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

26234 

Vol. 88, No. 82 

Friday, April 28, 2023 

1 ‘‘Primary financial regulatory agency’’ is defined 

in section 2(12) of the Dodd-Frank Act, 12 U.S.C. 

5301(12). 

2Section 113 of the Dodd-Frank Act, 12 U.S.C. 

5323, refers to a Council ‘‘determination’’ regarding 

a nonbank financial company. This proposal refers 

to ‘‘determination’’ and ‘‘designation’’ 

interchangeably for ease of reading. 

3On May 22, 2012, the Council approved hearing 

procedures relating to the conduct of hearings 

before the Council in connection with proposed 

determinations regarding nonbank financial 

companies and financial market utilities and related 

emergency waivers or modifications under sections 

113 and 804 of the Dodd-Frank Act, 12 U.S.C. 5323, 

5463; 77 FR 31855 (May 30, 2012). The hearing 

procedures were amended in 2013, 78 FR 22546 

(April 16, 2013), and 2018, 83 FR 12010 (March 19, 

2018). This proposed guidance would not amend 

the Council’s hearing procedures. 

4Financial Stability Oversight Council 

Supplemental Procedures Relating to Nonbank 

FINANCIAL STABILITY OVERSIGHT 

COUNCIL 

12 CFR Part 1310 

Authority To Require Supervision and 

Regulation of Certain Nonbank 

Financial Companies 

AGENCY: Financial Stability Oversight 

Council. 

ACTION: Notification of proposed 

interpretive guidance; request for public 

comment. 

SUMMARY: This proposed interpretive 

guidance, which would replace the 

Financial Stability Oversight Council’s 

existing interpretive guidance on 

nonbank financial company 

determinations, describes the process 

the Council intends to take in 

determining whether to subject a 

nonbank financial company to 

supervision and prudential standards by 

the Board of Governors of the Federal 

Reserve System. 

DATES: Comment due date: June 27, 

2023. 

ADDRESSES: You may submit comments 

by either of the following methods. All 

submissions must refer to the document 

title and RIN 4030–[XXXX]. 

Electronic Submission of Comments: 

You may submit comments 

electronically through the Federal 

eRulemaking Portal at https://

www.regulations.gov. Electronic 

submission of comments allows the 

commenter maximum time to prepare 

and submit a comment, ensures timely 

receipt, and enables the Council to make 

them available to the public. Comments 

submitted electronically through the 

https://www.regulations.gov website 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. 

Mail: Send comments to Financial 

Stability Oversight Council, Attn: Eric 

Froman, 1500 Pennsylvania Avenue 

NW, Room 2308, Washington, DC 

20220. 

All properly submitted comments will 

be available for inspection and 

downloading at https://

www.regulations.gov. 

In general, comments received, 

including attachments and other 

supporting materials, are part of the 

public record and are available to the 

public. Do not submit any information 

in your comment or supporting 

materials that you consider confidential 

or inappropriate for public disclosure. 

FOR FURTHER INFORMATION CONTACT: Eric 

Froman, Office of the General Counsel, 

Treasury, at (202) 622–1942; Devin 

Mauney, Office of the General Counsel, 

Treasury, at (202) 622–2537; or Carol 

Rodrigues, Office of the General 

Counsel, Treasury, at (202) 622–6127. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 111 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (12 U.S.C. 5321) (the ‘‘Dodd-Frank 

Act’’) established the Financial Stability 

Oversight Council. The purposes of the 

Council under section 112 of the DoddFrank Act (12 U.S.C. 5322) are ‘‘(A) to 

identify risks 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) to promote 

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) to respond to emerging 

threats to the stability of the United 

States financial system.’’ 

The Dodd-Frank Act gives the Council 

broad discretion to determine how to 

respond to potential threats to U.S. 

financial stability, and the Council uses 

each of its statutory authorities as 

appropriate. The Council’s duties under 

section 112 of the Dodd-Frank Act 

reflect the range of approaches the 

Council may consider, including 

collecting information from regulators, 

requesting data and analyses from the 

Office of Financial Research, monitoring 

the financial services marketplace and 

financial regulatory developments, 

facilitating information sharing and 

coordination among regulators, 

recommending to the Council member 

agencies general supervisory priorities 

and principles, identifying regulatory 

gaps, making recommendations to the 

Board of Governors of the Federal 

Reserve System (‘‘Federal Reserve’’) or 

other primary financial regulatory 

agencies,1 and designating certain 

entities or payment, clearing, and 

settlement activities for additional 

regulation. 

Section 113 of the Dodd-Frank Act 

authorizes the Council to determine that 

a nonbank financial company will be 

subject to supervision by the Federal 

Reserve and prudential standards. 

Under section 165 of the Dodd-Frank 

Act, the Federal Reserve is responsible 

for establishing the prudential standards 

that will be applicable to a nonbank 

financial company subject to a Council 

designation 2 under section 113. The 

Council has previously issued rules, 

guidance, and other public statements 

regarding its process for evaluating 

nonbank financial companies for a 

potential designation.3 On April 11, 

2012, the Council issued a final rule at 

12 CFR 1310.1–23 (the ‘‘2012 Rule’’) 

setting forth certain procedures related 

to designations under section 113 of the 

Dodd-Frank Act. Attached to the 2012 

Rule as Appendix A was interpretive 

guidance (the ‘‘2012 Interpretive 

Guidance’’) setting forth additional 

information regarding the manner in 

which the Council made determinations 

under section 113 (together with the 

2012 Rule, the ‘‘2012 Rule and 

Guidance’’). On February 4, 2015, the 

Council adopted supplemental 

procedures (the ‘‘2015 Supplemental 

Procedures’’) to the 2012 Rule and 

Guidance.4 On March 13, 2019, the 


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Financial Company Determinations (Feb. 4, 2015), 

available at https://home.treasury.gov/system/files/ 

261/Supplemental%20Procedures%20Related

%20to%20Nonbank%20Financial%20Company

%20Determinations%20%20%28

February%204%2C%202015%29.pdf. In addition, 

in June 2015, the Council published staff guidance 

with details regarding certain methodologies used 

in connection with the determination process under 

section 113. See Council, Staff Guidance 

Methodologies Relating to Stage 1 Thresholds (June 

8, 2015), available at https://home.treasury.gov/ 

system/files/261/Staff%20Guidance%20

Methodologies%20Relating%20to%20Stage%201

%20Thresholds.pdf. 

5 84 FR 8958 (March 13, 2019). 

6 84 FR 71740 (Dec. 30, 2019). 7See 84 FR 71740, 71761 (Dec. 30, 2019). 

Council amended the 2012 Rule by 

adding a new provision at 12 CFR 

1310.3.5 On December 30, 2019, the 

Council replaced the 2012 Interpretive 

Guidance with revised interpretive 

guidance (the ‘‘2019 Interpretive 

Guidance’’).6 In connection with the 

adoption of the 2019 Interpretive 

Guidance, the Council rescinded the 

2015 Supplemental Procedures. 

The Council is proposing this 

interpretive guidance (the ‘‘Proposed 

Guidance’’) to revise and update the 

2019 Interpretive Guidance. If the 

Council issues final interpretive 

guidance based on this proposal, the 

final interpretive guidance will replace 

the 2019 Interpretive Guidance, found at 

Appendix A to 12 CFR part 1310, in its 

entirety but will not modify the rules at 

12 CFR 1310.1–23. 

The Council is concurrently issuing 

for public comment a separate 

document (the Proposed Analytic 

Framework) explaining the Council’s 

broader approach to identifying, 

evaluating, and addressing potential 

risks to U.S. financial stability. The 

Proposed Analytic Framework describes 

the Council’s analytic approach without 

regard to the origin of a particular risk, 

including whether the risk arises from 

widely conducted activities or from 

individual entities, and regardless of 

which of the Council’s authorities may 

be used to address the risk. 

II. Overview of Proposed Guidance 

A. Key Changes 

The Proposed Guidance seeks to 

establish a durable process for the 

Council’s use of its authority to 

designate nonbank financial companies. 

The 2012 Interpretive Guidance 

provided a crucial framework for the 

Council’s analyses, but because it was 

adopted before the Council had 

designated any nonbank financial 

companies, it could not reflect the 

lessons learned from engaging in such 

designations. The 2019 Interpretive 

Guidance provided additional clarity 

regarding the Council’s procedures but 

created inappropriate hurdles to the 

Council’s ability to use this authority. 

Congress created the designation 

authority to fill a glaring regulatory gap 

that became apparent during the 

financial crisis in 2007–09, when 

financial distress at large, complex, 

highly interconnected, highly leveraged, 

and inadequately regulated nonbank 

financial companies devastated the 

financial system. The Council has used 

this authority sparingly, but to mitigate 

the risks of future financial crises, the 

Council must be able to use each of its 

statutory authorities as appropriate to 

address potential threats to U.S. 

financial stability. The Proposed 

Guidance is intended to make this 

authority available to the Council while 

maintaining rigorous procedural 

protections for nonbank financial 

companies that may be reviewed for 

potential designation. 

The Proposed Guidance would make 

three key changes. First, the Proposed 

Guidance would eliminate the 

statement, found in the 2019 

Interpretive Guidance, that the Council 

would first rely on federal and state 

regulators to address risks to financial 

stability before the Council would begin 

to consider a nonbank financial 

company for potential designation. The 

2019 Interpretive Guidance refers to the 

Council’s reliance on existing regulators 

as an ‘‘activities-based approach,’’ and 

provides that the Council will prioritize 

that approach before considering 

designations.7 The Council constantly 

works with federal and state financial 

regulatory agencies to identify, assess, 

and respond to risks to financial 

stability. Nearly all the Council 

members represent such agencies. Many 

of the Council’s statutory duties relate to 

promoting interagency collaboration, 

monitoring financial market 

developments, facilitating information 

sharing, and recommending that 

existing regulators address risks. These 

activities comprise the foundation of all 

the Council’s work, and under the 

Proposed Guidance the Council would 

continue to monitor for activities that 

pose risks to financial stability and to 

work with regulators to respond to those 

risks. Under the Proposed Guidance, the 

Council would maintain its previous 

commitment to engaging extensively 

with existing regulators. The Council 

considers dozens of potential risks to 

financial stability every year, as 

described in its annual reports, and the 

Council expects that most potential 

risks to financial stability will continue 

to be addressed by existing regulators 

rather than by use of the Council’s 

nonbank financial company designation 

authority. However, to enable the 

Council to use its authorities as 

appropriate, the Proposed Guidance 

would eliminate the statement in the 

2019 Interpretive Guidance that the 

Council would use an activities-based 

approach before considering a 

designation under section 113. 

The second fundamental change 

under the Proposed Guidance is that it 

is limited to the Council’s procedures— 

rather than substantive analyses— 

related to nonbank financial company 

designations. The Council is issuing, for 

public comment, a separate document 

explaining the Council’s broader 

approach to identifying, evaluating, and 

addressing potential risks to U.S. 

financial stability. The Proposed 

Analytic Framework describes the 

Council’s analytic approach without 

regard to the origin of a particular risk, 

including whether the risk arises from 

widely conducted activities or from 

individual entities. It provides new 

public transparency into how the 

Council expects to consider any type of 

risk to financial stability, regardless of 

which of the Council’s authorities may 

be used to address those risks. 

Therefore, the Council proposes to 

rescind the description, set forth in 

section III of the 2019 Interpretive 

Guidance, of the Council’s analytic 

approach to evaluating nonbank 

financial companies under 

consideration for designation. 

The third primary change under the 

Proposed Guidance, related to its focus 

on the Council’s procedures rather than 

substantive analyses, is that the 

Proposed Guidance does not include 

language, found in the 2019 Interpretive 

Guidance, stating that the Council 

would conduct a cost-benefit analysis 

and an assessment of the likelihood of 

a firm’s material financial distress prior 

to making a determination under section 

113. As explained in greater detail 

below, the Council believes that these 

steps are not required by the DoddFrank Act, are not useful or appropriate, 

and unduly hamper the Council’s ability 

to use the statutory authority Congress 

provided to it. 

With respect to the Council’s 

procedures for nonbank financial 

company designations and annual 

reevaluations of designations, the 

Proposed Guidance would make only 

minor changes. The revisions made in 

the 2019 Interpretive Guidance related 

to the Council’s procedures for nonbank 

financial company designations largely 

reflected the rules and guidance the 

Council had previously issued, 

including the 2015 Supplemental 

Procedures, as well as the Council’s 


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8 In accordance with the Council’s bylaws, the 

Council may delegate authority, including to its 

Deputies Committee, to implement and take any 

actions under the guidance, except with respect to 

actions that are expressly nondelegable under the 

Dodd-Frank Act, the Council’s bylaws, or the 

guidance. 

9The Council has long noted that the identified 

transmission channels are non-exhaustive. See 2019 

Interpretive Guidance, 84 FR 71763 (December 30, 

2019) (‘‘The transmission channels . . . set forth 

below are not exhaustive and may not apply to all 

nonbank financial companies under evaluation. 

. . . The Council may also consider other relevant 

channels through which risks could be transmitted 

from a particular nonbank financial company and 

thereby pose a threat to U.S. financial stability.’’); 

see also 2012 Interpretive Guidance, 77 FR 21637, 

21657 (April 11, 2012) (‘‘The Council intends to 

continue to evaluate additional transmission 

channels and may, at its discretion, consider other 

channels through which a nonbank financial 

company may transmit the negative effects of its 

material financial distress or activities and thereby 

pose a threat to U.S. financial stability.’’). 

10See 84 FR 71763 (December 30, 2019). The 

definition of this term in the 2019 Interpretive 

Guidance imposed a higher threshold than the 

Council’s previous interpretation of this term under 

the 2012 Interpretive Guidance. 11See also Dodd-Frank Act section 112(a)(2)(C) 

(setting forth the Council’s duty to ‘‘require 

[enhanced] supervision . . . for nonbank financial 

companies that may pose risks to . . . financial 

stability’’ (emphasis added)). 

practices in its previous designations. 

Among other things, the Proposed 

Guidance continues to provide for 

significant engagement and 

communication between the Council 

and a nonbank financial company under 

review for potential designation, and 

with the company’s primary financial 

regulatory agency or home-country 

supervisor. In addition to these existing 

features, the Proposed Guidance 

provides further detail on how the 

Council would identify nonbank 

financial companies for preliminary 

evaluation to assess the risks they could 

pose to U.S. financial stability. The 

Council believes that under these 

procedures, the designation process 

would be rigorous and transparent.8

B. Basis for Nonbank Financial 

Company Determinations 

Both the 2012 Interpretive Guidance 

and the 2019 Interpretive Guidance 

discussed substantive analytic factors 

the Council applies in its assessment of 

nonbank financial companies. The 

Proposed Guidance is instead limited to 

the Council’s procedures related to 

nonbank financial company 

designations and does not include a 

discussion of the Council’s substantive 

analyses of nonbank financial 

companies, like the description in 

section III of the 2019 Interpretive 

Guidance. The Proposed Guidance does 

not include that type of discussion 

because the Council is issuing a separate 

document—the Proposed Analytic 

Framework—apart from its guidance on 

nonbank financial company 

designations, regarding its approach for 

identifying and evaluating potential 

risks to U.S. financial stability. That 

framework describes the Council’s 

planned analytic approach without 

regard to either the origin of a particular 

risk, including whether the risk arises 

from widely conducted activities or 

from individual entities, or any 

potential application of the Council’s 

authorities to mitigate such risks. 

In particular, the 2019 Interpretive 

Guidance describes channels deemed 

most likely to facilitate the transmission 

of the negative effects of a nonbank 

financial company’s material financial 

distress, or of the nature, scope, size, 

scale, concentration, 

interconnectedness, or mix of the 

company’s activities, to other financial 

firms and markets; how the complexity 

and resolvability and existing regulatory 

scrutiny of a company under 

consideration for designation may affect 

the Council’s evaluation of the relevant 

statutory factors; and the Council’s 

interpretation of several statutory terms. 

For the reasons discussed below, these 

descriptions do not appear in the 

Proposed Guidance and would not be 

included in Appendix A to part 1310. 

History illustrates that many factors, 

such as leverage, liquidity risk, and 

operational risk, regularly recur in 

different forms and under different 

conditions to generate risks to financial 

stability, and the Proposed Analytic 

Framework describes vulnerabilities 

that commonly generate or exacerbate 

risks to financial stability and the 

mechanisms by which negative effects 

can be transmitted more broadly. The 

Council may consider those risk factors 

and transmission channels in activitiesbased reviews, entity-specific analyses, 

or other work.9 Accordingly, the 

Council believes that describing these 

substantive analytic approaches 

broadly, rather than in a context limited 

to nonbank financial company 

designations, is most appropriate. With 

respect to nonbank financial company 

designations specifically, the DoddFrank Act sets forth the standard for 

designations and certain specific 

considerations that the Council must 

take into account in making any 

determination under section 113. The 

Council will apply the statutory 

standard and considerations in any 

evaluation of a nonbank financial 

company for potential designation. 

The 2019 Interpretive Guidance also 

provides the Council’s interpretation of 

several statutory terms not defined in 

the Dodd-Frank Act, including 

‘‘company,’’ ‘‘nonbank financial 

company supervised by the Board of 

Governors,’’ and ‘‘material financial 

distress’’—that the Council proposes to 

retain and has incorporated into the 

Proposed Guidance. However, the 

Council believes the 2019 Interpretive 

Guidance’s interpretation of ‘‘threat to 

the financial stability of the United 

States’’ as meaning ‘‘the threat of an 

impairment of financial intermediation 

or of financial market functioning that 

would be sufficient to inflict severe 

damage on the broader economy’’ 10 is 

inappropriate. That definition, which 

requires the Council to determine that 

the economy ‘‘would’’ be severely 

damaged, contrasts sharply with the 

statutory standard under section 113 of 

the Dodd-Frank Act, which calls on the 

Council to determine whether there 

‘‘could’’ be a threat to financial 

stability.11 Moreover, the Council’s 

statutory purpose ‘‘to respond to 

emerging threats to the stability of the 

United States financial system’’ 

indicates that the Council must address 

threats that may impair the financial 

system before they are realized. The 

nature of financial crises is that the 

precise severity of harm posed by 

emerging threats may not be apparent 

until it is too late. Accordingly, the 

Proposed Guidance does not include 

this definition. For purposes of analyses 

under section 113, the Council would 

expect to evaluate a ‘‘threat to the 

financial stability of the United States’’ 

with reference to the description of 

financial stability provided in the 

Proposed Analytic Framework. 

Questions for Comment 

1. Does the proposal described above 

not to include in the interpretive 

guidance a description of the Council’s 

substantive analytic approach to 

evaluating nonbank financial companies 

in the context of a designation under 

section 113 of the Dodd-Frank Act, in 

favor of a separate framework that 

describes the Council’s analytic 

approach without regard to the origin of 

a particular risk or the authority the 

Council may use to mitigate such risk, 

allow the Council to achieve its 

statutory purposes? Should the 

Council’s proposed approach be 

modified for other considerations? 

2. Are there additional statutory terms 

beyond ‘‘company,’’ ‘‘nonbank financial 

company supervised by the Board of 

Governors,’’ and ‘‘material financial 

distress’’ for which the Council should 

set forth its interpretation in the 

Proposed Guidance? 

3. Would the Council’s elimination of 

the 2019 Interpretive Guidance’s 


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12See, e.g., FSOC, 2022 Annual Report (2022), 

available at https://home.treasury.gov/system/files/ 

261/FSOC2022AnnualReport.pdf. 

interpretation of ‘‘threat to the financial 

stability of the United States’’ as 

meaning ‘‘the threat of an impairment of 

financial intermediation or of financial 

market functioning that would be 

sufficient to inflict severe damage on the 

broader economy’’ enable it to achieve 

its statutory purposes? When the 

Council interprets the statutory phrase 

‘‘threat to the financial stability of the 

United States,’’ are there additional 

factors it should consider? 

C. Activities-Based Approach 

The 2019 Interpretive Guidance states 

that the Council will prioritize its efforts 

to identify, assess, and address potential 

risks and threats to U.S. financial 

stability through a process that begins 

with an ‘‘activities-based approach,’’ 

and that the Council will pursue entityspecific determinations under section 

113 of the Dodd-Frank Act only if a 

potential risk or threat cannot be 

adequately addressed through an 

activities-based approach. As explained 

in the 2019 Interpretive Guidance, an 

activities-based approach means an 

approach in which the Council seeks to 

address potential risks to financial 

stability using an authority other than 

nonbank financial company 

designations. 

The Proposed Guidance removes this 

prioritization among the Council’s 

authorities, clarifying that the Council 

may use any of its statutory authorities, 

as appropriate, to address risks and 

threats to U.S. financial stability. As 

noted above, the Council will continue 

to monitor for activities that pose risks 

to financial stability and work with 

regulators to respond to those risks. 

Appropriate actions to respond to a 

particular risk depend on the nature of 

the risk. For example, vulnerabilities 

originating from activities that are 

widely conducted in a particular sector 

or market may be well-suited for 

activity-based or industry-wide 

regulation. In contrast, where distress at 

one entity could threaten financial 

stability, or where risks arising from a 

particular financial company could 

threaten financial stability, entity-based 

regulation may be appropriate. The 

Dodd-Frank Act gives the Council a 

range of authorities and broad discretion 

to determine how to respond to 

potential threats to U.S. financial 

stability. The Council stated in the 2019 

Interpretive Guidance that it intended to 

use a prioritization scheme found 

nowhere in the Dodd-Frank Act, under 

which the Council would generally seek 

to use certain of its authorities before 

others. Consistent with the Council’s 

statutory purpose to respond to 

emerging threats to U.S. financial 

stability, the Proposed Guidance would 

remove this prioritization, allowing the 

Council the flexibility to use the most 

appropriate tool for addressing potential 

risks. For example, the Proposed 

Guidance makes clear that the Council 

could consider using its section 113 

designation authority when material 

financial distress at a nonbank financial 

company, or the nature, scope, size, 

scale, concentration, 

interconnectedness, or mix of the 

activities of a nonbank financial 

company, could pose a threat to U.S. 

financial stability, as appropriate, 

without first needing to consider other 

approaches. 

The Council’s history provides 

instructive examples of the Council’s 

use of different authorities and 

approaches for different types of risks. 

For example, the Council has taken an 

activities-based approach in 

recommending actions to address risks 

relating to crypto-assets, climate-related 

financial risks, and other topics. In 

2012, the Council used an activitiesbased approach in issuing for public 

comment proposed recommendations 

for money market mutual fund reforms. 

Further, all of the Council’s annual 

reports have identified and 

recommended actions regarding various 

risks to U.S. financial stability,12 many 

in the form of an activities-based 

approach. The Council has also used 

entity-specific approaches in 

designating eight financial market 

utilities under Title VIII of the DoddFrank Act and in designating four 

nonbank financial companies in 2013 

and 2014 under section 113 of the 

Dodd-Frank Act. 

Financial crises have illustrated the 

importance of ensuring that the Council 

can exercise its authorities as needed. 

For example, the 2007–09 financial 

crisis showed that material financial 

distress at a small number of large, 

interconnected, and highly leveraged 

nonbank financial companies could 

threaten the stability of the U.S. 

financial system. Based in part on that 

experience, Congress created the 

Council and gave it a mandate to 

address risks that arise in the future. 

Under the Proposed Guidance, the 

Council would retain flexibility to 

address risks and threats to U.S. 

financial stability using whichever 

authorities are appropriate for the 

circumstances. 

Consistent with the modifications 

described above, the Proposed Guidance 

provides additional detail on how the 

Council would identify nonbank 

financial companies for preliminary 

evaluation to assess the risks they could 

pose to U.S. financial stability (referred 

to as ‘‘Stage 1’’). The 2019 Interpretive 

Guidance, in accordance with the 

activities-based approach, provided that 

the Council could evaluate a company 

for designation if a company’s primary 

financial regulatory agency did not 

adequately address a potential risk 

identified by the Council. The Proposed 

Guidance instead explains the process 

by which the Council’s staff-level 

committees would preliminarily 

identify and assess potential risks to 

U.S. financial stability using the 

analytical methods described in the 

Council’s separately issued Proposed 

Analytic Framework. This approach 

seeks to strengthen the Council’s ability 

to monitor, assess, and mitigate risks to 

U.S. financial stability, regardless of 

whether those risks originate from 

individual companies or widely 

conducted activities, while providing 

flexibility for the Council to adapt to 

circumstances that may rapidly evolve. 

Questions for Comment 

4. Would removal of the prioritization 

of the ‘‘activities-based approach’’ from 

the interpretive guidance enable the 

Council to achieve its statutory 

purposes? Should the Council’s 

proposed approach be modified for 

other considerations? 

5. Are there additional steps the 

Council should take to ensure all of its 

authorities for addressing potential risks 

to U.S. financial stability are equally 

available and appropriately exercised? 

6. Would the proposed staff-level 

process for identifying nonbank 

financial companies for preliminary 

evaluation enable the Council to achieve 

its statutory purposes? Does the 

Proposed Guidance identify the 

appropriate procedures the Council 

should follow as it considers a company 

for potential designation? Are there 

other means of identifying companies 

for preliminary review the Council 

should consider, such as the application 

of specific metrics for different sectors 

of the nonbank financial system? 

7. If the Council were to establish a 

set of uniform quantitative metrics to 

identify nonbank financial companies 

for further evaluation, as it did through 

the Stage 1 thresholds in the 2012 

Interpretive Guidance, what metrics 

should the Council consider? 

D. Cost-Benefit Analysis and Likelihood 

of Material Financial Distress 

The 2019 Interpretive Guidance 

states, ‘‘The Council will make a 

determination under section 113 only if 


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13 12 U.S.C. 5323(a)(1). 

14 Id. 5323(a)(2). 

15 Dodd-Frank Act section 113(a)(2)(K), 12 U.S.C. 

5323(a)(2)(K). 

16The U.S. District Court for the District of 

Columbia held that the Council should have 

considered the potential costs of designation before 

designating MetLife, Inc. under section 113, but the 

Court’s reasoning assumes that a company’s 

likelihood of material financial distress is itself a 

required consideration under the Council’s 

guidance in effect at that time. See MetLife Inc. v. 

Financial Stability Oversight Council (MetLife), 177 

F. Supp. 3d 219, 239–42 (D.D.C. 2016) (discussing 

company’s argument that ‘‘imposing billions of 

dollars in cost could actually make MetLife more 

vulnerable to distress’’). The government appealed 

the district court’s decision in 2016, but agreed to 

dismiss its appeal in 2018. In the final settlement 

agreement between the Council and MetLife, the 

Council maintained that its designation of MetLife 

complied with applicable law. In the agreement 

MetLife expressly waived any right to argue that the 

cost-benefit portion of the district court’s opinion 

had any preclusive effect in any future proceeding 

before the Council or in any subsequent litigation. 

Under the Proposed Guidance, the likelihood of a 

company’s material financial distress would not be 

a consideration in a designation under section 113. 

17See also Dodd-Frank Act section 112, 12 U.S.C. 

5322(a)(2)(H) (providing that ‘‘[t]he Council shall 

. . . require supervision by the Board of Governors 

for nonbank financial companies that may pose 

risks to the financial stability of the United States 

in the event of their material financial distress or 

failure, or because of their activities . . .’’ 

(emphasis added)). 

18 In its MetLife decision, the U.S. District Court 

for the District of Columbia held that the Council’s 

failure to assess the likelihood of MetLife’s material 

financial distress was contrary to the 2012 

Interpretive Guidance. 177 F. Supp. 3d at 233–39. 

This prong of the District Court’s holding would not 

apply under the Proposed Guidance, which does 

not require any such assessment. 

19 12 U.S.C. 5323(a)(1). 

the expected benefits to financial 

stability from Federal Reserve 

supervision and prudential standards 

justify the expected costs that the 

determination would impose. As part of 

this analysis, the Council will assess the 

likelihood of a firm’s material financial 

distress, in order to assess the extent to 

which a determination may promote 

U.S. financial stability.’’ The Proposed 

Guidance does not include this 

language, as discussed below. 

Cost-Benefit Analysis. The DoddFrank Act does not require a cost-benefit 

analysis prior to the designation of a 

nonbank financial company under 

section 113. Rather, the statute instructs 

the Council to designate a nonbank 

financial company if the Council 

‘‘determines that material financial 

distress at the U.S. nonbank financial 

company, or the nature, scope, size, 

scale, concentration, 

interconnectedness, or mix of the 

activities of the U.S. nonbank financial 

company, could pose a threat to the 

financial stability of the United 

States.’’ 13 Subsection 113(a)(2) of the 

Dodd-Frank Act lists 10 factors the 

Council must consider when making a 

determination, such as the company’s 

leverage, transactions with other 

financial companies, assets under 

management, and existing regulation.14

The costs and benefits of a 

designation are not listed considerations 

in the statute and are not similar to any 

of the listed considerations. The statute 

is clear that the only required 

considerations are related to the 

potential impact the company’s material 

financial distress or activities could 

pose to U.S. financial stability. While 

Congress granted the Council discretion 

to consider other factors it ‘‘deems 

appropriate,’’ these too must be ‘‘riskrelated.’’ 15 The Council acknowledges 

that there may be costs associated with 

a designation or the resulting Federal 

Reserve supervision; however the 

Council does not consider the potential 

cost of a designation or of the resulting 

Federal Reserve supervision and 

prudential standards to be a ‘‘riskrelated factor.’’ The Council believes 

that the statutory reference to a ‘‘riskrelated factor’’ instead should be 

interpreted, consistent with the 

statutory standard for designation and 

the expressly enumerated 

considerations, as meaning a factor 

related to the risk to U.S. financial 

stability posed by the company or the 

company’s activities.16 Moreover, costs 

incurred by a designated nonbank 

financial company to comply with 

prudential standards established by the 

Federal Reserve would not increase the 

risk posed by the company or its 

activities because they are incurred for 

the purpose of increasing the safety and 

soundness of the company. For 

example, risk-based capital 

requirements, leverage limits, or 

liquidity requirements would reduce the 

risk the company poses to the financial 

system. 

The text of section 113 indicates that 

Congress itself determined that the 

potential costs of designation are 

outweighed by the benefits—mitigating 

risks to financial stability—if the 

company meets the statutory standard, 

based on the considerations Congress 

identified. That is, Congress’s legislative 

judgment was that if, based on the 

Council’s consideration of the factors 

listed in section 113, a nonbank 

financial company ‘‘could pose a threat 

to the financial stability of the United 

States,’’ then the benefits of a 

designation outweigh the costs.17

Further, even if the potential cost of 

designation were a ‘‘risk-related factor,’’ 

the Council does not believe that 

prescribing a cost-benefit analysis prior 

to a determination under section 113 is 

useful or appropriate. This is in part 

because it is not feasible to estimate 

with any certainty the likelihood, 

magnitude, or timing of a future 

financial crisis. The costs imposed by 

the potential failure of a nonbank 

financial company will depend on the 

state of the economy and financial 

system at the time. The benefits of 

designation are potentially enormous 

and, in many respects, incalculable, 

representing the tangible and intangible 

gains that come from averting a 

financial crisis and economic 

catastrophe. The costs of any particular 

future financial crisis, and thus the 

benefits of its prevention through 

designation or other measures, cannot 

be predicted. Even estimates of the costs 

of past crises, in terms of reductions in 

gross domestic product, greater 

government expenses, increases in 

unemployment, or other factors, vary 

widely but can be measured in the 

trillions of dollars. Moreover, the DoddFrank Act directs the Federal Reserve to 

adopt regulatory requirements 

applicable to a designated nonbank 

financial company. The cost to a 

company of designation will depend 

critically on the applicable regulatory 

regime. Generally, specific regulatory 

requirements for designated nonbank 

financial companies have been 

determined after the designation, in 

order to enable the requirements to be 

appropriately tailored to risks posed by 

the company. As such, evaluating the 

potential costs and benefits of a 

designation with reasonable specificity 

is not possible before a designation, and 

it is unlikely that performing a costbenefit analysis for a nonbank financial 

company would yield a balanced 

picture. 

Likelihood of Material Financial 

Distress. Under the Proposed Guidance, 

the Council would not assess the 

likelihood of a company’s material 

financial distress in considering a 

nonbank financial company under 

section 113. Similar to the language 

regarding a cost-benefit analysis, the 

Council does not believe an assessment 

of the likelihood of a company’s 

material financial distress is required or 

appropriate.18

The Dodd-Frank Act charges the 

Council with designating a company 

under section 113 if it ‘‘determines that 

material financial distress at the U.S. 

nonbank financial company . . . could 

pose a threat to the financial stability of 

the United States.’’ 19 Under this first 

prong of the statutory determination 

standard, the Council is instructed to 

determine whether material financial 


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20 12 U.S.C. 5322(a)(2)(H). 

21The Council for many years consistently 

expressed the view that the 2012 Interpretive 

Guidance did not contemplate the consideration of 

the likelihood of a nonbank financial company’s 

material financial distress. The 2019 Interpretive 

Guidance altered the Council’s approach. The 

Proposed Guidance would conform to the Council’s 

original understanding that this factor should not be 

taken into account. 

22See Dodd-Frank Act section 112(a)(1)(c), 12 

U.S.C. 5322(a)(1)(c). 

23Financial Crisis Inquiry Commission, The 

Financial Crisis Inquiry Report at 324 (2011), 

available at https://www.govinfo.gov/content/pkg/ 

GPO-FCIC/pdf/GPO-FCIC.pdf. 

24 Id. 

25See, for example, Dodd-Frank Act sections 

112(a)(2), 113, 115, 120, 804, 12 U.S.C. 5322(a)(2), 

5323, 5325, 5330, 5463. 

26Courts have recognized that ‘‘an agency 

charged with a duty to enforce or administer a 

statute has inherent authority to issue interpretive 

rules informing the public of the procedures and 

standards it intends to apply in exercising its 

discretion.’’ See, for example, Production Tool v. 

Employment & Training Administration, 688 F.2d 

1161, 1166 (7th Cir. 1982). The Supreme Court has 

acknowledged that ‘‘whether or not they enjoy any 

express delegation of authority on a particular 

question, agencies charged with applying a statute 

necessarily make all sorts of interpretive choices.’’ 

See U.S. v. Mead, 533 U.S. 218, 227 (2001). 

27See Dodd-Frank Act section 111(e)(2), 12 U.S.C. 

5321(e)(2). 

28See Association of Flight Attendants-CWA, 

AFL–CIO v. Huerta, 785 F.3d 710 (D.C. Cir. 2015). 

distress at the company could pose a 

threat to U.S. financial stability. Thus, 

pursuant to section 113, the Council 

presupposes a company’s material 

financial distress, and then evaluates 

what consequences could follow for 

U.S. financial stability. The first 

determination standard, by its terms, 

does not require the Council first to 

analyze the likelihood of a company 

experiencing material financial distress 

before determining whether such 

distress could threaten U.S. financial 

stability. Section 112 of the Dodd-Frank 

Act further underscores the statutory 

standard, making clear that the 

Council’s duty is to designate nonbank 

financial companies that could threaten 

U.S. financial stability ‘‘in the event of 

their material financial distress or 

failure’’—not based on the Council’s 

estimation of the likelihood of such 

distress or failure.20 Therefore, the 

language in the 2019 Interpretive 

Guidance regarding this factor fits 

poorly with the statutory standard.21

Further, the designation authority in 

section 113 is preventative and is meant 

to ‘‘respond to emerging threats to the 

stability of the United States financial 

system,’’ consistent with the Council’s 

purpose.22 Waiting to act until there is 

a reasonable likelihood of a company’s 

failure would negate the purpose of the 

Council’s designation authority, which 

is to mitigate risks before they threaten 

financial stability. The designation 

process under the Proposed Guidance 

would be a time-intensive exercise, and 

even once a company is designated, the 

Federal Reserve may then need to 

develop and implement prudential 

standards for the company. Such 

prudential standards, which may 

include capital and liquidity 

requirements, risk-management 

standards, and the development of 

resolution plans, are intended to 

prevent or mitigate risks to financial 

stability. For these tools to be most 

effective, they must be in place well 

before material financial distress 

appears to be likely. 

There are good reasons that Congress 

chose not to require the Council to 

determine the likelihood of a nonbank 

financial company’s material financial 

distress. A financial company can go 

from seemingly healthy to in danger of 

imminent collapse in a matter of 

months, weeks, or even days. For 

example, at the end of August 2008, 

Lehman Brothers had reported 

shareholder equity—which is a measure 

of solvency—of $28 billion.23 On 

September 12, 2008 ‘‘experts from the 

country’s biggest commercial 

investment banks . . . could not agree 

whether or not’’ Lehman Brothers was 

solvent.24 Only two days later, on 

Monday, September 14, 2008, Lehman 

Brothers declared bankruptcy. The 

failures of Silicon Valley Bank and 

Signature Bank in March 2023 further 

underscored how quickly and 

unexpectedly an institution can become 

insolvent. For designation to strengthen 

the financial system, it must be 

deployed early enough that companies 

have time to take actions to bolster their 

safety and soundness, which in turn 

supports financial stability—something 

that can take several years. 

Finally, if designation requires an 

assessment of the likelihood of material 

financial distress at the company, public 

awareness of designation (or its mere 

possibility) could create a run on the 

company by its creditors and 

counterparties. This is an important 

reason why bank supervisory ratings are 

confidential, in acknowledgement of the 

risk that disclosure of material issues at 

a company could trigger a run on the 

company. Thus, a designation that 

includes an assessment of the likelihood 

of material financial distress at the 

company could accelerate the 

company’s demise and thereby threaten 

financial stability and undermine the 

purpose of the designation. 

Questions for Comment 

8. Does the Council’s proposal 

described above to remove from the 

interpretive guidance provisions the 

discussion of the Council conducting a 

cost-benefit analysis and assessing the 

likelihood of a company’s material 

financial distress allow the Council to 

achieve its statutory purposes? Should 

the Council’s proposed approach be 

modified for other considerations? 

9. Are there additional points the 

Council should consider regarding the 

usefulness, practicality, or feasibility of 

conducting a cost-benefit analysis 

regarding the designation of a company 

under section 113? 

10. What data or factors should the 

Council consider in evaluating the 

potential risk to U.S. financial stability 

that could be posed by the failure of a 

company, should that company 

experience material financial distress? 

11. If the Council were to identify a 

nonbank financial company as likely to 

experience material financial distress, 

what, if any, effects would such 

identification have when it became 

public knowledge? 

III. Legal Authority of Council and 

Status of the Proposed Guidance 

The Council has numerous authorities 

and tools under the Dodd-Frank Act to 

carry out its statutory purposes.25 The 

Council expects that its response to any 

potential risk or threat to U.S. financial 

stability will be based on an assessment 

of the circumstances. As the agency 

charged by Congress with broad-ranging 

responsibilities under sections 112 and 

113 of the Dodd-Frank Act, the Council 

has the inherent authority to promulgate 

interpretive guidance under those 

provisions that explains and interprets 

the steps the Council will take when 

undertaking the determination 

process.26 The Council also has 

authority to issue procedural rules 27

and policy statements.28 The Proposed 

Guidance provides transparency to the 

public as to how the Council intends to 

exercise its statutory grant of 

discretionary authority. Except to the 

extent that the Proposed Guidance sets 

forth rules of agency organization, 

procedure, or practice, the Council has 

concluded that the Proposed Guidance 

does not have binding effect; does not 

impose duties on, or alter the rights or 

interests of, any person; does not change 

the statutory standards for the Council’s 

decision making; and does not relieve 

the Council of the need to make entityspecific determinations in accordance 

with section 113 of the Dodd-Frank Act. 

The Proposed Guidance also does not 

limit the ability of the Council to take 

emergency action under section 113(f) 

of the Dodd-Frank Act if the Council 

determines that such action is necessary 


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29See 5 U.S.C. 553(b)(A); 12 CFR 1310.3. 

30Section 1310.3 does not apply to the Council’s 

issuance of rules, guidance, procedures, or other 

documents that do not amend or rescind Appendix 

A. Thus, other Council materials, and documents 

that are referred to in but are not a part of the 

Proposed Guidance, such as the Council’s 

separately issued Proposed Analytic Framework, 

hearing procedures, bylaws, and committee 

charters, are not subject to section 1310.3’s 

requirements. 

31See Dodd-Frank Act section 113, 12 U.S.C. 

5323. 

or appropriate to prevent or mitigate 

threats posed by a nonbank financial 

company to U.S. financial stability. As 

a result, the Council has concluded that 

the notice and comment requirements of 

the Administrative Procedure Act 

would not apply.29 However, under the 

Council’s rule in 12 CFR 1310.3, the 

Council voluntarily committed that it 

would not amend or rescind Appendix 

A to part 1310 without providing the 

public with notice and an opportunity 

to comment in accordance with the 

procedures applicable to legislative 

rules under 5 U.S.C. 553.30

Consequently, the Council invites 

interested persons to submit comments 

regarding the Proposed Guidance. 

IV. Paperwork Reduction Act 

The Proposed Guidance is not 

expected to alter the collections of 

information previously reviewed and 

approved by the Office of Management 

and Budget in accordance with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3507(d)) under control number 

1505–0244. Nonetheless, the Council 

provides the estimated burdens of the 

information collections associated with 

the Proposed Guidance and invites 

comments below. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a valid 

control number assigned by the Office of 

Management and Budget. 

The collection of information under 

the Proposed Guidance is found in 12 

CFR 1310.20–23. 

The hours and costs associated with 

preparing data, information, and reports 

for submission to the Council constitute 

reporting and cost burdens imposed by 

the collection of information. The 

estimated total annual reporting burden 

associated with the collection of 

information in the Proposed Guidance is 

20 hours, based on an estimate of 1 

respondent. We estimate the cost 

associated with this information 

collection to be $9,000. 

In making this estimate, the Council 

estimates that due to the nature of the 

information likely to be requested, 

approximately 75 percent of the burden 

in hours will be carried by financial 

companies internally at an average cost 

of $400 per hour, and the remainder 

will be carried by outside professionals 

retained by financial companies at an 

average cost of $600 per hour. In 

addition, in determining these 

estimates, the Council considered its 

obligation under 12 CFR 1310.20(b) to, 

whenever possible, rely on information 

available from the Office of Financial 

Research or any Council member agency 

or primary financial regulatory agency 

that regulates a nonbank financial 

company before requiring the 

submission of reports from such 

nonbank financial company. The 

Council expects that its collection of 

information under the Proposed 

Guidance would be performed in a 

manner that attempts to minimize 

burdens for affected financial 

companies. The aggregate burden will 

be subject to the number of financial 

companies that are evaluated in the 

determination process, the extent of 

information regarding such companies 

that is available to the Council through 

existing public and regulatory sources, 

and the amount and types of 

information that financial companies 

provide to the Council. 

Interested persons are invited to 

submit comments regarding the 

estimates provided in this section. 

Comments on the collection of 

information should be sent to the Office 

of Management and Budget, Attn: Desk 

Officer for the Financial Stability 

Oversight Council, Office of Information 

and Regulatory Affairs, Washington, DC 

20503, with copies to Samantha 

MacInnis, Department of the Treasury, 

Washington, DC 20220. Comments on 

the collection of information must be 

received by June 27, 2023. 

Comments are specifically requested 

concerning: 

(1) Whether the proposed collection 

of information is necessary for the 

proper performance of the functions of 

the Council, including whether the 

information will have practical utility; 

(2) The accuracy of the estimated 

burden associated with the proposed 

collection of information; 

(3) How the quality, utility, and 

clarity of the information to be collected 

may be enhanced; 

(4) How the burden of complying with 

the proposed collection of information 

may be minimized, including through 

the application of automated collection 

techniques or other forms of information 

technology; and 

(5) Estimates of capital or start-up 

costs and costs of operation, 

maintenance, and purchase of services 

to provide information. 

V. Executive Orders 12866, 13563, and 

14094 

Executive Orders 12866, 13563 and 

14094 direct certain agencies to assess 

costs and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Pursuant to section 3(f) of 

Executive Order 12866, the Office of 

Information and Regulatory Affairs 

within the Office of Management and 

Budget has determined that the 

Proposed Guidance is a ‘‘significant 

regulatory action’’. Accordingly, the 

Proposed Guidance has been reviewed 

by the Office of Management and 

Budget. 

List of Subjects in 12 CFR Part 1310 

Brokers, Investments, Securities. 

The Financial Stability Oversight 

Council proposes to amend 12 CFR part 

1310 as follows: 

PART 1310—AUTHORITY TO REQUIRE 

SUPERVISION AND REGULATION OF 

CERTAIN NONBANK FINANCIAL 

COMPANIES 

■ 1. The authority citation for part 1310 

continues to read as follows: 

Authority: 12 U.S.C. 5321; 12 U.S.C. 5322; 

12 U.S.C. 5323. 

■ 2. Appendix A is revised to read as 

follows: 

Appendix A to Part 1310—Financial 

Stability Oversight Council Guidance 

for Nonbank Financial Company 

Determinations 

I. Introduction 

Section 113 of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (the 

Dodd-Frank Act) 31 authorizes the Financial 

Stability Oversight Council (the Council) to 

determine that a nonbank financial company 

will be supervised by the Board of Governors 

of the Federal Reserve System (the Federal 

Reserve Board) and be subject to prudential 

standards, in accordance with Title I of the 

Dodd-Frank Act, if either (1) the Council 

determines that material financial distress at 

the nonbank financial company could pose a 

threat to U.S. financial stability, or (2) the 

nature, scope, size, scale, concentration, 

interconnectedness, or mix of the activities of 

the nonbank financial company could pose a 

threat to U.S. financial stability. Section 113 

of the Dodd-Frank Act lists the 

considerations that the Council must take 

into account in making a determination. This 

guidance supplements the Council’s rule 


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32See 12 CFR part 1310. 

33The Council may waive or modify this process 

in its discretion if it determines that emergency 

circumstances exist, including if necessary or 

appropriate to prevent or mitigate threats posed by 

a nonbank financial company to U.S. financial 

stability in accordance with section 113(f) of the 

Dodd-Frank Act. 

34The Council intends to interpret the term 

‘‘company’’ to include any corporation, limited 

liability company, partnership, business trust, 

association, or similar organization. See DoddFrank Act section 102(a)(4), 12 U.S.C. 5311(a)(4). In 

addition, the Council intends to consider any 

nonbank financial company to be subject to a final 

determination of the Council if the company 

acquires, directly or indirectly, a majority of the 

assets or liabilities of a company that is subject to 

a final determination of the Council. As a result, if 

a nonbank financial company subject to a final 

determination of the Council sells or otherwise 

transfers a majority of its assets or liabilities, the 

acquirer will succeed to, and become subject to, the 

Council’s determination. As discussed in section III 

below, a nonbank financial company that is subject 

to a final determination of the Council may request 

a reevaluation of the determination before the next 

required annual reevaluation, in an appropriate 

case. Such an acquirer can use this reevaluation 

process to seek a rescission of the determination 

upon consummation of its transaction. 

35See Dodd-Frank Act section 2(12), 12 U.S.C. 

5301(12). In each stage of the Council’s process 

under section 113 of the Dodd-Frank Act, the 

Council may also consult with, solicit information 

from, or coordinate with other state or federal 

financial regulatory agencies that have jurisdiction 

over the nonbank financial company or its 

activities. 

36See Dodd-Frank Act section 112(d)(3), 12 

U.S.C. 5322(d)(3). 

37See 12 CFR 1310.21(c). 

38The Council’s Deputies Committee is 

composed of senior officials from each Council 

member and member agency. See Bylaws of the 

Deputies Committee of the Financial Stability 

Oversight Council, available at https://fsoc.gov. 

39The Nonbank Designations Committee supports 

the Council in fulfilling the Council’s 

responsibilities to consider, make, and review 

Council determinations regarding nonbank 

financial companies under section 113 of the DoddFrank Act. See Charter of the Nonbank Financial 

Companies Designations Committee of the 

Financial Stability Oversight Council, available at 

https://fsoc.gov. 

regarding nonbank financial company 

determinations.32

Section II of this appendix outlines a twostage process that the Council generally 

expects to follow when determining whether 

to subject a nonbank financial company to 

Federal Reserve Board supervision and 

prudential standards.33 Section III sets forth 

the process the Council expects to follow in 

conducting reevaluations of its previous 

determinations. 

II. Process for Nonbank Financial Company 

Determinations 

Under section 113 of the Dodd-Frank Act, 

the Council may evaluate a nonbank 

financial company 34 for an entity-specific 

determination. This section describes the 

process the Council expects to follow in 

general for those reviews. 

a. Overview of the Determination Process 

As described in detail below, the Council 

expects generally to follow a two-stage 

process of evaluation and analysis when 

evaluating a nonbank financial company 

under section 113 of the Dodd-Frank Act. 

During the first stage of the process (Stage 1), 

a nonbank financial company identified for 

review will be notified and subject to a 

preliminary analysis, based on quantitative 

and qualitative information available to the 

Council primarily through public and 

regulatory sources. During Stage 1, the 

Council will permit, but not require, the 

company to submit relevant information. The 

Council will also consult with the company’s 

primary financial regulatory agency 35 or 

home country supervisor, as appropriate. 

This approach will enable the Council to 

fulfill its statutory obligation to rely 

whenever possible on information available 

through the Office of Financial Research (the 

OFR), Council member agencies, or the 

nonbank financial company’s primary 

financial regulatory agencies before requiring 

the submission of reports from any nonbank 

financial company.36

Following Stage 1, any nonbank financial 

company that is selected for additional 

review will receive notice that it is being 

considered for a proposed determination that 

the company will be supervised by the 

Federal Reserve Board and be subject to 

prudential standards under Title I of the 

Dodd-Frank Act (a Proposed Determination) 

and that the company will be subject to indepth evaluation during the second stage of 

review (Stage 2). Stage 2 will also involve the 

evaluation of additional information 

collected directly from the nonbank financial 

company. At the end of Stage 2, the Council 

may consider whether to make a Proposed 

Determination with respect to the nonbank 

financial company. If the Council makes a 

Proposed Determination, the nonbank 

financial company may request a hearing in 

accordance with section 113(e) of the DoddFrank Act and § 1310.21(c) of the Council’s 

rule regarding nonbank financial company 

determinations.37 After making a Proposed 

Determination and holding any written or 

oral hearing if requested, the Council may 

vote to make a final determination (a Final 

Determination). 

b. Stage 1: Preliminary Evaluation of 

Nonbank Financial Companies 

Stage 1 involves a preliminary analysis of 

nonbank financial companies to assess the 

risks they could pose to U.S. financial 

stability. In light of the preliminary nature of 

a review in Stage 1, the Council expects that 

not all companies reviewed in Stage 1 will 

proceed to Stage 2 or a Final Determination. 

Identification of Company for Review in 

Stage 1 

The Council may evaluate one or more 

individual nonbank financial companies for 

an entity-specific determination under 

section 113 of the Dodd-Frank Act. The 

Council’s staff-level committees are 

responsible for monitoring and analyzing 

financial markets, financial companies, the 

financial system, and issues related to 

financial stability. These committees monitor 

a broad range of asset classes, institutions, 

and activities, as described in the Council’s 

Framework for Financial Stability Risk 

Identification, Assessment, and Response 

(the Analytic Framework), and as reflected in 

the Council’s annual reports. In assessing 

potential risks, these committees consider the 

vulnerabilities and types of metrics described 

in the Analytic Framework. These 

committees, in the course of their duties, will 

monitor each sector of the financial system 

at least annually and will report to the 

Deputies Committee 38 regarding potential 

risks to U.S. financial stability that they 

identify. With respect to these monitoring 

and reporting activities, the Council’s 

Systemic Risk Committee is responsible for 

monitoring and reporting on each financial 

sector, including information on identified 

firms and activities that may pose risks that 

merit further review, unless another Council 

committee or working group provides such 

updates to the Deputies Committee on a 

particular sector. The updates to the Deputies 

Committee will use applicable metrics as 

described in the Analytic Framework. The 

Deputies Committee is responsible for 

directing, coordinating, and overseeing the 

work of the Systemic Risk Committee and all 

of the Council’s other staff-level committees 

and working groups in accordance with this 

guidance. If an identified risk relates to one 

or more financial companies that may merit 

review in the context of a potential 

determination under section 113, the Council 

may review those companies in Stage 1. 

Alternatively, the Deputies Committee may 

direct a staff-level committee or working 

group to further assess the identified risks, 

including consideration of whether the risks 

could be addressed by a designation under 

section 113 or by use of a different Council 

authority, such as recommendations to 

existing regulators. The Deputies Committee 

may also direct the Council’s Nonbank 

Financial Companies Designations 

Committee (the Nonbank Designations 

Committee) 39 to conduct an initial analysis 

of the companies based on the riskassessment approach described in the 

Analytic Framework. The purpose of such an 

analysis by the Nonbank Designations 

Committee would be to further inform the 

determination regarding whether one or more 

companies should be reviewed in Stage 1, if 

needed. Following any such analysis by the 

Nonbank Designations Committee, the 

Council may review one or more companies 

in Stage 1. Any Council committee’s 

identification, reporting, direction, analysis, 

or recommendation described in this 

paragraph will be made in accordance with 

such committee’s bylaws or charter. 

When evaluating the potential risks 

associated with a nonbank financial 

company, the Council may consider the 

company and its subsidiaries separately or 

together. This approach enables the Council 

to consider potential risks arising across the 

entire organization, while retaining the 

ability to make a determination regarding 

either the parent or any individual nonbank 

financial company subsidiary (or neither), 

depending on which entity the Council 

determines could pose a threat to financial 

stability. 


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26242 Federal Register / Vol. 88, No. 82 / Friday, April 28, 2023 / Proposed Rules 

40 Dodd-Frank Act section 113(g), 12 U.S.C. 

5323(g). 

41The Council intends to interpret the term 

‘‘material financial distress’’ as a nonbank financial 

company being in imminent danger of insolvency 

or defaulting on its financial obligations. 

42See 12 CFR 1310.21(a). 

43See Dodd-Frank Act section 112(d), 12 U.S.C. 

5322(d). 

Engagement With Company and Regulators 

in Stage 1 

The Council will provide a notice to any 

nonbank financial company under review in 

Stage 1 no later than 60 days before the 

Council votes on whether to evaluate the 

company in Stage 2. In Stage 1, the Council 

will consider available public and regulatory 

information. In order to reduce the burdens 

of review on the company, the Council will 

not require the company to submit 

information during Stage 1; however, a 

company under review in Stage 1 may 

submit to the Council any information 

relevant to the Council’s evaluation and may, 

upon request, meet with staff of Council 

members and member agencies who are 

leading the Council’s analysis. The Council 

may request a page-limited summary of the 

company’s submissions. In addition, staff 

representing the Council will, upon request, 

provide the company with a list of the 

primary public sources of information being 

considered during the Stage 1 analysis, so 

that the company has an opportunity to 

understand the information the Council may 

rely upon during Stage 1. In addition, during 

discussions in Stage 1 with the company, the 

Council intends for representatives of the 

Council to indicate to the company potential 

risks that have been identified in the 

analysis. However, any potential risks 

identified at this stage are preliminary and 

may continue to develop until the Council 

makes a Final Determination. Through this 

engagement, the Council seeks to provide the 

company under review an opportunity to 

understand the focus of the Council’s 

analysis. 

The Council will also consider in Stage 1 

information available from relevant existing 

regulators of the company. Under the DoddFrank Act, the Council is required to consult 

with the primary financial regulatory agency, 

if any, for each nonbank financial company 

or subsidiary of a nonbank financial 

company that is being considered for a 

determination before the Council makes any 

Final Determination with respect to such 

company.40 For any company under review 

in Stage 1 that is regulated by a primary 

financial regulatory agency or home country 

supervisor, the Council will notify the 

regulator or supervisor that the company is 

under review no later than the time the 

company is notified. The Council will also 

consult with the primary financial regulatory 

agency, if any, of each significant subsidiary 

of the nonbank financial company, to the 

extent the Council deems appropriate in 

Stage 1. The Council will actively solicit the 

regulator’s views regarding risks at the 

company and potential mitigants or 

aggravating factors. In order to enable the 

regulator to provide relevant information, the 

Council will share its preliminary views 

regarding potential risks at the company, if 

any and to the extent practicable, and request 

that the regulator provide information 

regarding those specific risks, including the 

extent to which the risks are adequately 

mitigated by factors such as existing 

regulation or the company’s business 

practices. During the determination process, 

the Council will encourage the regulator to 

address any risks to U.S. financial stability 

using the regulator’s existing authorities; if 

the Council believes regulators’ or the 

company’s actions have adequately 

addressed the potential risks to U.S. financial 

stability the Council has identified, the 

Council may discontinue its consideration of 

the company for a potential determination 

under section 113 of the Dodd-Frank Act. 

Based on the preliminary evaluation in 

Stage 1, the Council, on a nondelegable basis, 

may vote to commence a more detailed 

analysis of the company by advancing the 

company to Stage 2, or it may decide not to 

evaluate the company further. If the Council 

votes not to advance a company that has been 

reviewed in Stage 1 to Stage 2, the Council 

will notify the company in writing of the 

Council’s decision. The notice will clarify 

that a decision not to advance the company 

from Stage 1 to Stage 2 at that time does not 

preclude the Council from reinitiating review 

of the company in Stage 1. 

c. Stage 2: In-Depth Evaluation 

Stage 2 involves an in-depth evaluation of 

a nonbank financial company that the 

Council has determined merits additional 

review. 

In Stage 2, the Council will review a 

nonbank financial company using 

information collected directly from the 

company, through the OFR, as well as public 

and regulatory information. The review will 

focus on whether material financial 

distress 41 at the nonbank financial company, 

or the nature, scope, size, scale, 

concentration, interconnectedness, or mix of 

the activities of the company, could pose a 

threat to U.S. financial stability. The Analytic 

Framework describes the Council’s approach 

to evaluating potential risks to U.S. financial 

stability, including in the context of a review 

under section 113 of the Dodd-Frank Act. 

Engagement With Company and Regulators 

in Stage 2 

A nonbank financial company to be 

evaluated in Stage 2 will receive a notice (a 

Notice of Consideration) that the company is 

under consideration for a Proposed 

Determination. The Council also will submit 

to the company a request that the company 

provide information that the Council deems 

relevant to the Council’s evaluation, and the 

nonbank financial company will be provided 

an opportunity to submit written materials to 

the Council.42 This information will 

generally be collected by the OFR.43 Before 

requiring the submission of reports from any 

nonbank financial company that is regulated 

by a Council member agency or a primary 

financial regulatory agency, the Council, 

acting through the OFR, will coordinate with 

such agencies and will, whenever possible, 

rely on information available from the OFR 

or such agencies. Council members and their 

agencies and staffs will maintain the 

confidentiality of such information in 

accordance with applicable law. During Stage 

2, the company may also submit any other 

information that it deems relevant to the 

Council’s evaluation. Information that may 

be considered by the Council includes details 

regarding the company’s financial activities, 

legal structure, liabilities, counterparty 

exposures, resolvability, and existing 

regulatory oversight. Information requests 

likely will involve both qualitative and 

quantitative information. Information 

relevant to the Council’s analysis may 

include confidential business information 

such as detailed information regarding 

financial assets, terms of funding 

arrangements, counterparty exposure or 

position data, strategic plans, and 

interaffiliate transactions. 

The Council will make staff representing 

Council members available to meet with the 

representatives of any company that enters 

Stage 2, to explain the evaluation process and 

the framework for the Council’s analysis. In 

addition, the Council expects that its 

Deputies Committee will grant a request to 

meet with a company in Stage 2 to allow the 

company to present any information or 

arguments it deems relevant to the Council’s 

evaluation. If the analysis in Stage 1 has 

identified specific aspects of the company’s 

operations or activities as the primary focus 

for the evaluation, staff will notify the 

company of those specific aspects, although 

the areas of analytic focus may change based 

on the ongoing analysis. 

During Stage 2 the Council will also seek 

to continue its consultation with the 

company’s primary financial regulatory 

agency or home country supervisor in a 

timely manner before the Council makes a 

Proposed or Final Determination with respect 

to the company. The Council will continue 

to encourage the regulator during the 

determination process to address any risks to 

U.S. financial stability using the regulator’s 

existing authorities; as noted above, if the 

Council believes regulators’ or the company’s 

actions adequately address the potential risks 

to U.S. financial stability the Council has 

identified, the Council may discontinue its 

consideration of the company for a potential 

determination under section 113 of the DoddFrank Act. 

Before making a Proposed Determination 

regarding a nonbank financial company, the 

Council will notify the company when the 

Council believes that the evidentiary record 

regarding the company is complete. The 

Council will notify any nonbank financial 

company in Stage 2 if the company ceases to 

be considered for a determination. Any 

nonbank financial company that ceases to be 

considered at any time in the Council’s 

determination process may be considered for 

a Proposed Determination in the future at the 

Council’s discretion, consistent with the 

processes described above. 

d. Proposed and Final Determination 

Proposed Determination 

Based on the analysis performed in Stage 

2, a nonbank financial company may be 

considered for a Proposed Determination. A 

Proposed Determination requires a vote, on a 


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Federal Register / Vol. 88, No. 82 / Friday, April 28, 2023 / Proposed Rules 26243 

44 12 CFR 1310.10(b). 

45 Dodd-Frank Act section 113(e)(1), 12 U.S.C. 

5323(e)(1). 

46See 12 CFR 1310.21(c). 

47Financial Stability Oversight Council Hearing 

Procedures for Proceedings Under Title I or Title 

VIII of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, available at https://

fsoc.gov. 

48 Dodd-Frank Act section 113(e)(3), 12 U.S.C. 

5323(e)(3); see also 12 CFR 1310.21(d)(2) and (e)(2). 

49See 12 CFR 1310.21(d)(3) and (e)(3) and 

1310.22(d)(3). 

50See Dodd-Frank Act section 113(h), 12 U.S.C. 

5323(h). 

51See Dodd-Frank Act section 112(d)(5), 12 

U.S.C. 5322(d)(5); see also 12 CFR 1310.20(e). 52See note 3 above. 

nondelegable basis, of two-thirds of the 

voting members of the Council then serving, 

including an affirmative vote by the 

Chairperson of the Council.44 Following a 

Proposed Determination, the Council will 

issue a written notice of the Proposed 

Determination to the nonbank financial 

company, which will include an explanation 

of the basis of the Proposed Determination.45

Promptly after the Council votes to make a 

Proposed Determination regarding a 

company, the Council will provide the 

company’s primary financial regulatory 

agency or home country supervisor with the 

nonpublic written explanation of the basis of 

the Council’s Proposed Determination 

(subject to appropriate protections for 

confidential information). 

Hearing 

A nonbank financial company that is 

subject to a Proposed Determination may 

request a nonpublic hearing to contest the 

Proposed Determination in accordance with 

section 113(e) of the Dodd-Frank Act. If the 

nonbank financial company requests a 

hearing in accordance with the procedures 

set forth in § 1310.21(c) of the Council’s 

rule,46 the Council will set a time and place 

for such hearing. The Council has published 

hearing procedures on its website.47 In light 

of the statutory timeframe for conducting a 

hearing, and the fact that the purpose of the 

hearing is to benefit the company, if a 

company requests that the Council waive the 

statutory deadline for conducting the 

hearing, the Council may do so in 

appropriate circumstances. 

Final Determination 

After making a Proposed Determination 

and holding any requested written or oral 

hearing, the Council, on a nondelegable 

basis, may, by a vote of not fewer than twothirds of the voting members of the Council 

then serving (including an affirmative vote by 

the Chairperson of the Council), make a Final 

Determination that the company will be 

subject to supervision by the Federal Reserve 

Board and prudential standards. If the 

Council makes a Final Determination, it will 

provide the company with a written notice of 

the Council’s Final Determination, including 

an explanation of the basis for the Council’s 

decision.48 The Council will also provide the 

company’s primary financial regulatory 

agency or home country supervisor with the 

nonpublic written explanation of the basis of 

the Council’s Final Determination (subject to 

appropriate protections for confidential 

information). The Council expects that its 

explanation of the basis for any Final 

Determination will highlight the key risks 

that led to the determination and include 

guidance regarding the factors that were 

important in the Council’s determination. 

When practicable and consistent with the 

purposes of the determination process, the 

Council will provide a nonbank financial 

company with notice of a Final 

Determination at least one business day 

before publicly announcing the 

determination pursuant to § 1310.21, 

paragraphs (d)(3), (e)(3), or (d)(3) of the 

Council’s rule.49 In accordance with the 

Dodd-Frank Act, a nonbank financial 

company that is subject to a Final 

Determination may bring an action in U.S. 

district court for an order requiring that the 

determination be rescinded.50

The Council does not intend to publicly 

announce the name of any nonbank financial 

company that is under evaluation prior to a 

Final Determination with respect to such 

company. However, if a company that is 

under review in Stage 1 or Stage 2 publicly 

announces the status of its review by the 

Council, the Council intends, upon the 

request of a third party, to confirm the status 

of the company’s review. In addition, the 

Council will publicly release the explanation 

of the Council’s basis for any Final 

Determination or rescission of a 

determination, following such an action by 

the Council. The Council is subject to 

statutory and regulatory requirements to 

maintain the confidentiality of certain 

information submitted to it by a nonbank 

financial company or its regulators.51 In light 

of these confidentiality obligations, such 

confidential information will be redacted 

from the materials that the Council makes 

publicly available, although the Council does 

not expect to restrict a company’s ability to 

disclose such information. 

III. Annual Reevaluations of Nonbank 

Financial Company Determinations 

After the Council makes a Final 

Determination regarding a nonbank financial 

company, the Council intends to encourage 

the company or its regulators to take steps to 

mitigate the potential risks identified in the 

Council’s written explanation of the basis for 

its Final Determination. Except in cases 

where new material risks arise over time, if 

the potential risks identified in writing by the 

Council at the time of the Final 

Determination and in subsequent 

reevaluations have been adequately 

addressed, generally the Council would 

expect to rescind its determination regarding 

the company. 

For any nonbank financial company that is 

subject to a Final Determination, the Council 

is required to reevaluate the determination at 

least annually, and to rescind the 

determination if the Council determines that 

the company no longer meets the statutory 

standards for a determination. The Council 

may also consider a request from a company 

for a reevaluation before the next required 

annual reevaluation, in the case of an 

extraordinary change that materially affects 

the Council’s analysis.52

The Council will apply the same standards 

of review in its annual reevaluations as the 

standards for an initial determination 

regarding a nonbank financial company: 

either material financial distress at the 

company, or the nature, scope, size, scale, 

concentration, interconnectedness, or the 

mix of the company’s activities, could pose 

a threat to U.S. financial stability. If the 

Council determines that the company does 

not meet either of those standards, the 

Council will rescind its determination. 

The Council’s annual reevaluations will 

generally assess whether any material 

changes since the previous reevaluation and 

since the Final Determination justify a 

rescission of the determination. The Council 

expects that its reevaluation process will 

focus on whether any material changes that 

have taken effect—including changes at the 

company, changes in its markets or its 

regulation, changes in the impact of relevant 

factors, or otherwise—result in the company 

no longer meeting the standards for a 

determination. In light of the frequent 

reevaluations, the Council’s analyses will 

generally focus on material changes since the 

Council’s previous review, but the ultimate 

question the Council will seek to assess is 

whether changes in the aggregate since the 

Council’s Final Determination regarding the 

company have caused the company to cease 

meeting either of the statutory standards for 

a determination. 

During the Council’s annual reevaluation 

of a determination regarding a nonbank 

financial company, the Council will provide 

the company with an opportunity to meet 

with representatives of the Council to discuss 

the scope and process for the review and to 

present information regarding any change 

that may be relevant to the threat the 

company could pose to financial stability. In 

addition, during an annual reevaluation, the 

company may submit any written 

information to the Council the company 

considers relevant to the Council’s analysis. 

During annual reevaluations, a company is 

encouraged to submit information regarding 

any changes related to the company’s risk 

profile that mitigate the potential risks 

previously identified by the Council. Such 

changes could include updates regarding 

company restructurings, regulatory 

developments, market changes, or other 

factors. If the company or its regulators have 

taken steps to address the potential risks 

previously identified by the Council, the 

Council will assess whether the risks have 

been adequately mitigated to merit a 

rescission of the determination regarding the 

company. If the company explains in detail 

and in a timely manner potential changes it 

could make to its business to address the 

potential risks previously identified by the 

Council, representatives of the Council will 

endeavor to provide their feedback on the 

extent to which those changes may address 

the potential risks. 

If a company contests the Council’s 

determination during the Council’s annual 

reevaluation, the Council will vote on 


ddrumheller on DSK120RN23PROD with PROPOSALS1
26244 Federal Register / Vol. 88, No. 82 / Friday, April 28, 2023 / Proposed Rules 

whether to rescind the determination and 

provide the company, its primary financial 

regulatory agency or home country 

supervisor, and the primary financial 

regulatory agency of its significant 

subsidiaries with a notice explaining the 

primary basis for any decision not to rescind 

the determination. If the Council does not 

rescind the determination, the written notice 

provided to the company will address the 

most material factors raised by the company 

in its submissions to the Council contesting 

the determination during the annual 

reevaluation. The written notice from the 

Council will also explain why the Council 

did not find that the company no longer met 

the standard for a determination under 

section 113 of the Dodd-Frank Act. In 

general, due to the sensitive, companyspecific nature of its analyses in annual 

reevaluations, the Council generally would 

not publicly release the written findings that 

it provides to the company, although the 

Council does not expect to restrict a 

company’s ability to disclose such 

information. 

Finally, the Council will provide each 

nonbank financial company subject to a 

Council determination an opportunity for an 

oral hearing before the Council once every 

five years at which the company can contest 

the determination. 

Kayla Arslanian, 

Executive Secretary. 

[FR Doc. 2023–08964 Filed 4–27–23; 8:45 am] 

BILLING CODE 4810–AK–P–P 

DEPARTMENT OF THE INTERIOR 

Fish and Wildlife Service 

50 CFR Part 25 

[Docket No. FWS–HQ–NWRS–2022–0092; 

FXRS12610900000–212–FF09R20000] 

RIN 1018–BG80 

National Wildlife Refuge System; Drain 

Tile Setbacks 

AGENCY: Fish and Wildlife Service, 

Interior. 

ACTION: Proposed rule. 

SUMMARY: We, the U.S. Fish and 

Wildlife Service (Service), propose new 

regulations pertaining to wetland 

easements to bring consistency, 

transparency, and clarity for both 

easement landowners and the Service in 

the administration of conservation 

easements, pursuant to the National 

Wildlife Refuge Administration Act of 

1966, as amended by the National 

Wildlife Refuge System Improvement 

Act of 1997. The proposed regulations 

would codify the process by which the 

Service establishes drain tile setbacks in 

wetland easement contracts. Setback 

distances would be calculated based 

upon the best available science 

considering soil characteristics, tile 

diameter, the depth of the tile below the 

surface, and/or topography sufficient to 

the easement contract’s standard of 

protection that ensures no drainage of 

adjacent protected wetland areas. The 

proposed regulations would apply only 

to setbacks provided by the Service 

beginning on the effective date of the 

final rule. 

DATES: 

Written comments: We will accept 

comments received or postmarked on or 

before June 27, 2023. 

Information collection requirements: 

If you wish to comment on the 

information collection requirements in 

this proposed rule, please note that the 

Office of Management and Budget 

(OMB) is required to make a decision 

concerning the collection of information 

contained in this proposed rule between 

30 and 60 days after publication of this 

proposed rule in the Federal Register. 

Therefore, comments should be 

submitted to OMB by June 27, 2023. 

ADDRESSES: 

Written comments: You may submit 

comments by one of the following 

methods: 

• Electronically: Go to the Federal 

eRulemaking Portal: https://

www.regulations.gov. In the Search box, 

type in FWS–HQ–NWRS–2022–0092, 

which is the docket number for this 

rulemaking. Then, click on the Search 

button. On the resulting screen, find the 

correct document and submit a 

comment by clicking on ‘‘Comment.’’ 

• By hard copy: Submit by U.S. mail 

or hand delivery: Public Comments 

Processing, Attn: FWS–HQ–NWRS– 

2022–0092; U.S. Fish and Wildlife 

Service; 5275 Leesburg Pike, MS: PRB 

(JAO/3W); Falls Church, VA 22041– 

3803. 

We will not accept email or faxes. We 

will post all comments on https://

www.regulations.gov. This generally 

means that we will post any personal 

information you provide us (see Request 

for Comments, below, for more 

information). 

Information collection requirements: 

Written comments and suggestions on 

the information collection requirements 

should be submitted by the date 

specified above in DATES to https://

www.reginfo.gov/public/do/PRAMain. 

Find this particular information 

collection by selecting ‘‘Currently under 

Review—Open for Public Comments’’ or 

by using the search function. Please 

provide a copy of your comments to the 

Service Information Collection 

Clearance Officer, U.S. Fish and 

Wildlife Service, 5275 Leesburg Pike, 

MS: PRB (JAO/3W), Falls Church, VA 

22041–3803 (mail); or Info_Coll@fws.gov 

(email). Please reference ‘‘OMB Control 

Number 1018–New Drain Tile Setbacks’’ 

in the subject line of your comments. 

FOR FURTHER INFORMATION CONTACT: 

Debbie DeVore, (251) 604–1383. 

Individuals in the United States who are 

deaf, deafblind, hard of hearing, or have 

a speech disability may dial 711 (TTY, 

TDD, or TeleBraille) to access 

telecommunications relay services. 

Individuals outside the United States 

should use the relay services offered 

within their country to make 

international calls to the point-ofcontact in the United States. 

SUPPLEMENTARY INFORMATION: 

Background 

Wetland habitat in the Prairie Pothole 

Region (PPR) of Iowa, Minnesota, 

Montana, North Dakota, and South 

Dakota is critically important to 

waterfowl and other migratory bird 

populations. The unique topography of 

the PPR includes the numerous small 

wetlands and potholes typical of the 

PPR that were formed through glaciation 

thousands of years ago. Prairie potholes 

are freshwater depressions and marshes, 

often less than 2 feet deep and 1 acre in 

size, that are a permanent feature of 

these landscapes barring deliberate 

alteration of the topography or 

hydrology. What makes the PPR so 

biologically important to waterfowl is 

the seasonal fluctuation of surface water 

through these permanent wetlands 

basins. The PPR is responsible for 

producing approximately 50 to 75 

percent of the primary species of ducks 

on the North American continent, 

providing habitat for more than 60 

percent of the breeding population. 

Waterfowl fledged in the PPR are a 

significant natural resource that 

supports waterfowl hunting and an 

associated industry that creates an 

estimated 30,000 jobs and nearly $1 

billion in economic benefit. 

Congress, recognizing the impact that 

widespread drainage was having on 

wetlands and waterfowl populations in 

the PPR, officially created the Small 

Wetlands Acquisition Program on 

August 1, 1958, by amending the 1934 

Migratory Bird Hunting Stamp Act 

(commonly referred to as the ‘‘Duck 

Stamp Act’’). The amendment allowed 

proceeds from the sale of Federal Duck 

Stamps to be used to conserve and 

protect ‘‘small wetland and pothole 

areas’’ through the acquisition and 

establishment of areas designated as 

Waterfowl Production Areas (WPAs). 

The Service purchased the first fee-title 

WPA in South Dakota in 1959 and 

began to purchase wetland easements 


ddrumheller on DSK120RN23PROD with PROPOSALS1