Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 18127 

By order of the Board of Directors. 

Dated at Washington, DC, this 20th day of 

March 2012. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2012–7268 Filed 3–26–12; 8:45 am] 

BILLING CODE 6714–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 380 

RIN 3064–AD94 

Enforcement of Subsidiary and 

Affiliate Contracts by the FDIC as 

Receiver of a Covered Financial 

Company 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The FDIC is proposing a rule 

(‘‘Proposed Rule’’), with request for 

comments, that implements section 

210(c)(16) of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(the ‘‘Dodd-Frank Act’’ or the ‘‘Act’’), 

codified at 12 U.S.C. section 

5390(c)(16), which permits the 

Corporation, as receiver for a financial 

company whose failure would pose a 

significant risk to the financial stability 

of the United States (a ‘‘covered 

financial company’’), to enforce 

contracts of subsidiaries or affiliates of 

the covered financial company despite 

contract clauses that purport to 

terminate, accelerate, or provide for 

other remedies based on the insolvency, 

financial condition or receivership of 

the covered financial company. As a 

condition to maintaining these 

subsidiary contracts in full force and 

effect, the Corporation as receiver must 

either: transfer any supporting 

obligations of the covered financial 

company that back the obligations of the 

subsidiary or affiliate under the contract 

(along with all assets and liabilities that 


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18128 Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 

relate to those supporting obligations) to 

a bridge financial company or qualified 

third-party transferee by the statutory 

one-business-day deadline; or provide 

adequate protection to such contract 

counterparties. The Proposed Rule sets 

forth the scope and effect of the 

authority granted under section 

210(c)(16), clarifies the conditions and 

requirements applicable to the receiver, 

addresses requirements for notice to 

certain affected counterparties, and 

defines key terms. 

DATES: Written comments on the Rule 

must be received by the FDIC no later 

than May 29, 2012. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Agency Web Site: http:// 

www.fdic.gov/regulations/laws/federal. 

Follow instructions for Submitting 

comments on the Agency Web Site. 

• Email: Comments@FDIC.gov. 

Include ‘‘RIN 3064–AD94’’ in the 

subject line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street NW., Washington, DC 20429 

• Hand Delivery/Courier: Guard 

station at the rear of the 550 17th Street 

Building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

(EST). 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal including any personal 

information provided. Comments may 

be inspected and photocopied in the 

FDIC Public Information Center, 3501 

North Fairfax Drive, Room E–I002, 

Arlington, VA 22226, between 9 a.m. 

and 5 p.m. (EST) on business days. 

Paper copies of public comments may 

be ordered from the Public Information 

Center by telephone at (877) 275–3342 

or (703) 562–2200. 

FOR FURTHER INFORMATON CONTACT: R. 

Penfield Starke, Assistant General 

Counsel, Legal Division (703) 562–2422; 

Elizabeth Falloon, Counsel, Legal 

Division (703) 562–6148; John W. 

Popeo, Senior Attorney, Legal Division 

(972–761–8171); Charlton R. Templeton, 

Resolution Planning and 

Implementation Specialist, Office of 

Complex Financial Institutions (202– 

898–6774). 

SUPPLEMENTARY INFORMATION: Title II of 

the Dodd-Frank Act provides for the 

appointment of the FDIC as receiver of 

a covered financial company that poses 

a systemic risk to the nation’s economic 

stability and outlines the process for the 

orderly resolution of a covered financial 

company following the FDIC’s 

appointment as receiver. Section 209, 

codified at 12 U.S.C. section 5389, 

authorizes the FDIC, in consultation 

with the Financial Stability Oversight 

Council, to prescribe rules and 

regulations as the FDIC considers 

necessary or appropriate with respect to 

the rights, interests, and priorities of 

creditors, counterparties, security 

entitlement holders, or other persons 

with respect to any covered financial 

company and other matters necessary or 

appropriate to the implementation of 

the orderly liquidation authority 

established under Title II of the Act. 

Pursuant to the authority granted by 

section 209, the FDIC is issuing the 

Proposed Rule, with request for 

comments. 

I. Background 

Fundamental to the orderly 

liquidation of a covered financial 

company is the ability to continue key 

operations, transactions and services 

that will maximize the value of the 

firm’s assets and operations and avoid a 

disorderly collapse in the marketplace. 

To facilitate this continuity of 

operations, the Dodd-Frank Act 

provides several tools to preserve the 

value of the covered financial 

company’s assets and business lines, 

including the powers granted in section 

210(c)(16), codified at 12 U.S.C. 

5390(c)(16). Specifically, section 

210(c)(16) provides that: 

The Corporation, as receiver for a covered 

financial company or as receiver for a 

subsidiary of a covered financial company 

(including an insured depository institution) 

shall have the power to enforce contracts of 

subsidiaries or affiliates of a covered 

financial company, the obligations under 

which are guaranteed or otherwise supported 

by or linked to the covered financial 

company, notwithstanding any contractual 

right to cause the termination, liquidation, or 

acceleration of such contracts based solely on 

the insolvency, financial condition or 

receivership of the covered financial 

company if— 

(i) such guaranty or other support and all 

related assets and liabilities are transferred to 

and assumed by a bridge financial company 

or a third party (other than a third party for 

which a conservator, receiver, trustee in 

bankruptcy or other legal custodian has been 

appointed, or which is otherwise the subject 

of a bankruptcy or insolvency proceeding) 

* * * [by 5 p.m. (eastern time) on the 

business day following the date of 

appointment]; or 

(ii) the Corporation, as receiver, otherwise 

provides adequate protection with respect to 

those obligations. 

The conditions contained in (i) and (ii) 

of the quoted statute were included to 

assure counterparties that any 

contractual right to guarantees or other 

support, including claims on collateral 

or other related assets, would be 

protected. Thus, section 210(c)(16) 

requires, as a condition to the authority 

to enforce subsidiary or affiliate 

contracts that are ‘‘linked to’’ the 

financial condition of the covered 

financial corporation through a default 

provision, that the Corporation as 

receiver transfer any guaranty or other 

support provided by the specified 

covered financial company for the 

contractual obligations together with all 

related collateral to a bridge financial 

company or other qualified transferee 

within one business day after its 

appointment as receiver. In the 

alternative, if the receiver does not 

transfer the support and the related 

assets and liabilities, the receiver must 

provide ‘‘adequate protection’’ with 

respect to any support or collateral not 

transferred in order to preserve its right 

to enforce the contract of the subsidiary 

or affiliate. 

In providing for the orderly 

liquidation authority of Title II, 

Congress recognized the structural 

complexity of large financial companies 

that might pose a threat to the financial 

stability of the nation. Accordingly, the 

Dodd-Frank Act provides certain 

particular authorities with respect to 

subsidiaries and affiliates of the covered 

financial company. For instance, section 

210(a)(1)(E) of the Dodd-Frank Act 

provides an expedited procedure to 

allow the Corporation to appoint itself 

as the receiver of certain subsidiaries of 

a covered financial company if the 

Corporation and the Secretary of the 

Treasury jointly determine that such 

subsidiary is in default or in danger of 

default and that such action would 

mitigate serious adverse effects on the 

financial stability of the United States 

and would facilitate the orderly 

liquidation of the covered financial 

company. That section further provides 

that upon such an appointment, the 

subsidiary would be treated as a covered 

financial company, and the Corporation 

would be able to exercise the full range 

of special powers available to the 

receiver. 

In certain cases, however, the receiver 

for the covered financial company may 

find that the best course of action to 

maximize the value of the covered 

financial company and to mitigate 

systemic risk would be to avoid actions 

that place subsidiaries in danger of 

default or that necessitate complex 

interlocking receiverships. The affiliated 

legal entities that collectively comprise 

a complex financial institution typically 

share and provide intra-group funding, 

guarantees, administrative support, 

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Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 18129 

human resources and other operational 

and business functions. Some of these 

operations and activities may be critical 

to the day-to-day functions and overall 

operations of the group. In addition, 

certain significant subsidiaries of a 

covered financial company may be 

essential to core business lines or 

conduct critical operations that, if 

discontinued, may threaten the stability 

of the financial markets. In these 

circumstances, orderly liquidation of a 

covered financial company may best be 

accomplished by establishing a single 

receivership of the parent holding 

company and transferring valuable 

operations and assets to a solvent bridge 

financial company, including the stock 

or other equity interests of the 

company’s various subsidiaries. 

Accordingly, the Dodd-Frank Act 

provides the FDIC with the tools and 

flexibility to act effectively as receiver 

for the covered financial company at the 

holding company or parent level 

without placing solvent subsidiaries 

into receivership. This approach may be 

the best means of preserving value, 

minimizing the shock to the financial 

system, providing additional flexibility 

to mitigate cross-border resolution 

issues for global systemically-important 

financial companies, and allowing for a 

more expeditious resolution of a 

covered financial company. 

Where such an approach is adopted, 

the powers granted to the receiver under 

section 210(c)(16) are essential to 

preservation of going-concern value of 

the subsidiaries for the benefit of the 

parent in receivership. Absent this 

statutory provision, counterparties to 

contracts of subsidiaries and affiliates 

could exercise contractual rights to 

terminate their agreements based upon 

the insolvency of the specified covered 

financial company. As a result, 

otherwise viable affiliates of the covered 

financial company could become 

insolvent, thereby inciting the collapse 

of interrelated companies and 

potentially amplifying ripple effects 

throughout the economy. 

As described in more detail below, 

this Proposed Rule would clarify the 

scope of the authority granted in section 

210(c)(16) as well as conditions and 

requirements applicable to the receiver. 

The Proposed Rule makes clear that the 

effect of this enforcement authority is 

that no party may exercise any remedy 

under a contract simply as a result of 

the appointment of the receiver and the 

exercise of its orderly liquidation 

authorities as long as the receiver 

complies with the statutory 

requirements. The Proposed Rule would 

address requirements for notice to 

affected counterparties and defines key 

terms. It also would clarify the term 

‘‘adequate protection’’ in a manner 

consistent with its interpretation under 

the Bankruptcy Code. 

II. Proposed Rule 

Overview 

The Proposed Rule would clarify that 

the power of the Corporation as receiver 

to enforce contracts of subsidiaries and 

affiliates under Dodd-Frank Act section 

210(c)(16) effectively preserves 

contractual relationships of subsidiaries 

and affiliates of the covered financial 

company during the orderly liquidation 

process. The Proposed Rule would 

identify certain contracts that are 

‘‘linked to’’ the covered financial 

company within the meaning of the 

statute, as well as contracts that also are 

‘‘supported by’’ the covered financial 

company. Under the statute, a contract 

is ‘‘linked to’’ a covered financial 

company if it contains a provision that 

provides a contractual right to ‘‘cause 

the termination, liquidation or 

acceleration of such contract based 

solely on the insolvency, financial 

condition, or receivership of the covered 

financial company.’’ That type of 

provision, called a ‘‘specified financial 

condition clause’’ in the Proposed Rule, 

is more fully defined in the Proposed 

Rule. Although the statute speaks in 

terms of the power to enforce a contract 

to which the receiver is not a party, the 

Proposed Rule would recognize the 

practical effect of the intent of this 

authority, which is that the counterparty 

to such a contract may not exercise 

remedies in connection with a specified 

financial condition clause if the 

statutory conditions are met. No action 

is required of the receiver to enforce a 

linked contract; the Proposed Rule 

would make clear that the contract 

would remain in full force and effect 

unless the receiver failed to meet the 

requirements with respect to any 

supporting obligations of the covered 

financial company. 

The Proposed Rule would establish 

that if the subsidiaries’ obligations 

under the linked contract are supported 

by the covered financial company 

through, for example, guarantees or the 

granting of collateral that supports the 

obligations, the Corporation as receiver 

must either (a) transfer such support 

(along with all related assets and 

liabilities) to a qualified transferee not 

later than 5 p.m. (eastern time) on the 

business day following the appointment 

of the receiver, or (b) provide ‘‘adequate 

protection’’ to contract counterparties 

following notice given to the 

counterparties in accordance with the 

guidelines set forth in the Proposed 

Rule by the one-business-day deadline. 

The Proposed Rule also would clarify 

the meaning of the statutory provision 

regarding a contractual obligation that is 

‘‘guaranteed or otherwise supported by’’ 

the covered financial company. Support 

includes guarantees that may or may not 

be collateralized, netting arrangements 

and other examples of financial support 

of the obligations of the subsidiary or 

affiliate under the contract. In 

circumstances where a contract of a 

subsidiary or affiliate is linked to the 

financial condition of the parent 

company via a ‘‘specified financial 

condition clause,’’ but where the 

obligations of the subsidiary or affiliate 

are not ‘‘supported by’’ the covered 

financial company through guarantees 

or similar supporting obligations, the 

requirement to transfer support and 

related assets or provide adequate 

protection does not apply. The mere 

existence of a ‘‘specified financial 

condition clause’’ does not constitute a 

‘‘support’’ obligation by the covered 

financial company, and the Proposed 

Rule would make it clear that the 

subsidiary contract remains enforceable 

without any requirement to effectively 

create new support where none 

originally existed. This is consistent 

with the effect of sections 210(c)(13), 

providing that ipso facto clauses in 

contracts of the covered financial 

company are unenforceable, and 

210(c)(8) of the Dodd-Frank Act, 

providing that ‘‘walkaway clauses’’ in 

qualified financial contracts of the 

covered financial company are 

unenforceable. In the case of those types 

of contractual provisions, there is no 

specified entity required to provide 

support, hence the concept of alternate 

support or adequate protection is 

inapplicable. In the same way, under 

the Proposed Rule, the concept of 

adequate protection does not arise in the 

absence of supporting obligations by the 

specified entity. 

The Proposed Rule similarly applies 

broadly to all contracts, and not solely 

to qualified financial contracts. For 

example, a real estate lease or a credit 

agreement, neither of which would 

typically be classified as a qualified 

financial contract, would be subject to 

enforcement under section 210(c)(16) 

and the Proposed Rule notwithstanding 

a specified financial condition clause 

that might, for instance, give a lessor the 

right to terminate a lease based upon a 

change in financial condition of the 

parent of the lessee. A swap agreement 

of a subsidiary or affiliate would be 

subject to section 210(c)(16) and the 

Proposed Rule in the same manner if the 

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18130 Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 

agreement contains specified financial 

condition clause. 

The Proposed Rule would not affect 

other provisions of the Dodd-Frank Act 

governing qualified financial contracts, 

such as sections 210(c)(8) (‘‘Certain 

Qualified Financial Contracts’’) and 

210(c)(9) (‘‘Transfer of Qualified 

Financial Contracts’’). For example, 

where a covered financial company’s 

support of a subsidiary or affiliate 

obligation would itself be considered a 

qualified financial contract, such as a 

securities contract, the provisions of 

section 210(c)(9) that prohibit the 

selective transfer of qualified financial 

contracts with a common counterparty 

(or a group of affiliated counterparties) 

would continue to apply. Likewise, the 

provisions in section 210(c)(10) of the 

Dodd-Frank Act applicable to 

counterparties of qualified financial 

contracts also would continue to apply. 

On the other hand, if the covered 

financial company’s support of a 

subsidiary or affiliate consists of 

multiple contracts that are not qualified 

financial contracts, the Corporation as 

receiver may transfer all or a portion of 

such group of contracts as long as it 

provides adequate protection for the 

supporting obligations that were not 

transferred. Similarly, the Corporation 

may transfer all or a portion of ‘‘related 

assets and liabilities’’ that are not 

qualified financial contracts if it 

provides adequate protection for the 

portion of the assets and liabilities that 

was retained by the Corporation as 

receiver. 

Section-by-Section Analysis 

Paragraph (a) of the Proposed Rule 

would state the general rule with 

respect to the authority granted under 

section 210(c)(16) of the Dodd-Frank 

Act, i.e., that the contracts of a 

subsidiary or affiliate of a covered 

financial company are enforceable 

notwithstanding the existence of a 

‘‘specified financial condition clause’’ 

that provides a counterparty with the 

right to terminate or exercise remedies 

based upon the financial condition of 

the parent or affiliate covered financial 

company, provided that the FDIC as 

receiver for the covered financial 

company transfers all support and 

related assets and liabilities that back 

the obligations of such subsidiary or 

affiliate. To the extent that the receiver 

fails to transfer all support and related 

assets and liabilities, it must provide 

adequate protection to such 

counterparty to preserve its right to 

enforce the contracts of the subsidiary. 

The effect of this ability to enforce the 

contract is intended to be broad enough 

to preclude the counterparties from 

terminating or exercising other remedies 

such as requiring additional collateral 

but is intended to be limited in scope 

solely to remedies arising out of a 

specified financial condition clause not 

other contractual defaults by the 

subsidiary or affiliate. The ability either 

to transfer support or to provide 

adequate protection can be exercised in 

the alternative, or in combination. For 

example, if some, but not all collateral 

is transferred, appropriate adequate 

protection may be provided in lieu of 

the collateral not transferred. 

The deadline for the transfer of 

support is the same as the time limit 

applicable to the transfer of qualified 

financial contracts under section 

210(c)(10) of the Dodd-Frank Act, i.e., 

by 5 p.m. (eastern time) on the next 

business day. Although the decision to 

provide adequate protection in lieu of 

transferring support must also be made 

and steps must be taken that are 

reasonably calculated to provide notice 

within a business day, the language of 

the Proposed Rule does not require that 

the adequate protection be fully in place 

by that next-day deadline. Although the 

failure to complete within a business 

day the documentation or transactions 

necessary should not be deemed to be 

a waiver of the right to enforce the 

contract, once the receiver has provided 

notice of its intent to transfer support or 

provide adequate protection, the 

counterparty would be entitled to the 

benefit of the adequate protection even 

before the documentation or transfer of 

collateral were fully completed, if 

necessary. 

The Proposed Rule would provide 

that a qualified transferee such as a 

bridge financial company or solvent 

third-party acquirer, as well as the 

Corporation as receiver, would have the 

authority to enforce linked contracts 

under the section 210(c)(16) of the 

Dodd-Frank Act. This is consistent with 

the intent of the statute that subsidiary 

and affiliate contracts should remain in 

effect and enforceable through the entire 

orderly resolution process. Also, the 

subsidiary or affiliate continues to have 

the ability to enforce the terms of such 

contract as well. In essence, the effect of 

such authority to enforce is 

substantively the same as a prohibition 

of the counterparty to assert a specified 

financial condition clause against the 

subsidiary or affiliate. Effectively, the 

Proposed Rule would make clear that 

the practical effect of the operation of 

section 210(c)(16) is similar to that of 

section 210(c)(13) (prohibiting 

counterparties from the exercise of 

certain rights arising out of ipso facto 

clauses) and section 210(c)(8) 

(prohibiting counterparties to qualified 

financial contracts from the exercise of 

certain rights arising out of walkaway 

clauses); i.e., that the counterparties are 

prohibited from exercising remedies 

under a specified financial condition 

clause if the statutory conditions are 

met. 

The statute expressly states that the 

power to enforce contracts of a 

subsidiary in the circumstances 

described in section 210(c)(16) is vested 

in ‘‘[t]he Corporation, as receiver for a 

covered financial company or as 

receiver for a subsidiary of a covered 

financial company (including an 

insured depository institution).’’ This is 

captured in subparagraph (a)(3) of the 

Proposed Rule. This recognizes that the 

preservation of value through the 

enforcement of subsidiary and affiliate 

contracts is important to all of the 

interconnected entities that are related 

to the entity in receivership. The effect 

of the statute is to prohibit the 

counterparty from terminating or 

exercising remedies based solely on the 

condition of the covered financial 

company. Once the essential link to the 

covered financial company is 

established via the specified financial 

condition clause, all of the subsidiaries 

of the covered financial company as 

well as the bridge financial company or 

qualified transferee share the benefit of 

the authority to enforce. 

Definitions 

The Proposed Rule would include 

eight definitions: ‘‘linked,’’ ‘‘specified 

financial condition clause,’’ ‘‘support,’’ 

‘‘related assets and liabilities,’’ 

‘‘qualified transferee,’’ ‘‘subsidiary,’’ 

‘‘affiliate,’’ and ‘‘control.’’ 

A contract is ‘‘linked’’ to a covered 

financial company if it contains a 

specified financial condition clause 

naming the covered financial company 

as the specified company. 

The term ‘‘specified financial 

condition clause’’ is intended to broadly 

capture any provision that gives any 

counterparty a right to terminate, 

accelerate or exercise default rights or 

remedies as a result of any action or 

circumstance that results in or arises out 

of the exercise of the orderly liquidation 

authority. Each aspect of the definition 

of the term ‘‘specified financial 

condition clause’’ should be read 

expansively to effectuate the statutory 

intent that counterparties are effectively 

stayed from exercising rights under such 

a clause to terminate contracts or 

exercise other remedies during a Title II 

resolution process if the requirements of 

the statute are met. Thus, a specified 

financial condition clause includes any 

clause that might be interpreted as 

giving rise to a termination right or 

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Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 18131 

other remedy due to the insolvency of 

the specified covered financial company 

that might have precipitated the 

appointment of the receiver, such as an 

act of insolvency or a downgrade in a 

rating from a rating agency. Likewise, 

the definition is broad enough to 

include a change in control provision 

that creates termination rights or other 

remedies upon the appointment of the 

FDIC as receiver or other change in 

control, such as the transfer of stock in 

the subsidiary to the bridge financial 

company or the sale, conversion or 

merger of the bridge financial company 

or its assets. The intent is to allow the 

subsidiary or affiliate contract to remain 

in effect despite the exercise of any or 

all of the authorities granted to the FDIC 

as receiver for a covered financial 

company throughout the orderly 

liquidation process. 

Although the language of the statute 

refers to the counterparty’s rights as 

‘‘termination, liquidation or 

acceleration,’’ that list of remedies is not 

intended to be exclusive as the overall 

intent of the statute is to provide the 

FDIC with the power it needs to 

preserve going-concern value of the 

covered financial company as long as 

the rights of counterparties to receive 

bargained-for support is respected. 

Accordingly, the Proposed Rule uses the 

broader phrase ‘‘terminate, liquidate, 

accelerate or declare a default under’’ 

the contract. In effect, the specified 

financial condition clause is 

unenforceable if the statutory 

requirements are met. In addition, by 

clarifying that the link created by the 

specified financial condition clause may 

operate ‘‘directly or indirectly,’’ the 

Proposed Rule clarifies that the scope of 

the defined term includes contracts 

where the specified company under the 

clause may be another company or an 

affiliate in the corporate structure so 

long as the ultimate triggering event 

relates to the financial condition of the 

covered financial company or the Title 

II actions take with respect to that 

covered financial company. The term 

‘‘specified company’’ used in the 

definition is consistent with 

terminology commonly used in such 

provisions in derivatives contracts to 

refer to the company whose financial 

condition is the basis for the 

termination right or other remedy. 

Language in this definition is 

borrowed from sections of the DoddFrank Act addressing related matters, 

such as the enforceability of contracts of 

the covered financial company 

notwithstanding ipso facto clauses 

(section 210(c)(13)) and walkaway 

clauses with respect to qualified 

financial contracts (section 210(c)(8)(F)). 

The fact that this language is adapted 

and expanded upon should not be 

deemed to reflect any interpretation of 

the meaning or possible limitations of 

those sections. The broad language of 

this definition reflects the intent that it 

be read to accomplish the purpose of 

section 210(c)(16) to ensure that the 

receiver has the power to avoid 

precipitous terminations by 

counterparties of the subsidiary 

resulting in disorderly collapse and a 

loss of value to the covered financial 

company. 

In the event a counterparty (including 

its affiliates) has more than one contract 

with the subsidiary or affiliate of the 

covered financial company, any contract 

with a cross-default provision with 

respect to another contract containing a 

specified financial condition clause also 

would be ‘‘linked.’’ 

The term ‘‘support’’ means to 

guarantee, indemnify, undertake to 

make any loan, advance or capital 

contribution, maintain the net worth of 

the subsidiary or affiliate, or provide 

other financial assistance. The proposed 

definition does not include other 

assistance that is not financial in nature, 

such as an undertaking to conduct 

specific performance. Generally, if the 

obligation of the counterparty to 

perform is linked to the financial 

condition of the parent, the support also 

would likely be financial, and other 

types of arrangements are beyond the 

scope of what was intended by the 

statute. We are requesting comments 

with respect to whether this definition 

is sufficiently comprehensive in the 

Notice of Proposed Rulemaking. 

The term ‘‘related assets and 

liabilities’’ includes assets of the 

covered financial company serving as 

collateral securing the covered financial 

company’s support obligation, and 

setoff rights or netting arrangements to 

which the covered financial company is 

subject if they are related to the covered 

financial company’s support. It should 

be noted, however, that if the ‘‘support’’ 

were in the nature of a non-recourse 

guarantee, or an unsecured limited 

recourse guarantee, the related assets 

and liabilities would not consist of all 

of the assets of the covered financial 

company. The transfer of an unsecured 

guarantee or obligation to a qualified 

transferee would meet the requirements 

of the Proposed Rule in this regard, 

without the transfer of any particular 

assets. The definition also broadly 

includes any liabilities of the covered 

financial company that directly arise out 

of or relate to its support of the 

obligations or liabilities of the 

subsidiary or affiliate. In some 

instances, this definition may be 

redundant with the definition of 

support, as a guaranty could be both a 

related liability or a supporting 

obligation. The broader definition is 

intended to make clear that the full 

range of supporting obligations and 

related assets and liabilities must be 

transferred to ensure that the 

counterparties are in substantially the 

same position as they were prior to the 

transfer to the qualified transferee. 

It is important to note that in some 

situations ‘‘support’’ and ‘‘related assets 

and liabilities’’ are themselves qualified 

financial contracts. Section 

210(c)(8)(D)(ii)(XII) of the Act includes 

‘‘securities contracts’’ as qualified 

financial contracts, and defines 

securities contracts to include ‘‘any 

security agreement or arrangement or 

other credit enhancement related to any 

agreement or transaction referred to in 

this clause, including any guarantee or 

reimbursement obligation in connection 

with any agreement or transaction 

referred to in this clause.’’ To the extent 

such support and related assets and 

liabilities are securities contracts or 

other forms of qualified financial 

contracts, they are subject to the rules 

applicable to the treatment of qualified 

financial contracts, including the socalled all-or-none rule under section 

210(c)(9). 

The term ‘‘qualified transferee’’ 

specifically includes a bridge financial 

company as well as any other unrelated 

third parties that assume the support of 

the covered financial company (and all 

related assets and liabilities). A 

qualified transferee can include both the 

bridge financial company and a 

subsequent transferee; for instance, if 

assets and liabilities, including the 

support and related assets and liabilities 

are transferred first to a bridge financial 

company and then to another acquirer 

either prior to or upon the termination 

of the bridge financial company 

pursuant to the orderly liquidation 

authorities granted under Title II of the 

Dodd-Frank Act. 

The definition of the terms 

‘‘subsidiary’’ and ‘‘affiliate’’ are 

consistent with the definitions given to 

such terms in the Dodd-Frank Act. 

Section 2(18) of the Act, codified at 12 

U.S.C. 5301(18), provides that these 

terms will have the same meanings as in 

section 3 of the FDI Act (12 U.S.C. 

1813). Under the FDI Act, the term 

‘‘subsidiary’’ is broadly defined as ‘‘any 

company which is owned or controlled 

directly or indirectly by another 

company * * *.’’ ‘‘Affiliate is defined 

by reference to the Bank Holding 

Company Act, 12 U.S.C. 1841(k) as ‘‘any 

company that controls, is controlled by, 

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18132 Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 

or is under common control with 

another company.’’ 

The statute refers to the definition of 

‘‘control’’ provided in the FDI Act, 

which in turn, refers to the definition 

provided in the Bank Holding Company 

Act, 12 U.S.C. 1841(a). The Proposed 

Rule streamlines these cross references, 

clarifies that certain provisions of the 

Bank Holding Company Act definition 

are inapplicable in this context, and 

adopts the flexible approach of 

conforming to the relevant provisions of 

the Bank Holding Company Act and 

regulations promulgated thereunder at 

the time of appointment of the receiver. 

In effect, the Proposed Rule would 

define ‘‘control’’ to include a company 

that directly or indirectly or acting 

through one or more persons owns, 

controls, or has the power to vote 25 

percent or more of any class of voting 

securities of the company. Under the 

Proposed Rule, a company may also 

exercise ‘‘control’’ if that company 

controls in any manner the election of 

a majority of the directors or trustees of 

the company. This definition is 

consistent with the Bank Holding 

Company Act definition as it has been 

reflected in regulations promulgated 

under that section, including Regulation 

W (12 CFR 223.3(g)) and Regulation Y 

(12 CFR 225.2(e)). 

Section 2 of the Dodd-Frank Act 

expressly adopts the FDI Act definitions 

that incorporate the Bank Holding 

Company Act definitions ‘‘except to the 

extent the context otherwise requires.’’ 

Parts of the Bank Holding Company Act 

definition of ‘‘control’’ are inapposite to 

the context of section 210(c)(16). 

Provisions that provide for a 

determination of ‘‘control’’ made by the 

Federal Reserve Board of Governors 

pursuant to a notice and hearing are 

inconsistent with the expedited 

decisionmaking expressly required by 

section 210(c)(16) and would 

undermine the statutory goal of 

providing prompt certainty to 

counterparties with respect to their 

contractual rights and remedies. 

Adequate Protection 

Paragraph (c) of the Proposed Rule 

describes the different ways that the 

Corporation may provide adequate 

protection in the event that it does not 

transfer a covered financial company’s 

support to a qualified transferee. The 

definition of adequate protection is 

consistent with the definition in section 

361 of the Bankruptcy Code, which also 

formed the basis of the definition of 

adequate protection in the context of 

treatment of certain secured creditors 

under 12 CFR 380.52. Adequate 

protection may include any of the 

following: (1) Making a cash payment or 

periodic cash payments to the 

counterparties of the contract to the 

extent that the failure to cause the 

assignment and assumption of the 

covered financial company’s support 

and related assets and liabilities causes 

a loss to the counterparties; (2) 

providing to the counterparties a 

guaranty, issued by the Corporation as 

receiver for the covered financial 

company, of the obligations of the 

subsidiary or affiliate of the covered 

financial company under the contract; 

or (3) providing relief that will result in 

the realization by the claimant of the 

indubitable equivalent of the covered 

financial company’s support. The 

phrase ‘‘indubitable equivalent,’’ which 

appears in section 361 of the 

Bankruptcy Code, is intended to have a 

meaning consistent with its meaning in 

bankruptcy, in conformance with 

section 209 of the Dodd-Frank Act that 

requires rules promulgated under Title 

II of the Act to be ‘‘harmonized’’ with 

the Bankruptcy Code where possible. 

It is important to note that although 

a guaranty of the Corporation as receiver 

is expressly included among the 

enumerated examples of ‘‘adequate 

protection’’ in paragraph (c) of the 

Proposed Rule, the omission of such 

specific reference in 12 CFR 380.52 is 

not intended to suggest that such a 

guaranty would not constitute adequate 

protection to secured creditors under to 

12 CFR 380.52. The guaranty of the 

receiver is, in any event, the indubitable 

equivalent of any guaranty or support 

that it may replace, and the express 

mention of the guaranty is added only 

for the avoidance of any doubt. Any 

such guaranty issued in accordance 

with the Act would be backed by the 

assets of the covered financial company, 

and also would be supported by the 

orderly liquidation fund and the 

authority of the Corporation as manager 

of the orderly liquidation fund to assess 

the financial industry pursuant to 

section 210(o) of the Act. Such a 

guaranty would in all events qualify as 

the indubitable equivalent of any 

guaranty or support that it may replace. 

The express mention of the guarantee is 

added merely for the avoidance of any 

doubt. The NPR will request comment 

on whether the interpretation of 

‘‘adequate protection’’ under Section 

380.52 should be consistent with the 

interpretation under the Proposed Rule, 

and whether Section 380.52 should be 

amended to include the express 

reference to the receiver’s guarantee for 

the sake of consistency and clarity. 

Notice of Transfer or Provision of 

Adequate Protection 

Paragraph (d) of the Proposed Rule 

provides that if the Corporation as 

receiver transfers any support and 

related assets and liabilities of the 

covered financial company or decides to 

provide adequate protection in 

accordance with subparagraphs (a)(1) 

and 2, it will promptly take steps to 

notify contract counterparties of such 

transfer or provision of adequate 

protection. Although the statute does 

not contain a notice requirement, the 

Proposed Rule would require that these 

reasonable steps be taken to provide 

notice in recognition of the practical 

reality that contract counterparties will 

need to know whether they may 

exercise remedies under a specified 

financial condition clause. In 

acknowledgement of the public’s 

growing reliance on communication 

using the Internet as well as the 

prevalence of online commerce, the 

Proposed Rule provides that the 

Corporation may post such notice on its 

public Web site, the Web site of the 

covered financial company or the 

subsidiary or affiliate, or provide notice 

via other electronic media. While the 

Corporation will endeavor to provide 

notice in a manner reasonably 

calculated to provide notification to the 

parties in a timely manner, the 

provision of actual notice is not a 

condition precedent to enforcing such 

contracts. Any action by a counterparty 

in contravention of section 210(c)(16) 

will be ineffective, whether or not such 

counterparty had actual notice of the 

transfer of support or provision of 

adequate protection. Further, where the 

contract of the subsidiary or affiliate is 

linked to the covered financial company 

but not otherwise supported by the 

covered financial company, actual 

notice of by the Corporation of its 

appointment as receiver or its intent to 

exercise the authority under section 

210(c)(16) is not required. 

III. Request for Comments 

The FDIC seeks comments on all 

aspects of the Proposed Rule. Comments 

will be considered by the FDIC and 

appropriate revisions will be made to 

the Proposed Rule, if necessary, before 

a final rule is issued. Comments are 

specifically requested on the following: 

1. What terms defined by the 

Proposed Rule require further 

clarification, and how should they be 

defined? 

2. Are there other terms used in the 

Proposed Rule that should be defined? 

Should the term ‘‘Business Day’’ be 

defined in the regulation consistent 

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Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 18133 

1See 5 U.S.C. 603, 604 and 605. 

2 13 CFR 121.201. 

with the definition found in section 

210(c)(10)(D) of the Dodd-Frank Act? 

3. Are the scopes of the definitions of 

‘‘support’’ and ‘‘related assets and 

liabilities’’ sufficiently broad so as to 

cover substantially all of the forms of 

financial assistance and related assets 

and liabilities that a company may 

provide in support of the obligations of 

the subsidiary or affiliate? If the scope 

is not sufficiently broad, please provide 

specific examples if possible. 

4. Is the definition of ‘‘control’’ used 

for purposes of determining whether an 

entity is a subsidiary or affiliate of the 

covered financial company sufficient? Is 

it sufficiently clear? 

5. Is the definition of ‘‘adequate 

protection’’ appropriately consistent 

with the definition found elsewhere in 

Part 380, in particular with the 

definition found at 12 CFR 380.52? Is 

the specific mention of guarantees of the 

receiver as a form of adequate protection 

necessary to clearly signal that this is 

one of the options available to the 

receiver? If so, should 12 CFR 380.52 be 

amended to specifically reference 

guarantees of the receiver as a form of 

adequate protection to assure that these 

provisions will be interpreted in 

harmony? 

6. Under the Proposed Rule, the 

Corporation is required to promptly take 

steps to notify contract counterparties 

when the covered financial company’s 

support and related assets and liabilities 

have been transferred to a qualified 

transferee, or when the Corporation 

provides adequate protection with 

respect to the obligations of a subsidiary 

or affiliate of the covered financial 

company. Are the steps described 

reasonably calculated to provide notice? 

Is the scope of circumstances in which 

notice is provided appropriate? 

7. Is the Proposed Rule sufficiently 

clear that no action is required of the 

receiver to preserve the enforceability of 

a contract as long as the conditions with 

respect to the transfer of support or 

provision of adequate protection are 

met? 

8. Is the Proposed Rule definition of 

specified financial condition clear? Is 

the definition broad enough to cover all 

orderly liquidation events from the 

point at which the covered financial 

company is insolvent or in danger of 

default to the final liquidation and 

transfer of assets of the covered 

financial company? Is it sufficiently 

limited to make clear that the ability to 

enforce contracts is limited to events 

arising out of the specified financial 

condition clause and is not intended to 

affect rights or remedies arising out of 

defaults unrelated to the financial 

condition of the covered financial 

company or the related exercise of 

orderly liquidation authority? 

IV. Regulatory Analysis and Procedure 

A. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act (44 U.S.C. 3501, et seq.) 

(‘‘PRA’’), the FDIC may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

Office of Management and Budget 

(OMB) control number. The Proposed 

Rule would not involve any new 

collections of information pursuant to 

the Paperwork Reduction Act (44 U.S.C. 

3501, et seq.). Consequently, no 

information will be submitted to the 

Office of Management and Budget for 

review. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act 5 

U.S.C. 601, et seq. (RFA) requires each 

federal agency to prepare a final 

regulatory flexibility analysis in 

connection with the promulgation of a 

final rule, or certify that the final rule 

will not have a significant economic 

impact on a substantial number of small 

entities.1 Pursuant to Section 605(b) of 

the Regulatory Flexibility Act, the FDIC 

certifies that the Proposed Rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Under regulations issued by the Small 

Business Administration (‘‘SBA’’), a 

‘‘small entity’’ includes those firms 

within the ‘‘Finance and Insurance’’ 

sector with asset sizes that vary from $7 

million or less in assets to $175 million 

or less in assets.2

The Proposed Rule will clarify rules 

and procedures for the liquidation of a 

nonviable systemically important 

financial company, to provide internal 

guidance to FDIC personnel performing 

the liquidation of such a company and 

to address any uncertainty in the 

financial system as to how the orderly 

liquidation of such a company would be 

conducted. As such, the Proposed Rule 

will not have a significant economic 

impact on small entities. 

C. The Treasury and General 

Government Appropriations Act, 1999— 

Assessment of Federal Regulations and 

Policies on Families 

The FDIC has determined that the 

Proposed Rule will not affect family 

well-being within the meaning of 

Section 654 of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999 (Pub. L. 105–277, 112 Stat. 2681). 

D. Plain Language 

Section 722 of the Gramm-LeachBliley Act (Pub. L. 106–102, 113 Stat. 

1338, 1471), requires the Federal 

banking agencies to use plain language 

in all proposed and final rules 

published after January 1, 2000. The 

FDIC has sought to present the Proposed 

Rule in a simple and straightforward 

manner. 

List of Subjects in 12 CFR Part 380 

Banks, banking, Financial companies, 

Holding companies, Insurance 

companies, Mutual insurance holding 

companies. 

For the reasons stated above, the 

Board of Directors of the Federal 

Deposit Insurance Corporation proposes 

to amends part 380 of title 12 of the 

Code of Federal Regulations as follows: 

PART 380—ORDERLY LIQUIDATION 

AUTHORITY 

1. The authority citation for part 380 

is revised to read as follows: 

Authority: 12 U.S.C. 5383(e); 12 U.S.C. 

5389; 12 U.S.C. 5390(c)(16); 12 U.S.C. 

5390(s)(3); 12 U.S.C. 5390(b)(1)(C); 12 U.S.C. 

5390(a)(7)(D). 

2. The heading for subpart A is 

revised to read as follows: 

Subpart A—General and Miscellaneous 

Provisions 

Sec. 

380.1 Definitions. 

380.2 [Reserved] 

380.3 Treatment of personal service 

agreements. 

380.4 [Reserved] 

380.5 Treatment of covered financial 

companies that are subsidiaries of 

insurance companies. 

380.6 Limitation on liens on assets of 

covered financial companies that are 

insurance companies or covered 

subsidiaries of insurance companies. 

380.7 Recoupment of compensation from 

senior executives and directors. 

380.8 [Reserved] 

380.9 Treatment of fraudulent and 

preferential transfers. 

380.10 Calculation of maximum obligation 

limitation. 

380.11 Treatment of mutual insurance 

holding companies. 

380.12 Enforcement of subsidiary and 

affiliate contracts by the FDIC as receiver 

of a covered financial company. 

380.13–380.19 [Reserved] 

3. Revise § 380.12 to read as follows: 

§ 380.12 Enforcement of certain contracts 

of a subsidiary or affiliate of the covered 

financial company. 

(a) General. (1) Contracts of 

subsidiaries or affiliates of a covered 

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18134 Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 

financial company that are linked to or 

supported by the covered financial 

company shall remain in full force and 

effect notwithstanding any specified 

financial condition clause contained in 

such contract and no counterparty shall 

be entitled to terminate, accelerate, 

liquidate or exercise any other remedy 

arising solely by reason of such 

specified financial condition clause. 

The Corporation as receiver for the 

covered financial company and any 

qualified transferee shall have the 

power to enforce such contracts 

according to their terms. 

(2) Notwithstanding paragraph (a)(1) 

of this section, if the obligations under 

such contract are supported by the 

covered financial company then such 

contract shall be enforceable only if— 

(i) Any such support together with all 

related assets and liabilities are 

transferred to and assumed by a 

qualified transferee not later than 5 p.m. 

(eastern time) on the business day 

following the date of appointment of the 

Corporation as receiver for the covered 

financial company; or 

(ii) If and to the extent paragraph 

(a)(2)(i) of this section is not satisfied, 

the Corporation as receiver otherwise 

provides adequate protection to the 

counterparties to such contracts with 

respect to the covered financial 

company’s support of the obligations or 

liabilities of the subsidiary or affiliate 

and provides notice consistent with the 

requirements of paragraph (d) of this 

section not later than 5 p.m. (eastern 

time) on the business day following the 

date of appointment of the Corporation 

as receiver. 

(3) The Corporation as receiver of a 

subsidiary of a covered financial 

company (including a failed insured 

depository institution that is a 

subsidiary of a covered financial 

company) may enforce any contract that 

is enforceable by the Corporation as 

receiver for a covered financial 

company under paragraphs (a)(1) and 

(a)(2) of this section. 

(b) Definitions. For purposes of this 

part, the following terms shall have the 

meanings set forth below: 

(1) A contract is ‘‘linked’’ to a covered 

financial company if it contains a 

specified financial condition clause that 

specifies the covered financial 

company. 

(2)(i) A ‘‘specified financial condition 

clause’’ means any provision of any 

contract (whether expressly stated in the 

contract or incorporated by reference to 

any other contract, agreement or 

document) that permits a contract 

counterparty to terminate, accelerate, 

liquidate or exercise any other remedy 

under any contract to which the 

subsidiary or affiliate is a party or to 

obtain possession or exercise control 

over any property of the subsidiary or 

affiliate or affect any contractual rights 

of the subsidiary or affiliate directly or 

indirectly based upon or by reason of 

(A) A change in the financial 

condition or the insolvency of a 

specified company that is a covered 

financial company; 

(B) The appointment of the FDIC as 

receiver for the specified company or 

any actions incidental thereto including, 

without limitation, the filing of a 

petition seeking judicial action with 

respect to the appointment of the 

Corporation as receiver for the specified 

company and the issuance of 

recommendations or determinations of 

systemic risk; 

(C) The exercise of rights or powers by 

the Corporation as receiver for the 

specified company, including, without 

limitation, the appointment of the 

Securities Investor Protection 

Corporation (SIPC) as trustee in the case 

of a specified company that is a covered 

broker-dealer and the exercise by SIPC 

of all of its rights and powers as trustee; 

(D) The transfer of assets or liabilities 

to a bridge financial company or other 

qualified transferee; 

(E) Any actions taken by the FDIC as 

receiver for the specified company to 

effectuate the liquidation of the 

specified company; or (vi) any actions 

taken by or on behalf of the bridge 

financial company to operate and 

terminate the bridge financial company 

including the dissolution, conversion, 

merger or termination of a bridge 

financial company or actions incidental 

or related thereto. 

(ii) Without limiting the general 

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

of this section, a specified financial 

condition clause includes a ‘‘walkaway 

clause’’ as defined in 12 U.S.C. 

5390(c)(8)(F)(iii) or any regulations 

promulgated thereunder. 

(3) The term ‘‘support’’ means 

undertaking any of the following for the 

purpose of supporting the contractual 

obligations of a subsidiary or affiliate of 

a covered financial company for the 

benefit of a counterparty to a linked 

contract— 

(i) To guarantee, indemnify, 

undertake to make any loan or advance 

to or on behalf of the subsidiary or 

affiliate; 

(ii) To undertake to make capital 

contributions to the subsidiary or 

affiliate; or 

(iii) To be contractually obligated to 

provide any other financial assistance to 

the subsidiary or affiliate. 

(4) The term ‘‘related assets and 

liabilities’’ means— 

(i) Any assets of the covered financial 

company that directly serve as collateral 

for the covered financial company’s 

support (including a perfected security 

interest therein or equivalent under 

applicable law); 

(ii) Any rights of offset or setoff or 

netting arrangements that directly arise 

out of or directly relate to the covered 

financial company’s support of the 

obligations or liabilities of its subsidiary 

or affiliate; and 

(iii) Any liabilities of the covered 

financial company that directly arise out 

of or directly relate to its support of the 

obligations or liabilities of the 

subsidiary or affiliate. 

(5) A ‘‘qualified transferee’’ means 

any bridge financial company or any 

third party (other than a third party for 

which a conservator, receiver, trustee in 

bankruptcy, or other legal custodian has 

been appointed, or which is otherwise 

the subject of a bankruptcy or 

insolvency proceeding). 

(6) A ‘‘subsidiary’’ means any 

company which is controlled by another 

company at the time of, or immediately 

prior to, the appointment of receiver of 

the covered financial company. 

(7) An ‘‘affiliate’’ means any company 

that controls, is controlled by, or is 

under common control with another 

company at the time of, or immediately 

prior to, the appointment of receiver of 

the covered financial company. 

(8) The term ‘‘control’’ has the 

meaning given to such term under 12 

U.S.C. 1841(a)(2)(A) and (B) as such 

law, or any successor, may be in effect 

at the date of the appointment of the 

receiver, together with any regulations 

promulgated thereunder then in effect. 

(c) Adequate Protection. 

The Corporation as receiver for a 

covered financial company may provide 

adequate protection with respect to a 

covered financial company’s support of 

the obligations and liabilities of a 

subsidiary or an affiliate pursuant to 

paragraph (a)(2)(ii) of this section by any 

of the following means: 

(1) Making a cash payment or periodic 

cash payments to the counterparties of 

the contract to the extent that the failure 

to cause the assignment and assumption 

of the covered financial company’s 

support and related assets and liabilities 

causes a loss to the counterparties; 

(2) Providing to the counterparties a 

guaranty, issued by the Corporation as 

receiver for the covered financial 

company, of the obligations of the 

subsidiary or affiliate of the covered 

financial company under the contract; 

or 

(3) Providing relief that will result in 

the realization by the counterparty of 

the indubitable equivalent of the 

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Federal Register / Vol. 77, No. 59 / Tuesday, March 27, 2012 / Proposed Rules 18135 

covered financial company’s support of 

such obligations or liabilities. 

(d) Notice of Transfer of Support or 

Provision of Adequate Protection. 

If the Corporation as receiver for a 

covered financial company transfers any 

support and related assets and liabilities 

of the covered financial company in 

accordance with paragraph (a)(2)(i) of 

this section or provides adequate 

protection in accordance with paragraph 

(a)(2)(ii) of this section, it shall 

promptly take steps to notify contract 

counterparties of such transfer or 

provision of adequate protection. Notice 

shall be given in a manner reasonably 

calculated to provide notification in a 

timely manner, including, but not 

limited to, notice posted on the Web site 

of the Corporation, the covered financial 

company or the subsidiary or affiliate, 

notice via electronic media, or notice by 

publication. Neither the failure to 

provide actual notice to any party nor 

the lack of actual knowledge on the part 

of any party shall affect the authority of 

the Corporation or a qualified transferee 

to enforce any contract or exercise any 

rights or powers under this section. 

Dated at Washington, DC, this 20th day of 

March 2012. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2012–7051 Filed 3–26–12; 8:45 am] 

BILLING CODE 6714–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2012–0298; Directorate 

Identifier 2011–NM–072–AD] 

RIN 2120–AA64 

Airworthiness Directives; Bombardier, 

Inc., Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for certain 

Bombardier, Inc., Model DHC–8–400, 

–401, and –402 airplanes. This proposed 

AD was prompted by reports of cracking 

of certain fuel access panels of the outer 

wing. This proposed AD would require 

an external inspection, and if necessary 

an internal inspection, to determine if 

certain fuel access panels are installed, 

and replacement if necessary; optional 

repetitive inspections for cracking of the 

fuel access panels, and replacement if 

necessary, would defer the internal 

inspection; and eventual replacement of 

affected fuel access panels with new 

panels. We are proposing this AD to 

prevent cracking of fuel access panels, 

which could result in arcing and 

ignition of fuel vapor in the outer wing 

fuel tank during a lightning strike. 

DATES: We must receive comments on 

this proposed AD by May 11, 2012. 

ADDRESSES: You may send comments by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: (202) 493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, 

M–30, West Building Ground Floor, 

Room W12–140, 1200 New Jersey 

Avenue SE., Washington, DC 20590. 

• Hand Delivery: U.S. Department of 

Transportation, Docket Operations, 

M–30, West Building Ground Floor, 

Room W12–140, 1200 New Jersey 

Avenue SE., Washington, DC, between 9 

a.m. and 5 p.m., Monday through 

Friday, except Federal holidays. 

For service information identified in 

this proposed AD, contact Bombardier, 

Inc., Q-Series Technical Help Desk, 123 

Garratt Boulevard, Toronto, Ontario 

M3K 1Y5, Canada; telephone 416–375– 

4000; fax 416–375–4539; email 

thd.qseries@aero.bombardier.com; 

Internet http://www.bombardier.com. 

You may review copies of the 

referenced service information at the 

FAA, Transport Airplane Directorate, 

1601 Lind Avenue SW., Renton, 

Washington. For information on the 

availability of this material at the FAA, 

call 425–227–1221. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Operations office between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this proposed AD, the 

regulatory evaluation, any comments 

received, and other information. The 

street address for the Docket Operations 

office (telephone (800) 647–5527) is in 

the ADDRESSES section. Comments will 

be available in the AD docket shortly 

after receipt. 

FOR FURTHER INFORMATION CONTACT: Aziz 

Ahmed, Aerospace Engineer, Airframe 

and Mechanical Systems Branch, ANE– 

171, FAA, New York Aircraft 

Certification Office, 1600 Stewart 

Avenue. Westbury, NY 11590; 

telephone (516) 228–7329; fax (516) 

794–5531. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite you to send any written 

relevant data, views, or arguments about 

this proposed AD. Send your comments 

to an address listed under the 

ADDRESSES section. Include ‘‘Docket No. 

FAA–2012–0298; Directorate Identifier 

2011–NM–072–AD’’ at the beginning of 

your comments. We specifically invite 

comments on the overall regulatory, 

economic, environmental, and energy 

aspects of this proposed AD. We will 

consider all comments received by the 

closing date and may amend this 

proposed AD based on those comments. 

We will post all comments we 

receive, without change, to http:// 

www.regulations.gov, including any 

personal information you provide. We 

will also post a report summarizing each 

substantive verbal contact we receive 

about this proposed AD. 

Discussion 

Transport Canada Civil Aviation 

(TCCA), which is the airworthiness 

authority for Canada, has issued 

Canadian Airworthiness Directive CF– 

2011–04, dated March 8, 2011 (referred 

to after this as ‘‘the MCAI’’), to correct 

an unsafe condition for the specified 

products. The MCAI states: 

[Canadian] Airworthiness Directive (AD) 

CF–2005–37 was issued on 11 October 2005 

to address cracking of the outer wing fuel 

access panel, Part Number (P/N) 85714230– 

001. Similar cracking on an outer wing fuel 

access panel, P/N 85714231–001, has been 

reported. Further investigation revealed that 

certain fuel access panels may have seal 

grooves manufactured with non-conforming 

fillet radii which could lead to cracking. 

Cracking of the fuel access panel, if not 

corrected, could result in arcing and ignition 

of fuel vapor in the outer wing fuel tank 

during a lightning strike. 

This [TCCA] directive mandates the 

inspection and replacement of the affected 

fuel access panels. 

Required actions include an external 

detailed inspection of the outer wing 

access panels for rivets of the 

identification plate, and an internal 

inspection of panels without rivets to 

determine if the identification plate is 

installed, and replacing the fuel access 

panel if necessary. As an option, this 

proposed AD would allow repetitive 

external detailed inspections for 

cracking of the fuel access panels and, 

replacing if necessary, until the internal 

inspection is done. This proposed AD 

would also require eventually replacing 

the affected fuel access panels with new 

fuel access panels. You may obtain 

further information by examining the 

MCAI in the AD docket. 

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