Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks, 22345-22349 [2020-08574]
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Rules and Regulations
Federal Register
Vol. 85, No. 78
Wednesday, April 22, 2020
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
FEDERAL RESERVE SYSTEM
12 CFR Part 215
[Regulation O; Docket No. 1714]
RIN 7100–AF 88
Loans to Executive Officers, Directors,
and Principal Shareholders of Member
Banks
Board of Governors of the
Federal Reserve System (Board).
ACTION: Interim final rule with request
for comments.
AGENCY:
In light of recent disruptions
in economic conditions caused by the
Coronavirus Disease 2019 and current
strains in U.S. financial markets, the
Board is issuing an interim final rule
that excepts certain loans that are
guaranteed under the Small Business
Administration’s Paycheck Protection
Program from the requirements of
section 22(h) of the Federal Reserve Act
and the corresponding provisions of the
Board’s Regulation O.
DATES: This rule is effective April 22,
2020. Comments on the interim final
rule must be received no later than June
8, 2020.
ADDRESSES: You may submit comments,
identified by Docket No. R–1714 and
RIN 7100 AF 88, by any of the following
methods:
• Agency Website: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Email: regs.comments@
federalreserve.gov. Include docket and
RIN numbers in the subject line of the
message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Ann E. Misback, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551.
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SUMMARY:
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All public comments will be made
available on the Board’s website at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical
reasons or to remove personally
identifiable information at the
commenter’s request. Accordingly,
comments will not be edited to remove
any identifying or contact information.
Public comments also may be viewed
electronically or in paper form in Room
146, 1709 New York Avenue NW,
Washington, DC 20006, between 9:00
a.m. and 5:00 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT:
Laurie Schaffer, Deputy General
Counsel, (202) 452–2272, Alison Thro,
Deputy Associate General Counsel,
(202) 452–3236, Benjamin McDonough,
Assistant General Counsel, (202) 452–
2036, Josh Strazanac, Senior Attorney,
(202) 452–2457, Jasmin Keskinen, Legal
Assistant, (202) 475–6650, Legal
Division; or Anna Lee Hewko, Associate
Director, (202) 530–6360, Constance
Horsley, Deputy Associate Director,
(202) 452–5239, Kathryn Ballintine,
Manager, (202) 452–2555, Joe
Maldonado, Senior Financial Policy
Analyst, (202) 973–7341, Division of
Supervision and Regulation; Board of
Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue NW, Washington, DC 20551.
Users of Telecommunication Device for
Deaf (TDD) only, call (202) 263–4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. The Paycheck Protection Program and
Small Business Administration Lending
Restrictions
B. Insider Lending Restrictions in the
Federal Reserve Act and Regulation O
II. The Interim Final Rule
III. Administrative Law Matters
A. Administrative Procedure Act
B. Congressional Review Act
C. Paperwork Reducation Act
D. Regulatory Flexibility Act
E. Riegle Community Development and
Regulatory Improvement Act of 1994
F. Use of Plain Language
I. Background
A. The Paycheck Protection Program
and Small Business Administration
Lending Restrictions
The spread of the Coronavirus Disease
2019 (COVID–19) has disrupted
economic activity in the United States
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and many other countries. In addition,
financial markets have experienced
significant volatility. The magnitude
and persistence of the overall effects on
the economy remain highly uncertain.
In light of these developments, Congress
passed the Coronavirus Aid, Relief, and
Economic Security (CARES) Act which,
among other things, created the
Paycheck Protection Program (PPP) to
facilitate lending to small businesses
affected by COVID–19.
Under the PPP, qualified lenders,
including many depository institutions
subject to section 22(h) of the Federal
Reserve Act and the Board’s Regulation
O,1 may make loans to small businesses
for payroll-related and other purposes
specified in the CARES Act.2 Loans that
meet the requirements for the PPP (PPP
loans) set forth by the Small Business
Administration (SBA) are guaranteed as
to the unpaid principal and accrued
interest of the loan. The guarantee for
PPP loans provided by the SBA is
backed by the full faith and credit of the
United States. Only loans made between
February 15, 2020, and June 30, 2020,
are eligible for the PPP.3 The SBA has
issued several interim final rules to
implement the PPP.4
Under the PPP, eligible borrowers
generally include businesses with fewer
than 500 employees or that are
otherwise considered by the SBA to be
small, including individuals operating
sole proprietorships, entities that are
independent contractors of other
businesses, certain franchisees,
nonprofit corporations, veterans
organizations, and Tribal businesses.5
The loan amount under the PPP is
limited to the lesser of $10 million and
250 percent of a borrower’s average
monthly payroll costs.6
Under the PPP, a borrower may apply
to a PPP qualified lender for forgiveness
of the portion of a PPP loan that is used
1 12
U.S.C. 375b; 12 CFR part 215.
Law 116–136, 134 Stat. 281. CARES Act
section 1102(a)(2).
3 Id.
4 Interim Final Rule: ‘‘Business Loan Program
Temporary Changes; Paycheck Protection Program’’
(April 2, 2020) (85 FR 20811); Interim Final Rule:
‘‘Business Loan Program Temporary Changes;
Paycheck Protection Program’’ (April 2, 2020) (85
FR 20817); Interim Final Rule: ‘‘Business Loan
Program Temporary Changes; Paycheck Protection
Program—Additional Eligibility Criteria and
Requirements for Certain Pledges of Loans’’ (April
14, 2020) (85 FR 21747).
5 Id.
6 Id.
2 Public
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in the first eight weeks of the loan for
payroll costs and certain mortgage, rent,
and utility payments. The SBA will
reimburse the PPP lender for the
forgiven amount of any PPP loan.7 PPP
loans will have a maturity of two years
and an interest rate of 100 basis points.8
PPP lenders may not alter these terms.
PPP loans are subject to the same
rules, conditions, and requirements as
all other loans made under section 7(a)
of the Small Business Act, unless
otherwise specified by the SBA in its
interim final rules administering the
PPP.9 Normally, SBA regulations would
prohibit a PPP lender from making a
PPP loan to ‘‘[b]usinesses in which the
[PPP lender] or any of its Associates
owns an equity interest’’ (SBA lending
restrictions).10 SBA regulations define
an ‘‘Associate’’ of a PPP lender to be
‘‘[a]n officer, director, key employee, or
holder of 20 percent or more of the
value of the [PPP] [l]ender’s . . . stock
or debt instruments’’ and any entity in
which one of these individuals or
certain relatives ‘‘own or controls at
least 20 percent.’’ 11
On April 14, 2020, the SBA issued an
interim final rule stating, among other
things, that SBA lending restrictions
‘‘shall not apply to prohibit an
otherwise eligible business owned (in
whole or part) by an outside director or
holder of less than 30 percent equity
interest in a PPP [l]ender from obtaining
a PPP loan from the PPP [l]ender on
whose board the director serves or in
which the equity owner holders an
interest, provided that the eligible
business owned by the director or
equity holder follows the same process
as similarly situated customer or
account holder of the [l]ender.’’ 12 The
interim final rule also stated that SBA
lending restrictions would continue to
apply to officers and key employees of
a PPP lender, and that ‘‘[f]avoritism by
[a PPP] [l]ender in processing time or
prioritization of [a] director’s or equity
holder’s PPP application is
prohibited.’’ 13
7 CARES
Act section 1106.
Final Rule: ‘‘Business Loan Program
Temporary Changes; Paycheck Protection Program’’
(April 2, 2020).
9 Interim Final Rule: ‘‘Business Loan Program
Temporary Changes; Paycheck Protection Program’’
(April 2, 2020) at 85 FR 20816.
10 13 CFR 120.110(o).
11 13 CFR 120.10.
12 Interim Final Rule: ‘‘Business Loan Program
Temporary Changes; Paycheck Protection
Program—Additional Eligibility Criteria and
Requirements for Certain Pledges of Loans’’ (April
14, 2020).
13 Id. at 85 FR 21750.
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B. Insider Lending Restrictions in the
Federal Reserve Act and Regulation O
Among other things, section 22(h) and
Regulation O impose requirements on a
bank regarding extensions of credit
made to insiders 14 of the bank or its
affiliates. Loans to insiders are subject to
quantitative limits, prior approval
requirements by the bank’s board, and
qualitative requirements concerning
loan terms.15 Regulation O also requires
banks to keep certain records and make
certain disclosures concerning
extensions of credit subject to the rule.16
Under section 22(h), an ‘‘extension of
credit’’ includes, among other things,
‘‘making or renewing any loan, granting
a line of credit, or entering into any
similar transaction as a result of which
the person becomes obligated (directly
or indirectly, or by any means
whatsoever) to pay money or its
equivalent to the bank.’’ 17 Accordingly,
PPP loans from a bank to an insider,
including the insider’s related
interests,18 would be subject to the
requirements of section 22(h) and
Regulation O.
The Housing and Community
Development Act of 1992 (HCDA) 19
amended section 22(h) to authorize the
Board to adopt, by regulation,
exceptions to the definition of
‘‘extension of credit’’ in section 22(h) for
transactions that ‘‘pose minimal risk.’’
Therefore, the Board may except PPP
loans from the restrictions imposed by
section 22(h) and the corresponding
provisions of Regulation O if it
determines that PPP loans pose minimal
risk.20
II. The Interim Final Rule
The legislative history of the HCDA
states that a transaction poses minimal
risk when the risk is ‘‘minuscule
compared to that of other loans.’’ 21 PPP
loans are guaranteed by the SBA, and
the guarantee is backed by the full faith
and credit of the United States. Unlike
other SBA loans authorized under
section 7(a) of the Small Business Act,22
the SBA’s guarantee for PPP loans
14 Insider means an executive officer, director, or
principal shareholder, and includes any related
interest of such a person. 12 CFR 215.2(h).
15 See 12 CFR 215.4.
16 See 12 CFR 215.8, 215.9, and 215.10.
17 12 U.S.C. 375b(9)(D)(i)(I).
18 Related interest of a person means a company
that is controlled by that person or a political or
campaign committee that is controlled by that
person or the funds or services of which will benefit
that person. 12 CFR 215.2(n).
19 Public Law 102–550, section 955, 106 Stat.
3672 (1992).
20 12 U.S.C. 375b(9)(D)(ii).
21 See 138 Cong. Rec. S17, 914–15 (daily ed.
October 8, 1992).
22 15 U.S.C. 636(a)(1)(A).
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extends to 100 percent of the PPP loan
amount. PPP loans also are less
susceptible to insider abuse than other
extensions of credit from a bank to an
insider, other loans guaranteed by the
SBA, or other extensions of credit that
the Board previously has determined
pose minimal risk.23 Unlike these other
extensions of credit, PPP loans have
standard terms that do not allow for
variation between borrowers, so banks
are unable to modify the terms of PPP
loans to be more favorable for insiders
than for borrowers that are not insiders.
Furthermore, like the PPP, which only
applies to loans made between February
15 and June 30, 2020, the exception in
this interim final rule only applies to
loans made during the same time
period. Excepting PPP loans from the
definition of ‘‘extension of credit’’ in
section 22(h) and the corresponding
provisions of Regulation O is
appropriate in light of these
circumstances.
Accordingly, the Board has
determined that PPP loans pose
minimal risk. These PPP loans will not
be subject to section 22(h) or the
corresponding provisions of Regulation
O if they are not prohibited by the SBA
lending restrictions. The exception will
help banks, particularly in smaller
communities, to give effect to the PPP’s
purpose of helping small businesses to
continue to operate under current
economic conditions. The Board is
providing the temporary exclusion in
the interim final rule to allow banking
organizations to make PPP loans to a
broad range of small businesses within
their communities, consistent with
applicable law and safe and sound
banking practices. As noted, the SBA
explicitly has prohibited a banking
organization from favoring in processing
time or prioritization a PPP application
of one of its directors or equity holders
and the Board will administer this
interim final rule accordingly.
SBA lending restrictions continue to
apply to certain PPP loans that also
would be subject to section 22(h) and
the corresponding provisions of
Regulation O. Excepting PPP loans that
would be prohibited by the SBA lending
restrictions from the requirements of
section 22(h) and the corresponding
provisions in Regulation O would not
achieve any meaningful regulatory
purpose. Excepting these loans from one
regime and not the other also may create
confusion because some lenders may
23 The Board previously excepted certain
transactions from the aggregate lending limit in
§ 215.4(d) of Regulation O based on a determination
that these transactions posed ‘‘minimal risk.’’ See
58 FR 26507 (May 4, 1993).
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mistakenly interpret an exception under
one regime to extend to both regimes.
This determination does not impact
the application of other restrictions that
may apply to PPP loans, including
section 22(g) of the Federal Reserve Act
or § 215.5 of Regulation O.24 This
determination also does not affect the
SBA lending restrictions.
Question 1: What are the advantages
and disadvantages of excepting PPP
loans from the definition of ‘‘extension
of credit’’ in section 22(h) and the
corresponding provisions of the Board’s
Regulation O?
Question 2: What are the most
appropriate terms and conditions for
this exception and why?
III. Administrative Law Matters
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A. Administrative Procedure Act
The Board is issuing the interim final
rule without prior notice and the
opportunity for public comment and the
delayed effective date ordinarily
prescribed by the Administrative
Procedure Act (APA)).25 Pursuant to
section 553(b)(B) of the APA, general
notice and the opportunity for public
comment are not required with respect
to a rulemaking when an ‘‘agency for
good cause finds (and incorporates the
finding and a brief statement of reasons
therefor in the rules issued) that notice
and public procedure thereon are
impracticable, unnecessary, or contrary
to the public interest.’’ 26
The Board believes that the public
interest is best served by implementing
the interim final rule immediately. As
discussed above, the spread of COVID–
19 has disrupted economic activity in
the United States and other countries. In
addition, U.S. financial markets have
featured substantial levels of volatility.
The magnitude and persistence of
COVID–19 on the economy remain
uncertain. In light of the substantial
disruptions in the economy, and the
likelihood that this interim final rule
would help ameliorate those disruptions
by promoting lending to small
businesses, the Board finds that there is
good cause consistent with the public
interest to issue the rule without
advance notice and comment.27
The APA also requires a 30-day
delayed effective date, except for (1)
substantive rules which grant or
recognize an exemption or relieve a
restriction; (2) interpretative rules and
statements of policy; or (3) as otherwise
provided by the agency for good
cause.28 Because the rules relieve a
restriction by providing an exception to
the definition of ‘‘extension of credit’’ in
section 22(h) and Regulation O, the
interim final rule is exempt from the
APA’s delayed effective date
requirement.29
While the Board believes that there is
good cause to issue the rule without
advance notice and comment and with
an immediate effective date, the Board
is interested in the views of the public
and requests comment on all aspects of
the interim final rule.
B. Congressional Review Act
For purposes of the Congressional
Review Act, the Office of Management
and Budget (OMB) makes a
determination as to whether a final rule
constitutes a ‘‘major’’ rule.30 If a rule is
deemed a ‘‘major rule’’ by the OMB, the
Congressional Review Act generally
provides that the rule may not take
effect until at least 60 days following its
publication.31
The Congressional Review Act defines
a ‘‘major rule’’ as any rule that the
Administrator of the Office of
Information and Regulatory Affairs of
the OMB finds has resulted in or is
likely to result in (A) an annual effect
on the economy of $100,000,000 or
more; (B) a major increase in costs or
prices for consumers, individual
industries, Federal, State, or local
government agencies or geographic
regions, or (C) significant adverse effects
on competition, employment,
investment, productivity, innovation, or
on the ability of United States-based
enterprises to compete with foreignbased enterprises in domestic and
export markets.32
For the same reasons set forth above,
the Board is adopting the interim final
rule without the delayed effective date
generally prescribed under the
Congressional Review Act. The delayed
effective date required by the
Congressional Review Act does not
apply to any rule for which an agency
for good cause finds (and incorporates
the finding and a brief statement of
reasons therefor in the rule issued) that
notice and public procedure thereon are
impracticable, unnecessary, or contrary
to the public interest.33 In light of
current market uncertainty, the Board
believes that delaying the effective date
28 5
U.S.C. 553(d).
U.S.C. 553(d)(1).
30 5 U.S.C. 801 et seq.
31 5 U.S.C. 801(a)(3).
32 5 U.S.C. 804(2).
33 5 U.S.C. 808.
29 5
24 12
U.S.C. 375a; 12 CFR 215.5.
U.S.C. 553.
26 5 U.S.C. 553(b)(B).
27 5 U.S.C. 553(b)(B); 553(d)(3).
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of the rule would be contrary to the
public interest.
As required by the Congressional
Review Act, the Board will submit the
final rule and other appropriate reports
to Congress and the Government
Accountability Office for review.
C. Paperwork Reduction Act
The Paperwork Reduction Act (44
U.S.C. 3501–3521) (PRA) states that no
agency may conduct or sponsor, nor is
the respondent required to respond to,
an information collection unless it
displays a currently valid Office of
Management and Budget (OMB) control
number. On June 15, 1984, OMB
delegated to the Board authority under
the PRA to approve and assign OMB
control numbers to collections of
information conducted or sponsored by
the Board, as well as the authority to
temporarily approve a new collection of
information without providing
opportunity for public comment if the
Board determines that a change in an
existing collection must be instituted
quickly and that public participation in
the approval process would defeat the
purpose of the collection or
substantially interfere with the Board’s
ability to perform its statutory
obligation.
This interim final rule does not
contain any collections of information
subject to the PRA. However, the
interim final rule does indirectly affect
certain recordkeeping and disclosure
requirements in Regulation O that have
not previously been cleared by the
Board under the PRA. In order to
accurately account for these
requirements pursuant to the PRA, the
Board has temporarily approved a new
collection of information titled
Recordkeeping and Disclosure
Requirements Associated with
Regulation O (FR O; OMB No. 7100–
NEW).
The Board’s delegated authority
requires that the Board, after
temporarily approving a collection,
solicit public comment to extend the
information collections for a period not
to exceed three years. Therefore, the
Board is inviting comment to extend the
FR O information collection for three
years.
The Board invites public comment on
the following information collection,
which is being reviewed under
authority delegated by the OMB under
the PRA. Comments must be submitted
on or before June 22, 2020. Comments
are invited on the following:
a. Whether the collection of
information is necessary for the proper
performance of the Board’s functions,
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including whether the information has
practical utility;
b. The accuracy of the Board’s
estimate of the burden of the
information collection, 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 collection on respondents,
including through the use of automated
collection techniques or other forms of
information technology; and
e. Estimates of capital or startup costs
and costs of operation, maintenance,
and purchase of services to provide
information.
At the end of the comment period, the
comments and recommendations
received will be analyzed to determine
the extent to which the Board should
modify the collection.
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Final Approval Under OMB Delegated
Authority of the Temporary
Implementation of, and Solicitation of
Comment To Extend for Three Years,
the Following Information Collection
Collection title: Recordkeeping and
Disclosure Requirements Associated
with Regulation O.
Agency form number: FR O.
OMB control number: 7100–NEW.
Effective Date: April 22, 2020.
Frequency: Annual, event generated.
Respondents: Member banks of the
Federal Reserve System, savings
associations, and any subsidiary of such
institutions.
Estimated number of respondents:
Recordkeeping (§§ 215.8 and 215.9):
1,570; disclosure (§ 215.9): 1,570.
Estimated average hours per response:
Recordkeeping (§§ 215.8 and 215.9): 4;
disclosure (§ 215.9): 2.
Estimated annual burden hours:
Recordkeeping (§§ 215.8 and 215.9):
6,280; disclosure (§ 215.9): 3,140; total:
9,420.
General description of information
collection:
Sections 22(g) and (h) of the Federal
Reserve Act 34 retstrict certain
transactions between banks and their
insiders or insiders of their affiliates.
Insiders include executive officers,
directors, principal shareholders, and
companies controlled by such persons.
Congress enacted sections 22(g) and (h)
to prevent bank insiders from abusing
their positions to gain favorable
treatment from their associated banks.
Congress authorized the Board to
prescribe rules and regulations as
necessary to effectuate the purposes and
34 12
U.S.C. 375a, 375b.
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to prevent the evasions of the sections.
Accordingly, the Board has promulgated
the Board’s Regulation O to effectuate
Congress’ purpose of preventing insider
abuse in banks.
Regulation O contains certain
recordkeeping and disclosure
requirements. Pursuant to § 215.8 of
Regulation O, respondents must
maintain records necessary for
compliance with the requirements of
Regulation O.35 Any recordkeeping
method adopted by a respondent shall
identify, through an annual survey, all
insiders of the respondent and maintain
records of all extensions of credit to
insiders of the respondent, including
the amount and terms of each such
extension of credit. Additionally, any
recordkeeping method adopted by a
respondent shall maintain records of
extensions of credit to insiders of the
respondent’s affiliates by using either
the survey method or borrower inquiry
method, as set forth in Regulation O, or
a different recordkeeping method if the
appropriate Federal banking agency
determines that the respondent’s
method is at least as effective as the
listed methods.
Pursuant to § 215.9 of Regulation O,
upon receipt of a written request from
the public, a respondent must make
available the names of each of its
executive officers and each of its
principal shareholders to whom, or to
whose related interests, the member
bank had outstanding as of the end of
the latest previous quarter of the year,
an extension of credit that, when
aggregated with all other outstanding
extensions of credit at such time from
the member bank to such person and to
all related interests of such person,
equaled or exceeded 5 percent of the
member bank’s capital and unimpaired
surplus or $500,000, whichever amount
is less.36 Respondents are not required
to disclose the specific amounts of
individual extensions of credit.
Additionally, each respondent must
maintain records of all requests for the
information described above and the
disposition of such requests. These
35 A
respondent that is prohibited by law or by
an express resolution of the board of directors of the
respondent from making an extension of credit to
any company or other entity that is covered by
Regulation O as a company is not required to
maintain any records of the related interests of the
insiders of the respondent or its affiliates or to
inquire of borrowers whether they are related
interests of the insiders of the respondent or its
affiliates. 12 CFR 215.8(d).
36 No such disclosure is required if the aggregate
amount of all extensions of credit outstanding at
such time from the member bank to the executive
officer or principal shareholder of the respondent
and to all related interests of such a person does
not exceed $25,000.
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records may be disposed of after two
years from the date of the request.
The recordkeeping and disclosure
requirements in §§ 215.8 and 215.9 of
Regulation O are required by section
306(o) of Public Law 102–242, 105 Stat.
2236 (1991) and authorized under 12
U.S.C. 1817(k).
Current actions: The Board has
temporarily approved the collections of
information contained within
Regulation O. The Board has
determined that this collection of
information must be instituted quickly
and that public participation in the
approval process would defeat the
purpose of the collection of information,
as these collections of information are
contained in an existing regulation, and
the inability of the Board to enforce
these collection of information
requirements due to noncompliance
with the PRA would interfere with the
Board’s ability to perform its statutory
duties.
The Board also invites comment to
extend the FR O information collection
for three years.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act
(RFA) 37 requires an agency to consider
whether the rules it proposes will have
a significant economic impact on a
substantial number of small entities.38
The RFA applies only to rules for which
an agency publishes a general notice of
proposed rulemaking pursuant to 5
U.S.C. 553(b). As discussed previously,
consistent with section 553(b)(B) of the
APA, the Board has determined for good
cause that general notice and
opportunity for public comment are
unnecessary, and therefore the Board is
not issuing a notice of proposed
rulemaking. Accordingly, the Board has
concluded that the RFA’s requirements
relating to initial and final regulatory
flexibility analysis do not apply.
Nevertheless, the Board seeks
comment on whether, and the extent to
which, the interim final rule would
affect a significant number of small
entities.
E. Riegle Community Development and
Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the
Riegle Community Development and
Regulatory Improvement Act
(RCDRIA),39 in determining the effective
37 5
U.S.C. 601 et seq.
regulations issued by the SBA, a small
entity includes a depository institution, bank
holding company, or savings and loan holding
company with total assets of $600 million or less
and trust companies with total assets of $41.5
million or less. See 13 CFR 121.201.
39 12 U.S.C. 4802(a).
38 Under
E:\FR\FM\22APR1.SGM
22APR1
Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES
date and administrative compliance
requirements for new regulations that
impose additional reporting, disclosure,
or other requirements on insured
depository institutions (IDIs), the
Federal banking agencies must consider,
consistent with the principle of safety
and soundness and the public interest,
any administrative burdens that such
regulations would place on depository
institutions, including small depository
institutions, and customers of
depository institutions, as well as the
benefits of such regulations. In addition,
section 302(b) of RCDRIA requires new
regulations and amendments to
regulations that impose additional
reporting, disclosures, or other new
requirements on IDIs generally to take
effect on the first day of a calendar
quarter that begins on or after the date
on which the regulations are published
in final form, with certain exceptions,
including for good cause.40 For the
reasons described above, the Board
finds good cause exists under section
302 of RCDRIA to publish this interim
final rule with an immediate effective
date.
As such, the final rule will be
effective immediately on publication.
Nevertheless, the Board seeks comment
on RCDRIA.
F. Use of Plain Language
Section 722 of the Gramm-LeachBliley Act 41 requires the Federal
banking agencies to use plain language
in all proposed and final rules
published after January 1, 2000. The
Board has sought to present the interim
final rule in a simple and
straightforward manner. The Board
invites comments on whether there are
additional steps it could take to make
the rule easier to understand. For
example:
• Have we organized the material to
suit your needs? If not, how could this
material be better organized?
• Are the requirements in the
regulation clearly stated? If not, how
could the regulation be more clearly
stated?
• Does the regulation contain
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 to the format would make the
regulation easier to understand?
• What else could we do to make the
regulation easier to understand?
40 12
41 12
List of Subjects in 12 CFR Part 215
Credit, Penalties, Reporting and
recordkeeping requirements.
Authority and Issuance
PART 215—LOANS TO EXECUTIVE
OFFICERS, DIRECTORS, AND
PRINCIPAL SHAREHOLDERS OF
MEMBER BANKS (REGULATION O)
1. The authority citation for part 215
is revised to read as follows:
■
15:57 Apr 21, 2020
Jkt 250001
U.S. Customs and Border Protection
19 CFR Part 24
[USCBP–2020–0017; CBP Dec. 20–05]
RIN 1515–AE54
Temporary Postponement of the Time
To Deposit Certain Estimated Duties,
Taxes, and Fees During the National
Emergency Concerning the Novel
Coronavirus Disease (COVID–19)
Outbreak
Authority: 12 U.S.C. 248(a), 375a(10),
375b(9) and (10), 1468, 1817(k), 5412; Pub. L.
102–242, 105 Stat. 2236 (1991) (12 U.S.C.
1811 note) and Pub. L. 116–136, 134 Stat.
281.
AGENCY:
2. In § 215.3:
■ a. In paragraph (b)(6), remove the
words ‘‘of this part’’ and the word ‘‘or’’
at the end of the paragraph;
■ b. In paragraph (b)(7), remove the
period at the end of the paragraph and
add ‘‘; or’’ in its place; and
■ c. Add paragraph (b)(8).
The addition reads as follows:
SUMMARY:
■
Extension of credit.
*
*
*
*
*
(b) * * *
(8) Except for purposes of § 215.5, a
loan:
(i) In which the participation by the
Small Business Administration on a
deferred basis is 100 percent pursuant to
section 1102(a)(1) of Public Law 116–
136 (to be codified at 15 U.S.C.
636(a)(2)(F));
(ii) That is made during the period
beginning on February 15, 2020, and
ending on June 30, 2020; and
(iii) That would not be prohibited by
13 CFR 120.110(o) or rules or
interpretations thereof issued by the
Small Business Administration.
*
*
*
*
*
Dated: April 17, 2020.
By order of the Board of Governors of the
Federal Reserve System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2020–08574 Filed 4–20–20; 11:15 am]
BILLING CODE P
U.S.C. 4802.
U.S.C. 4809.
VerDate Sep<11>2014
DEPARTMENT OF HOMELAND
SECURITY
DEPARTMENT OF THE TREASURY
For the reasons stated in the
preamble, the Board of Governors of the
Federal Reserve System amends 12 CFR
chapter II as follows:
§ 215.3
PO 00000
Frm 00005
Fmt 4700
Sfmt 4700
22349
U.S. Customs and Border
Protection, Department of Homeland
Security; Department of the Treasury.
ACTION: Temporary final rule.
In light of the President’s
Proclamation Declaring a National
Emergency Concerning the Novel
Coronavirus Disease (COVID–19)
(Presidential Proclamation 9994) under
the National Emergencies Act on March
13, 2020, and the President’s Executive
Order entitled ‘‘National Emergency
Authority to Temporarily Extend
Deadlines for Certain Estimated
Payments’’ authorizing the Secretary of
the Treasury to exercise the authority
under section 318(a) of the Tariff Act of
1930, issued on April 18, 2020, the
Secretary of the Treasury, in
consultation with the designee of the
Secretary of Homeland Security (U.S.
Customs and Border Protection (CBP)),
is amending the CBP regulations to
temporarily postpone the deadline for
importers of record with a significant
financial hardship to deposit certain
estimated duties, taxes, and fees that
they would ordinarily be obligated to
pay as of the date of entry, or
withdrawal from warehouse, for
consumption, for merchandise entered
in March or April 2020, for a period of
90 days from the date that the deposit
would otherwise have been due but for
this emergency action. This temporary
postponement does not permit return of
any deposits of estimated duties, taxes,
and/or fees that have been paid. This
temporary postponement also does not
apply to entries, or withdrawals from
warehouse, subject to certain specified
trade remedies, and any entry summary
that includes merchandise subject to
those trade remedies is not eligible
under this rule.
DATES: Effective date: April 20, 2020.
Comments must be received by May 20,
2020.
E:\FR\FM\22APR1.SGM
22APR1
]]>Agencies
[Federal Register Volume 85, Number 78 (Wednesday, April 22, 2020)]
[Rules and Regulations]
[Pages 22345-22349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08574]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 /
Rules and Regulations
[[Page 22345]]
FEDERAL RESERVE SYSTEM
12 CFR Part 215
[Regulation O; Docket No. 1714]
RIN 7100-AF 88
Loans to Executive Officers, Directors, and Principal
Shareholders of Member Banks
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: In light of recent disruptions in economic conditions caused
by the Coronavirus Disease 2019 and current strains in U.S. financial
markets, the Board is issuing an interim final rule that excepts
certain loans that are guaranteed under the Small Business
Administration's Paycheck Protection Program from the requirements of
section 22(h) of the Federal Reserve Act and the corresponding
provisions of the Board's Regulation O.
DATES: This rule is effective April 22, 2020. Comments on the interim
final rule must be received no later than June 8, 2020.
ADDRESSES: You may submit comments, identified by Docket No. R-1714 and
RIN 7100 AF 88, by any of the following methods:
Agency Website: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Email: [email protected]. Include docket
and RIN numbers in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
All public comments will be made available on the Board's website
at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons or to remove
personally identifiable information at the commenter's request.
Accordingly, comments will not be edited to remove any identifying or
contact information. Public comments also may be viewed electronically
or in paper form in Room 146, 1709 New York Avenue NW, Washington, DC
20006, between 9:00 a.m. and 5:00 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Laurie Schaffer, Deputy General
Counsel, (202) 452-2272, Alison Thro, Deputy Associate General Counsel,
(202) 452-3236, Benjamin McDonough, Assistant General Counsel, (202)
452-2036, Josh Strazanac, Senior Attorney, (202) 452-2457, Jasmin
Keskinen, Legal Assistant, (202) 475-6650, Legal Division; or Anna Lee
Hewko, Associate Director, (202) 530-6360, Constance Horsley, Deputy
Associate Director, (202) 452-5239, Kathryn Ballintine, Manager, (202)
452-2555, Joe Maldonado, Senior Financial Policy Analyst, (202) 973-
7341, Division of Supervision and Regulation; Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551. Users of Telecommunication Device for Deaf (TDD)
only, call (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. The Paycheck Protection Program and Small Business
Administration Lending Restrictions
B. Insider Lending Restrictions in the Federal Reserve Act and
Regulation O
II. The Interim Final Rule
III. Administrative Law Matters
A. Administrative Procedure Act
B. Congressional Review Act
C. Paperwork Reducation Act
D. Regulatory Flexibility Act
E. Riegle Community Development and Regulatory Improvement Act
of 1994
F. Use of Plain Language
I. Background
A. The Paycheck Protection Program and Small Business Administration
Lending Restrictions
The spread of the Coronavirus Disease 2019 (COVID-19) has disrupted
economic activity in the United States and many other countries. In
addition, financial markets have experienced significant volatility.
The magnitude and persistence of the overall effects on the economy
remain highly uncertain. In light of these developments, Congress
passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act
which, among other things, created the Paycheck Protection Program
(PPP) to facilitate lending to small businesses affected by COVID-19.
Under the PPP, qualified lenders, including many depository
institutions subject to section 22(h) of the Federal Reserve Act and
the Board's Regulation O,\1\ may make loans to small businesses for
payroll-related and other purposes specified in the CARES Act.\2\ Loans
that meet the requirements for the PPP (PPP loans) set forth by the
Small Business Administration (SBA) are guaranteed as to the unpaid
principal and accrued interest of the loan. The guarantee for PPP loans
provided by the SBA is backed by the full faith and credit of the
United States. Only loans made between February 15, 2020, and June 30,
2020, are eligible for the PPP.\3\ The SBA has issued several interim
final rules to implement the PPP.\4\
---------------------------------------------------------------------------
\1\ 12 U.S.C. 375b; 12 CFR part 215.
\2\ Public Law 116-136, 134 Stat. 281. CARES Act section
1102(a)(2).
\3\ Id.
\4\ Interim Final Rule: ``Business Loan Program Temporary
Changes; Paycheck Protection Program'' (April 2, 2020) (85 FR
20811); Interim Final Rule: ``Business Loan Program Temporary
Changes; Paycheck Protection Program'' (April 2, 2020) (85 FR
20817); Interim Final Rule: ``Business Loan Program Temporary
Changes; Paycheck Protection Program--Additional Eligibility
Criteria and Requirements for Certain Pledges of Loans'' (April 14,
2020) (85 FR 21747).
---------------------------------------------------------------------------
Under the PPP, eligible borrowers generally include businesses with
fewer than 500 employees or that are otherwise considered by the SBA to
be small, including individuals operating sole proprietorships,
entities that are independent contractors of other businesses, certain
franchisees, nonprofit corporations, veterans organizations, and Tribal
businesses.\5\ The loan amount under the PPP is limited to the lesser
of $10 million and 250 percent of a borrower's average monthly payroll
costs.\6\
---------------------------------------------------------------------------
\5\ Id.
\6\ Id.
---------------------------------------------------------------------------
Under the PPP, a borrower may apply to a PPP qualified lender for
forgiveness of the portion of a PPP loan that is used
[[Page 22346]]
in the first eight weeks of the loan for payroll costs and certain
mortgage, rent, and utility payments. The SBA will reimburse the PPP
lender for the forgiven amount of any PPP loan.\7\ PPP loans will have
a maturity of two years and an interest rate of 100 basis points.\8\
PPP lenders may not alter these terms.
---------------------------------------------------------------------------
\7\ CARES Act section 1106.
\8\ Interim Final Rule: ``Business Loan Program Temporary
Changes; Paycheck Protection Program'' (April 2, 2020).
---------------------------------------------------------------------------
PPP loans are subject to the same rules, conditions, and
requirements as all other loans made under section 7(a) of the Small
Business Act, unless otherwise specified by the SBA in its interim
final rules administering the PPP.\9\ Normally, SBA regulations would
prohibit a PPP lender from making a PPP loan to ``[b]usinesses in which
the [PPP lender] or any of its Associates owns an equity interest''
(SBA lending restrictions).\10\ SBA regulations define an ``Associate''
of a PPP lender to be ``[a]n officer, director, key employee, or holder
of 20 percent or more of the value of the [PPP] [l]ender's . . . stock
or debt instruments'' and any entity in which one of these individuals
or certain relatives ``own or controls at least 20 percent.'' \11\
---------------------------------------------------------------------------
\9\ Interim Final Rule: ``Business Loan Program Temporary
Changes; Paycheck Protection Program'' (April 2, 2020) at 85 FR
20816.
\10\ 13 CFR 120.110(o).
\11\ 13 CFR 120.10.
---------------------------------------------------------------------------
On April 14, 2020, the SBA issued an interim final rule stating,
among other things, that SBA lending restrictions ``shall not apply to
prohibit an otherwise eligible business owned (in whole or part) by an
outside director or holder of less than 30 percent equity interest in a
PPP [l]ender from obtaining a PPP loan from the PPP [l]ender on whose
board the director serves or in which the equity owner holders an
interest, provided that the eligible business owned by the director or
equity holder follows the same process as similarly situated customer
or account holder of the [l]ender.'' \12\ The interim final rule also
stated that SBA lending restrictions would continue to apply to
officers and key employees of a PPP lender, and that ``[f]avoritism by
[a PPP] [l]ender in processing time or prioritization of [a] director's
or equity holder's PPP application is prohibited.'' \13\
---------------------------------------------------------------------------
\12\ Interim Final Rule: ``Business Loan Program Temporary
Changes; Paycheck Protection Program--Additional Eligibility
Criteria and Requirements for Certain Pledges of Loans'' (April 14,
2020).
\13\ Id. at 85 FR 21750.
---------------------------------------------------------------------------
B. Insider Lending Restrictions in the Federal Reserve Act and
Regulation O
Among other things, section 22(h) and Regulation O impose
requirements on a bank regarding extensions of credit made to insiders
\14\ of the bank or its affiliates. Loans to insiders are subject to
quantitative limits, prior approval requirements by the bank's board,
and qualitative requirements concerning loan terms.\15\ Regulation O
also requires banks to keep certain records and make certain
disclosures concerning extensions of credit subject to the rule.\16\
Under section 22(h), an ``extension of credit'' includes, among other
things, ``making or renewing any loan, granting a line of credit, or
entering into any similar transaction as a result of which the person
becomes obligated (directly or indirectly, or by any means whatsoever)
to pay money or its equivalent to the bank.'' \17\ Accordingly, PPP
loans from a bank to an insider, including the insider's related
interests,\18\ would be subject to the requirements of section 22(h)
and Regulation O.
---------------------------------------------------------------------------
\14\ Insider means an executive officer, director, or principal
shareholder, and includes any related interest of such a person. 12
CFR 215.2(h).
\15\ See 12 CFR 215.4.
\16\ See 12 CFR 215.8, 215.9, and 215.10.
\17\ 12 U.S.C. 375b(9)(D)(i)(I).
\18\ Related interest of a person means a company that is
controlled by that person or a political or campaign committee that
is controlled by that person or the funds or services of which will
benefit that person. 12 CFR 215.2(n).
---------------------------------------------------------------------------
The Housing and Community Development Act of 1992 (HCDA) \19\
amended section 22(h) to authorize the Board to adopt, by regulation,
exceptions to the definition of ``extension of credit'' in section
22(h) for transactions that ``pose minimal risk.'' Therefore, the Board
may except PPP loans from the restrictions imposed by section 22(h) and
the corresponding provisions of Regulation O if it determines that PPP
loans pose minimal risk.\20\
---------------------------------------------------------------------------
\19\ Public Law 102-550, section 955, 106 Stat. 3672 (1992).
\20\ 12 U.S.C. 375b(9)(D)(ii).
---------------------------------------------------------------------------
II. The Interim Final Rule
The legislative history of the HCDA states that a transaction poses
minimal risk when the risk is ``minuscule compared to that of other
loans.'' \21\ PPP loans are guaranteed by the SBA, and the guarantee is
backed by the full faith and credit of the United States. Unlike other
SBA loans authorized under section 7(a) of the Small Business Act,\22\
the SBA's guarantee for PPP loans extends to 100 percent of the PPP
loan amount. PPP loans also are less susceptible to insider abuse than
other extensions of credit from a bank to an insider, other loans
guaranteed by the SBA, or other extensions of credit that the Board
previously has determined pose minimal risk.\23\ Unlike these other
extensions of credit, PPP loans have standard terms that do not allow
for variation between borrowers, so banks are unable to modify the
terms of PPP loans to be more favorable for insiders than for borrowers
that are not insiders. Furthermore, like the PPP, which only applies to
loans made between February 15 and June 30, 2020, the exception in this
interim final rule only applies to loans made during the same time
period. Excepting PPP loans from the definition of ``extension of
credit'' in section 22(h) and the corresponding provisions of
Regulation O is appropriate in light of these circumstances.
---------------------------------------------------------------------------
\21\ See 138 Cong. Rec. S17, 914-15 (daily ed. October 8, 1992).
\22\ 15 U.S.C. 636(a)(1)(A).
\23\ The Board previously excepted certain transactions from the
aggregate lending limit in Sec. 215.4(d) of Regulation O based on a
determination that these transactions posed ``minimal risk.'' See 58
FR 26507 (May 4, 1993).
---------------------------------------------------------------------------
Accordingly, the Board has determined that PPP loans pose minimal
risk. These PPP loans will not be subject to section 22(h) or the
corresponding provisions of Regulation O if they are not prohibited by
the SBA lending restrictions. The exception will help banks,
particularly in smaller communities, to give effect to the PPP's
purpose of helping small businesses to continue to operate under
current economic conditions. The Board is providing the temporary
exclusion in the interim final rule to allow banking organizations to
make PPP loans to a broad range of small businesses within their
communities, consistent with applicable law and safe and sound banking
practices. As noted, the SBA explicitly has prohibited a banking
organization from favoring in processing time or prioritization a PPP
application of one of its directors or equity holders and the Board
will administer this interim final rule accordingly.
SBA lending restrictions continue to apply to certain PPP loans
that also would be subject to section 22(h) and the corresponding
provisions of Regulation O. Excepting PPP loans that would be
prohibited by the SBA lending restrictions from the requirements of
section 22(h) and the corresponding provisions in Regulation O would
not achieve any meaningful regulatory purpose. Excepting these loans
from one regime and not the other also may create confusion because
some lenders may
[[Page 22347]]
mistakenly interpret an exception under one regime to extend to both
regimes.
This determination does not impact the application of other
restrictions that may apply to PPP loans, including section 22(g) of
the Federal Reserve Act or Sec. 215.5 of Regulation O.\24\ This
determination also does not affect the SBA lending restrictions.
---------------------------------------------------------------------------
\24\ 12 U.S.C. 375a; 12 CFR 215.5.
---------------------------------------------------------------------------
Question 1: What are the advantages and disadvantages of excepting
PPP loans from the definition of ``extension of credit'' in section
22(h) and the corresponding provisions of the Board's Regulation O?
Question 2: What are the most appropriate terms and conditions for
this exception and why?
III. Administrative Law Matters
A. Administrative Procedure Act
The Board is issuing the interim final rule without prior notice
and the opportunity for public comment and the delayed effective date
ordinarily prescribed by the Administrative Procedure Act (APA)).\25\
Pursuant to section 553(b)(B) of the APA, general notice and the
opportunity for public comment are not required with respect to a
rulemaking when an ``agency for good cause finds (and incorporates the
finding and a brief statement of reasons therefor in the rules issued)
that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.'' \26\
---------------------------------------------------------------------------
\25\ 5 U.S.C. 553.
\26\ 5 U.S.C. 553(b)(B).
---------------------------------------------------------------------------
The Board believes that the public interest is best served by
implementing the interim final rule immediately. As discussed above,
the spread of COVID-19 has disrupted economic activity in the United
States and other countries. In addition, U.S. financial markets have
featured substantial levels of volatility. The magnitude and
persistence of COVID-19 on the economy remain uncertain. In light of
the substantial disruptions in the economy, and the likelihood that
this interim final rule would help ameliorate those disruptions by
promoting lending to small businesses, the Board finds that there is
good cause consistent with the public interest to issue the rule
without advance notice and comment.\27\
---------------------------------------------------------------------------
\27\ 5 U.S.C. 553(b)(B); 553(d)(3).
---------------------------------------------------------------------------
The APA also requires a 30-day delayed effective date, except for
(1) substantive rules which grant or recognize an exemption or relieve
a restriction; (2) interpretative rules and statements of policy; or
(3) as otherwise provided by the agency for good cause.\28\ Because the
rules relieve a restriction by providing an exception to the definition
of ``extension of credit'' in section 22(h) and Regulation O, the
interim final rule is exempt from the APA's delayed effective date
requirement.\29\
---------------------------------------------------------------------------
\28\ 5 U.S.C. 553(d).
\29\ 5 U.S.C. 553(d)(1).
---------------------------------------------------------------------------
While the Board believes that there is good cause to issue the rule
without advance notice and comment and with an immediate effective
date, the Board is interested in the views of the public and requests
comment on all aspects of the interim final rule.
B. Congressional Review Act
For purposes of the Congressional Review Act, the Office of
Management and Budget (OMB) makes a determination as to whether a final
rule constitutes a ``major'' rule.\30\ If a rule is deemed a ``major
rule'' by the OMB, the Congressional Review Act generally provides that
the rule may not take effect until at least 60 days following its
publication.\31\
---------------------------------------------------------------------------
\30\ 5 U.S.C. 801 et seq.
\31\ 5 U.S.C. 801(a)(3).
---------------------------------------------------------------------------
The Congressional Review Act defines a ``major rule'' as any rule
that the Administrator of the Office of Information and Regulatory
Affairs of the OMB finds has resulted in or is likely to result in (A)
an annual effect on the economy of $100,000,000 or more; (B) a major
increase in costs or prices for consumers, individual industries,
Federal, State, or local government agencies or geographic regions, or
(C) significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
enterprises to compete with foreign-based enterprises in domestic and
export markets.\32\
---------------------------------------------------------------------------
\32\ 5 U.S.C. 804(2).
---------------------------------------------------------------------------
For the same reasons set forth above, the Board is adopting the
interim final rule without the delayed effective date generally
prescribed under the Congressional Review Act. The delayed effective
date required by the Congressional Review Act does not apply to any
rule for which an agency for good cause finds (and incorporates the
finding and a brief statement of reasons therefor in the rule issued)
that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.\33\ In light of
current market uncertainty, the Board believes that delaying the
effective date of the rule would be contrary to the public interest.
---------------------------------------------------------------------------
\33\ 5 U.S.C. 808.
---------------------------------------------------------------------------
As required by the Congressional Review Act, the Board will submit
the final rule and other appropriate reports to Congress and the
Government Accountability Office for review.
C. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. 3501-3521) (PRA) states that
no agency may conduct or sponsor, nor is the respondent required to
respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number. On June 15,
1984, OMB delegated to the Board authority under the PRA to approve and
assign OMB control numbers to collections of information conducted or
sponsored by the Board, as well as the authority to temporarily approve
a new collection of information without providing opportunity for
public comment if the Board determines that a change in an existing
collection must be instituted quickly and that public participation in
the approval process would defeat the purpose of the collection or
substantially interfere with the Board's ability to perform its
statutory obligation.
This interim final rule does not contain any collections of
information subject to the PRA. However, the interim final rule does
indirectly affect certain recordkeeping and disclosure requirements in
Regulation O that have not previously been cleared by the Board under
the PRA. In order to accurately account for these requirements pursuant
to the PRA, the Board has temporarily approved a new collection of
information titled Recordkeeping and Disclosure Requirements Associated
with Regulation O (FR O; OMB No. 7100-NEW).
The Board's delegated authority requires that the Board, after
temporarily approving a collection, solicit public comment to extend
the information collections for a period not to exceed three years.
Therefore, the Board is inviting comment to extend the FR O information
collection for three years.
The Board invites public comment on the following information
collection, which is being reviewed under authority delegated by the
OMB under the PRA. Comments must be submitted on or before June 22,
2020. Comments are invited on the following:
a. Whether the collection of information is necessary for the
proper performance of the Board's functions,
[[Page 22348]]
including whether the information has practical utility;
b. The accuracy of the Board's estimate of the burden of the
information collection, 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 collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
At the end of the comment period, the comments and recommendations
received will be analyzed to determine the extent to which the Board
should modify the collection.
Final Approval Under OMB Delegated Authority of the Temporary
Implementation of, and Solicitation of Comment To Extend for Three
Years, the Following Information Collection
Collection title: Recordkeeping and Disclosure Requirements
Associated with Regulation O.
Agency form number: FR O.
OMB control number: 7100-NEW.
Effective Date: April 22, 2020.
Frequency: Annual, event generated.
Respondents: Member banks of the Federal Reserve System, savings
associations, and any subsidiary of such institutions.
Estimated number of respondents: Recordkeeping (Sec. Sec. 215.8
and 215.9): 1,570; disclosure (Sec. 215.9): 1,570.
Estimated average hours per response: Recordkeeping (Sec. Sec.
215.8 and 215.9): 4; disclosure (Sec. 215.9): 2.
Estimated annual burden hours: Recordkeeping (Sec. Sec. 215.8 and
215.9): 6,280; disclosure (Sec. 215.9): 3,140; total: 9,420.
General description of information collection:
Sections 22(g) and (h) of the Federal Reserve Act \34\ retstrict
certain transactions between banks and their insiders or insiders of
their affiliates. Insiders include executive officers, directors,
principal shareholders, and companies controlled by such persons.
Congress enacted sections 22(g) and (h) to prevent bank insiders from
abusing their positions to gain favorable treatment from their
associated banks. Congress authorized the Board to prescribe rules and
regulations as necessary to effectuate the purposes and to prevent the
evasions of the sections. Accordingly, the Board has promulgated the
Board's Regulation O to effectuate Congress' purpose of preventing
insider abuse in banks.
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\34\ 12 U.S.C. 375a, 375b.
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Regulation O contains certain recordkeeping and disclosure
requirements. Pursuant to Sec. 215.8 of Regulation O, respondents must
maintain records necessary for compliance with the requirements of
Regulation O.\35\ Any recordkeeping method adopted by a respondent
shall identify, through an annual survey, all insiders of the
respondent and maintain records of all extensions of credit to insiders
of the respondent, including the amount and terms of each such
extension of credit. Additionally, any recordkeeping method adopted by
a respondent shall maintain records of extensions of credit to insiders
of the respondent's affiliates by using either the survey method or
borrower inquiry method, as set forth in Regulation O, or a different
recordkeeping method if the appropriate Federal banking agency
determines that the respondent's method is at least as effective as the
listed methods.
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\35\ A respondent that is prohibited by law or by an express
resolution of the board of directors of the respondent from making
an extension of credit to any company or other entity that is
covered by Regulation O as a company is not required to maintain any
records of the related interests of the insiders of the respondent
or its affiliates or to inquire of borrowers whether they are
related interests of the insiders of the respondent or its
affiliates. 12 CFR 215.8(d).
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Pursuant to Sec. 215.9 of Regulation O, upon receipt of a written
request from the public, a respondent must make available the names of
each of its executive officers and each of its principal shareholders
to whom, or to whose related interests, the member bank had outstanding
as of the end of the latest previous quarter of the year, an extension
of credit that, when aggregated with all other outstanding extensions
of credit at such time from the member bank to such person and to all
related interests of such person, equaled or exceeded 5 percent of the
member bank's capital and unimpaired surplus or $500,000, whichever
amount is less.\36\ Respondents are not required to disclose the
specific amounts of individual extensions of credit. Additionally, each
respondent must maintain records of all requests for the information
described above and the disposition of such requests. These records may
be disposed of after two years from the date of the request.
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\36\ No such disclosure is required if the aggregate amount of
all extensions of credit outstanding at such time from the member
bank to the executive officer or principal shareholder of the
respondent and to all related interests of such a person does not
exceed $25,000.
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The recordkeeping and disclosure requirements in Sec. Sec. 215.8
and 215.9 of Regulation O are required by section 306(o) of Public Law
102-242, 105 Stat. 2236 (1991) and authorized under 12 U.S.C. 1817(k).
Current actions: The Board has temporarily approved the collections
of information contained within Regulation O. The Board has determined
that this collection of information must be instituted quickly and that
public participation in the approval process would defeat the purpose
of the collection of information, as these collections of information
are contained in an existing regulation, and the inability of the Board
to enforce these collection of information requirements due to
noncompliance with the PRA would interfere with the Board's ability to
perform its statutory duties.
The Board also invites comment to extend the FR O information
collection for three years.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \37\ requires an agency to
consider whether the rules it proposes will have a significant economic
impact on a substantial number of small entities.\38\ The RFA applies
only to rules for which an agency publishes a general notice of
proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed
previously, consistent with section 553(b)(B) of the APA, the Board has
determined for good cause that general notice and opportunity for
public comment are unnecessary, and therefore the Board is not issuing
a notice of proposed rulemaking. Accordingly, the Board has concluded
that the RFA's requirements relating to initial and final regulatory
flexibility analysis do not apply.
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\37\ 5 U.S.C. 601 et seq.
\38\ Under regulations issued by the SBA, a small entity
includes a depository institution, bank holding company, or savings
and loan holding company with total assets of $600 million or less
and trust companies with total assets of $41.5 million or less. See
13 CFR 121.201.
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Nevertheless, the Board seeks comment on whether, and the extent to
which, the interim final rule would affect a significant number of
small entities.
E. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\39\ in determining the effective
[[Page 22349]]
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
insured depository institutions (IDIs), the Federal banking agencies
must consider, consistent with the principle of safety and soundness
and the public interest, any administrative burdens that such
regulations would place on depository institutions, including small
depository institutions, and customers of depository institutions, as
well as the benefits of such regulations. In addition, section 302(b)
of RCDRIA requires new regulations and amendments to regulations that
impose additional reporting, disclosures, or other new requirements on
IDIs generally to take effect on the first day of a calendar quarter
that begins on or after the date on which the regulations are published
in final form, with certain exceptions, including for good cause.\40\
For the reasons described above, the Board finds good cause exists
under section 302 of RCDRIA to publish this interim final rule with an
immediate effective date.
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\39\ 12 U.S.C. 4802(a).
\40\ 12 U.S.C. 4802.
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As such, the final rule will be effective immediately on
publication. Nevertheless, the Board seeks comment on RCDRIA.
F. Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act \41\ requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The Board has sought to present the
interim final rule in a simple and straightforward manner. The Board
invites comments on whether there are additional steps it could take to
make the rule easier to understand. For example:
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\41\ 12 U.S.C. 4809.
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Have we organized the material to suit your needs? If not,
how could this material be better organized?
Are the requirements in the regulation clearly stated? If
not, how could the regulation be more clearly stated?
Does the regulation contain 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 to the format would make the regulation
easier to understand?
What else could we do to make the regulation easier to
understand?
List of Subjects in 12 CFR Part 215
Credit, Penalties, Reporting and recordkeeping requirements.
Authority and Issuance
For the reasons stated in the preamble, the Board of Governors of
the Federal Reserve System amends 12 CFR chapter II as follows:
PART 215--LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL
SHAREHOLDERS OF MEMBER BANKS (REGULATION O)
0
1. The authority citation for part 215 is revised to read as follows:
Authority: 12 U.S.C. 248(a), 375a(10), 375b(9) and (10), 1468,
1817(k), 5412; Pub. L. 102-242, 105 Stat. 2236 (1991) (12 U.S.C.
1811 note) and Pub. L. 116-136, 134 Stat. 281.
0
2. In Sec. 215.3:
0
a. In paragraph (b)(6), remove the words ``of this part'' and the word
``or'' at the end of the paragraph;
0
b. In paragraph (b)(7), remove the period at the end of the paragraph
and add ``; or'' in its place; and
0
c. Add paragraph (b)(8).
The addition reads as follows:
Sec. 215.3 Extension of credit.
* * * * *
(b) * * *
(8) Except for purposes of Sec. 215.5, a loan:
(i) In which the participation by the Small Business Administration
on a deferred basis is 100 percent pursuant to section 1102(a)(1) of
Public Law 116-136 (to be codified at 15 U.S.C. 636(a)(2)(F));
(ii) That is made during the period beginning on February 15, 2020,
and ending on June 30, 2020; and
(iii) That would not be prohibited by 13 CFR 120.110(o) or rules or
interpretations thereof issued by the Small Business Administration.
* * * * *
Dated: April 17, 2020.
By order of the Board of Governors of the Federal Reserve
System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2020-08574 Filed 4-20-20; 11:15 am]
BILLING CODE P
