Federal Register / Vol. 76, No. 45 / Tuesday, March 8, 2011 / Proposed Rules 12611 

1 12 CFR part 567, Appendix C. 

2Public Law 111–203, § 171, 124 Stat. 1376, 

1435–38 (2010). 

3 12 CFR part 567. 

4Public Law 111–203, § 171, 124 Stat. 1376, 

1435–38 (2010). 

5The Office of Thrift Supervision (OTS), the 

Office of Comptroller of the Currency (OCC), the 

Board of Governors of the Federal Reserve System 

(Board), and the Federal Deposit Insurance 

Corporation (FDIC) are considered Federal banking 

agencies. Section 312 of the Act provides for the 

transfer of OTS functions to the FDIC, OCC, and 

Board, on the transfer date, which is July 21, 2011 

(unless the Secretary of the Treasury designates a 

later date, but not later than January 21, 2012). More 

specifically, the Act transfers authority over Federal 

savings associations to the OCC, authority over 

State savings associations to the FDIC, and 

authority over savings and loan holding companies 

to the Board. OTS rulemaking authority relating to 

savings associations and savings and loan holding 

companies will be transferred to the OCC and 

Board, respectively. 12 U.S.C. 5412. 

6OTS’s capital regulations applicable to savings 

associations are set forth at 12 CFR part 567. 

Section 303 of the Riegle Community Development 

and Regulatory Improvement Act of 1994 (12 U.S.C. 

4803) directs the agencies to work jointly to make 

uniform all regulations and guidelines 

implementing common statutory or supervisory 

policies. Accordingly, the banking agencies 

generally issue capital standards whose substance 

is as similar as possible, thereby minimizing 

interagency differences. Due to timing 

considerations, the OCC, Board, and FDIC 

published a notice of proposed rulemaking (Joint 

NPR) in the Federal Register which addressed 

section 171 of the Dodd-Frank Act (75 FR 82317, 

December 30, 2010). OTS is issuing today’s NPR 

which essentially parallels the substance of the 

joint proposal. 

(c) From subsection (e)(1) (Relevancy and 

Necessity of Information) because in the 

course of investigations into potential 

violations of Federal law, the accuracy of 

information obtained or introduced 

occasionally may be unclear, or the 

information may not be strictly relevant or 

necessary to a specific investigation. In the 

interests of effective law enforcement, it is 

appropriate to retain all information that may 

aid in establishing patterns of unlawful 

activity. 

(d) From subsections (e)(4)(G), (e)(4)(H), 

and (e)(4)(I) (Agency Requirements) and (f) 

(Agency Rules), because portions of this 

system are exempt from the individual access 

provisions of subsection (d) for the reasons 

noted above, and therefore DHS is not 

required to establish requirements, rules, or 

procedures with respect to such access. 

Providing notice to individuals with respect 

to existence of records pertaining to them in 

the system of records or otherwise setting up 

procedures pursuant to which individuals 

may access and view records pertaining to 

themselves in the system would undermine 

investigative efforts and reveal the identities 

of witnesses, and potential witnesses, and 

confidential informants. 

Dated: February 25, 2011. 

Mary Ellen Callahan, 

Chief Privacy Officer, Department of 

Homeland Security. 

[FR Doc. 2011–5094 Filed 3–7–11; 8:45 am] 

BILLING CODE 9110–9A–P 

DEPARTMENT OF THE TREASURY 

Office of Thrift Supervision 

12 CFR Part 567 

[Docket No. OTS–2011–0002] 

RIN 1550–AC41 

Risk-Based Capital Standards: 

Advanced Capital Adequacy 

Framework—Basel II; Establishment of 

a Risk-Based Capital Floor 

AGENCY: Office of Thrift Supervision, 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Office of Thrift 

Supervision (OTS) proposes to: Amend 

its advanced risk-based capital 

adequacy standards (advanced 

approaches rules) 1 to be consistent with 

certain provisions of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (the Act) 2 and amend the 

general risk-based capital rules 3 to 

provide limited flexibility consistent 

with section 171(b) of the Act for 

recognizing the relative risk of certain 

assets generally not held by depository 

institutions. 

DATES: Comments on this notice of 

proposed rulemaking must be received 

by May 9, 2011. 

ADDRESSES: Comments should be 

directed to: 

OTS: You may submit comments, 

identified by OTS–2011–0002 by any of 

the following methods: 

Federal eRulemaking Portal: 

‘‘Regulations.gov’’: Go to http:// 

www.regulations.gov and follow the 

instructions for submitting comments. 

• Mail: Regulation Comments, Chief 

Counsel’s Office, Office of Thrift 

Supervision, 1700 G Street, NW., 

Washington, DC 20552, Attention: OTS– 

2011–0002. 

• Fax: (202) 906–6518. 

• Hand Delivery/Courier: Guard’s 

Desk, East Lobby Entrance, 1700 G 

Street, NW., from 9 a.m. to 4 p.m. on 

business days, Attention: Regulation 

Comments, Chief Counsel’s Office, 

Attention: OTS–2011–0002. 

• Instructions: All submissions 

received must include the agency name 

and docket number for this rulemaking. 

All comments received will be posted 

without change, including any personal 

information provided. Comments 

received, including attachments and 

other supporting materials, are part of 

the public record and subject to public 

disclosure. Do not enclose any 

information in your comment or 

supporting materials that you consider 

confidential or inappropriate for public 

disclosure. 

• Viewing Comments Electronically: 

Go to http://www.regulations.gov and 

follow the instructions for reading 

comments. 

• Viewing Comments On-Site: You 

may inspect comments at the Public 

Reading Room, 1700 G Street, NW., by 

appointment. To make an appointment 

for access, call (202) 906–5922, send an 

e-mail to public.info@ots.treas.gov, or 

send a facsimile transmission to (202) 

906–6518. (Prior notice identifying the 

materials you will be requesting will 

assist us in serving you.) We schedule 

appointments on business days between 

10 a.m. and 4 p.m. In most cases, 

appointments will be available the next 

business day following the date we 

receive a request. 

FOR FURTHER INFORMATION CONTACT: 

Sonja White, Director, Capital Policy, 

(202) 906–7857, Teresa A. Scott, Senior 

Policy Analyst, Capital Policy, (202) 

906–6478, or Marvin Shaw, Senior 

Attorney, Regulations and Legislation 

Division, (202) 906–6639, Office of 

Thrift Supervision, 1700 G Street, NW., 

Washington, DC 20552. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. The Dodd-Frank Wall Street Reform 

and Consumer Protection Act 

Section 171(b)(2) of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (the Act) 4 states that the 

Federal banking agencies 5 shall 

establish minimum risk-based capital 

requirements 6 applicable to insured 

depository institutions, depository 

institution holding companies, and 

nonbank financial companies 

supervised by the Federal Reserve 

(covered institutions). In particular, and 

as described in more detail below, 

sections 171(b)(1) and (2) specify that 

the minimum leverage and risk-based 

capital requirements established under 

section 171 shall not be less than 

‘‘generally applicable’’ capital 

requirements, which shall serve as a 

floor for any capital requirements the 

agencies may require. Moreover, 

sections 171(b)(1) and (2) specify that 

the Federal banking agencies may not 

establish leverage or risk-based capital 

requirements for covered institutions 

that are quantitatively lower than the 

generally applicable leverage or riskbased capital requirements in effect for 

insured depository institutions as of the 

date of enactment of the Act. 

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12612 Federal Register / Vol. 76, No. 45 / Tuesday, March 8, 2011 / Proposed Rules 

7 72 FR 69288 (December 7, 2007). Subject to 

prior supervisory approval, other banking 

organizations can opt to use the advanced 

approaches rules. See 72 FR 69397 (December 7, 

2007). 

8The BCBS is a committee of banking supervisory 

authorities established by the central bank 

governors of the G–10 countries in 1975. The BCBS 

issued the New Accord to modernize its first capital 

Accord, which was endorsed by the BCBS members 

in 1988 and implemented by the agencies in 1989. 

The New Accord, the 1988 Accord, and other 

documents issued by the BCBS are available 

through the Bank for International Settlements’ Web 

site at http://www.bis.org. 

9 12 CFR part 567, Appendix C. See also, 12 CFR 

part 3, Appendix A (OCC); 12 CFR parts 208 and 

225, Appendix A (Board); 12 CFR part 325, 

appendix A (FDIC). 

10Under the advanced approaches rules, the 

minimum tier 1 risk-based capital requirement is 4 

percent and the total risk-based capital requirement 

is 8 percent. See 12 CFR, part 567, Appendix C 

(OTS), See also, 12 CFR part 3, Appendix C (OCC); 

12 CFR part 208, Appendix F and 12 CFR part 225, 

Appendix G (Board); and 12 CFR part 325 

Appendix D (FDIC). 

11See Public Law 102–242; 105 Stat. 2242 (1991). 12 12 CFR part 565 (OTS). 

B. Advanced Approaches Rules 

On December 7, 2007, the Federal 

banking agencies implemented the 

advanced approaches rules, which are 

mandatory for U.S. depository 

institutions and bank holding 

companies (collectively, banking 

organizations) meeting certain 

thresholds for total consolidated assets 

or foreign exposure.7 The advanced 

approaches rules incorporate a series of 

proposals released by the Basel 

Committee on Banking Supervision 

(Basel Committee or BCBS), including 

the Basel Committee’s comprehensive 

June 2006 release entitled ‘‘International 

Convergence of Capital Measurement 

and Capital Standards: A Revised 

Framework’’ (New Accord).8

The advanced approaches rules 

establish a series of transitional floors to 

provide a smooth transition to the 

advanced approaches rules and to limit 

temporarily the amount by which a 

banking organization’s risk-based 

capital requirements could decline 

relative to the general risk-based capital 

rules over a period of at least three years 

following completion of a satisfactory 

parallel run. The advanced approaches 

rules place limits on the amount by 

which a banking organization’s riskbased capital requirements may decline. 

Under the advanced approaches rules, 

the banking organization must take the 

risk-based capital ratios equal to the 

lesser of (i) the organization’s ratios 

calculated under the advanced 

approaches rules and (ii) the 

organization’s ratios calculated under 

the general risk-based capital rules,9

with risk-weighted assets multiplied by 

95 percent, 90 percent, and 85 percent 

during the first, second, and third 

transitional floor periods, respectively, 

and compare these ratios to its 

minimum risk-based capital ratio 

requirements under section 3 of the 

advanced approaches rules.10 Under 

this approach, banking organizations 

that use the advanced approaches rule 

could operate with lower minimum 

risk-based capital requirements during a 

transitional floor period, and potentially 

thereafter, than would be required 

under the general risk-based capital 

rules. At this time, no savings 

association or other banking 

organization has entered a transitional 

floor period and all organizations are 

required to compute their risk-based 

capital requirements using the general 

risk-based capital rules. 

C. Requirements of Section 171 of the 

Act 

Section 171(a)(2) of the Act defines 

the term ‘‘generally applicable riskbased capital requirements’’ to mean: 

‘‘(A) the risk-based capital requirements, 

as established by the appropriate 

Federal banking agencies to apply to 

insured depository institutions under 

the prompt corrective action regulations 

implementing section 38 of the Federal 

Deposit Insurance Act, regardless of 

total consolidated asset size or foreign 

financial exposure; and (B) includes the 

regulatory capital components in the 

numerator of those capital requirements, 

the risk-weighted assets in the 

denominator of those capital 

requirements, and the required ratio of 

the numerator to the denominator.’’ 

Section 171(b)(2) of the Act further 

provides that ‘‘[t]he appropriate Federal 

banking agencies shall establish 

minimum risk-based capital 

requirements on a consolidated basis for 

insured depository institutions, 

depository institution holding 

companies, and nonbank financial 

companies supervised by the Board of 

Governors. The minimum risk-based 

capital requirements established under 

this paragraph shall not be less than the 

generally applicable risk-based capital 

requirements, which shall serve as a 

floor for any capital requirements that 

the agency may require, nor 

quantitatively lower than the generally 

applicable risk-based capital 

requirements that were in effect for 

insured depository institutions as of the 

date of enactment of this Act.’’ 

In accordance with section 38 of the 

Federal Deposit Insurance Act,11 the 

Federal banking agencies established 

minimum leverage and risk-based 

capital requirements for insured 

depository institutions for prompt 

corrective action (PCA rules).12 All 

insured institutions, regardless of their 

total consolidated assets or foreign 

exposure, must compute their minimum 

risk-based capital requirements for PCA 

purposes using the general risk-based 

capital rules, which currently are the 

‘‘generally applicable risk-based capital 

requirements’’ defined by Section 

171(a)(2) of the Act. 

D. Effect of Section 171 of the Act on 

Certain Institutions and Their Assets 

As explained in the Joint NPR, certain 

covered institutions may not previously 

have been subject to consolidated riskbased capital requirements. Some of 

these companies are likely to be similar 

in nature to most depository institutions 

and bank holding companies subject to 

the general risk-based capital rules. 

Other covered institutions may be 

different with exposure types and risks 

that were not contemplated when the 

general risk-based capital rules were 

developed. The Financial Stability 

Oversight Council has not yet 

designated any nonbank financial 

companies to be supervised by the 

Board; over time it is conceivable that 

it will designate one or more companies 

whose activities are quite different than 

those addressed in the general riskbased capital rules. As noted in the Joint 

NPR, the Board will be supervising 

these institutions for the first time and 

expects that there will be cases when it 

needs to evaluate the risk-based capital 

treatment of specific exposures not 

typically held by depository 

institutions, and that do not have a 

specific risk weight under the generally 

applicable risk-based capital 

requirements. 

Under the general risk-based capital 

rules, exposures are generally assigned 

to five risk weight categories, that is, 0 

percent, 20 percent, 50 percent, 100 

percent, and 200 percent, according to 

their relative riskiness. Assets not 

explicitly included in a lower risk 

weight category are assigned to the 100 

percent risk weight category. Going 

forward, there may be situations where 

exposures of a depository institution 

holding company or a nonbank financial 

company supervised by the Board not 

only do not wholly fit within the terms 

of a risk weight category, but also 

impose risks that are not commensurate 

with the risk weight otherwise specified 

in the generally applicable risk-based 

capital requirements. 

For example, there are some material 

exposures of insurance companies that, 

while not riskless, would be assigned to 

a 100 percent risk weight category 

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Federal Register / Vol. 76, No. 45 / Tuesday, March 8, 2011 / Proposed Rules 12613 

13 12 CFR part 567 (OTS). See also, 12 CFR part 

3, Appendix C, § 3 (OCC); 12 CFR part 208, 

Appendix F, § 3 and 12 CFR part 225, Appendix G, 

§ 3 (Board); and 12 CFR part 325, § 3 Appendix D 

(FDIC). 

because they are not explicitly assigned 

to a lower risk weight category. An 

automatic assignment to the 100 percent 

risk weight category without 

consideration of an exposure’s 

economic substance could overstate the 

risk of the exposure and produce 

uneconomic capital requirements for a 

covered institution. 

II. Proposed Rule 

A. Generally Applicable Risk-Based 

Capital Requirement Floor 

Consistent with the Joint NPR, the 

OTS is proposing to modify its 

advanced approaches rule consistent 

with section 171(b)(2). In particular, like 

the other agencies, OTS is proposing to 

revise its advanced approaches rule by 

replacing the transitional floors in 

section 21(e) of the advanced 

approaches rule with a permanent floor 

equal to the tier 1 and total risk-based 

capital requirements under the current 

generally applicable risk-based capital 

rules. Thus, OTS is proposing to require 

each banking organization subject to the 

advanced approaches rule to maintain 

the systems and records necessary to 

calculate its required minimum riskbased capital requirements under both 

the general risk-based capital rules and 

the advanced approaches rules. Each 

quarter, each banking organization 

subject to the advanced approaches 

rules must calculate and compare its 

minimum tier 1 and total risk-based 

capital ratios as calculated under the 

general risk-based capital rules and the 

advanced approaches risk-based capital 

rules. The banking organization would 

then compare the lower of the two tier 

1 risk-based capital ratios and the lower 

of the two total risk-based capital ratios 

to the minimum tier 1 ratio requirement 

of 4 percent and total risk-based capital 

ratio requirement of 8 percent in section 

3 of the advanced approaches rules 13 to 

determine if it met its minimum capital 

requirements. 

OTS is also proposing to eliminate the 

paragraphs of its advanced approaches 

rule dealing with the transitional floor 

periods, and the interagency study. 

These parts of the advanced approaches 

rules no longer serve a purpose. 

Question 1: OTS seeks comment 

generally on the impact of a permanent 

floor on the minimum risk-based capital 

requirements for banking organizations 

subject to the advanced approaches 

rules, and on the manner in which OTS 

and the other Federal banking agencies 

are proposing to implement the 

provisions of section 171(b) of the Act. 

B. Change to Generally Applicable RiskBased Capital Requirements 

The proposed floor, consistent with 

the requirements of section 171(b)(2), is 

based on the generally applicable riskbased capital requirements for 

depository institutions. To address the 

appropriate capital requirement for low 

risk assets that non-depository 

institutions may hold and for which 

there is no explicit capital treatment in 

the general risk-based capital rules, 

consistent with the other banking 

agencies, OTS is proposing that such 

exposures receive the capital treatment 

applicable under the capital guidelines 

for bank holding companies under 

limited circumstances. The 

circumstances are intended to allow for 

an appropriate capital requirement for 

low risk nonbanking exposures without 

creating unintended new opportunities 

for depository institutions to engage in 

capital arbitrage. OTS therefore 

proposes to limit this treatment to cases 

in which a depository institution is not 

authorized to hold the asset under 

applicable law other than under debt 

previously contracted or similar 

authority, and the risks associated with 

the asset are substantially similar to the 

risks of assets that receive a lower risk 

weight. Accordingly, OTS is proposing 

a change to the general risk-based 

capital rules for depository institutions 

to permit this limited flexibility to 

appropriately address exposures of 

depository institution holding 

companies and nonbank financial 

companies supervised by the Board. 

OTS requests comment on this change 

to the general risk-based capital rules. 

Question 2: For what specific types of 

exposures do commenters believe this 

treatment is appropriate? Does the 

proposal provide sufficient flexibility to 

address the exposures of depository 

institution holding companies and 

nonbank financial companies 

supervised by the Federal Reserve? If 

not, how should the proposal be 

changed to recognize the considerations 

outlined in this section? 

Consistent with the joint efforts of the 

Federal banking agencies and the Basel 

Committee to enhance the regulatory 

capital rules, OTS anticipates that the 

generally applicable risk-based capital 

requirements and advanced approaches 

rule will be amended from time to time. 

These amendments would reflect 

advances in risk sensitivity and other 

potentially substantive changes to 

fundamental aspects of the New Accord 

such as the definition of capital, 

treatment of counterparty credit risk, 

and new regulatory capital elements 

such as an international leverage ratio 

and prudential capital buffers. 

OTS will consider each proposed 

change to the risk-based capital rules 

and determine whether it is appropriate 

to implement the change by rulemaking 

based on the implications of each 

proposal for the capital adequacy of 

banking organizations, the 

implementation costs of such proposals, 

and the nature of any unintended 

consequences or competitive issues. The 

generally applicable risk-based capital 

requirements and generally applicable 

leverage capital requirements that OTS 

and the other agencies may establish in 

the future would, as required under the 

Act, become the minimum leverage and 

risk-based capital requirements for all 

banking organizations. Furthermore, as 

provided under the Act, any future 

amendments to the leverage 

requirements or risk-based capital 

requirements established by the Federal 

banking agencies may not result in 

capital requirements that are 

‘‘quantitatively lower’’ than the generally 

applicable leverage requirements or 

risk-based capital requirements in effect 

as of the date of enactment of the Act. 

To comply with this provision of the 

Act, OTS along with the other Federal 

banking agencies anticipate performing 

a quantitative analysis of the likely 

effect on capital requirements as part of 

developing future amendments to the 

capital rules to ensure that any new 

capital framework is not quantitatively 

lower than the requirements in effect as 

of the date of enactment of the Act. In 

the Joint NPR, the OCC, FDIC, and 

Board stated that they would not 

anticipate proposing to require banking 

organizations to compute two sets of 

generally applicable capital 

requirements from current and historic 

frameworks as the generally applicable 

requirements are amended over time. 

Those agencies further stated that they 

have not yet determined the quantitative 

method for measuring the equivalence 

of current, historic, and proposed future 

capital frameworks. 

Question 3: OTS requests comment on 

the most appropriate method of 

conducting the aforementioned 

analysis. What are potential 

quantitative methods for comparing 

future capital requirements to ensure 

that any new capital framework is not 

quantitatively lower than the 

requirements in effect as of the date of 

the enactment of the Act? 

The Federal banking agencies 

anticipate addressing aspects of Section 

171 not addressed in this proposed rule 

in a subsequent rulemaking. 

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12614 Federal Register / Vol. 76, No. 45 / Tuesday, March 8, 2011 / Proposed Rules 

Question 4: OTS seeks comment on 

all other aspects of this proposed rule, 

including the costs and benefits. What, 

if any, changes should OTS and the 

other agencies make to the proposed 

rule or the risk-based capital framework 

to better balance costs and benefits? 

III. Regulatory Analyses 

A. Executive Orders 13563 and 12866 

Executive Order 13563 ‘‘Improving 

Regulations and Regulatory Review’’ 

affirms and supplements Executive 

Order 12866, ‘‘Regulatory Planning and 

Review, which requires Federal 

agencies to prepare a regulatory impact 

analysis for agency actions that are 

found to be ‘‘significant regulatory 

actions.’’ Significant regulatory actions 

include, among other things, 

rulemakings that ‘‘have an annual effect 

on the economy of $100 million or more 

or adversely affect in a material way the 

economy, a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, or Tribal governments or 

communities.’’ Pursuant to Executive 

Order 12866, OMB’s Office of 

Information and Regulatory Affairs 

(OIRA) has designated the proposed rule 

to be significant. 

Based on initial assessment of the 

costs and benefits likely to be incurred 

to comply with this proposed 

rulemaking, OTS anticipates that the 

effect on the economy of the final rule 

would not exceed the $100 million 

annual threshold. 

B. OTS Regulatory Impact Assessment 

1. Requirements of Proposed Regulation 

a. Permanent Floor 

As noted below, the OCC, the Board, 

and the FDIC published a notice of 

proposed rulemaking (Joint NPR) that 

addressed section 171 of the DoddFrank Act, (75 FR 82317)(the Act), on 

December 30, 2010. Consistent with the 

Joint NPR, OTS is proposing to modify 

its advanced approaches rule consistent 

with section 171(b)(2) of the Act. In 

particular, like the other agencies, OTS 

is proposing to revise its advanced 

approaches rule by replacing the 

transitional floors in section 21(e) of the 

advanced approaches rule with a 

permanent floor equal to the tier 1 and 

total risk-based capital requirements 

under the current generally applicable 

risk-based capital rules. The Federal 

banking agencies implemented the 

advanced approaches rules on 

December 7, 2007 that are mandatory for 

U.S. depository institutions and bank 

holding companies (collectively, 

banking organizations) that have $250 

billion or more in total consolidated 

assets or more than $10 billion in 

foreign exposure. 

Thus, OTS is proposing to require 

each savings association subject to the 

advanced approaches rule to maintain 

the systems and records necessary to 

calculate its required minimum riskbased capital requirements under both 

the general risk-based capital rules and 

the advanced approaches rules. Each 

quarter, each savings association subject 

to the advanced approaches rules must 

calculate and compare its minimum tier 

1 and total risk-based capital ratios as 

calculated under the general risk-based 

capital rules and the advanced 

approaches risk-based capital rules. The 

savings association would then compare 

the lower of the two tier 1 risk-based 

capital ratios and the lower of the two 

total risk-based capital ratios to the 

minimum tier 1 ratio requirement of 4 

percent and total risk-based capital ratio 

requirement of 8 percent in section 3 of 

the advanced approaches rules to 

determine if it met its minimum capital 

requirements. 

OTS reviewed the holdings and 

corporate structure of 941 savings 

associations subject to OTS regulation. 

As of this analysis, only two savings 

associations ($1.5 billion in total assets; 

and $15 billion in total assets, 

respectively), due to their corporate 

ownership structure by larger banking 

organizations, are subject to the 

advanced approaches rule. Both have 

begun the parallel run portion of 

preparation for the advanced approach, 

and they are unlikely to enter the first 

transitional floor within the next six 

months. One other savings association 

may be eligible for the advance 

approach because its foreign exposure 

exceeds $10 billion. However, it has not 

yet submitted an implementation plan, 

which must be approved before the 

institution begins the parallel run 

portion of its preparation; it is not likely 

to do so in the next six months. Section 

312 of the Act provides for the transfer 

of OTS functions to the FDIC, OCC, and 

Board, on the transfer date, which is 

July 21, 2011 (unless the Secretary of 

the Treasury designates a later date, but 

not later than January 21, 2012). More 

specifically, the Act transfers authority 

over Federal savings associations to the 

OCC, authority over State savings 

associations to the FDIC, and authority 

over savings and loan holding 

companies to the Board. OTS 

rulemaking authority relating to savings 

associations and savings and loan 

holding companies will be transferred to 

the OCC and Board, respectively. 

b. Implementation Costs 

In estimating the implementation 

costs to the covered institutions, OTS 

assumed that costs would generally fall 

in two areas: 

• Quarterly calculation costs to 

determine minimum risk-based capital 

requirements. 

• The costs of maintaining higher 

capital levels, if required. 

Given that OTS currently has, at most, 

three smaller savings associations that 

may be subject to the rule, the annual 

costs of calculating alternative 

minimum capital requirements are 

likely to be small. Two of the savings 

associations are subsidiaries of larger 

banking organizations that are required 

to calculate their overall risk-based 

capital requirements under a rule 

promulgated by the other banking 

agencies, and thus the marginal costs for 

the two savings association are likely to 

be minimal. Whether these particular 

institutions would be required to hold 

additional capital is very difficult to 

determine at this time. Any costs 

associated with holding additional 

capital would be offset, to some degree, 

by the reduced costs of borrowing, as 

the institution would then be better 

capitalized and its borrowing costs 

reduced because of its lowered risk. The 

sum of the identified costs is likely, 

given these three institutions, to fall 

well below the $100 million annual cost 

benchmark. 

2. Risk Weights for Holding Company 

Assets 

While none of three savings 

associations currently hold such assets, 

to address the appropriate capital 

requirement for low risk assets that nondepository institutions may hold and for 

which there is no explicit capital 

treatment in the general risk-based 

capital rules, consistent with the other 

banking agencies and consistent with 

the Joint NPR, OTS is proposing that 

such exposures receive the capital 

treatment applicable under the capital 

guidelines for bank holding companies 

under limited circumstances. The 

circumstances are intended to allow for 

an appropriate capital requirement for 

low risk nonbanking exposures without 

creating unintended new opportunities 

for depository institutions to engage in 

capital arbitrage. OTS therefore 

proposes to limit this treatment to cases 

in which a depository institution is not 

authorized to hold the asset under 

applicable law other than under debt 

previously contracted or similar 

authority, and the risks associated with 

the asset are substantially similar to the 

risks of assets that receive a lower risk 

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Federal Register / Vol. 76, No. 45 / Tuesday, March 8, 2011 / Proposed Rules 12615 

14 5 U.S.C. 605(b). 

15All totals are as of September 30, 2010. 

16 44 U.S.C. 3501–3521. 

17See Risk-Based Capital Reporting for 

Institutions Subject to the Advanced Capital 

Adequacy Framework, FFIEC 101, OTS OMB 

Number 1550–0115. 

weight. Accordingly, consistent with the 

other banking agencies, OTS is 

proposing a change to the general riskbased capital rules to permit this limited 

flexibility to appropriately address 

certain exposures of depository 

institution holding companies and 

nonbank financial companies 

supervised by the Board. 

3. Implementation Costs 

It is difficult to assess the benefit that 

this rule making would convey, as (1) it 

applies to certain nonbank-like 

exposures of depository holding 

companies and nonbank financial 

companies supervised by the Board, and 

(2) it is very narrow in scope but is 

being proposed to address unforeseen 

circumstances in which the absence of 

an existing risk weight designation 

would require substantially more capital 

than a comparability test would suggest 

is appropriate. 

4. Conclusion 

Because of the limited number of 

institutions and the amount of assets 

involved, OTS concludes that the 

impact of this proposed rulemaking 

would not exceed $100 million in 

annual costs. 

C. Regulatory Flexibility Act Analysis 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act,14 (RFA), the 

regulatory flexibility analysis otherwise 

required under section 604 of the RFA 

is not required if an agency certifies that 

the rule will not have a significant 

economic impact on a substantial 

number of small entities (defined for 

purposes of the RFA to include banks 

with assets less than or equal to $175 

million) and publishes its certification 

and a short, explanatory statement in 

the Federal Register along with its rule. 

The rule would affect savings 

associations that use the advanced 

approaches rules to calculate risk-based 

capital requirements according to 

certain internal ratings-based and 

internal model approaches. A savings 

association must use the advanced 

approaches rules only if: (i) It has 

consolidated total assets (as reported on 

its most recent year-end regulatory 

report) equal to $250 billion or more; (ii) 

it has consolidated total on-balance 

sheet foreign exposures at the most 

recent year-end equal to $10 billion or 

more; or (iii) it is a subsidiary of a bank 

holding company or bank that would be 

required to use the advanced 

approaches rules to calculate its riskbased capital requirements. 

With respect to the proposed changes 

to the general risk-based capital rules, 

the proposal has the potential to affect 

the risk weights applicable only to 

assets that generally are impermissible 

for savings associations to hold. These 

proposed changes are accordingly 

unlikely to have a significant impact on 

savings associations. OTS also notes 

that the changes to the general riskbased capital rules would not impose 

any additional obligations, restrictions, 

burdens, or reporting, recordkeeping or 

compliance requirements on savings 

associations including small banking 

organizations, nor do they duplicate, 

overlap or conflict with other Federal 

rules. 

OTS estimates that no small savings 

associations are required to use the 

advanced approaches rules.15 Therefore, 

OTS believes that the proposed rule will 

not result in a significant economic 

impact on a substantial number of small 

entities. 

D. OTS Unfunded Mandates Reform Act 

of 1995 Determinations 

Section 202 of the Unfunded 

Mandates Reform Act of 1995, Public 

Law 104–4 (UMRA) requires that an 

agency prepare 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 (adjusted annually 

for inflation) in any one year. If a 

budgetary impact statement is required, 

section 205 of the UMRA also requires 

an agency to identify and consider a 

reasonable number of regulatory 

alternatives before promulgating a rule. 

The OTS has determined that its 

proposed rule will not result in 

expenditures by State, local, and Tribal 

governments, or by the private sector, of 

$100 million or more. Accordingly, OTS 

has not prepared a budgetary impact 

statement or specifically addressed the 

regulatory alternatives considered. 

E. Paperwork Reduction Act 

In accordance with the requirements 

of the Paperwork Reduction Act of 

1995,16 OTS may not conduct or 

sponsor, and the respondent is not 

required to respond to, an information 

collection unless it displays a currently 

valid OMB control number. OTS has an 

established information collection for 

the paperwork burden imposed by the 

advanced approaches rule.17 This notice 

of proposed rulemaking would replace 

the transitional floors in section 21(e) of 

the advanced approaches rule with a 

permanent floor equal to the tier 1 and 

total risk-based capital requirements 

under the current generally applicable 

risk-based capital rules. The proposed 

change to transitional floors would 

change the basis for calculating a data 

element that must be reported to OTS 

under an existing requirement. 

However, it would have no impact on 

the frequency or response time for the 

reporting requirement and, therefore, 

does not constitute a substantive or 

material change subject to OMB review. 

F. Plain Language 

Section 722 of the Gramm-LeachBliley Act requires the agencies to use 

plain language in all proposed and final 

rules published after January 1, 2000. In 

light of this requirement, OTS has 

sought to present the proposed rule in 

a simple and straightforward manner. 

OTS invites comment on whether it 

could take additional steps to make the 

proposed rule easier to understand. 

List of Subjects in 12 CFR Part 567 

Capital, Reporting and recordkeeping 

requirements, Risk, Savings 

associations. 

Authority and Issuance 

For the reasons stated in the 

preamble, the Office of Thrift 

Supervision proposes to amend part 567 

of chapter V of Title 12, Code of Federal 

Regulations as follows: 

PART 567—CAPITAL 

1. The authority citation for part 3 

continues to read as follows: 

Authority: 12 U.S.C. 1462, 1462a, 1463, 

1464, 1467a, and 1828 (note). 

2. In § 567.6, add new paragraph 

(a)(1)(v) as follows: 

§ 567.6 Risk-based capital credit riskweight categories. 

* * * * * 

(a) * * * 

(1) * * * 

(v) Subject to the requirements in 

paragraphs (a)(1)(v)(A) and (B) of this 

section, a savings association may 

assign an asset not included in the 

categories above to the risk weight 

category applicable under the capital 

guidelines for bank holding companies 

(12 CFR part 225, appendix A), 

provided that all of the following 

conditions apply: 

(A) The savings association is not 

authorized to hold the asset under 

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12616 Federal Register / Vol. 76, No. 45 / Tuesday, March 8, 2011 / Proposed Rules 

applicable law other than debt 

previously contracted or similar 

authority; and 

(B) The risks associated with the asset 

are substantially similar to the risks of 

assets that are otherwise assigned to a 

risk weight category less than 100 

percent under this section. 

* * * * * 

3. In Appendix C to part 567: 

a. Revise Part I, section 3 to read as 

set forth below; and 

b. Remove section 21(e). 

Appendix C to Part 567—Risk-Based 

Capital Requirements—Internal 

Ratings-Based and Advanced 

Measurement Approaches 

Part I. General Provisions 

* * * * * 

Section 3. Minimum Risk-Based Capital 

Requirements 

(a)(1) Except as modified by paragraph (c) 

of this section or by section 23 of this 

appendix, each savings association must 

meet a minimum: 

(i) Total risk-based capital ratio of 8.0 

percent; and 

(ii) Tier 1 risk-based capital ratio of 4.0 

percent. 

(2) A savings association’s total risk-based 

capital ratio is the lower of: 

(i) Its total qualifying capital to total riskweighted assets; and 

(ii) Its total risk-based capital ratio as 

calculated under part 567. 

(3) A savings association’s tier 1 risk-based 

capital ratio is the lower of: 

(i) Its tier 1 capital to total risk-weighted 

assets; and 

(ii) Its tier 1 risk-based capital ratio as 

calculated under part 567. 

(b) Each savings association must hold 

capital commensurate with the level and 

nature of all risks to which the savings 

association is exposed. 

(c) When a savings association subject to 

any applicable market risk rule calculates its 

risk-based capital requirements under this 

appendix, the savings association must also 

refer to any applicable market risk rule for 

supplemental rules to calculate risk-based 

capital requirements adjusted for market risk. 

* * * * * 

Dated: January 31, 2011. 

By the Office of Thrift Supervision. 

John E. Bowman, 

Acting Director. 

[FR Doc. 2011–5011 Filed 3–7–11; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF COMMERCE 

Economic Development Administration 

13 CFR Chapter III 

[Docket No.: 110119042–1174–02] 

RIN 0610–XA04 

Request for Comments: Review and 

Improvement of EDA’s Regulations 

AGENCY: Economic Development 

Administration, Department of 

Commerce. 

ACTION: Notice and request for 

comments; extending public comment 

deadline. 

SUMMARY: On February 1, 2011, the 

Economic Development Administration 

(EDA) published a Federal Register 

notice requesting public input to 

improve the agency’s regulations (76 FR 

5501). Because of strong interest in the 

agency’s efforts to streamline and 

update its regulations, EDA publishes 

this notice to extend the deadline for 

submitting regulatory comments. 

DATES: Comments must be received no 

later than 5 p.m. Eastern Time on April 

11, 2011. 

ADDRESSES: Comments will continue to 

be accepted by the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Agency Web Site: http:// 

www.eda.gov/. EDA has created an 

online feature for submitting comments. 

Follow the instructions at http:// 

www.eda.gov/. 

• E-mail: regulations@eda.doc.gov. 

Include ‘‘Comments on EDA’s 

regulations’’ and Docket No. 

110119042–1041–01 in the subject line 

of the message. 

• Fax: (202) 482–5671, Attention: 

Office of Chief Counsel. Please indicate 

‘‘Comments on EDA’s regulations’’ and 

Docket No. 110119042–1041–01 on the 

cover page. 

• Mail: Economic Development 

Administration, Office of Chief Counsel, 

Suite D–100, U.S. Department of 

Commerce, 1401 Constitution Avenue, 

NW., Washington, DC 20230. Please 

indicate ‘‘Comments on EDA’s 

regulations’’ and Docket No. 

110119042–1041–01 on the envelope. 

FOR FURTHER INFORMATION CONTACT: 

Jamie Lipsey, Attorney Advisor, U.S. 

Department of Commerce, Economic 

Development Administration, Office of 

Chief Counsel, 1401 Constitution 

Avenue, NW., Suite D–100, Washington, 

DC 20230; telephone: (202) 482–4687. 

SUPPLEMENTARY INFORMATION: EDA’s 

regulations, which are codified at 13 

CFR chapter III, provide the framework 

through which the agency administers 

its economic development assistance 

programs. In a Federal Register notice 

published on February 1, 2011 (76 FR 

5501), EDA requested public feedback 

on any obstacles created by EDA’s 

current regulations and ways to improve 

them to help the agency better advance 

innovative economic development in 

the 21st century. Because of strong 

interest in this initiative and to ensure 

our stakeholders have ample time to 

comment, EDA is extending the 

deadline for the submission of 

comments from March 9, 2011, to April 

11, 2011. Although EDA welcomes 

comments on all of its regulations, the 

agency requests particular input on 

those regulations that impact the 

creation and growth of Regional 

Innovation Clusters (RICs) and on the 

agency’s property management 

regulations. Please see the notice and 

request for comments, 76 FR 5501 

(February 1, 2011), and EDA’s Web site 

at http://www.eda.gov/ for more 

information. As part of the 

Administration’s commitment to open 

government, EDA is interested in broad 

public and stakeholder participation in 

this effort and strives to create a 

simplified regulatory system that 

balances the agency’s fiduciary and 

transparency responsibilities with good, 

commonsense customer service to our 

stakeholders and the American people. 

Comments should be submitted to 

EDA as described in the ADDRESSES

section of this notice. EDA strongly 

encourages the use of the online feature 

on the agency’s Web site to share 

comments and suggestions, which is 

easily accessible at http://www.eda.gov/ 

and offers participants an opportunity to 

view the comments of others. EDA will 

consider all comments submitted in 

response to this notice that are received 

by 5 p.m. Eastern Time on April 11, 

2011, as referenced under DATES EDA 

will not accept public comments 

accompanied by a request that a part or 

all of the material be treated 

confidentially for any reason; EDA will 

not consider such comments and will 

return such comments and materials to 

the commenter. All public comments 

(including faxed or e-mailed comments) 

submitted in response to this notice 

must be in writing and will be a matter 

of public record. All comments 

submitted will be available for public 

inspection and copying at http:// 

www.regulations.gov. 

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