This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

61653 

Vol. 75, No. 193 

Wednesday, October 6, 2010 

1As defined in Section 102(a)(4) of DFA. 

FINANCIAL STABILITY OVERSIGHT 

COUNCIL 

12 CFR Chapter XIII 

Advance Notice of Proposed 

Rulemaking Regarding Authority To 

Require Supervision and Regulation of 

Certain Nonbank Financial Companies 

AGENCY: Financial Stability Oversight 

Council. 

ACTION: Advance notice of proposed 

rulemaking. 

SUMMARY: Section 113 of the DoddFrank Wall Street Reform and Consumer 

Protection Act (the ‘‘DFA’’) gives the 

Financial Stability Oversight Council 

(the ‘‘Council’’) the authority to require 

that a nonbank financial company be 

supervised by the Board of Governors of 

the Federal Reserve System (‘‘Board of 

Governors’’) and subject to prudential 

standards if the Council determines that 

material financial distress at such a 

firm, or the nature, scope, size, scale, 

concentration, interconnectedness, or 

mix of the activities of the firm, could 

pose a threat to the financial stability of 

the United States. 

This advance notice of proposed 

rulemaking (ANPR) invites public 

comment on the criteria that should 

inform the Council’s designation of 

nonbank financial companies under the 

DFA. 

DATES: Comments on this ANPR must be 

received by November 5, 2010. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this advance notice of proposed 

rulemaking according to the instructions 

for ‘‘Electronic Submission of 

Comments’’ below. All submissions 

must refer to the document title. The 

FSOC encourages the early submission 

of comments. 

Electronic Submission of Comments. 

Interested persons must submit 

comments electronically through the 

Federal eRulemaking Portal at http:// 

www.regulations.gov. Electronic 

submission of comments allows the 

commenter maximum time to prepare 

and submit a comment, ensures timely 

receipt, and enables the FSOC to make 

them available to the public. Comments 

submitted electronically through the 

http://www.regulations.gov Web site can 

be viewed by other commenters and 

interested members of the public. 

Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

Note: To receive consideration as public 

comments, comments must be submitted 

through the method specified above. Again, 

all submissions must refer to the docket 

number and title of the notice. 

Public Inspection of Public 

Comments. All properly submitted 

comments will be available for 

inspection and downloading at http:// 

www.regulations.gov. 

Additional Instructions. Please note 

the number of the question to which 

you are responding at the top of each 

response. Though the responses will be 

screened for obscenities and 

appropriateness, in general comments 

received, including attachments and 

other supporting materials, are part of 

the public record and are immediately 

available to the public. Do not enclose 

any information in your comment or 

supporting materials that you consider 

confidential or inappropriate for public 

disclosure. 

FOR FURTHER INFORMATION CONTACT: For 

further information regarding this 

interim final rule contact the Office of 

Domestic Finance, Treasury, at (202) 

622–1703. All responses to this Notice 

and Request for Information should be 

submitted via http:// 

www.regulations.gov to ensure 

consideration. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Council was established by 

section 111 of the DFA for the purposes 

of ‘‘(A) * * * identify[ing] risk to the 

financial stability of the United States 

that could arise from the material 

financial distress or failure, or ongoing 

activities, of large, interconnected bank 

holding companies or nonbank financial 

companies, or that could arise outside 

the financial services marketplace; (B) 

* * * promot[ing] market discipline, by 

eliminating expectations on the part of 

shareholders, creditors, and 

counterparties of such companies that 

the Government will shield them from 

losses in the event of failure; and (C) 

* * * respond[ing] to emerging threats 

to the stability of the United States 

financial system.’’ The Council has ten 

voting members and 5 nonvoting 

members. The voting members consist 

of the Secretary of the Treasury who 

also is the Chairperson of the Council, 

the Chairman of the Board of Governors 

of the Federal Reserve System, the 

Comptroller of the Currency, the 

Director of the Bureau of Consumer 

Financial Protection, the Chairman of 

the Securities and Exchange 

Commission, the Chairperson of the 

Federal Deposit Insurance Corporation, 

the Chairperson of the Commodity 

Futures Trading Commission, the 

Director of the Federal Housing Finance 

Agency, the Chairman of the National 

Credit Union Administration Board, and 

an independent member appointed by 

the President with the advice and 

consent of the Senate, having insurance 

expertise. The nonvoting members are 

the Director of the Office of Financial 

Research, the Director of the Federal 

Insurance Office, and a State insurance 

commissioner, a State banking 

supervisor, and a State securities 

commissioner, each designated by a 

selection process determined by their 

respective state supervisors or 

commissioners. 

Through this ANPR the Council is 

seeking to gather information as it 

begins to develop the specific criteria 

and analytical framework by which it 

will designate nonbank financial 

companies 1 for enhanced supervision 

under the DFA. 

a. Considerations in Making a 

Determination 

Under the provisions of the DFA, in 

making a determination on whether the 

company should be subject to 

supervision by the Board of Governors, 

the Council must consider: 

(A) The extent of the leverage of the 

company; 

(B) The extent and nature of the offbalance-sheet exposures of the 

company; 

(C) The extent and nature of the 

transactions and relationships of the 

company with other significant nonbank 

financial companies and significant 

bank holding companies; 

(D) The importance of the company as 

a source of credit for households, 

businesses, and State and local 

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61654 Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Proposed Rules 

2Under Section 113(f), the Council may waive the 

requirements on an emergency basis if necessary to 

prevent or mitigate threats to financial stability. 

governments and as a source of liquidity 

for the United States financial system; 

(E) The importance of the company as 

a source of credit for low-income, 

minority, or underserved communities, 

and the impact that the failure of such 

company would have on the availability 

of credit in such communities; 

(F) The extent to which assets are 

managed rather than owned by the 

company, and the extent to which 

ownership of assets under management 

is diffuse; 

(G) The nature, scope, size, scale, 

concentration, interconnectedness, and 

mix of the activities of the company; 

(H) The degree to which the company 

is already regulated by 1 or more 

primary financial regulatory agencies; 

(I) The amount and nature of the 

financial assets of the company; 

(J) The amount and types of the 

liabilities of the company, including the 

degree of reliance on short-term 

funding; and 

(K) Any other risk-related factors that 

the Council deems appropriate. 

The Council must consider similar 

factors in determining whether a foreign 

nonbank financial company should be 

designated and its U.S. operations and 

activities subject to supervision by the 

Board of Governors. In addition, the 

Council must consider the factors 

relevant to a U.S. or foreign nonbank 

financial company in determining 

whether a U.S. or foreign company, 

respectively, should be designated for 

supervision by the Board of Governors 

under the special anti-evasion 

provisions in section 113(c) of the DFA. 

b. Process for Making a Determination 

Under the provisions of the DFA, the 

Council must provide a nonbank 

financial firm with advance notice that 

it plans to designate the firm, and the 

firm has up to 30 days to request a 

hearing and an additional 30 days to 

submit material. Upon holding a 

hearing, the Council has up to 60 days 

to make a final determination. If a firm 

does not make a timely request for a 

hearing, the Council must notify the 

firm of its final determination within 40 

days of the firm’s receipt of advance 

notice from the Council. In making a 

determination, the Council must consult 

with the primary financial regulator, if 

any, of the affected firm, and with the 

appropriate foreign regulatory 

authorities as appropriate.2 Once 

designated, the Council must reevaluate 

its determination regarding each 

designated firm at least annually. 

Council designations are subject to 

judicial review. The Council is not 

requesting comments on these 

procedural requirements. 

II. Criteria for Designation 

1. What metrics should the Council 

use to measure the factors it is required 

to consider when making 

determinations under Section 113 of 

DFA? 

a. How should quantitative and 

qualitative considerations be 

incorporated into the determination 

process? 

b. Are there some factors that should 

be weighted more heavily by the 

Council than other factors in the 

designation process? 

2. What types of nonbank financial 

companies should the Council review 

for designation under DFA? Should the 

analytical framework, considerations, 

and measures used by the Council vary 

across industries? Across time? If so, 

how? 

3. Since foreign nonbank companies 

can be designated, what role should 

international considerations play in 

designating companies? Are there 

unique considerations for foreign 

nonbank companies that should be 

taken into account? 

4. Are there simple metrics that the 

Council should use to determine 

whether nonbank financial companies 

should even be considered for 

designation? 

5. How should the Council measure 

and assess the scope, size, and scale of 

nonbank financial companies? 

a. Should a risk-adjusted measure of 

a company’s assets be used? If so, what 

methodology or methodologies should 

be used? 

b. Section 113 of DFA requires the 

Council to consider the extent and 

nature of the off-balance-sheet 

exposures of a company. Given this 

requirement, what should be considered 

an off-balance sheet exposure and how 

should they be assessed? How should 

off-balance sheet exposures be measured 

(e.g., notional values, mark-to-market 

values, future potential exposures)? 

What measures of comparison are 

appropriate? 

c. How should the Council take 

managed assets into consideration in 

making designations? How should the 

term ‘‘managed assets’’ be defined? 

Should the type of asset management 

activity (e.g., hedge fund, private equity 

fund, mutual fund) being conducted 

influence the assessment under this 

criterion? How should terms, 

conditions, triggers, and other 

contractual arrangements that require 

the nonbank financial firm either to 

fund or to satisfy an obligation in 

connection with managed assets be 

considered? 

d. During the financial crisis, some 

firms provided financial support to 

investment vehicles sponsored or 

managed by their firm despite having no 

legal obligation to do so. How should 

the Council take account of such 

implicit support? 

6. How should the Council measure 

and assess the nature, concentration, 

and mix of activities of a nonbank 

financial firm? 

a. Section 113 of DFA requires the 

Council to consider the importance of 

the company as a source of credit for 

households, businesses, and State and 

local governments, and as a source of 

liquidity for the United States financial 

system. Given this requirement, are 

there measures of market concentration 

that can be used to inform the 

application of this criterion? How 

should these markets be defined? What 

other measures might be used to assess 

a nonbank financial firm’s importance 

under this criterion? 

b. Section 113 of DFA requires the 

Council to consider the importance of 

the company as a source of credit for 

low-income, minority, and underserved 

communities. Given this requirement, 

are there measures of market 

concentration that can be used to inform 

the application of this criterion? How 

should these markets be defined? What 

other measures might be used to assess 

a nonbank financial firm’s importance 

under this criterion? 

7. How should the Council measure 

and assess the interconnectedness of a 

nonbank financial firm? 

a. What measures of exposure should 

be considered (e.g., counterparty credit 

exposures, operational linkages, 

potential future exposures under 

derivative contracts, concentration in 

revenues, direct and contingent 

liquidity or credit lines, cross-holding of 

debt and equity)? What role should 

models of interconnectedness (e.g., 

correlation of returns or equity values 

across firms, stress tests) play in the 

Council’s determinations? 

b. Should the Council give special 

consideration to the relationships 

(including exposures and dependencies) 

between a nonbank financial company 

and other important financial firms or 

markets? If so, what metrics and 

thresholds should be used to identify 

what financial firms or markets should 

be considered significant for these 

purposes? What metrics and thresholds 

should be used in assessing the 

importance of a nonbank financial 

company’s relationships with these 

other firms and markets? 

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Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Proposed Rules 61655 

8. How should the Council measure 

and assess the leverage of a nonbank 

financial firm? How should measures of 

leverage address liabilities, off-balance 

sheet exposures, and non-financial 

business lines? Should standards for 

leverage differ by types of financial 

activities or by industry? Should 

acceptable leverage standards recognize 

differences in regulation? Are there 

existing standards (e.g., the Basel III 

leverage ratio) for measuring leverage 

that could be used in assessing the 

leverage of nonbank financial 

companies? 

9. How should the Council measure 

and assess the amount and types of 

liabilities, including the degree of 

reliance on short-term funding of a 

nonbank financial firm? 

a. What factors should the Council 

consider in developing thresholds for 

identifying excessive reliance on shortterm funding? 

b. How should funding concentrations 

be measured? 

c. Do some nonbank financial 

companies have funding sources that 

are contractually short-term but stable 

in practice (similar to ‘‘stable deposits’’ 

at banks)? 

d. Should the assessment link the 

maturity structure of the liabilities to 

the maturity structure and quality of the 

assets of nonbank financial companies? 

10. How should the Council take into 

account the fact that a nonbank 

financial firm (or one or more of its 

subsidiaries or affiliates) is already 

subject to financial regulation in the 

Council’s decision to designate a firm? 

Are there particular aspects of 

prudential regulation that should be 

considered as particularly important 

(e.g., capital regulation, liquidity 

requirements, consolidated 

supervision)? Should the Council take 

into account whether the existing 

regulation of the company comports 

with relevant national or international 

standards? 

11. Should the degree of public 

disclosures and transparency be a factor 

in the assessment? Should asset 

valuation methodologies (e.g., level 2 

and level 3 assets) and risk management 

practices be factored into the 

assessment? 

12. During the financial crisis, the 

U.S. Government instituted a variety of 

programs that served to strengthen the 

resiliency of the financial system. 

Nonbank financial companies 

participated in several of these 

programs. How should the Council 

consider the Government’s extension of 

financial assistance to nonbank 

financial companies in designating 

companies? 

13. Please provide examples of best 

practices used by your organization or 

in your industry in evaluating and 

considering various types of risks that 

could be systemic in nature. 

a. How do you approach analyzing 

and quantifying interdependencies with 

other organizations? 

b. When and if important 

counterparties or linkages are identified, 

how do you evaluate and quantify the 

risks that a firm is exposed to? 

c. What other types of information 

would be effective in helping to identify 

and avoid excessive risk concentrations 

that could ultimately lead to systemic 

instability? 

14. Should the Council define 

‘‘material financial distress’’ or ‘‘financial 

stability’’? If so, what factors should the 

Council consider in developing those 

definitions? 

15. What other risk-related 

considerations should the Council take 

into account when establishing a 

framework for designating nonbank 

financial companies? 

Dated: October 1, 2010. 

Alastair Fitzpayne, 

Deputy Chief of Staff and Executive Secretary, 

Department of the Treasury. 

[FR Doc. 2010–25321 Filed 10–4–10; 4:15 pm] 

BILLING CODE 4810–25–P–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2010–1006; Directorate 

Identifier 2009–CE–057–AD] 

RIN 2120–AA64 

Airworthiness Directives; Piper 

Aircraft, Inc. Model PA–28–161 

Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for all 

Piper Aircraft, Inc. (Piper) Model PA– 

28–161 airplanes equipped with 

Thielert Aircraft Engine GmbH (TAE) 

Engine Model TAE–125–01 installed per 

Supplemental Type Certificate (STC) 

No. SA03303AT. This proposed AD 

would require installing a full authority 

digital engine control (FADEC) backup 

battery, replacing the supplement pilot’s 

operating handbook and FAA approved 

airplane flight manual, and revising the 

limitations section of the supplement 

airplane maintenance manual. This 

proposed AD results from an incident 

where an airplane experienced an inflight engine shutdown caused by a 

momentary loss of electrical power to 

the FADEC. We are proposing this AD 

to prevent interruption of electrical 

power to the FADEC, which could result 

in an uncommanded engine shutdown. 

This failure could lead to a loss of 

engine power. 

DATES: We must receive comments on 

this proposed AD by November 22, 

2010. 

ADDRESSES: Use one of the following 

addresses to comment on this proposed 

AD: 

• 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 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. 

For service information identified in 

this proposed AD, contact Thielert 

Aircraft Engines Service GmbH, 

Platanenstra+e 14, 09350 Lichtenstein, 

Deutschland; telephone: +49 (37204) 

696–0; fax: +49 (37204) 696–1910; 

Internet: http://www.thielert.com/. 

FOR FURTHER INFORMATION CONTACT: Don 

O. Young, Aerospace Engineer, FAA, 

Atlanta Aircraft Certification Office 

(ACO), 1701 Columbia Avenue, College 

Park, Georgia 30337; telephone: (404) 

474–5585; fax: (404) 474–5606; e-mail: 

don.o.young@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite you to send any written 

relevant data, views, or arguments 

regarding this proposed AD. Send your 

comments to an address listed under the 

ADDRESSES section. Include the docket 

number, ‘‘FAA–2010–1006; Directorate 

Identifier 2009–CE–057–AD’’ at the 

beginning of your comments. We 

specifically invite comments on the 

overall regulatory, economic, 

environmental, and energy aspects of 

the proposed AD. We will consider all 

comments received by the closing date 

and may amend the proposed AD in 

light of those comments. 

We will post all comments we 

receive, without change, to http:// 

www.regulations.gov, including any 

WReier-Aviles on DSKGBLS3C1PROD with PROPOSALS