Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Proposed Rules 5063 

1See 12 CFR part 3 (OCC), 12 CFR part 217 

(Board); 12 CFR part 324 (FDIC). The term ‘‘banking 

organization’’ includes national banks, state 

member banks, state nonmember banks, savings 

associations, and top-tier bank holding companies 

domiciled in the United States not subject to the 

Board’s Small Bank Holding Company Policy 

Statement (12 CFR part 225, appendix C), as well 

as top-tier savings and loan holding companies 

domiciled in the United States, except for certain 

savings and loan holding companies that are 

substantially engaged in insurance underwriting or 

commercial activities. 

2See section 2 of the regulatory capital rules. 

3See 12 U.S.C. 5390(c)(8) through (16). 

4See 12 U.S.C. 1821(e)(8) through (13). The 

definition also recognizes that default rights may be 

stayed under any similar insolvency law applicable 

to government sponsored enterprises (GSEs). 

Generally under the agencies’ regulatory capital 

rules, government-sponsored enterprise means an 

entity established or chartered by the U.S. 

government to serve public purposes specified by 

the U.S. Congress but whose debt obligations are 

not explicitly guaranteed by the full faith and credit 

of the U.S. government. See regulatory capital rules 

Section 2. 

Subpart C also issued under 12 U.S.C. 

1462a; 1463; 1464; 1828; 1831p-1; and 1881– 

1884; 15 U.S.C. 1681m; 1681w. 

Subpart D also issued under 12 U.S.C. 

1462; 1462a; 1463; 1464; 42 U.S.C. 4012a; 

4104a; 4104b; 4106; 4128. 

Subpart E also issued under 12 U.S.C. 

1467a; 1468; 1817; 1831i. 

Subpart B—[Removed and Reserved] 

■ 5. Remove and reserve subpart B 

consisting of §§ 391.10 through 391.14, 

appendix A to subpart B of part 391, 

and appendix B to subpart B of part 391. 

Dated at Washington, DC, this 21st day of 

January, 2015. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2015–01325 Filed 1–29–15; 8:45 am] 

BILLING CODE 6714–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Parts 324 and 329 

RIN 3064–AE30 

Regulatory Capital Rules, Liquidity 

Coverage Ratio: Proposed Revisions 

to the Definition of Qualifying Master 

Netting Agreement and Related 

Definitions 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The FDIC invites comment on 

a notice of proposed rulemaking (NPR 

or proposed rule) that would amend the 

definition of ‘‘qualifying master netting 

agreement’’ under the regulatory capital 

rules, and the liquidity coverage ratio 

rule. The FDIC also is proposing to 

amend the definitions of ‘‘collateral 

agreement,’’ ‘‘eligible margin loan,’’ and 

‘‘repo-style transaction’’ under the 

regulatory capital rules. The 

amendments are designed to ensure that 

the regulatory capital and liquidity 

treatment of certain financial contracts 

generally would not be affected by 

implementation of special resolution 

regimes in foreign jurisdictions if such 

regimes are substantially similar to Title 

II of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act and the 

Federal Deposit Insurance Act in the 

United States, or by the International 

Swaps and Derivative Association 

Resolution Stay Protocol that provide 

for contractual submission to such 

regimes. In December 2014, the Office of 

the Comptroller of the Currency (OCC) 

and the Board of Governors of the 

Federal Reserve System (Board) adopted 

a joint interim final rule that is related 

to this proposed rule. 

DATES: Comments must be received 

March 31, 2015. 

ADDRESSES: You may submit comments, 

identified by RIN 3064–AE30, by any of 

the following methods: 

• Agency Web site: http:// 

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

Follow instructions for submitting 

comments on the Agency Web site. 

• Email: Comments@fdic.gov. Include 

the RIN 3064–AE30 on the subject line 

of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street NW., Washington, DC 20429. 

• Hand Delivery: Comments may be 

hand delivered to the guard station at 

the rear of the 550 17th Street Building 

(located on F Street) on business days 

between 7:00 a.m. and 5:00 p.m. 

Public Inspection: All comments 

received must include the agency name 

and RIN 3064–AE30 for this rulemaking. 

All comments received will be posted 

without change to http://www.fdic.gov/ 

regulations/laws/federal/, including any 

personal information provided. Paper 

copies of public comments may be 

ordered from the FDIC Public 

Information Center, 3501 North Fairfax 

Drive, Room E–I002, Arlington, VA 

22226 by telephone at (877) 275–3342 or 

(703) 562–2200. 

FOR FURTHER INFORMATION CONTACT: 

Bobby R. Bean, Associate Director, 

bbean@fdic.gov; Ryan Billingsley, Chief, 

Capital Policy Section, 

rbillingsley@fdic.gov; Benedetto Bosco, 

Capital Markets Policy Analyst, 

bbosco@fdic.gov; Capital Markets 

Branch, Division of Risk Management 

Supervision, (202) 898–6888; or David 

Wall, Assistant General Counsel, 

dwall@fdic.gov; Michael Phillips, 

Counsel, mphillips@fdic.gov; Ann 

Battle, Counsel, abattle@fdic.gov; Rachel 

Ackmann, Senior Attorney, 

rackmann@fdic.gov; Grace Pyun, Senior 

Attorney, gpyun@fdic.gov; Supervision 

Branch, Legal Division, Federal Deposit 

Insurance Corporation, 550 17th Street 

NW., Washington, DC 20429. 

SUPPLEMENTARY INFORMATION: 

I. Summary 

The regulatory capital rules of the 

Board, the OCC, and the FDIC 

(collectively, the agencies) permit a 

banking organization to measure 

exposure from certain types of financial 

contracts on a net basis and recognize 

the risk-mitigating effect of financial 

collateral for other types of exposures, 

provided that the contracts are subject 

to a ‘‘qualifying master netting 

agreement’’ that provides for certain 

rights upon a counterparty default.1 The 

agencies, by rule, have defined a 

qualifying master netting agreement as a 

netting agreement that permits a 

banking organization to terminate, apply 

close-out netting, and promptly 

liquidate or set-off collateral upon an 

event of default of the counterparty 

(default rights), thereby reducing its 

counterparty exposure and market 

risks.2 On the whole, measuring the 

amount of exposure of these contracts 

on a net basis, rather than a gross basis, 

results in a lower measure of exposure, 

and thus, a lower capital requirement, 

under the regulatory capital rules. 

The current definition of ‘‘qualifying 

master netting agreement’’ recognizes 

that default rights may be stayed if the 

financial company is in receivership, 

conservatorship, or resolution under 

Title II of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(Dodd-Frank Act),3 or under the Federal 

Deposit Insurance Act (FDI Act).4

Accordingly, transactions conducted 

under netting agreements where default 

rights may be stayed under Title II of the 

Dodd-Frank Act or the FDI Act may 

qualify for the favorable capital 

treatment described above. However, 

the current definition of ‘‘qualifying 

master netting agreement’’ does not 

recognize that default rights may be 

stayed where a master netting agreement 

is subject to limited stays under foreign 

special resolution regimes or where 

counterparties agree through contract 

that a special resolution regime would 

apply. When the agencies adopted the 

current definition of ‘‘qualifying master 

netting agreement,’’ no other 

jurisdiction had adopted a special 

resolution regime relevant to the 

definition, and no banking organizations 


rljohnson on DSK4SPTVN1PROD with PROPOSALS
5064 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Proposed Rules 

5See ISDA Protocol at http://assets.isda.org/ 

media/f253b540-25/958e4aed.pdf/. 

6The ISDA Master Agreement is a form of 

agreement that governs OTC derivatives 

transactions and is used by a significant portion of 

the parties to bilateral OTC derivatives transactions, 

including large, internationally active banking 

organizations. Furthermore, the ISDA Master 

Agreement generally creates a single legal 

obligation that provides for the netting of all 

individual transactions covered by the agreement. 

7 Generally, under the agencies’ regulatory capital 

rules, financial collateral means collateral in the 

form of: (i) Cash on deposit with the banking 

organization (including cash held for the banking 

organization by a third-party custodian or trustee); 

(ii) gold bullion; (iii) long-term debt securities that 

are not resecuritization exposures and that are 

investment grade; (iv) short-term debt instruments 

that are not resecuritization exposures and that are 

investment grade; (v) equity securities that are 

publicly traded; (vi) convertible bonds that are 

publicly traded; or (vii) money market fund shares 

and other mutual fund shares if a price for the 

shares is publicly quoted daily. In addition, the 

regulatory capital rules also require that the banking 

organization have a perfected, first-priority security 

interest or, outside of the United States, the legal 

equivalent thereof (with the exception of cash on 

deposit and notwithstanding the prior security 

interest of any custodial agent). See regulatory 

capital rule, Section 2. 

8 Generally under the agencies’ regulatory capital 

rules, eligible margin loan means an extension of 

credit where: (i) The extension of credit is 

collateralized exclusively by liquid and readily 

marketable debt or equity securities, or gold; (ii) the 

collateral is marked-to-fair value daily, and the 

transaction is subject to daily margin maintenance 

requirements; and (iii) the extension of credit is 

conducted under an agreement that provides the 

banking organization with default rights, provided 

that any exercise of rights under the agreement will 

not be stayed or avoided under applicable law in 

the relevant jurisdictions, other than in 

receivership, conservatorship, resolution under the 

Federal Deposit Insurance Act, Title II of the DoddFrank Act, or under any similar insolvency law 

applicable to GSEs. See regulatory capital rule, 

Section 2. In addition, in order to recognize an 

exposure as an eligible margin loan a banking 

organization must comply with the requirements of 

section 3(b) of the regulatory capital rules with 

respect to that exposure. 

9 Generally, under the agencies’ regulatory capital 

rules, repo-style transaction means a repurchase or 

reverse repurchase transaction, or a securities 

borrowing or securities lending transaction, 

including a transaction in which the banking 

organization acts as agent for a customer and 

indemnifies the customer against loss, provided 

that: (1) The transaction is based solely on liquid 

and readily marketable securities, cash, or gold; (2) 

the transaction is marked-to-fair value daily and 

subject to daily margin maintenance requirements; 

(3) the transaction provides certain default rights. 

See regulatory capital rule, Section 2. In addition, 

in order to recognize an exposure as a repo-style 

transaction for purposes of this subpart, a banking 

organization must comply with the requirements of 

section 3(e) of the regulatory capital rules. 

10See 12 CFR part 32. 

11On January 1, 2015, most of the provisions of 

the BRRD are expected to take effect in a number 

of the EU member states. 

had communicated to the agencies an 

intent to enter into contractual 

amendments to clarify that bilateral 

over-the-counter (OTC) derivatives 

transactions are subject to certain 

provisions of certain U.S. and foreign 

special resolution regimes. 

In recent months, the European Union 

(EU) finalized the Bank Recovery and 

Resolution Directive (BRRD), which 

prescribes aspects of a special resolution 

regime that EU member nations should 

implement. On January 1, 2015, most of 

the provisions of the BRRD are expected 

to take effect in a number of the EU 

member states. In addition, several U.S. 

banking organizations have opted to 

adhere to the International Swaps and 

Derivatives Association’s (ISDA) 

Resolution Stay Protocol (ISDA 

Protocol),5 which provides for 

amendments to the terms of ISDA 

Master Agreements 6 between 

counterparties that adhere to the ISDA 

Protocol to stay certain default rights 

and other remedies provided under the 

agreement. The effective date of certain 

provisions of the ISDA Protocol also is 

January 1, 2015. This expected 

implementation would generally mirror 

steps taken in the United States to 

implement a special resolution regime 

under Title II of the Dodd-Frank Act. 

A master netting agreement under 

which default rights may be stayed 

under the BRRD or that incorporates the 

ISDA Protocol would no longer qualify 

as a qualifying master netting agreement 

under the agencies’ current regulatory 

capital and liquidity rules. This would 

result in considerably higher capital and 

liquidity requirements. 

Accordingly, under this NPR, the 

FDIC proposes to permit an otherwise 

qualifying master netting agreement to 

qualify if (i) default rights under the 

agreement may be stayed under a 

qualifying foreign special resolution 

regime or (ii) the agreement incorporates 

a qualifying special resolution regime by 

contract. Through these proposed 

revisions, the proposed rule would 

maintain the existing treatment for these 

contracts for purposes of the regulatory 

capital and liquidity rules, while 

recognizing the recent changes 

contemplated by the BRRD and the 

ISDA Protocol. 

The proposed rule also would revise 

certain other definitions of the 

regulatory capital rules to make various 

conforming changes designed to ensure 

that a banking organization may 

continue to recognize the risk mitigating 

effects of financial collateral 7 received 

in a secured lending transaction, repostyle transaction, or eligible margin loan 

for purposes of the regulatory capital 

and liquidity rules, while recognizing 

the recent changes contemplated by the 

BRRD and banking organizations that 

have adhered to the ISDA Protocol. 

Specifically, the proposed rule would 

revise the definition of ‘‘collateral 

agreement,’’ ‘‘eligible margin loan,’’ 8

and ‘‘repo-style transaction’’ 9 to provide 

that a counterparty’s default rights may 

be stayed under a foreign special 

resolution regime or, if applicable, 

under a special resolution regime 

incorporated by contract.10 The FDIC 

requests comment on all aspects of these 

definitions. 

II. Background 

A. U.S. Resolution Regime 

It is common market practice for 

bilateral derivatives and certain other 

types of financial contracts entered into 

by large banking organizations to permit 

a non-defaulting counterparty to 

exercise early termination rights and 

other contractual remedies upon a 

counterparty (or a related entity) 

experiencing an event of default. These 

contractual provisions are generally 

recognized as a credit risk mitigant 

because the provisions allow a nondefaulting party the uninterrupted right 

to close-out, net, and liquidate any 

collateral securing its claim under the 

contract upon a counterparty’s default. 

However, as the failure of Lehman 

Brothers demonstrated, the 

uninterrupted exercise of such rights by 

counterparties of a globally-active 

financial company with a significant 

derivatives portfolio could impede the 

orderly resolution of the financial 

company and pose risks to financial 

stability. The United States has enacted 

laws that impose a limited stay on the 

exercise of early termination rights and 

other remedies with regard to qualified 

financial contracts (such as OTC 

derivatives, securities financing 

transactions, and margin loans) with 

insured depository institutions in 

resolution under the FDI Act and, in 

2010, with financial companies in 

resolution under Title II of the DoddFrank Act. 

B. Foreign Special Resolution 

Procedures and the ISDA Protocol 

In recognition of the issues faced in 

the financial crisis concerning 

resolution of globally-active financial 

companies, the EU issued the BRRD on 

April 15, 2014, which requires EU 

member states to implement a 

resolution mechanism by December 31, 

2014, in order to increase the likelihood 

for successful national or cross-border 

resolutions of a financial company 

organized in the EU.11 The BRRD 

contains special resolution powers, 

including a limited stay on certain 

financial contracts that is similar to the 

stays provided under Title II of the 

Dodd-Frank Act and the FDI Act. 


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Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Proposed Rules 5065 

12The Key Attributes are available at 

www.financialstabilityboard.org/publications/ 

r_111104cc.pdf. See specifically Key Attributes 4.1– 

4.4 regarding set-off, netting, collateralization and 

segregation of client assets and Appendix I Annex 

5 regarding temporary stays on early termination 

rights. In October 2014, the FSB adopted a 2014 

version of the Key Attributes that incorporates new 

annexes to provide additional guidance with 

respect to specific Key Attributes. No changes were 

made to the text of the twelve Key Attributes of 

October 2011. 

13The FSB is an international body that monitors 

and makes recommendations about the global 

financial system. The FSB coordinates the 

regulatory, supervisory, and other financial sector 

policies of national financial authorities and 

international standard-setting bodies. 14The G–20 membership comprises a mix of the 

world’s largest advanced and emerging economies. 

The G–20 members are Argentina, Australia, Brazil, 

Canada, China, France, Germany, India, Indonesia, 

Italy, Japan, Republic of Korea, Mexico, Russia, 

Saudi Arabia, South Africa, Turkey, the United 

Kingdom, the United States, and the European 

Union. Following the most recent financial crisis, 

leaders of the G–20 member nations recognized that 

the orderly cross-border resolution of a globallyactive financial company requires all countries to 

have effective national resolution regimes to resolve 

failing financial companies in an orderly manner 

and that national resolution regimes should be 

consistent with one another. Subjecting the same 

financial company to conflicting legal rules, 

procedures, and mechanisms across jurisdictions 

can create uncertainty, instability, possible systemic 

contagion, and higher costs of resolution. 

15As of November 12, 2014, the U.S. banking 

organizations that have agreed to adhere to the 

ISDA Protocol are Bank of America Corporation, 

Citigroup Inc., The Goldman Sachs Group, Inc., 

JPMorgan Chase & Co., and Morgan Stanley, and 

certain subsidiaries thereof. See current list of 

adhering parties to the ISDA Protocol at http:// 

www2.isda.org/functional-areas/protocolmanagement/protocol-adherence/20. 

16Under the ISDA Resolution Stay Protocol, a 

related entity is defined to include (i) each parent 

or (ii) an affiliate that is (a) a creditor support 

provider or (b) a specified entity. 

17The provisions of the ISDA Protocol relating to 

the special resolution regimes in these jurisdictions 

will become effective on January 1, 2015, for ISDA 

Master Agreements between the 18 adhering 

financial companies (as of November 12, 2014). The 

ISDA Protocol also covers special resolution 

regimes in other FSB member jurisdictions so long 

as the regimes meet conditions specified in the 

ISDA Protocol relating to creditor safeguards, which 

are consistent with the Key Attributes. 

18Parties adhering to the ISDA Protocol would 

initially be contractually subject to the statutory 

special resolution regimes of France, Germany, 

Japan, Switzerland, the United Kingdom and the 

United States. 

19Under the agencies’ regulatory capital rules, the 

general framework consists of two approaches: (1) 

The standardized approach, which, beginning on 

January 1, 2015, will apply to all banking 

organizations regardless of total asset size, and (2) 

the advanced approaches, which currently apply to 

large internationally active banking organizations 

(defined as those banking organizations with $250 

billion or more in total consolidated assets or $10 

billion or more in total on-balance sheet foreign 

exposure, depository institution subsidiaries of 

those banking organizations that use the advanced 

approaches rule, and banking organizations that 

elect to use the advanced approaches). As a general 

matter, the standardized approach sets forth 

standardized risk weights for different asset types 

for regulatory capital calculations, whereas, for 

certain assets, the advanced approaches make use 

of risk assessments provided by banking 

organizations’ internal systems as inputs for 

regulatory capital calculations. Consistent with 

section 171 of the Dodd-Frank Act (codified at 12 

U.S.C. 5371), a banking organization that is required 

to calculate its risk-based capital requirements 

under the advanced approaches (i.e., an advanced 

approaches banking organization) also must 

determine its risk-based capital requirements under 

the generally applicable risk-based capital rules, 

which will be the standardized approach beginning 

on January 1, 2015). The lower—or more binding— 

ratio for each risk-based capital requirement is the 

ratio that the advanced approaches banking 

organization must use to determine its compliance 

with minimum regulatory capital requirements. See 

generally 12 CFR part 324. 

Therefore, the operations of U.S. 

banking organizations located in 

jurisdictions that have implemented the 

BRRD could become subject to an 

orderly resolution under the BRRD, 

including the application of a limited 

statutory stay of a counterparty’s right to 

exercise early termination rights and 

other remedies with respect to certain 

financial contracts. The BRRD is 

generally designed to be consistent with 

the Key Attributes of Effective 

Resolution Regimes for Financial 

Institutions (Key Attributes),12 which 

were initially adopted by the Financial 

Stability Board (FSB) 13 of the G–2014

member nations in October 2011, and is 

designed to provide a standard for the 

responsibilities and powers that 

national resolution regimes should have 

to resolve a failing systemically 

important financial institution. 

ISDA published the ISDA Protocol on 

November 12, 2014, which provides for 

amendments to ISDA Master 

Agreements to stay certain early 

termination rights and other remedies 

provided under the agreement. As of 

November 12, 2014, 18 global financial 

institutions, including several of the 

largest U.S. banking organizations,15

have opted to adhere to the ISDA 

Protocol and thereby would modify 

ISDA Master Agreements among those 

adhering parties. Like other qualified 

financial contracts, OTC derivatives 

transactions executed under standard 

ISDA Master Agreements allow a party 

to terminate the agreement immediately 

upon an event of default of its 

counterparty, including if its 

counterparty (or a related entity) 16

enters insolvency or similar 

proceedings. 

The contractual amendments 

effectuated pursuant to the ISDA 

Protocol would apply the provisions of 

Title II of the Dodd-Frank Act and the 

FDI Act concerning limited stays of 

termination rights and other remedies in 

qualified financial contracts to ISDA 

Master Agreements between adhering 

counterparties, including adhering 

counterparties that are not otherwise 

subject to U.S. law. The amendments 

also would apply substantially similar 

provisions of certain non-U.S. laws, to 

ISDA Master Agreements between 

adhering counterparties that are not 

otherwise subject to such laws.17 The 

contractual amendments effectuated 

pursuant to the ISDA Protocol would 

permit a party that has agreed to adhere 

to the ISDA Protocol to exercise early 

termination rights and other remedies 

only to the extent that it would be 

entitled to do so under the special 

resolution regime applicable to its 

adhering counterparties (or related 

entities, as applicable).18

C. Description of Relevant Provisions of 

the Regulatory Capital and the Liquidity 

Coverage Ratio Rules 

As noted above, the agencies’ 

regulatory capital rules permit a banking 

organization to measure exposure from 

certain types of financial contracts on a 

net basis, provided that the contracts are 

subject to a qualifying master netting 

agreement or other agreement that 

contains specific provisions. 

Specifically, under the current 

regulatory capital rules, a banking 

organization with multiple OTC 

derivatives that are subject to a 

qualifying master netting agreement 

would be able to calculate a net 

exposure amount by netting the sum of 

all positive and negative fair values of 

the individual OTC derivative contracts 

subject to the qualifying master netting 

agreement and calculating a riskweighted asset amount based on the net 

exposure amount. For purposes of the 

current supplementary leverage ratio (as 

applied only to advanced approaches 

banking organizations), a banking 

organization that has one or more OTC 

derivatives with the same counterparty 

that are subject to a qualifying master 

netting agreement would be permitted 

to not include in total leverage exposure 

cash variation margin received from 

such counterparty that has offset the 

mark-to-fair value of the derivative asset 

or cash collateral that is posted to such 

counterparty that has reduced the 

banking organization’s on-balance sheet 

assets.19

In addition, the agencies’ current 

rules permit a banking organization to 

recognize the risk-mitigating effect of 

financial collateral for other types of 

collateralized exposures. Specifically, 

for risk-based capital purposes, a 

banking organization with a securities 

financing transaction that meets the 

definition of a repo-style transaction 

with financial collateral, a margin loan 

that meets the definition of an eligible 

margin loan with financial collateral, or 

an OTC derivative contract 


rljohnson on DSK4SPTVN1PROD with PROPOSALS
5066 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Proposed Rules 

20The agencies’ LCR rules are provided in 12 CFR 

part 50 (OCC); 12 CFR part 249 (Board); and 12 CFR 

part 329 (FDIC). 

21The LCR final rule provides that foreign 

currency transactions that meet certain criteria can 

be netted regardless of whether those transactions 

are covered by a qualified master netting agreement. 

79 FR 61440, 61532–33 (October 10, 2014). 

22See 12 U.S.C. 1821(e)(8) through (13) and 

5390(c)(8) through (16). As noted above, the ISDA 

Protocol covers only resolution regimes that are 

considered to be consistent with the principles of 

the Key Attributes. Therefore, it is also expected 

that any limited statutory stay under foreign law 

determined for purposes of this proposed rule to be 

similar to the FDI Act and Title II of the Dodd-Frank 

Act would also be consistent with the relevant 

principles of the Key Attributes. 

23Under Title II of the Dodd-Frank Act, 

counterparties are stayed until 5:00 p.m. on the 

business day following the date of appointment of 

a receiver from exercising termination, liquidation, 

or netting rights under the qualified financial 

contract. 12 U.S.C. 5390(c)(10)(B)(i)(I). If the 

qualified financial contracts are transferred to a 

solvent third party before the stay expires, the 

counterparty is permanently enjoined from 

exercising such rights based upon the appointment 

of the receiver, but is not stayed from exercising 

such rights based upon other events of default. See 

12 U.S.C. 5390(c)(10)(B)(i)(II). 24 79 FR 57348 (September 24, 2014). 

collateralized with financial collateral 

may determine a net exposure amount 

to its counterparty according to section 

37 or section 132 of the regulatory 

capital rules. A banking organization 

with multiple repo-style transactions or 

eligible margin loans with a 

counterparty that are subject to a 

qualifying master netting agreement 

may net the exposure amounts of the 

individual transactions under that 

agreement. In addition, for purposes of 

the supplementary leverage ratio, an 

advanced approaches banking 

organization with multiple repo-style 

transactions with the same counterparty 

that are subject to a qualifying master 

netting agreement would be permitted 

to net for purposes of calculating the 

counterparty credit risk component of 

its total leverage exposure. In general, 

recognition of netting results in a lower 

measure of risk-weighted assets and 

total leverage exposure than if a banking 

organization were to calculate its OTC 

derivatives, repo-style transactions, and 

eligible margin loans on a gross basis. 

The agencies also use the concept of 

a qualifying master netting agreement in 

the current liquidity coverage ratio rule 

(LCR).20 The LCR rule requires a 

banking organization to maintain an 

amount of high-quality liquid assets (the 

numerator) to match at least 100 percent 

of its total net cash outflows over a 

prospective 30 calendar-day period (the 

denominator). For derivative 

transactions subject to a qualifying 

master netting agreement, a banking 

organization would be able to calculate 

the net derivative outflow or inflow 

amount by netting the contractual 

payments and collateral that it would 

give to, or receive from, the 

counterparty over a prospective 30-day 

period.21 If the derivative transactions 

are not subject to a qualifying master 

netting agreement, then the derivative 

cash outflows for that counterparty 

would be included in the net derivative 

cash outflow amount and the derivative 

cash inflows for that counterparty 

would be included in the net derivative 

cash inflow amount, without any 

netting and subject to the LCR rule’s cap 

on total inflows. Recognition of netting 

may result in lower net cash outflows, 

and thus a lower LCR denominator and 

liquidity requirement, than if a banking 

organization were to calculate its 

inflows and outflows on its derivatives 

transactions on a gross basis. 

III. The Proposed Rule 

The proposed rule would amend the 

definitions of ‘‘collateral agreement, 

‘‘eligible margin loan,’’ ‘‘qualifying 

master netting agreement,’’ and ‘‘repostyle transaction’’ in the FDIC’s 

regulatory capital rules and ‘‘qualifying 

master netting agreement’’ in the FDIC’s 

LCR rules to ensure that the regulatory 

capital and liquidity treatment of OTC 

derivatives, repo-style transactions, 

eligible margin loans, and other 

collateralized transactions would be 

unaffected by the adoption of various 

foreign special resolution regimes and 

the ISDA Protocol. In particular, the 

proposed rule would amend these 

definitions to provide that a relevant 

netting agreement or collateral 

agreement may provide for a limited 

stay or avoidance of rights where the 

agreement is subject by its terms to, or 

incorporates, certain resolution regimes 

applicable to financial companies, 

including Title II of the Dodd-Frank Act, 

the FDI Act, or any foreign resolution 

regime that is substantially similar to 

Title II of the Dodd-Frank Act or the FDI 

Act. 

In determining whether the laws of 

foreign jurisdictions are ‘‘similar’’ to the 

FDI Act and Title II of the Dodd-Frank 

Act, the FDIC, jointly with the Board 

and OCC, intends to consider all aspects 

of these U.S. laws, including all aspects 

of stays provided thereunder.22 Relevant 

factors include, for instance, creditor 

safeguards or protections provided 

under a special foreign resolution 

regime as well as the length of stay.23

Without the proposed rule, several 

banking organizations would no longer 

be permitted to recognize financial 

contracts as subject to a qualifying 

master netting agreement or satisfying 

the criteria necessary for the current 

regulatory capital and liquidity 

treatment, and would be required to 

measure exposure from these contracts 

on a gross, rather than net, basis. The 

proposed rule would allow for 

continuation of the existing netting 

treatment for these contracts for 

purposes of the regulatory capital and 

liquidity rules. Implementation of 

consistent, national resolution regimes 

on a global basis furthers the orderly 

resolution of internationally active 

financial companies, and enhances 

financial stability. Moreover, the 

development of the ISDA Protocol 

furthers certain principles of Title II of 

the Dodd-Frank Act and the FDI Act (in 

instances where a counterparty is a U.S. 

entity or its subsidiary) with respect to 

counterparties who are not otherwise 

subject to U.S. law. 

In addition, the FDIC intends to 

incorporate the definition of ‘‘qualifying 

master netting agreement’’, once 

finalized, into rules that establish 

minimum margin requirements for 

registered swap dealers, major swap 

participants, security-based swap 

dealers, and major security-based swap 

participants (covered swap entities) 

subject to FDIC supervision. On 

September 24, 2014, the OCC, Board, 

FDIC, the Farm Credit Administration, 

and the Federal Housing Finance 

Agency published a notice of proposed 

rulemaking that would establish 

minimum margin requirements for 

covered swap entities subject to agency 

supervision (2014 swap margin NPR).24

The 2014 swap margin NPR would 

permit a covered swap entity to 

calculate variation margin requirements 

on an aggregate, net basis under an 

eligible master netting agreement 

(EMNA) with a counterparty. The 

comment period for the 2014 swap 

margin NPR closed on November 24, 

2014. The OCC, Board, FDIC, Farm 

Credit Administration and Federal 

Housing Finance Agency are reviewing 

the comments received and drafting a 

final rule. Ultimately, the Federal 

banking agencies intend to align, as 

appropriate, the definitions of EMNA 

and qualifying master netting agreement 

in their respective regulations 

pertaining to swap margin requirements, 

regulatory capital requirements, 

liquidity requirements, and lending 

limits. 

In December 2014, the OCC and the 

Board adopted a joint interim final rule 

that is identical to this proposed rule. 

IV. Request for Comments 

The FDIC is interested in receiving 

comments on all aspects of the proposed 


rljohnson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Proposed Rules 5067 

25Under the ISDA Protocol, upon commencement 

of such proceedings, adhering counterparties would 

be subject to a limited stay of their termination 

rights and other remedies. The limited stay does not 

apply if a direct counterparty is subject to general 

insolvency proceedings. The stay also does not 

apply to payment or delivery defaults or to defaults 

that are not directly or indirectly related to the 

affiliate insolvency proceedings. 

26See 13 CFR 121.201. Effective July 14, 2014, the 

Small Business Administration revised the size 

standards for banking organizations to $550 million 

in assets from $500 million in assets. 79 FR 33647 

(June 12, 2014). 

rule. In particular, do the amendments 

to the definitions of ‘‘qualifying master 

netting agreement,’’ ‘‘collateral 

agreement,’’ ‘‘repo-style transaction,’’ 

and ‘‘eligible margin loan’’ ensure that 

the regulatory capital and liquidity 

treatment of OTC derivatives, repo-style 

transactions, eligible margin loans and 

other collateralized transactions is 

unaffected by the ISDA Protocol and the 

BRRD? Is there any reason why the FDIC 

should not revise the above mentioned 

definitions? 

The ISDA Protocol also provides for 

limited stays of termination rights for 

cross-defaults resulting from affiliate 

insolvency proceedings under a limited 

number of U.S. general insolvency 

regimes, including the U.S. Bankruptcy 

Code.25 The proposed rule does not 

address this portion of the ISDA 

Protocol because this portion of the 

ISDA Protocol does not take effect on 

January 1, 2015. Instead it takes effect 

upon the effective date of implementing 

regulations in the United States. The 

FDIC requests comment on whether the 

definitions of ‘‘qualifying master netting 

agreement,’’ ‘‘collateral agreement,’’ 

‘‘repo-style transaction,’’ and ‘‘eligible 

margin loan’’ should also be amended to 

recognize the stay of default rights in 

this context. 

Question 1: The proposed rule would 

prevent an increase in regulatory capital 

by allowing a ‘‘qualifying master netting 

agreement’’ to include stays that may be 

imposed by the laws of a foreign 

jurisdiction as a result of the 

receivership, conservatorship, or 

resolution of a foreign financial entity. 

Given the recent introduction of stays 

through contracts under the ISDA 

protocol, as well as in foreign 

jurisdictions, the FDIC seeks comment 

on the appropriateness of the proposed 

rule’s effect on regulatory capital. 

Question 2: What was the 

effectiveness of netting agreements 

during the financial crisis? 

Question 3: How were cross-border 

netting agreements treated by U.S. and 

foreign courts? 

Question 4: What legal and 

operational impediments to netting exist 

today? 

Question 5: Does netting of exposures 

present an accurate reflection of the risk 

of the underlying transactions and 

assets covered by this proposal? 

Question 6: What criteria should be 

considered when determining whether a 

foreign resolution regime or legal 

framework is substantially similar to 

Title II of the Dodd-Frank Act and the 

FDI Act provisions for the insolvency of 

insured depository institutions? 

Question 7: Would the Total Loss 

Absorbing Capacity requirement as set 

forth by the Financial Stability Board 

ensure the presence of sufficient debt 

that may be bailed in to effectuate the 

resolution of a foreign counterparty to a 

U.S. bank as contemplated under the 

BRRD? 

Question 8: What sources are 

available to provide funding for the 

resolution of a foreign counterparty to 

an affected U.S. bank? 

Question 9: What length of stay in a 

resolution regime is appropriate to 

balance avoidance of market disruption 

against creditor protection? 

V. Regulatory Analysis 

A. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act, 5 

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

agency, in connection with a notice of 

proposed rulemaking, to prepare an 

Initial Regulatory Flexibility Act 

analysis describing the impact of the 

proposed rule on small entities (defined 

by the Small Business Administration 

for purposes of the RFA to include 

banking entities with total assets of $550 

million or less) or to certify that the 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. 

The FDIC believes that the proposed 

rule would not have a significant 

economic impact on a substantial 

number of small entities. 

Under regulations issued by the Small 

Business Administration, a small entity 

includes a depository institution, bank 

holding company, or savings and loan 

holding company with total assets of 

$550 million or less (a small banking 

organization).26 As of June 30, 2014, 

there were approximately 3,267 small 

state nonmember banks and 306 small 

state savings associations under the 

FDIC’s supervisory jurisdiction. 

The proposed rule is expected only to 

apply to banking organizations that 

adhere to the ISDA Protocol, which 

generally are entities that engage in a 

substantial amount of cross-border 

derivatives transactions. Small entities 

generally would not fall into this 

category. Accordingly, the FDIC believes 

that this proposed rule would not have 

a significant economic impact on small 

banking organizations supervised by the 

FDIC and therefore believes that there 

are no significant alternatives to the 

issuance of this proposed rule that 

would reduce the economic impact on 

small banking organizations supervised 

by the FDIC. 

The FDIC requests comment on its 

conclusion that the proposed rule 

would not have a significant economic 

impact on a substantial number of small 

entities. 

B. Solicitation of Comments on Use of 

Plain Language 

Section 722 of the Gramm-LeachBliley Act requires the FDIC to use plain 

language in all proposed and final rules 

published after January 1, 2000. The 

FDIC invites comment on how to make 

this proposed rule easier to understand. 

For example: 

• Has the FDIC organized the material 

to suit your needs? If not, how could the 

proposed rule be more clearly stated? 

• Are the proposed requirements in 

the rule clearly stated? If not, how could 

the proposed rule be more clearly 

stated? 

• Do the regulations contain technical 

language or jargon that is not clear? If 

so, which language requires 

clarification? 

• Would a different format (grouping 

and order of sections, use of headings, 

paragraphing) make the regulation 

easier to understand? If so, what 

changes would make the regulation 

easier to understand? 

• Would more, but shorter, sections 

be better? If so, which sections should 

be changed? 

• What else could the FDIC do to 

make the regulation easier to 

understand? 

C. Paperwork Reduction Act 

Request for Comment on Proposed 

Information Collection 

In accordance with the requirements 

of the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 through 3521) (‘‘PRA’’), 

the FDIC may not conduct or sponsor, 

and a respondent is not required to 

respond to, an information collection 

unless it displays a currently valid 

Office of Management and Budget 

(‘‘OMB’’) control number. The FDIC 

reviewed the proposed rule and 

determined that it would not produce 

any new collection of information 

pursuant to the PRA. 


rljohnson on DSK4SPTVN1PROD with PROPOSALS
5068 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Proposed Rules 

4The FDIC expects to evaluate jointly with the 

Board and OCC whether foreign special resolution 

regimes meet the requirements of this proposed 

rule. 

5The FDIC expects to evaluate jointly with the 

Board and OCC whether foreign special resolution 

regimes meet the requirements of this proposed 

rule. 

6The FDIC expects to evaluate jointly with the 

Board and OCC whether foreign special resolution 

regimes meet the requirements of this proposed 

rule. 

List of Subjects 

12 CFR Part 324 

Administrative practice and 

procedure, Banks, banking, Capital 

adequacy, Reporting and recordkeeping 

requirements, Savings associations, 

State non-member banks. 

12 CFR Part 329 

Administrative practice and 

procedure, Banks, banking, Federal 

Deposit Insurance Corporation, FDIC, 

Liquidity, Reporting and recordkeeping 

requirements. 

Federal Deposit Insurance Corporation 

12 CFR CHAPTER III 

Authority and Issuance 

For the reasons set forth in the 

supplementary information, the Federal 

Deposit Insurance Corporation proposes 

to amend 12 CFR chapter III parts 324 

and 329 to read as follows: 

PART 324—CAPITAL ADEQUACY OF 

FDIC-SUPERVISED INSTITUTIONS 

■ 1. The authority citation for part 324 

continues to read as follows: 

Authority: 12 U.S.C. 1815(a), 1815(b), 

1816, 1818(a), 1818(b), 1818(c), 1818(t), 1819 

(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 

1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 

5412; Pub. L. 102–233, 105 Stat. 1761, 1789, 

1790 (12 U.S.C. 1831n note); Pub. L. 102– 

242, 105 Stat. 2236, 2355, as amended by 

Pub. L. 103–325, 108 Stat. 2160, 2233 (12 

U.S.C. 1828 note); Pub. L. 102–242, 105 Stat. 

2236, 2386, as amended by Pub. L. 102–550, 

106 Stat. 3672, 4089 (12 U.S.C. 1828 note); 

Pub. L. 111–203, 124 Stat. 1376, 1887 (15 

U.S.C. 78o–7 note). 

■ 2. Amend § 324.2 by: 

■ a. Revising the definitions of 

‘‘Collateral agreement,’’ ‘‘Eligible margin 

loan,’’ ‘‘Qualifying master netting 

agreement,’’ and ‘‘Repo-style 

transaction’’; and 

■ b. Renumbering the remaining 

footnotes throughout the part. 

The revisions read as follows: 

* * * * * 

Collateral agreement means a legal 

contract that specifies the time when, 

and circumstances under which, a 

counterparty is required to pledge 

collateral to a FDIC-supervised 

institution for a single financial contract 

or for all financial contracts in a netting 

set and confers upon the FDICsupervised institution a perfected, firstpriority security interest 

(notwithstanding the prior security 

interest of any custodial agent), or the 

legal equivalent thereof, in the collateral 

posted by the counterparty under the 

agreement. This security interest must 

provide the FDIC-supervised institution 

with a right to close out the financial 

positions and liquidate the collateral 

upon an event of default of, or failure 

to perform by, the counterparty under 

the collateral agreement. A contract 

would not satisfy this requirement if the 

FDIC-supervised institution’s exercise of 

rights under the agreement may be 

stayed or avoided under applicable law 

in the relevant jurisdictions, other than: 

(1) In receivership, conservatorship, 

or resolution under the Federal Deposit 

Insurance Act, Title II of the DoddFrank Act, or under any similar 

insolvency law applicable to GSEs, or 

laws of foreign jurisdictions that are 

substantially similar 4 to the U.S. laws 

referenced in this paragraph (1) in order 

to facilitate the orderly resolution of the 

defaulting counterparty; or 

(2) Where the agreement is subject by 

its terms to any of the laws referenced 

in paragraph (1) of this definition. 

* * * * * 

Eligible margin loan means: 

(1) An extension of credit where: 

(i) The extension of credit is 

collateralized exclusively by liquid and 

readily marketable debt or equity 

securities, or gold; 

(ii) The collateral is marked to fair 

value daily, and the transaction is 

subject to daily margin maintenance 

requirements; and 

(iii) The extension of credit is 

conducted under an agreement that 

provides the FDIC-supervised 

institution the right to accelerate and 

terminate the extension of credit and to 

liquidate or set-off collateral promptly 

upon an event of default, including 

upon an event of receivership, 

insolvency, liquidation, 

conservatorship, or similar proceeding, 

of the counterparty, provided that, in 

any such case, any exercise of rights 

under the agreement will not be stayed 

or avoided under applicable law in the 

relevant jurisdictions, other than in 

receivership, conservatorship, or 

resolution under the Federal Deposit 

Insurance Act, Title II of the DoddFrank Act, or under any similar 

insolvency law applicable to GSEs, or 

laws of foreign jurisdictions that are 

substantially similar 5 to the U.S. laws 

referenced in this paragraph in order to 

facilitate the orderly resolution of the 

defaulting counterparty. 

(2) In order to recognize an exposure 

as an eligible margin loan for purposes 

of this subpart, an FDIC-supervised 

institution must comply with the 

requirements of § 324.3(b) with respect 

to that exposure. 

* * * * * 

Qualifying master netting agreement 

means a written, legally enforceable 

agreement provided that: 

(1) The agreement creates a single 

legal obligation for all individual 

transactions covered by the agreement 

upon an event of default following any 

stay permitted by paragraph (2) of this 

definition, including upon an event of 

receivership, insolvency, 

conservatorship, liquidation, or similar 

proceeding, of the counterparty; 

(2) The agreement provides the FDICsupervised institution the right to 

accelerate, terminate, and close-out on a 

net basis all transactions under the 

agreement and to liquidate or set-off 

collateral promptly upon an event of 

default, including upon an event of 

receivership, conservatorship, 

insolvency, liquidation, or similar 

proceeding, of the counterparty, 

provided that, in any such case, any 

exercise of rights under the agreement 

will not be stayed or avoided under 

applicable law in the relevant 

jurisdictions, other than: 

(i) In receivership, conservatorship, or 

resolution under the Federal Deposit 

Insurance Act, Title II of the DoddFrank Act, or under any similar 

insolvency law applicable to GSEs, or 

laws of foreign jurisdictions that are 

substantially similar 6 to the U.S. laws 

referenced in this paragraph (i) in order 

to facilitate the orderly resolution of the 

defaulting counterparty; or 

(ii) Where the agreement is subject by 

its terms to, or incorporates, any of the 

laws referenced in paragraph (2)(i) of 

this definition; 

(3) The agreement does not contain a 

walkaway clause (that is, a provision 

that permits a non-defaulting 

counterparty to make a lower payment 

than it otherwise would make under the 

agreement, or no payment at all, to a 

defaulter or the estate of a defaulter, 

even if the defaulter or the estate of the 

defaulter is a net creditor under the 

agreement); and 

(4) In order to recognize an agreement 

as a qualifying master netting agreement 

for purposes of this subpart, a FDICsupervised institution must comply 

with the requirements of § 324.3(d) with 

respect to that agreement. 

* * * * * 


rljohnson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Proposed Rules 5069 

7The FDIC expects to evaluate jointly with the 

Board, FDIC, and OCC whether foreign special 

resolution regimes meet the requirements of this 

proposed rule. 

1The FDIC expects to evaluate jointly with the 

Board and OCC whether foreign special resolution 

regimes meet the requirements of this proposed 

rule. 

Repo-style transaction means a 

repurchase or reverse repurchase 

transaction, or a securities borrowing or 

securities lending transaction, including 

a transaction in which the FDICsupervised institution acts as agent for 

a customer and indemnifies the 

customer against loss, provided that: 

(1) The transaction is based solely on 

liquid and readily marketable securities, 

cash, or gold; 

(2) The transaction is marked-to-fair 

value daily and subject to daily margin 

maintenance requirements; 

(3)(i) The transaction is a ‘‘securities 

contract’’ or ‘‘repurchase agreement’’ 

under section 555 or 559, respectively, 

of the Bankruptcy Code (11 U.S.C. 555 

or 559), a qualified financial contract 

under section 11(e)(8) of the Federal 

Deposit Insurance Act, or a netting 

contract between or among financial 

institutions under sections 401–407 of 

the Federal Deposit Insurance 

Corporation Improvement Act or the 

Federal Reserve’s Regulation EE (12 CFR 

part 231); or 

(ii) If the transaction does not meet 

the criteria set forth in paragraph (3)(i) 

of this definition, then either: 

(A) The transaction is executed under 

an agreement that provides the FDICsupervised institution the right to 

accelerate, terminate, and close-out the 

transaction on a net basis and to 

liquidate or set-off collateral promptly 

upon an event of default, including 

upon an event of receivership, 

insolvency, liquidation, or similar 

proceeding, of the counterparty, 

provided that, in any such case, any 

exercise of rights under the agreement 

will not be stayed or avoided under 

applicable law in the relevant 

jurisdictions, other than in receivership, 

conservatorship, or resolution under the 

Federal Deposit Insurance Act, Title II 

of the Dodd-Frank Act, or under any 

similar insolvency law applicable to 

GSEs, or laws of foreign jurisdictions 

that are substantially similar 7 to the 

U.S. laws referenced in this paragraph 

in order to facilitate the orderly 

resolution of the defaulting 

counterparty; or 

(B) The transaction is: 

(1) Either overnight or 

unconditionally cancelable at any time 

by the FDIC-supervised institution; and 

(2) Executed under an agreement that 

provides the FDIC-supervised 

institution the rights to accelerate, 

terminate, and close-out the transaction 

on a net basis and to liquidate or set off 

collateral promptly upon an event of 

counterparty default. 

(4) In order to recognize an exposure 

as a repo-style transaction for purposes 

of this subpart, an FDIC-supervised 

institution must comply with the 

requirements of § 324.3(e) of this part 

with respect to that exposure. 

* * * * * 

PART 329—LIQUIDITY RISK 

MEASUREMENT STANDARDS 

■ 3. The authority citation for part 329 

continues to read as follows: 

Authority: 12 U.S.C. 1815, 1816, 1818, 

1819, 1828, 1831p–1, 5412. 

■ 4. Amend § 329.3 by revising the 

definition of ‘‘Qualifying master netting 

agreement’’ and renumbering the 

remaining footnotes throughout the part 

to read as follows: 

§ 329.3 Definitions. 

* * * * * 

Qualifying master netting agreement 

means a written, legally enforceable 

agreement provided that: 

(1) The agreement creates a single 

legal obligation for all individual 

transactions covered by the agreement 

upon an event of default following any 

stay permitted by paragraph (2) of this 

definition, including upon an event of 

receivership, insolvency, 

conservatorship, liquidation, or similar 

proceeding, of the counterparty; 

(2) The agreement provides the FDICsupervised institution the right to 

accelerate, terminate, and close-out on a 

net basis all transactions under the 

agreement and to liquidate or set-off 

collateral promptly upon an event of 

default, including upon an event of 

receivership, conservatorship, 

insolvency, liquidation, or similar 

proceeding, of the counterparty, 

provided that, in any such case, any 

exercise of rights under the agreement 

will not be stayed or avoided under 

applicable law in the relevant 

jurisdictions, other than: 

(i) In receivership, conservatorship, or 

resolution under the Federal Deposit 

Insurance Act, Title II of the DoddFrank Act, or under any similar 

insolvency law applicable to GSEs, or 

laws of foreign jurisdictions that are 

substantially similar 1 to the U.S. laws 

referenced in this paragraph (2)(i) in 

order to facilitate the orderly resolution 

of the defaulting counterparty; or 

(ii) Where the agreement is subject by 

its terms to, or incorporates, any of the 

laws referenced in paragraph (2)(i) of 

this definition; 

(3) The agreement does not contain a 

walkaway clause (that is, a provision 

that permits a non-defaulting 

counterparty to make a lower payment 

than it otherwise would make under the 

agreement, or no payment at all, to a 

defaulter or the estate of a defaulter, 

even if the defaulter or the estate of the 

defaulter is a net creditor under the 

agreement); and 

(4) In order to recognize an agreement 

as a qualifying master netting agreement 

for purposes of this subpart, a FDICsupervised institution must comply 

with the requirements of § 329.4(a) with 

respect to that agreement. 

* * * * * 

Dated: January 21, 2015. 

By order of the Board of Directors of the 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2015–01324 Filed 1–29–15; 8:45 am] 

BILLING CODE 6714–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Parts 334 and 391 

RIN 3064–AE29 

Transferred OTS Regulations 

Regarding Fair Credit Reporting and 

Amendments; Amendment to the 

‘‘Creditor’’ Definition in Identity Theft 

Red Flags Rule; Removal of FDIC 

Regulations Regarding Fair Credit 

Reporting Transferred to the 

Consumer Financial Protection Bureau 

AGENCY: Federal Deposit Insurance 

Corporation. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: In this notice of proposed 

rulemaking (Proposed Rule), the Federal 

Deposit Insurance Corporation (FDIC) 

proposes to make several amendments 

to its regulations covering ‘‘Fair Credit 

Reporting.’’ 

First, the FDIC proposes to rescind 

and remove from the Code of Federal 

Regulations 12 CFR part 391, subpart C 

(part 391, subpart C), entitled ‘‘Fair 

Credit Reporting.’’ This subpart was 

included in the regulations that were 

transferred to the FDIC from the Office 

of Thrift Supervision (OTS) in 

connection with the implementation of 

applicable provisions of title III of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act). The requirements for State savings 

associations in part 391, subpart C are 

substantively similar to those in the 


rljohnson on DSK4SPTVN1PROD with PROPOSALS