[Federal Register Volume 85, Number 105 (Monday, June 1, 2020)]
[Rules and Regulations]
[Pages 32980-32990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10962]
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DEPARTMENT OF TREASURY
Office of the Comptroller of the Currency
12 CFR Parts 3 and 6
[Docket No. OCC-2020-0013]
RIN 1557-AE85
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 217
[Regulations H and Q; Docket No. R-1718]
RIN 7100-AF91
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 324
RIN 3064-AF44
Regulatory Capital Rule: Temporary Exclusion of U.S. Treasury
Securities and Deposits at Federal Reserve Banks From the Supplementary
Leverage Ratio for Depository Institutions
AGENCY: Office of the Comptroller of the Currency (OCC), Board of
Governors of the Federal Reserve System (Board), and Federal Deposit
Insurance Corporation (FDIC).
ACTION: Interim final rule and request for comment.
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SUMMARY: In light of recent disruptions in economic conditions caused
by the coronavirus disease 2019 and strains in U.S. financial markets,
the OCC, the Board, and the FDIC (together, the agencies) are issuing
an interim final rule that temporarily revises the supplementary
leverage ratio calculation for depository institutions. Under the
interim final rule, any depository institution subsidiary of a U.S.
global systemically important bank holding company or any depository
institution subject to Category II or Category III capital standards
may elect to exclude temporarily U.S. Treasury securities and deposits
at Federal Reserve Banks from the supplementary leverage ratio
denominator. Additionally, under this interim final rule, any
depository institution making this election must request approval from
its primary Federal banking regulator prior to making certain capital
distributions so long as the exclusion is in effect. The interim final
rule is effective as of the date of Federal Register publication and
will remain in effect through March 31, 2021. The agencies are adopting
this interim final rule to allow depository institutions that elect to
opt into this treatment additional flexibility to act as financial
intermediaries during this period of financial disruption. The tier 1
leverage ratio is not affected by this interim final rule.
DATES:
Effective date: This rule is effective on June 1, 2020.
Comment date: Comments on the interim final rule must be received
no later than July 16, 2020.
ADDRESSES:
OCC: Commenters are encouraged to submit comments through the
Federal eRulemaking Portal or email, if possible. Please use the title
``Regulatory Capital Rule: Temporary Exclusion of U.S. Treasury
Securities and Deposits at Federal Reserve Banks from the Supplementary
Leverage Ratio'' to facilitate the organization and distribution of the
comments. You may submit comments by any of the following methods:
Federal eRulemaking Portal--Regulations.gov Classic or
Regulations.gov Beta:
Regulations.gov Classic: Go to https://www.regulations.gov/. Enter
``Docket ID OCC-2020-0013'' in the Search Box and click ``Search.''
Click on ``Comment Now'' to submit public comments. For help with
submitting effective comments please click on ``View Commenter's
Checklist.'' Click on the ``Help'' tab on the Regulations.gov home page
to get information on using Regulations.gov, including instructions for
submitting public comments. Regulations.gov Beta: Go to https://beta.regulations.gov/ or click ``Visit New Regulations.gov Site'' from
the Regulations.gov Classic homepage. Enter ``Docket ID OCC-2020-0013''
in the Search Box and click ``Search.'' Public comments can be
submitted via the ``Comment'' box below the displayed document
information or by clicking on the document title and then clicking the
``Comment'' box on the top-left side of the screen. For help with
submitting effective comments please click on ``Commenter's
Checklist.'' For assistance with the Regulations.gov Beta site, please
call (877) 378-5457 (toll free) or (703) 454-9859 Monday-Friday, 9
a.m.-5 p.m. ET or email [email protected].
Email: [email protected].
Mail: Chief Counsel's Office, Attention: Comment
Processing, Office of the Comptroller of the Currency, 400 7th Street
SW, suite 3E-218, Washington, DC 20219.
Hand Delivery/Courier: 400 7th Street, SW, suite 3E-218,
Washington, DC 20219.
[[Page 32981]]
Fax: (571) 465-4326.
Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2020-0013'' in your comment. In general, the OCC will
enter all comments received into the docket and publish the comments on
the Regulations.gov website without change, including any business or
personal information provided such as name and address information,
email addresses, or phone numbers. Comments received, including
attachments and other supporting materials, are part of the public
record and subject to public disclosure. Do not include any information
in your comment or supporting materials that you consider confidential
or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this rulemaking action by any of the following methods:
Viewing Comments Electronically--Regulations.gov Classic
or Regulations.gov Beta:
Regulations.gov Classic: Go to https://www.regulations.gov/. Enter
``Docket ID OCC-2020-0013'' in the Search box and click ``Search.''
Click on ``Open Docket Folder'' on the right side of the screen.
Comments and supporting materials can be viewed and filtered by
clicking on ``View all documents and comments in this docket'' and then
using the filtering tools on the left side of the screen. Click on the
``Help'' tab on the Regulations.gov home page to get information on
using Regulations.gov. The docket may be viewed after the close of the
comment period in the same manner as during the comment period.
Regulations.gov Beta: Go to https://beta.regulations.gov/ or click
``Visit New Regulations.gov Site'' from the Regulations.gov Classic
homepage. Enter ``Docket ID OCC-2020-0013'' in the Search Box and click
``Search.'' Click on the ``Comments'' tab. Comments can be viewed and
filtered by clicking on the ``Sort By'' drop-down on the right side of
the screen or the ``Refine Results'' options on the left side of the
screen. Supporting materials can be viewed by clicking on the
``Documents'' tab and filtered by clicking on the ``Sort By'' drop-down
on the right side of the screen or the ``Refine Results'' options on
the left side of the screen.'' For assistance with the Regulations.gov
Beta site, please call (877) 378-5457 (toll free) or (703) 454-9859
Monday-Friday, 9 a.m.-5 p.m. ET or email
[email protected].
The docket may be viewed after the close of the comment period in
the same manner as during the comment period.
Board: You may submit comments, identified by Docket No. R-1718;
RIN 7100-AF91, by any of the following methods:
Agency website: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
Email: [email protected]. Include docket
and RIN numbers in the subject line of the message.
FAX: (202) 452-3819 or (202) 452-3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
All public comments will be made available on the Board's website
at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons or to remove
personally identifiable information at the commenter's request. Public
comments may also be viewed electronically or in paper in Room 146,
1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m. and
5:00 p.m. on weekdays. For security reasons, the Board requires that
visitors make an appointment to inspect comments. You may do so by
calling (202) 452-3684.
FDIC: You may submit comments, identified by RIN 3064-AF44, by any
of the following methods:
Agency website: https://www.fdic.gov/regulations/laws/federal. Follow instructions for submitting comments on the Agency
website.
Email: [email protected]. Include ``RIN 3064-AF44'' on the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments/RIN 3064-AF44, Federal Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
Hand Delivery/Courier: Comments may be hand delivered to
the guard station at the rear of the 550 17th Street building (located
on F Street) on business days between 7 a.m. and 5 p.m. All comments
received must include the agency name (FDIC) and RIN 3064-AF44 and will
be posted without change to https://www.fdic.gov/regulations/laws/federal, including any personal information provided.
FOR FURTHER INFORMATION CONTACT: OCC: Margot Schwadron, Director, or
Venus Fan, Risk Expert, Capital and Regulatory Policy, (202) 649-6370;
or Carl Kaminski, Special Counsel, or Chris Rafferty, Senior Attorney,
Chief Counsel's Office, (202) 649-5490, for persons who are deaf or
hearing impaired, TTY, (202) 649-5597, Office of the Comptroller of the
Currency, 400 7th Street SW, Washington, DC 20219.
Board: Anna Lee Hewko, Associate Director, (202) 530-6360;
Constance Horsley, Deputy Associate Director, (202) 452-5239; Elizabeth
MacDonald, Manager, (202) 475-6316; Sviatlana Phelan, Lead Financial
Institution Policy Analyst, (202) 912-4306; or Christopher Appel,
Senior Financial Institution Policy Analyst II, (202) 973-6862,
Division of Supervision and Regulation; Benjamin McDonough, Assistant
General Counsel, (202) 452-2036; Mark Buresh, Senior Counsel, (202)
452-5270; Andrew Hartlage, Counsel, (202) 452-6483; Jonah Kind, Senior
Attorney, (202) 452-2045; or Jasmin Keskinen, Legal Assistant, (202)
475-6650, Legal Division, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue NW, Washington, DC 20551.
Users of Telecommunication Device for Deaf (TDD) only, call (202) 263-
4869.
FDIC: Bobby R. Bean, Associate Director, [email protected]; Benedetto
Bosco, Chief, Capital Policy Section, [email protected]; Noah Cuttler,
Senior Policy Analyst, [email protected]; [email protected];
Capital Markets Branch, Division of Risk Management Supervision, (202)
898-6888; or Michael Phillips, Counsel, [email protected]; Catherine
Wood, Counsel, [email protected]; Francis Kuo, Counsel, [email protected];
Supervision and Legislation Branch, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street NW, Washington, DC 20429. For
the hearing impaired only, Telecommunication Device for the Deaf (TDD),
(800) 925-4618.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. The Interim Final Rule
III. Impact Assessment
IV. Technical Amendments
V. Administrative Law Matters
A. Administrative Procedure Act
B. Congressional Review Act
C. Paperwork Reduction Act
D. Regulatory Flexibility Act
E. Riegle Community Development and Regulatory Improvement Act
of 1994
F. Use of Plain Language
G. Unfunded Mandates Act
I. Background
The spread of the coronavirus disease 2019 (COVID-19) has
significantly and adversely affected global financial markets,
including depository institutions' role as financial intermediaries. In
particular,
[[Page 32982]]
disruptions in financial markets, and the resulting flight to liquid
assets by market participants, have caused depository institutions'
balance sheets to expand to accommodate inflows of deposits. This
balance sheet expansion has contributed to depository institutions
making substantial deposits in their accounts at Federal Reserve Banks
(deposits at Federal Reserve Banks). In addition, customer draws on
credit lines and depository institutions' holdings of significant
amounts of U.S. Treasury securities (Treasuries) have contributed to
balance sheet expansion. These trends are expected to continue
temporarily while depository institutions and their customers respond
to disruptions in the financial markets.
For a depository institution subsidiary of a U.S. global
systemically important bank holding company (GSIB), or a depository
institution subject to the Category II or Category III capital
standards, the agencies' regulatory capital rule (capital rule)
requires a minimum supplementary leverage ratio of 3 percent, measured
as the ratio of a depository institution's tier 1 capital to its total
leverage exposure.\1\ Total leverage exposure, the denominator of the
supplementary leverage ratio, includes certain off-balance sheet
exposures in addition to on-balance sheet assets.
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\1\ See 84 FR 59230 (Nov. 1, 2019). Banking organizations that
are subject to Category II standards include those with (1) at least
$700 billion in total consolidated assets or (2) at least $75
billion in cross-jurisdictional activity and at least $100 billion
in total consolidated assets. Banking organizations that are subject
to Category III standards include those with (1) at least $250
billion in average total consolidated assets or (2) at least $100
billion in average total consolidated assets and at least $75
billion in average total nonbank assets, average weighted short-term
wholesale funding; or average off-balance sheet exposure. See 12 CFR
217.2.
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GSIB depository institution subsidiaries also are subject to
enhanced supplementary leverage ratio (eSLR) standards established by
the agencies in 2014.\2\ Under the eSLR standards, GSIB depository
institution subsidiaries must maintain a 6-percent supplementary
leverage ratio to be considered ``well capitalized'' under the prompt
corrective action (PCA) framework of each agency.
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\2\ See 79 FR 24528 (May 1, 2014). The eSLR standards, as
adopted in 2014, applied to U.S. top-tier bank holding companies
with consolidated assets over $700 billion or more than $10 trillion
in assets under custody, and depository institution subsidiaries of
holding companies that meet those thresholds. The Board subsequently
revised its capital rule so that the applicability of the eSLR
standards is to bank holding companies identified as U.S. GSIBs and
their depository institution subsidiaries. See 80 FR 49082 (August
14, 2015). The banking organizations currently subject to the eSLR
standards are the same under either applicability standard.
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In contrast to the risk-based capital requirements in the capital
rule, a leverage ratio does not differentiate the amount of capital
required by the type of exposure. Rather, a leverage ratio places an
upper bound on depository institution leverage. A leverage ratio
protects against underestimating risk and serves to complement the
risk-based capital requirements. Under the supplementary leverage
ratio, depository institutions include all on-balance sheet assets,
including Treasuries and deposits at Federal Reserve Banks, in their
total leverage exposure calculation.\3\
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\3\ The agencies recently issued a final rule, effective April
1, 2020, which implements section 402 of the Economic Growth,
Regulatory Relief, and Consumer Protection Act (EGRRCPA), 12 U.S.C.
1831o note, by amending the capital rule to allow a banking
organization that qualifies as a custodial banking organization to
exclude from total leverage exposure deposits at qualifying central
banks, subject to limits (402 rule). 85 FR 4569 (January 27, 2020).
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II. The Interim Final Rule
The ability of depository institutions to hold certain assets, most
notably deposits at a Federal Reserve Bank and Treasuries, is essential
to market functioning, financial intermediation, and funding market
activity, particularly in periods of financial uncertainty. In response
to volatility and market strains, the Federal Reserve has taken a
number of actions to support market functioning and the flow of credit
to the economy. The response to COVID-19 has notably increased the size
of the Federal Reserve's balance sheet and resulted in a large increase
in the amount of reserves in the banking system. The agencies
anticipate that the Federal Reserve's balance sheet may continue to
expand in the near term, as customer deposits continue to expand, and
recently announced facilities to support the flow of credit to
households and businesses begin or continue operations. In addition,
market participants have liquidated a high volume of assets, and
customers have drawn down credit lines and deposited the cash proceeds
with depository institutions in recent weeks, further increasing the
size of depository institutions' balance sheets. Absent any adjustments
to the supplementary leverage ratio, the resulting increase in the size
of depository institutions' balance sheets may cause a sudden and
significant increase in the regulatory capital needed to meet a
depository institution's leverage ratio requirement.\4\ This is
particularly the case for many of the depository institutions subject
to the supplementary leverage ratio, which are significant participants
in financial intermediation services, including as clearing banks for
dealers in the open market operations of the Federal Open Market
Committee and as major custodians of securities.
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\4\ The Board recently issued an interim final rule to revise,
on a temporary basis for bank holding companies, savings and loan
holding companies, and U.S. intermediate holding companies of
foreign banking organizations, the calculation of total leverage
exposure, the denominator of the supplementary leverage ratio in the
Board's capital rule, to exclude Treasuries and deposits at Federal
Reserve Banks. The exclusion will remain in effect until March 31,
2021. 85 FR 20578 (April 14, 2020).
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In order to facilitate depository institutions' significant
increase in reserve balances resulting from the Federal Reserve's asset
purchases and the establishment of various programs to support the flow
of credit to the economy, as well as the need to continue to accept
exceptionally high levels of customer deposits, the agencies are
issuing this interim final rule to provide depository institutions
subject to the supplementary leverage ratio (qualifying depository
institutions) the ability to exclude temporarily Treasuries and
deposits at Federal Reserve Banks from total leverage exposure through
March 31, 2021. For example, depository institutions would be able to
exclude temporarily on-balance sheet Treasuries that they hold,
including Treasuries that they have borrowed and re-pledged in a repo-
style transaction, provided such Treasuries are included in the
depository institution's total leverage exposure prior to the effect of
the exclusion.\5\
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\5\ This scope is consistent with the Board's recent interim
final rule to revise the supplementary leverage ratio. See supra
note 4.
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Under the interim final rule, a depository institution that opts
into this treatment (electing depository institution) would be required
to obtain prior approval of distributions from its primary Federal
banking regulator. An electing depository institution must notify its
primary Federal banking regulator of its election within 30 days after
the interim final rule is effective.\6\ The primary Federal banking
regulator will consider a notice received from a qualifying depository
institution more than 30 days after the effective date of the interim
final rule on a case-by-case basis. The election will not affect the
electing depository institution's ability to pay distributions already
declared or to declare distributions for payment in the second quarter
of 2020. The prior
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approval requirement applies to distributions to be paid beginning in
the third quarter of 2020. The interim final rule will terminate after
March 31, 2021.
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\6\ An FDIC supervised institution must provide this notice in
writing to the appropriate FDIC regional director of the FDIC
Division of Risk Management Supervision.
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For purposes of reporting the supplementary leverage ratio as of
June 30, 2020, an electing depository institution may reflect the
exclusion of Treasuries and deposits at Federal Reserve Banks from
total leverage exposure as if this interim final rule had been in
effect for the entire second quarter of 2020. Because the supplementary
leverage ratio is calculated as an average over the quarter, this will
have the effect of maximizing the effect of the exclusion starting in
the second quarter of 2020. The agencies are not making similar
adjustments to risk-based capital ratios because Treasuries and
deposits at Federal Reserve Banks are risk-weighted at zero percent.
Under the interim final rule, beginning in the third quarter of
2020, an electing depository institution will be required to obtain
approval from its primary Federal banking regulator before making a
distribution \7\ or creating an obligation to make such a distribution
so long as the temporary exclusion is in effect. The primary Federal
banking regulator will endeavor to respond within 14 days to the
request with an approval, disapproval, or request for additional
information. This prior-approval requirement will help support the
objective of the interim final rule to strengthen the ability of
electing depository institutions to continue taking deposits, lending,
and conducting other financial intermediation activities during this
period of stress.
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\7\ See 12 CFR 3.2 (defining ``distribution'') (OCC); 12 CFR
217.2 (defining ``distribution'') (Board); 12 CFR 324.2 (defining
``distribution'') (FDIC).
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When evaluating any such request, the primary Federal banking
regulator will consider all relevant factors, including whether any
distribution would be contrary to safety and soundness and limitations
on distributions in the existing rules applicable to the electing
depository institution.\8\ Factors that the primary Federal banking
regulator will take into account include the depository institution's
current earnings and forecasts, the nature, purpose, and extent of the
request, and the particular circumstances giving rise to the
request.\9\ For example, the primary Federal banking regulator may
consider the expected future capital needs of the depository
institution and its ability to meet capital requirements after the
temporary relief provided under this interim final rule expires. The
requirement that a depository institution request approval for
distributions is not intended to prohibit electing depository
institutions from paying dividends in all cases. Rather, the primary
Federal banking regulator will evaluate each request to ensure that the
electing depository institution will be able to continue supporting the
economy by lending and accepting deposits consistent with the goal of
this interim final rule.
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\8\ Additional limitations on distributions may apply under 12
CFR part 3, subparts H and I; 12 CFR 5.46, 12 CFR part 5, subpart E;
12 CFR part 6; 12 CFR part 208, subparts A and D; 12 CFR part 303,
subparts K and M. The restrictions set forth in this interim final
rule are in addition to, and therefore do not supersede, any
existing statutory or regulatory limitations on making capital
distributions. For purposes of the FDIC's PCA rules, regarding
capital distribution restrictions for undercapitalized FDIC-
supervised institutions, see 12 CFR 324.405.
\9\ Holding companies use dividends from their subsidiaries for
various purposes. For example, dividends to the holding company can
support the efficient internal allocation of capital within a
holding company, allowing excess capital from one subsidiary, such
as the depository institution, to be redeployed to other
subsidiaries. As such, an effective dividend strategy can both
ensure the safety and soundness of the depository institution and
promote the safety and soundness of the entire banking organization.
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The interim final rule revises the measure of total leverage
exposure on a temporary basis for electing depository institutions for
the limited purposes of the agencies' capital rule. Depository
institutions subject to supplementary leverage ratio requirements
report their supplementary leverage ratios on the Consolidated Reports
of Condition and Income (Call Reports), Schedule RC-R and Regulatory
Capital Reporting for Institutions Subject to the Advanced Capital
Adequacy Framework (FFIEC 101), Schedule A.\10\ The agencies expect in
the near future to make all necessary revisions to the Call Reports and
the FFIEC 101, Schedule A to implement the interim final rule's
revisions to the supplementary leverage ratio for electing depository
institutions and to require such institutions to disclose the election
publicly.\11\ In addition, the interim final rule provides for the
necessary modifications of the disclosure requirements of section 173
of the capital rule to reflect the optional temporary exclusion
provided by the interim final rule.
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\10\ Depository institutions that are required to submit the OCC
Reporting Form DFAST-14A on April 6, 2021, or the FDIC DFAST-14A,
have the option to include these changes in their company-run stress
test results.
\11\ The instructions for Board's FR Y-9C, Schedule HC-R, Line
Item 45 (Advanced approaches holding companies only: Supplementary
leverage ratio) state that respondents must report the supplementary
leverage ratio from FFIEC 101 Schedule A, Table 2, Item 2.22.
Therefore, revisions to the FFIEC 101 regarding how to report the
supplementary leverage ratio would flow through to the FR Y-9C. The
Board plans to amend the instructions for FR Y-9C as necessary.
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The agencies seek comment on all aspects of this interim final
rule.
Question 1: Discuss the advantages and disadvantages of removing
temporarily Treasuries and deposits at Federal Reserve Banks from total
leverage exposure for depository institutions. How does the interim
final rule support the objectives of facilitating financial
intermediation by depository institutions? How does the interim final
rule affect the concurrent objective of safety and soundness? How would
the end date of March 31, 2021, for the exclusion under the interim
final rule be consistent with the objectives of the rule, or what
earlier or later end date should be used instead?
Question 2: What additional assets or exposure types should the
agencies consider to exclude temporarily from total leverage exposure
in order to achieve the interim final rule's objectives? For example,
what consideration should the agencies give to excluding deposits at
certain foreign central banks, foreign sovereign debt instruments, or
exposures guaranteed by the U.S. Federal Government and why? Which
specific repo-style transactions that would support depository
institutions' role serving as financial intermediaries should the
agencies exclude, if any, and why?
III. Impact Assessment
The supplementary leverage ratio requirement generally has not
prevented depository institutions from accommodating customer deposit
inflows or serving as financial intermediaries. However, as a result of
the spread of COVID-19, stress has materialized in numerous financial
markets. Disruptions in financial markets have resulted in expansion of
depository institutions' balance sheets to accommodate inflows of
deposits. In particular, using data from the fourth quarter of 2019,
the agencies expect that the interim final rule would temporarily
decrease binding tier 1 capital requirements by approximately $55
billion for depository institutions if all depository institutions
subject to the supplementary leverage ratio elect to opt in.\12\ In
light of the exclusions under
[[Page 32984]]
this interim final rule, this temporary reduction in capital
requirements is expected to increase leverage exposure capacity at
depository institutions by approximately $1.2 trillion. In particular,
the agencies expect that the increase in leverage exposure capacity
will strengthen the depository institutions' ability to continue to
accept customer deposits, and therefore ensure that depository
institutions remain able to fulfill this important function.
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\12\ This analysis takes into account the exclusion of
qualifying central bank deposits for custodial banking organizations
as provided under the capital rule. As of April 1, 2020, custodial
banking organizations may exclude deposits with qualifying foreign
central banks, in addition to the exclusions of deposits at Federal
Reserve Banks provided under this interim final rule. (See supra
note 3.) In addition, the analysis in this interim final rule uses
balances due from banks in foreign countries and foreign central
banks, as reported under line item 3 of Schedule RC-A of the Call
Report. Line item 3 of Schedule RC-A may slightly overstate amounts
eligible for exclusion by custodial banking organizations because it
includes balances due from banks in foreign countries and foreign
central banks that are not eligible for exclusion under this interim
final rule.
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Depository institutions that opt into the temporary exclusion of
Treasuries and deposits at Federal Reserve Banks from the denominator
of the supplementary leverage ratio will likely incur some costs
associated with making changes to internal systems or processes for
managing supplementary leverage ratio compliance. However, these costs
are likely to be very small.
Aside from increases in balance sheets caused by increases in
customer deposits, the balance sheets of depository institutions also
have increased as households and businesses draw down credit lines. If
depository institutions become constrained by supplementary leverage
ratio requirements, this could adversely affect their ability to
intermediate in financial markets and hamper their ability to provide
credit to households and businesses. Therefore, the temporary increase
in leverage exposure capacity could have countercyclical benefits as it
supports financial market liquidity and increases depository
institutions' lending capacities in a time of economic stress.
Although a temporary increase in leverage exposure capacity could
lead to an increase in overall leverage in the banking system, the
temporary exclusion of Treasuries and deposits at Federal Reserve Banks
will help alleviate ongoing stresses on the financial system and the
real economy arising from COVID-19. The agencies will closely monitor
the balance sheets of electing depository institutions in the coming
months while the exclusion is in effect with a particular view toward
any resulting increase in risks in conjunction with this interim final
rule.
IV. Technical Amendments
Finally, the agencies are making technical corrections and
clarifications to the Prompt Corrective Action regulations. In their
respective Prompt Corrective Action regulations, the agencies are
correcting an unintentional omission of ``Category III'' to clarify
that depository institutions subject to Category III standards must
meet their minimum supplementary leverage ratio requirement of 3
percent in order to be considered ``adequately capitalized.'' \13\ When
the minimum supplementary leverage ratio requirement was initially
added to the capital rule in 2013, the term ``advanced approaches''
banking organizations referred to all banking organizations that were
subject to the supplementary leverage ratio.\14\ However, the tailoring
rule that became effective on December 31, 2019, redefined ``advanced
approaches.'' Under that rule, advanced approaches banking
organizations now include a smaller group of banking organizations
(i.e., banking organizations subject to Category I and II standards),
while certain banking organizations are no longer defined as advanced
approaches but remain subject to the supplementary leverage ratio
requirements (i.e., banking organizations subject to Category III
standards). The agencies did not intend to change the applicability of
the minimum supplementary leverage ratio requirement in their
respective Prompt Corrective Action regulations. Rather, the Prompt
Corrective Action requirement should continue to apply to all banking
organizations that are required to calculate the supplementary leverage
ratio. Therefore, consistent with the capital rule, the agencies are
now clarifying that the supplementary leverage ratio provisions in
their respective Prompt Corrective Action regulations apply to all
banking organizations subject to Category III standards, in addition to
banking organizations subject to Category I and II standards.
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\13\ 12 CFR 6.4(b) (OCC); 12 CFR 208.43(b) (Board); 12 CFR
324.403(b) (FDIC).
\14\ 78 FR 62018 (Oct. 11, 2013).
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V. Administrative Law Matters
A. Administrative Procedure Act
The agencies are issuing the interim final rule and its
accompanying technical edits without prior notice and the opportunity
for public comment and the delayed effective date ordinarily prescribed
by the Administrative Procedure Act (APA).\15\ Pursuant to section
553(b)(B) of the APA, general notice and the opportunity for public
comment are not required with respect to a rulemaking when an ``agency
for good cause finds (and incorporates the finding and a brief
statement of reasons therefor in the rules issued) that notice and
public procedure thereon are impracticable, unnecessary, or contrary to
the public interest.'' \16\
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\15\ 5 U.S.C. 553.
\16\ 5 U.S.C. 553(b)(B).
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The agencies believe that the public interest is best served by
implementing the interim final rule immediately upon publication in the
Federal Register. As discussed above, the spread of COVID-19 has slowed
economic activity in many countries, including the United States.
Specifically, the disruptions in financial markets have caused
depository institutions to receive inflows of deposits--contributing to
the increase of deposits at Federal Reserve Banks--and to hold
significant amounts of Treasuries. Notably, these deposits at Federal
Reserve Banks and holdings of Treasuries are essential to the normal
functioning of the financial markets, especially in times of stress. If
depository institutions cannot sustain the rapid increase in deposits
at Federal Reserve Banks and holdings of Treasuries, the financial
markets would experience a marked decline in financial intermediation
and a further increase in general market volatility. Because the
interim final rule will mitigate these potential negative effects, the
agencies find that there is good cause consistent with the public
interest to issue the rule without advance notice and comment.\17\ This
final rule makes additional technical edits and corrections to more
clearly articulate the scope of the supplementary leverage ratio
requirements. Because the additional technical edits and corrections
are not substantive, the agencies find there is good cause to issue the
rule without advance notice and comment.
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\17\ 5 U.S.C. 553(b)(B); 553(d)(3).
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The APA also requires a 30-day delayed effective date, except for
(1) substantive rules which grant or recognize an exemption or relieve
a restriction; (2) interpretative rules and statements of policy; or
(3) as otherwise provided by the agency for good cause.\18\ Because the
interim final rule will provide temporary capital relief, the interim
final rule is exempt from the APA's delayed effective date
requirement.\19\ Additionally, the agencies find good cause to publish
the technical edits and corrections, which clarify the scope of the
supplementary
[[Page 32985]]
leverage ratio for purposes of the Prompt Corrective Action
regulations, with an immediate effective date for the same reasons set
forth above under the discussion of section 553(b)(B) of the APA.
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\18\ 5 U.S.C. 553(d).
\19\ 5 U.S.C. 553(d)(1).
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While the agencies believe that there is good cause to issue this
interim final rule without advance notice and comment and with an
immediate effective date, the agencies are interested in the views of
the public and request comment on all aspects of the interim final
rule.
B. Congressional Review Act
For purposes of Congressional Review Act, the OMB makes a
determination as to whether a final rule constitutes a ``major''
rule.\20\ 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.\21\
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\20\ 5 U.S.C. 801 et seq.
\21\ 5 U.S.C. 801(a)(3).
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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.\22\
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\22\ 5 U.S.C. 804(2).
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For the same reasons set forth above, the agencies are adopting the
interim final rule without the delayed effective date generally
prescribed under the Congressional Review Act. The delayed effective
date required by the Congressional Review Act does not apply to any
rule for which an agency for good cause finds (and incorporates the
finding and a brief statement of reasons therefor in the rule issued)
that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.\23\ In light of
current market uncertainty, the agencies believe that delaying the
effective date of the rule would be contrary to the public interest.
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\23\ 5 U.S.C. 808.
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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.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA)
states that no agency may conduct or sponsor, nor is the respondent
required to respond to, an information collection unless it displays a
currently valid OMB control number. The interim final rule affects the
agencies' current information collections for the Call Reports (OCC OMB
No. 1557-0081; Board OMB No. 7100-0036; and FDIC OMB No. 3064-0052) and
the Regulatory Capital Reporting for Institutions Subject to the
Advanced Capital Adequacy Framework (FFIEC 101; OCC OMB No. 1557-0239;
Board OMB No. 7100-0319; and FDIC OMB No. 3064-0159). The revisions to
the Call Reports and the FFIEC 101 will be addressed in a separate
Federal Register notice.
The interim final rule also introduces a new notice opt-in
requirement and a requirement for prior approval for distributions,
which would affect the agencies' capital rule information collections.
The agencies believe that these new requirements will amount to 12
burden hours per respondent (two responses per respondent at six hours
per response).
OCC:
Title of Information Collection: Risk-Based Capital Standards:
Advanced Capital Adequacy Framework.
OMB Control No.: 1557-0318.
Respondents for Interim Final Rule: 21.
Responses per Respondent: 2.
Burden per Response: 6 hours.
Burden for Interim Final Rule: 252 hours.
Total Burden for Collection: 66,333 hours.
FDIC:
Title of Information Collection: Regulatory Capital Rules.
OMB Control No.: 3064-0153.
Respondents for Interim Final Rule: 7.
Responses per Respondent: 2.
Burden per Response: 6 hours.
Burden for Interim Final Rule: 84 hours.
Total Burden for Collection: 128,140 burden hours.
The agencies request comment on:
a. Whether the collections of information are necessary for the
proper performance of the agencies' functions, including whether the
information has practical utility;
b. The accuracy of the agencies' estimates of the burden of the
information collections, including the validity of the methodology and
assumptions used;
c. Ways to enhance the quality, utility, and clarity of the
information to be collected;
d. Ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
The Board has temporarily revised the Financial Statements for
Holding Companies (FR Y-9C; OMB No. 7100-0128) and the Recordkeeping
and Disclosure Requirements Associated with Regulation Q (FR Q; OMB No.
7100-0313) information collections to accurately reflect certain
aspects of this and other interim final rules. On June 15, 1984, OMB
delegated to the Board authority under the PRA to temporarily approve a
revision to a collection of information without providing opportunity
for public comment if the Board determines that a change in an existing
collection must be instituted quickly and that public participation in
the approval process would defeat the purpose of the collection or
substantially interfere with the Board's ability to perform its
statutory obligation. The Board's delegated authority requires that the
Board, after temporarily approving a collection, solicit public comment
to extend information collections for a period not to exceed three
years. Therefore, the Board is inviting comment to extend the FR Q
information collection for three years, with the revisions discussed
below. The Board is not inviting comment on the FR Y-9 information
collection for the reasons discussed below.
The Board invites public comment on the FR Q information
collection, which is being reviewed under authority delegated by the
OMB under the PRA. Comments must be submitted on or before July 31,
2020. Comments are invited on the following:
a. Whether the collections of information are necessary for the
proper performance of the Board's functions, including whether the
information has practical utility;
b. The accuracy of the Board's estimate of the burden of the
information collections, including the validity of the methodology
and assumptions used;
c. Ways to enhance the quality, utility, and clarity of the
information to be collected;
d. Ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
[[Page 32986]]
e. Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
At the end of the comment period, the comments and recommendations
received will be analyzed to determine the extent to which the Board
should modify the collections.
Final Approval Under OMB Delegated Authority of the Temporary Revision
of the Following Information Collection
Report Title: Financial Statements for Holding Companies.
Agency form number: FR Y-9C, FR Y-9LP, FR Y-9SP, FR Y-9ES, and FR
Y-9CS.
OMB control number: 7100-0128.
Effective Date: March 31, 2020
Frequency: Quarterly, semiannually, and annually.
Respondents: Bank holding companies, savings and loan holding
companies,\24\ securities holding companies, and U.S. intermediate
holding companies (collectively, HCs).
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\24\ An SLHC must file one or more of the FR Y-9 series of
reports unless it is: (1) A grandfathered unitary SLHC with
primarily commercial assets and thrifts that make up less than 5
percent of its consolidated assets; or (2) a SLHC that primarily
holds insurance-related assets and does not otherwise submit
financial reports with the SEC pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934.
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Estimated number of respondents: FR Y-9C (non-advanced approaches
CBLR HCs with less than $5 billion in total assets): 7; FR Y-9C (non-
advanced approaches CBLR HCs with $5 billion or more in total assets):
35; FR Y-9C (non-advanced approaches, non CBLR, HCs with less than $5
billion in total assets): 84; FR Y-9C (non-advanced approaches, non
CBLR HCs, with $5 billion or more in total assets): 154; FR Y-9C
(advanced approaches HCs): 19; FR Y-9LP: 434; FR Y-9SP: 3,960; FR Y-
9ES: 83; FR Y-9CS: 236.
Estimated average hours per response:
Reporting
FR Y-9C (non-advanced approaches CBLR HCs with less than $5 billion
in total assets): 29.14 hours; FR Y-9C (non-advanced approaches CBLR
HCs with $5 billion or more in total assets): 35.11; FR Y-9C (non-
advanced approaches, non CBLR HCs, with less than $5 billion in total
assets): 40.98; FR Y-9C (non-advanced approaches, non CBLR, HCs with $5
billion or more in total assets): 46.95 hours; FR Y-9C (advanced
approaches HCs): 48.59 hours; FR Y-9LP: 5.27 hours; FR Y-9SP: 5.40
hours; FR Y-9ES: 0.50 hours; FR Y-9CS: 0.50 hours.
Recordkeeping
FR Y-9C (non-advanced approaches HCs with less than $5 billion in
total assets), FR Y-9C (non-advanced approaches HCs with $5 billion or
more in total assets), FR Y-9C (advanced approaches HCs), and FR Y-9LP:
1.00 hour; FR Y-9SP, FR Y-9ES, and FR Y-9CS: 0.50 hours.
Estimated annual burden hours:
Reporting
FR Y-9C (non-advanced approaches CBLR HCs with less than $5 billion
in total assets): 8,276 hours; FR Y-9C (non-advanced approaches CBLR
HCs with $5 billion or more in total assets): 4,915; FR Y-9C (non-
advanced approaches non CBLR HCs with less than $5 billion in total
assets): 13,769; FR Y-9C (non-advanced approaches non CBLR HCs with $5
billion or more in total assets): 28,921 hours; FR Y-9C (advanced
approaches HCs): 3,693 hours; FR Y-9LP: 9,149 hours; FR Y-9SP: 42,768
hours; FR Y-9ES: 42 hours; FR Y-9CS: 472 hours.
Recordkeeping
FR Y-9C (non-advanced approaches HCs with less than $5 billion in
total assets): 620 hours; FR Y-9C (non-advanced approaches HCs with $5
billion or more in total assets): 756 hours; FR Y-9C (advanced
approaches HCs): 76 hours; FR Y-9LP: 1,736 hours; FR Y-9SP: 3,960
hours; FR Y-9ES: 42 hours; FR Y-9CS: 472 hours.
General description of report: The FR Y-9C consists of standardized
financial statements similar to the Call Reports filed by commercial
banks.\25\ The FR Y-9C collects consolidated data from HCs and is filed
quarterly by top-tier HCs with total consolidated assets of $3 billion
or more.\26\
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\25\ The Call Reports consist of the Consolidated Reports of
Condition and Income for a Bank with Domestic Offices Only and Total
Assets Less Than $5 Billion (FFIEC 051), the Consolidated Reports of
Condition and Income for a Bank with Domestic Offices Only (FFIEC
041) and the Consolidated Reports of Condition and Income for a Bank
with Domestic and Foreign Offices (FFIEC 031).
\26\ Under certain circumstances described in the FR Y-9C's
General Instructions, HCs with assets under $3 billion may be
required to file the FR Y-9C.
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The FR Y-9LP, which collects parent company only financial data,
must be submitted by each HC that files the FR Y-9C, as well as by each
of its subsidiary HCs.\27\ The report consists of standardized
financial statements.
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\27\ A top-tier HC may submit a separate FR Y-9LP on behalf of
each of its lower-tier HCs.
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The FR Y-9SP is a parent company only financial statement filed
semiannually by HCs with total consolidated assets of less than $3
billion. In a banking organization with total consolidated assets of
less than $3 billion that has tiered HCs, each HC in the organization
must submit, or have the top-tier HC submit on its behalf, a separate
FR Y-9SP. This report is designed to obtain basic balance sheet and
income data for the parent company, and data on its intangible assets
and intercompany transactions.
The FR Y-9ES is filed annually by each employee stock ownership
plan (ESOP) that is also an HC. The report collects financial data on
the ESOP's benefit plan activities. The FR Y-9ES consists of four
schedules: A Statement of Changes in Net Assets Available for Benefits,
a Statement of Net Assets Available for Benefits, Memoranda, and Notes
to the Financial Statements.
The FR Y-9CS is a free-form supplemental report that the Board may
utilize to collect critical additional data deemed to be needed in an
expedited manner from HCs on a voluntary basis. The data are used to
assess and monitor emerging issues related to HCs, and the report is
intended to supplement the other FR Y-9 reports. The data items
included on the FR Y-9CS may change as needed.
Legal authorization and confidentiality: The Board has the
authority to impose the reporting and recordkeeping requirements
associated with the Y-9 family of reports on bank holding companies
(``BHCs'') pursuant to section 5 of the Bank Holding Company Act (``BHC
Act''), (12 U.S.C. 1844); on savings and loan holding companies
pursuant to section 10(b)(2) and (3) of the Home Owners' Loan Act, (12
U.S.C. 1467a(b)(2) and (3)); on U.S. intermediate holding companies
(``U.S. IHCs'') pursuant to section 5 of the BHC Act, (12 U.S.C. 1844),
as well as pursuant to sections 102(a)(1) and 165 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act''),
(12 U.S.C. 511(a)(1) and 5365); and on securities holding companies
pursuant to section 618 of the Dodd-Frank Act, (12 U.S.C.
1850a(c)(1)(A)). The FR Y-9 series of reports, and the recordkeeping
requirements set forth in the respective instructions to each report,
are mandatory, except for the FR Y-9CS, which is voluntary. With
respect to the FR Y-9C, Schedule HI's memoranda item 7(g), Schedule HC-
P's item 7(a), and Schedule HC-P's item 7(b) are considered
confidential commercial and financial information under exemption 4 of
the Freedom of Information Act (``FOIA''), (5 U.S.C. 552(b)(4)), as is
Schedule HC's memorandum item 2.b. for both the FR Y-9C and FR Y-9SP
reports.
[[Page 32987]]
Aside from the data items described above, the remaining data items
on the FR Y-9 reports are generally not accorded confidential
treatment. As provided in the Board's Rules Regarding Availability of
Information (12 CFR part 261), however, a respondent may request
confidential treatment for any data items the respondent believes
should be withheld pursuant to a FOIA exemption. The Board will review
any such request to determine if confidential treatment is appropriate,
and will inform the respondent if the request for confidential
treatment has been denied.
To the extent that the instructions, to the FR Y-9C, FR Y-9LP, FR
Y-9SP, and FR Y-9ES reports, each respectively direct a financial
institution to retain the workpapers and related materials used in
preparation of each report, such material would only be obtained by the
Board as part of the examination or supervision of the financial
institution. Accordingly, such information may be considered
confidential pursuant to exemption 8 of the FOIA (5 U.S.C. 552(b)(8)).
In addition, the financial institution's workpapers and related
materials may also be protected by exemption 4 of the FOIA, to the
extent such financial information is treated as confidential by the
respondent (5 U.S.C. 552(b)(4)).
Current Actions: On April 1, 2020, the Board announced that it had
temporarily revised the instructions to the FR Y-9C to accurately
reflect the calculation of the supplementary leverage ratio pursuant to
the Board's interim final rule (the ``holding company SLR IFR'') that
revised, on a temporary basis for bank holding companies, savings and
loan holding companies, and U.S. intermediate holding companies of
foreign banking organizations, the calculation of total leverage
exposure, the denominator of the supplementary leverage ratio in the
Board's capital rule, to exclude the on-balance sheet amounts of
Treasuries and deposits at Federal Reserve Banks.\28\ This temporary
revision to the FR Y-9C was necessary because holding companies were
previously instructed to report their supplementary leverage ratio as
reported in the FFIEC 101; because the FFIEC 101 was not revised to
account for the holding company SLR IFR, retaining these instructions
would have resulted in inaccurate reporting by holding companies on the
FR Y-9C.
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\28\ 85 FR 20578 (April 14, 2020).
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The agencies now intend to revise the FFIEC 101 to account for this
interim final rule and the holding company SLR IFR. Following such
revisions, holding companies would be able to report their
supplementary leverage ratio on the FR Y-9C using the data reported on
the FFIEC 101, as they did previously. Therefore, the temporary
revisions to the FR Y-9C to account for the holding company SLR IFR,
announced by the Board on April 1, 2020, are no longer necessary, and
the Board has retracted these revisions. The Board has determined that
this revision to the FR Y-9C must be instituted quickly and that public
participation in the approval process would defeat the purpose of the
collection of information, as delaying the revisions would result in
the collection of inaccurate information, and would interfere with the
Board's ability to perform its statutory duties.
Because these revisions result completely revert the temporary
revisions made by the Board to the FR Y-9C in connection with the
holding company SLR IFR, the resulting instructions regarding the
supplementary leverage ratio are identical to those adopted following
notice and comment. Therefore, the Board does not intend to request
further comment in order to retain these instructions.
Final Approval Under OMB Delegated Authority of the Temporary Revision
of, and Solicitation of Comment To Extend for Three Years, With
Revision, of the Following Information Collections
Title of Information Collection: Recordkeeping and Disclosure
Requirements Associated with Regulation Q.
Agency form number: FR Q.
OMB control number: 7100-0313.
Frequency: Quarterly, annual.
Affected Public: Businesses or other for-profit.
Respondents: State member banks (SMBs), bank holding companies
(BHCs), U.S. intermediate holding companies (IHCs), savings and loan
holding companies (SLHCs), and global systemically important bank
holding companies (GSIBs).
Legal authorization and confidentiality: This information
collection is authorized by section 38(o) of the Federal Deposit
Insurance Act (12 U.S.C. 1831o(c)), section 908 of the International
Lending Supervision Act of 1983 (12 U.S.C. 3907(a)(1)), section 9(6) of
the Federal Reserve Act (12 U.S.C. 324), and section 5(c) of the Bank
Holding Company Act (12 U.S.C. 1844(c)). The obligation to respond to
this information collection is mandatory. If a respondent considers the
information to be trade secrets and/or privileged such information
could be withheld from the public under the authority of the Freedom of
Information Act (5 U.S.C. 552(b)(4)). Additionally, to the extent that
such information may be contained in an examination report such
information could also be withheld from the public (5 U.S.C. 552
(b)(8)). Estimated number of respondents: 1,431 (of which 19 are
advanced approaches institutions).
Estimated average hours per response:
Minimum Capital Ratios
Recordkeeping (Ongoing)--16.
Standardized Approach
Recordkeeping (Initial setup)--122.
Recordkeeping (Ongoing)--20.
Disclosure (Initial setup)--226.25.
Disclosure (Ongoing quarterly)--131.25.
Advanced Approach
Recordkeeping (Initial setup)--460.
Recordkeeping (Ongoing)--540.77.
Recordkeeping (Ongoing quarterly)--20.
Disclosure (Initial setup)--328.
Disclosure (Ongoing)--5.78.
Disclosure (Ongoing quarterly)--41.
Disclosure (Table 13 quarterly)--5.
Risk-based Capital Surcharge for GSIBs
Recordkeeping (Ongoing)--0.5.
Reporting (Twice)--6.
Total estimated annual burden: 1,136 hours initial setup, 80,245
hours for ongoing.
Current actions: The Board has temporarily revised the FR Q
information collection to reflect a revision to the disclosure
requirements contained in the Board's Regulation Q. Generally, Sec.
217.173 of the Board's Regulation Q requires each advanced approaches
Board-regulated institution and a Category III Board-regulated
institution that is required to publicly disclose its supplementary
leverage ratio pursuant to Sec. 217.172(d) of Regulation Q to make
certain disclosures, which are listed in Table 13 of Sec. 217.173.
Pursuant to this interim final rule, a Board-regulated institution that
is required to make such disclosures will be required exclude the
balance sheet carrying value of U.S. Treasury securities and funds on
deposit at a Federal Reserve Bank from its disclosures under Table 13
of Sec. 217.173. The interim final rule also introduces a new notice
opt-in requirement and a requirement for prior approval for
distributions, which would affect the agencies' capital rule
information collections. The agencies believe that these new
requirements will amount to 12 burden hours per respondent (two
responses per respondent at six hours per response).
Additionally, the Board has temporarily revised the FR Q
information collection to include the notification that an electing
depository
[[Page 32988]]
institution must provide to its primary Federal banking regulator, as
well as the request for approval that an electing depository
institution must submit to its primary Federal banking regulator prior
to making certain capital distributions.
The Board has determined that these revisions to the FR Q described
above must be instituted quickly and that public participation in the
approval process would defeat the purpose of the collection of
information, as delaying the revisions would result in the collection
of inaccurate information, and would interfere with the Board's ability
to perform its statutory duties.
The Board also invites comment on a proposal to extend the FR Y-Q
for three years, with the revision described above. This revision would
be effective for FR Q through March 31, 2021, the date after which the
exclusions in this interim final rule will no longer be effective.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \29\ requires an agency to
consider whether the rules it proposes will have a significant economic
impact on a substantial number of small entities.\30\ The RFA applies
only to rules for which an agency publishes a general notice of
proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed
previously, consistent with section 553(b)(B) of the APA, the agencies
have determined for good cause that general notice and opportunity for
public comment is unnecessary, and therefore the agencies are not
issuing a notice of proposed rulemaking. Accordingly, the agencies have
concluded that the RFA's requirements relating to initial and final
regulatory flexibility analysis do not apply.
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\29\ 5 U.S.C. 601 et seq.
\30\ Under regulations issued by the Small Business
Administration, a small entity includes a depository institution,
bank holding company, or savings and loan holding company with total
assets of $600 million or less and trust companies with total
average annual receipts of $41.5 million or less. See 13 CFR
121.201.
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Nevertheless, the agencies seek comment on whether, and the extent
to which, the interim final rule would affect a significant number of
small entities.
E. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\31\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
IDIs, each Federal banking agency must consider, consistent with the
principle of safety and soundness and the public interest, any
administrative burdens that such regulations would place on depository
institutions, including small depository institutions, and customers of
depository institutions, as well as the benefits of such regulations.
In addition, section 302(b) of RCDRIA requires new regulations and
amendments to regulations that impose additional reporting,
disclosures, or other new requirements on IDIs generally to take effect
on the first day of a calendar quarter that begins on or after the date
on which the regulations are published in final form, with certain
exceptions, including for good cause.\32\ For the reasons described
above, the agencies find good cause exists under section 302 of RCDRIA
to publish this interim final rule with an immediate effective date.
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\31\ 12 U.S.C. 4802(a).
\32\ 12 U.S.C. 4802.
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As such, the final rule will be effective on immediately.
Nevertheless, the agencies seek comment on RCDRIA.
F. Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act \33\ 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 interim final rule in a simple and straightforward manner. The
agencies invite comments on whether there are additional steps it could
take to make the rule easier to understand. For example:
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\33\ 12 U.S.C. 4809.
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Have we organized the material to suit your needs? If not,
how could this material be better organized?
Are the requirements in the regulation clearly stated? If
not, how could the regulation be more clearly stated?
Does the regulation contain language or jargon that is not
clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes to the format would make the regulation
easier to understand? What else could we do to make the regulation
easier to understand?
G. Unfunded Mandates Reform Act of 1995
As a general matter, the Unfunded Mandates Reform Act of 1995
(UMRA), 2 U.S.C. 1531 et seq., requires the preparation of a budgetary
impact statement before promulgating a rule that includes a Federal
mandate that may result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year. However, the UMRA does not apply to
final rules for which a general notice of proposed rulemaking was not
published. See 2 U.S.C. 1532(a). Therefore, because the OCC has found
good cause to dispense with notice and comment for this interim final
rule, the OCC has not prepared an economic analysis of the rule under
the UMRA.
List of Subjects
12 CFR Part 3
Administrative practice and procedure, Capital, Federal savings
associations, National banks, Risk.
12 CFR Part 6
Federal savings associations, National banks, Prompt corrective
action.
12 CFR Part 208
Accounting, Agriculture, Banks, banking, Confidential business
information, Consumer protection, Crime, Currency, Federal Reserve
System, Flood insurance, Insurance, Investments, Mortgages, Reporting
and recordkeeping requirements, Securities.
12 CFR Part 217
Administrative practice and procedure, Banks, banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
12 CFR Part 324
Administrative practice and procedure, Banks, banking, Reporting
and recordkeeping requirements, Savings associations, State non-member
banks.
Authority and Issuance
For the reasons stated in the joint preamble, the Office of the
Comptroller of the Currency amends part 3 of chapter I of title 12,
Code of Federal Regulations as follows:
PART 3--CAPITAL ADEQUACY STANDARDS
0
1. The authority citation for part 3 continues to read as follows:
Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818,
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, 5412(b)(2)(B), and
Pub. L. 116-136, 134 Stat. 281.
0
2. Section 3.304 is added to read as follows:
[[Page 32989]]
Sec. 3.304 Temporary exclusions from total leverage exposure.
(a) In general. Subject to paragraphs (b) through (g) of this
section, and notwithstanding any other requirement in this part, a
national bank or Federal savings association, when calculating on-
balance sheet assets as of each day of a reporting quarter for purposes
of determining the national bank's or Federal savings association's
total leverage exposure under Sec. 3.10(c)(4), may exclude the balance
sheet carrying value of the following items:
(1) U.S. Treasury securities; and
(2) Funds on deposit at a Federal Reserve Bank.
(b) Opt-in period. Before applying the relief provided in paragraph
(a) of this section, a national bank or Federal savings association
must first notify the OCC before July 1, 2020.
(c) Calculation of relief. When calculating on-balance sheet assets
as of each day of a reporting quarter, the relief provided in paragraph
(a) of this section applies from the beginning of the reporting quarter
in which the national bank or Federal savings association filed an opt-
in notice through the termination date specified in paragraph (d) of
this section.
(d) Termination of exclusions. This section shall cease to be
effective after the reporting period that ends March 31, 2021.
(e) Custody bank. A custody bank must reduce the amount in Sec.
3.10(c)(4)(ii)(J)(1) (to no less than zero) by any amount excluded
under paragraph (a)(2) of this section.
(f) Disclosure. Notwithstanding Table 13 to Sec. 3.173, a national
bank or Federal savings association that is required to make the
disclosures pursuant to Sec. 3.173 must exclude the items excluded
pursuant to paragraph (a) of this section from Table 13 to Sec. 3.173.
(g) OCC approval for distributions. During the calendar quarter
beginning on July 1, 2020, and until March 31, 2021, no national bank
or Federal savings association that has opted in to the relief provided
under paragraph (a) of this section may make a distribution, or create
an obligation to make such a distribution, without prior OCC approval.
When reviewing a request under this paragraph (g), the OCC will
consider all relevant factors, including whether the distribution would
be contrary to the safety and soundness of the national bank or Federal
savings association; the nature, purpose, and extent of the request;
and the particular circumstances giving rise to the request.
PART 6--PROMPT CORRECTIVE ACTION
0
3. The authority citation for part 6 continues to read as follows:
Authority: 12 U.S.C. 93a, 1831o, 5412(b)(2)(B).
0
4. Amend Sec. 6.4 by revising paragraphs (b)(2)(iv)(B) and
(b)(3)(iv)(B) to read as follows:
Sec. 6.4 Capital measures and capital categories.
* * * * *
(b) * * *
(2) * * *
(iv) * * *
(B) With respect to an advanced approaches or Category III national
bank or advanced approaches or Category III Federal savings
association, the national bank or Federal savings association has a
supplementary leverage ratio of 3.0 percent or greater; and
* * * * *
(3) * * *
(iv) * * *
(B) With respect to an advanced approaches or Category III national
bank or advanced approaches or Category III Federal savings
association, on January 1, 2018, and thereafter, the national bank or
Federal savings association has a supplementary leverage ratio of less
than 3.0 percent.
* * * * *
Authority and Issuance
For the reasons stated in the joint preamble, the Board of
Governors of the Federal Reserve System amends 12 CFR chapter II as
follows:
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
0
5. The authority citation for part 208 continues to read as follows:
Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-
338a, 371d, 461, 481-486, 601, 611, 1814, 1816, 1817(a)(3),
1817(a)(12), 1818, 1820(d)(9), 1833(j), 1828(o), 1831, 1831o, 1831p-
1, 1831r-1, 1831w, 1831x, 1835a, 1882, 2901-2907, 3105, 3310, 3331-
3351, 3905-3909, 5371, and 5371 note; 15 U.S.C. 78b, 78I(b), 78l(i),
780-4(c)(5), 78q, 78q-1, 78w, 1681s, 1681w, 6801, and 6805; 31
U.S.C. 5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
0
6. Section 208.43(b)(2)(iv)(B) and (b)(3)(iv)(B) are revised to read as
follows:
Sec. 208.43 Capital measures and capital categories.
* * * * *
(b) * * *
(2) * * *
(iv) * * *
(B) With respect to an advanced approaches bank or bank that is a
Category III Board-regulated institution (as defined in Sec. 217.2 of
this chapter), the bank has a supplementary leverage ratio of 3.0
percent or greater; and
* * * * *
(3) * * *
(iv) * * *
(B) With respect to an advanced approaches bank or bank that is a
Category III Board-regulated institution (as defined in Sec. 217.2 of
this chapter), the bank has a supplementary leverage ratio of less than
3.0 percent.
* * * * *
PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)
0
7. The authority citation for part 217 continues to read as follows:
Authority: 12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a,
1818, 1828, 1831n, 1831o, 1831p-1, 1831w, 1835, 1844(b), 1851, 3904,
3906-3909, 4808, 5365, 5368, 5371, 5371 note, and sec. 4012, Pub. L.
116-136, 134 Stat. 281.
Subpart G--Transition Provisions
0
8. Revise Sec. 217.303 to read as follows:
Sec. 217.303 Temporary exclusions from total leverage exposure.
(a) In general. Subject to paragraphs (b) through (g) of this
section and notwithstanding any other requirement in this part, when
calculating on-balance sheet assets as of each day of a reporting
quarter for purposes of determining the Board-regulated institution's
total leverage exposure under Sec. 217.10(c)(4), a Board-regulated
institution that is a depository institution holding company or a U.S.
intermediate holding company must, and a Board-regulated institution
that is a state member bank may, exclude the balance sheet carrying
value of the following items:
(1) U.S. Treasury securities; and
(2) Funds on deposit at a Federal Reserve Bank.
(b) Opt-in period. Before applying the relief provided in paragraph
(a) of this section, a state member bank must first notify the Board
before July 1, 2020.
(c) Calculation of relief. When calculating on-balance sheet assets
as of each day of a reporting quarter, the relief provided in paragraph
(a) of this section applies from the beginning of the reporting quarter
in which the state member bank filed an opt-in notice
[[Page 32990]]
through the termination date specified in paragraph (d) of this
section.
(d) Termination of exclusions. This section shall cease to be
effective after the reporting period that ends March 31, 2021.
(e) Custodial banking organizations. A custodial banking
organization must reduce the amount in Sec. 217.10(c)(4)(ii)(J)(1) (to
no less than zero) by any amount excluded under paragraph (a)(2) of
this section.
(f) Disclosure. Notwithstanding Table 13 to Sec. 217.173, a Board-
regulated institution that is required to make the disclosures pursuant
to Sec. 217.173 must exclude the items excluded pursuant to paragraph
(a) of this section from Table 13 to Sec. 217.173.
(g) Board approval for distributions. During the calendar quarter
beginning on July 1, 2020, and until March 31, 2021, no state member
bank that has opted in to the relief provided under paragraph (a) of
this section may make a distribution, or create an obligation to make
such a distribution, without prior Board approval. When reviewing a
request under this paragraph (g), the Board will consider all relevant
factors, including whether the distribution would be contrary to the
safety and soundness of the state member bank; the nature, purpose, and
extent of the request; and the particular circumstances giving rise to
the request.
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the joint preamble, the Federal
Deposit Insurance Corporation amends chapter III of title 12 of the
Code of Federal Regulations as follows:
PART 324--CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS
0
9. The authority citation for part 324 continues to read as follows:
Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b),
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n),
1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233,
105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242,
105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160,
2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386,
as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828
note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note);
Pub. L. 115-174; Pub. L. 116-136, 134 Stat. 281.
Subpart G--Transition Provisions
Sec. 324.304 [Redesignated as Sec. 324.305]
0
10. Redesignate Sec. 324.304 as Sec. 324.305.
0
11. A new Sec. 324.304 is added to read as follows:
Sec. 324.304 Temporary exclusions from total leverage exposure.
(a) In general. Subject to paragraphs (b) through (g) of this
section, and notwithstanding any other requirement in this part, an
FDIC-supervised institution, when calculating on-balance sheet assets
as of each day of a reporting quarter for purposes of determining the
FDIC-supervised institution's total leverage exposure under Sec.
324.10(c)(4), may exclude the balance sheet carrying value of the
following items:
(1) U.S. Treasury securities; and
(2) Funds on deposit at a Federal Reserve Bank.
(b) Opt-in period. Before applying the relief provided in paragraph
(a) of this section, an FDIC-supervised institution must first notify
the appropriate regional director of the FDIC Division of Risk
Management Supervision before July 1, 2020.
(c) Calculation of relief. When calculating on-balance sheet assets
as of each day of a reporting quarter, the relief provided in paragraph
(a) of this section applies from the beginning of the reporting quarter
in which the FDIC-supervised institution filed an opt-in notice through
the termination date specified in paragraph (d) of this section.
(d) Termination of exclusions. This section shall cease to be
effective after the reporting period that ends March 31, 2021.
(e) Custody bank. A custody bank must reduce the amount in Sec.
324.10(c)(4)(ii)(J)(1) (to no less than zero) by any amount excluded
under paragraph (a)(2) of this section.
(f) Disclosure. Notwithstanding Table 13 to Sec. 324.173, an FDIC-
supervised institution that is required to make the disclosures
pursuant to Sec. 324.173 must exclude the items excluded pursuant to
paragraph (a) of this section from Table 13 to Sec. 324.173.
(g) FDIC approval for distributions. During the calendar quarter
beginning on July 1, 2020, and until March 31, 2021, no FDIC-supervised
institution that has opted in to the relief provided under paragraph
(a) of this section may make a distribution, or create an obligation to
make such a distribution, without prior FDIC approval. When reviewing a
request under this paragraph (g), the FDIC will consider all relevant
factors, including whether the distribution would be contrary to the
safety and soundness of the FDIC-supervised institution; the nature,
purpose, and extent of the request; and the particular circumstances
giving rise to the request.
Subpart H--Prompt Corrective Action
0
12. Section 324.403(b)(2)(vi) and (b)(3)(v) are revised to read as
follows:
Sec. 324.403 Capital measures and capital categories definitions.
* * * * *
(b) * * *
(2) * * *
(vi) Beginning January 1, 2018, an advanced approaches or Category
III FDIC-supervised institution will be deemed to be ``adequately
capitalized'' if it satisfies paragraphs (b)(2)(i) through (v) of this
section and has a supplementary leverage ratio of 3.0 percent or
greater, as calculated in accordance with Sec. 324.10.
(3) * * *
(v) Beginning January 1, 2018, an advanced approaches or Category
III FDIC-supervised institution will be deemed to be
``undercapitalized'' if it has a supplementary leverage ratio of less
than 3.0 percent, as calculated in accordance with Sec. 324.10.
* * * * *
Brian P. Brooks,
First Deputy Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System.
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on or about May 14, 2020.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2020-10962 Filed 5-29-20; 8:45 am]
BILLING CODE 4810-33-P