This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

1303 

Vol. 86, No. 5 

Friday, January 8, 2021 

1 12 U.S.C. 461(b)(2). 

2Regulation D (Reserve Requirements of 

Depository Institutions) Interim Final Rule, 85 FR 

16525 (March 24, 2020). 3 12 U.S.C. 461 (b)(12)(A). 

4See 12 U.S.C. 461(b)(1)(A) & (b)(12)(C); see also 

12 CFR 204.2(y). 

5See 12 U.S.C. 461(b)(12)(B). 

6 12 CFR 204.10(b)(5). 

7 12 CFR 204.10(b)(1)–(3). 

8 12 CFR 204.2(gg). 

9 12 CFR 204.2(ee). 

10 12 CFR 204.2(z). 

FEDERAL RESERVE SYSTEM 

12 CFR Part 204 

Docket No. R–1737 

RIN 7100–AG07 

Regulation D: Reserve Requirements 

of Depository Institutions 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Notice of proposed rulemaking, 

request for public comment. 

SUMMARY: The Board of Governors of the 

Federal Reserve System (‘‘Board’’) 

proposes to amend its Regulation D 

(Reserve Requirements of Depository 

Institutions) to eliminate references to 

an ‘‘interest on required reserves’’ rate 

and to an ‘‘interest on excess reserves’’ 

rate and replace them with a reference 

to a single ‘‘interest on reserve 

balances’’ rate. The Board also proposes 

to simplify the formula used to calculate 

the amount of interest paid on balances 

maintained by or on behalf of eligible 

institutions in master accounts at 

Federal Reserve Banks, and to make 

other conforming changes. 

DATES: Comments must be received on 

or before March 9, 2021. 

ADDRESSES: You may submit comments, 

identified by Docket Number R–1737; 

RIN 7100–AG07, by any of the following 

methods: 

• Agency Website: http://

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Email: regs.comments@

federalreserve.gov. Include the docket 

number and RIN 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 are available 

from 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. 

Accordingly, comments will not be 

edited to remove any identifying or 

contact information. 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 FURTHER INFORMATION CONTACT: 

Sophia H. Allison, Senior Special 

Counsel, (202–452–3565), Legal 

Division, or Matthew Malloy (202–452– 

2416), Division of Monetary Affairs, or 

Heather Wiggins (202–452–3674), 

Division of Monetary Affairs; for users 

of Telecommunications Device for the 

Deaf (TDD) only, contact 202–263–4869; 

Board of Governors of the Federal 

Reserve System, 20th and C Streets NW, 

Washington, DC 20551. 

SUPPLEMENTARY INFORMATION: 

I. Statutory and Regulatory Background 

Section 19(b)(2) of the Federal 

Reserve Act (‘‘Act’’) 1 requires each 

depository institution to maintain 

reserves against its transaction accounts, 

nonpersonal time deposits, and 

Eurocurrency liabilities within ratios 

prescribed by the Board for the purpose 

of implementing monetary policy. 

Reserve requirement ratios for 

nonpersonal time deposits and 

Eurocurrency liabilities have been set at 

zero percent since 1990. Effective March 

24, 2020, the Board amended Regulation 

D to set all reserve requirement ratios 

for transaction accounts to zero percent, 

eliminating all reserve requirements.2

Section 19(b)(12) of the Act provides 

that balances maintained by or on behalf 

of ‘‘eligible institutions’’ in accounts at 

Federal Reserve Banks may receive 

earnings to be paid by the Reserve Bank 

at least once each quarter, at a rate or 

rates not to exceed the general level of 

short-term interest rates.3 Eligible 

institutions include depository 

institutions and certain other 

institutions as specified in the Act.4

Section 19(b)(12) also provides that the 

Board may prescribe regulations 

concerning the payment of earnings on 

balances at a Reserve Bank.5

Regulation D currently establishes an 

‘‘interest on required reserves’’ (‘‘IORR’’) 

rate of 0.10 percent and an ‘‘interest on 

excess reserves’’ (‘‘IOER’’) rate of 0.10 

percent.6 Regulation D also applies the 

IORR rate and the IOER rate to balances 

maintained by or on behalf of eligible 

institutions based on whether such 

balances are or are not maintained to 

satisfy reserve balance requirements. 

Specifically, the IORR rate applies to 

balances that an eligible institution 

maintains, on average over the 

maintenance period, that are equal to or 

lower than ‘‘the top of the penalty-free 

band.’’ 7 The ‘‘top of the penalty-free 

band’’ is defined as ‘‘an amount equal 

to an institution’s reserve balance 

requirement plus an amount that is the 

greater of 10 percent of the institution’s 

reserve balance requirement or 

$50,000.’’ 8 A ‘‘reserve balance 

requirement’’ is defined as ‘‘the balance 

that a depository institution is required 

to maintain on average over a reserve 

maintenance period in an account at a 

Federal Reserve Bank if vault cash does 

not fully satisfy the depository 

institution’s reserve requirement 

imposed by this part.’’ 9 Regulation D 

applies the IOER rate to balances 

maintained in excess of the top of the 

penalty-free band.10

With the setting of transaction 

account reserve requirement ratios to 

zero, depository institutions no longer 

have to maintain balances to satisfy a 

reserve balance requirement. To account 

for such changes, the Board is proposing 

to amend Regulation D in two ways. 

First, the proposed amendments would 

replace references to an IORR rate and 

an IOER rate with references to a single 

‘‘interest on reserve balances’’ (‘‘IORB’’) 

rate. Second, the proposed amendments 

would streamline the calculation of 

interest by multiplying the IORB rate on 

a day by the balances maintained on 

that day. The proposed amendments 

would eliminate the unnecessary 

distinction between institutions that 

maintain balances above or below an 

amount related to reserve requirements. 


tkelley on DSKBCP9HB2PROD with PROPOSALS
1304 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

11See 12 CFR 204.2(aa) (definition of excess 

balance account). 

12The Board authorized excess balance accounts 

in 2009 to permit eligible institutions to maintain 

established correspondent-respondent relationships 

while mitigating the implications for the 

correspondent’s balance sheet and its leverage ratio 

for capital adequacy purposes. Proposed Rule, 74 

FR 5628, 5629 (Jan. 30, 2009); see Final Rule, 74 

FR 25620, 25625–25628 (May 29, 2009). 

13The amount of a balance in an account 

maintained by or on behalf of an eligible institution 

at a Reserve Bank is determined at the close of the 

Reserve Bank’s business day. 12 CFR 204.10(a)(2). 

14See Final Guidelines for Evaluating Joint 

Account Requests, 82 FR 41951 (Sep. 5, 2017). 

In addition, the Board is proposing to 

amend Regulation D to refer to balances 

maintained in ‘‘excess balance 

accounts’’ 11 (‘‘EBAs’’) as ‘‘balances’’ 

rather than as ‘‘excess balances’’ and to 

apply the proposed ‘‘IORB’’ rate and 

proposed interest calculation to such 

balances. 

II. Discussion 

A. Section-by-Section Analysis 

1. Section 204.2(aa) 

Section 204.2(aa) currently defines an 

EBA as ‘‘an account at a Reserve Bank 

pursuant to § 204.10(d) of this part that 

is established by one or more eligible 

institutions through an agent and in 

which only excess balances of the 

participating eligible institutions may at 

any time be maintained. An excess 

balance account is not a ‘‘pass-through 

account’’ for purposes of this part.’’ 12

The Board proposes to amend section 

204.2(aa) to delete the word ‘‘excess’’ 

from the first sentence of this definition. 

As revised, the first sentence of section 

204.2(aa) would define an EBA as ‘‘an 

account at a Reserve Bank pursuant to 

§ 204.10(d) of this part that is 

established by one or more eligible 

institutions through an agent and in 

which only balances of the participating 

eligible institutions may at any time be 

maintained.’’ 

2. Section 204.10(b) 

Section 204.10(b) establishes the 

interest paid on different types of 

balances maintained by or on behalf of 

eligible institutions at Reserve Banks. 

Sections 204.10(b)(1)–(3) describe how 

the IORR and IOER rates apply to 

balances of eligible institutions above 

and below the top of the penalty-free 

band and how interest is calculated on 

those balances. Section 204.10(b)(5) sets 

forth the current IORR and IOER rates. 

(Section 204.10(b)(4) addresses term 

deposits; the Board is not proposing any 

amendments to this section other than 

the redesignation discussed below.) 

a. Proposed Section 204.10(b)(1) 

The Board proposes to delete current 

204.10(b)(1) through (3) and replace 

them with a new section 204.10(b)(1) 

that would establish interest on 

balances maintained in a master account 

at a Reserve Bank by or on behalf of an 

eligible institution and describe how 

that interest is calculated. The Board 

proposes to establish interest on such 

balances as the amount equal to the 

IORB rate on a day multiplied by the 

total balances maintained on that day.13

Finally, proposed section 204.10(b)(1) 

would establish the IORB rate. 

Section 204.10(b)(5) of Regulation D 

currently sets forth the IORR rate and 

the IOER rate. In light of the proposed 

replacement of such rates with a 

proposed IORB rate set forth in 

proposed section 204.10(b)(1), the Board 

proposes to delete current section 

204.10(b)(5) in its entirety. 

b. Proposed Section 204.10(b)(2) 

The Board proposes to redesignate 

current section 204.10(b)(4), dealing 

with term deposits, as proposed section 

204.10(b)(2). No changes to the content 

of current section 204.10(b)(4) are 

proposed. 

a. Proposed Section 204.10(b)(3) 

The Board proposes to add a new 

section 204.10(b)(3) defining ‘‘master 

account’’ for purposes of section 204.10 

as ‘‘the record maintained by a Federal 

Reserve Bank of the debtor-creditor 

relationship between the Federal 

Reserve Bank and a single eligible 

institution with respect to deposit 

balances of the eligible institution that 

are maintained with the Federal Reserve 

Bank. A ‘master account’ is not a ‘term 

deposit,’ an ‘excess balance account,’ a 

‘joint account,’ 14 or any deposit account 

maintained with a Federal Reserve Bank 

governed by an agreement that states the 

account is not a master account.’’ 

3. Section 204.10(d) 

a. Current Section 204.10(d) 

Current section 204.10(d)(1) 

authorizes the establishment of EBAs 

and specifies that balances in an EBA 

represent a liability of the Reserve Bank 

holding the EBA solely to the 

participating eligible institutions. 

Current section 204.10(d)(2) requires 

eligible institutions participating in an 

EBA to authorize another institution to 

act as agent of the participating 

institutions for purposes of general 

account management (including 

transferring balances in and out of the 

EBA), and requires an EBA to be 

established at the Reserve Bank holding 

the agent’s master account. Current 

section 204.10(d)(2) also prohibits the 

agent from maintaining any of its own 

balances in the EBA. Current section 

204.10(d)(3) provides that balances in 

an EBA do not satisfy any institution’s 

reserve balance requirement, and 

current section 204.10(d)(4) provides 

that EBAs are solely for the purpose of 

maintaining ‘‘excess balances’’ of 

participating institutions and may not 

be used for general payments or other 

activities. Current section 204.10(d)(5) 

establishes interest on balances in an 

EBA as ‘‘the amount equal to the IOER 

rate in effect each day multiplied by the 

total balances maintained on that day 

for each day of the maintenance 

period.’’ Current section 204.10(d)(6) 

authorizes Reserve Banks to establish 

additional terms and conditions with 

respect to the operation of EBAs. 

b. Proposed Section 204.10(d) 

Proposed section 204.10(d) would 

remove references to ‘‘excess balances’’ 

when describing the balances in an EBA 

and replace them with references to 

‘‘balances.’’ The Board proposes to 

retain the name ‘‘excess balance 

account.’’ Specifically, the second 

sentence of proposed section 

204.10(d)(1) would delete the reference 

to ‘‘excess balances of eligible 

institutions’’ in an EBA and replace it 

with a reference to ‘‘balances 

maintained by eligible institutions’’ in 

an EBA. Proposed section 204.10(d)(2) 

would delete the word ‘‘excess’’ from 

the reference to ‘‘transferring the excess 

balances of participating institutions in 

and out’’ of an EBA. 

Current section 204.10(d)(3) provides 

that ‘‘balances maintained in an excess 

balance account will not satisfy any 

institution’s reserve balance 

requirement.’’ The Board proposes to 

delete current section 204.10(d)(3) and 

redesignate current section 204.10(d)(4) 

as section 204.10(d)(3). Current section 

204.10(d)(4) provides that an EBA 

‘‘must be used exclusively for the 

purpose of maintaining the excess 

balances of participants’’ and may not 

be used for general payments or other 

activities. Proposed section 204.10(d)(3) 

would provide that ‘‘[b]alances 

maintained in an [EBA] may not be used 

for general payments or other 

activities.’’ Finally, proposed section 

204.10(d)(4) would delete the references 

in current section 204.10(d)(5) to the 

‘‘IOER rate’’ in establishing interest paid 

on EBAs and replace it with a reference 

to the ‘‘IORB rate.’’ Proposed section 

204.10(d)(4) would also revise the 

reference to the rate ‘‘in effect each day’’ 

and to ‘‘total balances maintained on 

that day for each day of the maintenance 

period’’ to provide that interest on 

balances in an EBA is the amount equal 

to ‘‘the IORB rate in effect on a day 


tkelley on DSKBCP9HB2PROD with PROPOSALS
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 1305 

15 5 U.S.C. 601 et seq. 

16 44 U.S.C. 3506. 

17Public Law 106–102, section 722, 113 Stat. 

1338, 1471 (1999). 

multiplied by the total balances 

maintained on that day.’’ 

III. Request for Comment 

The Board seeks comment on all 

aspects of the proposed rule. 

IV. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 15 generally requires an agency, 

in connection with a proposed rule, to 

prepare and make available for public 

comment an initial regulatory flexibility 

analysis that describes the impact of a 

proposed rule on small entities. 

However, a regulatory flexibility 

analysis is not required if the agency 

certifies that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The Small Business Administration has 

defined ‘‘small entities’’ to include 

banking organizations with total assets 

of less than or equal to $600 million. 

The Board has considered the 

potential impact of the proposal on 

small entities in accordance with the 

RFA. The Board believes that the 

proposal will not have a significant 

economic impact on a substantial 

number of small entities. As discussed 

in the Supplementary Information 

above, the proposed rule would apply to 

all eligible institutions regardless of 

size. The Board’s proposed rule would 

also not impose any new recordkeeping, 

reporting, or compliance requirements. 

The Board does not believe that the 

proposed rule duplicates, overlaps, or 

conflicts with any other Federal rules. 

The Board also does not believe that 

there are any significant alternatives to 

the proposal which accomplish its 

stated objectives. In light of the 

foregoing, the Board does not believe 

that the proposal, if adopted in final 

form, would have a significant 

economic impact on a substantial 

number of small entities. Nonetheless, 

the Board seeks comment on whether 

the proposal would impose undue 

burdens on, or have unintended 

consequences for, small banking 

organizations and whether there are 

ways such potential burdens or 

consequences could be minimized in a 

manner consistent with the purpose of 

the proposal. 

V. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act,16 the Board has 

reviewed the proposed rule under 

authority delegated to the Board by the 

Office of Management and Budget. The 

proposed rule contains no collections of 

information pursuant to the Paperwork 

Reduction Act. 

VI. Plain Language 

Section 772 of the Gramm-LeachBliley Act 17 requires the Board to use 

‘‘plain language’’ in all proposed and 

final rules. In light of this requirement, 

the Board has sought to present the 

interim final rule in a simple and 

straightforward manner. The Board 

invites comment on whether the Board 

could take additional steps to make the 

rule easier to understand. 

List of Subjects in 12 CFR Part 204 

Banks, banking, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

For the reasons set forth in the 

SUPPLEMENTARY INFORMATION, the Board 

proposes to amend 12 CFR part 204 as 

follows: 

PART 204—RESERVE 

REQUIREMENTS OF DEPOSITORY 

INSTITUTIONS (REGULATION D) 

■ 1. The authority citation for part 204 

continues to read as follows: 

Authority: 12 U.S.C. 248(a), 248(c), 461, 

601, 611, and 3105. 

■ 2. Amend § 204.2 by revising 

paragraph (aa) to read as follows: 

§ 204.2 Definitions. 

* * * * * 

(aa) Excess balance account means an 

account at a Reserve Bank pursuant to 

§ 204.10(d) that is established by one or 

more eligible institutions through an 

agent and in which only balances of the 

participating eligible institutions may at 

any time be maintained. An excess 

balance account is not a ‘‘pass-through 

account’’ for purposes of this part. 

■ 3. Amend § 204.10 by revising 

paragraphs (b) introductory text through 

(b)(3) and paragraphs (d) introductory 

text through (d)(4) to read as follows: 

§ 204.10 Payment of interest on balances. 

* * * * * 

(b) Payment of interest. Interest on 

balances maintained at Federal Reserve 

Banks by or on behalf of an eligible 

institution is established as set forth in 

paragraphs (b)(1) and (b)(2) of this 

section. 

(1) For balances maintained in an 

eligible institution’s master account, 

interest is the amount equal to the 

interest on reserve balances rate (‘‘IORB 

rate’’) on a day multiplied by the total 

balances maintained on that day. The 

IORB rate is 0.10 percent. 

(2) For term deposits, interest is: 

(i) The amount equal to the principal 

amount of the term deposit multiplied 

by a rate specified in advance by the 

Board, in light of existing short-term 

market rates, to maintain the federal 

funds rate at a level consistent with 

monetary policy objectives; or 

(ii) The amount equal to the principal 

amount of the term deposit multiplied 

by a rate determined by the auction 

through which such term deposits are 

offered. 

(3) For purposes of § 204.10(b), a 

‘‘master account’’ is the record 

maintained by a Federal Reserve Bank 

of the debtor-creditor relationship 

between the Federal Reserve Bank and 

a single eligible institution with respect 

to deposit balances of the eligible 

institution that are maintained with the 

Federal Reserve Bank. A ‘‘master 

account’’ is not a ‘‘term deposit,’’ an 

‘‘excess balance account,’’ a ‘‘joint 

account,’’ or any deposit account 

maintained with a Federal Reserve Bank 

governed by an agreement that states the 

account is not a master account. 

* * * * * 

(d) Excess balance accounts. (1) A 

Reserve Bank may establish an excess 

balance account for eligible institutions 

under the provisions of this paragraph 

(d). Notwithstanding any other 

provisions of this part, the balances 

maintained by eligible institutions in an 

excess balance account represent a 

liability of the Reserve Bank solely to 

those participating eligible institutions. 

(2) The participating eligible 

institutions in an excess balance 

account shall authorize another 

institution to act as agent of the 

participating institutions for purposes of 

general account management, including 

but not limited to transferring the 

balances of participating institutions in 

and out of the excess balance account. 

An excess balance account must be 

established at the Reserve Bank where 

the agent maintains its master account, 

unless otherwise determined by the 

Board. The agent may not commingle its 

own funds in the excess balance 

account. 

(3) Balances maintained in an excess 

balance account may not be used for 

general payments or other activities. 

(4) Interest on balances of eligible 

institutions maintained in an excess 

balance account is the amount equal to 

the IORB rate in effect on a day 

multiplied by the total balances 

maintained on that day. 

* * * * * 


tkelley on DSKBCP9HB2PROD with PROPOSALS
1306 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

By order of the Board of Governors of the 

Federal Reserve System. 

Margaret McCloskey Shanks, 

Deputy Secretary of the Board. 

[FR Doc. 2020–28755 Filed 1–7–21; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1241 

RIN 2590–AB09 

Enterprise Liquidity Requirements 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Notice of proposed rulemaking; 

request for comments. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) requests comment on a 

proposed rule that would implement 

four liquidity and funding requirements 

for Fannie Mae and Freddie Mac (the 

Enterprises). The 2008 financial crisis 

demonstrated substantial weaknesses in 

the liquidity positions of the 

Enterprises. Liquidity and funding 

challenges were a significant 

contributing factor to establishment of 

the conservatorships in September 2008. 

The proposed rule builds on the 

improvements made to the U.S. banking 

supervision framework’s regulation of 

institutions’ liquidity requirements, and 

on experience since the 2008 financial 

crisis including with the more recent 

2020 COVID–19-related financial market 

stress. FHFA believes that a robust 

Enterprise liquidity framework will 

improve market confidence in the 

Enterprises’ ability to fulfill their 

mission and provide countercyclical 

support to housing finance markets in 

times of stress, while further 

minimizing the likelihood that they will 

need further taxpayer support. FHFA 

envisions that an appropriate framework 

would incent the Enterprises to build 

their liquidity portfolios in good times, 

so that it is available to be deployed as 

necessary in times of stress. 

DATES: Comments must be received on 

or before March 9, 2021. 

ADDRESSES: You may submit your 

comments on the proposed rule, 

identified by regulatory information 

number (RIN) 2590–AB09, by any one of 

the following methods: 

• Agency Website: www.fhfa.gov/ 

open-for-comment-or-input. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. If 

you submit your comment to the 

Federal eRulemaking Portal, please also 

send it by email to FHFA at 

RegComments@fhfa.gov to ensure 

timely receipt by FHFA. Include the 

following information in the subject line 

of your submission: Comments/RIN 

2590–AB09. 

• Hand Delivered/Courier: The hand 

delivery address is Alfred M. Pollard, 

General Counsel, Attention: Comments/ 

RIN 2590–AB09, Federal Housing 

Finance Agency, Eighth Floor, 400 

Seventh Street SW, Washington, DC 

20219. Deliver the package at the 

Seventh Street entrance Guard Desk, 

First Floor, on business days between 9 

a.m. and 5 p.m. 

• U.S. Mail, United Parcel Service, 

Federal Express, or Other Mail Service: 

The mailing address for comments is: 

Alfred M. Pollard, General Counsel, 

Attention: Comments/RIN 2590–AB09, 

Federal Housing Finance Agency, 

Eighth Floor, 400 Seventh Street SW, 

Washington, DC 20219. Please note that 

all mail sent to FHFA via U.S. Mail is 

routed through a national irradiation 

facility, a process that may delay 

delivery by approximately two weeks. 

For any time-sensitive correspondence, 

please plan accordingly. 

FOR FURTHER INFORMATION CONTACT: 

Jamie Newell, Associate Director, 

Division of Resolutions, (202) 649–3530, 

Jamie.Newell@fhfa.gov; Ming-Yuen 

Meyer-Fong, Associate General Counsel, 

Office of General Counsel, (202) 649– 

3078, Ming-Yuen.Meyer-Fong@fhfa.gov; 

or Mark Laponsky, Deputy General 

Counsel, Office of General Counsel, 

(202) 649–3054, Mark.Laponsky@

fhfa.gov. These are not toll-free 

numbers. The telephone number for the 

Telecommunications Device for the Deaf 

is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: The 

proposed rule establishes four 

quantitative liquidity requirements that 

address the short, intermediate and 

long-term liquidity needs of the 

Enterprises. The short-term 30-day 

liquidity requirement is designed to 

promote the short-term resilience of the 

liquidity risk profile of the Enterprises, 

thereby improving the Enterprise’s 

ability to absorb shocks arising from 

financial market and economic stresses. 

In addition, the proposed rule includes 

an intermediate-term 365-day liquidity 

requirement to ensure that the 

Enterprises manage their liquidity needs 

beyond the short-term, and to provide 

additional incentives to fund their 

activities in a more stable fashion. 

Finally, the proposed rule includes two 

longer-term liquidity and funding 

requirements that encourage the 

issuance of an appropriate mix of 

longer-term debt to reduce the 

Enterprises’ rollover risk. FHFA expects 

that this more appropriate mix of 

longer-term debt will also reduce the 

risk that the Enterprises would have to 

sell less-liquid assets in distressed 

markets. 

Comments 

FHFA invites comments on all aspects 

of the proposed rule and will take all 

comments into consideration before 

issuing a final rule. Copies of all 

comments will be posted without 

change, and will include any personal 

information you provide such as your 

name, address, email address, and 

telephone number, on the FHFA website 

at http://www.fhfa.gov. In addition, 

copies of all comments received will be 

available for examination by the public 

through the electronic rulemaking 

docket for this proposed rule also 

located on the FHFA website. 

Table of Contents 

I. Introduction 

A. Background 

B. Overview of the Proposed Rule 

II. Liquidity and Funding Requirements 

A. Short-Term and Intermediate Term 

Liquidity Requirements 

1. High Quality Liquid Assets 

a. Federal Reserve Bank Balances 

b. U.S. Treasury Securities 

c. U.S. Treasury Repurchase Agreements 

Cleared Through the FICC 

d. Overnight Unsecured Deposits in 

Eligible Banks 

2. Non-Allowable Investments and WrongWay Risk 

3. Operational Requirements for High 

Quality Liquid Assets 

4. Cash Flows 

5. Daily Excess Requirement 

6. Stressed Cash Flow Scenarios 

a. Complete Loss of Ability To Issue 

Unsecured Debt 

b. Cash Window or Whole Loan Conduit 

Purchases 

c. Borrower Scheduled Principal, Interest, 

Tax, and Insurance Remittances 

d. Delinquent Loan Buyouts From MBS 

Trusts 

e. FICC Collateral Needs 

f. Liquidity Facility for Variable-Rate 

Demand Bonds 

g. Non-Bank Seller/Servicer Shortfalls 

7. Unsecured Callable Debt 

8. Changes in Financial Condition 

B. Long-Term Liquidity and Funding 

Requirements 

1. Background 

2. Long-Term Liquidity and Funding 

Requirements 

a. Long-Term Unsecured Debt to LessLiquid Asset Ratio 

b. Spread Duration of Unsecured Debt to 

Spread Duration of Assets Requirement 

c. Funding From Stockholders Equity 

C. Temporary Reduction of Liquidity 

Requirements 

III. Liquidity Risk Management Reporting 

IV. Supervisory Framework 

A. Liquidity Requirement Shortfall 


tkelley on DSKBCP9HB2PROD with PROPOSALS