[Federal Register Volume 84, Number 212 (Friday, November 1, 2019)]
[Rules and Regulations]
[Pages 59194-59228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23967]
[[Page 59193]]
Vol. 84
Friday,
No. 212
November 1, 2019
Part VI
Federal Reserve System
Federal Deposit Insurance Corporation
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12 CFR Parts 243 and 381
Resolution Plans Required; Final Rule
Federal Register / Vol. 84 , No. 212 / Friday, November 1, 2019 /
Rules and Regulations
[[Page 59194]]
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FEDERAL RESERVE SYSTEM
12 CFR Part 243
[Regulation QQ; Docket No. R-1660]
RIN 7100-AF47
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 381
RIN 3064-AE93
Resolution Plans Required
AGENCY: Board of Governors of the Federal Reserve System (Board) and
Federal Deposit Insurance Corporation (Corporation).
ACTION: Final rule.
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SUMMARY: The Board and the Corporation (together, the agencies) are
jointly adopting this final rule implementing the resolution planning
requirements of section 165(d) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the Dodd-Frank Act). This final rule is
intended to reflect improvements identified since the agencies
finalized their joint resolution plan rule in November 2011 (2011 rule)
and to address amendments to the Dodd-Frank Act made by the Economic
Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).
Through this final rule, the Board is also establishing risk-based
categories for determining the application of the resolution planning
requirement to certain U.S. and foreign banking organizations,
consistent with section 401 of EGRRCPA. The final rule also extends the
default resolution plan filing cycle, allows for more focused
resolution plan submissions, and improves certain aspects of the
resolution planning rule.
DATES: This rule is effective December 31, 2019.
FOR FURTHER INFORMATION CONTACT:
Board: Mona Elliot, Deputy Associate Director, (202) 912-4688,
Catherine Tilford, Assistant Director, (202) 452-5240, Kathryn
Ballintine, Lead Financial Institution Policy Analyst, (202) 452-2555,
or Tudor Rus, Lead Financial Institution Policy Analyst, (202) 475-
6359, Division of Supervision and Regulation; or Laurie Schaffer,
Associate General Counsel, (202) 452-2272, Jay Schwarz, Special
Counsel, (202) 452-2970, Steve Bowne, Senior Counsel, (202) 452-3900,
or Sarah Podrygula, Attorney, (202) 912-4658, Legal Division, Board of
Governors of the Federal Reserve System, 20th and C Streets NW,
Washington, DC 20551. For users of Telecommunications Device for the
Deaf (TDD), (202) 263-4869.
Corporation: Lori J. Quigley, Deputy Director, Institutions
Monitoring Group, [email protected]; Robert C. Connors, Associate
Director, Large Bank Supervision Branch, [email protected]; and
Alexandra Steinberg Barrage, Associate Director, Resolution Strategy
and Policy, Division of Complex Institution Supervision & Resolution,
[email protected]; or David N. Wall, Assistant General Counsel,
[email protected]; Celia Van Gorder, Supervisory Counsel,
[email protected]; Dena S. Kessler, Counsel, [email protected]; or
Ryan M. Rappa, Counsel, [email protected], Legal Division, Federal
Deposit Insurance Corporation, 550 17th Street NW, Washington, DC
20429.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
B. Overview of the Proposed Rule
II. Overview of Comments
III. Final Rule
A. Identification of Firms Subject to the Resolution Planning
Requirement and Filing Groups
1. Firms Subject to the Resolution Planning Requirement
2. Filing Groups and Filing Cycle
B. Resolution Plan Content
1. General Guidance and Firm-Specific Feedback
2. Material Changes and Extraordinary Events
3. Full Resolution Plans
4. Waivers of Informational Content Requirements
5. Targeted Resolution Plans
6. Reduced Resolution Plans
7. Tailored Resolution Plans
C. Critical Operations Methodology and Reconsideration Process
1. Identification by Covered Companies and Methodology
Requirement
2. Identification by Agencies and Requests for Reconsideration
D. Clarifications to the 2011 Rule
1. Resolution Strategy for Foreign-Based Covered Companies
2. Covered Companies in Multi-Tier Foreign Banking Organization
Holding Companies
3. Removal of the Incompleteness Concept and Related Review
4. Assessment of New Covered Companies
5. Timing of New Filings, Firms That Change Filing Categories
6. Clarification of the Mapping Expectations for Foreign Banking
Organizations
7. Standard of Review
8. Deletion of ``Deficiencies'' Relating to Management
Information Systems
9. Incorporation by Reference
E. Technical and Conforming Changes From the Proposal
F. Board Delegation of Authority
IV. Effective Date and Transition Period
V. Impact Analysis
VI. Regulatory Analysis
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Riegle Community Development and Regulatory Improvement Act
of 1994
D. Plain Language
E. The Congressional Review Act
I. Introduction
A. Background
Section 165(d) of the Dodd-Frank Act \1\ and the 2011 rule \2\
require certain financial companies (covered companies) to report
periodically to the agencies their plans for rapid and orderly
resolution under the U.S. Bankruptcy Code (the Bankruptcy Code) in the
event of material financial distress or failure. The goal of the Dodd-
Frank Act resolution planning process is to help ensure that a covered
company's failure would not have serious adverse effects on financial
stability in the United States. The Dodd-Frank Act and the 2011 rule
require a covered company to submit a resolution plan for review by the
agencies. The resolution planning process requires covered companies to
demonstrate that they have adequately assessed the challenges that
their structures and business activities pose to a rapid and orderly
resolution in the event of material financial distress or failure and
that they have taken action to address those challenges, including
through the development of capabilities appropriate to the covered
company's size and complexity.
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\1\ 12 U.S.C. 5365(d).
\2\ 76 FR 67323 (November 1, 2011).
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Implementation of the 2011 rule has been an iterative process aimed
at strengthening the resolvability and resolution planning capabilities
of covered companies. Since finalization of the 2011 rule, the agencies
have reviewed multiple resolution plan submissions and have provided
feedback on individual resolution plans following their review by the
agencies (firm-specific feedback) and guidance directed to groups of
firms (general guidance) to assist covered companies in their
development of subsequent resolution plan submissions.
EGRRCPA revised the resolution planning requirement as part of the
changes the law made to application of the enhanced prudential
standards in section 165 of the Dodd-Frank Act. Specifically, EGRRCPA
raised the $50 billion minimum asset threshold for general application
of the resolution planning requirement to $250 billion in total
consolidated assets, and provided the Board with discretion to apply
the resolution planning requirement to firms with $100 billion or more
and less than $250 billion in total consolidated
[[Page 59195]]
assets.\3\ The threshold increase occurs in two stages. Immediately on
the date of EGRRCPA's enactment, firms with total consolidated assets
of less than $100 billion (for foreign banking organizations, $100
billion in total global assets) were no longer subject to the
resolution planning requirement. Eighteen months after the date of
EGRRCPA's enactment, the threshold increases to $250 billion in total
consolidated assets. However, EGRRCPA provides the Board with the
authority to apply resolution planning requirements to firms with $100
billion or more and less than $250 billion in total consolidated
assets. Specifically, under section 165(a)(2)(C) of the Dodd-Frank Act,
as revised by EGRRCPA, the Board may, by order or rule, apply the
resolution planning requirement to any firm or firms with total
consolidated assets of $100 billion (for foreign banking organizations,
$100 billion in total global assets) or more.\4\
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\3\ EGRRCPA also provides that any bank holding company,
regardless of asset size, that has been identified as a U.S. global
systemically important bank (U.S. GSIB) under the Board's U.S. GSIB
surcharge rule shall be considered a bank holding company with $250
billion or more in total consolidated assets for purposes of the
application of the resolution planning requirement. EGRRCPA section
401(f), Public Law 115 174, 132 Stat. 1296.
\4\ 12 U.S.C. 5365(a); EGRRCPA section 401(a)(1)(B)(iii) (to be
codified at 12 U.S.C. 5365(a)(2)(C)). See also EGRRCPA section
401(g).
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In May 2019, the agencies invited comment on a proposal to amend
and restate the 2011 rule (the proposed rule or proposal).\5\ The
proposed rule was intended to address amendments to the Dodd-Frank Act
made by the EGRRCPA and improve certain aspects of the 2011 rule based
on the agencies' experience implementing the 2011 rule since its
adoption. The agencies are now finalizing the proposed rule, with
certain changes based on public comments on the proposed rule, as
described in detail below.
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\5\ 84 FR 21600 (May 14, 2019).
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The Board's Tailoring Rules
Consistent with section 401 of EGRRCPA, the Board finalized two
separate proposals to revise the framework for determining the
prudential standards that should apply to large U.S. banking
organizations (domestic tailoring rule) \6\ and to large foreign
banking organizations (FBO tailoring rule \7\ and together with the
domestic tailoring rule, the tailoring rules). Among other provisions,
the tailoring rules identify distinct standards applicable to firms for
the purpose of calibrating requirements. The tailoring categories
established in the tailoring rules are as follows:
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\6\ Prudential Standards for Large Bank Holding Companies and
Savings and Loan Holding Companies, 83 FR 61408 (November 29, 2018).
The Board's final rule is published elsewhere in this issue of the
Federal Register and is also available on the Board's website at
https://www.federalreserve.gov/aboutthefed/boardmeetings/files/tailoring-rule-fr-notice-20191010a2.pdf.
\7\ Prudential Standards for Large Foreign Banking
Organizations; Revisions to Proposed Prudential Standards for Large
Domestic Bank Holding Companies and Savings and Loan Holding
Companies, 84 FR 21988 (May 15, 2019). The Board's final rule is
published elsewhere in this issue of the Federal Register and is
also available on the Board's website at https://www.federalreserve.gov/aboutthefed/boardmeetings/files/tailoring-rule-fr-notice-20191010a2.pdf.
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Category I standards will apply to:
[cir] Global systemically important bank holding companies (U.S.
GSIBs),
Category II standards will apply to:
[cir] U.S. firms that are not subject to Category I standards with
(a) $700 billion or more in average total consolidated assets, or (b)
$100 billion or more in average total consolidated assets that have $75
billion or more in average cross-jurisdictional activity, and
[cir] Foreign banking organizations with (a) $700 billion or more
in average combined U.S. assets,\8\ or (b) $100 billion or more in
average combined U.S. assets that have $75 billion or more in average
cross-jurisdictional activity measured based on the foreign banking
organization's combined U.S. operations.\9\
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\8\ Combined U.S. assets means the sum of the consolidated
assets of each top-tier U.S. subsidiary of the foreign banking
organization (excluding any section 2(h)(2) company as defined in
section 2(h)(2) of the Bank Holding Company Act (12 U.S.C.
1841(h)(2)), if applicable) and the total assets of each U.S. branch
and U.S. agency of the foreign banking organization, as reported by
the foreign banking organization on the FR Y-7Q.
\9\ The combined U.S. operations of a foreign banking
organization include any U.S. subsidiaries (including any U.S.
intermediate holding company), U.S. branches, and U.S. agencies. In
addition, for a foreign banking organization that is not required to
form a U.S. intermediate holding company, combined U.S. operations
refer to its U.S. branch and agency network and the U.S.
subsidiaries of the foreign banking organization (excluding any
section 2(h)(2) company as defined in section 2(h)(2) of the Bank
Holding Company Act (12 U.S.C. 1841(h)(2), if applicable) and any
subsidiaries of such U.S. subsidiaries.
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Category III standards will apply to:
[cir] U.S. firms that are not subject to Category I or Category II
standards with (a) $250 billion or more in average total consolidated
assets, or (b) $100 billion or more in average total consolidated
assets that have $75 billion or more in any of the following risk-based
indicators: Average total nonbank assets, average weighted short-term
wholesale funding, or average off-balance sheet exposure, and
[cir] Foreign banking organizations that are not subject to
Category II standards with (a) $250 billion or more in average combined
U.S. assets, or (b) $100 billion or more in average combined U.S.
assets that have $75 billion or more in any of the following risk-based
indicators measured based on the combined U.S. operations: Average
total nonbank assets, average weighted short-term wholesale funding, or
average off-balance sheet exposure and
Category IV standards will apply to:
[cir] U.S. firms with $100 billion or more in average total
consolidated assets that do not meet any of the thresholds specified
for Categories I through III, and
[cir] Foreign banking organizations with $100 billion or more in
average combined U.S. assets that do not meet any of the thresholds
specified for Categories II or III.
These categories form the basis for the final rule's framework for
imposing resolution planning requirements, with adjustments where
appropriate. The categories are also used to tailor the content of the
resolution planning requirements, taking into account covered
companies' particular geographic footprints, operations, and
activities, as described below.
B. Overview of the Proposed Rule
Under the proposed rule, resolution planning requirements would
have applied to (1) those firms that are statutorily required to submit
resolution plans (i.e., U.S. and foreign banking organizations with
$250 billion or more in total consolidated assets, the U.S. GSIBs, and
any non-bank financial company designated by the Financial Stability
Oversight Council (Council) for supervision by the Board) and (2) firms
with total consolidated assets of $100 billion or more and less than
$250 billion that would have been subject to Category II or III
standards under the notices of proposed rulemaking for the tailoring
rules. In particular, the Board would have applied resolution planning
requirements to firms with total consolidated assets of $100 billion or
more and less than $250 billion that would have had $75 billion or more
in any of the following four risk-based indicators: Cross-
jurisdictional activity, nonbank assets, weighted short-term wholesale
funding, or off-balance-sheet exposure. In the case of a foreign
banking organization, resolution planning requirements would only have
applied if the firm also had combined U.S. assets equal to $100 billion
or more, and the risk-based indicators would have been measured based
on the firm's combined U.S. operations.
The proposed rule would have divided firms subject to resolution
[[Page 59196]]
planning requirements into three categories for purposes of determining
submission frequency and resolution plan content requirements. The U.S.
GSIBs would have been required to submit a resolution plan every two
years, alternating between full and targeted resolution plans. Firms
subject to Category II or III standards under the notices of proposed
rulemaking for the tailoring rules would have been required to submit a
resolution plan every three years, alternating between full and
targeted resolution plans. Other foreign banking organizations subject
to the proposed rule but not subject to Category II or III standards
would have been required to submit a resolution plan every three years,
with their initial filing being a full resolution plan and each
subsequent submission being a reduced resolution plan. The proposal
would have generally maintained the same informational content
requirements for full resolution plans as under the 2011 rule, but
would have established a new process whereby covered companies could
request a waiver from certain informational content requirements in
their full resolution plans. Under the proposal, covered companies
would have been required to include in targeted resolution plans and
reduced resolution plans information about certain changes since their
previous resolution plan submission. Targeted resolution plans would
also have included information about certain resolution planning core
elements and information responsive to the agencies' targeted
information requests.
The proposed rule would also have made certain procedural changes
to the provisions of the 2011 rule relating to the identification of
critical operations. The proposal would have established formal
processes for firms and the agencies to identify particular operations
of covered companies as critical operations and to rescind prior
critical operations identifications made by the agencies. In addition,
the proposal would have specified a process for a covered company to
request reconsideration of operations previously identified by the
agencies as critical operations, and required that a covered company
notify the agencies if it ceased to identify an operation as a critical
operation.
II. Overview of Comments
The agencies received and reviewed 14 comment letters on the
proposed rule. Commenters included various financial services trade
associations, covered companies, public interest groups, and
individuals. In addition, the agencies met with industry
representatives at their request to discuss issues relating to the
proposed rule. This section provides an overview of the general themes
raised by commenters. Comments are addressed in further detail in the
below sections describing the final rule, including any changes that
the agencies have made to the proposed rule in response to comments.
General Support and Opposition
A number of commenters generally supported the proposed rule. These
commenters supported the proposed rule's efforts to tailor resolution
planning requirements to a firm's size, complexity, and risk profile,
and asserted that the proposed rule would preserve and improve upon key
elements of resolution planning while enhancing transparency and
meaningfully reducing burden.\10\
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\10\ Certain commenters also made assertions that characterized
the agencies' views of prior resolution plan submissions under the
2011 rule or the agencies' rationale for proposing certain changes
to the 2011 rule. The agencies are not responding to or endorsing
these assertions in this preamble. The agencies' views regarding
individual resolution plans are communicated to covered companies
following the agencies' review of those resolution plans.
Separately, certain commenters proposed strengthening regulatory
requirements that are unrelated to the resolution planning rule.
These comments are outside the scope of this rulemaking.
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Several commenters raised concerns about the proposed rule. These
commenters generally asserted that the proposed rule would
inappropriately weaken financial regulations put in place after the
2008 financial crisis and thereby increase systemic risk. In addition,
certain commenters asserted that the proposed rule inappropriately
relied on burden reduction as a rationale for the proposed changes, was
inconsistent with administrative law because the agencies did not
provide sufficient justification for reducing the frequency and content
of resolution plans, and was inconsistent with the Dodd-Frank Act. One
commenter questioned whether firms would reallocate resources no longer
needed to comply with the current rule to activities considered to be
more beneficial, and whether any such benefit would accrue to the
public at large. One commenter also asserted that the agencies should
delay modifying the 2011 rule until it has been tested in an economic
downturn, and another commenter asserted that the agencies should be
cognizant of the effect of regulations on non-financial companies and
small business lending. As further explained below, the final rule
would continue to apply appropriate requirements on firms based on the
relative risk that a firm's failure would pose to U.S. financial
stability, and would preserve and improve upon key elements of the
resolution planning framework that were put in place after the 2008
financial crisis. The agencies believe that this approach is consistent
with the Dodd-Frank Act, as amended by the EGRRCPA, which generally
provides for the tailoring of enhanced prudential standards based on
firms' capital structure, riskiness, complexity, financial activities
(including financial activities of subsidiaries), size, and other risk-
related factors. Moreover, since the finalization of the 2011 rule, the
agencies have reviewed multiple resolution plan submissions and have
provided firm-specific feedback and general guidance to assist the
covered companies in their development of subsequent resolution plan
submissions. Consequently, covered companies' submissions and the
agencies' firm-specific feedback and general guidance have matured over
several resolution plan cycles, and the agencies believe this is an
appropriate time to revise the 2011 rule to reflect improvements
identified since it was originally adopted, including changes in the
frequency and content of resolution plans, for the reasons stated in
the proposal and this preamble.\11\
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\11\ With respect to the timing of these changes, the agencies
also note that, due to the effective date of section 401 of the
EGRRCPA, the agencies believe it is important to complete revisions
to the rule prior to the date that, pursuant to EGRRCPA, the
resolution plan submission threshold increases to $250 billion in
total consolidated assets.
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2019 and 2020 Plans
The agencies received several comments from covered companies and
industry representatives requesting clarification regarding resolution
plan filing requirements for 2019 and 2020. On July 26, 2019, the
agencies informed (1) covered companies with resolution plans due in
December 2019 that their next resolution plan submission dates were
extended to July 1, 2021 or such other date that may be specified when
the agencies adopt the final rule and (2) Barclays PLC, Credit Suisse,
Deutsche Bank AG, and UBS AG that the informational requirements for
their July 2020 resolution plans may be limited to changes they have
made to their 2018 resolution plans to address shortcomings identified
in those resolution plans, and they are required to submit their next
full resolution plans on July 1, 2021 or such other date that
[[Page 59197]]
may be specified when the agencies adopt the final rule.\12\
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\12\ See https://www.federalreserve.gov/newsevents/pressreleases/bcreg20190726a.htm; https://www.fdic.gov/news/news/press/2019/pr19069.html.
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Comments Related to the Corporation's IDI Rule
The agencies received several comments asserting that the filing
cycle or resolution plan content requirements under the final rule
should align with the requirements under the Corporation's rule
requiring certain insured depository institutions to submit resolution
plans (the IDI rule).\13\ Some commenters also asserted that firms
should be able to incorporate by reference information included in a
resolution plan submitted pursuant to the IDI rule into a resolution
plan submitted pursuant to the final rule. A commenter stated that the
agencies should harmonize the informational content requirements for
resolution plans under the final rule with resolution plans under the
IDI rule for filers subject to Category III standards, and that doing
so would permit these filers to focus their resolution planning efforts
on a uniform resolution plan filing process.
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\13\ 12 CFR 360.10.
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The agencies have not modified the proposal on the basis of these
comments. The agencies note that the final rule and the IDI rule are
separate requirements with different purposes and goals, and that the
IDI rule is administered by only the Corporation. In part because a
resolution plan submitted pursuant to the IDI rule is submitted to only
the Corporation, incorporating by reference such information into a
resolution plan submitted pursuant to the final rule is more
challenging than incorporation by reference of such information into a
resolution plan submitted pursuant to the IDI rule. The agencies note
that the Corporation has issued an advanced notice of proposed
rulemaking regarding the IDI rule. That advanced notice of proposed
rulemaking notes, ``[t]o promote efficiency and reduce burden, the
[Corporation] is encouraging the use of incorporation by reference to
[resolution plan submissions required under section 165(d) of the Dodd-
Frank Act] where practicable.'' \14\ As the Corporation works to amend
the IDI rule, the Corporation will seek to reduce unnecessary
duplication between the IDI rule and the final rule.
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\14\ 84 FR 16620, 16625 (April 22, 2019).
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Firms Subject to Resolution Planning Requirements
The agencies received several comments regarding the Board's
proposed scope of application for the resolution planning requirement.
Certain commenters supported the Board's proposal to rely on the risk-
based indicators to identify those firms with $100 billion or more and
less than $250 billion in total consolidated assets that would remain
subject to resolution planning requirements under the final rule.
However, some commenters recommended changes to the manner in which the
risk-based indicators were proposed to be calculated or recommended
that the Board further narrow the scope of coverage of the resolution
planning requirement. Conversely, some commenters asserted that the
proposed scope of coverage should be expanded so that more firms would
be subject to the resolution planning requirement.
Filing Cycle
The agencies received comments in support of and opposed to the
proposed filing cycle. Some commenters asserted that a less-than-annual
requirement would allow sufficient time for covered companies to
integrate firm-specific feedback, while other commenters raised
concerns that significant changes to resolvability could occur between
less frequent resolution plan submissions. Some commenters asserted
that covered companies generally begin to prepare their resolution
plans at least one year prior to submission and recommended related
changes to the proposed filing cycle to enhance the predictability of
the timing of producing a resolution plan. For example, these
commenters asserted that the final rule should include a formal
timeline for the agencies to provide firm-specific feedback to covered
companies within one year following a resolution plan submission and
advanced notice requirements when the agencies require submission of a
full resolution plan or an interim update, or alter resolution plan
submission dates.
Informational Content
Several commenters asserted that the proposal should further tailor
informational content requirements among different categories and types
of covered companies. Some of these commenters also expressed concern
that certain covered companies within a category would have general
guidance directed to them that is not appropriate for their category.
Certain other commenters asserted that the proposed targeted resolution
plans and reduced resolution plans would contain inadequate
information. Some commenters supported the inclusion of a process by
which covered companies would be able to request waivers from certain
informational content requirements for their full resolution plans and
asserted that it would help to streamline resolution plan submissions.
However, some other commenters opposed the proposed firm-initiated
waiver request process and asserted that it was unnecessary or would be
subject to abuse by covered companies.
Critical Operations
Numerous commenters asserted that the proposed timeline for
identification and de-identification of a critical operation should be
modified to provide covered companies with additional notice of new
identifications prior to a resolution plan submission date. Some
commenters asserted that the final rule should automatically exempt
from the requirement to have a process for identifying critical
operations any covered company that does not currently have an
identified critical operation.
The comments on the proposed rule and the agencies' related
responses are discussed in further detail below.
III. Final Rule
A. Identification of Firms Subject to the Resolution Planning
Requirement and Filing Groups
1. Firms Subject to the Resolution Planning Requirement
Following EGRRCPA, three types of firms are statutorily subject to
the resolution planning requirement:
U.S. and foreign banking organizations with $250 billion
or more in total consolidated assets,
U.S. banking organizations identified as U.S. GSIBs, and
Any designated nonbank financial companies that the
Council has determined under section 113 of the Dodd-Frank Act should
be supervised by the Board.
As discussed in the proposal, following EGRRCPA, the Board has the
authority to apply the resolution planning requirement to firms with
$100 billion or more and less than $250 billion in total consolidated
assets.\15\ In the proposal, the Board proposed to apply the risk-based
indicators established in the notices of proposed rulemaking for the
tailoring rules to
[[Page 59198]]
identify those U.S. firms with total consolidated assets equal to $100
billion or more and less than $250 billion that would be subject to a
resolution planning requirement. Consistent with the notices of
proposed rulemaking for the domestic tailoring rule, the Board proposed
to apply resolution planning requirements to U.S. bank holding
companies with (a) total consolidated assets equal to $100 billion or
more and less than $250 billion and (b) $75 billion or more in any of
the following risk-based indicators: Cross-jurisdictional activity,
nonbank assets, weighted short-term wholesale funding, or off-balance
sheet exposure. Consistent with the notices of proposed rulemaking for
the FBO tailoring rule, the Board proposed to apply resolution planning
requirements to foreign banking organizations \16\ with (a) total
global assets equal to $100 billion or more and less than $250 billion,
(b) combined U.S. assets equal to $100 billion or more, and (c) $75
billion or more in any of the risk-based indicators measured based on
combined U.S. operations. In addition, the agencies proposed to use the
risk-based indicators to divide U.S. and foreign firms into groups for
the purposes of determining the frequency and informational content of
resolution plan filings.
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\15\ 12 U.S.C. 5365(a); EGRRCPA section 401(a)(1)(B)(iii) (to be
codified at 12 U.S.C. 5365(a)(2)(C)). See also EGRRCPA section
401(g).
\16\ Consistent with the 2011 rule and the proposal, for
purposes of the final rule, a foreign banking organization is a
foreign bank that has a banking presence in the United States by
virtue of operating a branch, agency, or commercial lending
subsidiary in the United States or controlling a bank in the United
States; or any company of which the foreign bank is a subsidiary.
\17\ Projected categories are based on data for Q1 2019. Actual
categories will be based on 4-quarter averages. For certain measures
for foreign banks, conservative assumptions were used to estimate
incomplete data.
\18\ Firms subject to Category I standards will be the U.S.
GSIBs. Any future Council-designated nonbank would file full and
targeted plans on a two-year cycle, unless the agencies jointly
determine the firm should file full and targeted plans on a three-
year cycle.
\19\ Firms subject to Category II standards will be: (1) U.S.
firms with (a) >=$700b average total consolidated assets; or (b)
>=$100b average total consolidated assets with >=$75b in average
cross-jurisdictional activity and (2) foreign banking organizations
(FBOs) with (a) >=$700b average combined U.S. assets; or (b) >=$100b
average combined U.S. assets with >=$75b in average cross-
jurisdictional activity.
\20\ Firms subject to Category III standards will be: (1) U.S.
firms with (a) >=$250b and <$700b average total consolidated assets;
or (b) >=$100b average total consolidated assets with >=$75b in
average total nonbank assets, average weighted short-term wholesale
funding, or average off-balance sheet exposure and (2) FBOs with (a)
>=$250b and <$700b average combined U.S. assets; or (b) >=$100b
average combined U.S. assets with >=$75b in average total nonbank
assets, average weighted short-term wholesale funding, or average
off-balance sheet exposure.
\21\ Other FBOs subject to resolution planning pursuant to
statute are FBOs with >=$250b global consolidated assets that are
not subject to Category II or Category III standards.
[GRAPHIC] [TIFF OMITTED] TR01NO19.021
Foreign banking organizations that are expected to be triennial
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reduced filers
Agricultural Bank of China
Australia and New Zealand Banking Group
Banco Bradesco
Banco De Sabadell
Banco Do Brasil
Banco Santander
[[Page 59199]]
Bank of China
Bank of Communications
Bank of Montreal
Bank of Nova Scotia
Bayerische Landesbank
BBVA Compass
BNP Paribas
BPCE Group
Caisse Federale de Credit Mutuel
Canadian Imperial Bank of Commerce
China Construction Bank Corporation
China Merchants Bank
CITIC Group Corporation
Commerzbank
Commonwealth Bank of Australia
Cooperative Rabobank
Credit Agricole Corporate and Investment Bank
DNB Bank
DZ Bank
Erste Group Bank AG
Hana Financial Group
Industrial and Commercial Bank of China
Industrial Bank of Korea
Intesa Sanpaolo
Itau Unibanco
KB Financial Group
KBC Bank
Landesbank Baden-Weurttemberg
Lloyds Banking Group
National Agricultural Cooperative Federation
National Australia Bank
Nordea Group
Norinchukin Bank
Oversea-Chinese Banking Corporation
Shinhan Bank
Skandinaviska Enskilda Banken
Societe Generale
Standard Chartered Bank
State Bank of India
Sumitomo Mitsui Financial Group
Sumitomo Mitsui Trust Holdings
Svenska Handelsbanken
Swedbank
UniCredit Bank
United Overseas Bank
Westpac Banking Corporation
Woori Bank
In the proposal, the Board noted that the thresholds and risk-based
indicators identified in the categories were designed to take into
account an individual firm's particular activities and organizational
footprint that may present significant challenges to an orderly
resolution. The Board proposed to apply a uniform threshold of $75
billion for each of these risk-based indicators, based on the degree of
concentration this amount would represent for each firm and the
proportion of the risk factor among all U.S. firms with $100 billion or
more in total consolidated assets that would be included by the
threshold.
In the proposal, the Board noted that increased levels of cross-
jurisdictional activity could increase operational complexity and that
it may be more difficult to resolve or unwind a firm's positions due to
the multiple jurisdictions and regulatory authorities involved and
potential legal or regulatory barriers to transferring financial
resources across borders. Similarly, the Board noted that bank holding
companies with significant nonbank assets would be more likely to be
engaged in activities such as prime brokerage, or complex derivatives
and capital markets activities. Where a firm has not engaged in
planning to address these particular challenges, it is less likely the
firm's resolution would proceed in an orderly manner without unduly
impacting other firms. Regarding weighted short-term wholesale funding,
the Board noted that firms particularly reliant on short-term funding
sources may be more vulnerable to large-scale funding runs or ``fire
sale'' effects on asset prices and therefore proposed to continue to
apply resolution planning requirements to firms with higher levels of
potential liquidity vulnerability, as measured by the firm's weighted
short-term wholesale funding. Finally, the Board noted that where a
firm's activities result in large off-balance sheet exposure, the firm
may be more vulnerable to significant draws on capital and liquidity in
times of stress. The proposal therefore would have continued to apply
resolution planning requirements to firms with this risk-based
indicator.
The agencies received several comments on the use of the four risk-
based indicators and associated thresholds.\22\ One commenter
reiterated concerns that it described in its comment letter on the
notices of proposed rulemaking for the tailoring rules and stated that
its concerns regarding those notices applied equally to the proposed
rule. Another commenter expressed general support for the risk-based
indicator approach. Several commenters recommended changes to the
calibration of U.S. assets and activity in the risk-based indicators
for foreign banking organizations. One commenter argued against the
inclusion of U.S. branches and agencies in the calculation of a foreign
firm's combined U.S. assets or thresholds for risk-based indicators
unless the operations of branches or agencies are significant to a
critical operation. Instead, the commenter recommended that risk-based
indicators be calculated consistent with how the strategic analysis
requirements in the 2011 rule apply to U.S. branches, agencies, and
offices. Another commenter argued against the use of U.S. branch assets
in determining activity in risk-based indicators because branches are
discrete entities from the U.S. intermediate holding companies and
often have more stable funding.
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\22\ This preamble responds to comments received on the proposed
rule regarding the risk-based indicators. Responses to comments
received on the notices of proposed rulemaking for the tailoring
rules and additional information concerning the basis for the risk-
based indicators established under the tailoring rules are included
in the notices of final rulemaking for the tailoring rules. See
Board Final Rule, ``Prudential Standards for Large Bank Holding
Companies, Savings and Loan Holding Companies, and Foreign Banking
Organizations'' published elsewhere in this issue of the Federal
Register.
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The resolution planning requirement currently applies to a foreign
banking organization's entire U.S. operations, including U.S. branches
and agencies. U.S. branches and agencies constitute a significant share
of these foreign banking organizations' presence in the United States.
In addition, the agencies' experience reviewing resolution plans
demonstrates that there are interconnections and dependencies between a
foreign firm's U.S. branches, agencies, and offices and its U.S.
subsidiaries, core business lines, and critical operations. The
commenters' proposals to exclude certain U.S. branches, agencies, and
offices from the calculation of the risk-based indicators or combined
U.S. operations would not be consistent with the objective of measuring
the full scope of potential risks to U.S. financial stability,
including risks associated with operational complexity. Moreover, it is
appropriate to tailor resolution planning requirements based on the
size and complexity of a foreign firm's entire U.S. operations because
the resolution planning requirement applies to a firm's entire U.S.
operations. Accordingly, under the final rule, risk-based indicators
and combined U.S. operations would be measured as proposed, including a
foreign firm's U.S. branches, agencies, and offices.
Two commenters expressed concerns with the use of asset thresholds
to determine a firm's category unless the asset threshold is indexed to
inflation or total U.S. banking assets. As further explained in the
notices of final rulemaking for the tailoring rules, the $100 billion
and $250 billion size thresholds prescribed in the Dodd-Frank Act, as
amended by EGRRCPA, are fixed by statute.\23\ Indexing the other
[[Page 59200]]
thresholds would add complexity, a degree of uncertainty, and potential
discontinuity to the framework. The Board acknowledges the thresholds
should be reevaluated over time to ensure they appropriately reflect
growth on a macroeconomic and industry-wide basis, as well as to
continue to support the objectives of the final rule. The Board plans
to accomplish this by periodically reviewing the thresholds under the
tailoring rules and proposing changes through notice and comment
process, rather than including an automatic adjustment of thresholds
based on indexing.
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\23\ Section 165 of the Dodd-Frank Act does provide the Board
with discretion to establish a minimum asset threshold above the
statutory thresholds for some, but not all, enhanced prudential
standards. However, the Board may only utilize this discretion
pursuant to a recommendation by the Financial Stability Oversight
Council in accordance with section 115 of the Dodd-Frank Act. 12
U.S.C. 5365(a)(2)(B).
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Several commenters discussed the criteria for being subject to
Category II standards. Two commenters supported the calibration of
these criteria as proposed and asserted that no additional risk-based
indicators should be used to determine whether a firm would be subject
to Category II standards. These commenters opposed the use of
additional risk-based indicators (e.g., weighted short-term wholesale
funding, nonbank assets, or off balance-sheet exposure) and stated that
such indicators would only be appropriate if the threshold were set to
$210 billion. Another commenter stated that the criteria for being
subject to Category II standards should not be based on exceeding the
threshold for cross-jurisdictional activity only.
As further explained in the notices of final rulemaking for the
tailoring rules, significant cross-border activity can indicate
heightened interconnectivity and operational complexity. Cross-
jurisdictional activity can add operational complexity in normal times
and complicate the ability of a firm to undergo an orderly resolution
in times of stress, generating risks to financial stability in the
United States. In addition, cross-jurisdictional activity may present
increased challenges in resolution because there could be legal or
regulatory restrictions that prevent the transfer of financial
resources across borders where multiple jurisdictions and regulatory
authorities are involved. The cross-jurisdictional activity indicator
and threshold is intended to identify firms with significant cross-
border activities. Accordingly, the tailoring rules apply Category II
standards to domestic and foreign banking organizations with cross-
jurisdictional activity of $75 billion or more.
Alternative Scoping and Tailoring Criteria
In the proposal, the Board also proposed an alternative approach
for assessing the risk profile and systemic footprint of a U.S. banking
organization and of a foreign banking organization's combined U.S.
operations or U.S. intermediate holding company: Using a single,
comprehensive score. The Board uses an identification methodology
(scoring methodology) to identify a U.S. bank holding company as a U.S.
GSIB and apply risk-based capital surcharges to these firms. The Board
proposed using the same scoring methodology to determine whether to
apply the resolution planning requirements to firms with $100 billion
or more and less than $250 billion in total consolidated assets.\24\
The agencies also proposed using this same scoring methodology to
divide U.S. and foreign firms into groups to determine the frequency
and informational content of resolution plan filings.
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\24\ As discussed in further detail in the proposal, the scoring
methodology in the Board's regulations that is used to calculate a
U.S. GSIB's capital surcharge includes two methods (12 CFR part 217,
subpart H). The first method is based on the sum of a firm's
systemic indicator scores reflecting its size, interconnectedness,
cross-jurisdictional activity, substitutability, and complexity
(method 1). The second method is based on the sum of these same
measures of risk, except that the substitutability measures are
replaced with a measure of the firm's reliance on short-term
wholesale funding (method 2).
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One commenter directed agency staff to comments on the alternative
scoping criteria in relation to the notices of proposed rulemaking for
the tailoring rules. The comment generally expressed support for the
risk-based indicator methodology rather than the alternative
methodology, which the commenter described as flawed conceptually and
in calibration.
Under the tailoring rules, the Board finalized an indicators-based
approach for applying Category II, III, or IV standards to the firms,
as this approach provides a simple framework that supports the
objectives of risk sensitivity and transparency. To determine whether a
firm with total consolidated assets equal to $100 billion or more and
less than $250 billion is subject to resolution planning requirements,
the Board is finalizing the same indicators-based approach, requiring
any such firm that is subject to Category II or III standards to submit
resolution plans. As under the proposal, and as further described
below, the agencies are similarly finalizing the indicators-based
approach for determining the scope of resolution planning requirements
for firms other than the U.S. GSIBs and nonbank financial companies
supervised by the Board. The Board will continue to use the scoring
methodology to apply Category I standards to a U.S. GSIB and, as under
the proposal, the final rule relies on this identification for
determining the scope of resolution planning requirements for these
firms.
U.S. Covered Companies With $100 Billion or More and Less Than $250
Billion in Total Consolidated Assets
Under the proposed rule, resolution planning requirements would not
have applied to U.S. firms with total consolidated assets of $100
billion or more and less than $250 billion whose activities did not
exceed the threshold for any of the risk-based indicators (i.e., cross-
jurisdictional activity, nonbank assets, weighted short-term wholesale
funding, or off-balance-sheet exposure). In the proposal, the Board
noted that it was less likely that one of these firms' failure would
present a risk of serious adverse effects on U.S. financial stability
and that requiring a plan for rapid and orderly resolution in
bankruptcy from such a firm may impose burden without sufficient
corresponding benefit.
The Board received several comments on this aspect of the proposal.
One commenter expressed support for not applying the resolution
planning requirements to U.S. firms subject to Category IV standards.
Other commenters stated that the Board should apply resolution planning
requirements to all firms with $100 billion or more and less than $250
billion in total consolidated assets. A further commenter expressed
concern that the proposal would not apply resolution planning
requirements to any firm with less than $250 billion in total
consolidated assets. The commenter asserted that, instead, resolution
planning should be required for all firms with more than $100 billion
in total consolidated assets because the Corporation's resolution
authority under the Federal Deposit Insurance Act does not extend
beyond a covered company's insured depository institution subsidiary,
and that the resolution plan process under the final rule should be
coordinated with the IDI rule. Another commenter expressed concerns
about removing the resolution planning requirements for large regional
banks, asserting that the agencies did not explain sufficiently the
rationale for removing the requirement for U.S. firms subject to
Category IV standards.
The Board is finalizing this aspect of the proposal as proposed. In
response to comments on this aspect of the final
[[Page 59201]]
rule, the Board notes that the proposal and final rule would continue
to apply resolution planning requirements to some firms with $100
billion or more and less than $250 billion in total consolidated
assets.\25\ As explained above, the final rule relies on the risk-based
indicators to apply resolution planning requirements to firms in this
group. The Board believes the risk-based indicators are an effective
means for identifying those firms with total consolidated assets of
$100 billion or more and less than $250 billion whose material
financial distress or failure would pose a threat to U.S. financial
stability, for the reasons described above, in the proposal, and in the
proposed and final tailoring rules. Where a firm's activities in one or
more of the risk-based indicators exceed the $75 billion threshold, it
is more likely that its failure could adversely affect U.S. financial
stability; accordingly, the firm should be subject to resolution
planning requirements. However, when a firm's activities do not exceed
one or more of the risk-based indicators and its total consolidated
assets are less than $250 billion, it is less likely that the firm's
failure would have serious adverse effects on U.S. financial stability
and, accordingly, to impose resolution planning requirements on such a
firm would not yield a sufficient corresponding benefit.
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\25\ For this purpose, total consolidated assets are determined
under the tailoring rules. Accordingly, a firm has total
consolidated assets of $100 billion or more if the average of its
total consolidated assets as reported on multiple regulatory
reports, as specified in the tailoring rules, is $100 billion or
more.
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Foreign-Based Covered Companies With $100 Billion or More and Less Than
$250 Billion in Total Global Assets
In the proposal, the Board proposed applying resolution planning
requirements to foreign banking organizations with (a) total global
assets equal to $100 billion or more and less than $250 billion, (b)
combined U.S. assets equal to $100 billion or more, and (c) $75 billion
or more in any of the following risk-based indicators measured based on
combined U.S. operations: Cross-jurisdictional activity, nonbank
assets, weighted short-term wholesale funding, or off-balance-sheet
exposure. The Board noted in the proposal that it would no longer
require resolution plan submissions from foreign banking organizations
with total global assets equal to $100 billion or more and less than
$250 billion where (a) the firm has combined U.S. assets below $100
billion or (b) the firm does not have $75 billion or more in any of the
risk-based indicators measured based on combined U.S. operations.
One commenter asserted that resolution planning requirements should
be eliminated entirely for foreign firms with limited U.S. operations,
regardless of their total global asset size, or, in the alternative,
resolution planning requirements should apply to a foreign firm subject
to Category IV standards only if it is a global systemically important
financial institution. The commenter asserted that foreign firms should
also be permitted to comply with resolution planning requirements
pursuant to the final rule by certifying compliance with the home
country resolution requirements.
The Board is finalizing this aspect of the proposal as proposed.
The Board notes that the Dodd-Frank Act, as amended by EGRRCPA,
requires all foreign banking organizations with $250 billion or more in
total global assets to submit resolution plans, and a certification of
home country compliance by itself would not satisfy this statutory
standard. Moreover, as explained above, the Board believes that the
risk-based indicators are an effective means for identifying those
firms that should be subject to resolution planning requirements due to
the potential effect on U.S. financial stability of their financial
distress or failure.
Exiting Covered Company Status
The proposal would have updated the methodology for ascertaining
when a firm ceased to be a covered company. With respect to a decrease
in assets, under the proposal, a U.S. firm would have ceased to be a
covered company when its total consolidated assets are less than $250
billion based on total consolidated assets for each of the four most
recent calendar quarters (and it is not otherwise subject to Category
II or Category III standards based on the risk-based indicators
identified above). A foreign banking organization that files quarterly
reports on Form FR Y-7Q similarly would have been assessed on the basis
of its total global assets for each of the four most recent calendar
quarters. A foreign banking organization that files the Y-7Q report
annually rather than quarterly would have been assessed based on its
total global assets over two consecutive years. The agencies would have
retained the discretion to jointly determine that a firm is no longer a
covered company at an earlier time than it would be pursuant to its
quarterly or annual reports. Under the proposal, firms that would have
ceased to be, or to be treated as, bank holding companies or that were
de-designated by the Council for supervision by the Board would no
longer have been covered companies and would not have had any further
resolution planning requirements as of the effective date of the
applicable action unless there were a subsequent change to their
status. The agencies received no comments on this aspect of the
proposal and are finalizing it as proposed, but have clarified in the
final rule that a firm's total consolidated assets are determined on
the basis of total consolidated assets as reported on each of its four
most recent quarterly reports or two most recent annual reports.
2. Filing Groups and Filing Cycle
The proposal would have divided covered companies into three groups
of filers: (a) Biennial filers; (b) triennial full filers; and (c)
triennial reduced filers. Under the proposal, all covered companies
would have had a July 1 submission date, instead of the current
division between July 1 and December 31.
The agencies received comments offering general support for the
longer filing cycle and asserting that it would allow filers sufficient
time to consider firm-specific feedback. The agencies also received
comments suggesting that the current annual filing requirement be
retained to reflect the potential for rapid changes to firms' structure
and financial condition that may cause resolution plans to become
outdated.
The agencies note that the annual submission requirement has been a
challenging constraint for both the firms and the agencies. The annual
requirement did not provide sufficient time for the agencies to review
the resolution plans and develop useful firm-specific feedback or
general guidance, and for the firms to consider that firm-specific
feedback or general guidance in their next resolution plan submissions.
Independent of the proposal, the agencies have extended the resolution
plan filing deadlines over the past few submission cycles to provide at
least two years between resolution plan submissions. Accordingly, the
agencies are finalizing an extended filing cycle, consistent with the
proposal and described in more detail below.
The agencies received one comment regarding the proposal to move
the submission date to July 1 for all filers. The commenter suggested
that the 2011 rule's December 31 submission date be retained for
triennial full filers subject to Category III standards as this would
allow more efficient allocation of resources for resolution planning
and other supervisory activities. The
[[Page 59202]]
agencies are finalizing the July 1 submission date as proposed. Having
one resolution plan submission date will simplify administration of the
final rule for filers and the agencies, such as when filers change
filing groups.
Biennial Filers
In the proposal, the biennial filers would have comprised firms
subject to Category I standards, or the U.S. GSIBs, as well as any
nonbank financial company supervised by the Board that has not been
jointly designated as a triennial full filer by the agencies. The
agencies noted that any such designation of a nonbank financial company
would be made taking into account the relevant facts and circumstances,
including the degree of systemic risk posed by the particular covered
company's failure.
Since the failure of a firm in this group would pose the most
serious threat to U.S. financial stability, the proposal would have
applied the most stringent resolution planning requirements to biennial
filers in terms of both submission frequency and informational content.
Under the proposed rule, the biennial filers would have been required
to submit a resolution plan every two years, alternating between a full
resolution plan, subject to the waiver option, and a targeted
resolution plan. The agencies noted that the U.S. GSIBs' resolution
plans had matured over time and these firms had taken meaningful steps
to develop the foundational capabilities necessary for the
implementation of their resolution strategies. In addition, in recent
years, the agencies have provided extensions under the 2011 rule to
provide the biennial filers with two years between resolution plan
submissions, so formalization of a two-year cycle would be consistent
with established practice.
The agencies received two comments on this aspect of the proposal.
One commenter stated that the U.S. GSIBs should be required to submit
full resolution plans every two years. Another commenter expressed
general opposition to the two-year cycle and asserted that it would be
insufficient to capture important information about firms'
resolvability due to the speed with which changes can occur.
The agencies are finalizing this aspect of the proposal as
proposed. After several rounds of resolution plans, firm-specific
feedback, and general guidance, the U.S. GSIBs' resolution plans have
matured over time, making more frequent submissions generally
unnecessary. In addition, experience under the 2011 rule has shown that
an annual resolution plan submission schedule is too challenging a
constraint for the reasons described above. The agencies note, however,
that they retain the ability under the final rule to obtain key
information between resolution plan submissions, including by requiring
interim updates and receiving notices of extraordinary events, which
will allow the agencies to remain informed of material developments
affecting resolvability notwithstanding the less frequent filing cycle.
The agencies also will have authority to require a full resolution plan
instead of a targeted resolution plan and to move a resolution plan
submission date.
Triennial Full Filers
The proposal identified the second filing group, triennial full
filers, as firms subject to Category II or III standards under the
notices of proposed rulemaking for the tailoring rules, as well as any
nonbank financial company supervised by the Board that was designated
as a triennial full filer by the agencies.
The agencies proposed that triennial full filers be on a three-year
filing cycle rather than a two-year filing cycle because the failure of
a triennial full filer would generally be less likely to pose a threat
to U.S. financial stability as compared to the failure of a biennial
filer. The proposal would have required triennial full filers to submit
a resolution plan every three years, alternating between a full
resolution plan and a targeted resolution plan.
The agencies received several comments on the proposed three-year
filing cycle for triennial full filers. One commenter expressed support
for the proposed three-year cycle, and alternating between full and
targeted resolution plans for firms subject to Category III standards.
Another commenter stated that these firms should be on a biennial
schedule, alternating between full and targeted resolution plans. One
commenter expressed general opposition to the three-year cycle and
asserted that it would be insufficient to capture important information
about firms' resolvability due to the speed at which change can occur.
Another commenter stated that firms that would be triennial full filers
under the proposal should be allowed to submit targeted resolution
plans every three years, absent an extraordinary event.
The agencies are finalizing as proposed the three-year cycle for
triennial full filers, alternating between full and targeted resolution
plans. While the failure of a firm in this group could threaten U.S.
financial stability, such failure is less likely to threaten U.S.
financial stability as compared to the failure of a biennial filer.
Accordingly, it is appropriate to tailor this group's requirements
relative to the requirements for biennial filers. Given these firms'
size and complexity, the agencies have determined that a triennial
schedule is appropriate. In addition, as with biennial filers, the
agencies would retain authority to require interim updates and full
resolution plans, and to move resolution plan submission dates, and
firms would be required to submit notices of extraordinary events,
which would allow the agencies to remain informed of material
developments affecting resolvability that occur between resolution plan
submissions.
The agencies are not adopting commenters' recommendation to limit
all resolution plan submissions from triennial full filers to targeted
resolution plans absent an extraordinary event because the agencies
believe that, given the potential risks inherent in firms in this group
and because firms and markets change over time, it is appropriate for
these firms to submit a full resolution plan at least every six years.
In addition, the agencies note that a firm may apply for a waiver from
certain informational content requirements in its full resolution plan
and incorporate by reference information in a prior submission that
remains accurate in all respects that is material to the covered
company's resolution plan, as described further below. These aspects of
the final rule should appropriately tailor the burden of preparing a
full resolution plan.
In the proposal, the agencies also noted that the proposed
triennial full filer group would have included foreign banking
organizations that had previously received detailed general guidance
from the agencies.\26\ These firms have taken important steps to
enhance their resolvability and facilitate their orderly resolution in
bankruptcy and have significantly reduced the size and risk profiles of
their U.S. operations since the passage of the Dodd-Frank Act and in
response to the implementation of Regulation YY,\27\ although the
failure of one of these firms could potentially pose a threat to U.S.
financial stability. The agencies stated that it was appropriate that
these firms be part of
[[Page 59203]]
the triennial full filer group and submit resolution plans on the
three-year filing cycle because the preferred outcome for each of these
foreign banking organizations is a successful home country resolution
using a single point of entry resolution strategy, not the resolution
strategy described in its U.S. resolution plan.
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\26\ See, e.g., Guidance for 2018 Sec. 165(d) Annual Resolution
Plan Submissions By Foreign-based Covered Companies that Submitted
Resolution Plans in July 2015, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170324a21.pdf, https://www.fdic.gov/resauthority/2018subguidance.pdf.
\27\ 12 CFR part 252.
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The agencies received one comment on this aspect of the proposal.
The commenter asserted that the largest and most complex foreign
banking organizations should submit resolution plans every two years,
alternating between full and targeted resolution plans, because they
pose similar risks to the U.S. financial system as the risks posed by
the U.S. GSIBs. The commenter also stated that the rationale that these
firms would be resolved through a home country single point of entry
strategy was not compelling because the purpose of the resolution
planning requirement is to plan for the failure of a U.S. entity.
The agencies note that the U.S. footprints of the larger and more
complex foreign banking organizations are significantly smaller than
those of, and do not present the same complexities as, the U.S. GSIBs.
Consequently, while the failure of these operations may threaten the
U.S. financial system, it is less likely than the failure of a U.S.
GSIB, regardless of whether the global firm executes its preferred
resolution strategy successfully. Accordingly, the agencies believe
that a longer filing cycle is appropriate for these firms and are
finalizing this aspect of the proposal as proposed.
Triennial Reduced Filers
The proposal identified a third group, triennial reduced filers,
which would have consisted of any covered company that was not subject
to Category I, II, or III standards and was not a nonbank financial
company supervised by the Board. The proposal would have applied less
stringent resolution planning requirements to firms in this group
because they do not have the same size or complexity as firms that
would have been subject to Category I, II, or III standards. Under the
proposal, triennial reduced filers would have been required to submit
reduced resolution plans every three years. The proposal also would
have required a new triennial reduced filer to submit a full resolution
plan as its initial submission and thereafter a reduced resolution plan
every three years.
The agencies received one comment on this aspect of the proposal.
The commenter asserted that some of the larger triennial reduced filers
should be on a biennial schedule, alternating between full and targeted
resolution plans, and supported applying a longer filing cycle to the
U.S. operations of certain smaller foreign firms.
The agencies are finalizing the triennial reduced filer group and
related filing cycle as proposed. Given the limited scope of these
firms' U.S. operations and activities, the agencies have determined
that it is appropriate for triennial reduced filers to submit reduced
resolution plans on a three-year cycle; this requirement will
appropriately tailor burden for these firms while ensuring that the
agencies remain apprised of changes that could materially affect the
firms' resolvability or resolution strategies. In addition, the failure
of the U.S. operations of one of these firms may threaten the U.S.
financial system, but failure of these operations poses a lower risk
than the failure of a biennial filer or triennial full filer.
Nonetheless, the agencies retain the ability to obtain additional
information between resolution plan submissions, as mentioned above,
and to require any firm to submit a full resolution plan, as described
below.
Moving Submission Dates, Changing Plan Content, and Requiring Interim
Updates
The proposal would have provided the agencies the flexibility to
move covered companies' submission dates. The proposal would have
required the agencies to notify a covered company that had previously
submitted a resolution plan at least 180 days prior to the new
submission date. A new covered company would have received at least 12
months' notice prior to the new submission date. Consistent with the
2011 rule, the proposal also would have allowed agencies to require
covered companies to provide interim updates within a reasonable amount
of time. In addition, the proposal would have allowed the agencies to
jointly require that a covered company submit a full resolution plan
within a reasonable period of time.
The agencies received several comments on these aspects of the
proposal. Commenters asserted that the final rule should provide a
minimum of 12 months' notice prior to requiring a full resolution plan
or an off-cycle submission and six or 12 months' notice prior to an
interim update. Commenters also asserted that the agencies should
clarify that a ``reasonable amount of time'' for prior notice of a full
resolution plan submission would be at least 12 months' notice. These
commenters generally asserted that their proposed notice periods are
necessary to provide covered companies with sufficient time to prepare
their resolution plans.
The final rule contains certain changes from the proposal in
response to these commenters. Under the final rule, the agencies will
provide at least 12 months' notice prior to requiring a full resolution
plan submission or an off-cycle submission (i.e., a submission on a
date other than the regularly scheduled date for the covered company's
filing group).\28\ The agencies believe that these changes will enhance
the predictability of resolution plan submission dates, provide
appropriate time for resolution plan preparation, and help facilitate
covered companies' resource allocation decisions.
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\28\ If the agencies were to require an off-cycle submission
from a covered company, the covered company's next resolution plan
submission date after the off-cycle submission date would be
determined based on the off-cycle submission date. For example, if
the agencies were to move a triennial full filer's submission date
from July 1, 2027 to July 1, 2026, the covered company's next
resolution plan submission date after July 1, 2026 would be July 1,
2029 (absent the agencies jointly moving the July 1, 2029 submission
date). The agencies will consider the impact on the covered
company's future resolution plan submission dates and any deadlines
related to those submission dates when requiring an off-cycle
submission.
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Consistent with the proposal and the 2011 rule, the final rule
provides that the agencies may require a covered company to submit an
interim update within a reasonable amount of time, as jointly
determined by the agencies. An interim update is intended to be a
flexible tool for the agencies to obtain information between resolution
plan submission dates. When requiring an interim update, the agencies
will specify the portions or aspects of a previously submitted
resolution plan that a firm is required to update. Accordingly, the
informational content requirements for an interim update are not fixed,
making it difficult to identify a specific period that is necessary to
prepare every interim update. While a six- or 12-month period may be
appropriate in certain circumstances, a shorter time period may be
appropriate in other circumstances, especially where an interim update
would contain only limited information. Accordingly, the agencies do
not believe that it would be appropriate to introduce a fixed notice
period for an interim update.
The final rule provides that the agencies may require a covered
company to submit a full resolution plan instead of a targeted or
reduced resolution plan that the covered company is otherwise required
to submit. The full resolution plan's submission date will be the
submission date for the replaced targeted or reduced
[[Page 59204]]
resolution plan.\29\ The submission of such a full resolution plan will
not change the type of resolution plan that the covered company is
otherwise thereafter required to submit.
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\29\ Accordingly, a firm could be required to submit a full
resolution plan while the other members of the firm's filing group
are required to submit targeted or reduced resolution plans on that
submission date. Thereafter, the firm that was required to submit a
full resolution plan will revert to its filing group's regular
resolution plan type submission schedule.
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The agencies do not expect to regularly exercise this authority.
However, it may be necessary to require a full resolution plan instead
of a targeted or reduced resolution plan under unusual circumstances,
and the agencies have preserved this authority as a means for the
agencies to receive additional information from firms when appropriate.
The agencies could, for example, exercise their discretion to require a
triennial reduced filer whose activities have evolved gradually (rather
than as the result of a single material event) to submit full
resolution plan in lieu of a reduced resolution plan if the aggregate
effect of those changes might meaningfully increase the risk that the
firm's failure could have serious adverse effects on U.S. financial
stability.
B. Resolution Plan Content
1. General Guidance and Firm-Specific Feedback
The preamble to the proposal specified that general guidance
previously directed to specific full resolution plan filers concerning
the content of their upcoming submissions would continue to be directed
to those individual firms.
The agencies received several comments related to prior resolution
planning general guidance and firm-specific feedback. Some commenters
suggested that existing resolution planning general guidance directed
to some firms should be consolidated and tailored among the different
categories of firms, that any future general guidance be subject to
notice and public comment, and that the agencies commit to providing
firm-specific feedback on resolution plans and any general guidance no
later than 12 months prior to a covered company's resolution plan
submission date. These commenters asserted in particular that covered
companies subject to Category II or III standards should not receive
general guidance that is similar to the general guidance that is
directed to the U.S. GSIBs, which are subject to Category I standards.
A few commenters suggested that the agencies clarify to whom existing
general guidance is directed, and one commenter suggested incorporating
existing general guidance into the final rule.
The final rule provides that, absent extenuating circumstances, the
agencies will provide a firm with notice of any deficiency or
shortcoming identified by the agencies and any other firm-specific
feedback regarding its resolution plan no later than 12 months after
the later of (1) the date when the firm submitted the resolution plan
and (2) the date by which the firm was required to submit the
resolution plan. The agencies recognize firms' strong interest in
prompt firm-specific feedback from the agencies and in having
sufficient time to respond thereto, and would expect to exercise their
authority to provide such notice after the one-year period only when
providing the notice within a year would be impractical due to
circumstances outside the agencies' control. Absent extenuating
circumstances, this approach will provide a firm with at least one year
to consider any and all firm-specific feedback before it is next
required to submit a resolution plan. However, the agencies would
retain the authority to require a firm to submit within a shorter
period a revised resolution plan that addresses deficiencies or an
interim update.
In addition to firm-specific feedback that provides the agencies'
views on a particular resolution plan,\30\ the agencies may continue to
issue general guidance regarding future resolution plan submissions.
The firm-specific feedback letters sent to-date to firms are examples
of the firm-specific feedback that the agencies will provide to firms
within the 12-month period described in the previous paragraph. While
both firm-specific feedback (other than a notice of a deficiency) and
general guidance are meant to assist firms in preparing future
resolution plans, general guidance outlines the agencies' expectations
or priorities and articulates the agencies' general views regarding
resolution plans more generally than firm-specific feedback, which
presents the agencies' views on a particular resolution plan. The
agencies will strive to provide final general guidance at least a year
before the next resolution plan submission date of firms to which the
general guidance is directed.
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\30\ The agencies may provide the same or substantially similar
firm-specific feedback to more than one firm. For example, some
elements of firm-specific feedback provided to the U.S. GSIBs may be
the same or substantially similar when certain aspects of their
resolution plans are substantially similar.
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Existing general guidance, including its content and scope, is not
modified by the final rule. Accordingly, the detailed general guidance
that certain foreign banking organizations have received from the
agencies (FBO guidance) \31\ continues to be directed to only those
firms and is not directed to all triennial full filers as a result of
the changes from the 2011 rule reflected in the final rule. Likewise,
general guidance directed to certain domestic banking organizations
(domestic guidance) \32\ continues to be directed to only those
domestic banking organizations to which it was directed prior to
adoption of the final rule. Because general guidance sets forth non-
binding expectations as opposed to rule-based requirements, the
agencies do not believe that it is necessary or appropriate to
incorporate all general guidance into the final rule.
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\31\ See Guidance for 2018 Sec. 165(d) Annual Resolution Plan
Submissions By Foreign-based Covered Companies that Submitted
Resolution Plans in July 2015, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170324a21.pdf, https://www.fdic.gov/resauthority/2018subguidance.pdf.
\32\ See Guidance for Sec. [thinsp]165(d) Resolution Plan
Submissions by Domestic Covered Companies applicable to the Eight
Largest, Complex U.S. Banking Organizations, 84 FR 1438, 1449
(February 4, 2019).
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The agencies sought and received public comment on the domestic
guidance in 2018. The notice and comment process allowed the agencies
to gain valuable insight, which led to improvements and clarifications
in the final domestic guidance. Similar to the domestic guidance, the
agencies intend to consolidate and request public comment in the near
future on all aspects of the FBO guidance, including the informational
content expectations and the subset of firms to which it is directed.
The agencies expect that this process will lead to similar benefits for
the FBO guidance. Similarly, the agencies intend to make any future
general guidance concerning resolution planning available for public
comment, and will endeavor to finalize any such general guidance at
least one year prior to the submission date for the first resolution
plan submission to which it would apply. The agencies will continue to
provide firm-specific feedback on resolution plan submissions without
first making that firm-specific feedback available for notice and
comment.
2. Material Changes and Extraordinary Events
The proposal would have revised and clarified the requirements for
filing a notice of material events to reflect the creation of a
material changes definition. A material change would have been defined
as any event,
[[Page 59205]]
occurrence, change in conditions or circumstances, or other change that
results in, or could reasonably be foreseen to have a material effect
on the resolvability of the covered company, the covered company's
resolution strategy, or how the covered company's resolution strategy
is implemented. Full, targeted, and reduced resolution plans would have
been required to include information about material changes since a
covered company's previously submitted resolution plan and changes the
covered company made to its resolution plan in response.
Because of the broad definition of ``material change,'' the
agencies determined that a notice requirement triggered by the
occurrence of a material change between resolution plan submissions was
not appropriate and instead proposed the concept of an extraordinary
event, which would have required such a notice. Under the proposed
rule, a material merger, acquisition of assets or other similar
transaction, or a fundamental change to a covered company's resolution
strategy would have been an extraordinary event requiring notice to the
agencies between resolution plan submissions.
One commenter supported the inclusion in the proposal of the terms
``material change'' and ``extraordinary event,'' while another
commenter expressed concern that the proposal put too much reliance on
firms self-identifying material changes.
The final rule includes the proposed provisions regarding
``material changes'' \33\ and ``extraordinary events,'' with the
clarification that a notice related to an extraordinary event must
describe the event and explain how the event affects the resolvability
of the firm. The agencies believe that firms can effectively identify
these types of events, and note that the rule's requirement that the
board of directors (or delegee in the case of a foreign firm) approve
each resolution plan should help ensure that firms take appropriate
steps to identify material changes. In addition, the final rule has
been revised from the proposal to require that a firm affirmatively
state in its resolution plan that no material change has occurred since
its prior resolution plan submission if the resolution plan does not
identify any material changes. The agencies believe that this
clarification will further help to ensure that firms give due attention
to the requirement to identify material changes.
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\33\ As noted in the proposal, such changes include the
identification of a new critical operation or core business line;
the identification of a new material entity or the de-identification
of a material entity; significant increases or decreases in the
business, operations, or funding of a material entity; or changes in
the primary regulatory authorities of a material entity or the
covered company on a consolidated basis. Other such changes include
material changes in operational and financial interconnectivity,
both those that are intra-firm and external. Examples of such
operational interconnectivity include reliance on affiliates for
access to key financial market utilities or critical services, or
significant reliance on the covered company by other firms for
certain Payments, Clearing, and Settlement (PCS) services, including
agent bank clearing or nostro account clearing, or government
securities settlement services. Examples of such financial
interconnectivity include a material entity becoming reliant on an
affiliate as a source for funding or collateral, or the covered
company becoming a major over-the-counter derivatives dealer.
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3. Full Resolution Plans
The proposal would not have generally modified the components or
informational content requirements of a full resolution plan. Through
numerous resolution plan submissions, the agencies and firms have
gained familiarity with the format and content of the information
required to be submitted pursuant to the 2011 rule. The agencies also
recognize the utility of the existing informational content
requirements for full resolution plans. Focus on these items has
facilitated resolution plan and resolvability improvements,
particularly by the largest and most complex firms.
Several commenters suggested that the proposal tailor the full
resolution plan informational content requirements between categories
of firms, as well as among domestic and foreign firms based on their
relative risk to U.S. financial stability. One commenter suggested that
the contents of a full resolution plan should be further tailored for
foreign firms, focus on critical operations in the United States, and
include U.S. branches in the firm's strategic analysis only if they are
significant to a critical operation. The commenter also suggested that
the agencies should revise the definition of ``covered company'' to
clarify that the strategy for a foreign firm need only focus on
resolution of its U.S. core business lines, critical operations, and
material entities. The commenter also suggested that the agencies
confirm that foreign firms that have filed resolution plans under the
2011 rule will not be subject to requirements that impose greater
burdens than applied previously, and that any new requirements be based
on the occurrence of extraordinary events.
The agencies are not changing the informational content
requirements of a full resolution plan in the final rule from the
proposal, other than requiring an affirmation that no material change
has occurred, if applicable. With respect to differentiation of
requirements between domestic and foreign firms, section __.5(a) of the
final rule appropriately distinguishes between informational content
requirements for domestic firms and foreign firms by focusing foreign
firms' resolution plans on information related to their U.S.
operations, consistent with the 2011 rule. The agencies do not believe
that it is appropriate to limit resolution plan content to operations
that are related to a critical operation because the Dodd-Frank Act's
resolution planning requirement requires firms to plan generally for
their rapid and orderly resolution. Similarly, nothing in the Dodd-
Frank Act suggests that branches should be categorically excluded as
suggested. However, the agencies note that, consistent with the 2011
rule, the final rule limits the strategic analysis requirements
relating to material entities that are subject to an insolvency regime
other than the Bankruptcy Code (including branches) by allowing covered
companies to exclude such entities from their strategic analysis unless
the entities have $50 billion or more in total assets or conduct a
critical operation. The agencies have found this limitation to
appropriately capture the need for information about material entities
that may affect U.S. financial stability and accordingly are retaining
it under the final rule.
Although the informational content requirements for resolution
plans are not differentiated among filing groups in the final rule, the
firm-initiated waiver request process will enable further tailoring of
the informational content requirements of full resolution plans based
on the attributes and risks posed by a particular covered company and
the content of firms' most recent submissions. In addition, the
agencies will retain the authority to tailor informational content
requirements through waivers on the agencies' own initiative and will
continue to communicate their tailored expectations for individual
firms' resolution plans through firm-specific feedback. Moreover, as
explained in more detail below, under the final rule the firm-initiated
waiver request process would be available only to triennial full filers
and triennial reduced filers. As a result, the final rule would keep in
place all informational content requirements for biennial filers' full
resolution plans unless the agencies grant a waiver on their own
initiative. As explained below, this change to the process for covered
companies to request waivers reflects that among all categories of
covered companies, biennial filers' material financial distress or
failure
[[Page 59206]]
would be most likely to pose risks to U.S. financial stability, so
their full resolution plans should, as a general matter, be the most
comprehensive. The agencies believe that this procedural change is also
responsive to commenters' concerns about the degree of tailoring of
informational content requirements between biennial filers and
triennial full filers. Accordingly, the agencies believe that the final
rule reflects appropriate tailoring of informational content among
different categories of covered companies.
4. Waivers of Informational Content Requirements
The proposal would have continued to permit the agencies to waive
certain informational content requirements for one or more firms on the
agencies' joint initiative, given that through a covered company's
repeated resolution plan submissions, certain aspects of its resolution
plan may reach a steady state or become less material such that regular
updates would not be useful to the agencies in their review of the
resolution plan. The proposal also introduced a process whereby a
covered company that had previously submitted a resolution plan would
have been able to apply for a waiver of certain informational content
requirements of a full resolution plan. Under the proposal, firms would
have been able to submit one waiver request per filing cycle, which
would have included a public section containing the requirements sought
to be waived. These requests would have been required to be submitted
at least 15 months before the submission date and include all
information necessary to support the request. A waiver request would
have been automatically granted on the date that was nine months prior
to the submission date for the resolution plan to which it related if
the agencies did not jointly deny the waiver prior to that date. The
proposal would have enabled the agencies to deny a waiver in their
discretion.
Several commenters supported the firm-initiated waiver request
process, noting that the process would help streamline submissions and
that automatically approving waivers unless jointly denied would ensure
that requests would not be unduly delayed. One of those commenters
suggested that the waiver should be made automatic for filers that
qualified to submit tailored resolution plans under the 2011 rule,
while others, as discussed above, generally contended that different
categories of filers should be subject to different levels of
resolution plan informational content requirements. Other commenters
expressed concern that the firm-initiated waiver request process was
unnecessary or would inappropriately reduce resolution plan content
requirements, increase burden on the agencies, and be biased in favor
of approval. One commenter suggested that waivers should be required to
be approved by both agencies. This commenter was further concerned that
the agencies could grant waivers for multiple submission cycles,
effectively undermining the proposed rule's limit of one waiver request
per submission cycle. Another commenter stated that providing for
automatic approval of waivers when the agencies do not jointly deny
them could result in the loss of important information based on the
challenges of coordinating joint agency action.
The final rule retains both the agencies' ability to waive certain
informational content requirements on their joint initiative and the
firm-initiated waiver request process introduced in the proposal, with
some modifications. In response to concerns raised about the firm-
initiated waiver request process, and to suggestions that the agencies
should take additional steps to tailor the informational content
requirements between biennial filers and triennial full filers, the
agencies have revised the process for covered companies to request
waivers. The agencies have determined that the firm-initiated waiver
process should not be extended to biennial filers in light of the
additional risks that these firms present. Because the concerns noted
above outweigh the advantages of a firm-initiated waiver process for
biennial filers, the agencies are limiting firm-initiated waiver
requests to triennial full filers and triennial reduced filers.\34\ As
under the 2011 rule, the agencies have the authority to jointly waive
one or more of the resolution plan requirements on their own initiative
for any firm, including any biennial filer. This procedural change will
help to address these commenters' concerns by ensuring that, absent the
agencies granting a waiver on their own initiative, all full resolution
plan informational content requirements will remain in place for
biennial filers, whose material financial distress or failure would be
most likely to pose a threat to U.S. financial stability.
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\34\ Waiver requests will generally have limited application to
triennial reduced filers under the final rule because waiver
requests do not apply to a covered company's initial full resolution
plan or reduced resolution plans. However, the firm-initiated waiver
request process could apply to a triennial reduced filer if the
agencies were to require it to submit a full resolution plan with at
least 18 months' prior notice.
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The agencies believe that for triennial full filers and triennial
reduced filers, waiver requests will be a useful means to tailor the
informational content of resolution plans in a manner that will be both
efficient for the agencies and transparent to the public and,
accordingly, the final rule permits waiver requests from these firms.
Relative to the proposed rule, the final rule changes the procedure
by which the agencies act on waiver requests. Under the proposal, a
waiver request would have been automatically approved if the agencies
did not jointly deny it before a certain date. Under the final rule, a
waiver request is automatically denied if the agencies do not jointly
approve it before a certain date. The agencies believe that this change
from the proposal will be more consistent with other provisions of the
final rule that require joint agency agreement. The agencies will
nonetheless endeavor to respond to waiver requests in a timely manner.
Furthermore, safeguards are in place to ensure that firm-initiated
waivers would not inappropriately reduce resolution plan content
requirements or otherwise favor filers and that the firm-initiated
waiver request process will not be unnecessarily burdensome for the
agencies or inefficient. For example, firms can only request waivers
for full resolution plans and firms can only submit one waiver request
per full resolution plan submission. In addition, firm-initiated
waivers are not permitted for some of the most critical informational
content, including the core elements required for a targeted resolution
plan, any information specifically required pursuant to section 165(d)
of the Dodd-Frank Act, information about material changes, and
information about deficiencies and shortcomings. Moreover, the timing
for the agencies' processing of waiver requests has been structured to
ensure that the agencies have sufficient opportunity to properly review
and consider the requests.
This preamble describes below the kind of information that waiver
requests should contain, which should help make the firm-initiated
waiver request process more efficient and focused. Finally,
notwithstanding the new firm-initiated waiver request process, the
agencies have retained the ability under the final rule to obtain
additional information in a timely manner through, for example, interim
updates, notices of extraordinary events, and the ability to require
off-cycle resolution plan submissions.
[[Page 59207]]
The agencies are also clarifying in the final rule that, while the
agencies may waive requirements for one or more resolution plan
submissions on their own initiative, firm-initiated waivers apply to
the submission of only a single full resolution plan. The final rule
also clarifies that the agencies may approve or deny a waiver request
in whole or in part.
One commenter suggested changes to the firm-initiated waiver
request process aimed at ensuring transparency and consistency in its
application, including requirements that the agencies consider whether
approved waivers should apply to similarly situated firms and that both
the criteria used in waiver determinations and the agencies' waiver
decisions be made public. To ensure transparency in the firm-initiated
waiver request process, the agencies intend to make their decisions on
waiver requests public, although the information made public may not be
the complete response provided to a firm and would not include
confidential information. The agencies also note that under the final
rule they will be able to waive informational content requirements on
their joint initiative, and they could elect to exercise this
discretionary authority to waive informational content requirements for
similarly situated firms if they deem it appropriate to do so. However,
the final rule retains the agencies' ability to approve or deny waiver
requests at their joint discretion. The proposal's preamble included
clarifying examples of how the agencies expect to exercise this
discretion to approve waivers in appropriate circumstances, and these
examples also apply for the final rule. For example, a waiver may be
appropriate to reduce informational content that would be of limited
utility to the agencies, such as when the agencies have recently
completed an in-depth review of a particular business line and are
satisfied that they are in possession of current information relevant
to a firm's ability to resolve that business line. More specifically,
if the agencies have recently undertaken a comprehensive review of a
firm's Payments, Clearing, and Settlement (PCS) activities, it may be
appropriate to waive the requirement for that firm to submit
information relevant to these activities in its next resolution plan
submission. A waiver may also be appropriate for a firm that submitted
a tailored resolution plan under the 2011 rule and requests a waiver
that would limit the firm's required resolution plan content in a
manner that is similar to the tailored resolution plan provisions.
Additional circumstances may arise under the final rule where it is
appropriate to grant or deny waivers, and the agencies believe it is
therefore appropriate to maintain a flexible standard under the final
rule.
A covered company should provide all information necessary to
support its waiver request, including an explanation of why approval of
the request would be appropriate, why the information for which a
waiver is sought would not be relevant to the agencies' review of the
firm's resolution plan, and confirmation that the request meets the
eligibility requirements for a waiver under the final rule (i.e., that
it is not a core element, not related to an identified deficiency that
has not been adequately remedied, etc.). To ensure that the agencies
have the information necessary to evaluate a waiver request, the final
rule provides that covered companies would be required to explain why
the information sought to be waived would not be relevant to the
agencies' review of the covered company's next full resolution plan and
why a waiver of the requirement would be appropriate. Failure to
provide appropriate explanation or any information requested by the
agencies in a timely manner could lead the agencies to deny a waiver
request on the basis that insufficient explanation or a lack of
information makes it impossible to determine that the information
sought to be waived would not be relevant to their review of the
resolution plan. A full resolution plan should specify content omitted
due to a waiver request that was granted.
Two commenters suggested that the deadline for a waiver request to
be jointly denied by the agencies should be moved from nine months to
12 months prior to the submission deadline to better align with filers'
resolution plan preparation timelines. These commenters suggested that
the rule should provide for waiver requests to be submitted 15 months
prior to a full resolution plan submission date and allow the agencies
90 days within which to consider and act upon waiver requests, thereby
reducing the time period for agency review from six months to 90 days.
The agencies recognize that a firm may require more than nine
months to prepare a full resolution plan taking into account an
approved waiver request. Therefore, the final rule provides that a
waiver request is automatically denied on the date that is 12 months
prior to the submission date for the resolution plan to which it
related if the agencies do not jointly approve the waiver request prior
to that date. However, the agencies continue to believe that a minimum
of six months is the appropriate period for the agencies to review a
waiver request. Accordingly, the final rule requires a waiver request
to be submitted at least 18 months before the related resolution plan
submission date. If the agencies waive informational content
requirements for one or more firms on the agencies' own initiative, the
agencies will endeavor to provide those firms with notice of the waiver
at least 12 months before their next resolution plan submission date.
5. Targeted Resolution Plans
The proposal included a new type of resolution plan: A targeted
resolution plan. The agencies proposed the targeted resolution plan to
strike the appropriate balance between providing a means for the
agencies to continue receiving updated information on structural or
other changes that may impact a firm's resolution strategy while not
requiring submission of information that remains largely unchanged
since the previous submission. Under the proposed rule, the targeted
resolution plan would have been a subset of a full resolution plan and
would have included the following components: The information required
to be included in a full resolution plan regarding capital, liquidity,
and the covered company's plan for executing any recapitalization
contemplated in its resolution plan, including updated quantitative
financial information and analyses important to the execution of the
covered company's resolution strategy (i.e., the core elements); a
description of material changes since the covered company's previously
submitted resolution plan and changes the covered company has made to
its resolution plan in response; a description of changes in response
to firm-specific feedback provided by the agencies, general guidance
issued by the agencies, or legal or regulatory changes; a public
section; and information responsive to targeted areas of interest
identified by the agencies at least 12 months prior to the submission.
The agencies received several comments regarding the proposed
targeted resolution plan. One commenter asserted that the agencies
should further tailor the contents of the targeted resolution plan
based on firms' structures, business models, and activities in the
risk-based indicators and that the targeted resolution plan requirement
should apply differently to foreign filers subject to Category II or
III standards. Another commenter expressed concern that the targeted
resolution plan did not include
[[Page 59208]]
significant elements, such as booking and trading practices for
derivatives, trading exposure limits, and relationships with
counterparties, and that targeted resolution plans are untested.
Another commenter expressed concerns that the proposal's requirement
for biennial filers and triennial full filers to alternate between full
and targeted resolution plans would not be sufficient to capture
important information about resolvability given the speed with which
firms can change. Another commenter suggested that the agencies clarify
that targeted areas of interest identified by the agencies would not
require information that is wider in scope or depth than the
information required for a full resolution plan.
The agencies are finalizing the elements of the targeted resolution
plan as proposed, other than requiring a firm to affirm that no
material change has occurred, if applicable, and clarifying that a
targeted information request will be made in writing.\35\ Regarding the
request for further tailoring of the targeted resolution plan
requirement, the targeted resolution plan is already tailored to
capture the core elements and key informational content most critical
to helping ensure orderly resolution in bankruptcy, and to the extent
additional tailoring is needed, the agencies can provide it through
agency-initiated waivers and targeted information requests.
Accordingly, the agencies believe that the final rule will facilitate
appropriate tailoring of informational content requirements. The
agencies also note that they will continue to communicate their
tailored expectations for resolution plan content through firm-specific
feedback.
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\35\ The proposal's preamble included clarifying examples of how
the agencies expect firms to respond to the core elements
informational content requirement, and these examples also apply for
the final rule. For firms that have received general guidance from
the agencies applicable to their upcoming submissions regarding
capital, liquidity, and governance mechanisms, the targeted
resolution plans should address these elements consistent with that
general guidance. For example, a targeted resolution plan could
discuss changes to a firm's methodology for modeling liquidity needs
for its material entities during periods of financial stress, as
well as changes to the firm's means for providing capital and
liquidity to such entities as would be needed to successfully
execute the firm's resolution strategy. These updates could, for
example, involve changes to triggers upon which the firm relies to
execute a recapitalization, including triggers based on capital or
liquidity modeling. See, e.g., Guidance for Sec. 165(d) Resolution
Plan Submissions by Domestic Covered Companies, 84 FR 1438, 1449
(February 4, 2019); Guidance for 2018 Sec. 165(d) Annual Resolution
Plan Submissions By Foreign-based Covered Companies that Submitted
Resolution Plans in July 2015, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170324a21.pdf, https://www.fdic.gov/resauthority/2018subguidance.pdf. The firms that
received this general guidance would be expected to address
Resolution Capital Adequacy and Positioning (RCAP), Resolution
Liquidity Execution Need (RLEN), and governance mechanisms as part
of their updates concerning capital, liquidity, and any plans for
executing a recapitalization, respectively. A firm that has not
received general guidance is required to describe the capital and
liquidity needed to execute the firm's resolution strategy
consistent with Sec. __.5(c), (d)(1)(i), (iii), and (iv),
(e)(1)(ii), (e)(2), (3), and (5), (f)(1)(v), and (g) of the final
rule and, to the extent its resolution plan contemplates
recapitalization, the covered company's plan for executing the
recapitalization consistent with Sec. __.5(c)(5) of the final rule.
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Regarding commenters' concerns that the targeted resolution plan
does not include certain important elements, the agencies have found,
based on their experience reviewing resolution plans, that the
information that would be contained in the proposed targeted resolution
plan is the information that is most important to assessing firms'
resolvability, including the information that has the tendency to
change with the most frequency. While information about other topic
areas may be relevant to resolvability, the agencies believe it is
appropriate to receive this other information on a less frequent basis
through full resolution plan submissions. The agencies note that
targeted resolution plans must also address material changes.
Accordingly, a covered company that experiences material changes
relating to, for example, its booking and trading practices for
derivatives, trading exposure limits, relationships with
counterparties, or other activities or characteristics, would be
required to include such information in its targeted resolution plan.
In addition, the agencies have designed the targeted resolution plan to
ensure that they will receive important information that would allow
them to review and evaluate potential problem areas, including by
allowing the agencies to require firms to respond to targeted
information requests, while permitting less frequent submission of
information that may have a tendency to remain materially unchanged
over time. The agencies' ability to make targeted information requests,
require full resolution plan submissions and interim updates, move
resolution plan submission dates, and receive notices of extraordinary
events provides further means for the agencies to receive additional
information from these firms.
Regarding one commenter's request for clarification in relation to
the targeted information requests element of the targeted resolution
plan, consistent with the proposal, the agencies note that a targeted
resolution plan is a subset of a full resolution plan. Accordingly, the
information to be provided regarding areas of focus within a targeted
resolution plan would not require submission of information wider in
scope than what a full resolution plan requires.
The agencies may, however, request information in greater depth
than the firm chose to provide in prior submissions.
6. Reduced Resolution Plans
The proposal would have formalized the informational content
requirements for the reduced resolution plan. For foreign banking
organizations with relatively limited U.S. operations, the reduced
resolution plan components were proposed to include: A description of
(1) material changes experienced by the covered company since the
filing of the covered company's previously submitted resolution plan
and (2) changes to the strategic analysis that was presented in the
firm's previously submitted resolution plan resulting from material
changes, firm-specific feedback provided by the agencies, general
guidance issued by the agencies, or legal or regulatory changes.
Reduced resolution plans would also contain a public section. The
agencies noted that receiving updates of this information would permit
them to continue to monitor significant changes in a firm's structure
or activities while appropriately focusing the informational components
of these firms' resolution plans.
The agencies received several comments on the reduced resolution
plan. One commenter suggested that reduced resolution plans would not
provide the agencies sufficient information and that agencies may not
be able to assess whether a change is material as a result of triennial
reduced filers not filing full resolution plans after their initial
submissions. Another commenter suggested that firms that had previously
been resolution plan filers should not be required to submit a new full
resolution plan upon once again becoming a covered company and a new
triennial reduced filer. Another commenter suggested that the agencies
clarify when triennial reduced filers would be required to submit full
resolution plans under the final rule.
The agencies are finalizing the reduced resolution plan as
proposed, other than requiring an affirmation that no material change
has occurred, if applicable. Taking into account the relative degree of
risk posed by these firms, the agencies believe that the reduced
resolution plan as proposed generally would capture the information
necessary for the agencies to assess triennial reduced filers'
resolvability.
[[Page 59209]]
The material change requirement in the reduced resolution plan is
designed to capture important information relevant to the firm's
resolvability, its resolution strategy, and implementation of the
resolution strategy. In addition, and as discussed above, the final
rule has been revised from the proposal to require that a firm
affirmatively state in its resolution plan that no material change has
occurred since its prior resolution plan submission if the resolution
plan does not identify any material change. The agencies believe this
clarification will further help to ensure that firms give due attention
to the requirement to identify material changes. Finally, the agencies'
ability to require full resolution plan submissions and interim
updates, move resolution plan submission dates, and receive notices of
extraordinary events provides further means for the agencies to receive
additional information from triennial reduced filers.
The final rule also retains the requirement that any firm that was
not a covered company on the effective date of the final rule but
becomes a triennial reduced filer after the effective date of the final
rule submit a full resolution plan as its initial submission, even if
the firm was at some point previously subject to resolution planning
requirements (e.g., under the 2011 rule). There could be an extended
period of time between a firm's previous full resolution plan
submission and the time when it again becomes subject to the final
rule, rendering the earlier full resolution plan less relevant to the
firm's current operations, activities, and structure. The agencies
note, however, that a firm would be able to incorporate by reference
information from its prior resolution plan that meets the final rule's
standard for incorporation by reference. In addition, the agencies are
clarifying that full resolution plans filed under the 2011 rule by
firms that would continue to be covered companies under the final rule
and would be triennial reduced filers under the final rule would be
grandfathered for purposes of determining compliance with the
requirement that a triennial reduced filer's initial submission be a
full resolution plan. Accordingly, those firms would be required to
submit reduced resolution plans going forward but would not be required
to resubmit a new full resolution plan absent other relevant changes in
their circumstances (e.g., becoming subject to Category II or Category
III standards).
7. Tailored Resolution Plans
Under the 2011 rule, a tailored resolution plan was a means for
certain bank-centric firms to request that their resolution plan
submissions focus on nonbank activities that may pose challenges to
executing the firm's resolution strategy. Pursuant to the 2011 rule's
tailored resolution plan notice requirement, firms were required to
apply to the agencies to submit a tailored resolution plan rather than
a full resolution plan every year that a submission was required. The
agencies' proposal would have eliminated the tailored resolution plan
in light of the introduction of the firm-initiated waiver request
process and the targeted resolution plan as effective substitutes. The
agencies also noted in the proposal that many of the covered companies
that were eligible under the 2011 rule to file a tailored resolution
plan would no longer be subject to the resolution planning requirement
under the final rule or would become triennial reduced filers.
One commenter expressed concern regarding the proposal to eliminate
the tailored resolution plan. In particular, the commenter stated that
previous tailored resolution plan filers should be grandfathered so
that they would not need to apply for a waiver to continue to submit
similar submissions under the final rule. As an alternative, the
commenter proposed that the agencies limit the scope of these firms'
full and targeted resolution plan submissions to nonbank operations.
Another commenter asserted that the proposal should be modified to
allow for automatic waiver, upon request, from certain informational
content requirements for filers that qualified to submit tailored
resolution plans under the 2011 rule.
The agencies are finalizing the proposal to eliminate the tailored
resolution plan type. As explained in the proposal, the agencies expect
that the firm-initiated waiver request process and targeted resolution
plan requirements will be effective substitutes for the tailored
resolution plan and will allow the agencies to appropriately tailor
informational content requirements, taking into account the relative
mix of banking and non-banking activities for particular filers.
Accordingly, the agencies believe that it is unnecessary to retain the
tailored resolution plan in the final rule.
C. Critical Operations Methodology and Reconsideration Process
Under the final rule, and consistent with the 2011 rule, a critical
operation is an operation the failure or discontinuance of which would
pose a threat to the financial stability of the United States. The 2011
rule provides for critical operations to be identified by the firms or
at the agencies' joint direction. As part of their rule implementation
and supervision efforts, the agencies have developed a process and
methodology for jointly identifying critical operations and have made
certain critical operations identifications. In recognition that
financial markets and firms change over time, the agencies proposed
establishing a periodic, comprehensive review of critical operations
identifications by both the agencies and covered companies to ensure
that resolution planning reflects current operations and markets and
appropriately focuses on areas vital to financial stability.
1. Identification by Covered Companies and Methodology Requirement
Many covered companies have incorporated into their resolution
planning frameworks a procedure for identifying critical operations,
and the agencies proposed requiring biennial filers and triennial full
filers to maintain a process for identifying critical operations on a
scale that reflected the nature, size, complexity, and scope of their
operations. The proposal would have required this process for self-
identification to occur at least as frequently as a covered company's
resolution plan submission cycle and be documented in the covered
company's corporate governance policies and procedures. In addition,
the proposal would have established a process whereby firms that did
not currently have identified critical operations could request a
waiver from the requirement to maintain a self-identification process
and methodology. Firms that self-identified a critical operation would
have been required to notify the agencies if they ceased to identify an
operation as a critical operation. Finally, the agencies proposed a
conforming definitional change.\36\
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\36\ The agencies proposed including a new definition,
``identified critical operations,'' to clarify that critical
operations can be identified by either the covered company or
jointly identified by the agencies and that until such an operation
has been identified by either method, the operation does not need to
be addressed as a critical operation in a resolution plan.
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Two commenters suggested that the agencies clarify that the
requirement that firms have a process to self-identify critical
operations is presumptively waived for any covered company that has
previously submitted resolution plans and does not currently have an
identified critical operation. Finally, one commenter recommended
either eliminating or clarifying the use of the term ``economic
functions'' in the
[[Page 59210]]
agencies' description of a firm's methodology for identifying critical
operations.
Consistent with the proposal, under the final rule, biennial filers
and triennial full filers must establish and implement a process
designed to identify their critical operations. However, after July 1,
2022, the final rule also requires a triennial reduced filer that has
an identified critical operation to establish and implement a process
designed to identify its critical operations. As under the proposal, in
all cases, that process must contain a methodology and consider the
nature, size, complexity, and scope of the covered company's
operations.
Under the final rule, triennial reduced filers with identified
critical operations will be required to establish and implement a
process to identify critical operations, but only after they are
required to submit their next resolution plans in 2022. Where a firm
has an identified critical operation, it may be the case that it has
additional critical operations such that a periodic review by the firm
of its operations that is appropriate to the nature, size, complexity,
and scope of its operations could be beneficial. This timing will
provide the agencies the opportunity to complete their first joint
review of critical operations under the final rule and triennial
reduced filers with the opportunity to request reconsideration of any
currently identified critical operation in anticipation of their next
resolution plan submission.
Also consistent with the proposal, the final rule allows a covered
company that has previously submitted a resolution plan and does not
have an identified critical operation to request a waiver of the
requirement to have a process and methodology to identify its critical
operations if it does not have an identified critical operation as of
the date the waiver request is submitted.\37\ Under the proposal, the
covered company would have needed to apply for such a waiver at least
15 months before the submission date for that resolution plan, and
waivers would have been automatically granted on the date that was nine
months prior to the date that the resolution plan it relates to was due
if the agencies did not jointly deny the waiver prior to that date.
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\37\ The proposal's preamble included clarifying examples of why
a waiver may be appropriate, and these examples also apply for the
final rule. For example, for a covered company that has not
experienced any significant changes in its business, operations, or
organizational structure since its most recent resolution plan, a
waiver request that so states, with reasonable supporting detail,
could provide sufficient information for the agencies to evaluate
the request. Alternatively, if one of a covered company's operations
gained significant market share since it submitted its most recent
resolution plan submission, the waiver request should include this
information, a description of the operation, and a discussion of why
this change would not warrant the development of a methodology for
identifying critical operations.
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Consistent with the changes to the firm-initiated waiver request
process for informational content requirements, under the final rule, a
request for a waiver from the critical operations process and
methodology requirement will be automatically denied on a certain date
unless the agencies have jointly approved it before that date.
Requiring joint approval of waiver requests will be more consistent
with other provisions of the final rule that require joint agency
approval.
The agencies recognize that a firm may require more than nine
months to prepare a resolution plan taking into account any critical
operation the covered company newly identifies and, accordingly, a
covered company may need to complete its process more than nine months
before its next resolution plan is due. Therefore, the final rule
provides that a waiver request is automatically denied on the date that
is 12 months prior to the submission date for the resolution plan to
which it related if the agencies do not jointly approve the waiver
prior to that date. However, the agencies continue to believe that a
minimum of six months is the appropriate period for the agencies to
review a waiver request. Accordingly, the final rule requires a waiver
request to be submitted at least 18 months before the submission date.
This timing is consistent with the timing for firm-initiated waiver
requests of informational content requirements under the final rule.
However, to provide firms with an appropriate period to prepare a
waiver request after the agencies' adoption of the final rule with
respect to a resolution plan due on or before July 1, 2021, the final
rule provides that a waiver request must be submitted at least 17
months before that submission date.
The proposal would have required a covered company to submit a
waiver request with respect to each resolution plan submission. The
agencies recognize that a covered company that does not have an
identified critical operation and has been granted a waiver may not
experience any changes between resolution plan submissions that would
increase the likelihood of it having a critical operation. Accordingly,
to balance the benefits of covered companies engaging in a process to
identify their critical operations with the burden placed on covered
companies, the final rule provides that if a critical operations waiver
request is granted, the waiver will remain effective until the covered
company is required to submit its next full resolution plan. For
example, if a triennial full filer submits a waiver request in
connection with a full resolution plan that is due on or before July 1,
2024 and the request is approved, the waiver would be effective for the
July 1, 2024 full resolution plan submission and the firm's next
regularly scheduled targeted resolution plan due on or before July 1,
2027. To continue the effectiveness of the waiver, the covered company
would need to submit a new waiver request at least 18 months before its
next regularly scheduled full resolution plan due on or before July 1,
2030. Similarly, if a triennial full filer submits a waiver request in
connection with a targeted resolution plan and the request is granted,
the waiver would be effective for only that targeted resolution plan
and not its next full resolution plan.
The agencies recognize a foreign firm may not first determine the
category of standards to which it is subject (and, accordingly, whether
it is a triennial full filer or a triennial reduced filer) until after
the date by which a triennial full filer would need to submit a waiver
request with respect to its resolution plan due on or before July 1,
2021. Therefore, the final rule exempts each foreign triennial full
filer from the requirement to establish and implement a process and
methodology designed to identify their critical operations with respect
to its resolution plan due on or before July 1, 2021 if the foreign
firm does not have an identified critical operation as of the date by
which the waiver would have had to be submitted for this resolution
plan submission (i.e., 17 months before the resolution plan submission
date).
In addition, the agencies are clarifying the final rule by
eliminating usage of the term ``economic function,'' as suggested by
the commenter. However, consistent with the preamble to the proposed
rule, the agencies note that the types of operations that may be
critical operations include, but are not limited to, the core banking
functions of deposit taking; lending; payments, clearing and
settlement; custody; wholesale funding; and capital markets and
investment activities. In general, an operation is most likely to be a
critical operation of the firm where both (a) a market or activity
engaged in by the firm is significant to U.S. financial stability and
(b) the firm is a significant provider or participant in such a market
or activity. Factors relevant for determining whether a market or
activity is significant to U.S. financial stability, or
[[Page 59211]]
whether a firm is a significant provider or participant in such a
market or activity, may include substitutability, market concentration,
interconnectedness, and the impact of cessation. The firm's analysis
should focus on the significance of the activity to U.S. financial
stability, not whether a particular activity is significant for a
foreign parent or other foreign affiliates of the firm.\38\ The process
undertaken by a firm in completing such an analysis should be
commensurate with the nature, size, complexity, and scope of its
operations.\39\
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\38\ Where a firm's operation, such as U.S. dollar deposit
taking, is significant to the firm, but the failure or
discontinuance of that activity would not pose a threat to the
financial stability of the United States, that operation would not
be an identified critical operation under the final rule.
\39\ For a foreign firm, the critical operations identification
process and methodology should be commensurate with the nature,
size, complexity, and scope of its U.S. operations.
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2. Identification by Agencies and Requests for Reconsideration
Under the proposal, the agencies would have reviewed the operations
of covered companies at least every six years to determine whether any
new operations should be identified as critical or any prior
identifications should be rescinded. The proposal provided that, when
the agencies identified an operation as critical, the covered company
would have been required to treat the operation as an identified
critical operation in future resolution plans, unless the
identification occurred within six months of a firm's resolution plan
submission date. In addition, the proposal would have permitted a
covered company to request that the agencies reconsider a jointly made
critical operation identification. The agencies generally would have
been required to complete their assessment of the request within 90
days after receipt of the request, if the request were made at least
270 days before the firm's next resolution plan submission deadline.
Commenters were generally supportive of efforts to codify the
critical operations identification processes. Some commenters suggested
that the agencies modify the timeline for de-identification of a
critical operation identified by the agencies.\40\ A commenter also
suggested that the deadline for the agencies to be able to identify a
new critical operation be 12 months prior to a submission deadline,
instead of six months, as proposed.
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\40\ Specifically, the commenters suggested requiring a request
for de-identification to be filed no later than 15 months before the
next resolution plan submission is due; mandating that the agencies
make a decision within 90 days of receipt of the request; and
deeming the request approved if not denied by one year prior to the
resolution plan submission date.
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The agencies are adopting the proposed provisions related to the
identification of critical operations by the agencies with revisions
that address certain concerns raised by commenters.\41\ Consistent with
the proposal, the final rule permits the joint identification and
rescission of critical operations by the agencies at any time and the
agencies will review all identified critical operations and the
operations of firms for consideration as critical operations at least
every six years. The agencies recognize that a firm may require time to
revise its resolution plan to take into account a newly identified
critical operation. Therefore, consistent with commenters' feedback, a
covered company will be required to treat a critical operation as an
identified critical operation only if the joint identification is made
at least 12 months before the resolution plan submission date. The
agencies believe 12 months is a reasonable period for a firm to assess
the identified critical operation and adjust its resolution plan. To
align with this notice period, the agencies will endeavor to complete
their first joint review under the final rule of the operations of
covered companies at least 12 months prior to the 2021 resolution plan
submission date.
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\41\ The agencies are also adopting the proposed term,
``identified critical operations.''
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Finally, the agencies are adopting a modified process whereby firms
can request that the agencies reconsider a jointly identified critical
operation. Under the final rule, a firm may request reconsideration of
a jointly identified critical operation at any time. If a firm requests
reconsideration at least 18 months prior to its next resolution plan
submission date, the agencies will generally complete their review no
later than 12 months before that resolution plan submission date.
However, the agencies may request additional information, in which case
the agencies will complete their review no later than the later of (a)
90 days after the submission of all requested information and (b) 12
months before the resolution plan submission date. This generally
aligns the timing for requests for reconsideration with the timing
under the final rule for waiver requests of the requirement to
establish and implement a process designed to identify critical
operations and firm-initiated waiver requests of informational content
requirements.
The agencies retain discretion to defer consideration of a
reconsideration request submitted less than 18 months before a
resolution plan submission date until after the covered company's next
submission. If the agencies do not defer consideration of the
reconsideration request, the agencies intend to communicate with the
firm regarding the timing of the agencies' response. If the agencies
defer consideration of a request submitted less than 18 months before a
resolution plan submission date, the agencies will generally complete
their review no later than 12 months before the next resolution plan
submission date that follows that resolution plan submission date.
The agencies understand commenters' concerns regarding the de-
identification timeline, and have revised and lengthened the process to
provide covered companies with additional notice of new identifications
prior to a resolution plan submission date. However, the agencies
decline to adopt the commenters' request for an automatic rescission of
a critical operations identification if a request is submitted at least
15 months before the firm's next resolution plan is due and the
agencies have not acted within three months. A firm's initial request
for de-identification may be incomplete or unclear, and critical
operations identifications may raise complex issues that require
substantial time to consider. Accordingly, the agencies may require
more than 90 days to make an informed decision regarding whether an
operation should be de-identified. The agencies believe the final rule
adequately balances covered companies' need for certainty prior to a
resolution plan submission date with the need to carefully assess
critical operations identifications.
D. Clarifications to the 2011 Rule
1. Resolution Strategy for Foreign-based Covered Companies
The 2011 rule does not specify the assumptions a foreign banking
organization should make with respect to how resolution actions it
takes outside of the United States should be addressed in its
resolution plan. The proposal, consistent with general guidance that
the agencies have previously provided,\42\ would have
[[Page 59212]]
clarified that covered companies that are foreign banking organizations
should not assume that the covered company takes resolution actions
outside of the United States that would eliminate the need for any U.S.
subsidiaries to enter into resolution proceedings.
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\42\ See Guidance for 2018 Sec. 165(d) Annual Resolution Plan
Submissions By Foreign-based Covered Companies that Submitted
Resolution Plans in July 2015, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170324a21.pdf, p. 4, https://www.fdic.gov/resauthority/2018subguidance.pdf, p. 4 and https://www.federalreserve.gov/newsevents/pressreleases/bcreg20180129a.htm,
https://www.fdic.gov/news/news/press/2018/pr18006.html.
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One commenter asserted that the agencies should better align U.S.
resolution planning with home country resolution strategy by
recognizing the development of single point of entry strategies, total
loss absorbing capacity, and other improved resolvability measures
implemented by international banks. Although the agencies recognize
that foreign banking organizations may have home-country resolution
strategies under which U.S. entities are not planned to enter
resolution, the Dodd-Frank Act requires firms to plan for the failure
of their U.S. operations. General guidance and firm-specific feedback
have taken into account resolution plan resolvability improvements made
by foreign banking organizations. Accordingly, the final rule includes
this clarification as proposed.
2. Covered Company in Multi-Tier Foreign Banking Organization Holding
Companies
The definition of covered company in the 2011 rule includes the top
tier entity in a multi-tier holding company structure of any foreign
bank or company that is a bank holding company or is treated as a bank
holding company under section 8(a) of the International Banking Act of
1978. There is no benefit to the agencies in obtaining resolution plan
information relating to a top tier holding company that is, for
example, a government, sovereign entity, or family trust. The agencies
previously addressed this issue on a case-by-case basis and proposed
including a formal process in the proposal by which the agencies would
identify a subsidiary in a multi-tiered FBO holding company structure
to serve as the covered company that would be required to submit the
resolution plan. The agencies did not receive comment on this provision
and are adopting the clarification as proposed.
3. Removal of the Incompleteness Concept and Related Review
The 2011 rule includes a requirement that the agencies review a
resolution plan within 60 days of submission and jointly inform the
covered company if the resolution plan is informationally incomplete or
additional information is required to facilitate review of the
resolution plan. This process has not led to resubmissions in recent
years, and the proposal would have removed it. The agencies received
one comment in support of this provision, and the agencies are removing
the incompleteness concept and related review as proposed for the
reasons stated in the proposal.
4. Assessment of New Covered Companies
The 2011 rule provides that covered company status for a foreign
banking organization may be based on annual or quarterly reports,
depending on availability of such reports, but does not clarify whether
firms that file quarterly reports would be assessed for covered company
status on a quarterly or annual basis. The proposal would have
clarified that a foreign banking organization's status as a covered
company would be assessed quarterly for foreign banking organizations
that file the Federal Reserve's Form FR Y-7Q (FR Y-7Q) on a quarterly
basis and annually for foreign banking organizations that file the Y-7Q
on an annual basis only. In each case, the assessment would have been
based on total consolidated assets as averaged over the preceding four
calendar quarters as reported on the FR Y-7Q.
In addition, the proposal would also have addressed the process for
assessing a firm whose assets have grown due to a merger, acquisition,
combination, or similar transaction for covered company status. Under
these circumstances, the agencies would have the discretion to
alternatively consider, to the extent and in the manner the agencies
jointly consider appropriate, the relevant assets reflected on the one
or more of the four most recent reports of the pre-combination entities
(the FR Y-9C in the case of a U.S. firm and the FR Y-7Q in the case of
a foreign banking organization). The agencies did not receive comment
on these provisions and are adopting the clarifications as proposed.
5. Timing of New Filings, Firms That Change Filing Categories
To address the new filing cycles for biennial, triennial full, and
triennial reduced filers, the proposal included related modifications
to the timing of the initial submission for new filers. The proposal
also included a reservation of authority permitting the agencies to
require the initial resolution plan earlier than the date of the filing
group's next filing, so long as the submission deadline would have been
at least 12 months from the date on which the agencies jointly
determined to require the covered company to submit its resolution
plan. Similarly, the proposal specified the timing and type of
resolution plan a firm would be required to submit if it changed groups
(e.g., a triennial reduced filer becomes a triennial full filer or a
triennial full filer becomes a triennial reduced filer). The agencies
received no comments on these changes and are finalizing them as
proposed with technical changes to clarify that the relevant date for
these timing provisions is the date as of which the covered company
became a covered company or a member of a filing group.
6. Clarification of the Mapping Expectations for Foreign Banking
Organizations
The proposal would have amended the language governing the
expectations regarding the mapping of intragroup interconnections and
interdependencies by foreign banking organizations. The proposal also
would have clarified that foreign banking organizations would be
expected to map (a) the interconnections and interdependencies among
their U.S. subsidiaries, branches, and agencies, (b) the
interconnections and interdependencies between these U.S. entities and
any critical operations and core business lines, and (c) the
interconnections and interdependencies between these U.S. entities and
any foreign-based affiliates. The agencies did not receive comment on
these provisions and are adopting the clarifications regarding mapping
expectations for foreign banking organizations as proposed.
7. Standard of Review
In reviewing resolution plans, the agencies have identified
``deficiencies'' and ``shortcomings'' in resolution plans and have
issued firm-specific feedback letters to covered companies describing
the rationale for the findings and suggesting potential alternatives
for how the identified deficiencies and shortcomings could be
addressed. While the agencies have defined these terms in a public
statement,\43\ they are not defined in the 2011 rule. To provide an
opportunity for public comment on these terms and a clearer
articulation of the standards the agencies apply in identifying
deficiencies and shortcomings, the agencies proposed defining a
deficiency and a shortcoming. In addition, the agencies proposed
continuing to require a covered company that was assessed to have a
deficiency to submit a revised resolution plan to the agencies
addressing the deficiency within 90
[[Page 59213]]
days of receiving notice of the deficiency, consistent with the 2011
rule. The agencies received one comment in support of the proposal's
timeline for requiring a firm to respond to a notice of deficiency, and
the agencies are adopting the definitions of deficiency and
shortcoming, and the related standard of review, as proposed.
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\43\ Resolution Plan Assessment Framework and Firm
Determinations (2016), April 13, 2016, https://www.fdic.gov/news/news/press/2016/pr16031a.pdf.
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8. Deletion of ``Deficiencies'' Relating to Management Information
Systems
The 2011 rule requires a resolution plan to include information
about a covered company's management information systems, including a
description and analysis of the system's ``deficiencies, gaps or
weaknesses'' in the system's capabilities. The proposal would have
deleted the term ``deficiencies'' from this informational content
requirement solely to avoid confusion with the proposal's new
definition of ``deficiencies'' in the proposal, and not to change the
informational content requirement relating to a covered company's
management information systems. The agencies did not receive comment on
this provision and are adopting the clarification as proposed.
9. Incorporation by Reference
Similar to the 2011 rule, the proposal would have continued to
allow a covered company to incorporate by reference information from
its previously submitted resolution plans, subject to certain
restrictions. The proposal would have required the referenced
information to remain accurate in all respects that are material to the
covered company's resolution plan, and the incorporated information
would remain subject to the contemporaneous certification requirement.
The agencies intended that this clarification regarding the material
accuracy of referenced information provide covered companies greater
flexibility in their ability to incorporate by reference information,
thereby reducing duplication and further streamlining the resolution
planning process. One commenter supported this clarification and the
proposed expanded ability of firms to utilize incorporation by
reference, and the agencies are adopting the clarification as proposed.
E. Technical and Conforming Changes From the Proposal
In addition to the changes to the proposal described above, the
final rule includes technical and conforming changes for purposes of
clarity and consistency. For example, the final rule clarifies that
firms are required to submit a resolution plan on or before the
applicable submission date. The technical and conforming changes have
no substantive effect on the final rule as compared to the proposal.
F. Board Delegation of Authority
The Board has delegated to its Director of Supervision and
Regulation, or his or her delegatee, in consultation with the General
Counsel, or his or her delegatee, the authority to identify on behalf
of the Board a holding company in a multi-tiered holding company to
satisfy the requirements that apply to a covered company under the
final rule, to the extent such identification is consistent with the
criteria specified in the final rule and does not raise any significant
legal, policy, or supervisory concerns.
IV. Effective Date and Transition Period
The effective date of the final rule is [60 days after publication
in the Federal Register]. Financial institutions that are covered
companies under the final rule are required to comply with the final
rule beginning on the effective date.
The requirements for covered companies' initial resolution plans
under the final rule will be determined based on their categorization
under the tailoring rules on October 1, 2020, which is after the first
date foreign banking organizations are required to submit reports
including data for purposes of their categorization based on their
combined U.S. operations under the tailoring rules.\44\ In particular,
firms that are covered companies as of the effective date of the final
rule are required to submit their initial and subsequent resolution
plans under the final rule as follows:
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\44\ Top-tier foreign banking organizations will report the FR
Y-15 on behalf of their U.S. intermediate holding company and
combined U.S. operations using data as of June 30, 2020.
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Biennial filers (all firms subject to Category I standards):
Covered companies that are biennial filers on October 1, 2020 are
required to submit their next resolution plans on or before July 1,
2021, unless a firm changes its filing group before July 1, 2021. This
submission will be a targeted resolution plan. Thereafter, the biennial
filers will alternate between filing full and targeted resolution plans
on a biennial basis.
Triennial full filers (all firms subject to Category II or Category
III standards): Covered companies that are triennial full filers on
October 1, 2020 are required to submit targeted resolution plans on or
before July 1, 2021, unless a firm changes its filing group before July
1, 2021. The proposal would have required these firms to submit a full
resolution plan on or before July 1, 2021. The agencies recognize a
foreign firm may not first determine the category of standards to which
it is subject (and, accordingly, whether it is a triennial full filer
or a triennial reduced filer) until after the date by which a triennial
full filer would need to submit a firm-initiated waiver request of
informational content requirements for a full resolution plan due on or
before July 1, 2021. To provide clarity to covered companies during
this transition period, the final rule requires all triennial full
filers to submit a targeted resolution plan on or before July 1, 2021.
Thereafter, the triennial full filers will alternate between filing
full and targeted resolution plans on a triennial basis.
For firms with outstanding shortcomings or deficiencies, the
agencies' expectations regarding remediation and related timelines
established by the agencies continue to apply. For example, the four
foreign banking organizations that received firm-specific feedback
letters on December 20, 2018 (Barclays plc, Credit Suisse Group AG,
Deutsche Bank AG, and UBS Group AG) are expected to address their
shortcomings and complete their respective project plans by July 1,
2020, as provided in the agencies' firm-specific feedback letters.
Consistent with prior communications to these firms, they are required
to submit resolution plans on or before July 1, 2020 that may be
limited to describing changes that the firms have made to their July
2018 resolution plans to address shortcomings identified in those
resolution plans.\45\
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\45\ As the final rule makes clear, the requirement to submit a
resolution plan on or before July 1, 2020 does not affect the timing
or type of resolution plans required to be submitted as described
above. The applicable date for completion of the following
activities remains July 1, 2020: (i) The resolvability enhancement
initiatives identified in the agencies' 2018 firm-specific feedback
letters, and (ii) any additional enhancement initiatives identified
in the July 2018 resolution plan submission or in writing by firm
management during the 2018 resolution plan review. In connection
with their July 1, 2020 submissions, the firms should provide an
update concerning these initiatives.
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Likewise, consistent with previous communications to Northern Trust
Corporation, it is required to provide an interim update, as specified
in the agencies' joint March 29, 2019 firm-specific feedback letter,
concerning its projects to address the liquidity shortcoming identified
in its 2015 resolution plan.
Triennial reduced filers (all other filers): Covered companies that
are triennial reduced filers on October 1, 2020 must submit their
initial reduced resolution plans under the final rule on
[[Page 59214]]
or before July 1, 2022, unless a firm changes its filing group before
July 1, 2022. Thereafter, they are required to submit reduced
resolution plans on a triennial basis.
V. Impact Analysis
The final rule will modify the expected costs imposed by the 2011
rule while seeking to preserve the benefits to U.S. financial stability
provided by the 2011 rule. The economic effects of the final rule are
driven by the changes in the reporting costs related to resolution plan
submissions.
Consistent with EGRRCPA, the final rule changes the asset
thresholds at which all firms are required to file resolution plans
from $50 billion to $250 billion in total consolidated assets. The
final rule also requires the submission of resolution plans by certain
firms with $100 billion or more and less than $250 billion in total
consolidated assets, including those that have certain risk-based
indicators. As of March 31, 2019, firms with $50 billion or more and
less than $100 billion in total consolidated assets accounted for less
than 2 percent of total U.S. industry assets, and firms with $100
billion or more and less than $250 billion in total consolidated assets
accounted for 18 percent of total U.S. industry assets.\46\ The net
impact of these threshold changes would reduce the number of U.S.
filers from 23 to 12 and the number of foreign banking organization
filers from 86 to 62.\47\ This reduction in resolution plan filers
decreases costs as fewer firms would be required to prepare plans.
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\46\ Assets as reported on form FR Y-9C for the quarter ending
March 31, 2019.
\47\ Upon enactment of EGRRCPA on May 24, 2018, firms with total
consolidated assets of less than $100 billion were automatically no
longer subject to the resolution planning requirement, reducing the
number of U.S. filers and foreign banking organizations filers.
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The final rule also seeks to minimize the impact of this change on
benefits to U.S. financial stability provided from resolution plan
filings by maintaining filing requirements for certain firms with $100
billion or more and less than $250 billion in total consolidated
assets, including those that have certain risk-based indictors.
The final rule also reduces the frequency of required resolution
plan submissions for the remaining resolution plan filers, including
the largest and most complex resolution plan filers, by extending the
default filing cycle between resolution plan submissions. The final
rule modifies the filing cycle to every two years for the U.S. GSIBs
and certain systemically important nonbank financial companies and to
every three years for all other resolution plan filers. This change
formalizes a practice that has developed over time to extend firms'
resolution plan submission dates to allow at least two years between
resolution plan submissions and should reduce costs.
In the August 2018 proposal to extend mandatory Reporting
Requirements Associated with Regulation QQ, the estimate of total
annual burden for resolution plan filings was estimated to be 1,137,797
hours for 111 resolution plan filers.\48\ Since then, the number of
resolution plan filers has declined to 109, with a current total annual
burden of 1,066,086 hours.\49\ Under the final rule, the revised
estimated annual burden, incorporating proposed modifications to the
resolution plan rule, is 425,525 hours.\50\ At an estimated mean wage
of $56.05 per hour,\51\ this reduction in the estimated burden hours
has an estimated wage savings of approximately $35,903,444 per year.
Reductions in submission frequency and content could potentially reduce
the preparedness of covered companies to execute a rapid and orderly
resolution in the event of material financial distress or failure.
However, this potential economic effect would be ameliorated by the
agencies' authority to require a firm to submit a full resolution plan,
interim update, or alter resolution plan submission dates. This
authority would address circumstances where the agencies determine that
waiting for a firm to submit on its regular submission cycle could
present excess risk.
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\48\ Agency Information Collection Activities: Announcement of
Board Approval Under Delegated Authority and Submission to OMB, 83
FR 42296 (August 21, 2018).
\49\ As of March 31, 2019.
\50\ See Section VI.A. for estimated annual hourly burden
details.
\51\ Mean hourly wages retrieved from the Bureau of Labor and
Statistics (BLS), Occupational Employment and Wages May 2017,
published March 30, 2018 https://www.bls.gov/oes/2017/may/oes_nat.htm.
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Finally, the final rule is expected to improve efficiency by
streamlining the information requirements for the resolution plan
submissions: The final rule includes a mechanism for certain firms to
request a waiver from certain informational requirements in full
resolution plan submissions; introduces a new, more focused resolution
plan submission (i.e., targeted resolution plan); and formalizes the
conditions and content for reduced resolution plans. These resolution
plan modifications are appropriate because the firms' resolution plans
have matured and become more stable through multiple submissions.
Further, the resolution plan modifications should reduce the costs of
preparing and reviewing the resolution plans without having a material
impact on the benefits provided by the resolution plans.
In short, as detailed in this section, the proposal would provide
estimated wage savings, to the institutions affected by it, totaling
$35,903,444 due to the reduction of an estimated 640,561 burden hours
needed to comply with the final rule. Moreover, firms could reallocate
the estimated 640,561 hours used to comply with the final rule to other
activities considered to be more beneficial.\52\ Thus, the total
economic benefits of the proposal could be greater than the dollar
amount estimated.
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\52\ A commenter asserted that firms would likely eliminate (and
not repurpose) compliance jobs, resulting in cost savings to the
firms, and that these savings will likely only benefit the firms'
shareholders and executives. The agencies note that it is
speculative how firms will utilize resources no longer needed to
comply with the final rule.
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VI. Regulatory Analysis
A. Paperwork Reduction Act
Certain provisions of the final rule contain ``collections of
information'' within the meaning of the Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3521) (PRA). In accordance with the requirements of the
PRA, the agencies may not conduct or sponsor, and a respondent is not
required to respond to, an information collection unless it displays a
currently valid Office of Management and Budget (OMB) control number.
The agencies reviewed the final rule and determined that it would
revise the reporting requirements that have been previously approved by
the Board under OMB control number 7100-0346 (Reporting Requirements
Associated with Regulation QQ; FR QQ). The Board's information
collection will be extended for three years, with revision.
Since the original rule was adopted in 2011, the Board's PRA
clearance has accounted for the entire burden associated with the rule
even though the Board and the Corporation are both legally authorized
to receive and review the Resolution Plans. The agencies have decided
to now equally account for the burden associated with this final rule.
As a result, the Corporation has submitted to OMB a request to
implement, for three years, an information collection in connection
with the final rule Resolution Plan submissions that accounts for half
of the estimated burden associated with the final rule.
The Corporation has submitted its request to OMB for review and
approval under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and
section 1320.11 of
[[Page 59215]]
OMB's implementing regulations (5 CFR 1320). The Corporation submitted
the information collection requirements to OMB at the proposed rule
stage. OMB filed a comment assigning the Corporation OMB control number
3064-0210 and requested that the Corporation make a submission to OMB
after the proposed rule is finalized. The Board has reviewed the final
rule under the authority delegated to the Board by OMB. The agencies
did not receive any comments on the PRA.
Proposed Information Collection
Title of Information Collection: Reporting Requirements Associated
with Resolution Planning.
Agency Form Number: FR QQ.
OMB Control Number: 7100-0346.
Frequency of Response: Biennially, Triennially.
Respondents: Bank holding companies \53\ with assets of $250
billion or more, bank holding companies with $100 billion or more with
certain characteristics specified in the preamble, and nonbank
financial firms designated by the Council for supervision by the Board.
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\53\ This includes any foreign bank or company that is, or is
treated as, a bank holding company under section 8(a) of the
International Banking Act of 1978, and meets the relevant total
consolidated assets threshold.
----------------------------------------------------------------------------------------------------------------
Number of Estimated Estimated
FR QQ respondents Annual average hours annual burden
\54\ frequency per response hours
----------------------------------------------------------------------------------------------------------------
Current 55
----------------------------------------------------------------------------------------------------------------
Reduced Reporters............................... 71 1 60 4,260
December Filers:
Tailored Reporters:
Domestic................................ 12 1 9,000 108,000
Foreign................................. 5 1 1,130 5,650
Full Reporters:
Domestic.................................... 3 1 26,000 78,000
Foreign..................................... 6 1 2,000 12,000
Complex Filers:
Domestic.................................... 8 1 \56\ 79,522 636,176
Foreign..................................... 4 1 55,500 222,000
---------------------------------------------------------------
Current Total........................... .............. .............. .............. 1,066,086
----------------------------------------------------------------------------------------------------------------
Final Rule
----------------------------------------------------------------------------------------------------------------
Triennial Reduced............................... 53 1 20 1,060
Triennial Full:
Complex Foreign............................. 4 1 13,135 52,540
Foreign and Domestic........................ 9 1 5,667 51,003
Biennial Filers:
Domestic.................................... 8 1 40,115 320,920
Waivers \57\.................................... 2 1 1 2
---------------------------------------------------------------
Proposed Total.............................. .............. .............. .............. 425,525
---------------------------------------------------------------
Change.................................. .............. .............. .............. -640,561
----------------------------------------------------------------------------------------------------------------
The agencies did not receive any comments on their proposed
revisions to this information collection. Accordingly, with the
exception of minor technical adjustments, the information collection
revisions are adopted as proposed in the proposal and replicated in the
chart above.
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\54\ Of these respondents, none are small entities as defined by
the Small Business Administration (i.e., entities with less than
$600 million in total assets) www.sba.gov/document/support-table-size-standards.
\55\ As of March 31, 2019.
\56\ This estimate captures the annual time that complex
domestic filers will spend complying with this collection, given
that these filers will only submit two resolution plans over the
three-year period covered by this notice. The estimate therefore
represents two-thirds of the time these firms are estimated to spend
on each resolution plan submission.
\57\ The agencies cannot reasonably estimate how many of the
firms that file resolution plans may submit waiver requests, nor how
long it would take to prepare a waiver request. Accordingly, the
agencies are including this line as a placeholder. To facilitate the
split of the burden between the agencies, this placeholder has been
adjusted to two estimated annual burden hours in the final rule.
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B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a final rulemaking, an agency prepare and make
available for public comment a final regulatory flexibility analysis
describing the impact of the proposed rule on small entities.\58\
However, a regulatory flexibility analysis is not required if the
agency certifies that the final rule will not have a significant
economic impact on a substantial number of small entities. The Small
Business Administration (SBA) has defined ``small entities'' to include
banking organizations with total assets of less than or equal to $600
million that are independently owned and operated or owned by a holding
company with less than or equal to $600 million in total assets.\59\
For the reasons described below and under section 605(b) of the RFA,
the agencies certify that the final rule will not have a significant
economic impact on a substantial number of small entities. As of March
31, 2019, there were 4,004
[[Page 59216]]
insured depository institutions and approximately 3,198 bank holding
companies that would fit the SBA's current definition of ``small
entity'' for purposes of the RFA.
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\58\ 5 U.S.C. 601 et seq.
\59\ The SBA defines a small banking organization as having $600
million or less in assets, where an organization's ``assets are
determined by averaging the assets reported on its four quarterly
financial statements for the preceding year.'' See 13 CFR 121.201 as
amended by Small Business Size Standards: Adjustment of Monetary-
Based Size Standards for Inflation, 84 FR 34261 (July 18, 2019)
(effective August 19, 2019). In its determination, the ``SBA counts
the receipts, employees, or other measure of size of the concern
whose size is at issue and all of its domestic and foreign
affiliates.'' See 13 CFR 121.103. Following these regulations, the
agencies use a covered entity's affiliated and acquired assets,
averaged over the preceding four quarters, to determine whether the
covered entity is ``small'' for the purposes of RFA.
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As discussed in detail above, section 165(d) of the Dodd-Frank Act
requires certain financial companies to report periodically to the
agencies their plans for rapid and orderly resolution under the
Bankruptcy Code in the event of material financial distress or failure.
This provision of the Dodd-Frank Act was amended by EGRRCPA in 2018.
Specifically, EGRRCPA raised the $50 billion minimum asset threshold
for general application of the resolution planning requirement to $250
billion in total consolidated assets, and provided the Board with
discretion to apply the resolution planning requirement to firms with
$100 billion or more and less than $250 billion in total consolidated
assets. EGRRCPA also provides that any bank holding company, regardless
of asset size, that has been identified as a U.S. GSIB under the
Board's U.S. GSIB surcharge rule shall be considered a bank holding
company with $250 billion or more in total consolidated assets for
purposes of the application of the resolution planning requirement.
In accordance with section 165(d) of the Dodd-Frank Act as amended
by EGRRCPA, the Board is amending Regulation QQ \60\ and the
Corporation is amending part 381 \61\ to amend the requirement that a
covered company periodically submit a resolution plan to the Board and
Corporation.\62\ The final rule also modifies the procedures for joint
review of a resolution plan by the agencies. The reasons and
justification for the final rule are described in the preamble.
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\60\ 12 CFR part 243.
\61\ 12 CFR part 381.
\62\ 12 U.S.C. 5365(d).
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As discussed in the preamble, the final rule applies to covered
companies, which include only bank holding companies and foreign
banking organizations with at least $100 billion in total consolidated
assets, and nonbank financial companies that the Council has determined
under section 113 of the Dodd-Frank Act must be supervised by the Board
and for which such determination is in effect. The assets of a covered
company substantially exceed the $600 million asset threshold under
which a banking organization is considered a ``small entity'' under SBA
regulations.\63\
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\63\ The Dodd-Frank Act provides that the Board may, on the
recommendation of the Council, increase the asset threshold for the
application of the resolution planning requirements. 12 U.S.C.
5365(a)(2)(B). However, neither the Board nor the Council has the
authority to lower such threshold.
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The final rule also applies to a nonbank financial company
designated by the Council for supervision by the Board under section
113 of the Dodd-Frank Act, regardless of such a company's asset size.
As of the date of the adoption of the final rule, there are no such
nonbank financial companies supervised by the Board. Although the asset
size of nonbank financial companies may not be the sole determinative
factor of whether such companies may pose systemic risks and would be
designated by the Council for supervision by the Board, it is one
consideration.\64\ It therefore may be unlikely that a financial firm
that is at or below the $600 million asset threshold would be
designated by the Council under section 113 of the Dodd-Frank Act.
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\64\ 12 CFR 1310.11.
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Because the final rule is not likely to apply to any company with
assets of $600 million or less, it is not expected to apply to any
small entity for purposes of the RFA. The agencies do not believe that
the final rule duplicates, overlaps, or conflicts with any other
Federal rules.
In light of the foregoing, the Board and the Corporation certify
that the final rule will not have a significant economic impact on a
substantial number of small entities supervised.
C. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\65\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
insured depository institutions (IDIs), each Federal banking agency
must consider, consistent with principles 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.\66\
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\65\ 12 U.S.C. 4802(a).
\66\ 12 U.S.C. 4802.
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Because the final rule would not impose additional reporting,
disclosure, or other requirements on IDIs, section 302 of the RCDRIA
therefore does not apply.
D. Plain Language
Section 722 of the Gramm-Leach-Bliley Act \67\ requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The agencies have sought to present
the final rule in a simple and straightforward manner, and did not
receive any comments on plain language.
---------------------------------------------------------------------------
\67\ 12 U.S.C. 4809(a).
---------------------------------------------------------------------------
E. The Congressional Review Act
For purposes of Congressional Review Act, the OMB makes a
determination as to whether a final rule constitutes a ``major''
rule.\68\ If a rule is deemed a ``major rule'' by the Office of
Management and Budget (OMB), the Congressional Review Act generally
provides that the rule may not take effect until at least 60 days
following its publication.\69\
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\68\ 5 U.S.C. 801 et seq.
\69\ 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.\70\
---------------------------------------------------------------------------
\70\ 5 U.S.C. 804(2).
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The OMB has determined that the final rule is not a ``major rule''
within the meaning of the Congressional Review Act. As required by the
Congressional Review Act, the agencies will submit the final rule and
other appropriate reports to Congress and the Government Accountability
Office for review.
Text of the Common Rules
(All Agencies)
0
The text of the common rules appears below:
[[Page 59217]]
PART [ ]--RESOLUTION PLANS
Sec.
__.1 Authority and scope.
__.2 Definitions.
__.3 Critical operations.
__.4 Resolution plan required.
__.5 Informational content of a full resolution plan.
__.6 Informational content of a targeted resolution plan.
__.7 Informational content of a reduced resolution plan.
__.8 Review of resolution plans; resubmission of deficient
resolution plans.
__.9 Failure to cure deficiencies on resubmission of a resolution
plan.
__.10 Consultation.
__.11 No limiting effect or private right of action; confidentiality
of resolution plans.
__.12 Enforcement.
Sec. __.1 Authority and scope.
(a) Authority. This part is issued pursuant to section 165(d)(8) of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L.
111-203, 124 Stat. 1376, 1426-1427), as amended by the Economic Growth,
Regulatory Relief, and Consumer Protection Act (Pub. L. 115-174, 132
Stat. 1296) (the Dodd-Frank Act), 12 U.S.C. 5365(d)(8), which requires
the Board of Governors of the Federal Reserve System (Board) and the
Federal Deposit Insurance Corporation (Corporation) to jointly issue
rules implementing the provisions of section 165(d) of the Dodd-Frank
Act.
(b) Scope. This part applies to each covered company and
establishes rules and requirements regarding the submission and content
of a resolution plan, as well as procedures for review by the Board and
Corporation of a resolution plan.
Sec. __.2 Definitions.
For purposes of this part:
Bankruptcy Code means Title 11 of the United States Code.
Biennial filer is defined in Sec. __.4(a)(1).
Category II banking organization means a covered company that is a
category II banking organization pursuant to Sec. 252.5 of this title.
Category III banking organization means a covered company that is a
category III banking organization pursuant to Sec. 252.5 of this
title.
Company means a corporation, partnership, limited liability
company, depository institution, business trust, special purpose
entity, association, or similar organization, but does not include any
organization, the majority of the voting securities of which are owned
by the United States.
Control. A company controls another company when the first company,
directly or indirectly, owns, or holds with power to vote, 25 percent
or more of any class of the second company's outstanding voting
securities.
Core business lines means those business lines of the covered
company, including associated operations, services, functions and
support, that, in the view of the covered company, upon failure would
result in a material loss of revenue, profit, or franchise value.
Core elements mean the information required to be included in a
full resolution plan pursuant to Sec. __.5(c), (d)(1)(i), (iii), and
(iv), (e)(1)(ii), (e)(2), (3), and (5), (f)(1)(v), and (g) regarding
capital, liquidity, and the covered company's plan for executing any
recapitalization contemplated in its resolution plan, including updated
quantitative financial information and analyses important to the
execution of the covered company's resolution strategy.
Council means the Financial Stability Oversight Council established
by section 111 of the Dodd-Frank Act (12 U.S.C. 5321).
Covered company--(1) In general. A covered company means:
(i) Any nonbank financial company supervised by the Board;
(ii) Any global systemically important BHC;
(iii) Any bank holding company, as that term is defined in section
2 of the Bank Holding Company Act, as amended (12 U.S.C. 1841), and
part 225 of this title (the Board's Regulation Y), that has $250
billion or more in total consolidated assets, as determined based on
the average of the company's four most recent Consolidated Financial
Statements for Holding Companies as reported on the Federal Reserve's
Form FR Y-9C; provided that in the case of a company whose total
consolidated assets have increased as the result of a merger,
acquisition, combination, or similar transaction, the Board and the
Corporation may alternatively consider, in their discretion, to the
extent and in the manner the Board and the Corporation jointly consider
to be appropriate, one or more of the four most recent Consolidated
Financial Statements for Holding Companies as reported on the Federal
Reserve's Form FR Y-9C or Capital and Asset Reports for Foreign Banking
Organizations as reported on the Federal Reserve's Form FR Y-7Q of the
companies that were party to the merger, acquisition, combination or
similar transaction;
(iv) Any foreign bank or company that is a bank holding company or
is treated as a bank holding company under section 8(a) of the
International Banking Act of 1978 (12 U.S.C. 3106(a)), and that has
$250 billion or more in total consolidated assets, as determined
annually based on the foreign bank's or company's most recent annual
or, as applicable, quarterly based on the average of the foreign bank's
or company's four most recent quarterly Capital and Asset Reports for
Foreign Banking Organizations as reported on the Federal Reserve's Form
FR Y-7Q; provided that in the case of a company whose total
consolidated assets have increased as the result of a merger,
acquisition, combination, or similar transaction, the Board and the
Corporation may alternatively consider, in their discretion, to the
extent and in the manner the Board and the Corporation jointly consider
to be appropriate, one or more of the four most recent Consolidated
Financial Statements for Holding Companies as reported on the Federal
Reserve's Form FR Y-9C or Capital and Asset Reports for Foreign Banking
Organizations as reported on the Federal Reserve's Form FR Y-7Q of the
companies that were party to the merger, acquisition, combination or
similar transaction; and
(v) Any additional covered company as determined pursuant to Sec.
243.13.
(2) Cessation of covered company status for nonbank financial
companies supervised by the Board and global systemically important
BHCs. Once a covered company meets the requirements described in
paragraph (1)(i) or (ii) of this definition of covered company, the
company shall remain a covered company until it no longer meets any of
the requirements described in paragraph (1) of this definition of
covered company.
(3) Cessation of covered company status for other covered
companies. Once a company meets the requirements described in paragraph
(1)(iii) or (iv) of this definition of covered company, the company
shall remain a covered company until--
(i) In the case of a covered company described in paragraph
(1)(iii) of this definition of covered company or a covered company
described in paragraph (1)(iv) of this definition of covered company
that files quarterly Capital and Asset Reports for Foreign Banking
Organizations on the Federal Reserve's Form FR Y-7Q, the company has
reported total consolidated assets that are below $250 billion for each
of four consecutive quarters, as determined based on its total
consolidated assets as reported on each of its four most recent
Consolidated Financial Statements for Holding Companies on the Federal
Reserve's Form FR Y-9C or Capital and
[[Page 59218]]
Asset Reports for Foreign Banking Organizations on the Federal
Reserve's Form FR Y-7Q, as applicable; or
(ii) In the case of a covered company described in paragraph
(1)(iv) of this definition of covered company that does not file
quarterly Capital and Asset Reports for Foreign Banking Organizations
on the Federal Reserve's Form FR Y-7Q, the company has reported total
consolidated assets that are below $250 billion for each of two
consecutive years, as determined based on its total consolidated assets
as reported on each of its two most recent annual Capital and Asset
Reports for Foreign Banking Organizations on the Federal Reserve's Form
FR Y-7Q, or such earlier time as jointly determined by the Board and
the Corporation.
(4) Multi-tiered holding company. In a multi-tiered holding company
structure, covered company means the top-tier of the multi-tiered
holding company unless the Board and the Corporation jointly identify a
different holding company to satisfy the requirements that apply to the
covered company. In making this determination, the Board and the
Corporation shall consider:
(i) The ownership structure of the foreign banking organization,
including whether the foreign banking organization is owned or
controlled by a foreign government;
(ii) Whether the action would be consistent with the purposes of
this part; and
(iii) Any other factors that the Board and the Corporation
determine are relevant.
(5) Asset threshold for bank holding companies and foreign banking
organizations. The Board may, pursuant to a recommendation of the
Council, raise any asset threshold specified in paragraph (1)(iii) or
(iv) of this definition of covered company.
(6) Exclusion. A bridge financial company chartered pursuant to 12
U.S.C. 5390(h) shall not be deemed to be a covered company hereunder.
Critical operations means those operations of the covered company,
including associated services, functions and support, the failure or
discontinuance of which would pose a threat to the financial stability
of the United States.
Deficiency is defined in Sec. __.8(b).
Depository institution has the same meaning as in section 3(c)(1)
of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(1)) and
includes a state-licensed uninsured branch, agency, or commercial
lending subsidiary of a foreign bank.
Foreign banking organization means--
(1) A foreign bank, as defined in section 1(b)(7) of the
International Banking Act of 1978 (12 U.S.C. 3101(7)), that:
(i) Operates a branch, agency, or commercial lending company
subsidiary in the United States;
(ii) Controls a bank in the United States; or
(iii) Controls an Edge corporation acquired after March 5, 1987;
and
(2) Any company of which the foreign bank is a subsidiary.
Foreign-based covered company means any covered company that is not
incorporated or organized under the laws of the United States.
Full resolution plan means a full resolution plan described in
Sec. __.5.
Functionally regulated subsidiary has the same meaning as in
section 5(c)(5) of the Bank Holding Company Act, as amended (12 U.S.C.
1844(c)(5)).
Global systemically important BHC means a covered company that is a
global systemically important BHC pursuant to Sec. 252.5 of this
title.
Identified critical operations means the critical operations of the
covered company identified by the covered company or jointly identified
by the Board and the Corporation under Sec. __.3(b)(2).
Material change means an event, occurrence, change in conditions or
circumstances, or other change that results in, or could reasonably be
foreseen to have, a material effect on:
(1) The resolvability of the covered company;
(2) The covered company's resolution strategy; or
(3) How the covered company's resolution strategy is implemented.
Such changes include, but are not limited to:
(i) The identification of a new critical operation or core business
line;
(ii) The identification of a new material entity or the de-
identification of a material entity;
(iii) Significant increases or decreases in the business,
operations, or funding or interconnections of a material entity; or
(iv) Changes in the primary regulatory authorities of a material
entity or the covered company on a consolidated basis.
Material entity means a subsidiary or foreign office of the covered
company that is significant to the activities of an identified critical
operation or core business line, or is financially or operationally
significant to the resolution of the covered company.
Material financial distress with regard to a covered company means
that:
(1) The covered company has incurred, or is likely to incur, losses
that will deplete all or substantially all of its capital, and there is
no reasonable prospect for the company to avoid such depletion;
(2) The assets of the covered company are, or are likely to be,
less than its obligations to creditors and others; or
(3) The covered company is, or is likely to be, unable to pay its
obligations (other than those subject to a bona fide dispute) in the
normal course of business.
Nonbank financial company supervised by the Board means a nonbank
financial company or other company that the Council has determined
under section 113 of the Dodd-Frank Act (12 U.S.C. 5323) shall be
supervised by the Board and for which such determination is still in
effect.
Rapid and orderly resolution means a reorganization or liquidation
of the covered company (or, in the case of a covered company that is
incorporated or organized in a jurisdiction other than the United
States, the subsidiaries and operations of such foreign company that
are domiciled in the United States) under the Bankruptcy Code that can
be accomplished within a reasonable period of time and in a manner that
substantially mitigates the risk that the failure of the covered
company would have serious adverse effects on financial stability in
the United States.
Reduced resolution plan means a reduced resolution plan described
in Sec. __.7.
Shortcoming is defined in Sec. __.8(e).
Subsidiary means a company that is controlled by another company,
and an indirect subsidiary is a company that is controlled by a
subsidiary of a company.
Targeted resolution plan means a targeted resolution plan described
in Sec. __.6.
Triennial full filer is defined in Sec. __.4(b)(1).
Triennial reduced filer is defined in Sec. __.4(c)(1).
United States means the United States and includes any state of the
United States, the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, and the Virgin Islands.
Sec. __.3 Critical operations.
(a) Identification of critical operations by covered companies--(1)
Process and methodology required. (i) Each biennial filer and triennial
full filer shall establish and implement a process designed to identify
each of its critical operations. After July 1, 2022, each triennial
reduced filer that has any identified critical operation shall
establish and implement a process
[[Page 59219]]
designed to identify each of its critical operations. The scale of the
process must be appropriate to the nature, size, complexity, and scope
of the covered company's operations. The covered company must review
its process periodically and update it as necessary to ensure its
continued effectiveness. The covered company shall describe its process
and how it is applied as part of its corporate governance relating to
resolution planning under Sec. __.5(d)(1). The covered company must
conduct the process described in this paragraph (a)(1) sufficiently in
advance of its next resolution plan submission so that the covered
company is prepared to submit the information required under Sec. Sec.
__.5 through __.7 for each identified critical operation.
(ii) The process required under paragraph (a)(1)(i) of this section
must include a methodology for evaluating the covered company's
participation in activities and markets that may be critical to the
financial stability of the United States. The methodology must be
designed, taking into account the nature, size, complexity, and scope
of the covered company's operations, to identify and assess:
(A) The markets and activities in which the covered company
participates or has operations;
(B) The significance of those markets and activities with respect
to the financial stability of the United States; and
(C) The significance of the covered company as a provider or other
participant in those markets and activities.
(2) Waiver requests. A covered company that has previously
submitted a resolution plan under this part may request a waiver of the
requirement to have a process and methodology under paragraph (a)(1) of
this section by submitting a waiver request in accordance with this
paragraph (a)(2) if the covered company does not have an identified
critical operation as of the date it submits the waiver request.
(i) Each waiver request shall be divided into a public section and
a confidential section. A covered company shall segregate and
separately identify the public section from the confidential section. A
covered company shall include in the confidential section of a waiver
request its rationale for why a waiver of the requirement would be
appropriate, including an explanation of why the process and
methodology are not likely to identify any critical operation given its
business model, operations, and organizational structure. A covered
company shall describe in the public section of a waiver request that
it is seeking to waive the requirement.
(ii) Any waiver request must be made in writing no later than 18
months before the date by which the covered company is required to
submit its next resolution plan. Notwithstanding the foregoing, with
respect to any resolution plan that a covered company is required to
submit on or before July 1, 2021, any waiver request must be made in
writing no later than 17 months before that date.
(iii) The Board and Corporation may jointly approve or deny a
waiver request in their discretion. Unless the Board and the
Corporation have jointly approved a waiver request, the waiver request
will be deemed denied on the date that is 12 months before the date by
which the covered company is required to submit the resolution plan
that immediately follows submission of the waiver request.
(iv) An approved waiver request under this paragraph (a)(2) is
effective for the resolution plan submission that immediately follows
submission of the waiver request and for any resolution plan submitted
thereafter until, but not including, the covered company's next full
resolution plan submission.
(3) Limited exemption. A foreign-based covered company is exempt
from the requirement to have a process and methodology under paragraph
(a)(1) of this section in connection with any requirement to submit a
resolution plan on or before July 1, 2021 if the foreign-based covered
company does not have an identified critical operation as of the date
that is 17 months before the date by which the covered company is
required to submit the resolution plan.
(b) Joint identification of critical operations by the Board and
the Corporation. (1) The Board and the Corporation shall, not less
frequently than every six years, jointly review the operations of
covered companies to determine whether to jointly identify critical
operations of any covered company in accordance with paragraph (b)(2)
of this section, or to jointly rescind any currently effective joint
identification in accordance with paragraph (b)(3) of this section.
(2) If the Board and the Corporation jointly identify a covered
company's operation as a critical operation, the Board and the
Corporation shall jointly notify the covered company in writing. A
covered company is not required to include the information required
under Sec. Sec. __.5 through __.7 for the identified critical
operation in any resolution plan that the covered company is required
to submit within 12 months after the joint notification unless the
operation had been identified by the covered company as a critical
operation on or before the date the Board and the Corporation jointly
notified the covered company.
(3) The Board and the Corporation may jointly rescind a joint
identification under paragraph (b)(2) of this section by providing the
covered company with joint notice of the rescission. Upon the
notification, the covered company is not required to include the
information regarding the operation required for identified critical
operations under Sec. Sec. __.5 through __.7 in any subsequent
resolution plan unless:
(i) The covered company identifies the operation as a critical
operation; or
(ii) The Board and the Corporation subsequently provide a joint
notification under paragraph (b)(2) of this section to the covered
company regarding the operation.
(4) A joint notification provided by the Board and the Corporation
to a covered company before [effective date of final rule] that
identifies any of its operations as a critical operation and not
previously jointly rescinded is deemed to be a joint identification
under paragraph (b)(2) of this section.
(c) Request for reconsideration of jointly identified critical
operations. A covered company may request that the Board and the
Corporation reconsider a joint identification under paragraph (b)(2) of
this section in accordance with this paragraph (c).
(1) Written request for reconsideration. The covered company must
submit a written request for reconsideration to the Board and the
Corporation that includes a clear and complete statement of all
arguments and all relevant, material information that the covered
company expects to have considered. If a covered company has previously
requested reconsideration regarding the operation, the written request
must also describe the material differences between the new request and
the most recent prior request.
(2) Timing. (i) If a covered company submits a request for
reconsideration on or before the date that is 18 months before the date
by which it is required to submit its next resolution plan, the Board
and the Corporation will complete their reconsideration no later than
12 months before the date by which the covered company is required to
submit its next resolution plan. Notwithstanding the foregoing, if the
Board and the Corporation jointly find that additional information from
the covered company is required to complete their reconsideration, the
Board and the Corporation will jointly request in writing the
additional information from the covered company.
[[Page 59220]]
The Board and the Corporation will then complete their reconsideration
no later than the later of:
(A) Ninety (90) days after receipt of all additional information
from the covered company; and
(B) Twelve (12) months before the date by which the covered company
is required to submit its next resolution plan.
(ii) If a covered company submits a request for reconsideration
less than 18 months before the date by which it is required to submit
its next resolution plan, the Board and the Corporation may, in their
discretion, defer reconsideration of the joint identification until
after the submission of that resolution plan, with the result that the
covered company must include the identified critical operation in that
resolution plan and the Board and the Corporation will complete their
reconsideration in accordance with paragraph (c)(2)(i) of this section
as though the covered company had submitted the request after the date
by which the covered company is required to submit that resolution
plan.
(3) Joint communication following reconsideration. The Board and
the Corporation will communicate jointly the results of their
reconsideration in writing to the covered company.
(d) De-identification by covered company of self-identified
critical operations. A covered company may cease to include in its
resolution plans the information required under Sec. Sec. __.5 through
__.7 regarding an operation previously identified only by the covered
company (and not also jointly by the Board and the Corporation) as a
critical operation only in accordance with this paragraph (d).
(1) Notice of de-identification. If a covered company ceases to
identify an operation as a critical operation, the covered company must
notify the Board and the Corporation of its de-identification. The
notice must be in writing and include a clear and complete explanation
of:
(i) Why the covered company previously identified the operation as
a critical operation; and
(ii) Why the covered company no longer identifies the operation as
a critical operation.
(2) Timing. Notwithstanding a covered company's de-identification,
and unless otherwise notified in writing jointly by the Board and the
Corporation, a covered company shall include the applicable information
required under Sec. Sec. __.5 through Sec. __.7 regarding an
operation previously identified by the covered company as a critical
operation in any resolution plan the covered company is required to
submit during the period ending 12 months after the covered company
notifies the Board and the Corporation in accordance with paragraph
(d)(1) of this section.
(3) No effect on joint identifications. Neither a covered company's
de-identification nor notice thereof under paragraph (d)(1) of this
section rescinds a joint identification made by the Board and the
Corporation under paragraph (b)(2) of this section.
Sec. __.4 Resolution plan required.
(a) Biennial filers--(1) Group members. Biennial filer means:
(i) Any global systemically important BHC; and
(ii) Any nonbank financial company supervised by the Board that has
not been jointly designated a triennial full filer by the Board and
Corporation under paragraph (a)(2) of this section or that has been
jointly re-designated a biennial filer by the Board and the Corporation
under paragraph (a)(2) of this section.
(2) Nonbank financial companies. The Board and the Corporation may
jointly designate a nonbank financial company supervised by the Board
as a triennial full filer in their discretion, taking into account
facts and circumstances that each of the Board and the Corporation in
its discretion determines to be relevant. The Board and the Corporation
may in their discretion jointly re-designate as a biennial filer a
nonbank financial company that the Board and the Corporation had
previously designated as a triennial filer, taking into account facts
and circumstances that each of the Board and the Corporation in its
discretion determines to be relevant.
(3) Frequency of submission. Biennial filers shall each submit a
resolution plan to the Board and the Corporation every two years.
(4) Submission date. Biennial filers shall submit their resolution
plans on or before July 1 of each year in which a resolution plan is
due.
(5) Type of resolution plan required to be submitted. Biennial
filers shall alternate submitting a full resolution plan and a targeted
resolution plan.
(6) New covered companies that are biennial filers. A company that
becomes a covered company and a biennial filer after [effective date of
final rule] shall submit a full resolution plan on or before the next
date by which the other biennial filers are required to submit
resolution plans pursuant to paragraph (a)(4) of this section that
occurs no earlier than 12 months after the date as of which the company
became a covered company. The company's subsequent resolution plans
shall be of the type required to be submitted by the other biennial
filers.
(b) Triennial full filers--(1) Group members. Triennial full filer
means:
(i) Any category II banking organization;
(ii) Any category III banking organization; and
(iii) Any nonbank financial company supervised by the Board that is
jointly designated a triennial full filer by the Board and Corporation
under paragraph (a)(2) of this section.
(2) Frequency of submission. Triennial full filers shall each
submit a resolution plan to the Board and the Corporation every three
years.
(3) Submission date. Triennial full filers shall submit their
resolution plans on or before July 1 of each year in which a resolution
plan is due.
(4) Type of resolution plan required to be submitted. Triennial
full filers shall alternate submitting a full resolution plan and a
targeted resolution plan.
(5) New covered companies that are triennial full filers. A company
that becomes a covered company and a triennial full filer after
[effective date of final rule] shall submit a full resolution plan on
or before the next date by which the other triennial full filers are
required to submit resolution plans pursuant to paragraph (b)(3) of
this section that occurs no earlier than 12 months after the date as of
which the company became a covered company. The company's subsequent
resolution plans shall be of the type required to be submitted by the
other triennial full filers.
(c) Triennial reduced filers--(1) Group members. Triennial reduced
filer means any covered company that is not a global systemically
important BHC, nonbank financial company supervised by the Board,
category II banking organization, or category III banking organization.
(2) Frequency of submission. Triennial reduced filers shall each
submit a resolution plan to the Board and the Corporation every three
years.
(3) Submission date. Triennial reduced filers shall submit their
resolution plans on or before July 1 of each year in which a resolution
plan is due.
(4) Type of resolution plan required to be submitted. Triennial
reduced filers shall submit a reduced resolution plan.
(5) New covered companies that are triennial reduced filers. A
company that becomes a covered company and a triennial reduced filer
after December 31, 2019 shall submit a full resolution plan on or
before the next date by which
[[Page 59221]]
the other triennial reduced filers are required to submit resolution
plans pursuant to paragraph (c)(3) of this section that occurs no
earlier than 12 months after the date as of which the company became a
covered company. The company's subsequent resolution plans shall be
reduced resolution plans.
(d) General--(1) Changing filing groups. If a covered company that
is a member of a filing group specified in paragraphs (a) through (c)
of this section (``original group filer'') becomes a member of a
different filing group specified in paragraphs (a) through (c) of this
section (``new group filer''), then the covered company shall submit
its next resolution plan as follows:
(i) If the next date by which the original group filers are
required to submit their next resolution plans is the same date by
which the other new group filers are required to submit their next
resolution plans and:
(A) That date is less than 12 months after the date as of which the
covered company became a new group filer, the covered company shall
submit its next resolution plan on or before that date. The resolution
plan may be the type of resolution plan that the original group filers
are required to submit on or before that date or the type of resolution
plan that the other new group filers are required to submit on or
before that date.
(B) That date is 12 months or more after the date as of which the
covered company became a new group filer, the covered company shall
submit on or before that date the type of resolution plan the other new
group filers are required to submit on or before that date.
(ii) If the next date by which the original group filers are
required to submit their next resolution plans is different from the
date by which the new group filers are required to submit their next
resolution plans, the covered company shall submit its next resolution
plan on or before the next date by which the other new group filers are
required to submit a resolution plan that occurs no earlier than 12
months after the date as of which the covered company became a new
group filer. The covered company shall submit the type of resolution
plan that the other new group filers are required to submit on or
before the date the covered company is required to submit its next
resolution plan.
(iii) Notwithstanding paragraph (d)(1)(i) or (ii) of this section,
any triennial reduced filer that becomes a biennial filer or a
triennial full filer shall submit a full resolution plan on or before
the next date by which the other new group filers are required to
submit their next resolution plans that occurs no earlier than 12
months after the date as of which the covered company became a new
group filer. After submitting a full resolution plan, the covered
company shall submit, on or before the next date that the other new
group filers are required to submit their next resolution plans, the
type of resolution plan the other new group filers are required to
submit on or before that date.
(2) Altering submission dates. Notwithstanding anything to the
contrary in this part, the Board and Corporation may jointly determine
that a covered company shall submit its resolution plan on or before a
date other than as provided in paragraphs (a) through (c) or paragraph
(d)(1) of this section. The Board and the Corporation shall provide a
covered company with written notice of a determination under this
paragraph (d)(2) no later than 12 months before the date by which the
covered company is required to submit the resolution plan.
(3) Authority to require interim updates. The Board and the
Corporation may jointly require that a covered company submit an update
to a resolution plan submitted under this part, within a reasonable
amount of time, as jointly determined by the Board and Corporation. The
Board and the Corporation shall notify the covered company of its
requirement to submit an update under this paragraph (d)(3) in writing,
and shall specify the portions or aspects of the resolution plan the
covered company shall update.
(4) Notice of extraordinary events--(i) In general. Each covered
company shall provide the Board and the Corporation with a notice no
later than 45 days after any material merger, acquisition of assets, or
similar transaction or fundamental change to the covered company's
resolution strategy. Such notice must describe the event and explain
how the event affects the resolvability of the covered company. The
covered company shall address any event with respect to which it has
provided notice pursuant to this paragraph (d)(4)(i) in the following
resolution plan submitted by the covered company.
(ii) Exception. A covered company shall not be required to submit a
notice under paragraph (d)(4)(i) of this section if the date by which
the covered company would be required to submit the notice under
paragraph (d)(4)(i) of this section would be within 90 days before the
date by which the covered company is required to submit a resolution
plan under this section.
(5) Authority to require a full resolution plan submission.
Notwithstanding anything to the contrary in this part, the Board and
Corporation may jointly require a covered company to submit a full
resolution plan instead of a targeted resolution plan or a reduced
resolution plan that the covered company is otherwise required to
submit under this section. The Board and the Corporation shall provide
a covered company with written notice of a determination under this
paragraph (d)(5) no later than 12 months before the date by which the
covered company is required to submit the full resolution plan. The
date on or before which a full resolution plan must be submitted under
this paragraph (d)(5) will be the date by which the covered company
would otherwise be required to submit its upcoming targeted resolution
plan or reduced resolution plan under paragraphs (a) through (c), or
(d)(1) or (2) of this section. The requirement to submit a full
resolution plan under this paragraph (d)(5) does not alter the type of
resolution plan the covered company will subsequently be required to
submit under this section.
(6) Waivers--(i) Authority to waive requirements. The Board and the
Corporation may jointly waive one or more of the resolution plan
requirements of Sec. __.5, Sec. __.6, or Sec. __.7 for one or more
covered companies for any number of resolution plan submissions. A
request pursuant to paragraph (d)(6)(ii) of this section is not
required for the Board and Corporation to exercise their authority
under this paragraph (d)(6)(i).
(ii) Waiver requests by covered companies. In connection with the
submission of a full resolution plan, a triennial full filer or
triennial reduced filer that has previously submitted a resolution plan
under this part may request a waiver of one or more of the
informational content requirements of Sec. __.5 in accordance with
this paragraph (d)(6)(ii).
(A) A requirement to include any of the following information is
not eligible for a waiver at the request of a triennial full filer or
triennial reduced filer:
(1) Information specified in section 165(d)(1)(A) through (C) of
the Dodd-Frank Act (12 U.S.C. 5365(d)(1)(A) through (C));
(2) Any core element;
(3) Information required to be included in the public section of a
full resolution plan under Sec. __.11(c)(2);
(4) Information about the remediation of any previously identified
deficiency or shortcoming unless the Board and the Corporation have
jointly determined that the triennial full filer or triennial
[[Page 59222]]
reduced filer has satisfactorily remedied the deficiency or addressed
the shortcoming before its submission of the waiver request; or
(5) Information about changes to the triennial full filer or
triennial reduced filer's last submitted resolution plan resulting from
any:
(i) Change in law or regulation;
(ii) Guidance or feedback from the Board and the Corporation; or
(iii) Any material change experienced by the triennial full filer
or triennial reduced filer since it submitted that resolution plan.
(B) Each waiver request shall be divided into a public section and
a confidential section. A triennial full filer or triennial reduced
filer shall segregate and separately identify the public section from
the confidential section.
(1) The triennial full filer or triennial reduced filer shall
include in the confidential section of a waiver request a clear and
complete explanation of why:
(i) Each requirement sought to be waived is not a requirement
described in paragraph (d)(6)(ii)(A) of this section;
(ii) The information sought to be waived would not be relevant to
the Board's and Corporation's review of the triennial full filer or
triennial reduced filer's next full resolution plan; and
(iii) A waiver of each requirement would be appropriate.
(2) The triennial full filer or triennial reduced filer shall
include in the public section of a waiver request a list of the
requirements that it is requesting be waived.
(C) A triennial full filer or triennial reduced filer may not make
more than one waiver request for any full resolution plan submission
and any waiver request must be made in writing no later than 18 months
before the date by which the triennial full filer or triennial reduced
filer is required to submit the full resolution plan.
(D) The Board and Corporation may jointly approve or deny a waiver
request, in whole or in part, in their discretion. Unless the Board and
the Corporation have jointly approved a waiver request, the waiver
request will be deemed denied on the date that is 12 months before the
date by which the triennial full filer or triennial reduced filer is
required to submit the full resolution plan to which the waiver request
relates.
(E) An approved waiver request under this paragraph (d)(6)(ii) is
effective for only the full resolution plan that immediately follows
submission of the waiver request.
(e) Access to information. In order to allow evaluation of a
resolution plan, each covered company must provide the Board and the
Corporation such information and access to personnel of the covered
company as the Board and the Corporation jointly determine during the
period for reviewing the resolution plan is necessary to assess the
credibility of the resolution plan and the ability of the covered
company to implement the resolution plan. In order to facilitate review
of any waiver request by a covered company under Sec. __.3(a)(2) or
paragraph (d)(6)(ii) of this section, or any joint identification of a
critical operation of a covered company under Sec. __.3(b), each
covered company must provide such information and access to personnel
of the covered company as the Board and the Corporation jointly
determine is necessary to evaluate the waiver request or whether the
operation is a critical operation. The Board and the Corporation will
rely to the fullest extent possible on examinations conducted by or on
behalf of the appropriate Federal banking agency for the relevant
company.
(f) Board of directors approval of resolution plan. Before
submission of a resolution plan under paragraphs (a) through (c) of
this section, the resolution plan of a covered company shall be
approved by:
(1) The board of directors of the covered company and noted in the
minutes; or
(2) In the case of a foreign-based covered company only, a delegee
acting under the express authority of the board of directors of the
covered company to approve the resolution plan.
(g) Resolution plans provided to the Council. The Board shall make
the resolution plans and updates submitted by the covered company
pursuant to this section available to the Council upon request.
(h) Required and prohibited assumptions. In preparing its
resolution plan, a covered company shall:
(1) Take into account that the material financial distress or
failure of the covered company may occur under the severely adverse
economic conditions provided to the covered company by the Board
pursuant to 12 U.S.C. 5365(i)(1)(B);
(2) Not rely on the provision of extraordinary support by the
United States or any other government to the covered company or its
subsidiaries to prevent the failure of the covered company, including
any resolution actions taken outside the United States that would
eliminate the need for any of a covered company's U.S. subsidiaries to
enter into resolution proceedings; and
(3) With respect to foreign banking organizations, not assume that
the covered company takes resolution actions outside of the United
States that would eliminate the need for any U.S. subsidiaries to enter
into resolution proceedings.
(i) Point of contact. Each covered company shall identify a senior
management official at the covered company responsible for serving as a
point of contact regarding the resolution plan of the covered company.
(j) Incorporation of previously submitted resolution plan
information by reference. Any resolution plan submitted by a covered
company may incorporate by reference information from a resolution plan
previously submitted by the covered company to the Board and the
Corporation, provided that:
(1) The resolution plan seeking to incorporate information by
reference clearly indicates:
(i) The information the covered company is incorporating by
reference; and
(ii) Which of the covered company's previously submitted resolution
plan(s) originally contained the information the covered company is
incorporating by reference and the specific location of the information
in the covered company's previously submitted resolution plan; and
(2) The covered company certifies that the information the covered
company is incorporating by reference remains accurate in all respects
that are material to the covered company's resolution plan.
(k) Initial resolution plans after effective date. (1)
Notwithstanding anything to the contrary in paragraphs (a) through (c)
or (d)(1) of this section, each company that is a covered company as of
December 31, 2019 is required to submit its initial resolution plan
after December 31, 2019, as provided in this paragraph (k). The
submission date and resolution plan type for each subsequent resolution
plan will be determined pursuant to paragraphs (a) through (d) of this
section.
(i) Biennial filers. Each covered company that is a biennial filer
on October 1, 2020 and remains a biennial filer as of July 1, 2021, is
required to submit a targeted resolution plan pursuant to paragraph
(a)(4) of this section on or before July 1, 2021.
(ii) Triennial full filers. Each covered company that is a
triennial full filer on October 1, 2020 and remains a triennial full
filer as of July 1, 2021 is required
[[Page 59223]]
to submit a targeted resolution plan pursuant to paragraph (b)(3) of
this section on or before July 1, 2021.
(iii) Triennial reduced filers. Each covered company that is a
triennial reduced filer on October 1, 2020 and remains a triennial
reduced filer as of July 1, 2022 is required to submit a reduced
resolution plan pursuant to paragraph (c)(3) of this section on or
before July 1, 2022.
(2) With respect to any company that is a covered company as of
December 31, 2019, and changes filings groups specified in paragraphs
(a) through (c) of this section after October 1, 2020 and before the
date by which it would be required to submit a resolution plan under
paragraph (k)(1) of this section, the requirements for its initial
resolution plan after it changes filing groups will be determined
pursuant to paragraph (d)(1) of this section.
(3) Notwithstanding anything to the contrary in this paragraph (k),
a covered company that has been jointly directed by the Board and the
Corporation before December 31, 2019, to submit a resolution plan on or
before July 1, 2020 describing changes it has made to its most recent
resolution plan submission to address each shortcoming the agencies
identified in that resolution plan shall submit a responsive resolution
plan on or before July 1, 2020 in addition to any resolution plan that
such covered company is otherwise required to submit under this
section. The requirement to submit such a resolution plan on or before
July 1, 2020 does not alter the timing or type of resolution plan any
such covered company is required to submit under this section after
July 1, 2020.
Sec. __.5 Informational content of a full resolution plan.
(a) In general--(1) Domestic covered companies. A full resolution
plan of a covered company that is organized or incorporated in the
United States shall include the information specified in paragraphs (b)
through (h) of this section with respect to the subsidiaries and
operations that are domiciled in the United States as well as the
foreign subsidiaries, offices, and operations of the covered company.
(2) Foreign-based covered companies. A full resolution plan of a
covered company that is organized or incorporated in a jurisdiction
other than the United States (other than a bank holding company) or
that is a foreign banking organization shall include:
(i) The information specified in paragraphs (b) through (h) of this
section with respect to the subsidiaries, branches and agencies, and
identified critical operations and core business lines, as applicable,
that are domiciled in the United States or conducted in whole or
material part in the United States. With respect to the information
specified in paragraph (g) of this section, the resolution plan of a
foreign-based covered company shall also identify, describe in detail,
and map to legal entity the interconnections and interdependencies
among the U.S. subsidiaries, branches, and agencies, and between those
entities and:
(A) The identified critical operations and core business lines of
the foreign-based covered company; and
(B) Any foreign-based affiliate; and
(ii) A detailed explanation of how resolution planning for the
subsidiaries, branches and agencies, and identified critical operations
and core business lines of the foreign-based covered company that are
domiciled in the United States or conducted in whole or material part
in the United States is integrated into the foreign-based covered
company's overall resolution or other contingency planning process.
(b) Executive summary. Each full resolution plan of a covered
company shall include an executive summary describing:
(1) The key elements of the covered company's strategic plan for
rapid and orderly resolution in the event of material financial
distress at or failure of the covered company;
(2) A description of each material change experienced by the
covered company since the filing of the covered company's previously
submitted resolution plan (or affirmation that no such material change
has occurred);
(3) Changes to the covered company's previously submitted
resolution plan resulting from any:
(i) Change in law or regulation;
(ii) Guidance or feedback from the Board and the Corporation; or
(iii) Material change described pursuant to paragraph (b)(2) of
this section; and
(4) Any actions taken by the covered company since filing of the
previous resolution plan to improve the effectiveness of the covered
company's resolution plan or remediate or otherwise mitigate any
material weaknesses or impediments to effective and timely execution of
the resolution plan.
(c) Strategic analysis. Each full resolution plan shall include a
strategic analysis describing the covered company's plan for rapid and
orderly resolution in the event of material financial distress or
failure of the covered company. Such analysis shall:
(1) Include detailed descriptions of the:
(i) Key assumptions and supporting analysis underlying the covered
company's resolution plan, including any assumptions made concerning
the economic or financial conditions that would be present at the time
the covered company sought to implement such plan;
(ii) Range of specific actions to be taken by the covered company
to facilitate a rapid and orderly resolution of the covered company,
its material entities, and its identified critical operations and core
business lines in the event of material financial distress or failure
of the covered company;
(iii) Funding, liquidity and capital needs of, and resources
available to, the covered company and its material entities, which
shall be mapped to its identified critical operations and core business
lines, in the ordinary course of business and in the event of material
financial distress at or failure of the covered company;
(iv) Covered company's strategy for maintaining operations of, and
funding for, the covered company and its material entities, which shall
be mapped to its identified critical operations and core business
lines;
(v) Covered company's strategy in the event of a failure or
discontinuation of a material entity, core business line or identified
critical operation, and the actions that will be taken by the covered
company to prevent or mitigate any adverse effects of such failure or
discontinuation on the financial stability of the United States;
provided, however, if any such material entity is subject to an
insolvency regime other than the Bankruptcy Code, a covered company may
exclude that entity from its strategic analysis unless that entity
either has $50 billion or more in total assets or conducts an
identified critical operation; and
(vi) Covered company's strategy for ensuring that any insured
depository institution subsidiary of the covered company will be
adequately protected from risks arising from the activities of any
nonbank subsidiaries of the covered company (other than those that are
subsidiaries of an insured depository institution);
(2) Identify the time period(s) the covered company expects would
be needed for the covered company to successfully execute each material
aspect and step of the covered company's plan;
(3) Identify and describe any potential material weaknesses or
impediments to effective and timely execution of the covered company's
plan;
[[Page 59224]]
(4) Discuss the actions and steps the covered company has taken or
proposes to take to remediate or otherwise mitigate the weaknesses or
impediments identified by the covered company, including a timeline for
the remedial or other mitigatory action; and
(5) Provide a detailed description of the processes the covered
company employs for:
(i) Determining the current market values and marketability of the
core business lines, identified critical operations, and material asset
holdings of the covered company;
(ii) Assessing the feasibility of the covered company's plans
(including timeframes) for executing any sales, divestitures,
restructurings, recapitalizations, or other similar actions
contemplated in the covered company's resolution plan; and
(iii) Assessing the impact of any sales, divestitures,
restructurings, recapitalizations, or other similar actions on the
value, funding, and operations of the covered company, its material
entities, identified critical operations and core business lines.
(d) Corporate governance relating to resolution planning. Each full
resolution plan shall:
(1) Include a detailed description of:
(i) How resolution planning is integrated into the corporate
governance structure and processes of the covered company;
(ii) The covered company's policies, procedures, and internal
controls governing preparation and approval of the covered company's
resolution plan;
(iii) The identity and position of the senior management
official(s) of the covered company that is primarily responsible for
overseeing the development, maintenance, implementation, and filing of
the covered company's resolution plan and for the covered company's
compliance with this part; and
(iv) The nature, extent, and frequency of reporting to senior
executive officers and the board of directors of the covered company
regarding the development, maintenance, and implementation of the
covered company's resolution plan;
(2) Describe the nature, extent, and results of any contingency
planning or similar exercise conducted by the covered company since the
date of the covered company's most recently filed resolution plan to
assess the viability of or improve the resolution plan of the covered
company; and
(3) Identify and describe the relevant risk measures used by the
covered company to report credit risk exposures both internally to its
senior management and board of directors, as well as any relevant risk
measures reported externally to investors or to the covered company's
appropriate Federal regulator.
(e) Organizational structure and related information. Each full
resolution plan shall:
(1) Provide a detailed description of the covered company's
organizational structure, including:
(i) A hierarchical list of all material entities within the covered
company's organization (including legal entities that directly or
indirectly hold such material entities) that:
(A) Identifies the direct holder and the percentage of voting and
nonvoting equity of each legal entity and foreign office listed; and
(B) The location, jurisdiction of incorporation, licensing, and key
management associated with each material legal entity and foreign
office identified;
(ii) A mapping of the covered company's identified critical
operations and core business lines, including material asset holdings
and liabilities related to such identified critical operations and core
business lines, to material entities;
(2) Provide an unconsolidated balance sheet for the covered company
and a consolidating schedule for all material entities that are subject
to consolidation by the covered company;
(3) Include a description of the material components of the
liabilities of the covered company, its material entities, identified
critical operations and core business lines that, at a minimum,
separately identifies types and amounts of the short-term and long-term
liabilities, the secured and unsecured liabilities, and subordinated
liabilities;
(4) Identify and describe the processes used by the covered company
to:
(i) Determine to whom the covered company has pledged collateral;
(ii) Identify the person or entity that holds such collateral; and
(iii) Identify the jurisdiction in which the collateral is located,
and, if different, the jurisdiction in which the security interest in
the collateral is enforceable against the covered company;
(5) Describe any material off-balance sheet exposures (including
guarantees and contractual obligations) of the covered company and its
material entities, including a mapping to its identified critical
operations and core business lines;
(6) Describe the practices of the covered company, its material
entities and its core business lines related to the booking of trading
and derivatives activities;
(7) Identify material hedges of the covered company, its material
entities, and its core business lines related to trading and derivative
activities, including a mapping to legal entity;
(8) Describe the hedging strategies of the covered company;
(9) Describe the process undertaken by the covered company to
establish exposure limits;
(10) Identify the major counterparties of the covered company and
describe the interconnections, interdependencies and relationships with
such major counterparties;
(11) Analyze whether the failure of each major counterparty would
likely have an adverse impact on or result in the material financial
distress or failure of the covered company; and
(12) Identify each trading, payment, clearing, or settlement system
of which the covered company, directly or indirectly, is a member and
on which the covered company conducts a material number or value amount
of trades or transactions. Map membership in each such system to the
covered company's material entities, identified critical operations and
core business lines.
(f) Management information systems. (1) Each full resolution plan
shall include:
(i) A detailed inventory and description of the key management
information systems and applications, including systems and
applications for risk management, accounting, and financial and
regulatory reporting, used by the covered company and its material
entities. The description of each system or application provided shall
identify the legal owner or licensor, the use or function of the system
or application, service level agreements related thereto, any software
and system licenses, and any intellectual property associated
therewith;
(ii) A mapping of the key management information systems and
applications to the material entities, identified critical operations
and core business lines of the covered company that use or rely on such
systems and applications;
(iii) An identification of the scope, content, and frequency of the
key internal reports that senior management of the covered company, its
material entities, identified critical operations and core business
lines use to monitor the financial health, risks, and operation of the
covered company, its material entities, identified critical operations
and core business lines;
(iv) A description of the process for the appropriate supervisory
or regulatory agencies to access the management information systems and
[[Page 59225]]
applications identified in paragraph (f) of this section; and
(v) A description and analysis of:
(A) The capabilities of the covered company's management
information systems to collect, maintain, and report, in a timely
manner to management of the covered company, and to the Board, the
information and data underlying the resolution plan; and
(B) Any gaps or weaknesses in such capabilities, and a description
of the actions the covered company intends to take to promptly address
such gaps, or weaknesses, and the time frame for implementing such
actions.
(2) The Board will use its examination authority to review the
demonstrated capabilities of each covered company to satisfy the
requirements of paragraph (f)(1)(v) of this section. The Board will
share with the Corporation information regarding the capabilities of
the covered company to collect, maintain, and report in a timely manner
information and data underlying the resolution plan.
(g) Interconnections and interdependencies. To the extent not
provided elsewhere in this part, each full resolution plan shall
identify and map to the material entities the interconnections and
interdependencies among the covered company and its material entities,
and among the identified critical operations and core business lines of
the covered company that, if disrupted, would materially affect the
funding or operations of the covered company, its material entities, or
its identified critical operations or core business lines. Such
interconnections and interdependencies may include:
(1) Common or shared personnel, facilities, or systems (including
information technology platforms, management information systems, risk
management systems, and accounting and recordkeeping systems);
(2) Capital, funding, or liquidity arrangements;
(3) Existing or contingent credit exposures;
(4) Cross-guarantee arrangements, cross-collateral arrangements,
cross-default provisions, and cross-affiliate netting agreements;
(5) Risk transfers; and
(6) Service level agreements.
(h) Supervisory and regulatory information. Each full resolution
plan shall:
(1) Identify any:
(i) Federal, state, or foreign agency or authority (other than a
Federal banking agency) with supervisory authority or responsibility
for ensuring the safety and soundness of the covered company, its
material entities, identified critical operations and core business
lines; and
(ii) Other Federal, state, or foreign agency or authority (other
than a Federal banking agency) with significant supervisory or
regulatory authority over the covered company, and its material
entities and identified critical operations and core business lines.
(2) Identify any foreign agency or authority responsible for
resolving a foreign-based material entity and identified critical
operations or core business lines of the covered company; and
(3) Include contact information for each agency identified in
paragraphs (h)(1) and (2) of this section.
Sec. __.6 Informational content of a targeted resolution plan.
(a) In general. A targeted resolution plan is a subset of a full
resolution plan and shall include core elements of a full resolution
plan and information concerning key areas of focus as set forth in this
section.
(b) Targeted resolution plan content. Each targeted resolution plan
of a covered company shall include:
(1) The core elements;
(2) Such targeted information as the Board and Corporation may
jointly identify pursuant to paragraph (c) of this section;
(3) A description of each material change experienced by the
covered company since the filing of the covered company's previously
submitted resolution plan (or affirmation that no such material change
has occurred); and
(4) A description of changes to the covered company's previously
submitted resolution plan resulting from any;
(i) Change in law or regulation;
(ii) Guidance or feedback from the Board and the Corporation; or
(iii) Material change described pursuant to paragraph (b)(3) of
this section.
(c) Targeted information requests. No less than 12 months before
the date by which a covered company is required to submit a targeted
resolution plan, the Board and Corporation may jointly identify in
writing resolution-related key areas of focus, questions, and issues
that must also be addressed in the covered company's targeted
resolution plan.
(d) Deemed incorporation by reference. If a covered company does
not include in its targeted resolution plan a description of changes to
any information set forth in section 165(d)(1)(A), (B), or (C) of the
Dodd-Frank Act (12 U.S.C. 5365(d)(1)(A), (B), or (C)) since its
previously submitted resolution plan, such information from its
previously submitted resolution plan are incorporated by reference into
its targeted resolution plan.
Sec. __.7 Informational content of a reduced resolution plan.
(a) Reduced resolution plan content. Each reduced resolution plan
of a covered company shall include:
(1) A description of each material change experienced by the
covered company since the filing of the covered company's previously
submitted resolution plan (or affirmation that no such material change
has occurred); and
(2) A description of changes to the strategic analysis that was
presented in the covered company's previously submitted resolution plan
resulting from any:
(i) Change in law or regulation;
(ii) Guidance or feedback from the Board and the Corporation; or
(iii) Material change described pursuant to paragraph (a)(1) of
this section.
(b) Deemed incorporation by reference. If a covered company does
not include in its reduced resolution plan a description of changes to
any information set forth in section 165(d)(1)(A), (B), or (C) of the
Dodd-Frank Act (12 U.S.C. 5365(d)(1)(A), (B), or (C)) since its
previously submitted resolution plan, such information from its
previously submitted resolution plan are incorporated by reference into
its reduced resolution plan.
Sec. __.8 Review of resolution plans; resubmission of deficient
resolution plans.
(a) Review of resolution plans. The Board and Corporation will seek
to coordinate their activities concerning the review of resolution
plans, including planning for, reviewing, and assessing the resolution
plans, as well as such activities that occur during the periods between
resolution plan submissions.
(b) Joint determination regarding deficient resolution plans. If
the Board and Corporation jointly determine that the resolution plan of
a covered company submitted under Sec. __.4 is not credible or would
not facilitate an orderly resolution of the covered company under the
Bankruptcy Code, the Board and Corporation shall jointly notify the
covered company in writing of such determination. Any joint notice
provided under this paragraph (b) shall be provided pursuant to
paragraph (f) of this section and shall identify the deficiencies
identified by the Board and Corporation in the resolution plan. A
deficiency is an aspect of a covered company's resolution plan that the
[[Page 59226]]
Board and Corporation jointly determine presents a weakness that
individually or in conjunction with other aspects could undermine the
feasibility of the covered company's resolution plan.
(c) Resubmission of a resolution plan. Within 90 days of receiving
a notice of deficiencies issued pursuant to paragraph (b) of this
section, or such shorter or longer period as the Board and Corporation
may jointly determine, a covered company shall submit a revised
resolution plan to the Board and Corporation that addresses the
deficiencies jointly identified by the Board and Corporation, and that
discusses in detail:
(1) The revisions made by the covered company to address the
deficiencies jointly identified by the Board and the Corporation;
(2) Any changes to the covered company's business operations and
corporate structure that the covered company proposes to undertake to
facilitate implementation of the revised resolution plan (including a
timeline for the execution of such planned changes); and
(3) Why the covered company believes that the revised resolution
plan is credible and would result in an orderly resolution of the
covered company under the Bankruptcy Code.
(d) Extensions of time. Upon their own initiative or a written
request by a covered company, the Board and Corporation may jointly
extend any time period under this section. Each extension request shall
be supported by a written statement of the covered company describing
the basis and justification for the request.
(e) Joint determination regarding shortcomings in resolution plans.
The Board and Corporation may also jointly identify one or more
shortcomings in a covered company's resolution plan. A shortcoming is a
weakness or gap that raises questions about the feasibility of a
covered company's resolution plan, but does not rise to the level of a
deficiency for both the Board and Corporation. If a shortcoming is not
satisfactorily explained or addressed before or in the submission of
the covered company's next resolution plan, it may be found to be a
deficiency in the covered company's next resolution plan. The Board and
the Corporation may identify an aspect of a covered company's
resolution plan as a deficiency even if such aspect was not identified
as a shortcoming in an earlier resolution plan submission.
(f) Feedback. Following their review of a resolution plan, the
Board and the Corporation will jointly send a notification to each
covered company that identifies any deficiencies or shortcomings in the
covered company's resolution plan (or confirms that no deficiencies or
shortcomings were identified) and provides any feedback on the
resolution plan. The Board and the Corporation will jointly send the
notification no later than 12 months after the later of the date on
which the covered company submitted the resolution plan and the date by
which the covered company was required to submit the resolution plan,
unless the Board and the Corporation jointly determine in their
discretion that extenuating circumstances exist that require delay.
Sec. __.9 Failure to cure deficiencies on resubmission of a
resolution plan.
(a) In general. The Board and Corporation may jointly determine
that a covered company or any subsidiary of a covered company shall be
subject to more stringent capital, leverage, or liquidity requirements,
or restrictions on the growth, activities, or operations of the covered
company or the subsidiary if:
(1) The covered company fails to submit a revised resolution plan
under Sec. __.8(c) within the required time period; or
(2) The Board and the Corporation jointly determine that a revised
resolution plan submitted under Sec. __.8(c) does not adequately
remedy the deficiencies jointly identified by the Board and the
Corporation under Sec. __.8(b).
(b) Duration of requirements or restrictions. Any requirements or
restrictions imposed on a covered company or a subsidiary thereof
pursuant to paragraph (a) of this section shall cease to apply to the
covered company or subsidiary, respectively, on the date that the Board
and the Corporation jointly determine the covered company has submitted
a revised resolution plan that adequately remedies the deficiencies
jointly identified by the Board and the Corporation under Sec.
__.8(b).
(c) Divestiture. The Board and Corporation, in consultation with
the Council, may jointly, by order, direct the covered company to
divest such assets or operations as are jointly identified by the Board
and Corporation if:
(1) The Board and Corporation have jointly determined that the
covered company or a subsidiary thereof shall be subject to
requirements or restrictions pursuant to paragraph (a) of this section;
and
(2) The covered company has failed, within the 2-year period
beginning on the date on which the determination to impose such
requirements or restrictions under paragraph (a) of this section was
made, to submit a revised resolution plan that adequately remedies the
deficiencies jointly identified by the Board and the Corporation under
Sec. __.8(b); and
(3) The Board and Corporation jointly determine that the
divestiture of such assets or operations is necessary to facilitate an
orderly resolution of the covered company under the Bankruptcy Code in
the event the company was to fail.
Sec. __.10 Consultation.
Before issuing any notice of deficiencies under Sec. __.8(b),
determining to impose requirements or restrictions under Sec. __.9(a),
or issuing a divestiture order pursuant to Sec. __.9(c) with respect
to a covered company that is likely to have a significant impact on a
functionally regulated subsidiary or a depository institution
subsidiary of the covered company, the Board--
(a) Shall consult with each Council member that primarily
supervises any such subsidiary; and
(b) May consult with any other Federal, state, or foreign
supervisor as the Board considers appropriate.
Sec. __.11 No limiting effect or private right of action;
confidentiality of resolution plans.
(a) No limiting effect on bankruptcy or other resolution
proceedings. A resolution plan submitted pursuant to this part shall
not have any binding effect on:
(1) A court or trustee in a proceeding commenced under the
Bankruptcy Code;
(2) A receiver appointed under title II of the Dodd-Frank Act (12
U.S.C. 5381 et seq.);
(3) A bridge financial company chartered pursuant to 12 U.S.C.
5390(h); or
(4) Any other authority that is authorized or required to resolve a
covered company (including any subsidiary or affiliate thereof) under
any other provision of Federal, state, or foreign law.
(b) No private right of action. Nothing in this part creates or is
intended to create a private right of action based on a resolution plan
prepared or submitted under this part or based on any action taken by
the Board or the Corporation with respect to any resolution plan
submitted under this part.
(c) Form of resolution plans--(1) Generally. Each full, targeted,
and
[[Page 59227]]
reduced resolution plan of a covered company shall be divided into a
public section and a confidential section. Each covered company shall
segregate and separately identify the public section from the
confidential section.
(2) Public section of full and targeted resolution plans. The
public section of a full or targeted resolution plan shall consist of
an executive summary of the resolution plan that describes the business
of the covered company and includes, to the extent material to an
understanding of the covered company:
(i) The names of material entities;
(ii) A description of core business lines;
(iii) Consolidated or segment financial information regarding
assets, liabilities, capital and major funding sources;
(iv) A description of derivative activities and hedging activities;
(v) A list of memberships in material payment, clearing and
settlement systems;
(vi) A description of foreign operations;
(vii) The identities of material supervisory authorities;
(viii) The identities of the principal officers;
(ix) A description of the corporate governance structure and
processes related to resolution planning;
(x) A description of material management information systems; and
(xi) A description, at a high level, of the covered company's
resolution strategy, covering such items as the range of potential
purchasers of the covered company, its material entities, and its core
business lines.
(3) Public section of reduced resolution plans. The public section
of a reduced resolution plan shall consist of an executive summary of
the resolution plan that describes the business of the covered company
and includes, to the extent material to an understanding of the covered
company:
(i) The names of material entities;
(ii) A description of core business lines;
(iii) The identities of the principal officers; and
(iv) A description, at a high level, of the covered company's
resolution strategy, referencing the applicable resolution regimes for
its material entities.
(d) Confidential treatment of resolution plans. (1) The
confidentiality of resolution plans and related materials shall be
determined in accordance with applicable exemptions under the Freedom
of Information Act (5 U.S.C. 552(b)), 12 CFR part 261 (the Board's
Rules Regarding Availability of Information), and 12 CFR part 309 (the
Corporation's Disclosure of Information rules).
(2) Any covered company submitting a resolution plan or related
materials pursuant to this part that desires confidential treatment of
the information under 5 U.S.C. 552(b)(4), 12 CFR part 261 (the Board's
Rules Regarding Availability of Information), and 12 CFR part 309 (the
Corporation's Disclosure of Information rules) may file a request for
confidential treatment in accordance with those rules.
(3) To the extent permitted by law, information comprising the
Confidential Section of a resolution plan will be treated as
confidential.
(4) To the extent permitted by law, the submission of any nonpublic
data or information under this part shall not constitute a waiver of,
or otherwise affect, any privilege arising under Federal or state law
(including the rules of any Federal or state court) to which the data
or information is otherwise subject. Privileges that apply to
resolution plans and related materials are protected pursuant to
section 18(x) of the Federal Deposit Insurance Act (12 U.S.C. 1828(x)).
Sec. __.12 Enforcement.
The Board and Corporation may jointly enforce an order jointly
issued by the Board and Corporation under Sec. __.9(a) or (c). The
Board, in consultation with the Corporation, may take any action to
address any violation of this part by a covered company under section 8
of the Federal Deposit Insurance Act (12 U.S.C. 1818).
[END OF COMMON TEXT]
List of Subjects
12 CFR Part 243
Administrative practice and procedure, Banks, Banking, Holding
companies, Reporting and recordkeeping requirements, Securities.
12 CFR Part 381
Administrative practice and procedure, Banks, Banking, Holding
companies, Reporting and recordkeeping requirements, Resolution plans.
Adoption of the Common Rule Text
The adoption of the common rules by the agencies, as modified by
agency-specific text, is set forth below:
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the preamble, the Board of Governors
of the Federal Reserve System revises part 243 to 12 CFR chapter II as
set forth in the text of the common rule at the end of the preamble and
further amends 12 CFR part 243 as follows:
PART 243--RESOLUTION PLANS (REGULATION QQ)
0
1. The authority citation for part 243 continues to read as follows:
Authority: 12 U.S.C. 5365.
0
2. The heading of part 243 is revised to read as set forth above.
0
3. In Sec. 243.1, amend paragraph (a) by adding a sentence at the end
to read as follows:
Sec. 243.1 Authority and scope.
(a) * * * The Board is also issuing this part pursuant to section
165(a)(2)(C) of the Dodd-Frank Act.
* * * * *
0
4. Add Sec. 243.13 to read as follows:
Sec. 243.13 Additional covered companies.
An additional covered company is any bank holding company or any
foreign bank or company that is a bank holding company or is treated as
a bank holding company under section 8(a) of the International Banking
Act of 1978 (12 U.S.C. 3106(a)) that is:
(a) Identified as a category II banking organization pursuant to
Sec. 252.5 of this title;
(b) Identified as a category III banking organization pursuant to
Sec. 252.5 of this title; or
(c) Made subject to this part by order of the Board.
[[Page 59228]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the preamble, the Federal Deposit
Insurance Corporation revises part 381 to 12 CFR chapter III as set
forth in the text of the common rule at the end of the preamble and
further amends 12 part 381 as follows:
PART 381--RESOLUTION PLANS
0
5. The authority citation for part 381 continues to read as follows:
Authority: 12 U.S.C.5365(d).
Sec. 381.2 [Amended]
0
6. In Sec. 381.2, in paragraph (1)(v) of the definition of ``covered
company'', add the words ``of this title'' after the phrase ``pursuant
to Sec. 243.13''.
By order of the Board of Governors of the Federal Reserve
System, October 23, 2019.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on October 15, 2019.
Annmarie H. Boyd,
Assistant Executive Secretary.
[FR Doc. 2019-23967 Filed 10-31-19; 8:45 am]
BILLING CODE 6210-01-P 6714-01-P