11618 Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations 

1Public Law 102–242; 105 Stat. 2236, 2372–3; 12 

U.S.C. 4401–4407. 

2FDICIA section 402(2) generally defines 

‘‘clearing organization’’ to include entities that 

provide clearing, netting, and settlement services to 

their members and in which all members of the 

entity are themselves financial institutions or 

clearing organizations. However, certain entities 

qualify as clearing organizations under FDICIA 

section 402(2)—and are therefore eligible for the 

multilateral netting protections under FDICIA 

section 404—without regard to whether all of their 

members qualify as financial institutions or clearing 

organizations. Specifically, an entity automatically 

qualifies as a clearing organization if it is (1) 

registered with the Securities and Exchange 

the number of customers taking 

broadband service on a per community 

basis utilizing RUS’ on-line reporting 

system. These reports must be 

submitted throughout the loan 

amortization period or for the economic 

life of the facilities funded with a grant. 

(d) Awardees will be required to 

submit annually updated service area 

maps through the RUS mapping tool 

showing the areas where construction 

has been completed and premises are 

receiving service until the entire PFSA 

can receive the broadband service. At 

the end of the project, Awardees must 

submit a service area map indicating 

that all construction has been completed 

as proposed in the application. If parts 

of the PFSA have not been constructed, 

RUS may require a portion of the award 

to be rescinded or paid back. 

(e) Awardees must comply with all 

reasonable Agency requests to support 

ongoing monitoring efforts. The 

Awardee shall afford RUS, through its 

representatives, reasonable opportunity, 

at all times during business hours and 

upon prior notice, to have access to and 

the right to inspect: The Broadband 

System, any other property encumbered 

by the Award Documents, any and all 

books, records, accounts, invoices, 

contracts, leases, payrolls, timesheets, 

cancelled checks, statements, and other 

documents (electronic or paper, of every 

kind) belonging to or in the possession 

of the Awardee or in any way pertaining 

to its property or business, including its 

subsidiaries, if any, and to make copies 

or extracts thereof. 

(f) Awardee records shall be retained 

and preserved in accordance with the 

provisions of 7 CFR part 1770, subpart 

A. 

(g) Awardees receiving assistance 

under this part will be required to 

submit annual reports for three (3) years 

after the completion of construction. 

The reports must include the following 

information: 

(1) Existing network service 

improvements and facility upgrades, as 

well as new equipment and capacity 

enhancements that support high-speed 

broadband access for educational 

institutions, health care providers, and 

public safety service providers; 

(2) The estimated number of end users 

who are currently using or forecasted to 

use the new or upgraded infrastructure; 

(3) The progress towards fulfilling the 

objectives for which the assistance was 

granted; 

(4) The number and geospatial 

location of residences and businesses 

that will receive new broadband service; 

(5) The speed and price of the 

Awardee’s broadband service offerings; 

and 

(6) The average price of broadband 

service in the Project’s service area. 

§ 1740.81 Default and de-obligation. 

RUS reserves the right to deobligate 

awards to Awardees under this part that 

demonstrate an insufficient level of 

performance, wasteful or fraudulent 

spending, or noncompliance with 

environmental and historic preservation 

requirements. 

§§ 1740.82–1740.93 [Reserved] 

Subpart G—Other Information and 

Federal Requirements 

§ 1740.94 Confidentiality of Applicant 

information. 

Applicants are encouraged to identify 

and label any confidential and 

proprietary information contained in 

their applications. The Agency will 

protect confidential and proprietary 

information from public disclosure to 

the fullest extent authorized by 

applicable law, including the Freedom 

of Information Act, as amended (5 

U.S.C. 552), the Trade Secrets Act, as 

amended (18 U.S.C. 1905), the 

Economic Espionage Act of 1996 (18 

U.S.C. 1831 et seq.), and CALEA (47 

U.S.C. 1001 et seq.). Applicants should 

be aware, however, that this program 

requires substantial transparency. For 

example, RUS is required to make 

publicly available on the internet a list 

of each entity that has applied for a loan 

or grant, a description of each 

application, the status of each 

application, the name of each entity 

receiving funds, and the purpose for 

which the entity is receiving the funds. 

§ 1740.95 Compliance with applicable 

laws. 

Any recipient of funds under this 

regulation shall be required to comply 

with all applicable federal, tribal and 

state laws, including but not limited to: 

(a) The Architectural Barriers Act of 

1968, as amended (42 U.S.C. 4151 et 

seq.); 

(b) The Uniform Federal Accessibility 

Standards (UFAS) (Appendix A to 41 

CFR subpart 101–19.6); and 

(c) All applicable federal, tribal and 

state communications laws and 

regulations, including, for example, the 

Communications Act of 1934, as 

amended, (47 U.S.C. 151 et seq.) the 

Telecommunications Act of 1996, as 

amended (Pub. L. 104–104, 110 Stat. 56 

(1996), and CALEA. For further 

information, see http://www.fcc.gov. 

§§ 1740.96–1740.99 [Reserved] 

§ 1740.100 OMB control number. 

The information collection 

requirements in this part are approved 

by the Office of Management and 

Budget (OMB) and assigned OMB 

control number 0572–0152. 

Christopher A. McLean, 

Acting Administrator, Rural Utilities Service. 

[FR Doc. 2021–03443 Filed 2–25–21; 8:45 am] 

BILLING CODE 3410–15–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 231 

[Regulation EE; Docket No. R–1661] 

RIN 7100–AF 48 

Netting Eligibility for Financial 

Institutions 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: The Board of Governors 

(Board) is publishing a final rule that 

amends Regulation EE to include 

additional entities in the definition of 

‘‘financial institution’’ contained in 

section 402 of the Federal Deposit 

Insurance Corporation Improvement Act 

of 1991 (FDICIA) so that they are 

covered by FDICIA’s netting protections. 

The final rule also clarifies certain 

aspects of the existing activities-based 

test in Regulation EE. 

DATES: The final rule is effective March 

29, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Evan Winerman, Senior Counsel (202– 

872–7578), Legal Division. Users of 

Telecommunication Device for Deaf 

(TDD) only, call (202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Sections 401–407 of FDICIA 1 provide 

certainty that netting contracts will be 

enforced, even in the event of the 

insolvency of one of the parties. These 

netting provisions apply to bilateral 

netting contracts between two financial 

institutions and multilateral netting 

contracts among members of a clearing 

organization.2 FDICIA defines ‘‘financial 


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Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations 11619 

Commission (SEC) as a clearing agency or has been 

exempted from registration by the SEC or (2) 

registered with the Commodity Futures Trading 

Commission (CFTC) as a derivatives clearing 

organization or has been exempted from registration 

by the CFTC. 

3 12 CFR 231.3(a). Regulation EE generally defines 

the term ‘‘financial contract’’ by reference to the 

term ‘‘qualified financial contract’’ under section 

11(e)(8)(D) of the Federal Deposit Insurance Act, 12 

U.S.C. 1821(e)(8)(D). 12 CFR 231.2(c). 

4 59 FR 4780, 4782 (February 2, 1994). 

5 Id. 

6 84 FR 18741 (May 2, 2019). FDICIA section 

402(9) defines the term ‘‘financial institution’’ to 

include an enumerated list of entities and ‘‘any 

other institution as determined by the Board of 

Governors of the Federal Reserve System.’’ 

7See 7 U.S.C. 6s (swap dealer registration 

requirement) and 17 CFR 1.3 (swap dealer 

definition and de minimis thresholds); 15 U.S.C. 

78o–10 (security-based swap dealer registration 

requirement) and 17 CFR 240.3a71–1 and 240.3a71– 

2 (security-based swap dealer definition and de 

minimis thresholds). 

8See 7 U.S.C. 6s (MSP registration requirement) 

and 15 U.S.C. 78o–10 (MSBSP registration 

requirement). 

9 12 U.S.C. 5323. 

10See 7 U.S.C. 7a–1(a) and (h). 

11See 15 U.S.C. 78q–1(b) and (k). 

12 12 U.S.C. 5463. 

13 12 U.S.C. 3101. As described in the proposal, 

the Board believes that foreign banks qualify as 

financial institutions under FDICIA’s statutory 

definition. 

14 12 CFR 217.2. 

15Exposures to a QCCP are risk-weighted at either 

2 or 4 percent (see 12 CFR 217.35(b)(3) and (c)(3)), 

whereas exposures to a CCP that is not a QCCP are 

risk-weighted based on the risk weight otherwise 

assignable to the CCP. 

institution’’ as a broker or dealer, a 

depository institution, a futures 

commission merchant, or any other 

institution as determined by the Board. 

Regulation EE expands the FDICIA 

definition of ‘‘financial institution’’— 

and therefore expands FDICIA’s netting 

protections—using an activities-based 

test that includes a qualitative 

component and a quantitative 

component. The qualitative component 

requires that the person ‘‘represent, 

orally or in writing, that it will engage 

in financial contracts as a counterparty 

on both sides of one or more financial 

markets.’’ 3 A person that makes this 

representation demonstrates that it is 

willing to engage in transactions on both 

sides of the market and is, in effect, 

holding itself out as a market 

intermediary.4 The quantitative 

component requires that the person 

have either (1) one or more financial 

contracts of a total gross dollar value of 

at least $1 billion in notional principal 

amount outstanding on any day during 

the previous 15-month period with 

counterparties that are not its affiliates 

or (2) total gross mark-to-market 

positions of at least $100 million 

(aggregated across counterparties) in one 

or more financial contracts on any day 

during the previous 15-month period 

with counterparties that are not its 

affiliates.5

On May 2, 2019, consistent with the 

purposes of FDICIA’s netting provisions, 

and in order to reduce systemic risk and 

increase efficiency in the financial 

markets, the Board proposed to amend 

Regulation EE to include additional 

categories of entities in the definition of 

financial institution.6 The Board also 

proposed to clarify certain aspects of 

Regulation EE’s existing activities-based 

test for qualifying as a financial 

institution. 

II. Public Comments 

The Board received five responsive 

comments from private-sector financial 

institutions, industry associations, and 

an international organization. 

Commenters supported the proposed 

revisions to Regulation EE and, in some 

cases, suggested additional revisions. 

Several commenters suggested that the 

Board extend the financial institution 

definition to additional categories of 

entities. One commenter suggested that 

the Board make two minor clarifications 

related to the proposed changes to the 

activities-based test. 

A. Qualification as a Financial 

Institution Based on Type of Entity 

The Board is amending Regulation EE 

to include in the definition of financial 

institution the entities identified in the 

proposal. Additionally, the Board is 

including two other categories of 

entities, as well as the Bank for 

International Settlements (BIS), in the 

definition of financial institution. 

The Board proposed to define the 

following entities as financial 

institutions: Swap dealers and securitybased swap dealers; 7 major swap 

participants (MSPs) and major securitybased swap participants (MSBSPs); 8

nonbank financial companies that the 

Financial Stability Oversight Council 

(FSOC) has determined shall be 

supervised by the Board and subject to 

prudential standards (nonbank 

systemically important financial 

institutions, or SIFIs); 9 derivatives 

clearing organizations (DCOs) that are 

registered with the CFTC or have been 

exempted from registration by the 

CFTC; 10 clearing agencies that are 

registered with the SEC or have been 

exempted from registration by the 

SEC; 11 financial market utilities that the 

FSOC has designated as, or as likely to 

become, systemically important 

(designated financial market utilities, or 

DFMUs); 12 foreign banks as defined in 

the International Banking Act; 13 bridge 

institutions established for the purpose 

of resolving financial institutions; and 

Federal Reserve Banks. Commenters 

supported extending the financial 

institution definition to the entities 

identified in the proposal. 

The Board believes that adding these 

entities to the definition of financial 

institution would promote the purposes 

of FDICIA’s netting provisions—namely 

to reduce systemic risk and increase 

efficiency in the financial markets. The 

Board recognizes that Congress has 

imposed or expanded federal 

supervision and regulation for many of 

these entities since the Board first 

promulgated Regulation EE. In 

subjecting these entities to higher levels 

of regulation and supervision due to 

their activities, transaction volumes, 

and risks presented to the financial 

markets, Congress indicated the 

importance of the smooth functioning of 

these entities to the financial markets. 

Accordingly, the Board is finalizing its 

proposal to extend the financial 

institution definition to include swap 

dealers, security-based swap dealers, 

MSPs, MSBSPs, nonbank SIFIs, DCOs, 

clearing agencies, DFMUs, foreign 

banks, bridge institutions established for 

the purpose of resolving financial 

institutions, and Federal Reserve Banks. 

The Board is also amending 

Regulation EE to define qualifying 

central counterparties (QCCPs), foreign 

central banks, and the BIS as financial 

institutions. 

1. QCCPs 

In the preamble to the proposed rule, 

the Board requested comment on 

whether it should include in the 

definition of financial institution an 

entity that is a QCCP under the Board’s 

Regulation Q.14 One industry 

association supported this addition. 

The Board’s Regulation Q establishes 

criteria for identifying QCCPs. 

Generally, a Board-supervised 

institution that clears financial 

transactions through a QCCP can receive 

preferential capital treatment for those 

transactions.15 To qualify as a QCCP, an 

entity based outside the United States 

must generally (among other things) be 

subject to home-country riskmanagement standards that are 

comparable to those that apply to 

DFMUs. 

As noted above, the Board is 

amending the definition of financial 

institution to include DCOs and clearing 

agencies that are registered with, or 

have been exempted from registration 

by, the CFTC or SEC. All domestic 

QCCPs and many foreign-based QCCPs 

are registered or exempt DCOs/clearing 

agencies. To ensure that all foreignVerDate Sep<11>2014 16:49 Feb 25, 2021 Jkt 253001 PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 E:\FR\FM\26FER1.SGM 26FER1

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11620 Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations 

16See https://www.bis.org/about/index.htm. 

17See https://www.bis.org/banking/finserv.htm. 

18See https://www.bis.org/cpmi/publ/d101.htm. 

19 12 CFR 231.3(a). The Bankruptcy Code 

includes a test for identifying ‘‘financial 

participants’’ that is substantively identical to the 

quantitative test in Regulation EE. 11 U.S.C. 

101(22A). Under the Bankruptcy Code, financial 

participants that enter into certain types of financial 

contracts and master netting agreements for those 

financial contracts are exempt from provisions of 

the Bankruptcy Code that might otherwise delay or 

prevent netting related to those contracts. See, e.g., 

11 U.S.C. 362(b)(6), (7), (17), and (27) (specifying 

that the Bankruptcy Code’s automatic stay does not 

prevent a financial participant from exercising a 

contractual right to, inter alia, ‘‘offset or net out any 

termination value, payment amount, or other 

transfer obligation arising under or in connection 

with’’ certain types of financial contracts and 

master netting agreements for those financial 

contracts). 

based QCCPs qualify as financial 

institutions for purposes of FDICIA’s 

netting provisions, the Board is 

amending Regulation EE to extend the 

financial institution definition to 

QCCPs. The Board believes that defining 

QCCPs to be financial institutions 

would benefit financial markets that 

rely on FDICIA’s netting provisions by 

ensuring that foreign-based QCCPs can 

participate in other financial market 

utilities that require participants to be 

financial institutions and that including 

QCCPs would meet the statutory 

objectives of reducing systemic risk and 

increasing efficiency in those financial 

markets. Additionally, the Board 

believes that it is appropriate to extend 

the financial institution definition to 

QCCPs because Regulation Q (1) 

establishes criteria for identifying 

QCCPs and (2) provides that an entity 

must meet heightened risk-management 

standards to qualify as a QCCP. 

2. Foreign Central Banks 

A private-sector financial institution 

and an international organization 

suggested that the Board include foreign 

central banks in the definition of 

financial institution. These commenters 

stated that foreign central banks are 

systemically important and that 

extending the financial institution 

definition to cover foreign central banks 

would reduce systemic risk and increase 

efficiency in the financial markets, 

consistent with the purpose of the 

proposal. 

The Board understands that foreign 

central banks, like Federal Reserve 

Banks, may participate in financial 

markets through various types of 

transactions that are used to implement 

monetary policy. The Board believes 

that including foreign central banks 

categorically in the definition of 

financial institution may benefit 

financial markets that rely on FDICIA 

and would meet the statutory objectives 

of reducing systemic risk and increasing 

efficiency in those financial markets. 

Furthermore, given that the Board is 

amending Regulation EE to define 

Federal Reserve Banks as financial 

institutions, the Board believes that a 

parallel addition of foreign central 

banks would be appropriate. 

Accordingly, the Board is amending 

Regulation EE to define foreign central 

banks as financial institutions. 

3. The BIS 

Multiple commenters suggested that 

the Board include the BIS in the 

definition of financial institution. The 

BIS’s shareholders are central banks and 

monetary authorities that are members 

of the BIS.16 The BIS engages in 

financial contracts (e.g., foreign 

exchange derivatives) to help central 

banks and other official monetary 

institutions manage their foreign 

exchange reserves.17 Because the BIS 

engages in market-facing financial 

contracts and has characteristics similar 

to those of the Federal Reserve Banks 

and foreign central banks, the Board 

believes that the BIS should receive 

financial institution status, which is 

also being extended to the Federal 

Reserve Banks and foreign central 

banks. The Board believes that 

extending financial institution status to 

the BIS would meet the statutory 

objectives of reducing systemic risk and 

increasing efficiency in the financial 

markets. Accordingly, the Board is 

amending Regulation EE to define the 

BIS as a financial institution. 

4. Other Categories of Entities 

Two private-sector financial 

institutions and one international 

organization requested that the Board 

add the following categories of entities 

to the definition of financial institution: 

(i) Supranational institutions, such as 

multilateral development banks; (ii) 

foreign systemically important financial 

market infrastructures that are subject to 

the Principles for Financial Market 

Infrastructures 18 as implemented in 

their respective jurisdictions, and their 

operators; (iii) sovereign wealth funds; 

and (iv) electronic money institutions 

and payment institutions. The 

commenters did not provide detailed 

explanations for why the Board should 

extend financial institution status to 

these categories of entities. 

As discussed above, the domestic and 

global landscape for financial regulation 

has changed dramatically since the 

Board promulgated Regulation EE. In 

particular, several types of entities are 

now subject to expanded federal 

supervision and regulation. In 

subjecting these types of entities to 

higher levels of regulation and 

supervision due to their activities, 

transaction volumes, and risks 

presented to the financial markets, 

Congress indicated the importance of 

the smooth functioning of these entities 

to the financial markets. 

The Board is not extending the 

financial institution definition to 

include the four categories of entities 

suggested by commenters. It is not clear 

the extent to which these types of 

entities, as categories, are active in 

financial contract netting such that the 

smooth functioning of their netting 

contracts is important for reducing 

systemic risk within the U.S. banking 

system or financial markets. 

Additionally, it is not clear the extent to 

which some of these entities function as 

market intermediaries. The Board notes 

that some foreign systemically 

important financial market 

infrastructures may be captured by other 

newly-added categories in the definition 

of financial institution, including DCOs, 

clearing agencies, and QCCPs. 

As the Board noted in the proposed 

rule, it has the authority to issue caseby-case determinations for individual 

entities seeking financial institution 

status. Further, while the Board is not 

categorically defining all of the entities 

described above as financial 

institutions, individual entities in these 

categories might independently qualify 

as financial institutions under 

Regulation EE’s activities-based test. 

B. Activities-Based Test 

The quantitative component of the 

activities-based test requires that a 

person have either (1) one or more 

financial contracts of a total gross dollar 

value of at least $1 billion in notional 

principal amount outstanding on any 

day during the previous 15-month 

period with counterparties that are not 

its affiliates or (2) total gross mark-tomarket positions of at least $100 million 

(aggregated across counterparties) in one 

or more financial contracts on any day 

during the previous 15-month period 

with counterparties that are not its 

affiliates.19

The Board proposed to clarify how 

the quantitative component of the 

activities-based test would apply 

following a consolidation of legal 

entities. Specifically, the Board 

proposed that, upon the consolidation 

of two or more entities, the surviving 

entity may aggregate the total gross 

dollar value of notional principal 

amounts outstanding or the total gross 

mark-to-market positions of both 


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Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations 11621 

20 12 CFR 231.3(a). Regulation EE generally 

defines the term ‘‘financial contract’’ by reference 

to the term ‘‘qualified financial contract’’ under 

section 11(e)(8)(D) of the Federal Deposit Insurance 

Act, 12 U.S.C. 1821(e)(8)(D). 12 CFR 231.2(c). 

21See 44 U.S.C. 3502(3). 

22 13 CFR 121.201, sector 52 (SBA small entity 

size standards for finance and insurance entities). 

23As explained above, the final rule also codifies 

the Board’s existing view that foreign banks are 

financial institutions. 

24 79 FR 65543, 65556 (Nov. 5, 2014). 

25See, e.g., 81 FR 80563, 80565 (Nov. 16, 2016); 

76 FR 69334, 69428 (Nov. 8, 2011). 

26See, e.g., 81 FR 29959, 30142 (May 3, 2016); 81 

FR 70744, 70784 (Oct. 13, 2016). 

27None of the industry codes in the SBA’s small 

entity size standards necessarily apply to the 

Federal Reserve Banks per se, but the SBA’s size 

standards for commercial depository institutions 

are instructive. Generally, the SBA’s size standards 

provide that depository institutions are small 

entities if they have $600 million or less in assets. 

13 CFR 121.201, sector 52. Each of the Federal 

Reserve Banks holds significantly more than $600 

million in assets. See the Statement of Condition of 

Each Federal Reserve Bank, https://

www.federalreserve.gov/releases/h41/current/ 

h41.htm#h41tab10a. 

28A bridge depository institution might be a 

small entity, but this final rule would not affect the 

status of bridge depository institutions under 

FDICIA because (as noted above) such institutions 

qualify as ‘‘financial institutions’’ under FDICIA’s 

statutory definition. 

29 12 U.S.C. 5383(b)(2). 

30See 13 CFR 121.201, sector 52 (Small Business 

Administration small entity size standards for 

finance and insurance entities), which generally 

provides that financial entities are ‘‘small entities’’ 

only if they have (1) at most, $41.5 million or less 

in annual receipts or (2) for depository institutions 

and credit card issuers, $600 million or less in 

assets. 

entities on each calendar day during the 

previous 15-month period, and such 

total amounts would be used to 

determine whether the surviving entity 

meets the quantitative thresholds of the 

activities-based test. The Board did not 

receive any responsive comments on 

this clarification and is adopting the 

clarification as proposed. 

The Board also proposed to add 

language to clarify, consistent with its 

current understanding, that the 

‘‘previous 15-month period’’ described 

in the activities-based test includes the 

day on which a person evaluates 

whether it meets the relevant thresholds 

in the quantitative component of the 

activities-based test. Specifically, the 

Board proposed to add the words ‘‘at 

such time’’ to proposed §§ 231.3(a)(1) 

and (a)(2) to clarify that a person can 

qualify as a financial institution under 

the activities-based test if (1) the 

person’s positions exceeded one of the 

quantitative threshold on any prior day 

within the previous 15-month period or 

(2) the person’s positions exceed one of 

the quantitative thresholds on the day 

the person evaluates its status as a 

financial institution. One commenter 

requested that the Board confirm that 

the proposed clarification is not 

intended to modify the settled 

understanding that the ‘‘previous 15- 

month period’’ includes the day on 

which a party evaluates its status as a 

financial institution. The Board is 

adopting the proposed clarification, and 

confirms that a person can qualify as a 

financial institution under the activitiesbased test if the person’s positions 

exceed one of the quantitative 

thresholds on the day the person 

evaluates its status as a financial 

institution. 

A commenter also requested 

clarification that satisfying the 

qualitative component of the activitiesbased test (which requires that a person 

‘‘represent[ ], orally or in writing, that it 

will engage in financial contracts as a 

counterparty on both sides of one or 

more financial markets’’) 20 does not 

affect a person’s regulatory status for 

any other purpose. The Board confirms 

that satisfying the qualitative 

component of the activities-based test 

does not affect a person’s regulatory 

status for any other purpose. 

IV. Regulatory Analysis 

A. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act (PRA) of 1995 (44 U.S.C. 

3506; 5 CFR part 1320, Appendix A.1), 

the Board may not conduct or sponsor, 

and a respondent is not required to 

respond to, an information collection 

unless it displays a valid Office of 

Management and Budget (OMB) control 

number. The Board reviewed the final 

rule under the authority delegated to the 

Board by the OMB and determined that 

it contains no collections of information 

under the PRA.21 Accordingly, there is 

no paperwork burden associated with 

the rule. 

B. Regulatory Flexibility Act 

In accordance with section 4 of the 

Regulatory Flexibility Act (RFA), 5 

U.S.C. 601 et seq., the Board is 

publishing a final regulatory flexibility 

analysis for the final rule. The RFA 

generally requires an agency to assess 

the impact a rule is expected to have on 

small entities. The RFA requires an 

agency either to provide a regulatory 

flexibility analysis or to certify that the 

final rule will not have a significant 

economic impact on a substantial 

number of small entities. The Small 

Business Administration (SBA) has 

adopted small entity size standards 

which generally provide that financial 

entities are ‘‘small entities’’ only if they 

have (1) at most, $41.5 million or less 

in annual receipts or (2) for depository 

institutions and credit card issuers, 

$600 million or less in assets.22

The Board did not receive any 

comments on its initial regulatory 

flexibility analysis. The Board certifies 

that the final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The final rule extends the ‘‘financial 

institution’’ definition to swap dealers, 

security-based swap dealers, MSPs, 

MSBSPs, DCOs, clearing agencies, 

QCCPs, bridge institutions, Federal 

Reserve Banks, foreign central banks, 

and the BIS.23

The Board has previously determined 

that designated financial market utilities 

are not small entities; 24 the CFTC has 

previously determined that swap 

dealers, MSPs, and DCOs are not small 

entities; 25 and the SEC has previously 

determined that security-based swap 

dealers, MSBSPs, and clearing agencies 

are not small entities.26 The Federal 

Reserve Banks are not small entities.27

Similarly, the Board does not believe 

that foreign central banks or the BIS 

would be small entities. All domestic 

QCCPs are registered as DCOs and/or 

clearing agencies and, accordingly, are 

not small entities. Certain foreign-based 

QCCPs are not registered as DCOs or 

clearing agencies, but these foreignbased QCCPs function similarly to DCOs 

and clearing agencies and—like DCOs 

and clearing agencies—are unlikely to 

be small entities. 

Similarly, a bridge financial company 

would not be a small entity.28 Under 

U.S. law, the Federal Deposit Insurance 

Corporation (FDIC) can establish a 

bridge financial company when it acts 

as receiver for a failing financial 

company. In order for the FDIC to be 

appointed as receiver for a financial 

company, the Secretary of the Treasury 

must determine that, inter alia, ‘‘the 

failure of the financial company and its 

resolution under otherwise applicable 

Federal or State law would have serious 

adverse effects on financial stability in 

the United States.’’ 29 The failure of a 

financial company that is a ‘‘small 

entity’’ would not affect financial 

stability in the United States.30

Accordingly, the FDIC would not act as 

receiver—and would not form a bridge 

financial company—for a small entity. It 

is therefore unlikely that a bridge 

financial company would be a small 

entity. Similarly, it is unlikely that a 

foreign bridge institution established to 

facilitate the resolution of a foreign 


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11622 Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations 

nonbank financial institution would be 

a small entity. 

Foreign banks (including bridge 

banks) are already covered by FDICIA’s 

statutory definition of financial 

institution. Accordingly, while this final 

rule clarifies that foreign banks are 

financial institutions, it will not have 

any economic impact on foreign banks. 

List of Subjects in 12 CFR Part 231 

Banks, Banking, Financial 

institutions, Netting. 

For the reasons set forth in the 

preamble, the Board amends Regulation 

EE, 12 CFR part 231, as follows: 

PART 231—NETTING ELIGIBILITY FOR 

FINANCIAL INSTITUTIONS 

(REGULATION EE) 

■ 1. The authority citation for part 231 

continues to read as follows: 

Authority: 12 U.S.C. 4402(1)(B) and 

4402(9). 

■ 2. In § 231.2, redesignate paragraphs 

(c) through (f) as paragraphs (d) through 

(g), and add new paragraph (c) to read 

as follows: 

§ 231.2 Definitions. 

* * * * * 

(c) Bridge institution means a legal 

entity that has been established by a 

governmental authority to take over, 

transfer, or continue operating critical 

functions and viable operations of an 

entity in resolution. A bridge institution 

could include a bridge depository 

institution or a bridge financial 

company organized by the Federal 

Deposit Insurance Corporation in 

accordance with 12 U.S.C. 1821(n) or 

5390(h), respectively, or a similar entity 

organized under foreign law. 

■ 3. Amend § 231.3 by: 

■ a. Revising paragraph (a); 

■ b. Redesignating paragraphs (b) and 

(c) as paragraphs (c) and (d); 

■ c. Adding new paragraphs (b) and (e). 

The revision and additions read as 

follows: 

§ 231.3 Qualification as a financial 

institution. 

(a) A person qualifies as a financial 

institution for purposes of sections 401– 

407 of the Act if it represents, orally or 

in writing, that it will engage in 

financial contracts as a counterparty on 

both sides of one or more financial 

markets and either— 

(1) Had one or more financial 

contracts of a total gross dollar value of 

at least $1 billion in notional principal 

amount outstanding at such time or on 

any day during the previous 15-month 

period with counterparties that are not 

its affiliates; or 

(2) Had total gross mark-to-market 

positions of at least $100 million 

(aggregated across counterparties) in one 

or more financial contracts at such time 

or on any day during the previous 15- 

month period with counterparties that 

are not its affiliates. 

(b) After two or more persons 

consolidate, such as through a merger or 

acquisition, the surviving person meets 

the quantitative thresholds under 

paragraphs (a)(1) and (a)(2) if, on the 

same, single calendar day during the 

previous 15-month period, the aggregate 

financial contracts of the consolidated 

persons would have met such 

quantitative thresholds. 

* * * * * 

(e) A person qualifies as a financial 

institution for purposes of sections 401– 

407 of the Act if it is— 

(1) A swap dealer or major swap 

participant registered with the 

Commodity Futures Trading 

Commission pursuant to section 4s of 

the Commodity Exchange Act (7 U.S.C. 

6s); 

(2) A security-based swap dealer or 

major security-based swap participant 

registered with the U.S. Securities and 

Exchange Commission pursuant to 

section 15F of the Securities Exchange 

Act of 1934 (15 U.S.C. 78o–10); 

(3) A derivatives clearing organization 

registered with the Commodity Futures 

Trading Commission pursuant to 

section 5b(a) of the Commodity 

Exchange Act (7 U.S.C. 7a–1(a)) or a 

derivatives clearing organization that 

the Commodity Futures Trading 

Commission has exempted from 

registration by rule or order pursuant to 

section 5b(h) of the Commodity 

Exchange Act (7 U.S.C. 7a–1(h)); 

(4) A clearing agency registered with 

the U.S. Securities and Exchange 

Commission pursuant to section 17A(b) 

of the Securities Exchange Act of 1934 

(15 U.S.C. 78q–1(b)) or a clearing agency 

that the U.S. Securities and Exchange 

Commission has exempted from 

registration by rule or order pursuant to 

section 17A(k) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78q– 

1(k)); 

(5) A financial market utility that the 

Financial Stability Oversight Council 

has designated as, or as likely to 

become, systemically important 

pursuant to 12 U.S.C. 5463; 

(6) A qualifying central counterparty 

under 12 CFR 217.2; 

(7) A nonbank financial company that 

the Financial Stability Oversight 

Council has determined shall be 

supervised by the Board and subject to 

prudential standards, pursuant to 12 

U.S.C. 5323; 

(8) A foreign bank as defined in 

section 1(b) of the International Banking 

Act of 1978 (12 U.S.C. 3101), including 

a foreign bridge bank; 

(9) A bridge institution established for 

the purpose of resolving a financial 

institution; 

(10) A Federal Reserve Bank or a 

foreign central bank; or 

(11) The Bank for International 

Settlements. 

By order of the Board of Governors of the 

Federal Reserve System, February 17, 2021. 

Ann Misback, 

Secretary of the Board. 

[FR Doc. 2021–03596 Filed 2–25–21; 8:45 am] 

BILLING CODE P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 272 

Federal Open Market Committee; Rules 

of Procedure 

AGENCY: Federal Open Market 

Committee. 

ACTION: Final rule. 

SUMMARY: The Federal Open Market 

Committee is amending its Rules of 

Procedure to replace the terms 

‘‘Chairman’’ and ‘‘Vice Chairman’’ with 

‘‘Chair’’ and Vice Chair,’’ respectively. 

DATES: Effective February 26, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Matthew Luecke, Deputy Secretary of 

the Federal Open Market Committee, 

(202) 452–2576, 20th and C Streets NW, 

Washington, DC 20551; or Alye S. 

Foster, Deputy Associate General 

Counsel (202–452–5289), Legal 

Division, Board of Governors of the 

Federal Reserve System. 

SUPPLEMENTARY INFORMATION: The 

Federal Open Market Committee 

(Committee) is replacing the references 

in its Rules of Procedure to ‘‘Chairman’’ 

and ‘‘Vice Chairman,’’ with the genderneutral equivalent terms of ‘‘Chair’’ and 

‘‘Vice Chair’’. Although the terms 

‘‘Chairman’’ and ‘‘Vice Chairman’’ are 

referenced in the Federal Reserve Act, 

traditionally these terms have been used 

to refer to persons regardless of gender. 

As the terms are not intended to be and, 

in practice, are not gender-specific, the 

Committee is replacing of the terms 

‘‘Chairman’’ and ‘‘Vice Chairman’’ in 

the Committee’s Rules of Procedure 

with their gender-neutral equivalents of 

‘‘Chair’’ and ‘‘Vice Chair,’’ respectively. 

This change also aligns the Committee’s 

Rules of Procedure with its practice. 

Because the amended rule relates 

solely to the internal organization, 

procedure, or practice of the Committee, 

the public notice, public comment, and 


khammond on DSKJM1Z7X2PROD with RULES