Agency Information Collection Activities: Information Collection Renewal; Submission for OMB Review; Margin and Capital Requirements for Covered Swap Entities, 1825-1828 [2019-00952]
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Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Notices
Comments must be submitted on
or before April 8, 2019.
ADDRESSES: Commenters are encouraged
to submit comments by email, if
possible. You may submit comments by
any of the following methods:
• Email: prainfo@occ.treas.gov.
• Mail: Legislative and Regulatory
Activities Division, Office of the
Comptroller of the Currency, Attention:
1557–0217, 400 7th Street SW, Suite
3E–218, Washington, DC 20219.
• Hand Delivery/Courier: 400 7th
Street SW, Suite 3E–218, Washington,
DC 20219.
• Fax: (571) 465–4326.
Instructions: You must include
‘‘OCC’’ as the agency name and ‘‘1557–
0217’’ in your comment. In general, the
OCC will publish comments on
www.reginfo.gov without change,
including any business or personal
information, 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
include 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
information collection beginning on the
date of publication of the second notice
for this collection 1 by any of the
following methods:
• Viewing Comments Electronically:
Go to www.reginfo.gov. Click on the
‘‘Information Collection Review’’ tab.
Underneath the ‘‘Currently under
Review’’ section heading, from the dropdown menu, select ‘‘Department of
Treasury’’ and then click ‘‘submit.’’ This
information collection can be located by
searching by OMB control number
‘‘1557–0217’’ or ‘‘Interagency Guidance
on Asset Securitization Activities.’’
Upon finding the appropriate
information collection, click on the
related ‘‘ICR Reference Number.’’ On the
next screen, select ‘‘View Supporting
Statement and Other Documents’’ and
then click on the link to any comment
listed at the bottom of the screen.
• For assistance in navigating
www.reginfo.gov, please contact the
Regulatory Information Service Center
at (202) 482–7340.
• Viewing Comments Personally: You
may personally inspect 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 or,
for persons who are deaf or hearing
impaired, TTY, (202) 649–5597. Upon
arrival, visitors will be required to
present valid government-issued photo
identification and submit to security
screening in order to inspect comments.
FOR FURTHER INFORMATION CONTACT:
Shaquita Merritt, OCC Clearance
Officer, (202) 649–5490 or, for persons
who are deaf or hearing impaired, TTY,
(202) 649–5597, Chief Counsel’s Office,
Office of the Comptroller of the
Currency, 400 7th Street SW, Suite 3E–
218, Washington, DC 20219.
SUPPLEMENTARY INFORMATION: Under the
PRA (44 U.S.C. 3501–3520), federal
agencies must obtain approval from
OMB for each collection of information
that they conduct or sponsor.
‘‘Collection of information’’ is defined
in 44 U.S.C. 3502(3) and 5 CFR
1320.3(c) to include agency requests or
requirements that members of the public
submit reports, keep records, or provide
information to a third party. Section
3506(c)(2)(A) of title 44 requires federal
agencies to provide a 60-day notice in
the Federal Register concerning each
proposed collection of information,
including each proposed extension of an
existing collection of information,
before submitting the collection to OMB
for approval. To comply with this
requirement, the OCC is publishing
notice of the renewal of the collection
of information set forth in this
document.
Title: Interagency Guidance on Asset
Securitization Activities.
OMB Control No.: 1557–0217.
Description: In 1999, the OCC issued
the Interagency Guidance on Asset
Securitization Activities 2 (guidance) in
response to a determination that some
institutions involved in asset
securitization activities had significant
weaknesses in their asset securitization
practices. The information collection
contained in the guidance applies to
financial institutions engaged in asset
securitization activities and provides
that any institution engaged in these
activities should maintain a written
asset securitization policy, document
the fair value of retained interests, and
maintain a management information
system to monitor asset securitization
activities. Financial institution
management uses the information
collected to ensure the safe and sound
operation of the institution’s asset
securitization activities. The OCC uses
the information to evaluate the quality
1 Following the close of the 60-day comment
period for this notice, the OCC will publish a notice
for 30 days of comment for this collection.
2 OCC Bulletin 1999–46, December 13, 1999,
https://www.occ.gov/news-issuances/bulletins/
1999/bulletin-1999-46a.pdf.
DATES:
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of an institution’s risk management
practices.
Affected Public: Businesses or other
for-profit.
Type of Review: Regular.
Estimated Number of Respondents:
35.
Estimated Annual Burden: 1,827
hours.
Frequency of Response: On occasion.
Comments submitted in response to
this notice will be summarized,
included in the request for OMB
approval, and become a matter of public
record. Comments are invited on:
(a) Whether the collection of
information is necessary for the proper
performance of the functions of the
OCC, including whether the information
has practical utility; (b) The accuracy of
the OCC’s estimate of the information
collection burden; (c) Ways to enhance
the quality, utility, and clarity of the
information to be collected; (d) Ways to
minimize the burden of the collection
on respondents, including through the
use of automated collection techniques
or other forms of information
technology; and (e) Estimates of capital
or start-up costs and costs of operation,
maintenance, and purchase of services
to provide information.
Dated: January 19, 2019.
Theodore J. Dowd,
Deputy Chief Counsel, Office of the
Comptroller of the Currency.
[FR Doc. 2019–01114 Filed 2–4–19; 8:45 am]
BILLING CODE 4810–33–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
Agency Information Collection
Activities: Information Collection
Renewal; Submission for OMB Review;
Margin and Capital Requirements for
Covered Swap Entities
Office of the Comptroller of the
Currency (OCC), Treasury.
ACTION: Notice and request for comment.
AGENCY:
The OCC, as part of its
continuing effort to reduce paperwork
and respondent burden, invites the
general public and other federal
agencies to take this opportunity to
comment on a continuing information
collection as required by the Paperwork
Reduction Act of 1995 (PRA).
In accordance with the requirements
of the PRA, the OCC may not conduct
or sponsor, and respondents are not
required to respond to, an information
collection unless it displays a currently
valid Office of Management and Budget
(OMB) control number.
SUMMARY:
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Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Notices
The OCC is soliciting comment
concerning the renewal of its
information collection titled ‘‘Margin
and Capital Requirements for Covered
Swap Entities.’’ The OCC also is giving
notice that it has sent the collection to
OMB for review.
DATES: Comments must be received by
March 7, 2019.
ADDRESSES: Commenters are encouraged
to submit comments by email, if
possible.
You may submit comments by any of
the following methods:
• Email: prainfo@occ.treas.gov.
• Mail: Legislative and Regulatory
Activities Division, Office of the
Comptroller of the Currency, Attention:
1557–0251, 400 7th Street, SW, suite
3E–218, Washington, DC 20219.
• Hand Delivery/Courier: 400 7th
Street SW, Suite 3E–218, Washington,
DC 20219.
• Fax: (571) 465–4326.
Instructions: You must include
‘‘OCC’’ as the agency name and ‘‘1557–
0251’’ in your comment. In general, the
OCC will publish comments on
www.reginfo.gov without change,
including any business or personal
information provided, 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 include any
information in your comment or
supporting materials that you consider
confidential or inappropriate for public
disclosure.
Additionally, please send a copy of
your comments by mail to: OCC Desk
Officer, 1557–0251, U.S. Office of
Management and Budget, 725 17th
Street NW, #10235, Washington, DC
20503 or by email to oira_submission@
omb.eop.gov.
You may review comments and other
related materials that pertain to this
information collection 1 following the
close of the 30-day comment period for
this notice by any of the following
methods:
• Viewing Comments Electronically:
Go to www.reginfo.gov. Click on the
‘‘Information Collection Review’’ tab.
Underneath the ‘‘Currently under
Review’’ section heading, from the dropdown menu, select ‘‘Department of
Treasury’’ and then click ‘‘submit.’’ This
information collection can be located by
searching by OMB control number
‘‘1557–0251’’ or ‘‘Margin and Capital
Requirements for Covered Swap
Entities.’’ Upon finding the appropriate
1 On
November 6, 2018, the OCC published a 60day notice for this information collection.
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information collection, click on the
related ‘‘ICR Reference Number.’’ On the
next screen, select ‘‘View Supporting
Statement and Other Documents’’ and
then click on the link to any comment
listed at the bottom of the screen.
• For assistance in navigating
www.reginfo.gov, please contact the
Regulatory Information Service Center
at (202) 482–7340.
• Viewing Comments Personally: You
may personally inspect 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 or,
for persons who are deaf or hearing
impaired, TTY, (202) 649–5597. Upon
arrival, visitors will be required to
present valid government-issued photo
identification and submit to security
screening in order to inspect comments.
FOR FURTHER INFORMATION CONTACT:
Shaquita Merritt, Clearance Officer,
(202) 649–5490 or, for persons who are
deaf or hearing impaired, TTY, (202)
649–5597, Chief Counsel’s Office, Office
of the Comptroller of the Currency, 400
7th Street SW, Washington, DC 20219.
SUPPLEMENTARY INFORMATION: Under the
PRA (44 U.S.C. 3501–3520), federal
agencies must obtain approval from the
OMB for each collection of information
that they conduct or sponsor.
‘‘Collection of information’’ is defined
in 44 U.S.C. 3502(3) and 5 CFR
1320.3(c) to include agency requests or
requirements that members of the public
submit reports, keep records, or provide
information to a third party. The OCC is
soliciting comment on the renewal of
the following collection.
Title: Margin and Capital
Requirements for Covered Swap
Entities.
OMB Control No.: 1557–0251
(Merging in 1557–0335).
Description: Title VII of the DoddFrank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act)
established a comprehensive regulatory
framework for derivatives, which are
generally characterized as swaps and
security-based swaps. Sections 731 and
764 of the Dodd-Frank Act require the
registration and regulation of swap
dealers and major swap participants and
security-based swap dealers and major
security-based swap participants,
respectively (collectively, ‘‘swap
entities’’). For certain types of swap
entities that are prudentially regulated
by one of the Agencies,2 sections 731
and 764 of the Dodd-Frank Act required
the Agencies to jointly adopt rules for
swap entities under their respective
jurisdictions imposing capital
requirements and initial and variation
margin requirements on all non-cleared
swaps. Swap entities that are
prudentially regulated by the Agencies
and therefore subject to the proposed
rule are referred to herein as ‘‘covered
swap entities.’’
Section 302 of the Terrorism Risk
Insurance Program Reauthorization Act
of 2015 (TRIPRA),3 amended sections
731 and 764 of the Dodd-Frank Act to
provide that the initial and variation
margin requirements do not apply to
certain transactions with specified
counterparties that qualify for an
exemption or exception from clearing.
Non-cleared swaps and non-cleared
security-based swaps that are exempt
under section 302 of TRIPRA are not
subject to the Agencies’ rules
implementing margin requirements.
TRIPRA augmented provisions that
would allow swap entities to collect no
initial or variation margin from certain
‘‘other counterparties’’ like commercial
end-users with a provision that grants
an exception from the margin
requirements for certain swaps with
these and certain additional
counterparties. In addition, swap
entities could continue with the current
practice of collecting initial or variation
margin at such times and in such forms
and amounts (if any) as the covered
swap entity determines appropriate
consistent with its overall credit risk
management of its exposures to ‘‘other
counterparties.’’
2 The Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation,
the Federal Housing Finance Agency, and the Farm
Credit Administration.
3 Public Law 114–1, 129 Stat. 3 (2015).
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Section by Section Analysis
The reporting requirements found in
12 CFR 45.1(d) refer to other statutory
provisions that set forth conditions for
an exemption from clearing. Section
45.1(d)(1) provides an exemption for
non-cleared swaps if one of the
counterparties to the swap is not a
financial entity, is using swaps to hedge
or mitigate commercial risk, and notifies
the Commodity Futures Trading
Commission of how it generally meets
its financial obligations associated with
entering into non-cleared swaps.
Section 45.1(d)(2) provides an
exemption for security-based swaps if
the counterparty notifies the Securities
and Exchange Commission (SEC) of how
it generally meets its financial
obligations associated with entering into
non-cleared security-based swaps.
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Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Notices
Section 45.2 defines terms used in
part 45, including the definition of
‘‘eligible master netting agreement,’’
which provides that a covered swap
entity that relies on the agreement for
purpose of calculating the required
margin must: (1) Conduct sufficient
legal review of the agreement to
conclude with a well-founded basis that
the agreement meets specified criteria;
and (2) establish and maintain written
procedures for monitoring relevant
changes in law and to ensure that the
agreement continues to satisfy the
requirements of this section. The term
‘‘eligible master netting agreement’’ is
used elsewhere in part 45 to specify
instances in which a covered swap
entity may: (1) Calculate variation
margin on an aggregate basis across
multiple non-cleared swaps and
security-based swaps; and (2) calculate
initial margin requirements under an
initial margin model for one or more
swaps and security-based swaps.
Section 45.5(c)(2)(i) specifies that a
covered swap entity shall not be
deemed to have violated its obligation to
collect or post margin from or to a
counterparty if the covered swap entity
has made the necessary efforts to collect
or post the required margin, including
the timely initiation and continued
pursuit of formal dispute resolution
mechanisms, or has otherwise
demonstrated upon request to the
satisfaction of the agency that it has
made appropriate efforts to collect or
post the required margin.
Section 45.7 generally requires a
covered swap entity to ensure that any
initial margin collateral that it collects
or posts is held at a third-party
custodian. Section 45.7(c) requires the
custodian to act pursuant to a custody
agreement that: (1) Prohibits the
custodian from rehypothecating,
repledging, reusing, or otherwise
transferring (through securities lending,
securities borrowing, repurchase
agreement, reverse repurchase
agreement or other means) the collateral
held by the custodian, except that cash
collateral may be held in a general
deposit account with the custodian if
the funds in the account are used to
purchase an asset held in compliance
with § 45.7, and such purchase takes
place within a time period reasonably
necessary to consummate such purchase
after the cash collateral is posted as
initial margin; and (2) is a legal, valid,
binding, and enforceable agreement
under the laws of all relevant
jurisdictions, including in the event of
bankruptcy, insolvency, or a similar
proceeding. A custody agreement may
permit the posting party to substitute or
direct any reinvestment of posted
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collateral held by the custodian under
certain conditions. With respect to
collateral collected by a covered swap
entity pursuant to § 45.3(a) or posted by
a covered swap entity pursuant to
§ 45.3(b), the agreement must require
the posting party to substitute only
funds or other property that would
qualify as eligible collateral under § 45.6
and for which the amount net of
applicable discounts described in
Appendix B would be sufficient to meet
the requirements of § 45.3 and direct
reinvestment of funds only in assets that
would qualify as eligible collateral
under § 45.6.
Section 45.8 establishes standards for
the use of initial margin models. These
standards include: (1) A requirement
that the covered swap entity receive
prior approval from the relevant Agency
based on demonstration that the initial
margin model meets specific
requirements (§§ 45.8(c)(1) and
45.8(c)(2)); (2) a requirement that a
covered swap entity notify the relevant
Agency in writing 60 days before
extending use of the model to additional
product types, making certain changes
to the initial margin model, or making
material changes to modeling
assumptions (§ 45.8(c)(3)); and (3) a
variety of quantitative requirements,
including requirements that the covered
swap entity validate and demonstrate
the reasonableness of its process for
modeling and measuring hedging
benefits, demonstrate to the satisfaction
of the relevant Agency that the omission
of any risk factor from the calculation of
its initial margin is appropriate,
demonstrate to the satisfaction of the
relevant Agency that incorporation of
any proxy or approximation used to
capture the risks of the covered swap
entity’s non-cleared swaps or noncleared security-based swaps is
appropriate, periodically review and, as
necessary, revise the data used to
calibrate the initial margin model to
ensure that the data incorporate an
appropriate period of significant
financial stress (§§ 45.8(d)(5),
45.8(d)(10), 45.8(d)(11), 45.8(d)(12), and
45.8(d)(13)). Also, if the validation
process reveals any material problems
with the initial margin model, the
covered swap entity must promptly
notify the Agency of the problems,
describe to the Agency any remedial
actions being taken, and adjust the
initial margin model to ensure an
appropriately conservative amount of
required initial margin is being
calculated (§ 45.8(f)(3)).
Section 45.8 also establishes
requirements for the ongoing review and
documentation of initial margin models.
These standards include: (1) A
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requirement that a covered swap entity
review its initial margin model annually
(§ 45.8(e)); (2) a requirement that the
covered swap entity validate its initial
margin model at the outset and on an
ongoing basis, describe to the relevant
Agency any remedial actions being
taken, and report internal audit findings
regarding the effectiveness of the initial
margin model to the covered swap
entity’s board of directors or a
committee thereof (§§ 45.8(f)(2),
45.8(f)(3), and 45.8(f)(4)); (3) a
requirement that the covered swap
entity adequately document all material
aspects of its initial margin model
(§ 45.8(g)); and
(4) that the covered swap entity must
adequately document internal
authorization procedures, including
escalation procedures, that require
review and approval of any change to
the initial margin calculation under the
initial margin model, demonstrable
analysis that any basis for any such
change is consistent with the
requirements of this section, and
independent review of such
demonstrable analysis and approval
(§ 45.8(h)).
Section 45.9 addresses the treatment
of cross-border transactions and, in
certain limited situations, will permit a
covered swap entity to comply with a
foreign regulatory framework for noncleared swaps (as a substitute for
compliance with the prudential
regulators’ rule) if the prudential
regulators jointly determine that the
foreign regulatory framework is
comparable to the requirements in the
prudential regulators’ rule. Section
45.9(e) allows a covered swap entity to
request that the prudential regulators
make a substituted compliance
determination and must provide the
reasons therefore and other required
supporting documentation. A request
for a substituted compliance
determination must include: (1) A
description of the scope and objectives
of the foreign regulatory framework for
non-cleared swaps and non-cleared
security-based swaps; (2) the specific
provisions of the foreign regulatory
framework for non-cleared swaps and
security-based swaps (scope of
transactions covered; determination of
the amount of initial and variation
margin required; timing of margin
requirements; documentation
requirements; forms of eligible
collateral; segregation and rehypothecation requirements; and
approval process and standards for
models); (3) the supervisory compliance
program and enforcement authority
exercised by a foreign financial
regulatory authority or authorities in
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Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Notices
such system to support its oversight of
the application of the non-cleared swap
and security-based swap regulatory
framework; and (4) any other
descriptions and documentation that the
prudential regulators determine are
appropriate. A covered swap entity may
make a request under this section only
if directly supervised by the authorities
administering the foreign regulatory
framework for non-cleared swaps and
non-cleared security-based swaps.
Section 45.10 requires a covered swap
entity to execute trading documentation
with each counterparty that is either a
swap entity or financial end user
regarding credit support arrangements
that: (1) Provides the contractual right to
collect and post initial margin and
variation margin in such amounts, in
such form, and under such
circumstances as are required; and (2)
specifies the methods, procedures,
rules, and inputs for determining the
value of each non-cleared swap or noncleared security-based swap for
purposes of calculating variation margin
requirements and the procedures for
resolving any disputes concerning
valuation.
Section 45.11(b)(1) provides that the
requirement for a covered swap entity to
post initial margin under § 45.3(b) does
not apply with respect to any noncleared swap or non-cleared securitybased swap with a counterparty that is
an affiliate. A covered swap entity shall
calculate the amount of initial margin
that would be required to be posted to
an affiliate that is a financial end user
with material swaps exposure pursuant
to § 45.3(b) and provide documentation
of such amount to each affiliate on a
daily basis.
Type of Review: Extension without
change of a currently approved
information collection.
Affected Public: Businesses or other
for-profit.
Frequency of Response: On occasion.
Estimated Number of Respondents:
10.
Estimated Total Annual Burden:
17,390 hours.
The OCC published a notice for 60
days of comment regarding this
collection on November 6, 2018, 83 FR
55598. No comments were received.
Comments continue to be requested on:
(a) Whether the information
collections are necessary for the proper
performance of the OCC’s functions,
including whether the information has
practical utility;
(b) The accuracy of the OCC’s
estimates of the burden of the
information collections, including the
validity of the methodology and
assumptions used;
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(c) Ways to enhance the quality,
utility, and clarity of the information to
be collected;
(d) Ways to minimize the burden of
information collections on respondents,
including through the use of automated
collection techniques or other forms of
information technology; and
(e) Estimates of capital or start-up
costs and costs of operation,
maintenance, and purchase of services
to provide information.
Dated: January 23, 2019.
Theodore J. Dowd,
Deputy Chief Counsel, Office of the
Comptroller of the Currency.
[FR Doc. 2019–00952 Filed 2–4–19; 8:45 am]
BILLING CODE 4810–33–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
Agency Information Collection
Activities: Information Collection
Renewal; Comment Request;
Interagency Statement on Complex
Structured Finance Transactions
Office of the Comptroller of the
Currency (OCC), Treasury.
ACTION: Notice and request for comment.
AGENCY:
The OCC, as part of its
continuing effort to reduce paperwork
and respondent burden, invites the
general public and other federal
agencies to take this opportunity to
comment on a continuing information
collection as required by the Paperwork
Reduction Act of 1995 (PRA).
An agency may not conduct or
sponsor, and respondents are not
required to respond to, an information
collection unless it displays a currently
valid Office of Management and Budget
(OMB) control number.
The OCC is soliciting comment
concerning the renewal of an
information collection titled
‘‘Interagency Statement on Complex
Structured Finance Transactions.’’
DATES: Comments must be submitted on
or before April 8, 2019.
ADDRESSES: Commenters are encouraged
to submit comments by email, if
possible. You may submit comments by
any of the following methods:
• Email: prainfo@occ.treas.gov.
• Mail: Legislative and Regulatory
Activities Division, Office of the
Comptroller of the Currency, Attention:
1557–0229, 400 7th Street SW, suite 3E–
218, Washington, DC 20219.
• Hand Delivery/Courier: 400 7th
Street SW, suite 3E–218, Washington,
DC 20219.
SUMMARY:
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• Fax: (571) 465–4326.
Instructions: You must include
‘‘OCC’’ as the agency name and ‘‘1557–
0229’’ in your comment. In general, the
OCC will publish comments on
www.reginfo.gov without change,
including any business or personal
information provided, 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 include 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
information collection beginning on the
date of publication of the second notice
for this collection 1 by any of the
following methods:
• Viewing Comments Electronically:
Go to www.reginfo.gov. Click on the
‘‘Information Collection Review’’ tab.
Underneath the ‘‘Currently under
Review’’ section heading, from the dropdown menu, select ‘‘Department of
Treasury’’ and then click ‘‘submit.’’ This
information collection can be located by
searching by OMB control number
‘‘1557–0229’’ or ‘‘Interagency Statement
on Complex Structured Finance
Transactions.’’ Upon finding the
appropriate information collection, click
on the related ‘‘ICR Reference Number.’’
On the next screen, select ‘‘View
Supporting Statement and Other
Documents’’ and then click on the link
to any comment listed at the bottom of
the screen.
• For assistance in navigating
www.reginfo.gov, please contact the
Regulatory Information Service Center
at (202) 482–7340.
• Viewing Comments Personally: You
may personally inspect 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 or,
for persons who are deaf or hearing
impaired, TTY, (202) 649–5597. Upon
arrival, visitors will be required to
present valid government-issued photo
identification and submit to security
screening in order to inspect comments.
FOR FURTHER INFORMATION CONTACT:
Shaquita Merritt, OCC Clearance
Officer, (202) 649–5490 or, for persons
who are deaf or hearing impaired, TTY,
(202) 649–5597, Chief Counsel’s Office,
1 Following the close of the 60-day comment
period for this notice, the OCC will publish a notice
for 30 days of comment for this collection.
E:\FR\FM\05FEN1.SGM
05FEN1
Agencies
[Federal Register Volume 84, Number 24 (Tuesday, February 5, 2019)]
[Notices]
[Pages 1825-1828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-00952]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
Agency Information Collection Activities: Information Collection
Renewal; Submission for OMB Review; Margin and Capital Requirements for
Covered Swap Entities
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.
ACTION: Notice and request for comment.
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SUMMARY: The OCC, as part of its continuing effort to reduce paperwork
and respondent burden, invites the general public and other federal
agencies to take this opportunity to comment on a continuing
information collection as required by the Paperwork Reduction Act of
1995 (PRA).
In accordance with the requirements of the PRA, the OCC may not
conduct or sponsor, and respondents are not required to respond to, an
information collection unless it displays a currently valid Office of
Management and Budget (OMB) control number.
[[Page 1826]]
The OCC is soliciting comment concerning the renewal of its
information collection titled ``Margin and Capital Requirements for
Covered Swap Entities.'' The OCC also is giving notice that it has sent
the collection to OMB for review.
DATES: Comments must be received by March 7, 2019.
ADDRESSES: Commenters are encouraged to submit comments by email, if
possible.
You may submit comments by any of the following methods:
Email: prainfo@occ.treas.gov.
Mail: Legislative and Regulatory Activities Division,
Office of the Comptroller of the Currency, Attention: 1557-0251, 400
7th Street, SW, suite 3E-218, Washington, DC 20219.
Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218,
Washington, DC 20219.
Fax: (571) 465-4326.
Instructions: You must include ``OCC'' as the agency name and
``1557-0251'' in your comment. In general, the OCC will publish
comments on www.reginfo.gov without change, including any business or
personal information provided, 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 include any information
in your comment or supporting materials that you consider confidential
or inappropriate for public disclosure.
Additionally, please send a copy of your comments by mail to: OCC
Desk Officer, 1557-0251, U.S. Office of Management and Budget, 725 17th
Street NW, #10235, Washington, DC 20503 or by email to
oira_submission@omb.eop.gov.
You may review comments and other related materials that pertain to
this information collection \1\ following the close of the 30-day
comment period for this notice by any of the following methods:
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\1\ On November 6, 2018, the OCC published a 60-day notice for
this information collection.
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Viewing Comments Electronically: Go to www.reginfo.gov.
Click on the ``Information Collection Review'' tab. Underneath the
``Currently under Review'' section heading, from the drop-down menu,
select ``Department of Treasury'' and then click ``submit.'' This
information collection can be located by searching by OMB control
number ``1557-0251'' or ``Margin and Capital Requirements for Covered
Swap Entities.'' Upon finding the appropriate information collection,
click on the related ``ICR Reference Number.'' On the next screen,
select ``View Supporting Statement and Other Documents'' and then click
on the link to any comment listed at the bottom of the screen.
For assistance in navigating www.reginfo.gov, please
contact the Regulatory Information Service Center at (202) 482-7340.
Viewing Comments Personally: You may personally inspect
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 or, for persons who
are deaf or hearing impaired, TTY, (202) 649-5597. Upon arrival,
visitors will be required to present valid government-issued photo
identification and submit to security screening in order to inspect
comments.
FOR FURTHER INFORMATION CONTACT: Shaquita Merritt, Clearance Officer,
(202) 649-5490 or, for persons who are deaf or hearing impaired, TTY,
(202) 649-5597, Chief Counsel's Office, Office of the Comptroller of
the Currency, 400 7th Street SW, Washington, DC 20219.
SUPPLEMENTARY INFORMATION: Under the PRA (44 U.S.C. 3501-3520), federal
agencies must obtain approval from the OMB for each collection of
information that they conduct or sponsor. ``Collection of information''
is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to include agency
requests or requirements that members of the public submit reports,
keep records, or provide information to a third party. The OCC is
soliciting comment on the renewal of the following collection.
Title: Margin and Capital Requirements for Covered Swap Entities.
OMB Control No.: 1557-0251 (Merging in 1557-0335).
Description: Title VII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act) established a comprehensive
regulatory framework for derivatives, which are generally characterized
as swaps and security-based swaps. Sections 731 and 764 of the Dodd-
Frank Act require the registration and regulation of swap dealers and
major swap participants and security-based swap dealers and major
security-based swap participants, respectively (collectively, ``swap
entities''). For certain types of swap entities that are prudentially
regulated by one of the Agencies,\2\ sections 731 and 764 of the Dodd-
Frank Act required the Agencies to jointly adopt rules for swap
entities under their respective jurisdictions imposing capital
requirements and initial and variation margin requirements on all non-
cleared swaps. Swap entities that are prudentially regulated by the
Agencies and therefore subject to the proposed rule are referred to
herein as ``covered swap entities.''
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\2\ The Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Federal Housing Finance Agency, and the
Farm Credit Administration.
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Section 302 of the Terrorism Risk Insurance Program Reauthorization
Act of 2015 (TRIPRA),\3\ amended sections 731 and 764 of the Dodd-Frank
Act to provide that the initial and variation margin requirements do
not apply to certain transactions with specified counterparties that
qualify for an exemption or exception from clearing. Non-cleared swaps
and non-cleared security-based swaps that are exempt under section 302
of TRIPRA are not subject to the Agencies' rules implementing margin
requirements. TRIPRA augmented provisions that would allow swap
entities to collect no initial or variation margin from certain ``other
counterparties'' like commercial end-users with a provision that grants
an exception from the margin requirements for certain swaps with these
and certain additional counterparties. In addition, swap entities could
continue with the current practice of collecting initial or variation
margin at such times and in such forms and amounts (if any) as the
covered swap entity determines appropriate consistent with its overall
credit risk management of its exposures to ``other counterparties.''
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\3\ Public Law 114-1, 129 Stat. 3 (2015).
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Section by Section Analysis
The reporting requirements found in 12 CFR 45.1(d) refer to other
statutory provisions that set forth conditions for an exemption from
clearing. Section 45.1(d)(1) provides an exemption for non-cleared
swaps if one of the counterparties to the swap is not a financial
entity, is using swaps to hedge or mitigate commercial risk, and
notifies the Commodity Futures Trading Commission of how it generally
meets its financial obligations associated with entering into non-
cleared swaps. Section 45.1(d)(2) provides an exemption for security-
based swaps if the counterparty notifies the Securities and Exchange
Commission (SEC) of how it generally meets its financial obligations
associated with entering into non-cleared security-based swaps.
[[Page 1827]]
Section 45.2 defines terms used in part 45, including the
definition of ``eligible master netting agreement,'' which provides
that a covered swap entity that relies on the agreement for purpose of
calculating the required margin must: (1) Conduct sufficient legal
review of the agreement to conclude with a well-founded basis that the
agreement meets specified criteria; and (2) establish and maintain
written procedures for monitoring relevant changes in law and to ensure
that the agreement continues to satisfy the requirements of this
section. The term ``eligible master netting agreement'' is used
elsewhere in part 45 to specify instances in which a covered swap
entity may: (1) Calculate variation margin on an aggregate basis across
multiple non-cleared swaps and security-based swaps; and (2) calculate
initial margin requirements under an initial margin model for one or
more swaps and security-based swaps.
Section 45.5(c)(2)(i) specifies that a covered swap entity shall
not be deemed to have violated its obligation to collect or post margin
from or to a counterparty if the covered swap entity has made the
necessary efforts to collect or post the required margin, including the
timely initiation and continued pursuit of formal dispute resolution
mechanisms, or has otherwise demonstrated upon request to the
satisfaction of the agency that it has made appropriate efforts to
collect or post the required margin.
Section 45.7 generally requires a covered swap entity to ensure
that any initial margin collateral that it collects or posts is held at
a third-party custodian. Section 45.7(c) requires the custodian to act
pursuant to a custody agreement that: (1) Prohibits the custodian from
rehypothecating, repledging, reusing, or otherwise transferring
(through securities lending, securities borrowing, repurchase
agreement, reverse repurchase agreement or other means) the collateral
held by the custodian, except that cash collateral may be held in a
general deposit account with the custodian if the funds in the account
are used to purchase an asset held in compliance with Sec. 45.7, and
such purchase takes place within a time period reasonably necessary to
consummate such purchase after the cash collateral is posted as initial
margin; and (2) is a legal, valid, binding, and enforceable agreement
under the laws of all relevant jurisdictions, including in the event of
bankruptcy, insolvency, or a similar proceeding. A custody agreement
may permit the posting party to substitute or direct any reinvestment
of posted collateral held by the custodian under certain conditions.
With respect to collateral collected by a covered swap entity pursuant
to Sec. 45.3(a) or posted by a covered swap entity pursuant to Sec.
45.3(b), the agreement must require the posting party to substitute
only funds or other property that would qualify as eligible collateral
under Sec. 45.6 and for which the amount net of applicable discounts
described in Appendix B would be sufficient to meet the requirements of
Sec. 45.3 and direct reinvestment of funds only in assets that would
qualify as eligible collateral under Sec. 45.6.
Section 45.8 establishes standards for the use of initial margin
models. These standards include: (1) A requirement that the covered
swap entity receive prior approval from the relevant Agency based on
demonstration that the initial margin model meets specific requirements
(Sec. Sec. 45.8(c)(1) and 45.8(c)(2)); (2) a requirement that a
covered swap entity notify the relevant Agency in writing 60 days
before extending use of the model to additional product types, making
certain changes to the initial margin model, or making material changes
to modeling assumptions (Sec. 45.8(c)(3)); and (3) a variety of
quantitative requirements, including requirements that the covered swap
entity validate and demonstrate the reasonableness of its process for
modeling and measuring hedging benefits, demonstrate to the
satisfaction of the relevant Agency that the omission of any risk
factor from the calculation of its initial margin is appropriate,
demonstrate to the satisfaction of the relevant Agency that
incorporation of any proxy or approximation used to capture the risks
of the covered swap entity's non-cleared swaps or non-cleared security-
based swaps is appropriate, periodically review and, as necessary,
revise the data used to calibrate the initial margin model to ensure
that the data incorporate an appropriate period of significant
financial stress (Sec. Sec. 45.8(d)(5), 45.8(d)(10), 45.8(d)(11),
45.8(d)(12), and 45.8(d)(13)). Also, if the validation process reveals
any material problems with the initial margin model, the covered swap
entity must promptly notify the Agency of the problems, describe to the
Agency any remedial actions being taken, and adjust the initial margin
model to ensure an appropriately conservative amount of required
initial margin is being calculated (Sec. 45.8(f)(3)).
Section 45.8 also establishes requirements for the ongoing review
and documentation of initial margin models. These standards include:
(1) A requirement that a covered swap entity review its initial margin
model annually (Sec. 45.8(e)); (2) a requirement that the covered swap
entity validate its initial margin model at the outset and on an
ongoing basis, describe to the relevant Agency any remedial actions
being taken, and report internal audit findings regarding the
effectiveness of the initial margin model to the covered swap entity's
board of directors or a committee thereof (Sec. Sec. 45.8(f)(2),
45.8(f)(3), and 45.8(f)(4)); (3) a requirement that the covered swap
entity adequately document all material aspects of its initial margin
model (Sec. 45.8(g)); and
(4) that the covered swap entity must adequately document internal
authorization procedures, including escalation procedures, that require
review and approval of any change to the initial margin calculation
under the initial margin model, demonstrable analysis that any basis
for any such change is consistent with the requirements of this
section, and independent review of such demonstrable analysis and
approval (Sec. 45.8(h)).
Section 45.9 addresses the treatment of cross-border transactions
and, in certain limited situations, will permit a covered swap entity
to comply with a foreign regulatory framework for non-cleared swaps (as
a substitute for compliance with the prudential regulators' rule) if
the prudential regulators jointly determine that the foreign regulatory
framework is comparable to the requirements in the prudential
regulators' rule. Section 45.9(e) allows a covered swap entity to
request that the prudential regulators make a substituted compliance
determination and must provide the reasons therefore and other required
supporting documentation. A request for a substituted compliance
determination must include: (1) A description of the scope and
objectives of the foreign regulatory framework for non-cleared swaps
and non-cleared security-based swaps; (2) the specific provisions of
the foreign regulatory framework for non-cleared swaps and security-
based swaps (scope of transactions covered; determination of the amount
of initial and variation margin required; timing of margin
requirements; documentation requirements; forms of eligible collateral;
segregation and re-hypothecation requirements; and approval process and
standards for models); (3) the supervisory compliance program and
enforcement authority exercised by a foreign financial regulatory
authority or authorities in
[[Page 1828]]
such system to support its oversight of the application of the non-
cleared swap and security-based swap regulatory framework; and (4) any
other descriptions and documentation that the prudential regulators
determine are appropriate. A covered swap entity may make a request
under this section only if directly supervised by the authorities
administering the foreign regulatory framework for non-cleared swaps
and non-cleared security-based swaps.
Section 45.10 requires a covered swap entity to execute trading
documentation with each counterparty that is either a swap entity or
financial end user regarding credit support arrangements that: (1)
Provides the contractual right to collect and post initial margin and
variation margin in such amounts, in such form, and under such
circumstances as are required; and (2) specifies the methods,
procedures, rules, and inputs for determining the value of each non-
cleared swap or non-cleared security-based swap for purposes of
calculating variation margin requirements and the procedures for
resolving any disputes concerning valuation.
Section 45.11(b)(1) provides that the requirement for a covered
swap entity to post initial margin under Sec. 45.3(b) does not apply
with respect to any non-cleared swap or non-cleared security-based swap
with a counterparty that is an affiliate. A covered swap entity shall
calculate the amount of initial margin that would be required to be
posted to an affiliate that is a financial end user with material swaps
exposure pursuant to Sec. 45.3(b) and provide documentation of such
amount to each affiliate on a daily basis.
Type of Review: Extension without change of a currently approved
information collection.
Affected Public: Businesses or other for-profit.
Frequency of Response: On occasion.
Estimated Number of Respondents: 10.
Estimated Total Annual Burden: 17,390 hours.
The OCC published a notice for 60 days of comment regarding this
collection on November 6, 2018, 83 FR 55598. No comments were received.
Comments continue to be requested on:
(a) Whether the information collections are necessary for the
proper performance of the OCC's functions, including whether the
information has practical utility;
(b) The accuracy of the OCC's estimates of the burden of the
information collections, including the validity of the methodology and
assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
Dated: January 23, 2019.
Theodore J. Dowd,
Deputy Chief Counsel, Office of the Comptroller of the Currency.
[FR Doc. 2019-00952 Filed 2-4-19; 8:45 am]
BILLING CODE 4810-33-P