This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

26347 

Vol. 83, No. 110 

Thursday, June 7, 2018 

1 ‘‘FDIC-supervised institution’’ means any 

insured depository institution for which the FDIC 

is the appropriate Federal banking agency pursuant 

to section 3(q) of the Federal Deposit Insurance Act, 

12 U.S.C. 1813(q). 12 CFR 344.3(h). Pursuant to 

section 3(q), the FDIC is the appropriate Federal 

banking agency with respect to: (1) Any State 

nonmember insured bank; (2) any foreign bank 

having an insured branch; and (3) any State savings 

association. 12 U.S.C. 1813(q)(2). 2 82 FR 42619 (Sep. 11, 2017). 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Parts 12 and 151 

[Docket ID OCC–2017–0013] 

RIN 1557–AE24 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 344 

RIN 3064–AE64 

Securities Transaction Settlement 

Cycle 

AGENCY: Office of the Comptroller of the 

Currency, Treasury (‘‘OCC’’); and 

Federal Deposit Insurance Corporation 

(‘‘FDIC’’). 

ACTION: Final rule. 

SUMMARY: The OCC and the FDIC 

(‘‘Agencies’’) are adopting a final rule to 

shorten the standard settlement cycle 

for securities purchased or sold by 

national banks, federal savings 

associations, and FDIC-supervised 

institutions. The Agencies’ final rule is 

consistent with an industry-wide 

transition to a two business-day 

settlement cycle, which is designed to 

reduce settlement exposure and align 

settlement practices across all market 

participants. 

DATES: This final rule is effective 

October 1, 2018. 

FOR FURTHER INFORMATION CONTACT: 

OCC: David Stankiewicz, Special 

Counsel, Securities and Corporate 

Practices Division, (202) 649–5510; 

Daniel Perez, Attorney, Legislative and 

Regulatory Activities Division, (202) 

649–5490 or, for persons who are deaf 

or hearing-impaired, TTY, (202) 649– 

5597; or Patricia Dalton, Technical 

Expert, Asset Management Group, 

Market Risk, at (202) 649–6360. 

FDIC: Thomas F. Lyons, Chief, (202) 

898–6850; Michael W. Orange, Senior 

Trust Examination Specialist, (678) 

916–2289, Policy & Program 

Development, Risk Management Policy 

Branch, Division of Risk Management 

Supervision; Annmarie H. Boyd, 

Counsel, (202) 898–3714; Benjamin J. 

Klein, Counsel, (202) 898–7027, Bank 

Activities Unit, Supervision and 

Legislation Branch, Legal Division. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On September 5, 2017, the securities 

industry in the United States 

transitioned from a standard securities 

settlement cycle of three business days 

after the date of the contract, commonly 

known as ‘‘T+3,’’ to a two-business day 

standard, or ‘‘T+2.’’ The transition was 

the culmination of a multi-year 

securities industry initiative and rule 

changes implemented by the U.S. 

Securities and Exchange Commission 

and securities self-regulatory 

organizations (such as the Financial 

Industry Regulatory Authority and the 

Municipal Securities Rulemaking 

Board). In connection with the 

transition to T+2, on June 9, 2017, the 

OCC issued Bulletin 2017–22, which 

notified national banks, federal savings 

associations (‘‘FSAs’’), federal branches, 

and federal agencies (together, ‘‘OCCsupervised institutions’’) that they 

should be in compliance with T+2 as of 

September 5, 2017. The FDIC issued 

similar guidance applicable to FDICsupervised institutions 1 through 

Financial Institution Letter 32–2017 on 

July 26, 2017. 

Regulations governing recordkeeping 

and confirmation requirements for the 

securities transactions of national banks 

and FSAs, both for the bank’s own 

account and for customers, are set out 

in parts 12 and 151 of the OCC’s 

regulations, respectively. Regulations 

governing the same for FDIC-supervised 

institutions are set out in part 344 of the 

FDIC’s regulations. These regulations 

require that banks generally not effect or 

enter into a contract for the purchase or 

sale of a security that provides for 

payment of funds and delivery of 

securities later than the third business 

day after the date of the contract, unless 

otherwise expressly agreed to by the 

parties at the time of the transaction. 

II. Notice of Proposed Rulemaking 

On September 11, 2017, the Agencies 

published in the Federal Register a 

notice of proposed rulemaking that 

would amend regulations applicable to 

OCC-supervised institutions and FDICsupervised institutions (together, 

‘‘banks’’) by aligning those regulations 

with T+2.2 In the notice of proposed 

rulemaking, the Agencies proposed to 

amend their respective regulations by 

directly changing the settlement period 

applicable to banks from three business 

days to two. The Agencies also 

proposed an alternative approach, 

which would achieve the same 

immediate result but operate by tying 

the settlement period applicable to 

banks to the ‘‘standard settlement cycle 

followed by registered broker dealers in 

the United States.’’ 

The Agencies received three 

responses to their request for comment. 

The Investment Company Institute 

(‘‘ICI’’) and the Securities Industry and 

Financial Markets Association 

(‘‘SIFMA’’) both ‘‘strongly’’ supported 

the proposal as a path to aligning the 

Agencies’ regulations with those 

applicable to other market participants 

in the United States. A third 

commenter, an individual, also 

expressed support for the final rule. 

Both ICI and SIFMA expressed a 

preference for the alternative approach. 

After considering these comments, the 

Agencies decided to adopt the 

alternative approach in order to 

maintain alignment more readily 

between the settlement period 

applicable to banks and the standard 

settlement cycle followed by registered 

broker dealers in the United States. 

III. Description of the Final Rule 

The final rule will require banks to 

settle most securities transactions 

within the number of business days in 

the ‘‘standard settlement cycle followed 

by registered broker dealers in the 

United States’’ unless otherwise agreed 

to by the parties at the time of the 

transaction. Banks will be able to 

determine the number of business days 

in the standard settlement cycle 


sradovich on DSK3GMQ082PROD with RULES
26348 Federal Register / Vol. 83, No. 110 / Thursday, June 7, 2018 / Rules and Regulations 

3The OCC calculated the number of small entities 

using the SBA’s size thresholds for commercial 

banks and savings institutions, and trust 

companies, which are $550 million and $38.5 

million, respectively. Consistent with the General 

Principles of Affiliation, 13 CFR 121.103(a), the 

OCC counted the assets of affiliated financial 

institutions when determining whether to classify 

a national bank or federal savings association as a 

small entity. The OCC used December 31, 2017, to 

determine size because a ‘‘financial institution’s 

assets are determined by averaging the assets 

reported on its four quarterly financial statements 

for the preceding year.’’ See footnote 8 of the SBA’s 

Table of Size Standards. 

followed by registered broker dealers in 

the United States by referencing SEC 

Rule 15c6–1, 17 CFR 240.15c6–1(a). 

Effective September 5, 2017, and as of 

the date of publication of this final rule, 

the standard settlement cycle followed 

by registered broker dealers in the 

United States is two business days after 

the date of the contract. 

The final rule amends the OCC and 

FDIC regulations at parts 12, 151, and 

344, which govern the recordkeeping 

and confirmation requirements for bank 

securities transactions. In order to 

accommodate the change described 

above, the Agencies made certain 

additional, purely editorial changes to 

the language of these parts. The 

additional changes were intended to 

make the regulations easier to follow 

and understand in light of the revisions 

necessary to implement the alternative 

approach. 

The effective date for this final rule is 

October 1, 2018. The Agencies 

understand that, consistent with the 

industry’s transition to T+2, banks are 

already in compliance with a two-day 

settlement standard as a practical 

matter. 

IV. Regulatory Analysis 

Paperwork Reduction Act 

Under the Paperwork Reduction Act 

(‘‘PRA’’), 44 U.S.C. 3501–3520, the 

Agencies may not conduct or sponsor, 

and a person is not required to respond 

to, an information collection unless the 

information collection displays a valid 

Office of Management and Budget 

(‘‘OMB’’) control number. This final rule 

does not introduce or change any 

collections of information; therefore, it 

does not require a submission to OMB. 

The Agencies invited comment on their 

PRA determination when issuing the 

proposed rule, and no responsive 

comments were received. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. 601 et seq. (‘‘RFA’’), requires an 

agency, in connection with a final rule, 

to prepare a Final Regulatory Flexibility 

Analysis describing the impact of the 

rule on small entities (defined by the 

Small Business Administration (‘‘SBA’’) 

for purposes of the RFA to include 

banking entities with total assets of $550 

million or less) or to certify that the rule 

would not have a significant economic 

impact on a substantial number of small 

entities. 

FDIC: For the reasons described below 

and pursuant to section 605(b) of the 

RFA, the FDIC certifies that the final 

rule will not have a significant 

economic impact on a substantial 

number of small entities. 

As of December 31, 2017, the FDIC 

supervises 3,643 depository institutions, 

of which 2,924 are defined as small 

banking entities by the terms of the 

RFA. The transition of the standard 

settlement cycle to two days will reduce 

by one day the settlement time of 

transactions for equities, corporate 

bonds, municipal bonds, unit 

investment trusts, mutual funds, 

exchange-traded funds, exchange-traded 

products, American depository receipts, 

options, rights, and warrants. According 

to recent Call Report data, 2,565 FDICsupervised small entities reported 

holding some volume of equities that 

are likely to be affected by the new 

securities settlement cycle, provide 

custodial banking services, or possess a 

subsidiary classified as a securities 

dealer. 

The effects on small entities will vary 

according to the degree of participation 

in securities transactions. According to 

recent Call Report data one small entity 

identified itself as providing custodial 

banking services, while seven small 

entities have a subsidiary classified as a 

securities dealer according to data from 

the Federal Reserve’s National 

Information Center. 

As discussed above, because the 

industry has already implemented the 

practice of a standard settlement cycle, 

currently consisting of two days, and 

because the final rule does not contain 

any new recordkeeping, reporting, or 

compliance requirements, the FDIC 

anticipates that it will not impose any 

significant additional costs on FDICsupervised institutions. Thus, the final 

rule will not have a substantial impact 

on any FDIC-supervised small entities. 

Therefore, the FDIC certifies that the 

final rule would not have a significant 

economic impact on a substantial 

number of FDIC-supervised small 

entities. 

OCC: As of December 31, 2017, the 

OCC supervised approximately 886 

small entities.3 Because the final rule 

does not contain any new 

recordkeeping, reporting, or compliance 

requirements, the OCC anticipates that 

it will not impose costs on any OCCsupervised institutions. Further, OCCsupervised institutions were required to 

comply with the substance of the rule 

before the proposed rule was published 

in the Federal Register. Thus, the final 

rule will not have a substantial impact 

on any OCC-supervised small entities. 

Therefore, the OCC certifies that the 

final rule would not have a significant 

economic impact on a substantial 

number of OCC-supervised small 

entities. 

Unfunded Mandates Reform Act of 1995 

Determination 

The OCC analyzed the final rule 

under the factors set forth in the 

Unfunded Mandates Reform Act of 1995 

(2 U.S.C. 1532). Under this analysis, the 

OCC considered whether the final rule 

includes a federal mandate that may 

result in the expenditure by state, local, 

and Tribal governments, in the 

aggregate, or by the private sector, of 

$100 million or more in any one year 

(adjusted annually for inflation). 

The rule does not impose new 

mandates. Therefore, the OCC 

concludes that implementation of the 

rule will not result in an expenditure of 

$100 million or more annually by state, 

local, and tribal governments, or by the 

private sector. 

Riegle Community Development and 

Regulatory Improvement Act 

The Riegle Community Development 

and Regulatory Improvement Act 

(‘‘RCDRIA’’) requires that the Agencies, 

in determining the effective date and 

administrative compliance requirements 

of new regulations that impose 

additional reporting, disclosure, or other 

requirements on insured depository 

institutions (‘‘IDIs’’), consider, 

consistent with principles of safety and 

soundness and the public interest, any 

administrative burdens that such 

regulations would place on depository 

institutions, including small depository 

institutions, and customers of 

depository institutions, as well as the 

benefits of such regulations. 12 U.S.C. 

4802. In addition, in order to provide an 

adequate transition period, new 

regulations that impose additional 

reporting, disclosures, or other new 

requirements on IDIs generally must 

take effect on the first day of a calendar 

quarter that begins on or after the date 

on which the regulations are published 

in final form. 

The final rule includes no additional 

reporting, disclosure, or other 

requirements on IDIs, including small 

depository institutions, nor on the 

customers of depository institutions. 

Therefore, the requirements of RCDRIA 


sradovich on DSK3GMQ082PROD with RULES
Federal Register / Vol. 83, No. 110 / Thursday, June 7, 2018 / Rules and Regulations 26349 

do not apply. Nonetheless, the Agencies 

invited comment on any administrative 

burdens that the final rule would place 

on depository institutions, including 

small depository institutions, and 

customers of depository institutions. 

The Agencies did not receive any 

comments responsive to this issue. 

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. 

When issuing a proposed rule, the 

Agencies invited comment on how to 

make this rule easier to understand. No 

comments responsive to this issue were 

received. 

List of Subjects 

12 CFR Parts 12 and 151 

Banks, Banking, Federal savings 

associations, National banks, Reporting 

and recordkeeping requirements, 

Securities. 

12 CFR Part 344 

Banks, Banking, Reporting and 

recordkeeping requirements, Savings 

associations. 

OCC amends 12 CFR parts 12 and 151 

and FDIC amends 12 CFR part 344 as 

follows: 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

PART 12—RECORDKEEPING AND 

CONFIRMATION REQUIREMENTS FOR 

SECURITIES TRANSACTIONS 

■ 1. The authority citation for part 12 

continues to read as follows: 

Authority: 12 U.S.C. 24, 92a, and 93a. 

■ 2. Section 12.9 is amended by revising 

paragraph (a) to read as follows: 

§ 12.9 Settlement of securities 

transactions. 

(a) All contracts effected or entered 

into by a national bank for the purchase 

or sale of a security (other than an 

exempted security as defined in 15 

U.S.C. 78c(a)(12), government security, 

municipal security, commercial paper, 

bankers’ acceptances, or commercial 

bills) shall provide for completion of the 

transaction within the number of 

business days in the standard settlement 

cycle followed by registered broker 

dealers in the United States, unless 

otherwise agreed to by the parties at the 

time of the transaction. The number of 

business days in the standard settlement 

cycle shall be determined by reference 

to paragraph (a) of SEC Rule 15c6–1, 17 

CFR 240.15c6–1(a). 

* * * * * 

PART 151—RECORDKEEPING AND 

CONFIRMATION REQUIREMENTS FOR 

SECURITIES TRANSACTIONS 

■ 3. The authority citation for part 151 

continues to read as follows: 

Authority: 12 U.S.C. 1462a, 1463, 1464, 

5412(b)(2)(B). 

■ 4. Section 151.130 is amended by: 

■ a. Republishing paragraph (a) 

introductory text. 

■ b. Revising paragraphs (a)(1) and 

(a)(2); 

■ c. Redesignating paragraph (a)(3) as 

(a)(4); and 

■ d. Adding a new paragraph (a)(3). 

The revisions and addition are set 

forth below. 

§ 151.130 When must I settle a securities 

transaction? 

(a) You may not effect or enter into a 

contract for the purchase or sale of a 

security that provides for payment of 

funds and delivery of securities later 

than the latest of: 

(1) The number of business days in 

the standard settlement cycle followed 

by registered broker dealers in the 

United States after the date of the 

contract. The number of business days 

in the standard settlement cycle shall be 

determined by reference to paragraph (a) 

of SEC Rule 15c6–1, 17 CFR 240.15c6– 

1(a); 

(2) The fourth business day after the 

contract, if the contract involves the sale 

for cash of securities that are priced 

after 4:30 p.m. Eastern Standard Time 

on the date the securities are priced and 

are sold by an issuer to an underwriter 

under a firm commitment underwritten 

offering registered under the Securities 

Act of 1933, 15 U.S.C. 77a, et seq., or are 

sold by you to an initial purchaser 

participating in the offering; 

(3) Such time as the SEC may specify 

pursuant to an order of exemption in 

accordance with paragraph (b)(2) of SEC 

Rule 15c6–1; or 

* * * * * 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

PART 344—RECORDKEEPING AND 

CONFIRMATION REQUIREMENTS FOR 

SECURITIES TRANSACTIONS 

■ 5. The authority citation for part 344 

continues to read as follows: 

Authority: 12 U.S.C. 1817, 1818, 1819, and 

5412. 

■ 6. Section 344.7 is amended by 

revising paragraph (a) to read as follows: 

§ 344.7 Settlement of securities 

transactions. 

(a) All contracts effected or entered 

into by an FDIC-supervised institution 

that provide for the purchase or sale of 

a security (other than an exempted 

security as defined in 15 U.S.C. 

78c(a)(12), government security, 

municipal security, commercial paper, 

bankers’ acceptances, or commercial 

bills) shall provide for completion of the 

transaction within the number of 

business days in the standard settlement 

cycle followed by registered broker 

dealers in the United States, unless 

otherwise agreed to by the parties at the 

time of the transaction. The number of 

business days in the standard settlement 

cycle shall be determined by reference 

to paragraph (a) of SEC Rule 15c6–1, 17 

CFR 240.15c6–1(a). 

* * * * * 

Dated: May 29, 2018. 

Joseph M. Otting, 

Comptroller of the Currency. 

Dated at Washington, DC, this 31st of May 

2018. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2018–12267 Filed 6–6–18; 8:45 am] 

BILLING CODE 4810–33–P; 6714–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2018–0462; Product 

Identifier 2018–CE–017–AD; Amendment 

39–19292; AD 2018–11–04] 

RIN 2120–AA64 

Airworthiness Directives; Aircraft 

Industries a.s. Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule; request for 

comments. 

SUMMARY: We are adopting a new 

airworthiness directive (AD) for Aircraft 

Industries a.s. Models L 410 UVP–E20 

and L 410 UVP–E20 CARGO airplanes. 

This AD results from mandatory 

continuing airworthiness information 

(MCAI) issued by the aviation authority 

of another country to identify and 

correct an unsafe condition on an 

aviation product. The MCAI describes 

the unsafe condition as un-commanded 

negative thrust mode activated on an 

engine. We are issuing this AD to 

require actions to address the unsafe 

condition on these products. 


sradovich on DSK3GMQ082PROD with RULES