subpart
E of the 2013 capital rule (advanced
approaches).2
The agencies’ 2013 capital rule
included a definition of eligible
guarantee for purposes of both the
standardized approach and the
advanced approaches and introduced
the definition of ‘‘eligible guarantor.’’
The definition included the requirement
that an eligible guarantee be provided
by an eligible guarantor. An eligible
guarantor under the 2013 capital rule is
a sovereign, the Bank for International
Settlements, the International Monetary
Fund, the European Central Bank, the
European Commission, a Federal Home
Loan Bank, the Federal Agricultural
Mortgage Corporation (Farmer Mac), a
multilateral development bank (MDB), a
depository institution, a bank holding
company, a savings and loan holding
company, a credit union, a foreign bank,
or a qualifying central counterparty. It
may also be an entity (other than a
special purpose entity) that at the time
the guarantee is issued or anytime
thereafter, has issued and has
outstanding an unsecured debt security
that is investment grade; whose
creditworthiness is not positively
correlated with the credit risk of the
exposures for which it has provided
guarantees; and that is not an insurance
company engaged predominately in the
1 78 FR 55340 (September 10, 2013) (FDIC) and
78 FR 62018 (October 11, 2013) (OCC and Board).
On April 8, 2014, the FDIC adopted as final the
2013 revised capital rule, with no substantive
changes.
2 See BCBS, ‘‘Basel II: International Convergence
of Capital Measurement and Capital Standards: A
Revised Framework’’ (November 2005 and revised
in June 2006), available at https://www.bis.org/publ/
bcbs128.pdf. See BCBS, ‘‘Basel III: A Global
Regulatory Framework for More Resilient Banks
and Banking Systems’’ (December 2010 and revised
in June 2011), available at https://www.bis.org/publ/
bcbs189.htm. The BCBS is a committee of banking
supervisory authorities, which was established by
the central bank governors of the G–10 countries in
1975. More information regarding the BCBS and its
membership is available at https://www.bis.org/bcbs/
about.htm. Documents issued by the BCBS are
available through the Bank for International
Settlements Web site at https://www.bis.org.
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business of providing credit protection
(such as a monoline bond insurer or reinsurer).
The agencies received comments
following the release of the 2013 capital
rule indicating that the revisions made
to the definition of eligible guarantee
changed the recognition of these
guarantees for certain exposures under
the advanced approaches wholesale
framework. For example, several
advanced approaches banking
organizations noted that middle market
and commercial real estate loans often
involve guarantors that do not meet the
definition of eligible guarantor. The
guarantors are often related parties such
as owners or sponsors that have not
issued investment grade debt securities;
nevertheless, advanced approaches
banking organizations assert that such
guarantees provide valuable credit risk
mitigation that should be recognized
under the advanced approaches. The
agencies agree that the revisions to the
2013 capital rule inadvertently limited
the recognition of guarantees of
wholesale exposures under the
advanced approaches and that these
guarantees should continue to qualify as
credit risk mitigants for purposes of the
advanced approaches because they
provide credit enhancement. Therefore
the agencies propose to effectively
revert to the previous treatment of
eligible guarantees under the 2007
advanced approaches final rule for such
exposures.3
The proposed rule would modify the
definition of eligible guarantee for
purposes of the advanced approaches by
removing the requirement that an
eligible guarantee be provided by an
eligible guarantor for exposures that are
not securitizations. The agencies would
retain the definition of eligible
guarantee in the 2013 capital rule for
purposes of calculating risk-weighted
assets under the standardized approach
because the standardized approach
generally assigns a single risk weight to
exposures to most corporate borrowers
and guarantors and does not incorporate
the definition of eligible guarantee into
a risk-sensitive methodology like the
advanced approaches.
An eligible guarantee for purposes of
the advanced approaches would need to
be in writing and also be either an
unconditional guarantee or a contingent
obligation of the U.S. government or its
agencies, the enforceability of which is
dependent upon some affirmative action
on the part of the beneficiary of the
guarantee or a third party (for example,
meeting servicing requirements). The
guarantee would also have to cover all
3 72
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or a pro rata portion of all contractual
payments of the obligated party on the
reference exposure and give the
beneficiary a direct claim against the
protection provider. Additionally, the
guarantee would not be unilaterally
cancelable by the protection provider
for reasons other than the breach of the
contract by the beneficiary and would
have to be legally enforceable against
the protection provider in a jurisdiction
where the protection provider has
sufficient assets against which a
judgment may be attached and enforced
(except for a guarantee by a sovereign).
The guarantee would require the
protection provider to make payment to
the beneficiary on the occurrence of a
default (as defined in the guarantee) of
the obligated party on the reference
exposure in a timely manner without
the beneficiary first having to take legal
actions to pursue the obligor for
payment and must not increase the
beneficiary’s cost of credit protection on
the guarantee in response to
deterioration in the credit quality of the
reference exposure. Furthermore, the
guarantee would not be provided by an
affiliate of the banking organization,
unless the affiliate is an insured
depository institution, foreign bank,
securities broker or dealer, or insurance
company that does not control the
banking organization and is subject to
consolidated supervision and regulation
comparable to that imposed on
depository institutions, U.S. securities
broker-dealers, or U.S. insurance
companies (as the case may be) and for
purposes of sections l.141 to l.145
and of the standardized approach, the
guarantee would have to be provided by
an eligible guarantor.
II. Regulatory Analyses
A. Paperwork Reduction Act (PRA)
In accordance with the requirements
of the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3521) (PRA), the
agencies may not conduct or sponsor,
and a respondent is not required to
respond to, an information collection
unless it displays a currently valid
Office of Management and Budget
(OMB) control number. The agencies
reviewed the proposed rule and
determined that the rule does not
introduce any new collection of
information pursuant to the PRA.
B. Regulatory Flexibility Act Analysis
OCC: The Regulatory Flexibility Act,
5 U.S.C. 601 et seq. (RFA), requires an
agency, in connection with a notice of
proposed rulemaking, to prepare an
Initial Regulatory Flexibility Act
analysis describing the impact of the
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rule on small entities (defined by the
Small Business Administration for
purposes of the RFA to include banking
entities with total assets of $500 million
or less) or to certify that the rule will not
have a significant economic impact on
a substantial number of small entities.
Using the SBA’s size standards, as of
December 31, 2013, the OCC supervised
1,195 small entities.4
As described in the SUPPLEMENTARY
INFORMATION section of the preamble, the
proposed rule would apply only to
advanced approaches banking
organizations. Advanced approaches
banking organization is defined to
include a national bank or Federal
savings associations that has, or is a
subsidiary of a bank holding company
or savings and loan holding company
that has, total consolidated assets of
$250 billion or more, total consolidated
on-balance sheet foreign exposure of
$10 billion or more, or that has elected
to use the advanced approaches. After
considering the SBA’s size standards
and General Principals of Affiliation to
identify small entities, the OCC
determined that no small national banks
or Federal savings associations are
advanced approaches banking
organizations. Because the proposed
rule applies only to advanced
approaches banking organizations, it
does not impact any OCC-supervised
small entities. Therefore, the OCC
certifies that the proposed rule will not
have a significant economic impact on
a substantial number of OCC-supervised
small entities.
Board: The Board is providing an
initial regulatory flexibility analysis
with respect to this proposed rule. As
discussed above, this proposed rule
would amend the definition of ‘‘eligible
guarantee’’ in section 2 of Regulation Q
(12 CFR part 217) for the purposes of
calculating risk-weighted assets under
the advanced approaches in Regulation
Q (12 CFR part 217, subpart E).
Under regulations issued by the Small
Business Administration, a small entity
includes a depository institution, bank
holding company, or savings and loan
holding company with total assets of
4 The OCC calculated the number of small entities
using the SBA’s size thresholds for commercial
banks and savings institutions, and trust
companies, which are $500 million and $35.5
million, respectively. 78 FR 37409 (June 20, 2013).
Consistent with the General Principles of
Affiliation, 13 CFR 121.103(a), the OCC counted the
assets of affiliated financial institutions when
determining whether to classify a national bank or
Federal savings association as a small entity. The
OCC used December 31, 2013, to determine size
because a ‘‘financial institution’s assets are
determined by averaging the assets reported on its
four quarterly financial statements for the preceding
year.’’ See footnote 8 of the U.S. Small Business
Administration’s Table of Size Standards.
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$500 million or less (a small banking
organization).5 As of December 31,
2013, there were approximately 627
small state member banks. As of
December 31, 2013, there were
approximately 3,676 small bank holding
companies and approximately 268 small
savings and loan holding companies.6
The proposed rule would apply only
to advanced approaches banking
organizations, which, generally, are
banking organizations with total
consolidated assets of $250 billion or
more, that have total consolidated onbalance sheet foreign exposure of $10
billion or more, are a subsidiary of an
advanced approaches depository
institution, or that elect to use the
advanced approaches. Currently, no
small top-tier bank holding company,
top-tier savings and loan holding
company, or state member bank is an
advanced approaches banking
organization, so there would be no
additional projected compliance
requirements imposed on small bank
holding companies, savings and loan
holding companies, or state member
banks. The Board expects that any small
bank holding companies, savings and
loan holding companies, or state
member banks that would be covered by
this proposed rule would rely on their
parent banking organization for
compliance and would not bear
additional costs.
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.
FDIC: The Regulatory Flexibility Act,
5 U.S.C. 601 et seq. (RFA), requires an
agency, in connection with a notice of
proposed rulemaking, to prepare an
Initial Regulatory Flexibility Act
5 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).
6 Under the prior Small Business Administration
threshold of $175 million in assets, as of March 31,
2013 the Board supervised approximately 369 small
state member banks. As of December 31, 2012, there
were approximately 2,259 small bank holding
companies.
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analysis describing the impact of the
proposed rule on small entities (defined
by the Small Business Administration
for purposes of the RFA to include
banking entities with total assets of $500
million or less) or to certify that the
proposed rule will not have a significant
economic impact on a substantial
number of small entities.
Using the SBA’s size standards, as of
December 31, 2013, the FDIC supervised
1,195 small entities. As described in the
SUPPLEMENTARY INFORMATION section of
the preamble, however, the proposed
rule would apply only to advanced
approaches banking organizations.
Advanced approaches banking
organization is defined to include a
state nonmember bank or a State savings
association that has, or is a subsidiary
of a bank holding company or savings
and loan holding company that has,
total consolidated assets of $250 billion
or more, total consolidated on-balance
sheet foreign exposure of $10 billion or
more, or that has elected to use the
advanced approaches. As of December
31, 2013, based on a $500 million
threshold, 1 (out of 3,394) small state
nonmember banks and no (out of 303)
small state savings associations were
under the advanced approaches.
Therefore, the FDIC does not believe
that the proposed rule will result in a
significant economic impact on a
substantial number of small entities
under its supervisory jurisdiction.
The FDIC certifies that the proposed
rule would not have a significant
economic impact on a substantial
number of small FDIC-supervised
institutions.
C. OCC Unfunded Mandates Reform Act
of 1995 Determination
The OCC has analyzed the proposed
rule under the factors in the Unfunded
Mandates Reform Act of 1995 (UMRA)
(2 U.S.C. 1532). Under this analysis, the
OCC considered whether the proposed
rule includes a Federal mandate that
may result in the expenditure by State,
local, and tribal governments, in the
aggregate, or by the private sector, of
$100 million or more in any one year
(adjusted annually for inflation). As
detailed in the SUPPLEMENTARY
INFORMATION section, the proposed rule
would revise the definition of eligible
guarantee as incorporated into the
OCC’s advanced approaches risk-based
capital rule. In 2013, when the Federal
banking agencies revised their
respective risk-based capital
requirements, they added a requirement
that an eligible guarantee be from an
eligible guarantor. This proposed rule
would remove that requirement for the
purposes of calculating the risk-
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weighted asset amount for an exposure
(other than for a securitization
exposure) under the OCC’s advanced
approaches risk-based capital rule. For
example, the OCC understands that
advanced approaches banking
organizations commonly obtain
guarantees from guarantors that do not
qualify as eligible guarantors for
exposures in their commercial real
estate and other wholesale portfolios.
Under this proposed rule, these
guarantees would continue to qualify as
credit risk mitigants for purposes of the
wholesale framework in the advanced
approaches risk-based capital rule.
This proposed rule would not
increase the minimum capital
requirements for any institutions subject
to the OCC’s risk-based capital rules.
After comparing existing capital levels
with the proposed requirements, and
considering the burden and other
compliance costs associated with the
proposed changes, the OCC has
determined that its proposed rule will
not result in expenditures by State,
local, and Tribal governments, or by the
private sector, of $100 million or more
(adjusted annually for inflation).
Accordingly, the OCC is not including
a written statement to accompany this
proposed rule.
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D. Plain Language
Section 722 of the Gramm-LeachBliley Act requires the Federal banking
agencies to use plain language in all
proposed and final rules published after
January 1, 2000. The agencies have
sought to present the proposed rule in
a simple and straightforward manner,
and invite comment on the use of plain
language. For example:
• Have the agencies organized the
material to suit your needs? If not, how
could they present the proposed rule
more clearly?
• Are the requirements in the
proposed rule clearly stated? If not, how
could the proposed 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 achieve that?
• Is this section format adequate? If
not, which of the sections should be
changed and how?
• What other changes can the
agencies incorporate to make the
regulation easier to understand?
VerDate Mar<15>2010
17:07 Apr 30, 2014
Jkt 232001
List of Subjects
12 CFR Part 3
Administrative practice and
procedure, Capital, National banks,
Reporting and recordkeeping
requirements, Risk.
12 CFR Part 217
Administrative practice and
procedure, Banks, Banking, Capital,
Federal Reserve System, Holding
companies, Reporting and
recordkeeping requirements, Securities.
12 CFR Part 324
Administrative practice and
procedure, Banks, banking, Capital
Adequacy, Reporting and recordkeeping
requirements, Savings associations,
State non-member banks.
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Chapter I
Authority and Issuance
For the reasons set forth in the
preamble and under the authority of 12
U.S.C. 93a, 1462, 1462a, 1463, 1464,
3907, 3909, 1831o, and 5412(b)(2)(B),
the Office of the Comptroller of the
Currency proposes to amend part 3 of
chapter I of title 12, Code of Federal
Regulations as follows:
PART 3—CAPITAL ADEQUACY
STANDARDS
than the breach of the contract by the
beneficiary;
(6) Except for a guarantee by a
sovereign, is legally enforceable against
the protection provider in a jurisdiction
where the protection provider has
sufficient assets against which a
judgment may be attached and enforced;
(7) Requires the protection provider to
make payment to the beneficiary on the
occurrence of a default (as defined in
the guarantee) of the obligated party on
the reference exposure in a timely
manner without the beneficiary first
having to take legal actions to pursue
the obligor for payment;
(8) Does not increase the beneficiary’s
cost of credit protection on the
guarantee in response to deterioration in
the credit quality of the reference
exposure;
(9) Is not provided by an affiliate of
the national bank or Federal savings
association, unless the affiliate is an
insured depository institution, foreign
bank, securities broker or dealer, or
insurance company that:
(i) Does not control the national bank
or Federal savings association; and
(ii) Is subject to consolidated
supervision and regulation comparable
to that imposed on depository
institutions, U.S. securities brokerdealers, or U.S. insurance companies (as
the case may be); and
(10) For purposes of §§ 3.141 to 3.145
and of subpart D of this part, is provided
by an eligible guarantor.
*
*
*
*
*
1. The authority citation for part 3
continues to read as follows:
Board of Governors of the Federal
Reserve System
Authority: 12 U.S.C. 93a, 161, 1462, 1462a,
1463, 1464, 1818, 1828(n), 1828 note, 1831n
note, 1835, 3907, 3909, and 5412(b)(2)(B).
12 CFR Chapter II
■
2. In § 3.2, revise the definition of
‘‘eligible guarantee’’ to read as follows:
■
§ 3.2
Definitions.
*
*
*
*
*
Eligible guarantee means a guarantee
that:
(1) Is written;
(2) Is either:
(i) Unconditional, or
(ii) A contingent obligation of the U.S.
government or its agencies, the
enforceability of which is dependent
upon some affirmative action on the
part of the beneficiary of the guarantee
or a third party (for example, meeting
servicing requirements);
(3) Covers all or a pro rata portion of
all contractual payments of the
obligated party on the reference
exposure;
(4) Gives the beneficiary a direct
claim against the protection provider;
(5) Is not unilaterally cancelable by
the protection provider for reasons other
PO 00000
Frm 00028
Fmt 4702
Sfmt 4702
Authority and Issuance
For the reasons set forth in the
preamble, part 217 of chapter II of title
12 of the Code of Federal Regulations is
proposed to be amended as follows:
PART 217—CAPITAL ADEQUACY OF
BANK HOLDING COMPANIES,
SAVINGS AND LOAN HOLDING
COMPANIES, AND STATE MEMBER
BANKS (REGULATION Q)
3. The authority citation for part 217
continues to read as follows:
■
Authority: 12 U.S.C. 248(a), 321–338a,
481–486, 1462a, 1467a, 1818, 1828, 1831n,
1831o, 1831p–l, 1831w, 1835, 1844(b), 1851,
3904, 3906–3909, 4808, 5365, 5368, 5371.
4. The heading of part 217 is revised
to read as set forth above.
■ 5. In § 217.2, revise the definition of
‘‘eligible guarantee’’ to read as follows:
■
§ 217.2
*
E:\FR\FM\01MYP1.SGM
Definitions.
*
*
01MYP1
*
*
mstockstill on DSK4VPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules
Eligible guarantee means a guarantee
that:
(1) Is written;
(2) Is either:
(i) Unconditional, or
(ii) A contingent obligation of the U.S.
government or its agencies, the
enforceability of which is dependent
upon some affirmative action on the
part of the beneficiary of the guarantee
or a third party (for example, meeting
servicing requirements);
(3) Covers all or a pro rata portion of
all contractual payments of the
obligated party on the reference
exposure;
(4) Gives the beneficiary a direct
claim against the protection provider;
(5) Is not unilaterally cancelable by
the protection provider for reasons other
than the breach of the contract by the
beneficiary;
(6) Except for a guarantee by a
sovereign, is legally enforceable against
the protection provider in a jurisdiction
where the protection provider has
sufficient assets against which a
judgment may be attached and enforced;
(7) Requires the protection provider to
make payment to the beneficiary on the
occurrence of a default (as defined in
the guarantee) of the obligated party on
the reference exposure in a timely
manner without the beneficiary first
having to take legal actions to pursue
the obligor for payment;
(8) Does not increase the beneficiary’s
cost of credit protection on the
guarantee in response to deterioration in
the credit quality of the reference
exposure;
(9) Is not provided by an affiliate of
the Board-regulated institution, unless
the affiliate is an insured depository
institution, foreign bank, securities
broker or dealer, or insurance company
that:
(i) Does not control the Boardregulated institution; and
(ii) Is subject to consolidated
supervision and regulation comparable
to that imposed on depository
institutions, U.S. securities brokerdealers, or U.S. insurance companies (as
the case may be); and
(10) For purposes of §§ 217.141 to
217.145 and for purposes of subpart D
of this part, is provided by an eligible
guarantor.
*
*
*
*
*
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the
preamble, part 324 of chapter III of title
12 of the Code of Federal Regulations is
proposed to be amended as follows:
VerDate Mar<15>2010
20:22 Apr 30, 2014
Jkt 232001
PART 324—CAPITAL ADEQUACY OF
FDIC–SUPERVISED INSTITUTIONS
6. The authority citation for part 324
continues to read as follows:
■
Authority: 12 U.S.C. 1815(a), 1815(b),
1816, 1818(a), 1818(b), 1818(c), 1818(t),
1819(Tenth), 1828(c), 1828(d), 1828(i),
1828(n), 1828(o), 1831o, 1835, 3907, 3909,
4808; 5371; 5412; Pub. L. 102–233, 105 Stat.
1761, 1789, 1790 (12 U.S.C. 1831n note); Pub.
L. 102–242, 105 Stat. 2236, 2355, as amended
by Pub. L. 103–325, 108 Stat. 2160, 2233 (12
U.S.C. 1828 note); Pub. L. 102–242, 105 Stat.
2236, 2386, as amended by Pub. L. 102–550,
106 Stat. 3672, 4089 (12 U.S.C. 1828 note);
Pub. L. 111–203, 124 Stat. 1376, 1887 (15
U.S.C. 78o–7 note).
7. In § 324.2, revise the definition of
‘‘eligible guarantee’’ to read as follows:
■
§ 324.2
Definitions.
*
*
*
*
*
Eligible guarantee means a guarantee
that:
(1) Is written;
(2) Is either:
(i) Unconditional, or
(ii) A contingent obligation of the U.S.
government or its agencies, the
enforceability of which is dependent
upon some affirmative action on the
part of the beneficiary of the guarantee
or a third party (for example, meeting
servicing requirements);
(3) Covers all or a pro rata portion of
all contractual payments of the
obligated party on the reference
exposure;
(4) Gives the beneficiary a direct
claim against the protection provider;
(5) Is not unilaterally cancelable by
the protection provider for reasons other
than the breach of the contract by the
beneficiary;
(6) Except for a guarantee by a
sovereign, is legally enforceable against
the protection provider in a jurisdiction
where the protection provider has
sufficient assets against which a
judgment may be attached and enforced;
(7) Requires the protection provider to
make payment to the beneficiary on the
occurrence of a default (as defined in
the guarantee) of the obligated party on
the reference exposure in a timely
manner without the beneficiary first
having to take legal actions to pursue
the obligor for payment;
(8) Does not increase the beneficiary’s
cost of credit protection on the
guarantee in response to deterioration in
the credit quality of the reference
exposure;
(9) Is not provided by an affiliate of
the FDIC-supervised institution, unless
the affiliate is an insured depository
institution, foreign bank, securities
broker or dealer, or insurance company
that:
PO 00000
Frm 00029
Fmt 4702
Sfmt 4702
24623
(i) Does not control the FDICsupervised institution; and
(ii) Is subject to consolidated
supervision and regulation comparable
to that imposed on depository
institutions, U.S. securities brokerdealers, or U.S. insurance companies (as
the case may be); and
(10) For purposes of §§ 324.141 to
324.145 and of subpart D of this part, is
provided by an eligible guarantor.
*
*
*
*
*
Dated: April 8, 2014.
Thomas J. Curry,
Comptroller of the Currency.
By order of the Board of Governors of the
Federal Reserve System, April 11, 2014.
Robert deV. Frierson,
Secretary of the Board.
Dated at Washington, DC, this 8th day of
April, 2014.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2014–09452 Filed 4–30–14; 8:45 am]
BILLING CODE P
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 701
RIN 3133–AE31
Chartering and Field of Membership
Manual
National Credit Union
Administration (NCUA).
ACTION: Proposed rule with request for
comments.
AGENCY:
The NCUA Board (Board)
proposes to amend the associational
common bond provisions of NCUA’s
chartering and field of membership
rules. Specifically, the amendments
establish a threshold requirement that
an association not be formed primarily
for the purpose of expanding credit
union membership. The amendments
also expand the criteria in the totality of
the circumstances test, which is used to
determine if an association, which
satisfies the threshold requirement, also
satisfies the associational common bond
requirements and qualifies for inclusion
in a federal credit union’s (FCU) field of
membership (FOM). The amendments
will help to ensure FCU compliance
with membership requirements.
Additionally, NCUA proposes to grant
automatic qualification under the
associational common bond rules to
certain categories of groups that NCUA
has approved in the past after applying
the totality of the circumstances test.
SUMMARY:
E:\FR\FM\01MYP1.SGM
01MYP1
]]>Agencies
[Federal Register Volume 79, Number 84 (Thursday, May 1, 2014)]
[Proposed Rules]
[Pages 24618-24623]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09452]
-----------------------------------------------------------------------
DEPARTMENT OF TREASURY
Office of the Comptroller of the Currency
12 CFR Part 3
[Docket ID OCC-2014-0012]
RIN 1557-AD83
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Docket No. R-1488; Regulation Q]
RIN 7100 AE17
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 324
RIN 3064-AE13
Regulatory Capital Rules: Advanced Approaches Risk-Based Capital
Rule, Proposed Revisions to the Definition of Eligible Guarantee
AGENCY: Office of the Comptroller of the Currency, Treasury; the Board
of Governors of the Federal Reserve System; and the Federal Deposit
Insurance Corporation.
ACTION: Joint notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: 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) (collectively, the agencies) are
seeking comment on a notice of proposed rulemaking (proposed rule) that
would revise the definition of eligible guarantee as incorporated into
the agencies' advanced approaches risk-based capital rule, adopted in
the agencies' July 2013 regulatory capital rule (2013 capital rule).
The agencies inadvertently limited the recognition of guarantees of
wholesale exposures under the advanced approaches risk-based capital
rule as incorporated into subpart E of the 2013 capital rule (advanced
approaches). To address this matter, the proposed rule would remove the
requirement that an eligible guarantee be made by an eligible guarantor
for purposes of calculating the risk-weighted assets of an exposure
(other than a securitization exposure) under the advanced approaches.
The proposed change to the definition of eligible guarantee would apply
to all banks, savings associations, bank holding companies, and savings
and loan holding companies that are subject to the advanced approaches.
DATES: Comments must be received no later than June 13, 2014.
ADDRESSES: Comments should be directed to:
OCC: Because paper mail in the Washington, DC area and at the OCC
is subject to delay, commenters are encouraged to submit comments by
the Federal eRulemaking Portal or email, if possible. Please use the
title ``Regulatory Capital Rules: Regulatory Capital, Proposed
Revisions to the Definition of Eligible Guarantee'' to facilitate the
organization and distribution of the comments. You may submit comments
by any of the following methods:
Federal eRulemaking Portal--``regulations.gov'': Go to
https://www.regulations.gov. Enter ``Docket ID OCC-2014-0012'' in the
Search Box and click ``Search''. Results can be filtered
[[Page 24619]]
using the filtering tools on the left side of the screen. Click on
``Comment Now'' to submit public comments.
Click on the ``Help'' tab on the Regulations.gov home page
to get information on using Regulations.gov, including instructions for
submitting public comments.
Email: regs.comments@occ.treas.gov.
Mail: Legislative and Regulatory Activities Division,
Office of the Comptroller of the Currency, 400 7th Street SW., Suite
3E-218, Mail Stop 9W-11, Washington, DC 20219.
Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218,
Mail Stop 9W-11, Washington, DC 20219.
Fax: (571) 465-4326.
Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2014-0012'' in your comment. In general, OCC will enter
all comments received into the docket and publish them on the
Regulations.gov Web site without change, including any business or
personal information that you provide such as name and address
information, email addresses, or phone numbers. Comments received,
including attachments and other supporting materials, are part of the
public record and subject to public disclosure. Do not enclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this rulemaking action by any of the following methods:
Viewing Comments Electronically: Go to https://www.regulations.gov. Enter ``Docket ID OCC-2014-0012'' in the Search
box and click ``Search''. Comments can be filtered by Agency using the
filtering tools on the left side of the screen.
Click on the ``Help'' tab on the Regulations.gov home page
to get information on using Regulations.gov, including instructions for
viewing public comments, viewing other supporting and related
materials, and viewing the docket after the close of the comment
period.
Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC, 400 7th Street, SW., Washington, DC.
For security reasons, the OCC requires that visitors make an
appointment to inspect comments. You may do so by calling (202) 649-
6700. Upon arrival, visitors will be required to present valid
government-issued photo identification and to submit to security
screening in order to inspect and photocopy comments.
Docket: You may also view or request available background
documents and project summaries using the methods described above.
Board: 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-1488, RIN 7100 AE17, 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 docket
number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Robert de V. 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 9:00 a.m. and 5:00 p.m. on
weekdays.
FDIC: You may submit comments, identified by RIN 3064-AE13, by any
of the following methods:
Agency Web site: https://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on the Agency
Web site.
Email: Comments@fdic.gov. Include the RIN 3064-AE13 on the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW.,
Washington, DC 20429.
Hand Delivery: Comments may be hand delivered to the guard
station at the rear of the 550 17th Street Building (located on F
Street) on business days between 7:00 a.m. and 5:00 p.m.
Public Inspection: All comments received must include the agency
name and RIN 3064-AE13 for this rulemaking. All comments received will
be posted without change to https://www.fdic.gov/regulations/laws/federal/propose.html, including any personal information provided.
Paper copies of public comments may be ordered from the FDIC Public
Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington,
VA 22226 by telephone at (877) 275-3342 or (703) 562-2200.
FOR FURTHER INFORMATION CONTACT:
OCC: Margot Schwadron, Senior Risk Expert, (202) 649-6982; or Roger
Tufts, Senior Economic Advisor, (202) 649-6981, Capital Policy; or Carl
Kaminski, Counsel, Legislative and Regulatory Activities Division,
(202) 649-5490, for persons who are deaf or hard of hearing, TTY, (202)
649-5597, Office of the Comptroller of the Currency, 400 7th Street
SW., Washington, DC 20219.
Board: Anna Lee Hewko, Deputy Associate Director, (202) 530-6260;
Constance M. Horsley, Assistant Director, (202) 452-5239; Thomas
Boemio, Manager, (202) 452-2982; Andrew Willis, Senior Financial
Analyst, (202) 912-4323; or Justyna Milewski, Financial Analyst, (202)
452-3607, Capital and Regulatory Policy, Division of Banking
Supervision and Regulation; or Benjamin McDonough, Senior Counsel,
(202) 452-2036; April C. Snyder, Senior Counsel, (202) 452-3099;
Christine Graham, Counsel, 202 452 3005; 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.
FDIC: Bobby R. Bean, Associate Director, bbean@fdic.gov; Ryan
Billingsley, Chief, Capital Policy Section, rbillingsley@fdic.gov;
Benedetto Bosco, Capital Markets Policy Analyst, bbosco@fdic.gov,
Capital Markets Branch, Division of Risk Management Supervision,
regulatorycapital@fdic.gov or (202) 898-6888; or Mark Handzlik,
Counsel, mhandzlik@fdic.gov; Michael Phillips, Counsel,
mphillips@fdic.gov; or Rachel Ackmann, Attorney, rackmann@fdic.gov;
Supervision Branch, Legal Division, Federal Deposit Insurance
Corporation, 550 17th Street NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Proposed Rule
In 2013, 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) (collectively, the
agencies) comprehensively revised and strengthened the capital
regulations
[[Page 24620]]
applicable to banking organizations (2013 capital rule).\1\ Among other
changes, the 2013 capital rule revised the methodologies for
calculating risk-weighted assets, including aspects of the standardized
approach for calculating risk-weighted assets established by the Basel
Committee on Banking Supervision (BCBS) through its international
framework for regulatory capital in subpart D of the 2013 capital rule
(standardized approach). The agencies amended the advanced approaches
risk-based capital rule consistent with agreements reached by the BCBS,
and incorporated the advanced approaches rule into subpart E of the
2013 capital rule (advanced approaches).\2\
---------------------------------------------------------------------------
\1\ 78 FR 55340 (September 10, 2013) (FDIC) and 78 FR 62018
(October 11, 2013) (OCC and Board). On April 8, 2014, the FDIC
adopted as final the 2013 revised capital rule, with no substantive
changes.
\2\ See BCBS, ``Basel II: International Convergence of Capital
Measurement and Capital Standards: A Revised Framework'' (November
2005 and revised in June 2006), available at https://www.bis.org/publ/bcbs128.pdf. See BCBS, ``Basel III: A Global Regulatory
Framework for More Resilient Banks and Banking Systems'' (December
2010 and revised in June 2011), available at https://www.bis.org/publ/bcbs189.htm. The BCBS is a committee of banking supervisory
authorities, which was established by the central bank governors of
the G-10 countries in 1975. More information regarding the BCBS and
its membership is available at https://www.bis.org/bcbs/about.htm.
Documents issued by the BCBS are available through the Bank for
International Settlements Web site at https://www.bis.org.
---------------------------------------------------------------------------
The agencies' 2013 capital rule included a definition of eligible
guarantee for purposes of both the standardized approach and the
advanced approaches and introduced the definition of ``eligible
guarantor.'' The definition included the requirement that an eligible
guarantee be provided by an eligible guarantor. An eligible guarantor
under the 2013 capital rule is a sovereign, the Bank for International
Settlements, the International Monetary Fund, the European Central
Bank, the European Commission, a Federal Home Loan Bank, the Federal
Agricultural Mortgage Corporation (Farmer Mac), a multilateral
development bank (MDB), a depository institution, a bank holding
company, a savings and loan holding company, a credit union, a foreign
bank, or a qualifying central counterparty. It may also be an entity
(other than a special purpose entity) that at the time the guarantee is
issued or anytime thereafter, has issued and has outstanding an
unsecured debt security that is investment grade; whose
creditworthiness is not positively correlated with the credit risk of
the exposures for which it has provided guarantees; and that is not an
insurance company engaged predominately in the business of providing
credit protection (such as a monoline bond insurer or re-insurer).
The agencies received comments following the release of the 2013
capital rule indicating that the revisions made to the definition of
eligible guarantee changed the recognition of these guarantees for
certain exposures under the advanced approaches wholesale framework.
For example, several advanced approaches banking organizations noted
that middle market and commercial real estate loans often involve
guarantors that do not meet the definition of eligible guarantor. The
guarantors are often related parties such as owners or sponsors that
have not issued investment grade debt securities; nevertheless,
advanced approaches banking organizations assert that such guarantees
provide valuable credit risk mitigation that should be recognized under
the advanced approaches. The agencies agree that the revisions to the
2013 capital rule inadvertently limited the recognition of guarantees
of wholesale exposures under the advanced approaches and that these
guarantees should continue to qualify as credit risk mitigants for
purposes of the advanced approaches because they provide credit
enhancement. Therefore the agencies propose to effectively revert to
the previous treatment of eligible guarantees under the 2007 advanced
approaches final rule for such exposures.\3\
---------------------------------------------------------------------------
\3\ 72 FR 69288 (December 7, 2007).
---------------------------------------------------------------------------
The proposed rule would modify the definition of eligible guarantee
for purposes of the advanced approaches by removing the requirement
that an eligible guarantee be provided by an eligible guarantor for
exposures that are not securitizations. The agencies would retain the
definition of eligible guarantee in the 2013 capital rule for purposes
of calculating risk-weighted assets under the standardized approach
because the standardized approach generally assigns a single risk
weight to exposures to most corporate borrowers and guarantors and does
not incorporate the definition of eligible guarantee into a risk-
sensitive methodology like the advanced approaches.
An eligible guarantee for purposes of the advanced approaches would
need to be in writing and also be either an unconditional guarantee or
a contingent obligation of the U.S. government or its agencies, the
enforceability of which is dependent upon some affirmative action on
the part of the beneficiary of the guarantee or a third party (for
example, meeting servicing requirements). The guarantee would also have
to cover all or a pro rata portion of all contractual payments of the
obligated party on the reference exposure and give the beneficiary a
direct claim against the protection provider. Additionally, the
guarantee would not be unilaterally cancelable by the protection
provider for reasons other than the breach of the contract by the
beneficiary and would have to be legally enforceable against the
protection provider in a jurisdiction where the protection provider has
sufficient assets against which a judgment may be attached and enforced
(except for a guarantee by a sovereign). The guarantee would require
the protection provider to make payment to the beneficiary on the
occurrence of a default (as defined in the guarantee) of the obligated
party on the reference exposure in a timely manner without the
beneficiary first having to take legal actions to pursue the obligor
for payment and must not increase the beneficiary's cost of credit
protection on the guarantee in response to deterioration in the credit
quality of the reference exposure. Furthermore, the guarantee would not
be provided by an affiliate of the banking organization, unless the
affiliate is an insured depository institution, foreign bank,
securities broker or dealer, or insurance company that does not control
the banking organization and is subject to consolidated supervision and
regulation comparable to that imposed on depository institutions, U.S.
securities broker-dealers, or U.S. insurance companies (as the case may
be) and for purposes of sections --.141 to --.145 and of the
standardized approach, the guarantee would have to be provided by an
eligible guarantor.
II. Regulatory Analyses
A. Paperwork Reduction Act (PRA)
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501-3521) (PRA), the agencies may not conduct or
sponsor, and a respondent is not required to respond to, an information
collection unless it displays a currently valid Office of Management
and Budget (OMB) control number. The agencies reviewed the proposed
rule and determined that the rule does not introduce any new collection
of information pursuant to the PRA.
B. Regulatory Flexibility Act Analysis
OCC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA),
requires an agency, in connection with a notice of proposed rulemaking,
to prepare an Initial Regulatory Flexibility Act analysis describing
the impact of the
[[Page 24621]]
rule on small entities (defined by the Small Business Administration
for purposes of the RFA to include banking entities with total assets
of $500 million or less) or to certify that the rule will not have a
significant economic impact on a substantial number of small entities.
Using the SBA's size standards, as of December 31, 2013, the OCC
supervised 1,195 small entities.\4\
---------------------------------------------------------------------------
\4\ The OCC calculated the number of small entities using the
SBA's size thresholds for commercial banks and savings institutions,
and trust companies, which are $500 million and $35.5 million,
respectively. 78 FR 37409 (June 20, 2013). Consistent with the
General Principles of Affiliation, 13 CFR 121.103(a), the OCC
counted the assets of affiliated financial institutions when
determining whether to classify a national bank or Federal savings
association as a small entity. The OCC used December 31, 2013, to
determine size because a ``financial institution's assets are
determined by averaging the assets reported on its four quarterly
financial statements for the preceding year.'' See footnote 8 of the
U.S. Small Business Administration's Table of Size Standards.
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As described in the SUPPLEMENTARY INFORMATION section of the
preamble, the proposed rule would apply only to advanced approaches
banking organizations. Advanced approaches banking organization is
defined to include a national bank or Federal savings associations that
has, or is a subsidiary of a bank holding company or savings and loan
holding company that has, total consolidated assets of $250 billion or
more, total consolidated on-balance sheet foreign exposure of $10
billion or more, or that has elected to use the advanced approaches.
After considering the SBA's size standards and General Principals of
Affiliation to identify small entities, the OCC determined that no
small national banks or Federal savings associations are advanced
approaches banking organizations. Because the proposed rule applies
only to advanced approaches banking organizations, it does not impact
any OCC-supervised small entities. Therefore, the OCC certifies that
the proposed rule will not have a significant economic impact on a
substantial number of OCC-supervised small entities.
Board: The Board is providing an initial regulatory flexibility
analysis with respect to this proposed rule. As discussed above, this
proposed rule would amend the definition of ``eligible guarantee'' in
section 2 of Regulation Q (12 CFR part 217) for the purposes of
calculating risk-weighted assets under the advanced approaches in
Regulation Q (12 CFR part 217, subpart E).
Under regulations issued by the Small Business Administration, a
small entity includes a depository institution, bank holding company,
or savings and loan holding company with total assets of $500 million
or less (a small banking organization).\5\ As of December 31, 2013,
there were approximately 627 small state member banks. As of December
31, 2013, there were approximately 3,676 small bank holding companies
and approximately 268 small savings and loan holding companies.\6\
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\5\ 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).
\6\ Under the prior Small Business Administration threshold of
$175 million in assets, as of March 31, 2013 the Board supervised
approximately 369 small state member banks. As of December 31, 2012,
there were approximately 2,259 small bank holding companies.
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The proposed rule would apply only to advanced approaches banking
organizations, which, generally, are banking organizations with total
consolidated assets of $250 billion or more, that have total
consolidated on-balance sheet foreign exposure of $10 billion or more,
are a subsidiary of an advanced approaches depository institution, or
that elect to use the advanced approaches. Currently, no small top-tier
bank holding company, top-tier savings and loan holding company, or
state member bank is an advanced approaches banking organization, so
there would be no additional projected compliance requirements imposed
on small bank holding companies, savings and loan holding companies, or
state member banks. The Board expects that any small bank holding
companies, savings and loan holding companies, or state member banks
that would be covered by this proposed rule would rely on their parent
banking organization for compliance and would not bear additional
costs.
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.
FDIC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA),
requires an agency, in connection with a notice of proposed rulemaking,
to prepare an Initial Regulatory Flexibility Act analysis describing
the impact of the proposed rule on small entities (defined by the Small
Business Administration for purposes of the RFA to include banking
entities with total assets of $500 million or less) or to certify that
the proposed rule will not have a significant economic impact on a
substantial number of small entities.
Using the SBA's size standards, as of December 31, 2013, the FDIC
supervised 1,195 small entities. As described in the Supplementary
Information section of the preamble, however, the proposed rule would
apply only to advanced approaches banking organizations. Advanced
approaches banking organization is defined to include a state nonmember
bank or a State savings association that has, or is a subsidiary of a
bank holding company or savings and loan holding company that has,
total consolidated assets of $250 billion or more, total consolidated
on-balance sheet foreign exposure of $10 billion or more, or that has
elected to use the advanced approaches. As of December 31, 2013, based
on a $500 million threshold, 1 (out of 3,394) small state nonmember
banks and no (out of 303) small state savings associations were under
the advanced approaches. Therefore, the FDIC does not believe that the
proposed rule will result in a significant economic impact on a
substantial number of small entities under its supervisory
jurisdiction.
The FDIC certifies that the proposed rule would not have a
significant economic impact on a substantial number of small FDIC-
supervised institutions.
C. OCC Unfunded Mandates Reform Act of 1995 Determination
The OCC has analyzed the proposed rule under the factors in the
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this
analysis, the OCC considered whether the proposed rule includes a
Federal mandate that may result in the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year (adjusted annually for inflation). As
detailed in the SUPPLEMENTARY INFORMATION section, the proposed rule
would revise the definition of eligible guarantee as incorporated into
the OCC's advanced approaches risk-based capital rule. In 2013, when
the Federal banking agencies revised their respective risk-based
capital requirements, they added a requirement that an eligible
guarantee be from an eligible guarantor. This proposed rule would
remove that requirement for the purposes of calculating the risk-
[[Page 24622]]
weighted asset amount for an exposure (other than for a securitization
exposure) under the OCC's advanced approaches risk-based capital rule.
For example, the OCC understands that advanced approaches banking
organizations commonly obtain guarantees from guarantors that do not
qualify as eligible guarantors for exposures in their commercial real
estate and other wholesale portfolios. Under this proposed rule, these
guarantees would continue to qualify as credit risk mitigants for
purposes of the wholesale framework in the advanced approaches risk-
based capital rule.
This proposed rule would not increase the minimum capital
requirements for any institutions subject to the OCC's risk-based
capital rules. After comparing existing capital levels with the
proposed requirements, and considering the burden and other compliance
costs associated with the proposed changes, the OCC has determined that
its proposed rule will not result in expenditures by State, local, and
Tribal governments, or by the private sector, of $100 million or more
(adjusted annually for inflation). Accordingly, the OCC is not
including a written statement to accompany this proposed rule.
D. Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The agencies have sought to present
the proposed rule in a simple and straightforward manner, and invite
comment on the use of plain language. For example:
Have the agencies organized the material to suit your
needs? If not, how could they present the proposed rule more clearly?
Are the requirements in the proposed rule clearly stated?
If not, how could the proposed 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 achieve that?
Is this section format adequate? If not, which of the
sections should be changed and how?
What other changes can the agencies incorporate to make
the regulation easier to understand?
List of Subjects
12 CFR Part 3
Administrative practice and procedure, Capital, National banks,
Reporting and recordkeeping requirements, Risk.
12 CFR Part 217
Administrative practice and procedure, Banks, Banking, Capital,
Federal Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
12 CFR Part 324
Administrative practice and procedure, Banks, banking, Capital
Adequacy, Reporting and recordkeeping requirements, Savings
associations, State non-member banks.
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Chapter I
Authority and Issuance
For the reasons set forth in the preamble and under the authority
of 12 U.S.C. 93a, 1462, 1462a, 1463, 1464, 3907, 3909, 1831o, and
5412(b)(2)(B), the Office of the Comptroller of the Currency proposes
to amend part 3 of chapter I of title 12, Code of Federal Regulations
as follows:
PART 3--CAPITAL ADEQUACY STANDARDS
0
1. The authority citation for part 3 continues to read as follows:
Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818,
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).
0
2. In Sec. 3.2, revise the definition of ``eligible guarantee'' to
read as follows:
Sec. 3.2 Definitions.
* * * * *
Eligible guarantee means a guarantee that:
(1) Is written;
(2) Is either:
(i) Unconditional, or
(ii) A contingent obligation of the U.S. government or its
agencies, the enforceability of which is dependent upon some
affirmative action on the part of the beneficiary of the guarantee or a
third party (for example, meeting servicing requirements);
(3) Covers all or a pro rata portion of all contractual payments of
the obligated party on the reference exposure;
(4) Gives the beneficiary a direct claim against the protection
provider;
(5) Is not unilaterally cancelable by the protection provider for
reasons other than the breach of the contract by the beneficiary;
(6) Except for a guarantee by a sovereign, is legally enforceable
against the protection provider in a jurisdiction where the protection
provider has sufficient assets against which a judgment may be attached
and enforced;
(7) Requires the protection provider to make payment to the
beneficiary on the occurrence of a default (as defined in the
guarantee) of the obligated party on the reference exposure in a timely
manner without the beneficiary first having to take legal actions to
pursue the obligor for payment;
(8) Does not increase the beneficiary's cost of credit protection
on the guarantee in response to deterioration in the credit quality of
the reference exposure;
(9) Is not provided by an affiliate of the national bank or Federal
savings association, unless the affiliate is an insured depository
institution, foreign bank, securities broker or dealer, or insurance
company that:
(i) Does not control the national bank or Federal savings
association; and
(ii) Is subject to consolidated supervision and regulation
comparable to that imposed on depository institutions, U.S. securities
broker-dealers, or U.S. insurance companies (as the case may be); and
(10) For purposes of Sec. Sec. 3.141 to 3.145 and of subpart D of
this part, is provided by an eligible guarantor.
* * * * *
Board of Governors of the Federal Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the preamble, part 217 of chapter II
of title 12 of the Code of Federal Regulations is proposed to be
amended as follows:
PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)
0
3. The authority citation for part 217 continues to read as follows:
Authority: 12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a,
1818, 1828, 1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 1851, 3904,
3906-3909, 4808, 5365, 5368, 5371.
0
4. The heading of part 217 is revised to read as set forth above.
0
5. In Sec. 217.2, revise the definition of ``eligible guarantee'' to
read as follows:
Sec. 217.2 Definitions.
* * * * *
[[Page 24623]]
Eligible guarantee means a guarantee that:
(1) Is written;
(2) Is either:
(i) Unconditional, or
(ii) A contingent obligation of the U.S. government or its
agencies, the enforceability of which is dependent upon some
affirmative action on the part of the beneficiary of the guarantee or a
third party (for example, meeting servicing requirements);
(3) Covers all or a pro rata portion of all contractual payments of
the obligated party on the reference exposure;
(4) Gives the beneficiary a direct claim against the protection
provider;
(5) Is not unilaterally cancelable by the protection provider for
reasons other than the breach of the contract by the beneficiary;
(6) Except for a guarantee by a sovereign, is legally enforceable
against the protection provider in a jurisdiction where the protection
provider has sufficient assets against which a judgment may be attached
and enforced;
(7) Requires the protection provider to make payment to the
beneficiary on the occurrence of a default (as defined in the
guarantee) of the obligated party on the reference exposure in a timely
manner without the beneficiary first having to take legal actions to
pursue the obligor for payment;
(8) Does not increase the beneficiary's cost of credit protection
on the guarantee in response to deterioration in the credit quality of
the reference exposure;
(9) Is not provided by an affiliate of the Board-regulated
institution, unless the affiliate is an insured depository institution,
foreign bank, securities broker or dealer, or insurance company that:
(i) Does not control the Board-regulated institution; and
(ii) Is subject to consolidated supervision and regulation
comparable to that imposed on depository institutions, U.S. securities
broker-dealers, or U.S. insurance companies (as the case may be); and
(10) For purposes of Sec. Sec. 217.141 to 217.145 and for purposes
of subpart D of this part, is provided by an eligible guarantor.
* * * * *
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the preamble, part 324 of chapter III
of title 12 of the Code of Federal Regulations is proposed to be
amended as follows:
PART 324--CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS
0
6. The authority citation for part 324 continues to read as follows:
Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b),
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n),
1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233,
105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242,
105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160,
2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386,
as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828
note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note).
0
7. In Sec. 324.2, revise the definition of ``eligible guarantee'' to
read as follows:
Sec. 324.2 Definitions.
* * * * *
Eligible guarantee means a guarantee that:
(1) Is written;
(2) Is either:
(i) Unconditional, or
(ii) A contingent obligation of the U.S. government or its
agencies, the enforceability of which is dependent upon some
affirmative action on the part of the beneficiary of the guarantee or a
third party (for example, meeting servicing requirements);
(3) Covers all or a pro rata portion of all contractual payments of
the obligated party on the reference exposure;
(4) Gives the beneficiary a direct claim against the protection
provider;
(5) Is not unilaterally cancelable by the protection provider for
reasons other than the breach of the contract by the beneficiary;
(6) Except for a guarantee by a sovereign, is legally enforceable
against the protection provider in a jurisdiction where the protection
provider has sufficient assets against which a judgment may be attached
and enforced;
(7) Requires the protection provider to make payment to the
beneficiary on the occurrence of a default (as defined in the
guarantee) of the obligated party on the reference exposure in a timely
manner without the beneficiary first having to take legal actions to
pursue the obligor for payment;
(8) Does not increase the beneficiary's cost of credit protection
on the guarantee in response to deterioration in the credit quality of
the reference exposure;
(9) Is not provided by an affiliate of the FDIC-supervised
institution, unless the affiliate is an insured depository institution,
foreign bank, securities broker or dealer, or insurance company that:
(i) Does not control the FDIC-supervised institution; and
(ii) Is subject to consolidated supervision and regulation
comparable to that imposed on depository institutions, U.S. securities
broker-dealers, or U.S. insurance companies (as the case may be); and
(10) For purposes of Sec. Sec. 324.141 to 324.145 and of subpart D
of this part, is provided by an eligible guarantor.
* * * * *
Dated: April 8, 2014.
Thomas J. Curry,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, April 11, 2014.
Robert deV. Frierson,
Secretary of the Board.
Dated at Washington, DC, this 8th day of April, 2014.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2014-09452 Filed 4-30-14; 8:45 am]
BILLING CODE P
