966 Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 

1 Dodd-Frank Wall Street Reform and Consumer 

Protection Act, Pub. L. 111–203, 124 Stat. 1376 

(2010). 

2The FDIC has published a final rule that 

identifies the activities listed in section 4(k) of the 

BHC Act and the Board’s Regulation Y (12 CFR part 

225) that would be considered financial in nature 

or incidental thereto for purposes of Title II. See 78 

FR 34712 (June 10, 2013). 

3 Dodd-Frank Section 201(a)(11), 12 U.S.C. 

5381(a)(11). The definition excludes Farm Credit 

System institutions chartered under and subject to 

the provisions of the Farm Credit Act; governmental 

entities; and regulated entities, as defined under 

section 1303(20) of the Federal Housing Enterprises 

Financial Safety and Soundness Act of 1992. 

DEPARTMENT OF THE TREASURY 

31 CFR Part 148 

RIN 1505–AC36 

Qualified Financial Contracts 

Recordkeeping Related to Orderly 

Liquidation Authority 

AGENCY: The Secretary of the 

Department of the Treasury, as 

Chairperson of the Financial Stability 

Oversight Council. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Secretary of the Treasury 

(the ‘‘Secretary’’), as Chairperson of the 

Financial Stability Oversight Council, is 

proposing rules (the ‘‘Proposed Rules’’) 

to implement the qualified financial 

contract (‘‘QFC’’) recordkeeping 

requirements of the Dodd–Frank Wall 

Street Reform and Consumer Protection 

Act (‘‘Act’’ or the ‘‘Dodd–Frank Act’’). 

The Act provides that if the federal 

primary financial regulatory agencies do 

not prescribe joint final or interim final 

regulations requiring financial 

companies to maintain records with 

respect to QFCs to assist the Federal 

Deposit Insurance Corporation (‘‘FDIC’’) 

as receiver for a covered financial 

company to exercise its rights and fulfill 

its obligations under the Act within 24 

months of the enactment of the Act, the 

Chairperson of the Financial Stability 

Oversight Council (the ‘‘Council’’) shall 

prescribe, in consultation with the 

FDIC, such regulations. The Secretary, 

as Chairperson of the Council, is 

proposing the Proposed Rules in 

consultation with the FDIC because the 

federal primary financial regulatory 

agencies did not so prescribe joint final 

or interim final regulations. The 

Proposed Rules would require 

recordkeeping with respect to positions, 

counterparties, legal documentation and 

collateral. This information is necessary 

to assist the FDIC as receiver to: Fulfill 

its obligations under the Dodd–Frank 

Act in deciding whether to transfer 

QFCs; assess the consequences of 

decisions to transfer, disaffirm or 

repudiate, or allow the termination of, 

QFCs with one or more counterparties; 

determine if any financial systemic risks 

are posed by the transfer, disaffirmance 

or repudiation, or termination of such 

QFCs; and otherwise exercise its rights 

under the Act. The Secretary is 

requesting comment on all aspects of 

the Proposed Rules. 

DATES: Written comments must be 

received by April 7, 2015. 

ADDRESSES: Submit comments 

electronically through the Federal 

eRulemaking Portal: http://

www.regulations.gov, or by mail (if hard 

copy, preferably an original and two 

copies) to: The Treasury Department, 

Attn: Qualified Financial Contracts 

Recordkeeping Comments, 1500 

Pennsylvania Avenue NW., Washington, 

DC 20220. Because paper mail in the 

Washington, DC area may be subject to 

delay, it is recommended that comments 

be submitted electronically. Please 

include your name, affiliation, address, 

email address, and telephone number in 

your comment. Comments will be 

available for public inspection on 

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: 

Monique Rollins, Acting Deputy 

Assistant Secretary for Capital Markets; 

Patricia Kao, Director, Office of 

Financial Institutions Policy: (202) 622– 

4948. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

A. Executive Summary 

B. Publication of the Notice of Proposed 

Rulemaking 

II. Background—QFCs and Receivership 

III. The Proposed Rules 

A. Scope, Purpose, Effective Date and 

Compliance Dates 

1. Scope 

a. Key Definitions 

b. Records Entities Within a U.S. Holding 

Company 

c. Clearing Organizations 

d. Scope of Proposed Rules 

2. Purpose 

3. Effective Date and Compliance Dates 

B. General Definitions 

C. Form, Availability, and Maintenance of 

Records 

1. Form and Availability 

2. Maintenance and Updating 

3. Exemptions 

D. Content of Records 

1. General Information 

2. Appendix Information 

IV. Administrative Law Matters 

A. Initial Regulatory Flexibility Analysis 

1. Statement of the Need for, Objectives of, 

and Legal Basis for the Proposed Rules 

2. Small Entities Affected by the Proposed 

Rules 

3. Projected Recordkeeping and Other 

Compliance Requirements 

4. Identification of Duplication, 

Overlapping, or Conflicting Federal 

Rules 

5. Significant Alternatives to the Proposed 

Rules 

B. Paperwork Reduction Act 

C. Executive Orders 12866 and 13563 

1. Description of the Need for the 

Regulatory Action 

2. Literature Review 

a. Fire Sales Among Financial Institutions 

b. Costs of Lehman Brothers Bankruptcy 

c. Conclusion 

3. Baseline 

4. Evaluation of Alternatives 

a. Scope of the Proposed Rules 

b. Content of Records 

c. Standardized Recordkeeping 

5. Affected Population 

6. Assessment of Potential Costs and 

Benefits 

a. Potential Costs 

b. Potential Benefits 

7. Retrospective Analysis 

I. Introduction 

A. Executive Summary 

The Dodd-Frank Act was enacted on 

July 21, 2010.1 As part of a new and 

comprehensive regulatory framework, 

Title II of the Dodd-Frank Act (‘‘Title 

II’’) generally establishes a mechanism 

for the orderly resolution of a financial 

company whose failure and resolution 

under otherwise applicable federal or 

state law would have serious adverse 

effects on financial stability in the 

United States. A ‘‘financial company’’ 

under Title II is a company that is 

incorporated or organized under any 

provision of federal law or the laws of 

any State (as defined in 12 U.S.C. 

5301(16)) that is: 

• A bank holding company; 

• A nonbank financial company 

supervised by the Board of Governors of 

the Federal Reserve System (‘‘Board’’); 

• Any company that is predominantly 

engaged in activities that the Board has 

determined are financial in nature or 

incidental thereto for purposes of 

section 4(k) of the Bank Holding 

Company Act of 1956 (‘‘BHC Act’’); 2 or 

• Any subsidiary of such financial 

company that is itself predominantly 

engaged in activities that the Board has 

determined are financial in nature or 

incidental thereto for purposes of 

section 4(k) of the BHC Act, other than 

an insured depository institution or an 

insurance company.3

The Title II orderly liquidation 

mechanism is modeled in part on 


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4 12 U.S.C. 1811 et seq. 

5 12 U.S.C. 5390(c)(8)(D)(i). 

6 12 U.S.C. 5381(a)(8). 

7 12 U.S.C. 1821(e). 

8See e.g., 12 U.S.C. 5390(c)(9) and (10). 

9 12 U.S.C. 5390(c)(1), (10) and (11). 

10 12 U.S.C. 5301(12). See the term ‘‘primary 

financial regulatory agency.’’ 

11The term ‘‘affiliated financial companies’’ used 

in this release is the combination of two defined 

terms in the Proposed Rules: ‘‘affiliate’’ is defined 

in § 148.2(a) and ‘‘financial company’’ is defined in 

§ 148.2(f) of the Proposed Rules. An affiliated 

financial company of a records entity would itself 

be a records entity if it is not an exempt entity and 

is a party to an open QFC or guarantees, supports, 

or is linked to an open QFC of an affiliate. An 

‘‘open’’ QFC is a QFC which has not been fully 

performed. 

12See 12 U.S.C. 5390(c)(8)(H)(iv). 

13 73 FR 78170 (Dec. 22, 2008). Part 371 requires 

an insured depository institution in troubled 

condition, upon written notification by the FDIC, to 

produce immediately at the close of processing of 

the institution’s business day, for a period provided 

in the notification, the electronic files for certain 

position level and counterparty level data; 

electronic or written lists of QFC counterparty and 

Continued 

provisions of the Federal Deposit 

Insurance Act (‘‘FDIA’’) 4 regarding 

insolvencies of insured depository 

institutions. Under Title II, the FDIC has 

been given similar responsibilities as 

under the FDIA, including receivership 

authority over financial companies in 

default or in danger of default for which 

a determination has been made by the 

Secretary (in consultation with the 

President) to seek the appointment of 

the FDIC as receiver pursuant to section 

203(b) of the Dodd-Frank Act. 

Title II includes provisions, set forth 

at section 210(c)(8), concerning the 

QFCs held by covered financial 

companies. A ‘‘QFC’’ is a securities 

contract, commodities contract, forward 

contract, repurchase agreement, swap 

agreement, or any similar agreement 

that the FDIC determines by regulation, 

resolution, or order to be a qualified 

financial contract; 5 and a ‘‘covered 

financial company’’ is a financial 

company, other than an insured 

depository institution, for which the 

Secretary has made a determination to 

seek the appointment of the FDIC as 

receiver under the Dodd-Frank Act.6

The treatment afforded to QFCs under 

Title II parallels the treatment afforded 

to them under section 11(e) of the 

FDIA.7 Under Title II and the FDIA, 

from the time the FDIC is appointed as 

receiver until 5 p.m. (eastern time) on 

the business day following the date of 

the appointment, a QFC counterparty is 

prohibited from exercising any 

contractual rights (including 

termination) triggered by the 

appointment of the receiver.8

After its appointment as receiver and 

prior to 5 p.m. on the following business 

day, the FDIC has three options for a 

QFC to which a covered financial 

company is a party: 

(1) Transfer the QFC to another 

financial institution; 

(2) Retain the QFC within the 

receivership and allow the counterparty 

to terminate; or 

(3) Retain the QFC within the 

receivership and disaffirm or repudiate 

the QFC and pay compensatory 

damages.9

In order to assess the options that 

would be available following its 

appointment as receiver, the FDIC needs 

detailed information about the covered 

financial company’s QFCs. Section 

210(c)(8)(H) therefore requires that the 

Federal primary financial regulatory 

agencies, as defined in the Act 10 (the 

‘‘PFRAs’’), to jointly prescribe, by July 

21, 2012, final or interim final 

regulations that require financial 

companies to maintain such records 

with respect to QFCs that the PFRAs 

determine to be necessary or 

appropriate to assist the FDIC as 

receiver for a covered financial 

company. Section 210(c)(8)(H) further 

provides that if the PFRAs do not so 

prescribe such joint regulations by July 

21, 2012, the Secretary, as Chairperson 

of the Council, shall prescribe such 

regulations in consultation with the 

FDIC. 

As the PFRAs did not prescribe such 

regulations by the statutory deadline, 

the Secretary, as Chairperson of the 

Council, in consultation with the FDIC, 

is publishing the Proposed Rules. As 

described in greater detail below, the 

Proposed Rules would apply to a 

‘‘records entity,’’ which is defined in the 

Proposed Rules to include certain types 

of financial companies that are parties 

to an open QFC or guarantee, support, 

or are linked to an open QFC and that 

meet certain size or other thresholds 

(such as risk, complexity, and 

interconnectedness), or other conditions 

or are certain affiliates in the same 

corporate group as a financial company 

that meets these thresholds or 

conditions (referred throughout this 

release as ‘‘affiliated financial 

companies’’) and that are party to an 

open QFC or that guarantee, support, or 

are linked to an open QFC of an 

affiliate.11

The Proposed Rules would require 

these records entities to maintain 

detailed information about their QFC 

positions and be capable of providing 

this information to their PFRAs within 

24 hours of request by their PFRAs. This 

would assist the FDIC in resolving 

financial companies that may be subject 

to an orderly liquidation under Title II 

of the Dodd-Frank Act based on 

consideration of such financial 

companies’ size, risk, complexity, 

leverage, frequency and dollar amount 

of QFCs and interconnectedness to the 

financial system, and any other factors 

deemed appropriate.12 To that end, it is 

necessary that financial companies that 

qualify as records entities maintain the 

capacity to generate, on an ongoing 

basis, QFC information in a common 

data format. To facilitate the resolution 

of QFC portfolios, the FDIC needs to 

analyze such data upon being appointed 

as receiver under Title II. The 

information must be sufficient to allow 

the FDIC to estimate the financial and 

operational impact on the covered 

financial company or its affiliated 

companies of the FDIC’s decision to 

transfer, disaffirm or repudiate, or retain 

the QFCs. It must also allow the FDIC 

to assess the potential impact that such 

decisions may have on the financial 

markets as a whole. The standardized 

data format would reduce the time and 

effort needed by the FDIC to perform the 

analysis and would facilitate 

comparison of QFC data across financial 

companies with large complex QFC 

portfolios. 

The Proposed Rules also would allow 

the Secretary to issue conditional or 

unconditional general and specific 

exemptions from one or more 

requirements in the rule as the Secretary 

determines to be necessary or 

appropriate, including whether 

application of one or more requirements 

of the rule would not be necessary to 

achieve the purpose of the rule. The 

issuance of a conditional or 

unconditional exemption would be 

consistent with section 210(c)(8)(H)(iv) 

of the Act which provides that the 

regulations required by section 

210(c)(8)(H)(i) differentiate among 

financial companies, as appropriate, by 

taking into consideration a number of 

factors. Specifically, the Secretary 

would consider whether to grant an 

exemption after receiving a 

recommendation from the FDIC, 

prepared in consultation with the 

applicable PFRAs, that takes into 

consideration the financial company’s 

or financial companies’ size, risk, 

complexity, leverage, frequency and 

dollar amount of QFCs, and 

interconnectedness to the financial 

system and any other factors deemed 

necessary or appropriate. 

The proposed recordkeeping 

requirements of the Proposed Rules are 

based, in part, on 12 CFR part 371, 

Recordkeeping Requirements for 

Qualified Financial Contracts,13 which 


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portfolio location identifiers, certain affiliates of the 

institution and the institution’s counterparties to 

QFC transactions, contact information and 

organizational charts for key personnel involved in 

QFC activities, and contact information for vendors 

for such activities; and copies of key agreements 

and related documents for each QFC. 

14 12 U.S.C. 1821(e)(8)(H). 

15 12 U.S.C. 5390(c)(8), (9), and (10). 16 12 U.S.C. 1821(e). 17 12 U.S.C. 5390(c)(8)(D)(i). The term ‘‘securities 

contract’’ includes contracts ‘‘for the purchase, sale 

or loan of a security[.]’’ 12 U.S.C. 5390(c)(8)(D)(ii). 18 12 U.S.C. 5390(c)(8)(D)(i). 19 12 U.S.C. 5390(c)(8)(D)(viii). 

20 12 U.S.C. 5390(c)(8)(D)(ii)–(vi). 

21See 11 U.S.C. 361; 12 U.S.C. 1821(e)(13); 12 

U.S.C. 5390(c)(13). 

22 12 U.S.C. 5390(c)(13) and 12 U.S.C. 

1821(e)(13)(A). 

23See e.g.,12 U.S.C. 5390(c)(8)(A). 

24 11 U.S.C. 362(b)(6), (7) and (17). 

25 12 U.S.C. 1821(e)(10)(B)(i) and 12 U.S.C. 

5390(c)(10)(B)(i). This time frame in which QFC 

counterparties are stayed from acting is in contrast 

to parties to other contracts with a failed financial 

company, who are stayed from terminating such 

other contracts for 90 days. 

26 Id. There is an exception to this general rule 

in section 210(c)(8)(G) with respect to cleared QFCs, 

which provides in relevant part that a clearing 

organization would not be stayed from exercising 

its rights to liquidate all positions and collateral of 

the covered financial company under the 

company’s QFCs in certain circumstances. See 12 

U.S.C. 5390(c)(8)(G). 

27 12 U.S.C. 5390(c)(9). The FDIC as receiver of an 

insolvent financial company may establish a bridge 

financial company and transfer to such company 

assets and certain liabilities as the FDIC generally 

deems appropriate. 12 U.S.C. 5390(h). 

28 12 U.S.C. 5390(c)(11). 

29 12 U.S.C. 5390(c)(11)(A). 

30For transfer, see 12 U.S.C. 5390(c)(9)(A); for 

repudiation, see 12 U.S.C. 5390(c)(11). 

implements section 11(e)(8)(H) of the 

FDIA.14 The Proposed Rules also have 

been informed by the FDIC’s experience 

with both large and small portfolios of 

QFCs of failed insured depository 

institutions. 

The recent financial crisis 

demonstrated that management of QFC 

positions, including steps undertaken to 

close out such positions, can be an 

important element of a resolution 

strategy which, if not handled properly, 

may magnify market instability. The 

recordkeeping requirements of the 

Proposed Rules are designed to ensure 

that the FDIC, as receiver of a covered 

financial company, will have 

comprehensive information about the 

QFC portfolio maintained by such 

financial company subject to orderly 

resolution, and to enable the FDIC to 

plan the rapid and orderly resolution of 

a financial company’s QFC portfolio in 

the event of insolvency. The Proposed 

Rules are also designed to provide the 

FDIC with information necessary for the 

FDIC as receiver to comply with the 

statutory requirements for the transfer, 

disaffirmance, or repudiation of the 

QFCs of a financial company, within 

any applicable time periods mandated 

under Title II of the Dodd-Frank Act. 

B. Publication of the Notice of Proposed 

Rulemaking 

The Secretary is publishing this 

notice of proposed rulemaking in light 

of his responsibilities under section 

210(c)(8)(H) of the Dodd-Frank Act. The 

Secretary is seeking comment on all 

aspects of the Proposed Rules. 

The Proposed Rules provide that the 

compliance date for most of the 

provisions will be the day that is 270 

days after a records entity becomes 

subject to the final rule. Thus, for 

entities that would be subject to the 

final rule on its effective date, the 

compliance date would be the day that 

is 270 days after the effective date of the 

final rule (which is 330 days after the 

date of publication). However, one 

aspect of the Proposed Rules will 

require compliance in 60 days. 

Specifically, on the effective date of the 

final rule, a records entity must provide 

up-to-date contact information to the 

FDIC and each of its PFRAs. A financial 

company that becomes a records entity 

after the effective date of the final rule 

would be required to provide such 

contact information within 60 days of 

becoming a records entity. 

II. Background—QFCs and 

Receivership 

A QFC is a type of financial contract 

and is defined in section 210(c)(8) of the 

Act. As further described below, QFCs 

are treated differently than other types 

of contracts in the event of the failure 

of a financial company.15 The treatment 

afforded to QFCs under Title II parallels 

the treatment afforded to QFCs under 

section 11(e) of the FDIA.16

Under section 210(c)(8), QFCs include 

five specific types of financial contracts: 

securities contracts, commodity 

contracts, forward contracts, repurchase 

agreements, and swap agreements.17

The FDIC is empowered to define other 

similar agreements as QFCs by rule, 

regulation or order.18 In addition, a 

master agreement that governs any 

contracts in these five categories is 

treated as a QFC.19 Security agreements, 

guarantees, credit enhancements or 

reimbursement obligations that relate to 

QFCs are also defined to be QFCs.20 All 

swaps and security-based swaps defined 

in Title VII of the Act qualify as QFCs 

under section 210(c)(8). 

The filing of a bankruptcy petition or 

the appointment of the FDIC as receiver 

triggers an automatic stay that precludes 

a party to most types of contracts with 

an insolvent company from taking 

actions under that contract.21 Therefore, 

most types of contracts with a financial 

company cannot be terminated based 

solely upon the appointment of the 

FDIC as receiver.22 Under Title II, the 

FDIA, and other U.S. insolvency 

statutes, however, a party to a QFC with 

an insolvent entity can exercise any of 

its contractual rights to terminate such 

QFC, offset or net any amounts due, and 

apply any pledged collateral for 

payment of such amounts subject to 

certain conditions.23 Further, under 

Title 11 of the United States Bankruptcy 

Code (‘‘Bankruptcy Code’’), this right to 

terminate is immediate upon initiation 

of bankruptcy proceedings.24 However, 

Title II and the FDIA do not permit 

counterparties to exercise a contractual 

right of termination based solely upon 

insolvency or the appointment of a 

receiver until after 5 p.m. (eastern time) 

on the first business day following the 

appointment of the FDIC as receiver,25

nor do they permit counterparties to 

terminate a QFC because of its transfer 

to a bridge entity or another financial 

institution.26

After its appointment as receiver and 

prior to the close of the 5 p.m. window, 

the FDIC has three options in managing 

a covered financial company’s QFC 

portfolio. With respect to all of the 

covered financial company’s QFCs with 

a particular counterparty, and its 

affiliates, the FDIC may: 

(1) Transfer the QFCs to another 

institution, including a bridge financial 

company established by the FDIC; 27

(2) Retain the QFCs within the 

receivership and allow the counterparty 

to terminate; or 

(3) Retain the QFCs within the 

receivership, disaffirm or repudiate the 

QFCs, and pay compensatory 

damages.28

Within certain constraints,29 the FDIC 

can take different approaches to QFCs 

with different counterparties. However, 

the receiver’s power to transfer or 

repudiate a QFC is limited. If the FDIC 

as receiver desires to transfer any QFC 

with a particular counterparty, it must 

transfer all QFCs between the covered 

financial company and such 

counterparty and any affiliate of such 

counterparty to a single financial 

institution. Similarly, if the FDIC 

desires to repudiate any QFC with a 

particular counterparty, it must 

repudiate all QFCs between the covered 

financial company and such 

counterparty and any affiliate of such 

counterparty as a group.30

Transfer: The FDIC may transfer a 

QFC to any other financial institution 

not subject to a bankruptcy or 

insolvency proceeding. Such financial 


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31The FDIC as receiver of a covered financial 

company may not transfer QFCs to a foreign bank 

unless, under applicable law, the contractual rights 

of the parties to such QFCs and any netting 

contracts, security agreements or arrangements or 

other credit enhancements related to any such QFCs 

are enforceable substantially to the same extent as 

under 12 U.S.C. 5390. 12 U.S.C. 5390(c)(9)(B). 

32 12 U.S.C. 5390(c)(10)(B) and 12 U.S.C. 

5390(c)(16). 

33See 12 U.S.C. 5390(c)(10)(B). 

34 12 U.S.C. 5390(c)(10)(B). 

35 12 U.S.C. 5390(c)(1). 

36See 12 U.S.C. 5390(c)(8)(F)(ii), which provides 

that any payment or delivery obligations otherwise 

due from a party pursuant to the QFC shall be 

suspended from the time at which the FDIC is 

appointed as receiver under the earlier of (I) the 

time at which such party receives notice that such 

contract has been transferred pursuant to section 

210(c)(10)(A), or (II) 5 p.m. (eastern time) on the 

business day following the date of the appointment 

of the FDIC as receiver. 

37The receiver’s payment obligation is subject to 

the claims process of 12 U.S.C. 5390(a)(2). 

Therefore, if the counterparty does not have a 

perfected security interest in collateral sufficient to 

satisfy its claim, the counterparty might not receive 

cash payment in full. 

38 12 U.S.C. 5390(c)(3). 

39 12 U.S.C. 5390(c)(10)(B)(i). 

40 12 U.S.C. 5390(c)(16). Section 210(c)(16) does 

not define the terms ‘‘linked’’ to, or ‘‘guaranteed or 

supported’’ by, the covered financial company. As 

explained later in this preamble, the Proposed 

Rules include definitions of ‘‘guaranteed or 

supported’’ and ‘‘linked’’ that are consistent with 

the definitions of such terms in the FDIC final rule 

implementing section 210(c)(16) of the Orderly 

Liquidation Authority provisions of the Dodd-Frank 

Act. The FDIC published a final rule addressing all 

aspects of section 210(c)(16) on October 16, 2012. 

77 FR 63205 (‘‘FDIC Final Rule’’). 

41 12 U.S.C. 5390(c)(16). This section provides for 

the enforcement of contracts guaranteed by a 

financial company subject to orderly liquidation 

under Title II. 

42Under the FDIC final rule, contracts ‘‘supported 

by’’ a covered financial company may also be 

enforced by providing ‘‘adequate protection’’ either 

in the alternative to transferring any related support 

or in combination with a partial transfer of such 

support. Adequate protection, with respect to the 

covered financial company’s support of the 

obligations under such contracts, means: (1) making 

a cash payment or periodic cash payments to 

counterparties to the extent that the failure to cause 

the assignment and assumption of the covered 

financial company’s support and related assets and 

liabilities causes a loss to the counterparties; (2) 

provision by the FDIC as receiver of a guarantee of 

the subsidiary or affiliate’s obligations; or, (3) 

provision of relief that will result in realization by 

the counterparty of the ‘‘indubitable equivalent of 

the covered financial company’s support of such 

obligations or liabilities.’’ The definition of the term 

‘‘adequate protection’’ is consistent with the 

definition under section 361 of the United States 

Bankruptcy Code. 77 FR 63205. 

43 12 U.S.C. 5390(c)(16)(A)(ii). See also 77 FR 

63205. 

44The term ‘‘affiliate’’ is defined in § 148.2(a) of 

the Proposed Rules as any entity that controls, is 

controlled by, or is under common control with a 

financial company or counterparty. 

45See 12 U.S.C. 5384(d). Section 204(d) of the Act 

authorizes the FDIC, for example, to make loans to 

and guarantee the obligations of the covered 

financial company and its covered subsidiaries. 

institutions include, but are not limited 

to, banks, foreign banks,31 and bridge 

financial companies operated by the 

FDIC. If the FDIC as receiver transfers a 

QFC to a financial institution within the 

specified period of time, the 

counterparty cannot exercise its 

contractual right to terminate the QFC 

solely by reason of or incidental to the 

appointment of the FDIC as receiver, or 

the insolvency or financial condition of 

the covered financial company.32 If the 

FDIC as receiver decides to transfer any 

QFCs, it must take steps reasonably 

calculated to provide notice of the 

transfer of the QFCs of the failed 

financial company to the relevant 

counterparties.33 The counterparties 

must accept the transferee as a 

counterparty and cannot terminate the 

QFC solely by reason of such transfer.34

Disaffirmance or Repudiation: The 

FDIC as receiver may disaffirm or 

repudiate a QFC within a reasonable 

period of time if the receiver determines 

that the contract is burdensome.35 If the 

receiver does not elect to transfer all 

QFCs with a given counterparty (and 

with its affiliates), under the law the 

receiver has a ‘‘reasonable time’’ in 

which to repudiate such QFCs. 

However, as a practical matter, the 

receiver must promptly decide whether 

to repudiate all QFCs involving such 

counterparty (and its affiliates), in order 

to minimize the potential for an adverse 

change in the market value of such 

QFCs. For example, although 

counterparties to QFCs that are not 

transferred are not required to terminate 

the contracts immediately after the 

expiration of a one-business day stay,36

they may decide to exercise any 

contractual right they have to terminate 

in order to protect against the potential 

adverse change in the market value of 

the QFCs (especially if the 

counterparties have sufficient collateral 

to cover the termination value of the 

QFCs). 

If the receiver repudiates the QFCs, it 

must pay actual direct compensatory 

damages,37 which may include the 

normal and reasonable costs of cover or 

other reasonable measure of damages 

used in the industry for such claims 

(after giving effect to any contractual 

netting rights of the counterparty). Such 

damages are calculated as of the date of 

repudiation.38

Retention: The FDIC’s retention of a 

QFC in the receivership would allow a 

counterparty to terminate the contract 

after 5 p.m. (eastern time) on the first 

business day after the appointment of 

the FDIC as receiver.39 If the 

counterparty then terminates QFCs with 

the financial company, the counterparty 

may exercise any contractual right it 

may have to net any payment the 

counterparty owes to the receivership 

against any payment owed by the 

receivership to the counterparty with 

respect to QFCs as set forth in any 

netting agreement. 

In order to assess by 5 p.m. on the 

business day following the date of its 

appointment as receiver of a financial 

company its options to retain and allow 

the counterparty to terminate, retain and 

disaffirm or repudiate, or transfer QFCs, 

the FDIC needs detailed information 

about the company’s QFCs. To make a 

well-informed decision on these three 

options, the FDIC needs access to the 

information required to be maintained 

under the Proposed Rules. The 

information must be sufficient to allow 

the FDIC to estimate the financial and 

operational impact on the covered 

financial company or its affiliated 

financial companies of the receiver’s 

decision to transfer, repudiate or retain 

the QFCs. It must also allow the FDIC 

to assess the potential impact that such 

decisions may have on the financial 

markets as a whole. 

Under the Act, the FDIC as receiver 

has additional powers with respect to 

contracts of subsidiaries or affiliates of 

a covered financial company that are 

guaranteed or otherwise supported by or 

linked 40 to such covered financial 

company.41 Such contracts can be 

enforced by the FDIC as receiver 

notwithstanding the insolvency, 

financial condition, or receivership of 

the financial company. Contracts which 

are guaranteed or otherwise supported 

by the covered financial company 

remain enforceable by the FDIC if the 

FDIC transfers any such guaranty or 

other support and all related assets and 

liabilities to a bridge financial company 

or third-party financial institution not 

subject to a bankruptcy or insolvency 

proceeding within the period of time 

provided under section 210(c)(10), or if 

the FDIC provides adequate 

protection 42 with respect to the support 

of such contracts.43 The FDIC as 

receiver may also need to make sure that 

affiliates 44 of the covered financial 

company continue to perform their QFC 

obligations in order to preserve the 

critical operations of the covered 

financial company and its affiliates. In 

such cases, the FDIC may need to 

provide additional liquidity, support, or 

collateral to the affiliates to enable them 

to meet collateral obligations and 

generally perform their QFC 

obligations.45 The Proposed Rules 

therefore would impose recordkeeping 

requirements on affiliated financial 

companies in a corporate group because 

the Secretary, as informed by the FDIC, 


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46For example, the FDIC could be appointed as 

receiver of an affiliated financial company under 

section 210(a)(1)(E) of the Act. 

47Not all QFC data would be reported under Title 

VII of the Dodd-Frank Act. Some QFCs may not 

have central reporting repositories. 

48Clearing organizations would include central 

counterparties and security-based swap clearing 

organizations. 

believes that the information would be 

necessary or appropriate in assisting the 

FDIC in exercising its rights as receiver 

for a financial company with affiliates. 

In addition, the imposition of 

recordkeeping requirements on 

affiliated financial companies could also 

assist the FDIC as receiver of one or 

more of such affiliated financial 

companies of the Act in fulfilling its 

obligations under section 210(c)(8), (9), 

or (10).46

Under Title II, the FDIC may become 

receiver for financial companies of a 

substantial size or complexity. These 

large and complex companies and 

certain of their affiliates that enter into 

QFCs may hold large and complex 

portfolios of QFCs. Such financial 

companies and their affiliates often have 

counterparties that are themselves 

members of large, complex, and 

interconnected corporate financial 

groups. Therefore QFCs tend to increase 

the interconnectedness of the financial 

system and systemic risk. They are also 

an important and integral component of 

a Title II resolution, presenting multiple 

challenges to an orderly liquidation 

process. Given the limited postreceivership time frame allowed by Title 

II for the FDIC to make decisions 

regarding QFCs, it is important that the 

FDIC has adequate time to obtain QFC 

data, conduct necessary analysis, and 

make informed decisions on a QFC 

portfolio. 

Therefore, the Secretary in 

consultation with the FDIC is proposing 

the Proposed Rules described below. 

The Proposed Rules are similar to the 

FDIC’s Part 371 but the information 

requirements of the Proposed Rules are 

more extensive. Unlike the FDIC’s Part 

371 (which requires that only banks in 

‘‘troubled condition’’ maintain records 

of QFCs) the Proposed Rules do not 

contain such a ‘‘troubled financial 

condition’’ trigger. The recordkeeping 

requirements of the Proposed Rules 

have been informed by the FDIC’s 

experience in dealing with multiple 

QFC portfolios of insured depository 

institutions. The data requirements were 

also informed by efforts to standardize 

regulatory data. 

Given the short time frame for the 

FDIC to make decisions regarding a QFC 

portfolio of significant size or 

complexity, the Proposed Rules would 

also require the use of an updated and 

standardized format to allow the FDIC 

to obtain and process the large amount 

of QFC information quickly. In the 

absence of updated and standardized 

information, it is possible that QFCs 

could be left in the receivership, when 

transfer to a solvent financial institution 

or a bridge financial company would be 

a preferred course of action. The 

absence of QFC data may reduce the 

FDIC’s flexibility in managing the QFC 

portfolio, and may increase systemic 

risk. 

However, to reduce the burdens on 

financial companies, the Proposed Rules 

provide that upon receipt of a written 

recommendation from the FDIC, 

prepared in consultation with the 

primary financial regulatory agencies for 

the applicable records entities, the 

Secretary may grant conditional or 

unconditional exemptions as the 

Secretary determines to be necessary or 

appropriate. Such exemptions could 

include a conditional exemption to 

allow for a different recordkeeping 

format than that set forth in the 

Proposed Rules. For example, financial 

companies are required to report some 

QFC data to swap data repositories 

(‘‘SDRs’’),47 and some data may be 

available through derivatives clearing 

organizations registered with the CFTC 

or clearing agencies registered with the 

SEC (collectively referred to in this 

release as ‘‘clearing organizations’’).48

The Secretary notes that the FDIC would 

need to be able to manipulate and 

analyze such data to determine the 

effect of FDIC decisions under Title II 

with respect to a covered financial 

company’s QFC portfolio. 

III. The Proposed Rules 

The following section describes the 

requirements in the Proposed Rules and 

the rationale underlying the 

requirements. The Proposed Rules set 

forth the general requirements for 

financial companies, while the detailed 

lists of the records that would be 

required to be maintained are provided 

in the Appendix in the Proposed Rules. 

The Proposed Rules are organized 

into four parts: 

• Section 148.1 Scope, purpose, 

effective date, and compliance dates 

• Section 148.2 Definitions 

• Section 148.3 Form, availability and 

maintenance of records 

• Section 148.4 Content of records 

The Appendix in the Proposed Rules 

list the records that would be required 

to be maintained and provide the file 

structure for the QFC recordkeeping 

requirements. The Appendix is 

organized as follows: 

• Table A–1—Position-Level Data 

• Table A–2—Counterparty Collateral 

Data 

• Table A–3—Legal Agreements 

• Table A–4—Collateral Detail Data 

The discussion in this section of the 

release is based on the organization of 

the Proposed Rules and the Appendix is 

discussed in a separate subsection 

below. The Secretary asks questions and 

solicits comment in each subsection 

with respect to the related parts of the 

Proposed Rules or the Appendix. 

A. Scope, Purpose, Effective Date and 

Compliance Dates 

Section 148.1(a) of the Proposed Rules 

defines the scope of the rules and 

provides that the rules apply to each 

financial company that is a ‘‘records 

entity.’’ Section 148.1(b) explains the 

purpose of the rules. Section 148.1(c) 

sets forth the rule’s effective and 

compliance dates. The Proposed Rules 

are discussed below, followed by the 

Secretary’s questions regarding their 

subject matter. 

1. Scope 

a. Key Definitions 

The scope of the Proposed Rules is 

established by certain key definitions 

which determine the entities that would 

be subject to the rules. Specifically 

section 148.1(a) of the Proposed Rules 

provides that the rules would apply to 

any ‘‘financial company’’ that is a 

‘‘records entity’’ as those terms are 

defined in the Proposed Rules. The 

definitions of ‘‘financial company,’’ 

‘‘records entity,’’ and other related 

definitions are explained below, 

followed by an illustrative discussion of 

the records entities within a U.S. bank 

holding company structure, a summary 

of the application of the Proposed Rules 

to clearing organizations, and a 

discussion of the records entities that 

may come within the scope section of 

the Proposed Rules. 

Financial Company: The Proposed 

Rules incorporate the definition of a 

‘‘financial company’’ set forth in section 

201(a)(11) of the Dodd-Frank Act. 

Entities that are not included in the 

section 201(a)(11) definition of 

‘‘financial company’’ would not be 

included in the definition of ‘‘records 

entity’’ and, therefore, would not be 

subject to the rules. Entities that are 

included in the section 201(a)(11) 

definition of ‘‘financial company’’ 

would be subject to the rules if they also 

meet the other criteria in the definition 

of records entity. In addition, the 

definition of ‘‘covered financial 

company’’ in section 201(a)(8)(B) of the 

Dodd-Frank Act excludes insured 


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49 12 U.S.C. 5381(a)(8)(B). 

50 12 U.S.C. 4502(20). This provision, therefore, 

excludes from the orderly liquidation authority of 

Title II the Federal National Mortgage Association 

and any affiliate thereof, the Federal Home Loan 

Mortgage Corporation and any affiliate thereof, and 

any Federal Home Loan Bank. 

51See 12 U.S.C. 1843(k)(4)(C). 

52Exemptions would be available as outlined in 

§ 148.3(c) of the Proposed Rules. For example, the 

Secretary may consent to the use of electronic 

records maintained in an SDR or internally at the 

records entity which are not in the format set forth 

in the Appendices to the Proposed Rules if such 

alternative format is sufficient to enable the FDIC 

as receiver to exercise its rights and fulfill its 

obligations under 12 U.S.C. 5390(c)(8), (9), or (10). 

See discussion below in subsection III.3.C of this 

Supplementary Information. 

53See 12 U.S.C. 5390(c)(8)(H)(iv). 

54 12 U.S.C. 5390(c)(16). 

55See Title VIII, ‘‘Payment, Clearing, and 

Settlement Supervision Act of 2010.’’ 12 U.S.C. 

5461, et seq. A financial market utility is defined 

in section 802(6) of Title VIII as any person that 

manages or operates a multilateral system for the 

purpose of transferring, clearing, or settling 

payments, securities, or other financial transactions 

among financial institutions or between financial 

institutions and such person. 12 U.S.C. 5461(6)(A). 

56Total assets would be determined based on the 

most recent year-end consolidated statements of 

financial condition filed with a primary financial 

regulatory agency. For financial companies that are 

not required to file such statements, total assets 

would be determined based on the consolidated 

balance sheet for the most recent fiscal year-end. An 

entity, such as an investment adviser, that acts as 

agent on behalf of a client and is not a party to that 

client’s QFC or does not support, guarantee or is not 

otherwise linked to that client’s QFC would not be 

subject to the rule. 

57Section 113 authorizes the Council to make 

determinations for U.S. nonbank financial 

companies and foreign nonbank financial 

companies pursuant to two separate paragraphs, but 

the considerations related to the financial stability 

of the United States are nearly identical. See 12 

U.S.C. 5323(a) and (b). A determination under 

section 113 would mean that the nonbank financial 

company would be subject to supervision by the 

Board of Governors of the Federal Reserve System 

and to enhanced prudential standards established 

in accordance with Title I. See 12 U.S.C. 5365. 

58 12 U.S.C. 5463(a)(2)(D). 

59The first proposed prong under § 148.2(l)(3) of 

the Proposed Rules includes those entities that the 

Council designates as posing a threat to U.S. 

financial stability. The Council takes into 

consideration each of the factors expressly 

referenced in section 210(c)(8)(H)(iv) as follows: 

leverage of a company is expressly considered 

under rule 1310.11(a)(1) and (b)(1); complexity is 

addressed in a variety of ways, including under 

rules 1310.11(a)(2) and (b)(2) regarding the extent 

and nature of off-balance-sheet exposures; 

interconnectedness to the financial system is 

addressed in several of the rules including rules 

1310.11(a)(3)–(5) and (b)(3)–(5); size is expressly 

addressed in rules 1310.11(a)(7) and (b)(7); 

frequency and dollar amount of QFCs, to the extent 

relevant, is addressed through rules 1310.11(a)(9) 

and (10) and (b)(9)(10); and risk is addressed 

Continued 

depository institutions,49 which as a 

result are ineligible for orderly 

liquidation under Title II. Thus, based 

on the section 201(a)(11) definition of 

‘‘financial company’’ and the section 

201(a)(8)(B) definition of ‘‘covered 

financial company,’’ the following 

entities would not be required to 

maintain records under the Proposed 

Rules: 

• Financial companies that are not 

incorporated or organized under U.S. 

federal or state law; 

• Farm Credit System institutions; 

• Governmental entities, and 

regulated entities under the Federal 

Housing Enterprises Financial Safety 

and Soundness Act of 1992 (‘‘FHA’’); 50

and 

• Insured depository institutions. 

The following financial companies 

would be subject to the rules if they are 

incorporated or organized under any 

provision of federal law or the laws of 

any State and meet the definition of 

‘‘records entity’’ in the rules: 

• A bank holding company; 

• A nonbank financial company 

supervised by the Board; 

• Any company that is predominantly 

engaged in activities that the Board has 

determined are financial in nature or 

incidental thereto for purposes of 

section 4(k) of the BHC Act; and 

• Any subsidiary (other than an 

insured depository institution or 

insurance company) of such financial 

company where such subsidiary is 

predominantly engaged in activities that 

the Board has determined are financial 

in nature or incidental thereto for 

purposes of section 4(k) of the BHC 

Act.51

Records Entity: Each records entity 

would be required to maintain records 

with respect to all of its QFCs unless 

such records entity receives an 

exemption under the rules.52 In 

developing the definition of a records 

entity, the Secretary took into 

consideration factors such as financial 

company size, risk, complexity, 

leverage, frequency and dollar amount 

of QFCs, and interconnectedness to the 

financial system in addition to other 

factors described herein.53 The records 

entity definition would include a 

financial company that is a party to an 

open QFC or guarantees, supports, or is 

linked to an open QFC of an affiliate 

and is a member of a corporate group in 

which at least one financial company 

meets one of three other criteria for 

being a records entity. Because affiliated 

financial companies that are part of the 

same corporate group may play an 

important role in determining risks that 

are present, the information about the 

affiliates’ QFCs could assist the FDIC as 

receiver. Furthermore, the FDIC has 

authority to enforce the QFCs of 

affiliates of covered financial 

companies, the obligations of which are 

guaranteed or otherwise supported by or 

linked to the covered financial 

company.54

A ‘‘records entity’’ is defined in 

section 148.2(l) of the Proposed Rules as 

a financial company that: is not an 

exempt entity; is a party to an open 

QFC, or guarantees, supports or is 

linked to an open QFC; and meets one 

of the following requirements: (a) Is 

determined pursuant to 12 U.S.C. 5323 

(Title I of the Dodd-Frank Act) to be an 

entity that could pose a threat to the 

financial stability of the United States; 

(b) Is designated pursuant to 12 U.S.C. 

5463 (Title VIII of the Dodd-Frank Act) 

as a financial market utility 55 that is, or 

is likely to become, systemically 

important; or (c) Has total assets equal 

to or greater than $50 billion,56 or (d) Is 

a party to an open QFC or guarantees, 

supports, or is linked to an open QFC 

of an affiliate and is a member of a 

corporate group within which at least 

one affiliate meets one of the 

requirements in (a), (b), or (c). 

The Secretary has adequately 

considered the factors referenced in 

section 210(c)(8)(H)(iv) in developing 

the scope of the definition of records 

entity. The Secretary has decided to 

include in the scope of the definition of 

records entity those financial companies 

that: (1) the Council determines could 

pose a threat to U.S. financial stability; 

(2) the Council designates as 

systemically important financial market 

utilities; and (3) financial companies 

that have at least $50 billion in assets, 

for several reasons. First, the factors the 

Council must consider in designating a 

nonbank financial company as posing a 

threat to financial stability under 

section 113 of the Act, or a financial 

market utility as systemically important 

under section 804, are similar to the 

factors listed in section 210(c)(8)(H)(iv). 

The Council may make a determination 

under section 113 if it finds that 

material financial distress at the 

nonbank financial company, or the 

nature, scope, size, scale, concentration, 

interconnectedness, or mix of the 

activities of the nonbank financial 

company could pose a threat to the 

financial stability of the United States.57

Similarly, in making a determination 

that a financial market utility is or is 

likely to become systemically important, 

the Council is required to consider the 

effect that the failure of or a disruption 

to the financial market utility would 

have on critical markets, financial 

institutions, or the broader financial 

system.58 The Secretary believes that it 

would be unnecessary to create a 

different scheme for determining the 

scope of financial companies subject to 

recordkeeping for the purposes of this 

rulemaking.59


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directly and indirectly through various rules, 

including for instance rules 1310.11(a)(1), (a)(2), 

(a)(10) and (11), (b)(1), (b)(2) and (b)(10) and (11). 

See 12 CFR part 1310. See also 77 FR 21637. The 

second proposed prong under § 148.2(l)(3) of the 

Proposed Rules includes those entities that the 

Council designates as systemically important 

financial market utilities under 12 CFR part 1320. 

The Council’s rulemaking regarding financial 

market utilities takes into consideration various 

factors, which are directly or effectively the factors 

referenced in section 210(c)(8)(H)(iv). See 12 CFR 

1320.10. See also 76 FR 44763. In the third 

proposed prong of § 148.2(l)(3) of the Proposed 

Rules, the stand-alone test of assets equal to or 

greater than $50 billion is used because that size 

threshold, by itself, together with other aspects of 

the definition of records entity is sufficient to 

differentiate financial companies or their corporate 

groups that might be subject to orderly liquidation 

under Title II. The test in the fourth proposed prong 

of § 148.2(l)(3) of the Proposed Rules includes a 

requirement that the entity be a member of a 

corporate group in which at least one financial 

company meets one of the first three prongs, thus 

taking the various factors into account. To the 

extent a general or specific exemption from the 

rules may be necessary or appropriate, it is 

expected that the Secretary would consider these 

factors in determining whether to grant an 

exemption. 

60 12 U.S.C. 5365(a). 

61See Authority to Require Supervision and 

Regulation of Certain Nonbank Financial 

Companies. 12 CFR part 1310. In adopting this 

threshold, the Council noted that it is consistent 

with the Dodd-Frank Act threshold of $50 billion 

in assets for subjecting bank holding companies to 

enhanced prudential standards. 77 FR 21637, 

21661. 62 12 U.S.C. 5381(a)(8)(B). 

63See 77 FR 63205 (October 16, 2012). 

64See, e.g., section 210(c)(8)(D)(ii)(XII) (defining 

‘‘securities contract’’ to include ‘‘any security 

agreement or arrangement or other credit 

enhancement related to any agreement or 

transaction referred to in this clause, including any 

guarantee or reimbursement obligation in 

connection with any agreement or transaction 

referred to in this clause’’). 

The Secretary also believes that the 

$50 billion threshold is a useful means 

for identifying entities that are of a 

sufficient size that they could 

potentially be considered for orderly 

liquidation under Title II, and therefore 

should be incorporated in the definition 

of a records entity. A $50 billion asset 

threshold has been separately 

established for similar purposes under 

the Dodd-Frank Act.60 In particular, the 

Council applies a $50 billion threshold 

as an initial evaluation tool for 

determining whether a nonbank 

financial company could pose a threat 

to the financial stability of the United 

States and should be subject to 

heightened supervision under Title I of 

the Dodd-Frank Act, citing the potential 

for these types of firms to pose a threat 

to U.S. financial stability.61

Finally, a nonbank financial company 

supervised by the Board, a designated 

financial market utility, or a financial 

company (including a bank holding 

company) with total assets of $50 billion 

or more are the types of financial 

companies that potentially would be the 

most likely to be considered for orderly 

liquidation under Title II. Therefore, the 

Secretary proposes including this set of 

financial companies in the definition of 

records entity for purposes of the 

Proposed Rules. The definition of 

records entity is thus designed to reduce 

recordkeeping burdens by only 

capturing those financial companies 

with QFC positions for which the FDIC 

is most likely to be appointed as 

receiver. It does not, however, capture 

an entity, such as an investment adviser, 

that acts as agent on behalf of a client 

and is not a party to or does not support, 

guarantee or is not otherwise linked to 

that client’s QFC. These criteria would 

serve to exclude from the scope of the 

rule small financial company corporate 

groups that are unlikely to be subject to 

the orderly liquidation authority of Title 

II. 

Exempt Entity: An exempt entity that 

would be excluded from the definition 

of ‘‘records entity’’ and, therefore, the 

scope of the rules is defined in section 

148.2(e) of the Proposed Rules as: 

(1) An insured depository institution as 

defined in 12 U.S.C. 1813(c)(2); 

(2) A subsidiary of an insured depository 

institution that is not a functionally regulated 

subsidiary as defined in 12 U.S.C. 1844(c)(5), 

a security-based swap dealer as defined in 15 

U.S.C. 78c(a)(71), or a major security-based 

swap participant as defined in 15 U.S.C. 

78c(a)(67); or 

(3) A financial company that is not a party 

to a QFC and controls only exempt entities 

as defined in clause (1) of this definition. 

Insured depository institutions are 

proposed to be exempt because they are 

excluded from the definition of covered 

financial company and thus from the 

scope of Title II regardless of whether 

they are also a major swap or securitybased swap participant or a swap or 

security-based swap dealer.62 In 

addition, subsidiaries of an insured 

depository institution which are 

supervised on a consolidated basis with 

the insured depository institution are 

also proposed to be exempt for purposes 

of consistency with the insured 

depository institution exemption. 

However, functionally regulated 

subsidiaries, security-based swap 

dealers, and major security-based swap 

participants are not supervised on a 

consolidated basis with the parent 

insured depository institution and are 

not already required to maintain records 

under Part 371, as discussed above. 

These subsidiaries meet the definition 

of financial company in Title II, and 

would be required to comply with the 

recordkeeping requirements of the rules 

if they are ‘‘records entities.’’ Finally, a 

financial company that controls only 

insured depository institutions and is 

not itself a party to a QFC is also 

proposed to be exempt for purposes of 

consistency with the insured depository 

institution exemption. 

Guaranteed, Supported, or Linked: 

Under section 210(c)(16), the FDIC as 

receiver for the covered financial 

company may enforce contracts of 

subsidiaries or affiliates that are 

‘‘guaranteed,’’ ‘‘supported’’ by, or 

‘‘linked’’ to the covered financial 

company. However, section 210(c)(16) 

does not define these terms. The 

Proposed Rules thus include a 

definition of ‘‘guaranteed or supported’’ 

and a definition of ‘‘linked,’’ each of 

which is consistent with the definition 

of similar terms in the FDIC’s final rule 

implementing section 210(c)(16) of the 

Orderly Liquidation Authority 

provisions of the Dodd-Frank Act.63

Under the FDIC final rule, a contract is 

‘‘linked’’ to a covered financial 

company if it contains a ‘‘specified 

financial condition clause,’’ which is 

any provision that permits a contract 

counterparty to terminate, accelerate, 

liquidate, or exercise any other remedy 

under any contract to which the 

subsidiary or affiliate is a party or to 

obtain possession of or exercise control 

over any property of the subsidiary or 

affiliate or affect any contractual rights 

of the subsidiary or affiliate based on 

enumerated conditions related to the 

insolvency or financial condition of the 

covered financial company. The FDIC 

final rule also defines the term 

‘‘support’’ as undertaking any of the 

following for the purpose of supporting 

the contractual obligations of a 

subsidiary or affiliate of a covered 

financial company: guaranteeing, 

indemnifying, or undertaking to make 

any loan or advance to or on behalf of 

the subsidiary or affiliate; undertaking 

to make capital contributions to the 

subsidiary or affiliate; or being 

contractually obligated to provide any 

other financial assistance to the 

subsidiary or affiliate. In some 

instances, ‘‘support’’ may itself 

constitute a QFC.64

The terms ‘‘linked’’ and ‘‘guarantees, 

supports’’ are also used to define the 

financial companies that are records 

entities under the Proposed Rules. A 

financial company that guarantees or 

supports open QFCs would be a records 

entity, provided that the other 

conditions of the definition are met, 

because its exposure is connected to the 

exposure of the financial company that 

is the counterparty to the QFC. A 


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65See, e.g., Financial Accounting Standards 

Board, Statement of Financial Accounting 

Standards No. 167 (2009). 

financial company that is linked to an 

open QFC would also be a records 

entity, provided that the other 

conditions of the definition are met, 

because its financial condition or other 

circumstances are connected to such 

counterparty. Moreover, the financial 

company providing support or a 

guarantee is exposed, along with, 

depending on the circumstances, its 

corporate group, to the risk of 

termination of QFCs. Therefore, the 

Proposed Rules would require each 

records entity that guarantees or 

supports QFCs to keep records with 

respect to all such guaranteed or 

supported QFCs. The records entity that 

links its QFCs to another entity would 

be responsible for keeping records 

related to the specified financial 

condition clause. In each case, a records 

entity would be responsible for 

obtaining from its affiliates all 

information necessary to enable it to 

maintain these records. 

Including affiliated financial 

companies as records entities under the 

Proposed Rules is necessary: (1) To 

assist the FDIC in exercising its right to 

enforce contracts of subsidiaries and 

affiliates under section 210(c)(16), and 

fulfilling its obligations under section 

210(c)(9) and section 210(c)(10) with 

respect to the timing and notification of 

the transfer of any guarantee or other 

support and related assets and liabilities 

in connection with any agreement or 

transaction referred to in any such QFC; 

and (2) to assist the FDIC in fulfilling its 

obligations under section 210(c)(9) and 

section 210(c)(10) in the event the FDIC 

is appointed as receiver of an affiliated 

financial company. In connection with 

the transfers and notifications under 

section 210(c)(9) and section 210(c)(10), 

the FDIC will need the same 

information with respect to such QFCs 

(including guaranteed or supported 

QFCs) of an affiliate as it does with 

respect to QFCs to which the financial 

company was a party. 

Affiliate, Subsidiary, and Control: The 

definitions of the terms ‘‘subsidiary’’ 

and ‘‘affiliate’’ in the Proposed Rules are 

consistent with the definitions given to 

such terms in the Dodd-Frank Act. 

Section 2(18) of the Act provides that 

these terms will have the same 

meanings as in section 3 of the FDIA (12 

U.S.C. 1813). Under the FDIA, the term 

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

company which is owned or controlled 

directly or indirectly by another 

company.’’ Similarly, the term 

‘‘affiliate’’ is defined by reference to the 

BHC Act, 12 U.S.C. 1841(k) as ‘‘any 

company that controls, is controlled by, 

or is under common control with 

another company.’’ 

The definition of ‘‘control’’ is 

provided in the FDIA, which in turn, 

refers to the definition provided in the 

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

Proposed Rules would define ‘‘control’’ 

to include a company that directly or 

indirectly or acting through one or more 

persons owns, controls, or has the 

power to vote 25 percent or more of any 

class of voting securities of the 

company, controls in any manner the 

election of a majority of the directors or 

trustees of the company, or must 

consolidate another entity for financial 

or regulatory reporting purposes. The 

first two prongs of this definition are 

consistent with the BHC Act definition. 

The third prong reflects the fact that, in 

certain situations, a controlling interest 

may be achieved through arrangements 

that do not involve voting interests,65

and, unlike the BHC Act definition, 

provides an objective test that does not 

require a determination by the Board. 

Non-U.S. Entities. Because the 

Proposed Rules would incorporate the 

Title II definition of ‘‘financial 

company,’’ the Proposed Rules apply 

only to entities incorporated or 

organized in the United States that are 

considered records entities under the 

Proposed Rules. For example, a U.K.- 

incorporated London affiliate of a U.S. 

broker-dealer would not be a records 

entity because it is a separate legal 

entity that is not incorporated or 

organized within the United States. 

b. Records Entities Within a U.S. 

Holding Company 

Figure 1 below illustrates how the 

definition of financial company affects 

whether various affiliates in a U.S. 

holding company corporate group 

would qualify under the Proposed Rules 

as records entities based on the 

application of the definition of financial 

company in the Dodd-Frank Act and the 

Proposed Rules. The holding company 

and some affiliates would qualify as 

records entities as shown below, while 

the other affiliates would not. 


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c. Clearing Organizations 

The Proposed Rules would not 

exclude from their scope any records 

entity that is a clearing organization 

with respect to derivatives cleared for 

its members. As part of fulfilling its 

responsibilities, a clearing organization 

must keep, on a near real-time basis, 

thorough and well-organized records of 

the contracts with each of its members. 

The FDIC, as receiver for a clearing 

organization under Title II, would have 

access to this information to analyze 

clearing organization positions. Taking 

into consideration a clearing 

organization’s functions and that its role 

is to interpose itself between 

counterparties to transactions, some of 

the data elements that would be 

required by the Proposed Rules may not 

be relevant for clearing organizations. 

The Appendix to the Proposed Rules 

provides that a records entity may leave 

an entry blank or insert N/A in a data 

field that does not apply to a given QFC 

transaction or agreement. 

Accordingly, the Secretary seeks 

comment on the following: (i) Whether 

the Proposed Rules should provide a 

different set of data requirements for 

clearing organizations and/or for 

centrally cleared transactions; (ii) 

whether such different data elements 

should contain fields in addition to 

those included in Tables A–1 through 

A–4 of the Appendix in the Proposed 

Rules, should exclude some of the fields 

listed in Tables A–1 through A–4, or 

some combination of the two; and (iii) 

whether any required data set should be 

maintained in a form or fashion 

different from the format contained in 

the Proposed Rules. The Secretary seeks 

comment on whether, and if so, how 

best to modify those data elements and 

general recordkeeping requirements set 

forth in the Proposed Rules with respect 

to clearing organizations and/or 

centrally cleared transactions. For 

example, should the Secretary establish 

a different set of data elements, data 

format, or other general recordkeeping 

requirements for clearing organizations 

and/or centrally cleared transactions? If 

yes, how should the format and the 

content of data fields listed in Tables 1– 

4 of the Appendix in the Proposed Rules 

be modified for clearing organizations? 

Which fields should be deleted, 

modified, or replaced with other data 

fields? Are there any data fields that 

should be added for clearing 

organizations and/or centrally cleared 

transactions? 

Upon the written recommendation of 

the FDIC, prepared in consultation with 

the primary financial regulatory 

agencies for the applicable records 

entities, the Secretary may also issue 

exemptions of general applicability to 

address the issues that are relevant to 

clearing organizations. In addition, the 

Secretary notes that for data elements 

and recordkeeping requirements that 


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66Each individual series of a registered 

investment company offering multiple series would 

be deemed to be a separate financial company for 

purposes of these rules. See Investment Company 

Act Release No. 7276 (Aug. 8, 1972) published at 

37 FR 17384 (Aug. 26, 1972) (‘‘The individual series 

of such a [registered open-end investment] 

company are, for all practical purposes, separate 

investment companies. Each series of stock 

represents a different group of stockholders with an 

interest in a segregated portfolio of securities.’’). 

67Not all of these entities would qualify as 

records entities subject to the Proposed Rules 

because of conditions in the definition of records 

entity related to asset size, systemic importance and 

QFC activity. ‘‘Financial company’’ includes any 

company that is incorporated or organized under 

any provision of federal law or the laws of any state 

and is predominantly engaged in activities that the 

Board of Governors has determined are financial in 

nature for purposes of section 4(k) of the Bank 

Holding Company Act of 1956. 12 U.S.C. 

5381(a)(11). Activities that are ‘‘financial in nature’’ 

include ‘‘providing financial, investment, or 

economic advisory services, including advising an 

investment company’’ and ‘‘issuing or selling 

instruments representing interests in pools of assets 

. . .’’ and ‘‘underwriting, dealing in, or making a 

market in securities.’’ 12 U.S.C. 1843(k)(4). 

68For the rolling 12-month period, a financial 

company’s total consolidated assets are calculated 

based on the most recent financial statements from 

the prior fiscal year-end. 

may adversely affect a specific clearing 

organization, rather than all clearing 

organizations, the specific exemption 

process set forth in the Proposed Rules 

would be available. The decision to 

grant such an exemption could be 

conditioned upon the ability of the 

clearing organization to demonstrate 

and ensure that appropriate records are 

kept. 

d. Scope of Proposed Rules 

The ‘‘scope’’ subsection of the 

Proposed Rules provides that the rules 

apply to each entity that qualifies as a 

records entity. Section 210(c)(8)(H) of 

the Dodd-Frank Act gives the Secretary 

broad flexibility in determining the 

scope of the recordkeeping requirements 

based on factors that are deemed 

necessary or appropriate in order to 

assist the FDIC as a receiver for a 

covered financial company in being able 

to exercise its rights and fulfill its 

obligations under section 210(c)(8), (9) 

or (10) of the Dodd-Frank Act. Section 

210(c)(8)(H) also requires the 

regulations to differentiate among 

financial companies, as appropriate, by 

taking into consideration their size, risk, 

complexity, leverage, frequency and 

dollar amount of QFCs, and 

interconnectedness to the financial 

system and any other factors deemed 

appropriate. As discussed earlier, the 

Secretary has complied with these 

requirements. 

The Secretary anticipates that records 

entities would include the following 

types of financial companies (i) brokerdealers, investment advisers, investment 

companies,66 security-based swap 

dealers, security-based swap 

participants, and clearing agencies; 67

(ii) a bank holding company or bank 

holding company subsidiary (that is not 

an insured depository institution or 

other type of exempt entity); a savings 

and loan holding company or a savings 

and loan holding company subsidiary 

(that is not an insured depository 

institution or other type of exempt 

entity); a U.S. affiliate of a foreign bank; 

a noninsured state member bank; an 

agency or commercial lending company 

other than a federal agency; any 

organization organized and operated 

under section 25A of the Federal 

Reserve Act or operating under section 

25 of the Federal Reserve Act; (iii) any 

entity that the Council has determined 

to be either (A) a nonbank financial 

company that could pose a threat to the 

financial stability of the United States 

pursuant to 12 U.S.C. 5323 or (B) a 

financial market utility that is, or is 

likely to become, systemically important 

pursuant to 12 U.S.C. 5463; (iv) 

subsidiaries of State non-member 

insured banks that are not supervised on 

a consolidated basis with the State nonmember insured bank, or financial 

companies that are not supervised by a 

PFRA. 

2. Purpose 

Section 148.1(b) of the Proposed 

Rules provides that the purpose of the 

rules is to establish QFC recordkeeping 

requirements for a records entity in 

order to assist the FDIC as receiver for 

a covered financial company. 

3. Effective Date and Compliance Dates 

Section 148.1(c) of the Proposed Rules 

provides that the rule would become 

effective 60 days after publication of the 

final rule in the Federal Register. 

Section 148.1(d) of the Proposed Rules 

provides that each entity that 

constitutes a records entity on the date 

the final rule becomes effective would 

be required to comply with the rule not 

later than the 270th day after the date 

on which the final rule becomes 

effective. For a records entity that 

becomes subject to the rule after it 

becomes effective, compliance would be 

required 270 days after such entity 

becomes subject to the rule. In addition, 

section 148.1(d) of the Proposed Rules 

cross-references section 148.3(a)(3) of 

the Proposed Rules and would require 

a financial company that is a records 

entity on the effective date of the final 

rule to provide to each of its PFRAs and 

the FDIC a point of contact responsible 

for recordkeeping under the rule on the 

effective date of the rule. A financial 

company that becomes a records entity 

after the effective date would be 

required to provide a point of contact to 

each of its PFRAs and the FDIC within 

60 days of becoming a records entity. A 

financial company that no longer 

qualifies as a records entity would be 

permitted to cease maintaining records 

one year after it ceases to qualify as a 

records entity. This determination 

would be made on a rolling 12-month 

basis.68 The Secretary considered 

periods ranging from six months to 

eighteen months, but after consultation 

with the FDIC, chose to maintain a 

parallel with the FDIC’s Part 371 

Recordkeeping rules. 

If during the one-year period such 

financial company becomes subject to 

the rules again, even for a short period 

of time, the one-year period would be 

re-calculated from that later time. A 

financial company that becomes subject 

to the rules again after it had ceased 

recordkeeping would be required to 

comply with the requirements of the 

rule within 90 days. The Proposed Rules 

specify that the 90-day period 

commences on the date a financial 

company becomes subject to these rules 

as a records entity. 

Questions: 

1. Is the scope of the Proposed Rules 

adequate? Should additional entities be 

subject to the rule? Please provide 

specific details supporting these views. 

2. Is the initial compliance date of 270 

days adequate? If it is too long, please 

explain how records entities would be 

able to meet a shorter initial compliance 

date? If it is too short, please explain 

why a longer period would be necessary 

to comply with the rule. 

3. Is the rolling 12-month baseline for 

a financial company to cease being a 

records entity adequate? Please provide 

specific details if it is inadequate. Is the 

subsequent compliance date of 90 days 

adequate? Please provide specific 

details if it is inadequate. 

4. Should each affiliate of a corporate 

group that meets the records entity 

definition under section 148.2(l)(3)(iv) 

of the Proposed Rules be required to 

maintain records, or should the parent 

company aggregate records for all open 

QFCs that any such affiliate in the 

consolidated corporate group is a party 

to or guarantees, supports, or is linked? 

Should there be one recordkeeping 

requirement for an entire corporate 

group by the top tier holding company? 

Are there any barriers to the parent 

company obtaining the necessary 

information from such subsidiaries and 

affiliates? Should the parent company 

be required to maintain records for the 

QFCs at its foreign subsidiaries and 


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affiliates? Would such a definition, in 

which only the parent company in a 

corporate group is a records entity, 

make compliance more or less 

burdensome? Are the recordkeeping 

requirements in the Proposed Rules an 

effective means of assisting the FDIC as 

receiver of a covered financial company 

to exercise its rights and fulfill its 

obligations under section 210(c)(8), (9), 

or (10) of the Dodd-Frank Act? If not, 

how could the Proposed Rules be more 

effective to assist the FDIC? 

5. Should a records entity also be 

required to maintain records with 

respect to QFCs of affiliates that are 

linked to such entity? Should such 

records entity be responsible for 

obtaining from its affiliates or 

subsidiaries all information necessary to 

enable such records entity to maintain 

records with respect to QFCs of affiliates 

that are linked to it? Is there a different 

way the FDIC could obtain information 

about linked QFCs? Would the 

information provided in Table A–3 to 

the Appendix be sufficient to identify 

such linkages? How would such 

recordkeeping be handled if the affiliate 

is not a financial company or is an 

exempt entity? 

6. Would the current definitions 

provide for adequate recordkeeping for 

QFCs at foreign affiliates of U.S. records 

entities (recognizing that such foreign 

affiliates would not be records entities)? 

If not, should the record maintenance 

requirements be altered? 

7. Is the scope of the definition of 

‘‘exempt entity’’ adequate? What 

changes, if any, should be made to the 

definition of ‘‘exempt entity?’’ Are there 

other entities that should be included in 

the definition of ‘‘exempt entity’’? Are 

there entities that should be excluded 

from the definition of ‘‘exempt entity’’? 

Should the rules exempt other entities 

based on the number of QFC 

counterparties, QFC notional amounts, 

QFC mark-to-market values as of a 

particular date, or some other criteria? If 

so, at what levels should such 

exemptions be set? Please provide any 

data or other analyses that support this 

view. Should there be any other form of 

de minimis exemption? 

8. Should the rules provide additional 

categorization or tiering of financial 

companies based on other criteria? What 

should such other criteria be? Would 

financial company or QFC portfolio 

leverage be relevant? Should the dollar 

amount of the QFC portfolio or the 

frequency of trading be used to 

differentiate among financial 

companies? Please provide specific 

explanations of how such criteria would 

be applied together with an explanation 

of whether such criteria would help, be 

neutral to, or interfere with, the FDIC’s 

ability to resolve a QFC portfolio. Please 

provide specific details on the relevance 

of such criteria toward the orderly 

liquidation authority goal of reducing 

systemic risk. 

9. Should the Secretary further 

differentiate among financial companies 

or their corporate groups by their size, 

risk, complexity, leverage, frequency 

and dollar amount of QFCs, or 

interconnectedness to the financial 

system? Should any other factors be 

considered? Should the Secretary adopt 

different criteria? Please provide 

specific details on any factors to be 

considered or criteria proposed, 

including an explanation on why such 

factors would help, be neutral to, or 

interfere with, the FDIC’s ability to 

resolve a QFC portfolio. 

10. Should the Secretary have 

considered the factors referenced in 

section 210(c)(8)(H)(iv) in a different 

way than discussed above? Should the 

Secretary not rely on the Council’s 

designations? If so, how should the 

Secretary consider those factors? Should 

any other factors be considered? 

11. Is the scope of the Proposed Rules 

sufficiently clear with respect to 

subsidiaries of insured depository 

institutions? If not, how should the 

scope of the Proposed Rules be 

clarified? Should all subsidiaries of 

insured depository institutions be 

included in the scope of the Proposed 

Rules? 

12. Is it appropriate to include 

affiliates and other entities that might 

not be designated as systemically 

important, or that might not have total 

assets equal to or greater than $50 

billion, within the scope of the 

Proposed Rules? If not, how should the 

scope of the Proposed Rules be 

narrowed? For example, should 

affiliates be included only if they 

themselves are designated as 

systemically important or have total 

assets equal to or greater than $50 

billion? How would this affect the 

FDIC’s ability to exercise its rights 

under the Act and fulfill its obligations 

under section 210(c)(8), (9), or (10), as 

receiver? Conversely, should the scope 

of the Proposed Rules regarding 

affiliates be broadened? Are there any 

affiliates that would not fall within the 

scope of the Proposed Rules that 

should? If so, why? 

13. Does the definition of ‘‘control’’ 

adequately capture those entities that 

should be defined as affiliates for 

purposes of the rules? Should the 

definition of ‘‘control’’ be modified and, 

if so, how? For example, should the 

definition be the same as the definition 

of ‘‘control’’ under the BHC Act? 

14. Should financial companies that 

guarantee or support QFC positions be 

required to maintain records on such 

QFCs if such QFCs qualify for treatment 

under section 210(c)(16)? If not, how 

would the recordkeeping of such QFCs 

be handled? 

15. Should there be any additional 

data to avoid duplication of records of 

guaranteed, supported or linked QFCs if 

the related affiliate also is a records 

entity and maintains records with 

respect to such QFCs? 

16. Is the criterion in the definition of 

records entity in section 148.2(l)(3)(iii) 

of the Proposed Rules appropriate? 

Should the calculation of $50 billion in 

total assets exclude non-proprietary 

assets that are included on a balance 

sheet under accounting rules, such as 

certain types of client assets under 

management required to be included on 

an investment adviser’s balance sheet? 

Is it appropriate for some financial 

companies or corporate groups with less 

than $50 billion in total assets to not be 

required to maintain records? 

17. On what basis should investment 

advisers that are to be included as 

records entities be identified? Should 

the advisers be required to file fiscal 

year-end balance sheets and should 

their status as records entities be based 

on information contained in these 

balance sheets? 

18. Are there any other entities for 

which the rules need not apply? If so, 

which entities, and why? 

19. Should swap dealers and major 

swap participants be required to 

maintain records under the rules 

irrespective of the size and other 

requirements of the definition of records 

entity? 

20. Is the inclusion in the Proposed 

Rules of clearing organizations or other 

financial market utilities that are 

designated as systemically important 

appropriate? What issues should the 

Secretary consider when addressing 

recordkeeping requirements with 

respect to clearing organizations or 

other financial market utilities? What 

records do clearing organizations 

currently maintain for QFCs? Are they 

different from the records required in 

the Appendix to the Proposed Rules? 

Are they different from those 

maintained by counterparties in 

bilateral QFC transactions? If so, should 

a different framework for QFC records 

be considered for clearing organizations 

than for other records entities? Should 

a different set of data requirements be 

considered for clearing organizations? 

Should such different data set contain 

fields in addition to those included in 

Tables A–1 through A–4 of the 

Appendix, exclude some of the fields 


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69The term non-U.S. branch is used to designate 

a U.S. entity that operates in a non-U.S. jurisdiction 

under special license in such jurisdictions instead 

of operating through a subsidiary incorporated or 

organized in such non-U.S. jurisdiction. 70 12 U.S.C. 5301(12). 

listed in Tables A–1 through A–4 of the 

Appendix, or some combination of the 

two? Should any required data be 

provided in a form or fashion different 

from the format contained in the 

Proposed Rules? 

21. Should the recordkeeping 

requirements for centrally-cleared 

transactions differ from those for noncentrally-cleared transactions? If so, 

should such requirements include data 

fields in addition to those included in 

Tables A–1 through A–4 of the 

Appendix, exclude some of the fields 

listed in Tables A–1 through A–4 of the 

Appendix, or some combination of the 

two? 

22. Are there special considerations 

regarding a clearing organization 

resolution that should be reflected in 

the rule? In particular, what records of 

a clearing organization would be useful 

to the FDIC as receiver? Is this different 

from the records that are needed for the 

resolution of other types of financial 

companies under Title II? If so, how 

should recordkeeping requirements be 

modified to address appropriately a 

clearing organization or other financial 

market utility resolution? 

23. Is it appropriate, if a registered 

investment company has multiple 

series, to deem each series of the 

company to be a separate financial 

company for purposes of the rules? If 

not, why not? 

24. Should the rules apply to an 

investment adviser acting as agent for its 

client with respect to a QFC if the 

adviser otherwise is not a party to, does 

not support, does not guarantee, or is 

not linked to the client’s QFC? 

B. General Definitions 

In addition to the definitions 

described in detail above in reference to 

the scope of the Proposed Rules, certain 

additional terms are defined in the 

Proposed Rules to describe a records 

entity’s recordkeeping obligations. The 

term ‘‘counterparty’’ would be defined 

as any natural person or entity (or 

separate non-U.S. branch of any 

entity) 69 that is a party to a QFC with 

a records entity. An affiliate or a nonU.S. branch of such records entity that 

is not itself a records entity would be 

considered a counterparty of a records 

entity if it is a party to a QFC with such 

affiliated records entity. The term 

‘‘counterparty’’ would also include any 

natural person or entity that is a party 

to a QFC that is guaranteed or supported 

by a records entity. To the extent a 

corporate group includes more than one 

records entity, for each inter-affiliate 

QFC to which two or more affiliated 

records entities are a party (or are 

otherwise linked), each affiliate would 

be required to treat the other as a 

counterparty for purposes of the rules. 

Recordkeeping with respect to interaffiliate QFCs is necessary to enable the 

FDIC to decide as quickly as possible 

which affiliated financial companies in 

a corporate group should be subject to 

orderly liquidation under Title II, to 

understand all QFC linkages in a 

corporate group, and to evaluate the 

potential systemic effects of FDIC 

decisions. 

The term ‘‘primary financial 

regulatory agency’’ would consist of the 

Federal banking agencies, the CFTC, 

FHFA and the SEC and would be 

defined by reference to the definition of 

‘‘primary financial regulatory agency’’ 

in the Dodd–Frank Act.70

Questions: 

25. Should the proposed definition of 

counterparty be modified to exclude 

some affiliated entities? If so, which 

affiliated entities should be excluded 

and why? 

26. Would the proposed definitions 

result in duplication of data or 

positions? If so, how could such 

duplication be removed? 

27. Is there an alternative means of 

introducing transparency for interaffiliate transactions other than 

including affiliates in the definition of 

counterparty? How would the 

recordkeeping requirements need to be 

modified to accomplish this goal? 

28. Should other terms used in the 

Proposed Rules be defined? If so which 

ones? Please include support for any 

suggested definition or clarification to 

definitions supplied. 

29. Are the Proposed Rules’ 

definitions appropriate? Would there be 

any additional definitions, 

modifications or considerations that 

would be helpful? 

C. Form, Availability, and Maintenance 

of Records 

1. Form and Availability 

Section 148.3(a)(1) of the Proposed 

Rules would require that a records 

entity maintain all records in electronic 

form in the format set forth in the 

Appendix to the Proposed Rules. All 

records entities in a corporate group 

would be required to be able to generate 

data in the same data format and use the 

same counterparty identifiers to enable 

the aggregation of all records entities in 

the corporate group. In addition, the use 

of such counterparty identifiers would 

enable the data to be aggregated by 

counterparty, thus permitting the FDIC 

to understand the exposure of the entire 

corporate group to a given counterparty. 

The FDIC will use the aggregation of 

counterparty positions to determine the 

effects of termination or transfer of 

QFCs. Although the Proposed Rules 

specify a recordkeeping format, the 

Secretary recognizes the need to buildin flexibility for an alternate 

recordkeeping format. Therefore, 

Section 148.3(c) of the Proposed Rules 

provides that the Secretary may grant 

conditional or unconditional 

exemptions from compliance with one 

or more of the requirements of the rule. 

An exemption with regard to the 

recordkeeping format requirements 

could be conditioned upon the records 

entity keeping the records in an 

alternate format that enables the FDIC to 

exercise its rights under the Act and 

fulfill its obligations under section 

210(c)(8), (9), or (10) of the Act. 

Section 148.3(a)(1) of the Proposed 

Rules would require that all records be 

capable of being transmitted 

electronically to a records entity’s PFRA 

and the FDIC. This requirement would 

impose a recordkeeping burden but not 

a reporting burden on records entities. 

In order to comply with the rule, a 

records entity would need to ensure that 

it is able to comply with the 

recordkeeping requirements of the rules 

for all cross-border transactions. 

These proposed requirements are 

necessary and appropriate in order to 

assist the FDIC as receiver. 

Transparency with respect to all QFC 

positions is necessary to enable the 

FDIC as receiver to rapidly dispose of 

the QFC portfolio or perform on the 

QFCs and minimize the potential for 

disorderly liquidation of the covered 

financial company and increased 

systemic risk. Accordingly, the FDIC 

should have detailed and complete 

information available to it with respect 

to all QFCs of a records entity and its 

affiliated financial companies, without 

delay, on the date of appointment. As 

discussed above, given the short time 

frame for FDIC decisions, it may be 

difficult to obtain and analyze a large 

amount of information unless it is 

readily available to the FDIC in an 

updated and standardized format that 

enables the FDIC to carry out the 

required financial and legal analysis in 

an expeditious and efficient manner. 

Furthermore, absent electronic access to 

the complete records of a records entity 

and the ability to view such information 

in the context of the records entity’s 

booking practices, governing law, and 

organizational structure, the FDIC may 


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71An entity, such as an investment adviser, that 

acts as agent on behalf of a client would not be 

required to maintain records for any QFC to which 

the adviser is not a party or that the adviser does 

not support or guarantee. 

not be able to analyze QFC positions 

and make decisions with respect to such 

QFCs by the end of the first business 

day following the appointment of the 

receiver. In addition, the FDIC could use 

the data to help subsidiaries of a 

financial company in receivership 

perform their obligations under the 

QFCs, thereby preserving the value of 

the receivership estate. This should help 

to prevent the disorderly termination of 

trades, including cross-border and 

affiliate trades, which could have farreaching negative effects on the records 

entity and its corporate group, as well 

as the broader financial markets. 

Section 148.3(a)(2) of the Proposed 

Rules would require that each records 

entity maintain records for all QFCs to 

which it is a party, including interaffiliate QFCs to which it is a party. 

Each records entity also would be 

required to maintain records for all 

QFCs that are guaranteed or supported 

by such records entity.71 These records 

would help to enable the FDIC as 

receiver to determine the effect of 

termination or transfer of counterparty 

transactions on the QFC portfolio held 

by affiliates as well as any potential 

effects on broader financial markets, 

such as by inadvertently un-hedging one 

or more affiliated counterparties. 

However, a records entity that is only 

linked to an open QFC would not be 

required to maintain records under the 

Proposed Rules with respect to such 

linked QFCs. 

Section 148.3(a)(3) of the Proposed 

Rules would require that each records 

entity provide a point of contact to 

enable its PFRA and the FDIC to contact 

the records entity with respect to the 

rule, and to update this information 

within 30 days of any change. Because 

the FDIC, after being appointed as 

receiver, will have very little time to 

update QFC information and make 

decisions with respect to QFCs, the 

FDIC must work cooperatively with 

personnel in charge of QFCs at each 

records entity who can provide greater 

context for the data, including the 

records entity’s booking practices, 

governing law, and organizational 

structure. 

Section 148.3(a)(4) of the Proposed 

Rules would require that each records 

entity that is regulated by a PFRA be 

capable of providing all QFC records 

specified in the rules to its PFRA within 

24 hours of request. This requirement 

would impose a recordkeeping burden 

but not a reporting burden on records 

entities. A PFRA could exercise its own 

authority by imposing a 24 hour 

reporting requirement on a records 

entity for the QFC records maintained 

under the rule, and by sharing such 

records with the FDIC. The Secretary 

recognizes that many financial 

companies may not currently have the 

capability to provide all QFC records in 

the required format within a 24-hour 

time period. Nevertheless, because of 

timing constraints set forth in Title II, 

the FDIC must become familiar with the 

types and formats of QFC data 

maintained by records entities to be able 

to comply with the statutory deadlines 

upon receivership and to be able to 

exercise its rights under the Act. In 

addition, the records entity must be able 

to generate the records in the formats 

specified in the rules quickly, generally 

overnight, to refresh the information 

provided to regulators. These formats or 

records may also be used by the FDIC 

both to refine receivership processes 

with respect to the evaluation of QFCs 

of financial companies and their 

corporate groups, and to familiarize 

itself with the QFCs of the records 

entities in a given corporate group. 

Questions: 

30. Are the proposed requirements 

that records entities in a corporate group 

be able to maintain the records in the 

same data format and use the same 

counterparty identifiers to enable the 

aggregation of the data across all records 

entities in the corporate group or by 

counterparty reasonable? 

31. Are there any other procedures 

that should be addressed by the rules 

which may help streamline data 

production? For example, some records 

entities may have a very large volume of 

QFC records. Could this raise practical 

considerations in the electronic 

transmission of such records? 

32. Are there particular methods that 

would best address record maintenance 

and data requirements for inter-affiliate 

transactions and cross-border 

transactions? Should there be specific 

requirements for such transactions? 

Should records entities be exempted 

from any part of the recordkeeping 

requirements in the Proposed Rules for 

such transactions? 

33. Should the Proposed Rules set 

forth a standard data specification that 

would require common data structures 

and content for data submitted for each 

corporate group? 

34. What types of consents, if any, 

would a records entity need to obtain 

from counterparties outside of the 

United States in order to comply with 

the recordkeeping requirements in the 

Proposed Rules? Would records entities 

be able to comply with the rules if they 

are unable to get such consents? Are 

there any alternatives to the Proposed 

Rules that would allow the records 

entity to maintain the records and have 

the capability to provide the data to its 

PFRA? 

35. Should the chief compliance 

officer for registered investment 

advisers and the officers of registered 

investment companies be deemed to be 

the point of contact under the rules? If 

not, who should the point of contact be 

for each of these entities? 

36. The Proposed Rules currently 

contemplate requiring a records entity 

that is regulated by a PFRA to be 

capable of providing to such PFRA, 

within 24 hours of request, the required 

records. The records entity must also be 

capable of transmitting electronically 

the required records to such PFRA and 

the FDIC. Should the rule provide for 

the PFRAs to make actual requests? If 

so, should anyone other than the PFRA 

(e.g., the FDIC) also have the ability to 

request records? Should the records 

entity be required to provide their 

records directly to the FDIC rather than 

only to the PFRA? Is 24 hours sufficient 

time to produce the records? 

2. Maintenance and Updating 

Section 148.3(b) of the Proposed 

Rules would require that each records 

entity maintain the capacity to produce 

QFC records on a daily basis based on 

previous end-of-day records and values. 

This provision would not require that 

the records entity update all values 

daily in the ordinary course of business. 

Rather, it would require that the records 

entity have the capacity to do so upon 

request. Some data elements set forth in 

Tables A–1 through A–4 of the 

Appendix may not generally be updated 

daily. However, since all data items 

must be updated to enable the FDIC as 

receiver to exercise its rights under the 

Act and fulfill its obligations under 

sections 210(c)(8), (9), or (10) within the 

limited time frame afforded by the Act, 

each records entity would need to 

maintain the capacity to update the data 

elements to current values within a 24- 

hour period. To the extent the electronic 

recordkeeping system produces data 

that is more current than previous endof-day records and values (e.g., real-time 

data), such data would also comply with 

the Proposed Rules. If a records entity 

is not able to update the records or 

values quickly, the FDIC may not be 

able to comply with the requirements of 

Title II with respect to QFCs. As 

mentioned above, this inability of a 

records entity could increase the 

potential for a disorderly liquidation of 

a financial company. 


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72See supra note 59. 

When a records entity uses an affiliate 

or a third party to maintain the records 

required under the Proposed Rules, it 

would be the responsibility of the 

records entity to ensure that records 

maintained by the affiliate or third party 

can be provided to the PFRA within 24 

hours of a request. 

Each records entity also would be 

required to be able to generate historical 

end-of-day records of open QFC 

positions, and any other QFC positions 

needed to generate data based on endof-day records and values, for a period 

of at least the preceding five business 

days. Historical data are important as a 

measure of the day-to-day volatility of 

the given positions, and such data may 

help the FDIC calculate portfolio values 

on the business day after the 

appointment of the receiver. 

With respect to record retention, the 

proposed requirement for a records 

entity to maintain records would 

generally apply to records and values 

with respect to open QFC positions and 

any other QFC positions needed to 

generate information based on end-ofday records and values for at least the 

five business days prior to the date of a 

request. 

Questions: 

37. Are the record maintenance 

requirements of the Proposed Rules 

sufficiently clear? If not, what 

additional requirements should be 

adopted? 

38. Is the five-day retention period for 

required historical data sufficient? If a 

different period would be more 

appropriate, please provide support for 

your recommendation. 

39. In the case of records entities that 

use affiliates or third-party service 

providers to maintain their records, is it 

appropriate for the records entity to be 

responsible for providing the records 

within 24 hours of a request, rather than 

the affiliate or third-party service 

provider? 

40. Should the records be retained for 

a period shorter or longer than that set 

forth in the Proposed Rules based on the 

status of an open QFC? What are the 

potential benefits or costs of a shorter or 

longer period for record retention? 

3. Exemptions 

Section 148.3(c) of the Proposed Rules 

would permit the Secretary to grant two 

types of exemptions from the rules. Any 

exemptions granted pursuant to the 

rules may be subject to conditions. The 

Proposed Rules provide that, upon 

written request by a records entity, the 

FDIC, in consultation with the PFRAs 

for the records entity, may recommend 

that the Secretary grant a specific 

exemption from compliance with one or 

more of the requirements of the rules. 

For example, if a records entity is a 

subsidiary of a national bank, but is also 

registered as a major swap participant 

and a major security-based swap 

participant, the FDIC, in consultation 

with the OCC, SEC and CFTC, could 

recommend that the Secretary issue an 

exemption because the OCC is the 

primary banking regulator while the 

SEC and the CFTC have oversight 

authority over the entity by virtue of it 

being a major swap participant and a 

major security-based swap participant. 

As another example, if a records entity 

is a financial company that does not 

collect certain types of QFC 

recordkeeping data in the ordinary 

course of its business, the FDIC, in 

consultation with the relevant PFRAs, 

could recommend that the Secretary 

issue a specific exemption from certain 

data requirements of the rules, if the 

FDIC believes such data omissions are 

warranted under the particular 

circumstances. 

The Secretary would also be 

permitted to issue exemptions that have 

general applicability upon receipt of a 

recommendation from the FDIC, in 

consultation with the PFRAs for the 

applicable records entities. For example, 

the FDIC, in consultation with the 

PFRAs, could recommend that the 

Secretary issue an exemption informing 

all records entities that some data 

elements required by Tables A–1 

through A–4 of the Appendix are not 

relevant for a particular type of QFC. 

The Secretary considered authorizing 

the FDIC and the PFRAs to jointly grant 

specific and general exemptions, 

because the PFRAs are familiar with the 

operations of the records entities, and 

because the FDIC as the intended user 

of the QFC recordkeeping would be 

affected by the granting of any 

exemption. However, the Act does not 

appear to authorize the Secretary, as 

Chairperson of the Council, to subdelegate decision making authority to 

other agencies. Instead, the Secretary is 

turning directly to the FDIC and 

indirectly to the PFRAs for 

recommendations on whether to grant 

specific or general exemptions. The 

Secretary will consider any FDIC 

recommendation that carefully 

considers the factors contained in 

section 210(c)(8)(H)(iv) of the Act. 

Section 210(c)(8)(H) of the DoddFrank Act gives the Secretary broad 

flexibility in determining the scope of 

the records entities based on, as 

appropriate, the financial companies’ 

size, risk, complexity, leverage, 

frequency, and dollar amount of QFCs 

and interconnectedness to the financial 

system. The Secretary also may consider 

other factors deemed appropriate, which 

the Secretary believes should include 

whether the application of one or more 

requirements of the Proposed Rules is 

not necessary to achieve the purpose of 

the rule. As noted previously, in 

determining whether to grant any 

exemptions permitted under the rule, 

the Secretary expects to take into 

consideration with respect to financial 

companies their size, risk, complexity, 

leverage, frequency and dollar amount 

of QFCs, interconnectedness to the 

financial system, and any other factors 

deemed necessary or appropriate, 

including whether the application of 

one or more requirements of the rule is 

not necessary to achieve the purpose of 

the rule.72

Moreover, some records entities are 

subject to separate recordkeeping rules 

promulgated by the CFTC and SEC and 

may in the future be subject to 

additional recordkeeping requirements 

promulgated by other U.S. and non-U.S. 

agencies. The exemption provisions set 

forth in the Proposed Rules are designed 

to enable the rules to work in 

conjunction with the CFTC’s, SEC’s and 

other regulatory recordkeeping 

requirements as well as any global or 

local standard adopted after the 

publication of the final rule, as they 

would provide the ability for the 

Secretary to be flexible in taking such 

requirements and standards into 

account. Although section 148.3(a)(1) of 

the Proposed Rules specify a standard 

format for recordkeeping, the Secretary, 

upon receipt of a recommendation from 

the FDIC made in consultation with the 

appropriate PFRAs, could exempt 

records entities from this requirement 

on the condition that they maintain 

electronic records maintained in a swap 

data repository or internally in a 

different format. The format of proposed 

Tables A–1 through A–4 of the 

Appendix therefore, should not 

complicate appropriate recordkeeping, 

so long as the information set forth in 

the Appendix can be provided to the 

FDIC in a manner that allows the FDIC 

to properly analyze and aggregate the 

data. Records entities could build upon 

the mandatory data templates of the 

swap data repositories and augment 

and/or hyperlink the data to create the 

totality of the information requested. A 

records entity could also help the FDIC, 

upon appointment as receiver, analyze 

internal databases by providing the 

personnel necessary to manipulate 

internal databases. Because the PFRA 

for a records entity and the FDIC must 

work with and understand the data, a 

records entity would need an exemption 


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from the Secretary (which could be 

conditioned on the use of an alternative 

recordkeeping format) before using a 

recordkeeping format that is different 

from the format referenced in section 

148.3(a)(1) of the Proposed Rules. 

The Proposed Rules also would 

empower the Secretary, in consultation 

with the FDIC, to grant extensions of 

time with respect to compliance with 

the recordkeeping requirements. It is 

anticipated that such extensions of time 

would apply when records entities first 

become subject to the rules and likely 

would not be used to lengthen the time 

periods specified in the maintenance 

and updating requirements of the rules. 

Extensions of time may also be 

appropriate on a limited basis with 

respect to being capable of providing 

full records because of unforeseen 

technical issues. 

Questions: 

41. Is the scope of the exemptions 

appropriate as written? 

42. The Proposed Rules would allow 

the Secretary, upon receipt of a written 

recommendation from the FDIC, to issue 

general or specific exemptions based on 

factors the Secretary determines to be 

necessary or appropriate. Is the 

prerequisite of an FDIC 

recommendation appropriate? For 

example, in the case of a records entity 

request for a specific exemption, should 

the Secretary proceed in determining 

whether to grant or deny the request if 

the FDIC does not submit its 

recommendation within a reasonable 

period of time? If yes, should the FDIC 

and/or the PFRAs be consulted in some 

other manner? Is the FDIC’s 

consultation with the relevant PFRAs in 

preparing the written recommendation 

appropriate? If not, should the relevant 

PFRA be involved in some other 

manner? For example, should a 

recommendation be made jointly by the 

FDIC and the relevant PFRA, or should 

they each submit separate 

recommendations to the Secretary? Are 

the factors the FDIC would be required 

to consider in making its 

recommendation appropriate? 

43. Should the Secretary delegate 

decision making authority to the FDIC, 

the PFRAs, or both with regard to 

granting general or specific exemptions 

and extensions of time? If so, please 

explain the authority by which the 

Secretary could make such a delegation. 

44. How should the PFRAs’ separate 

rulemaking and exemptive authority be 

used in conjunction with exemptions 

under this rulemaking? 

45. What is the volume and nature of 

exemption requests that commenters 

believe are likely to be requested? 

46. Should the final rule exempt 

categories of financial companies? If so, 

which categories should be exempted 

and why? Alternatively, should the final 

rule exempt certain categories of 

financial companies only from certain 

provisions of the rules but require them 

to comply with others? Please specify 

the conditions and factors to be 

considered for each such exemption. 

47. Should clearing organizations or 

other financial market utilities be 

exempted from recordkeeping under the 

rule? Please explain in detail why 

current recordkeeping requirements for 

clearing organizations and other 

financial market utilities are sufficient 

to enable the FDIC to conduct the 

orderly liquidation of clearing 

organizations or financial market 

utilities. 

48. What conditions, if any, should be 

included in a clearing organization 

exemption? Should it suffice that a 

clearing organization coordinates with 

its members that are records entities to 

ensure that appropriate records are 

kept? 

49. Is it feasible for data to be 

maintained in a standardized format? 

Should specific format exemptions be 

included in the final rule, in particular 

for formats used by common QFC 

reporting repositories (e.g., swap data 

repositories)? To the extent such other 

recordkeeping requirements do not meet 

the full requirements contemplated here 

(e.g., they do not include certain 

categories or fields necessary), how 

would records entities meet the 

contemplated recordkeeping 

requirement? In such a case, would a 

format exemption reduce regulatory 

burden? 

50. Should the provisions addressing 

form and availability of data be further 

detailed? 

51. Should the rule specify a process 

for requesting exemptions and 

extensions of time? If so, what should 

this process be? 

D. Content of Records 

1. General Information 

Section 148.4(a) of the Proposed Rules 

would require each records entity to 

maintain all data required by Tables A– 

1 through A–4 of the Appendix, as well 

as additional information that is needed 

to be able to understand affiliated 

relationships among records entities and 

counterparties. Records entities may 

currently maintain such data; however, 

they might not be maintaining it in the 

manner or format in the Proposed Rules. 

By presenting the data elements in the 

form of an Appendix, the Secretary has 

sought to maintain a parallel with the 

FDIC’s Part 371 QFC Recordkeeping 

rules, and to provide an easy means of 

separating the data into their relevant 

categories. As stated below, the 

Appendix corresponds to position level 

data, counterparty exposure data, legal 

agreement data, and collateral data. 

Where appropriate, each table in the 

appendix also gives an example of each 

data element and describes the 

relevance of such data in the context of 

an FDIC receivership. 

For the purpose of QFC 

recordkeeping, each records entity 

would be required to treat its affiliates, 

including affiliated clearing 

organizations or other financial market 

utilities, as third-party counterparties 

and maintain complete records of all 

inter-affiliate QFCs. The Proposed Rules 

would require a records entity to use a 

unique counterparty identifier to 

identify each of its counterparties. The 

records entity would be required to 

assign a separate unique counterparty 

identifier to each legal entity and each 

non-U.S. branch or office of a legal 

entity that transacts business as a 

separate branch or division to enable the 

FDIC to analyze cross-border QFC 

activity. The unique counterparty 

identifier also would facilitate the 

aggregation of positions by counterparty 

as well as the aggregation by corporate 

group. The ability of records entities to 

incorporate unique identifiers for each 

counterparty is likely to vary 

significantly depending on the number 

and types of counterparties, and if the 

counterparties are currently identified 

and tracked within the records entity’s 

systems. 

Authorities from around the world, 

including the FDIC, have established a 

global legal entity identifier (‘‘LEI’’) 

system, with oversight effected by a 

Regulatory Oversight Committee 

(‘‘ROC’’), comprised of those same 

authorities, in order to coordinate and 

oversee a global system of legal entity 

identification. In June 2014, a Swiss 

non-profit foundation (the ‘‘Global LEI 

Foundation’’) was established with the 

intention for it to provide operational 

governance and management over Local 

Operating Units (‘‘LOUs’’) that will 

issue LEIs. 

Before the Global LEI Foundation was 

established, the ROC created an interim 

system by which those with pre-LEIs 

(LEIs compliant with various ROC 

principles) issued by ROC-endorsed 

LOUs would be sufficient to satisfy the 

regulatory requirements of ROC member 

authorities. 

As a result, unique LEIs were already 

being issued prior to the operational 

governance and management of the 

system by the Global LEI Foundation 


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73See 17 CFR 45.5. 

and such LEIs are being accepted by 

certain individual ROC members, 

including for purposes of meeting 

certain other recordkeeping and 

reporting requirements mandated by the 

Dodd-Frank Act. The Proposed Rules 

would require records entities to use 

LEIs issued by LOUs endorsed by the 

ROC, and by those LOUs endorsed or 

otherwise governed by the Global LEI 

Foundation. 

To the extent that the LEI or pre-LEI 

does not allow branches to be separately 

identified, the records entity would be 

required to include additional 

identifiers to enable the FDIC to 

segment the QFC activity both across 

the corporate group and by jurisdiction, 

as treatment of a QFC varies based on 

the law governing the QFC and/or the 

location of the collateral. 

To that end, financial companies 

would need to maintain the capacity to 

generate QFC information in a common 

data format, at a minimum, within each 

corporate group, and, ideally, among 

financial companies. To facilitate the 

resolution of QFC portfolios, the FDIC 

needs to analyze such data upon 

appointment as receiver under Title II 

by working collaboratively with the 

PFRAs. The standardized data format 

would reduce the time and effort 

needed by the FDIC to perform the 

analysis and facilitate comparison of 

QFC data across financial companies 

with large complex QFC portfolios. 

A records entity also would be 

required to maintain electronic copies of 

all agreements that govern the QFC 

transactions, as well as credit support 

documents related to such QFC 

transactions. As noted previously, 

electronic records are necessary or 

appropriate to assist the FDIC as 

receiver to quickly analyze QFC 

positions and make prompt decisions 

with respect to such QFCs, and to 

minimize the potential for disorderly 

liquidation of the covered financial 

company and increased systemic risk. 

These copies would need to be 

maintained in full-text searchable 

electronic form, and would be required 

to include master agreements and 

annexes, confirmations, master netting 

agreements, credit support annexes, 

guarantees, net worth maintenance 

agreements, security interest 

agreements, and other related 

agreements, if any. Similarly, the 

Proposed Rules would require records 

entities to keep full-text searchable 

copies of all assignment or novation 

documents to enable the FDIC to 

determine the appropriate 

counterparties for the various QFC 

positions. 

The Proposed Rules would require 

that each records entity also maintain a 

list of vendors directly supporting the 

QFC-related activities and the contact 

information for such vendors. Section 

148.4(a) of the Proposed Rules would 

also require that each records entity 

maintain certain additional information 

with respect to its current QFC 

portfolio, including information about 

the risk metrics used to monitor the 

QFC portfolios and contact information 

for each risk manager. The maintenance 

of such information would enable the 

FDIC to contact a risk manager or 

vendor quickly in the event that the 

FDIC requires additional information 

that is not currently included among the 

required data. Furthermore, maintaining 

risk manager contact information and a 

vendor list is unlikely to be overly 

burdensome because most financial 

companies are likely to already 

maintain similar information in the 

ordinary course of business. 

Questions: 

52. Are the proposed requirements 

related to unique counterparty 

identifiers sufficient to enable 

compliance with the rules? 

53. Is it necessary or appropriate for 

a records entity to maintain full-text 

searchable electronic copies of all 

agreements governing QFC transactions? 

If not, are there any viable alternatives 

to this? 

54. Is it necessary or appropriate for 

a records entity to maintain risk metrics 

used to monitor the QFC portfolio, risk 

manager contact information, and a list 

of vendors that directly support the QFC 

related activities of the records entity? If 

not, are there any viable alternatives to 

this? 

55. Should the rule include additional 

guidance with respect to form, content 

and format of the records required? If so, 

how? 

56. Should the rule specify a data 

standard (or language, or specification, 

e.g., XML or XBRL) and a standard set 

(e.g., a schema or taxonomy) of data 

item tags? Should the rule specify 

further the definitions which the 

records entity must use for its QFC 

records data? Please provide detailed 

specifications of the data standard or 

standard set as well as of the proposed 

definitions, if any. 

57. Should data elements be 

interoperable among affiliated records 

entities and among financial company 

groups? If so, discuss which standard(s) 

should be considered, and why? If the 

rule should not include such a 

requirement to use a standard for the 

QFC data, will the complexity and 

quantity of data hinder the ability of the 

FDIC to use the QFC data for the 

purposes described in the rule? 

2. Appendix Information 

As described previously, the Proposed 

Rules would organize the detailed QFC 

recordkeeping requirements into an 

appendix of four tables: (1) Positionlevel data set forth in Table A–1; (2) 

counterparty collateral data set forth in 

Table A–2; (3) legal agreements related 

data set forth in Table A–3; and (4) 

collateral detail data set forth Table A– 

4. The information that would be 

required by Tables A–1 through A–4 is 

largely self-explanatory and contains 

examples as well as narrative 

explanations of the applications. Some 

of the data fields, such as the unique 

counterparty identifiers for the records 

entity and the counterparty, are used in 

each table to help link the data among 

the tables. 

The Appendix specifies that a records 

entity may leave an entry blank, or may 

insert ‘‘N/A’’ for any data fields that do 

not apply to a given QFC transaction or 

agreement. For example, if a QFC is not 

guaranteed, data fields that relate to a 

guarantee agreement would not need to 

be filled in, so long as those guaranteerelated fields that required a Y/N (‘‘Yes/ 

No’’) answer are completed where 

appropriate. Similarly, if QFCs with a 

counterparty are not collateralized, 

there would be no need to maintain 

collateral information with respect to 

that counterparty. 

a. Table A–1 

Table A–1 would set forth positionlevel data that enable the FDIC to 

evaluate a records entity’s exposure to 

its counterparties. The FDIC would also 

use these data to evaluate the effects of 

the receiver’s determination to transfer, 

disaffirm or repudiate, or retain QFCs. 

In addition, position-level information 

would assist the receiver or any 

transferee to comply with the terms of 

the QFCs and reduce the likelihood of 

inadvertent defaults. For example, a 

unique position identifier would allow 

for the tracking and separation of 

positions maintained by the records 

entity, and the identifier also would be 

consistent with the CFTC- and SECmandated data that need to be reported 

to SDRs.73 The information would also 

be required to include CUSIP identifier 

numbers, unique trade confirmation 

numbers, as well as other internal 

identifying information relevant to the 

position. 

The unique booking unit or desk 

identifier is intended to serve to further 

segment the data provided by the 


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74 12 U.S.C. 5390(c)(9)(A)(i)(IV). 

records entity. It identifies which 

division or trading desk of a records 

entity has entered into the QFC 

position. This information is necessary 

to enable the FDIC to evaluate the 

business purposes of each QFC and 

locate back office contacts. The 

information that would be maintained 

in this field would help to determine 

the purpose of the QFC and assist the 

FDIC to determine whether the QFC was 

backed by another entity or an affiliate, 

if the QFC had a full or partial hedge, 

or if the QFC was used to hedge an 

asset. In addition to a unique booking 

unit or desk identifier, a description of 

that booking unit or desk would 

facilitate QFC classification. This 

description would assist in determining 

the specific nature and purpose of the 

QFCs and enable the FDIC to carry out 

an orderly liquidation. 

Counterparties to records entities 

often trade QFCs under the terms of a 

single master agreement or similar 

governing document. Each master 

agreement may contain non-standard 

legal provisions that govern the 

relationship of the parties. In certain 

cases, counterparties may maintain 

multiple master agreements with the 

same records entity. For the FDIC to 

accurately assess the effect of transfer or 

termination of QFC positions on the 

financial stability of the derivatives and 

other financial markets, such QFC 

positions would need to be aggregated 

under the relevant corresponding 

agreements or governing documents at 

each level permitted by the documents. 

To the extent the master agreements are 

subject to further cross-product or 

multi-party netting, such ‘‘mastermaster agreements’’ also would need to 

be identified. All master agreements are 

included in the QFC definition under 

the Act and would be required to be 

treated as QFCs for all purposes under 

the Proposed Rules. The data that would 

be maintained must enable the FDIC to 

not only aggregate and disaggregate 

positions at the level of each 

counterparty, affiliate, and agreement, 

but also to determine the overall effect 

of the FDIC’s decisions for each of the 

counterparty’s and the records entity’s 

corporate groups. 

Table A–1 would also require the 

records entity to maintain information 

with respect to any loan or other 

obligation that relates to a QFC. For 

example, the counterparty to a swap 

with a records entity may have entered 

into the swap to hedge the interest rate 

exposure on amounts borrowed from an 

affiliate of the records entity, where 

both the loan and the swap are secured 

by one mortgage on the property. This 

information is necessary to enable the 

FDIC to evaluate both the loan and the 

swap. The information that would be 

maintained with respect to related 

obligations includes a reference number 

of the obligation and information about 

the borrower, lender and any other 

material terms of the related obligation. 

b. Table A–2 

Table A–2 would require a records 

entity to maintain counterparty 

aggregate exposures and collateral data 

for all QFCs entered into by a records 

entity with a counterparty. For such 

data, the records entity would need to 

demonstrate the ability to maintain 

itemized records of collateral by 

counterparty, which also would allow 

for the aggregation of collateral based on 

the netting rights of the counterparty 

and its affiliates. The data would need 

to take into account enforceability of 

netting in an insolvency close-out 

situation in specific jurisdictions, in 

addition to contractual payment netting 

outside an insolvency or receivership. 

The information in Table A–2 would 

need to be maintained at each level of 

netting under a master agreement. For 

example, if a master agreement includes 

Annexes that require intermediate 

netting under each Annex, the net 

exposures under each Annex would 

need to be maintained separately. The 

data would need to identify whether 

multi-party or cross-product netting is 

contemplated among affiliates in a 

corporate group and provide exposure 

data taking into account such multiparty or cross-product netting. To the 

extent netting is not enforceable in an 

insolvency of the records entity or the 

counterparty, the positions that cannot 

be netted in an insolvency would not 

need to be netted for the purpose of 

Table A–2. This information would 

allow counterparty-level data to be 

segregated by records entity and 

counterparty. The use of the term 

‘‘counterparty’’ would also include each 

affiliate in a records entity’s corporate 

group that is a counterparty to an interaffiliate QFC. 

The title and name of each master 

agreement, master netting agreement, 

and accompanying governing 

documentation relating to counterparty 

positions, would enable the FDIC as 

receiver to identify the related 

agreement and review the contractual 

provisions governing the counterparty 

relationship. 

The primary objective of proposed 

Table A–2 is to identify exposure of the 

records entity to each counterparty and 

its affiliates, as well as the exposure that 

counterparties might have to the records 

entity. This information would enable 

the FDIC to determine the effects of 

transfer or termination of QFCs with a 

given counterparty and the potential 

risk of contagion in the financial 

markets. Therefore, the data would need 

to be aggregated only to the extent 

permitted under the governing 

agreements and applicable law. Such 

information also would provide relative 

concentrations of risk with 

counterparties under each applicable 

agreement. A records entity could also 

transact QFCs for hedging or other 

purposes with the various affiliates 

within a group, which may include 

cross-border positions that cannot be 

netted. In order to assess the true 

exposure of an entity, the FDIC as 

receiver must have a full understanding 

of the aggregate QFC position by 

including all inter-affiliate transactions 

in its evaluations. This information also 

would be needed to assess cross-border 

risk and collateral availability as well as 

the likely systemic or practical 

implication of transferring QFC 

positions. 

Table A–2 would require 

comprehensive collateral information, 

including market value of collateral, 

location of collateral, and any custodial 

and segregation arrangements. Collateral 

excess or deficiency positions as well as 

collateral thresholds and valuation 

discounts also would need to be 

provided. The creditworthiness of 

counterparties that might not be able to 

return rehypothecated collateral 

represents an additional risk to a QFC 

transaction. Conversely, if the records 

entity is able to rehypothecate collateral, 

the records entity may create additional 

risks for its counterparties. Table A–2 

would require identification of the 

collateral status and a notation whether 

collateral posted to a counterparty is 

subject to re-hypothecation. This 

information would enable the FDIC as 

receiver to comply with the law and 

transfer QFC obligations together with 

the related collateral.74 In addition, it 

would enable the receiver to identify 

excess collateral of counterparties for 

possible return should the contracts be 

terminated after the one business day 

stay. For cross-border transactions, this 

information would help the FDIC 

evaluate the availability of collateral in 

different jurisdictions and the related 

close-out risks if the receiver cannot 

arrange for the transfer of QFC positions 

under local law. 

c. Table A–3 

Table A–3 would require the 

maintenance of legal agreement data for 

each QFC agreement or master 

agreement between each records entity 


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75See e.g., Exchange Act Release No. 71958, 79 

FR 25194 (May 2, 2014). 

and counterparty. For each QFC, the 

records entity would be required to 

maintain in readily accessible 

searchable format all of the following 

documents: Legal agreements (including 

master agreements, annexes, 

supplements or other modifications 

with respect to the agreements) between 

the records entity and its counterparties 

that govern QFC transactions; 

documents related to and affirming the 

position; active or ‘‘open’’ 

confirmations, if the position has been 

confirmed; credit support documents; 

and assignment documents, if 

applicable, including documents that 

confirm that all required consents, 

approvals, or other conditions precedent 

for such assignment(s) have been 

obtained or satisfied. 

Counterparties to records entities 

often trade QFCs under the terms of a 

master agreement (for example, an ISDA 

master agreement) coupled with other 

governing documentation. Therefore, it 

is important that the legal agreement(s) 

between the records entity and 

counterparty be identified by name and 

any unique identifier information. Such 

agreement(s) outline the legal terms of 

the transaction, including relevant 

governing law, and will assist the 

receiver in determining a definitive 

course of action. The records entity 

would need to identify the relevant 

governing law. The records entity also 

would need to include a list and 

description of any events of default or 

termination events that are in addition 

to those specified in the form of 

agreement used, as well as a list and 

description of events of default or 

termination events that have been 

removed by mutual agreement. In 

addition, each records entity would 

need to specify all ‘‘specified financial 

condition clauses’’ that are part of a 

given agreement, as well as the entity to 

which such QFCs are linked. 

To the extent a counterparty does not 

use a specific industry standard form, 

the records entity could either prepare 

this information by reference to the 

standard form or by providing a list and 

description of all relevant events of 

default or termination events. This 

information would assist the receiver in 

planning a course of action and in 

determining whether there are any 

events that trigger the counterparty’s 

right to terminate the agreement. 

Because the receiver has a limited 

period of time in which to evaluate QFC 

provisions, the availability of the legal 

agreements in fully searchable 

electronic form is of utmost importance. 

In particular, the identification of any 

support by or linkage to a parent entity 

or affiliate and the identification of any 

transfer restrictions and non-standard 

covenants would enable the FDIC as 

receiver to evaluate the treatment of 

QFCs under such contracts in an orderly 

liquidation of the records entity or its 

affiliate under Title II of the Act 

d. Table A–4 

Table A–4 would expand on the 

information set forth in Table A–2. Each 

records entity would be required to 

maintain collateral detail data both with 

respect to collateral received and with 

respect to collateral posted. Such 

information would need to be 

maintained on a counterparty-bycounterparty basis. In addition, the data 

would need to include collateral 

information for each records entity. The 

collateral information would need to be 

capable of aggregation for the records 

entity’s corporate group, as well as the 

counterparty’s corporate group to the 

extent required or permitted by any 

applicable netting agreements. The data 

in this Table, together with the data in 

Table A–2, would allow the FDIC to 

better understand the QFC portfolio 

risk, and to model various QFC transfer 

or termination scenarios. 

Questions: 

58. Is it reasonable for the Proposed 

Rules to require collateral detail data 

both with respect to collateral received 

and collateral posted, on a counterpartyby-counterparty basis? Is it reasonable 

for the Proposed Rules to require data 

that include collateral information for 

each records entity? If not, what are the 

viable alternatives? 

59. Are there any additional records 

that should be maintained by a records 

entity? If so, what additional categories 

or fields should be included? Please be 

specific in identifying data to be 

maintained. 

60. Do the recordkeeping 

requirements sufficiently capture 

information regarding QFCs that are 

linked to the records entity? Do the 

recordkeeping requirements sufficiently 

capture information regarding QFCs that 

are guaranteed or otherwise supported 

by the records entity? 

61. In the event that only some 

portion of the QFC records need to be 

capable of being produced immediately, 

should fewer data elements be required? 

62. Please comment on the general 

nature and scope of records proposed to 

be maintained Should some records be 

further explained? How does the nature 

and scope of records compare to other 

QFC recordkeeping requirements (e.g., 

swap data repositories)? Are there ways 

to further align the recordkeeping 

requirements with those of other 

reporting repositories to reduce 

regulatory burden? If so, how? Do the 

proposed recordkeeping requirements 

generally reflect the size and complexity 

of entities that likely qualify as records 

entities? Are there any additional 

records or data that would assist the 

FDIC in its role as receiver with respect 

to a covered financial company? 

63. Are there any impediments to 

maintaining the records proposed to be 

required? How should these 

impediments be resolved? Please 

specify why the unavailability of a 

record would or would not create 

impediments to the transfer or 

repudiation of the affected QFCs. 

64. Should different records or data be 

required to be maintained by records 

entities based on entity types? 

65. Are any of the proposed 

recordkeeping requirements not 

necessary or appropriate to assist the 

FDIC as receiver? If not, why not? Are 

some records not necessary or 

appropriate based on the entity type of 

the records entity? Would any of the 

contemplated records or data result in 

undue burden on records entities? 

66. Do the proposed recordkeeping 

requirements overlap or conflict with 

any existing or proposed regulatory 

requirements applicable to various 

entities that would qualify as records 

entities? If so, how should any 

conflicting or overlapping requirements 

be addressed? Specifically, do the 

proposed recordkeeping requirements 

overlap with or conflict with the 

proposed recordkeeping rules 

applicable to broker-dealers and 

security-based swap dealers (SBSD)? 75

If so, be as specific as possible regarding 

how the Proposed Rules may conflict 

and provide specific recommendations 

for making this Proposed Rules and the 

proposed rules applicable to brokerdealers and SBSDs more consistent. Do 

any existing regulatory requirements 

require records to be maintained in a 

format that is similar to the format set 

forth in the Proposed Rules, or that 

would otherwise allow for the FDIC to 

easily evaluate the records in the event 

it is appointed as receiver? How could 

any existing reporting or recordkeeping 

requirements be used to assist the FDIC 

in its role as receiver? Could any 

existing regulatory requirements be 

modified to require maintenance of the 

records required under the Proposed 

Rules? If so, how? Would any such 

modifications promote efficiencies or 

reduce the burden or costs on records 

entities? Conversely, could they 

adversely affect the FDIC’s ability to 


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76 12 U.S.C. 5390(c)(9)(A)(i)(IV). 

exercise its rights and obligations as 

receiver? 

67. If there are QFCs between a 

records entity and a counterparty that 

are of the type that typically would be 

covered by two or more different types 

of master agreements, should a different 

schedule be required for each such 

different type of QFC? 

68. What would be the most efficient 

method of obtaining information as to 

changes affecting individual positions, 

as well as changes to Master Agreements 

pursuant to annexes, changes to 

annexes, other amendments and 

protocols? 

69. What would be the most efficient 

way to account for inter-affiliate 

positions while avoiding duplication of 

position reporting? Should the positionlevel data require a unique counterparty 

identifier and counterparty name for the 

counterparty to related inter-affiliate 

position(s) with non-records entities in 

the corporate group or with nonaffiliates? 

70. In order to enable the FDIC as 

receiver to meet pending margin calls 

for all companies in a corporate group, 

should a records entity be required to 

provide information as to collateral 

deficiencies, after giving effect to 

pending margin calls, of each subsidiary 

that is not a records entity? Should a 

records entity also be required to 

provide information as to the location of 

collateral provided in connection with 

such subsidiaries’ positions or other 

additional information with respect to 

the positions of such subsidiaries? 

71. Table A–1 of the Appendix 

requires position-level data that 

identifies whether the purpose of such 

positions is for hedging or trading, and 

if the purpose of a position is for 

hedging, Table A–1 requires a general 

description of the hedge (e.g., hedging 

mortgage servicing or hedging a 

mortgage pipeline). This information is 

necessary for the FDIC to determine the 

corporate group’s business strategy for 

purposes of estimating the financial and 

operational impact of the FDIC’s 

decision to transfer, disaffirm or 

repudiate, or retain the QFC in the 

receivership. For example, if the 

covered financial company entered into 

a QFC in the form of an interest rate 

swap to hedge the interest rate risk 

associated with its portfolio of 

mortgage-backed securities, knowing the 

purpose of the QFC position will help 

the FDIC decide whether to transfer 

both the mortgage-backed securities and 

the interest-rate swap to a bridge 

financial company. Without knowing 

the purpose of the position, the FDIC 

could potentially transfer the mortgagebacked securities to a bridge financial 

company but leave the interest-rate 

swap in the receivership where it could 

potentially be terminated by the 

counterparty, which would expose the 

bridge financial company’s assets to 

previously hedged risks. Should the 

position-level data require the purpose 

of the position? With respect to hedging 

positions, what are the appropriate 

general categories for the item(s) that are 

hedged? Are the hedging categories 

listed in Table A–1 (hedging mortgage 

servicing, hedging a mortgage pipeline) 

appropriate examples? Should Table A– 

1 require different information for QFCs 

where the position consists of hedging 

strategies? Should the position-level 

data require specific identifiers for 

portfolio hedging transactions? If so, 

how should split hedging be treated? 

72. The recordkeeping requirement 

for the reference number of any related 

loan data, if applicable, in Table A–1 to 

the Appendix serves a similar purpose 

as the requirement to identify the 

particular purpose of a position. To the 

extent a QFC is related to a specific loan 

or loans held by the covered financial 

company in receivership or an affiliate, 

it may be beneficial to transfer or retain 

in the receivership the QFC and the 

related loan or loans in conjunction 

with each other where, in the case of a 

transfer, the bridge financial company 

does not end up holding a QFC without 

also holding directly or indirectly the 

related loan or loans. For example, the 

covered financial company may have 

issued a loan along with a related 

interest rate swap, and in the case of 

resolution, it might be beneficial to 

transfer to the bridge financial company, 

or terminate, together the interest rate 

swap and the underlying loan. To the 

extent a QFC position has a related loan 

or loans, would it be appropriate for a 

records entity to include the reference 

number for any related loan? Would it 

be appropriate for a records entity to 

include the legal name of the records 

entity that is lender of related loan as 

required in the position-level data? 

73. As specified in Tables A–1 and A– 

2, records entities are also required to 

maintain the industry code for each 

counterparty by using either the Global 

Industry Classification (GIC) code or the 

Standard Industrial Classification (SIC) 

code. Each of these two codes uses four 

digits to identify the primary business of 

an entity, and is designed to facilitate 

uniformity and comparability in the 

collection, presentation, and analysis of 

data. By having access to a GIC or SIC 

code for each counterparty, the FDIC 

will be better positioned to estimate the 

financial and operational impact of its 

decisions to transfer, disaffirm or 

repudiate, or retain QFCs in the 

receivership, and will be better able to 

assess the potential impact (‘‘knock-on 

effects’’) that such decisions may have 

on the financial markets as a whole and 

particularly on individual sectors of the 

economy. Is the use of a GIC or SIC code 

appropriate? Are there alternative codes 

that would better assist the FDIC? 

74. Table A–4 to the Appendix 

requires recordkeeping in the form of a 

‘‘yes or no’’ on whether the collateral for 

a particular position is segregated and a 

brief description of such segregation. 

This information is necessary for the 

FDIC to decide whether to transfer 

QFCs. If the FDIC as receiver decides to 

transfer all QFCs between the covered 

financial company in receivership and a 

specific counterparty, the Act requires 

the FDIC to transfer all property or 

collateral securing such QFCs.76 If the 

collateral underlying such QFCs is not 

segregated, then the FDIC may need to 

‘‘disentangle’’ such collateral if it 

decides to transfer the QFCs and the 

collateral in accordance with the 

requirements of the Act or, if it does not 

disentangle the collateral, it may need to 

transfer certain QFCs and other assets 

that it would not otherwise have 

decided to transfer. Does this 

recordkeeping requirement sufficiently 

capture the information the FDIC needs? 

Are there any alternative approaches? 

75. Is there a different format for 

maintaining the records that would 

improve the receiver’s ability to 

evaluate QFC portfolios? How do the 

proposed formatting requirements affect 

a records entity’s ability to generate the 

records in the time frames provided for 

in the Proposed Rules? Are there any 

other requirements relating to 

formatting or transmission of records 

that the Secretary should consider? 

IV. Administrative Law Matters 

A. Initial Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (the 

‘‘RFA’’) (5 U.S.C. 601 et seq.) requires an 

agency to consider whether the rules it 

proposes will have a significant 

economic impact on a substantial 

number of small entities. Congress 

enacted the RFA to address concerns 

related to the effects of agency rules on 

small entities, and the Secretary is 

sensitive to the impact the Proposed 

Rules may impose on small entities. In 

this case, the Secretary believes that the 

Proposed Rules likely would not have a 

‘‘significant economic impact on a 

substantial number of small entities.’’ 5 

U.S.C. 605(b). The Act mandates that 

the Secretary prescribe regulations 

requiring financial companies to 


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77See 77 FR 21637, 21650 (April 11, 2012) and 

76 FR 44763, 44772 (July 27, 2011). 

78See 12 U.S.C. 5390(c)(16)(A); 12 CFR 

380.12(a)(2). 

maintain records with respect to QFCs 

to assist the FDIC as receiver of a 

covered financial company in being able 

to exercise its rights under the Act and 

fulfill its obligations under section 

210(c)(8), (9), or (10) of the Act. As a 

result, the economic impact on financial 

companies, including small entities, 

flows directly from the Act, and not the 

Proposed Rules. Comments are 

requested on whether the Proposed 

Rules would have a significant 

economic impact on a substantial 

number of small entities and whether 

the costs are the result of the Act itself, 

and not the Proposed Rules. 

Instead of requiring all financial 

companies to maintain records with 

respect to QFCs, the Secretary is 

narrowing the scope of the Proposed 

Rules to a smaller subset of financial 

companies. As a threshold matter, the 

Secretary is proposing to exclude from 

the scope of the Proposed Rules 

financial companies that do not meet 

one of the following three criteria: (1) 

Are designated pursuant to section 113 

of the Act (12 U.S.C. 5323) to be a 

nonbank financial company that could 

pose a threat to the financial stability of 

the United States; (2) are designated 

pursuant to Section 804 of the Act (12 

U.S.C. 5463) as a financial market utility 

that is, or is likely to become, 

systemically important; or (3) have total 

assets equal to or greater than $50 

billion. Since the Act’s enactment in 

2010, eleven financial companies have 

been designated by the Council under 

categories (1) and (2), and the 

Secretary’s understanding is that each of 

those designated companies has 

revenues in excess of the Small 

Business Administration’s (‘‘SBA’’) 

revised standards for small entities, 

which went into effect on July 22, 2013. 

Moreover, the Secretary, as Chairperson 

of the Council, does not expect that any 

small entities will be designated by the 

Council in the foreseeable future.77

However, the Proposed Rules would 

also apply to these large financial 

companies’ affiliated financial 

companies (regardless of their size) if an 

affiliated financial company otherwise 

qualifies as a ‘‘records entity’’ and is not 

an ‘‘exempt entity’’ under the Proposed 

Rules. 

The RFA requires agencies either to 

provide an initial regulatory flexibility 

analysis with a proposed rule or to 

certify that the proposed rule will not 

have a significant economic impact on 

a substantial number of small entities. 

In accordance with section 3(a) of the 

RFA, the Secretary has reviewed the 

Proposed Rules. While the Secretary 

believes that the Proposed Rules likely 

would not have a significant economic 

impact on a substantial number of small 

entities (5 U.S.C. 605(b)), the Secretary 

does not have complete data at this time 

to make this determination, particularly 

with regard to affiliated financial 

companies. Therefore, an Initial 

Regulatory Flexibility Analysis has been 

prepared in accordance with 5 U.S.C. 

603. 

The Secretary also requests that 

commenters quantify the number of 

small entities, if any, that would be 

subject to the Proposed Rules, describe 

the nature of any impact on small 

entities, and provide empirical and 

other data to illustrate and support the 

number of small entities subject to the 

Proposed Rules and the extent of any 

impact. After reviewing the comments 

received during the public comment 

period, the Secretary will consider 

whether to conduct a final regulatory 

flexibility analysis. 

1. Statement of the Need for, Objectives 

of, and Legal Basis for, the Proposed 

Rules 

The Secretary is proposing a 

regulation to implement section 

210(c)(8)(H) of the Act, as required by 

the Act. Section 210(c)(8)(H) provides 

that, if the federal primary financial 

regulatory agencies do not prescribe 

joint final or interim final regulations 

requiring financial companies to 

maintain records with respect to QFCs 

to assist the FDIC as receiver for a 

covered financial company to exercise 

its rights and fulfill its obligations under 

certain provisions of the Act within 24 

months of the enactment of the Act, the 

Secretary, as Chairperson of the 

Council, shall prescribe, in consultation 

with the FDIC, such regulations. 

The Proposed Rules would require 

records entities to maintain detailed 

information about their QFC positions 

and be capable of providing this 

information to their PFRAs within 24 

hours of request. The Proposed Rules 

include, among other things, 

recordkeeping requirements with 

respect to position-level data, 

counterparty-level data, legal 

documentation data, and collateral-level 

data. These requirements would assist 

the FDIC in resolving financial 

companies that may be subject to 

orderly liquidation under Title II of the 

Act. Specifically, these data are 

necessary to enable the FDIC as receiver 

of a covered financial company in 

deciding whether to: (1) Transfer the 

covered financial company’s QFCs 

under section 210(c)(9) and (10) of the 

Act within the narrow time window 

afforded by the Act; (2) retain such 

QFCs within the receivership and allow 

a counterparty to terminate the QFCs; 

(3) retain the QFCs within the 

receivership and disaffirm or repudiate 

the QFCs; (4) exercise its rights to 

enforce certain QFCs of subsidiaries and 

affiliates under section 210(c)(16) 

within the narrow time window 

afforded under section 210(c)(10) of the 

Act; 78 and (5) assess the consequences 

of decisions to transfer, disaffirm or 

repudiate, or retain QFCs, including the 

potential impact that such decisions 

may have on the financial markets as a 

whole. Because of the narrow time 

window by which the FDIC may decide 

to transfer QFCs of the covered financial 

company and enforce the QFCs of the 

covered financial company’s 

subsidiaries and affiliates under section 

210(c)(9), (10) and (16) of the Act, it is 

necessary that financial companies that 

qualify as records entities maintain the 

capacity to generate, on an ongoing 

basis, QFC information in a common 

data format. Upon being appointed as 

receiver under Title II of the Act, the 

FDIC needs to analyze such data to 

facilitate the resolution of QFC 

portfolios. As noted earlier, the 

information must be sufficient to allow 

the FDIC to estimate the financial and 

operational impact on the covered 

financial company or its affiliated 

financial companies of the FDIC’s 

decision to transfer, disaffirm or 

repudiate, or retain the QFCs. 

Additionally, it must allow the FDIC to 

assess the potential impact that such 

decisions may have on the financial 

markets as a whole. 

2. Small Entities Affected by the 

Proposed Rules 

As discussed above, the Proposed 

Rules would only affect large financial 

companies and certain of their affiliates 

that meet the definition of a records 

entity. The Secretary proposes that the 

recordkeeping requirements in the 

Proposed Rules be applicable to all 

affiliated financial companies in a large 

corporate group that meet the definition 

of records entity, regardless of their size, 

because an exemption for small entities 

would significantly impair the FDIC’s 

right to enforce certain QFCs of affiliates 

of covered financial companies under 

section 210(c)(16) of the Act. Such 

enforcement may be necessary for the 

FDIC to preserve the critical operations 

of these affiliated financial companies. 

Based on current information and 

discussions with several of the PFRAs 

who are familiar with financial 


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79See 13 CFR 121.201. 

company operations and have 

experience supervising financial 

companies with QFCs portfolios, the 

Secretary believes that the large 

corporate groups that would be subject 

to the Proposed Rules are likely to have 

an existing centralized system for 

recording and reporting QFC activities 

that they will continue to rely upon to 

perform most of the recordkeeping 

requirements set forth herein. The entity 

within the corporate group responsible 

for this centralized system will likely 

operate and maintain a technology 

shared services model with the majority 

of the technology applications, systems, 

and data shared by the affiliated 

financial companies within the large 

corporate group. Therefore, the entity 

responsible for this centralized system, 

and not the affiliated financial 

companies, may be most significantly 

impacted by the Proposed Rules. The 

affiliated financial companies may be 

able to utilize the technology and 

network infrastructure operated and 

maintained by their respective entities 

responsible for the centralized 

recordkeeping system. Additionally, the 

entities responsible for maintaining 

these centralized systems for each large 

corporate group will likely exceed the 

SBA’s revised size standards for small 

entities.79 Accordingly, the Secretary 

believes the Proposed Rules will not 

have a significant economic effect on a 

substantial number of small entities. 

The Secretary seeks information and 

comment on the role of entities 

responsible for the centralized 

recordkeeping systems and whether 

such entities are small entities to which 

the Proposed Rules would apply. 

3. Projected Recordkeeping, and Other 

Compliance Requirements 

As discussed in more detail above, the 

Proposed Rules impose certain 

recordkeeping requirements on records 

entities. A records entity is required to 

maintain all records described in 

section 148.4 of the Proposed Rules in 

electronic form and be able to generate 

data in the format set forth in the 

Appendix to the Proposed Rules. The 

Proposed Rules include, among other 

things, recordkeeping requirements with 

respect to position-level data, 

counterparty-level data, legal 

documentation data, and collateral-level 

data. Additionally, such records shall be 

capable of being transmitted 

electronically to the records entity’s 

PFRAs. 

Based on discussions with several of 

the PFRAs who are familiar with 

financial company operations and have 

experience supervising financial 

companies with QFCs portfolios, the 

Secretary believes that records entities 

should already be maintaining most of 

these QFC records as part of their 

ordinary course of business. However, 

the Secretary recognizes that the 

Proposed Rules’ form and availability 

requirements may impose additional 

costs and burdens on records entities. 

To help reduce these costs and burdens, 

section 148.3(c) of the Proposed Rules 

provides the Secretary with the ability 

to grant general and specific exemptions 

from compliance with one or more of 

the requirements of the Proposed Rules 

under certain circumstances. For 

example, the exemption provisions set 

forth in the Proposed Rules are designed 

to enable the rules to work in 

conjunction with the CFTC’s, SEC’s and 

other regulatory recordkeeping 

requirements, as they would provide the 

ability for the Secretary to be flexible in 

taking such requirements into account. 

Although section 148.3(a)(1) of the 

Proposed Rules specifies a standard 

format for recordkeeping, the Secretary, 

upon receipt of recommendation from 

the FDIC made in consultation with the 

appropriate PFRAs, could exempt 

records entities from this requirement 

on the condition that they maintain 

electronic records maintained in a swap 

data repository or internally in a 

different format. Therefore, the format of 

proposed Tables A–1 through A–4 of the 

Appendix should not complicate 

appropriate recordkeeping, so long as 

the information set forth in the 

Appendix can be provided to the FDIC 

in a manner that allows the FDIC to 

properly analyze and aggregate the data. 

The Proposed Rules further provide the 

Secretary with the authority to grant 

extensions of time for compliance 

purposes. 

The Secretary seeks information and 

comment on any costs, compliance 

requirements, or changes in operating 

procedures arising from application of 

the Proposed Rules on small entities. 

4. Identification of Duplicative, 

Overlapping, or Conflicting Federal 

Rules 

The Secretary does not believe that 

any Federal rules duplicate or conflict 

with the Proposed Rules. The Proposed 

Rules may overlap with certain CFTC 

and SEC recordkeeping requirements. 

However, the Secretary believes the 

Proposed Rules are necessary to assist 

the FDIC as receiver for a covered 

financial company in deciding whether 

to: (1) Transfer the covered financial 

company’s QFCs under section 210(c)(9) 

and (10) of the Act within the narrow 

time window afforded by the Act; (2) 

retain such QFCs within the 

receivership and allow a counterparty to 

terminate the QFCs; (3) retain the QFCs 

within the receivership and disaffirm or 

repudiate the QFCs; (4) exercise its 

rights to enforce certain QFCs of 

subsidiaries and affiliates under section 

210(c)(16) within the narrow time 

window afforded under section 

210(c)(10) of the Act; and (5) assess the 

consequences of decisions to transfer, 

disaffirm or repudiate, or retain QFCs, 

including the potential impact that such 

decisions may have on the financial 

markets as a whole. Additionally, the 

exemption provisions set forth in the 

Proposed Rules are designed to enable 

the rules to work in conjunction with 

the CFTC’s and SEC’s recordkeeping 

requirements, as they would provide the 

ability for the Secretary to be flexible in 

taking such requirements into account. 

The Secretary seeks comment 

regarding any other statutes or 

regulations that would duplicate, 

overlap, or conflict with the Proposed 

Rules. 

5. Significant Alternatives to the 

Proposed Rules 

The Secretary is unaware of any 

appropriate alternatives to the Proposed 

Rules, other than those included and 

discussed in the Proposed Rules, that 

accomplish the stated objectives of the 

Proposed Rules and that minimize any 

significant economic impact of the 

Proposed Rules on small entities. The 

Secretary requests comment on whether 

there are ways to reduce the burdens 

associated with the recordkeeping 

requirements on small entities 

associated with the Proposed Rules. 

B. Paperwork Reduction Act 

The collection of information 

requirements in the Proposed Rules 

have been submitted by the Secretary to 

the Office of Management and Budget 

(‘‘OMB’’) for review in accordance with 

the Paperwork Reduction Act of 1995 

(the ‘‘PRA’’), 44 U.S.C. 3507(d). 

Comments on the collection of 

information should be sent to the Office 

of Management and Budget, Attention: 

Desk Officer for the Department of 

Treasury, Office of Information and 

Regulatory Affairs, Washington, DC 

20503, with copies to the Department of 

Treasury at the addresses previously 

specified herein. Comments on the 

information collection should be 

submitted no later than March 9, 2015. 

Comments are specifically requested 

concerning: 

(1) Whether the proposed information 

collection is necessary for the proper 

performance of agency functions, 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 987 

80See 76 FR 46960 (August 3, 2011); 76 FR 43851 

(July 22, 2011); 77 FR 2136 (January 13, 2012); 75 

FR 78162 (December 22, 2008). 

including whether the information will 

have practical utility; 

(2) The accuracy of the estimated 

burden associated with the proposed 

collection of information, including the 

validity of the methodology and 

assumptions used (see below); 

(3) How to enhance the quality, 

utility, and clarity of the information 

required to be maintained; 

(4) How to minimize the burden of 

complying with the proposed 

information collection, including the 

application of automated collection 

techniques or other forms of information 

technology; 

(5) Estimates of capital or start-up 

costs and costs of operation, 

maintenance, and purchase of services 

to maintain the information; and 

(6) Estimates of (i) the number of 

financial companies subject to the 

Proposed Rules, (ii) the number of 

records entities that are parties to an 

open QFC or guarantee, support, or are 

linked to an open QFC, and (iii) the 

number of affiliated financial companies 

that are parties to an open QFC or 

guarantee, support, or are linked to an 

open QFC of an affiliate. 

The collection of information in the 

Proposed Rules is in §§ 148.3 and 148.4 

and in Tables A–1, A–2, A–3, and A– 

4 of the Appendix. The collection of 

information is required by section 

210(c)(8)(H) of the Act, which mandates 

that the Secretary prescribe regulations 

requiring financial companies to 

maintain records with respect to QFCs 

to assist the FDIC as receiver for a 

covered financial company in being able 

to exercise its rights under the Act and 

fulfill its obligations under section 

210(c)(8), (9) or (10) of the Act. 

The Proposed Rules implement these 

requirements by requiring that a records 

entity maintain all records specified in 

the Proposed Rules in electronic form 

and be capable of generating and 

transmitting data electronically to such 

records entity’s PFRAs and the FDIC. 

The Proposed Rules require that a 

records entity be capable of providing 

QFC records to its PFRA within 24 

hours of the request of such PFRA. The 

Proposed Rules set forth various 

recordkeeping requirements with 

respect to, among other things, positionlevel data, counterparty-level data, legal 

documentation data (including copies of 

agreements governing QFC transactions 

and open confirmations), collateral level 

data, a list of affiliates of counterparties 

and of the records entity, a list of 

vendors supporting QFC-related 

activities, risk metrics used to monitor 

the QFC portfolio, and risk manager 

contact information for each portfolio 

that includes QFCs. 

The Proposed Rules also provide that 

a records entity may request in writing 

a specific exemption from the Proposed 

Rules, and may also request an 

extension of time with respect to 

compliance with the recordkeeping 

requirements. 

Respondents 

The Secretary estimates that 

approximately 140 large corporate 

groups, and each of their respective 

affiliated financial companies that is a 

party to an open QFC or guarantees, 

supports or is linked to an open QFC of 

an affiliate and is not an ‘‘exempt 

entity’’, will meet the definition of 

records entity in section 148.2(l). This 

list of large corporate groups likely 

includes bank holding companies, 

nonbank financial companies 

determined pursuant to section 113 of 

the Act to be an entity that could pose 

a threat to the financial stability of the 

United States, financial market utilities 

designated pursuant to Section 804 of 

the Act as a financial market utility that 

is, or is likely to become, systemically 

important; broker-dealers registered 

with the SEC under section 15 of the 

Securities and Exchange Act of 1934; 

investment advisers registered with the 

SEC under section 203 of the Investment 

Advisers Act of 1940 and unregistered 

investment advisers; investment 

companies registered with the SEC 

under section 8 of the Investment 

Company Act of 1940; insurers; real 

estate investment trusts; and finance 

companies. The Proposed Rules would 

also apply to these large corporate 

groups’ affiliated financial companies 

(regardless of their size) if an affiliated 

financial company otherwise qualifies 

as a ‘‘records entity’’ and is not an 

‘‘exempt entity’’ under the Proposed 

Rules. 

The Secretary estimates that these 

large corporate groups collectively have 

23,325 affiliated financial companies 

that may qualify as records entities 

based on discussions and consultations 

with the PFRAs who are familiar with 

financial company operations and have 

experience supervising financial 

companies with QFC portfolios. Because 

there is no information available to 

determine how many of these affiliated 

financial companies are a party to an 

open QFC or guarantee, support, or are 

linked to an open QFC of an affiliate, 

and thus would qualify as records 

entities, the Secretary has assumed that 

all 23,325 affiliated financial companies 

would qualify as record entities. The 

Secretary recognizes that, based on a 

number of factors, the actual total 

number of respondents may differ 

significantly from these estimates and 

requests comment on the total number 

of respondents. 

The Secretary’s initial recordkeeping, 

reporting, data retention, and records 

generation burden estimates are based 

on discussions with the PFRAs 

regarding their prior experience with 

initial burden estimates for other 

recordkeeping systems. The Secretary 

also considered the burden estimates in 

rulemakings with similar recordkeeping 

and reporting requirements.80

In order to comply with the Proposed 

Rules, each of the large corporate group 

respondents will need to set up its 

network infrastructure to collect data in 

the required format. This will likely 

impose a one-time initial burden on the 

large corporate group respondents in 

connection with the necessary updates 

to their recordkeeping systems, such as 

systems development or modifications. 

The initial burden for each large 

corporate group respondent to set up its 

network infrastructure will depend 

largely on whether the financial 

companies already hold and maintain 

QFC data in an organized electronic 

format, and if so, whether the data 

currently resides on entirely different 

systems rather than on one centralized 

system. Large corporate group 

respondents may need to amend 

internal procedures, reprogram systems, 

reconfigure data tables, and implement 

compliance processes. Moreover, they 

may need to standardize the data and 

create records tables to match the format 

required by the Proposed Rules. 

However, this initial burden is mitigated 

to some extent because QFC data is 

likely already retained in some form by 

each respondent in the ordinary course 

of business. 

As discussed above, the Proposed 

Rule also applies to certain affiliated 

financial companies of the large 

corporate group respondents. The 

Proposed Rules will likely impose a 

one-time initial burden on the affiliated 

financial companies in connection with 

necessary updates to their 

recordkeeping systems, such as systems 

development or modifications. These 

burdens will vary widely among 

affiliated financial companies. Their 

initial burden will depend largely on 

whether the affiliated financial 

companies already hold and maintain 

QFC data in an organized electronic 

format, and if so, whether the data 

currently resides on entirely different 

systems rather than on one centralized 

system. 


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988 Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 

The Secretary believes that the large 

corporate groups subject to the Proposed 

Rules are likely to rely on centralized 

systems for their QFC activities that will 

perform most of the recordkeeping 

requirements set forth herein. The entity 

responsible for this centralized system 

will likely operate and maintain a 

technology shared services model with 

the majority of the technology 

applications, systems, and data shared 

by the multiple affiliated financial 

companies within the corporate group. 

Therefore, the Proposed Rules will 

impose the most significant burden on 

the entities responsible for these 

centralized systems within the large 

corporate group respondents, and not 

the affiliated financial companies. The 

affiliated financial companies will likely 

have a much lower burden because they 

can utilize the technology and network 

infrastructure operated and maintained 

by the entity responsible for the 

centralized system at their respective 

large corporate group. Similarly, the 

Secretary believes that the affiliated 

financial companies will rely on the 

entities responsible for the centralized 

systems to perform the reporting 

requirements under section 148.3(c)(2) 

and (3). 

Similarly, the Secretary believes that 

affiliated financial companies will rely 

on large corporate group respondents to 

submit requests for extensions of time, 

specific exemptions, or both. 

Recordkeeping 

Estimated Number of Respondents: 

Estimated Number of large corporate 

groups: 140. 

Estimated Number of affiliated 

financial companies: 23,325. 

Total estimated initial recordkeeping 

burden: 

Estimated average initial burden 

hours per respondent: 360 hours for 

large corporate groups, 0.5 hours for 

affiliated financial companies. 

Estimated frequency: Annually. 

Estimated total initial recordkeeping 

burden: 50,400 hours for large corporate 

groups and 11,663 hours for affiliated 

financial companies. 

Total estimated annual recordkeeping 

burden: 

Estimated average annual burden 

hours per respondent: 120 hours for 

large corporate group, 0.5 hours for 

affiliated financial companies. 

Estimated frequency: Annually. 

Estimated total annual recordkeeping 

burden: 16,800 hours per year for large 

corporate group respondents and 11,663 

hours per year for affiliated financial 

companies. 

The initial and annual recordkeeping 

burden is imposed by the Act, which 

requires that the Secretary prescribe 

regulations requiring financial 

companies to maintain records with 

respect to QFCs to assist the FDIC as 

receiver of a covered financial company 

in being able to exercise its rights under 

the Act and fulfill its obligations under 

section 210(c)(8), (9), or (10) of the Act. 

Reporting 

Estimated Number of Respondents: 

140. 

Total estimated annual reporting 

burden: 

Estimated average annual burden 

hours per respondent: 25 hours. 

Estimated frequency: Annually. 

Estimated total annual reporting 

burden: 3,500 hours per year. 

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 OMB. 

C. Executive Orders 12866 and 13563 

It has been determined that the 

Proposed Rules are a significant 

regulation as defined in section 3(f)(1) of 

Executive Order 12866, as amended. 

Accordingly, the Proposed Rules have 

been reviewed by OMB. The Regulatory 

Assessment prepared by the Secretary 

for the Proposed Rules is provided 

below. 

1. Description of the Need for the 

Regulatory Action 

The rulemaking is required by the 

Dodd-Frank Act to implement the QFC 

recordkeeping requirements of section 

210(c)(8)(H) of the Act. Section 

210(c)(8)(H) generally provides that if 

the PFRAs do not prescribe joint final or 

interim final regulations requiring 

financial companies to maintain records 

with respect to QFCs within 24 months 

from the date of enactment of the Act, 

the Chairperson of the Council shall 

prescribe such regulations in 

consultation with the FDIC. The 

Secretary, as Chairperson of the 

Council, is proposing the Proposed 

Rules in consultation with the FDIC 

because the PFRAs did not prescribe 

such joint final or interim final 

regulations. The recordkeeping required 

in the Proposed Rules is necessary to 

assist the FDIC as receiver to exercise its 

rights and fulfill its obligations under 

section 210(c)(8), (9), and (10) of the 

Dodd-Frank Act, by enabling it to assess 

the consequences (including any 

financial systemic risks) of decisions to 

transfer, disaffirm or repudiate, or allow 

the termination of, QFCs with one or 

more counterparties. 

The recent financial crisis has 

demonstrated that management of QFC 

positions, including steps undertaken to 

close out such positions, can be an 

important element of a resolution 

strategy which, if not handled properly, 

may magnify market instability. Large, 

interconnected financial companies may 

hold very large positions in QFCs 

involving numerous counterparties. A 

disorderly unwinding of these QFCs, 

including the rapid liquidation of 

collateral, could cause severe negative 

consequences for not only the 

counterparties themselves but also U.S. 

financial stability. 

In order for the FDIC to effectuate an 

orderly liquidation of a covered 

financial company under Title II and 

thereby minimize systemic risk, the 

FDIC would need to make appropriate 

decisions regarding whether to transfer 

QFCs to a bridge financial company or 

other solvent financial institution or 

leave QFCs in the covered financial 

company in receivership. It may not be 

possible for the FDIC to fully analyze a 

large amount of QFC information in the 

short time frame afforded by Title II, 

unless such information is readily 

available to the FDIC in a standardized 

format designed to enable the FDIC to 

conduct the analysis in an expeditious 

manner. 

2. Literature Review 

In assessing the need for these 

recordkeeping requirements, we have 

reviewed two categories of academic 

literature. As highlighted above, one of 

the potential channels through which 

the disorderly unwinding of these QFCs 

could cause severe negative 

consequences for both the 

counterparties themselves and U.S. 

financial stability is through the rapid 

liquidation of collateral. The disorderly 

failure of a financial company with a 

large QFC portfolio may lead QFC 

counterparties to exercise their 

contractual remedies and rights by 

closing out positions and liquidating 

collateral, while also potentially 

increasing uncertainty in both 

derivatives and asset markets. This 

could lead to lower asset prices, 

decrease the availability of funding, and 

increase the likelihood that other 

financial companies also are forced to 

liquidate assets. To assess the potential 

impact of rapid liquidations, or ‘‘fire 

sales,’’ we have reviewed economic 

studies of fire sales among financial 

companies. Second, while there is 

limited academic literature specifically 

focused on the cost of a disorderly 

unwinding of a large, complex financial 

company’s QFC portfolio, there has 

been recent literature analyzing the cost 

of the Lehman Brothers bankruptcy in 


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Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 989 

81Lehman Brothers Holdings, Inc. (‘‘Lehman 

Brothers’’), Lehman Brothers Inc. (the U.S. 

registered broker-dealer), and Lehman Brothers 

International (Europe) (the UK registered brokerdealer) were subject to separate liquidation 

proceedings. 

82Shleifer, A., and Vishny, R. (2011). Fire Sales 

in Finance and Macroeconomics. Journal of 

Economic Perspectives 25: 29–48. 

83Shleifer, A. and Vishny, R. (2010). Asset Fire 

Sales and Credit Easing. National Bureau of 

Economic Research working paper 15652. 

84He, Z., Khang, I.G., and Krishnamurthy, A. 

(2010). Balance Sheet Adjustments During the 2008 

Crisis. IMF Economic Review 58: 118–156. 

85 Ivashina, V. and Scharfstein, D. (2010). Bank 

Lending During the Financial Crisis of 2008. Journal 

of Financial Economics 97: 319–338. 

86Campello, M., Graham, J., and Harvey, C. 

(2010). The Real Effects of Financial Constraints: 

Evidence from a Financial Crisis. Journal of 

Financial Economics 97: 470–487. 

87 Derived from survey respondents’ selfassessments of their financial condition. 

2008, which may be illustrative of the 

potential costs.81

a. Fire Sales Among Financial 

Institutions 

The economic literature on financial 

company fire sales offers insight on 

their potential internal and external 

impacts. While not directly addressing 

QFCs, the fire sale literature can be 

applied to the potential impact of the 

rapid liquidation of QFC collateral that 

might occur in a disorderly unwinding 

of a large QFC portfolio. 

Principles of Fire Sales Among 

Financial Companies. According to the 

literature, a fire sale can occur when a 

company cannot pay its creditors 

without selling assets. During a fire sale, 

assets sold may be heavily discounted 

below their fundamental values, 

depending on the market of 

participating buyers. If buyers are other 

investors in the asset class or classes 

being sold (‘‘specialists’’), prices may 

decline little. However, if the fire sale 

occurs during a financial crisis when 

uncertainty is higher and many 

specialists, including financial 

companies, may be constrained by 

solvency or liquidity pressures, they 

may not participate in the other side of 

the market. As a result, prices may fall 

substantially, to a level at which buyers 

who would only buy the assets in 

question at a large discount enter the 

market. Low sale prices may cause other 

financial companies to reduce the value 

at which they hold similar assets on 

their books when marking to market, 

which may trigger a downward spiral 

marked by more firms in distress 

(Shleifer and Vishny, 2011).82 In 

addition, because many financial 

companies rely upon short-term sources 

of financing, such as repurchase 

agreements, the falling asset prices and 

heightened uncertainty may contribute 

to liquidity pressures as these financing 

sources withdraw funding or demand 

more collateral. This may force even 

solvent financial companies to sell 

assets in order to deleverage, decrease 

the size of their balance sheets, and 

reduce risk. This self-reinforcing cycle 

can result in additional fire sales, and 

eventually, precipitate or magnify a 

financial crisis. 

Shleifer and Vishny (2011) believe 

that before the September 2008 Lehman 

Brothers bankruptcy most specialist 

buyers, including most financial 

companies, were active in the market, 

but after the Lehman bankruptcy most 

of them were unwilling to buy assets, 

causing security prices to plunge, and 

prompting fund withdrawals, collateral 

calls, and self-reinforcing fire sales. This 

cycle of price collapses and 

deleveraging increased the fragility of 

the financial system, and disrupted 

financial intermediation. The next major 

section discusses the Lehman failure in 

more detail. 

At the time of a fire sale both seller 

and non-seller financial companies may 

curtail their lending, thereby imposing 

additional social costs associated with 

reduced financial intermediation. 

Shleifer and Vishny (2010) 83 use a 

three-period model of bank lending to 

illustrate the dynamics. They show that, 

in normal times, securitization can lead 

to higher lending volumes and earnings, 

but market sentiment shocks can 

quickly reverse these outcomes. When 

banks are highly leveraged, they may be 

more vulnerable to unanticipated 

shocks. A severe shock can lead them to 

liquidate assets in fire sales, fostering 

industry-wide asset price declines and 

weakening the banking system. In that 

environment, banks may forego lending, 

both to meet capital requirements and to 

preserve the capacity to purchase 

deeply discounted assets in the future. 

This credit contraction may reduce 

economic welfare due to a large number 

of potentially profitable investments 

that do not receive financing. He et al. 

(2010) 84 and Ivashina and Scharfstein 

(2010) 85 offer evidence that financial 

companies used spare balance sheet 

capacity to purchase discounted 

securities after the financial crisis rather 

than to increase lending. Hence, 

foregone lending during a crisis is a 

potential social cost, although we do not 

include it in our summary of costs 

associated with the Lehman Brothers 

bankruptcy in the next section, since we 

find no specific description of it in this 

context in the literature. 

Potential Effects on Lending. As 

predicted by the theoretical models 

discussed above, empirical research 

shows bank lending declined sharply 

during the crisis. Ivashina and 

Scharfstein (2010) show that in August 

through December 2008, banks that 

depended more heavily on short-term 

debt (other than insured deposits), 

reduced their business lending by 

significantly more than banks less 

dependent on short-term debt financing. 

At the time of the Lehman bankruptcy, 

the paper identifies two channels 

driving this result that collectively 

constituted a ‘‘run’’ on financial 

companies. First, short-term creditors 

refused to roll over their unsecured 

commercial paper loans and repo 

lenders increased collateral 

requirements, which particularly 

constrained financial companies 

dependent on short-term credit for a 

significant share of their financing. 

Second, borrowers substantially 

increased draws on their existing credit 

lines ‘‘to enhance their liquidity and 

financial flexibility during the credit 

crisis.’’ In particular, financial 

companies that co-syndicated credit 

lines with Lehman Brothers were more 

likely to experience larger credit line 

drawdowns after the Lehman failure, 

and reduced their new lending more 

than those without co-syndication 

relationships with Lehman. Ivashina 

and Scharfstein conclude the results are 

consistent with a decline in the supply 

of funding as a result of the run 

associated with the Lehman event. 

On the borrower side, Campello et al. 

(2010) 86 surveyed the chief financial 

officers of 1,050 nonfinancial firms in 

the United States, Europe, and Asia and 

found that those that identified their 

firms as ‘‘financially constrained’’ 87

during the financial crisis cut back more 

on capital and technology investments 

compared to those that identified their 

firms as ‘‘financially unconstrained.’’ 

They also cut marketing expenditures 

by significantly greater margins, and 

shed far more employees (financially 

constrained firms planned to cut 10.9 

percent of their personnel in 2009, 

while financially unconstrained firms 

planned to shed 2.7 percent). The 

survey revealed that during the crisis, 

86 percent of constrained firms reported 

foregoing attractive investments, 

compared to 44 percent of 

unconstrained firms. This suggests the 

crisis-related decline in bank credit 

supply directly contributed to the 

reduction in constrained firms’ 

investments, and imposed associated 

economic effects. 


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990 Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 

88 Government Accountability Office, Financial 

Regulatory Reform: Financial Crisis Losses and 

Potential Impacts of the Dodd-Frank Act, GAO–13– 

180 (January 16, 2013). 

89Most derivatives were held in several 

subsidiaries specializing in derivatives and related 

instruments. Since Lehman had numerous 

subsidiaries with intermingled interests, we 

simplify the discussion by describing them as if 

they were a single entity, except when specificity 

is necessary for descriptive accuracy. 

90Fleming, M. and Sarkar, A. (2014). The Failure 

Resolution of Lehman Brothers. Economic Policy 

Review 20(2). Federal Reserve Bank of New York. 

91Fleming and Sarkar believe the selection of the 

termination date for safe harbor purposes 

influenced this. They write (p. 25), ‘‘Although 

Lehman filed for bankruptcy protection at about 

1:00 a.m. on Monday, September 15, 2008, the 

termination date was set as Friday, September 12 

for derivatives subject to automatic termination. 

Normally, nondefaulting derivatives counterparties 

of Lehman would have attempted to hedge their 

positions on Monday to mitigate expected losses on 

their position. However, they could not do so since 

their positions were deemed to have terminated two 

days earlier.’’ 

92 Valukas, A. (2010). ‘‘Report of the Examiner in 

the Chapter 11 Proceedings of Lehman Brothers 

Holdings Inc.’’ March 11. Accessed at: http://

jenner.com/lehman/. 

b. Costs of Lehman Brothers Bankruptcy 

Numerous researchers have provided 

broad estimates of the economic costs of 

the 2007–09 financial crisis (see GAO 

(2013) 88 for a useful review). This 

section focuses more narrowly on the 

terminations of derivative contracts 

associated with the Lehman bankruptcy 

to help illustrate the potential costs of 

unwinding the derivatives portfolio of a 

large, complex financial company under 

the U.S. Bankruptcy Code. 

The net worth of Lehman Brothers 

derivative positions at the time of 

bankruptcy totaled $21 billion, with 96 

percent representing over-the-counter 

(OTC) positions.89 The portfolio 

consisted of more than 6,000 OTC 

derivative contracts involving over 

900,000 transactions at the time of 

bankruptcy on September 15, 2008. 

Fleming and Sarkar’s (2014) 90 detailed 

assessment of the Lehman Brothers 

bankruptcy finds the overall recovery 

rate of all allowed unsecured claims 

(not limited to QFCs) amounted to 

roughly 28 percent, a rate the authors 

describe as low relative to both an 

estimated 59 percent for other financial 

company failures and 40 percent for 

failures occurring in recessions. 

We use a framework that divides costs 

associated with derivatives resolution 

into private costs and public (external) 

costs. Private costs consist of direct 

losses to derivatives counterparties from 

unrecovered claims, indirect costs to 

derivatives counterparties from loss of 

hedged positions, costs to other Lehman 

Brothers creditors in the bankruptcy 

proceeding due to reductions in 

recovery values resulting from the 

termination and settlement of OTC 

derivatives, and litigation and 

administrative expenses. While we find 

no literature that assesses the public 

costs directly attributable to the 

resolution of Lehman’s derivatives 

portfolio, below we examine the 

literature assessing the public impact of 

Lehman’s failure more broadly. 

While rigorous estimates of the value 

of each cost element listed above would 

be ideal, in reality we are constrained by 

a lack of publicly available data. 

Therefore, this section combines 

qualitative descriptions of costs with 

limited quantitative information when 

available, in an effort to provide insight 

on the costs of resolving Lehman’s QFC 

portfolio under the bankruptcy 

proceedings. 

Private Derivatives Counterparty 

Costs: Unrecovered Claims. Estimates of 

bankruptcy claim recovery rates of OTC 

derivative counterparties (excluding 

Lehman affiliate claims) are reported in 

the literature at the Lehman subsidiary 

level, and vary widely, ranging from 31 

percent for Lehman Brothers Special 

Financing (the largest Lehman 

derivatives entity) to 100 percent each 

for Lehman Brothers OTC Derivatives, 

Lehman Brothers Derivatives Products, 

and Lehman Brothers Financial 

Products, as of March 27, 2014 (Fleming 

and Sarkar (2014)). Still the authors 

emphasize that, ‘‘most counterparties of 

Lehman’s OTC derivatives suffered 

substantial losses.’’ 

Private Derivatives Counterparty 

Costs: Loss of Hedged Positions. A key 

reason for many counterparties to 

acquire derivative positions is to hedge 

against potential future market 

developments. These hedges reduce 

uncertainties and serve as valuable risk 

management instruments. Fleming and 

Sarkar (2014) suggest Lehman’s abrupt 

bankruptcy took counterparties by 

surprise, and allowed them little time to 

assess their derivative positions facing 

Lehman, decide whether to terminate 

contracts, and rehedge their positions as 

needed.91 Therefore, many 

counterparties lost their hedged 

positions within a brief period and were 

unexpectedly exposed to risks until new 

positions could be established. We find 

no estimates of the costs of these lost 

hedges in the literature. 

Private Costs to the Entire Lehman 

Bankruptcy Estate: Settlement of OTC 

Derivatives. Fleming and Sarkar (2014) 

note that the settlement of Lehman’s 

OTC derivatives claims may have also 

resulted in significant losses to the 

Lehman bankruptcy estate. Derivatives 

valuation claims are generally based on 

replacement costs and they note that 

due to the large prevailing bid-ask 

spreads at the time of Lehman’s 

bankruptcy filing, replacement costs 

may have diverged significantly from 

fair value. During the settlement process 

the Lehman estate received $11.85 

billion in OTC derivatives receivables 

by January 10, 2011. It is unclear how 

much in additional receivables may 

have been ‘‘lost’’ by Lehman due to the 

termination and settlement of contracts 

following its bankruptcy filing. The 

literature notes that the relatively abrupt 

timing of the bankruptcy filing may 

have also influenced the magnitude of 

losses. Valukas (2010) suggested that 

Lehman insufficiently planned for the 

possibility of bankruptcy, such that 

management only began to plan 

seriously for bankruptcy a few days 

before the bankruptcy filing. A 

bankruptcy court document 92 cites a 

‘‘turnaround specialist’’ advising 

Lehman, Bryan Marsal, as telling the 

court-appointed examiner that the 

sudden bankruptcy resulted in the loss 

of 70 percent of $48 billion of 

receivables from derivatives that could 

have been unwound. Yet, the same 

document notes that Lehman counsel 

Harvey Miller did not think the rushed 

filing had an adverse impact on the 

estate (Valukas 2010). These accounts 

appear anecdotal and no information is 

provided on the derivation of the figures 

cited by Marsal. 

Private Costs: Litigation and 

Administrative. The extended duration 

of the OTC derivatives settlement 

process included multiple court 

petitions, procedure approvals, 

settlement mechanisms, and legal 

challenges. While 81 percent of 

derivative contracts in claims against 

Lehman were terminated by November 

13, 2008, the final settlement process 

moved more deliberately due to the 

multiple steps involved in properly 

addressing the unprecedented scale and 

complexity of claims within the 

bankruptcy process. Only 84 percent of 

derivatives claims had been settled by 

the end of 2012. Estimates of litigation 

and administrative expenses for OTC 

derivatives alone are not available, but 

these expense categories for the full 

Lehman settlement process were 

estimated to total $3.2 billion as of May 

13, 2011 (Fleming and Sarkar (2014)). 

Public Costs: Externalities. The event 

study is a common method of estimating 

the market impact of a particular event. 

Measured market reactions to the 

Lehman bankruptcy are based on the 

institution’s failure event as a whole; 

they are not reactions to the QFC 

resolution process alone and therefore 


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93Still, we caution that event study results may 

produce ‘‘noisy’’ signals. For example, attribution is 

problematic as the period surrounding the Lehman 

collapse was a particularly active one with nearly 

two dozen significant economic events in 

September 2008. 

94 Johnson, M.A. and Mamun, A. (2012). The 

Failure of Lehman Brothers and its Impact on Other 

Financial Institutions. Applied Financial 

Economics 22: 375–385. 

95 Dumontaux, N. and Pop, A. (2012). ‘‘Contagion 

Effects in the Aftermath of Lehman’s Collapse: 

Measuring the Collateral Damage.’’ University of 

Nantes working paper 2012/27. 

96Large financial companies are defined as those 

with total assets over $1 billion in their last audited 

report before the event date. 

97Congressional Budget Office. (2010). The 

Budgetary Impact and Subsidy Costs of the Federal 

Reserve’s Actions During the Financial Crisis. 

98 12 U.S.C. 1821(e)(8)(H). 

overstate the impacts of these 

terminations. We may plausibly assume, 

however, that the market reactions to 

the overall Lehman collapse 

announcement included a component 

associated with potential costs of 

settling their derivative contracts.93

Johnson and Mamun (2012) 94 apply 

an event study approach to assess stock 

market reactions of a sample of 742 U.S. 

financial institutions—divided into 

banks, savings and loans, brokers, and 

primary dealers—on the date of the 

Lehman bankruptcy filing. While each 

group of institutions showed negative 

abnormal returns, only the bank (-3 

percent) and primary dealer (-6 percent) 

coefficients were statistically 

significant. The data strongly support 

the notion that the event had differential 

impacts by type of financial institution 

and abnormal returns across institution 

groups were jointly significantly 

different from zero. 

Dumontaux and Pop (2012) 95 apply a 

similar approach to assess stock market 

reactions of a sample of 382 U.S. 

financial companies, using brief event 

windows. They report heterogeneous 

outcomes according to institution size 

and business lines. Among the twenty 

large companies 96 (excluding Lehman 

Brothers), cumulative abnormal stock 

price returns were highly significantly 

negative, ranging from -10 percent to -18 

percent over five distinct event 

windows of up to five days in duration. 

However, the effects on the full sample 

were not statistically significant, 

indicating the immediate contagion 

effect was limited to large companies. 

The results of both event studies suggest 

the Lehman bankruptcy likely imparted 

immediate negative external effects on a 

subset of financial companies, causing 

substantial drops in their market 

valuations. We did not find event 

studies specifically assessing market 

impacts on non-financial firms. 

Domestic Public Support: Federal 

Reserve Facility. The Federal Reserve 

provided substantial liquidity to the 

markets during the 2007–2009 period. 

Fleming and Sarkar (2014) consider the 

support to Lehman in the first week 

after the bankruptcy as a critical factor 

in the recovery of claims against at least 

part of Lehman Brothers, which allowed 

it to keep operating until it was acquired 

by Barclays. Between September 15 and 

18, 2008, Lehman Brothers Inc. 

borrowed $68 billion from the Primary 

Dealer Credit Facility (PDCF). Because 

the borrowed funds were fully 

collateralized and repaid in full with 

interest, the Congressional Budget 

Office (2010) 97 estimated that total 

lending through the PDCF involved a 

negligible subsidy value. 

Global Public Costs: Externalities. The 

economic literature is rich with event 

studies of market reactions to policy 

announcements designed to alleviate 

the financial crisis, however, we find no 

studies focusing directly on the global 

market impacts of the Lehman Brothers 

bankruptcy as an event. We also 

acknowledge global spillovers as a 

potential public cost, however, we find 

no studies focusing directly on the 

global impacts of the Lehman Brothers 

bankruptcy as an event. 

c. Conclusion 

The economic literature on financial 

asset fire sales maintains that such 

events are more systemically harmful 

when occurring during industry-wide 

periods of distress, making mitigating 

these costs a public policy concern. The 

Lehman Brothers bankruptcy and the 

resulting QFC terminations occurred 

during a crisis period, and might have 

imposed widespread private and public 

costs. We do not compare the Lehman 

bankruptcy costs to the alternative of 

potential resolution costs under a 

counterfactual case had Title II of the 

Dodd-Frank Act been in effect at the 

time of the Lehman bankruptcy filing. 

3. Baseline 

The FDIC promulgated 12 CFR part 

371, Recordkeeping Requirements for 

Qualified Financial Contracts (‘‘Part 

371’’), pursuant to section 11(e)(8)(H) of 

the FDIA.98 The FDIC’s QFC 

recordkeeping rule applies to insured 

depository institutions which are in a 

troubled condition, and was 

promulgated to enable the FDIC as 

receiver to make an informed decision 

as to whether to transfer or retain QFCs 

and also thereby minimize the potential 

for market disruptions that could occur 

with respect to the liquidation of QFC 

portfolios of insured depository 

institutions. However, Part 371 does not 

apply to non-depository financial 

companies that are eligible for 

resolution under Title II of the Dodd 

Frank Act. The proposed recordkeeping 

requirements of the Proposed Rules are 

based, in part, on Part 371, and have 

been informed by the FDIC’s experience 

with both large and small portfolios of 

QFCs of failed insured depository 

institutions. However, the information 

requirements of the Proposed Rules are 

more extensive. While Part 371 requires 

certain position-level data and 

counterparty-level data, the Proposed 

Rules require certain position-level data 

and counterparty-level data that are not 

required by Part 371. Part 371 also does 

not require recordkeeping with regard to 

Legal Agreements or Collateral Detail 

Data to the same extent as is 

contemplated in Tables A–3 and A–4 to 

the Appendix in the Proposed Rules. 

Similar to the Proposed Rules, under 

Part 371, any insured depository 

institution that is subject to the 

requirements must produce and 

maintain the required records in an 

electronic format, unless the institution 

has fewer than twenty open QFC 

positions. However, under Part 371 the 

records do not necessarily need to be 

maintained in a standardized format, 

but must be maintained in a format that 

is acceptable to the FDIC. 

Based on staff-level discussions with 

the PFRAs who are familiar with 

financial company operations and have 

experience supervising financial 

companies with QFC portfolios, the 

Secretary believes that the large 

corporate groups that would be subject 

to the Proposed Rules should already be 

maintaining most or all of the QFC 

records required under the Proposed 

Rules as part of their ordinary course of 

business. In order for these large 

corporate groups to effectively manage 

their QFC portfolios, they need to have 

robust recordkeeping systems in place. 

For example, large corporate groups that 

trade derivatives out of several distinct 

legal entities need to have detailed 

records, including counterparty 

identification, position-level data, 

collateral received and posted, and 

contractual requirements, in order to 

effectively manage their portfolio, 

perform on contracts, and monitor risks. 

However, it is unlikely that these large 

corporate groups are maintaining the 

QFC records in the standardized format 

prescribed by the Proposed Rules and as 

set forth in the Appendix to the 

Proposed Rules. 

4. Evaluation of Alternatives 

The Secretary considered alternative 

forms of the proposed rules, but believes 

that the current form is the best 


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99See e.g., 12 U.S.C. 5365(a). 

100 12 U.S.C. 5365(i)(2). 101 17 CFR 39.6(d). 102 12 U.S.C. 5390(c)(9)(A)(i)(IV). 

available method of achieving the 

regulatory objectives. The assessment of 

alternatives below is organized into 

three subcategories: (a) Scope of the 

proposed rules; (b) content of records; 

and (c) standardized recordkeeping. 

a. Scope of the Proposed Rules 

In developing the definition of a 

records entity, the Secretary took into 

consideration factors such as financial 

company size, risk, complexity, 

leverage, frequency and dollar amount 

of QFCs, and interconnectedness to the 

financial system, as well as other factors 

described herein. The Secretary 

included the following entities within 

the scope of the definition of a records 

entity: Financial companies that have at 

least $50 billion in assets, financial 

companies that the Council determines 

could pose a threat to U.S. financial 

stability, and financial companies that 

the Council designates as systemically 

important financial market utilities. 

The Secretary believes that the $50 

billion asset threshold is a useful means 

for identifying entities that are of a 

sufficient size that they could 

potentially be considered for orderly 

liquidation under Title II, and therefore 

should be incorporated in the definition 

of a records entity. A $50 billion asset 

threshold has been separately 

established for similar purposes under 

the Dodd-Frank Act.99 In particular, the 

Council applies a $50 billion threshold 

as an initial evaluation tool for 

determining whether a nonbank 

financial company could pose a threat 

to the financial stability of the U.S. and 

should potentially be subject to 

enhanced prudential standards under 

Title I of the Dodd-Frank Act. 

The Secretary considered alternative 

criteria in developing the definition of 

a records entity, such as including 

financial companies that have more 

than $10 billion in assets. This 

threshold, which would have captured 

more financial companies that 

potentially might be considered for 

orderly liquidation under Title II, has 

been used in other regulatory 

requirements. For example, the DoddFrank Act requires certain financial 

companies with more than $10 billion 

in total consolidated assets to conduct 

annual stress tests.100 Additionally, the 

CFTC’s final rule on the end-user 

exemption to the clearing requirement 

for swaps exempts banks, savings 

associations, farm credit system 

institutions, and credit unions with total 

assets of $10 billion or less from the 

definition of ‘‘financial entity,’’ making 

such ‘‘smaller’’ financial institutions 

eligible for the end-user exception.101

However, the Secretary determined 

that while it is possible that financial 

companies with more than $10 billion 

and less than $50 billion in total assets 

potentially would be considered for 

orderly liquidation under Title II, $50 

billion was a more appropriate 

threshold. Including all financial 

companies with over $10 billion in total 

assets would substantially increase the 

number of financial companies subject 

to recordkeeping requirements, many of 

which would likely not be considered 

for orderly liquidation under Title II. A 

financial company (including a bank 

holding company) with total assets of 

$50 billion or more, is the type of 

financial company that potentially 

would be the most likely to be 

considered for orderly liquidation under 

Title II. The definition of records entity 

is thus designed to reduce 

recordkeeping burdens on smaller 

financial companies by only capturing 

those financial companies with QFC 

positions for which the FDIC is most 

likely to be appointed as receiver. 

The Secretary seeks comment on the 

following questions: Is the scope of the 

Proposed Rules adequate? Should 

additional or different criteria be used to 

define a records entity? If so, what 

criteria would be appropriate? For 

example, should the rules exempt 

certain entities based on the number of 

QFC counterparties, QFC notional 

amounts, or QFC mark-to-market values 

as of a particular date? If so, at what 

levels should such exemptions be set? 

Should there be any other form of de 

minimis exemption from these criteria? 

Please provide specific explanations of 

how such criteria would be applied 

together with an explanation of whether 

such criteria would affect the FDIC’s 

ability to resolve a QFC portfolio. 

b. Content of Records 

The Secretary determined, after 

consulting with the FDIC, that requiring 

each records entity to maintain the data 

included in Tables A–1 through A–4 of 

the Appendix to the Proposed Rules is 

necessary to assist the FDIC in being 

able to effectively exercise its rights 

under the Act and fulfill its obligations 

under section 210(c)(8), (9), or (10) of 

the Act. To facilitate the resolution of 

QFC portfolios, the FDIC needs to 

analyze such data and, upon being 

appointed as receiver under Title II, 

effectuate decisions with respect to the 

exercise of such rights. The information 

must be sufficient to allow the FDIC to 

estimate the financial and operational 

impact on the covered financial 

company and its counterparties, or 

affiliated financial companies, of the 

FDIC’s decision to transfer, disaffirm or 

repudiate, or retain the QFCs. It must 

also allow the FDIC to assess the 

potential impact that such decisions 

may have on the financial markets as a 

whole. 

The position-level data included in 

Table A–1 to the Appendix is intended 

to enable the FDIC to evaluate a records 

entity’s exposure to its counterparties. 

The FDIC would also use these data to 

evaluate the effects of the receiver’s 

determination to transfer, disaffirm or 

repudiate, or retain QFCs. In addition, 

position-level information would assist 

the receiver or any transferee to comply 

with the terms of the QFCs and reduce 

the likelihood of inadvertent defaults. 

For example, a unique position 

identifier would allow for the tracking 

and separation of positions maintained 

by the records entity. 

The primary objective of proposed 

Table A–2 to the Appendix is to identify 

exposure of the records entity to each 

counterparty and its affiliates, as well as 

the exposure that counterparties might 

have to the records entity. This 

information would enable the FDIC to 

determine the effects of transfer or 

termination of QFCs with a given 

counterparty and the potential risk of 

contagion in the financial markets. 

Table A–2 would also require 

comprehensive collateral information, 

including market value of collateral, 

location of collateral, and any custodial 

and segregation arrangements. Collateral 

excess or deficiency positions as well as 

collateral thresholds and valuation 

discounts also would need to be 

maintained. This information would 

enable the FDIC as receiver to evaluate 

counterparty relationships and 

determine if the receivership would 

benefit from retaining and repudiating 

QFCs with certain counterparties. It 

would also enable the FDIC as receiver 

to comply with the requirements of the 

Act by transferring QFC obligations 

together with the related collateral.102 In 

addition, it would enable the receiver to 

identify excess collateral of 

counterparties for possible return 

should the contracts be terminated after 

the one business day stay. 

Table A–3 to the Appendix would 

require the maintenance of legal 

agreement data for each QFC agreement 

or master agreement between each 

records entity and counterparty. 

Because the receiver has a limited 

period of time in which to evaluate QFC 

provisions, the availability of the legal 


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103 12 CFR 371.1(c). 

agreements in fully searchable 

electronic form is of utmost importance. 

In particular, the identification of any 

support by or linkage to a parent entity 

or affiliate and the identification of any 

transfer restrictions and non-standard 

covenants would enable the FDIC as 

receiver to evaluate the treatment of 

QFCs under such contracts in an orderly 

liquidation of the records entity or its 

affiliated financial company under Title 

II of the Act. 

Table A–4 to the Appendix would 

require each records entity to maintain 

collateral detail data both with respect 

to collateral received and with respect 

to collateral posted on a counterpartyby-counterparty basis. The data in this 

Table, together with the data in Table 

A–2, would allow the FDIC to better 

understand the QFC portfolio risk, and 

to model various QFC transfer or 

termination scenarios. 

As indicated above, the proposed 

recordkeeping requirements of the 

Proposed Rules are similar to the FDIC’s 

Part 371 but the information 

requirements of the Proposed Rules are 

more extensive. The Secretary 

considered reducing recordkeeping 

burden by aligning the requirements 

more closely with those of the FDIC’s 

Part 371. However, the Secretary 

determined, in consultation with the 

FDIC, that additional recordkeeping 

beyond that required by Part 371 would 

be needed for the FDIC to resolve a 

financial company with significant QFC 

positions under Title II. In particular, 

the FDIC will need this additional 

information to analyze the QFC 

portfolio and determine whether to 

transfer, disaffirm or repudiate, or retain 

the QFCs during the one business day 

stay and to perform the obligations 

under the QFCs, including meeting 

collateral requirements. For example, 

the proposed position-level and 

counterparty-level data included in 

Tables A–1 and A–2 to the Appendix 

would require recordkeeping for interaffiliate transactions, which was not 

included in Part 371. Recordkeeping 

with respect to inter-affiliate QFCs is 

necessary to enable the FDIC to quickly 

understand all QFC linkages in a 

corporate group and to evaluate the 

potential systemic effects of FDIC 

decisions. Table A–2, the counterparty 

collateral data, is also more extensive 

than the FDIC’s Part 371 due to the 

inclusion of pending margin calls in the 

calculation of the excess or deficiency of 

the counterparty’s collateral. This will 

assist the FDIC in meeting the 

obligations under the QFCs, including 

certain clearing organization margin 

calls. The Table A–3 legal agreements, 

which were not included in Part 371, 

are necessary to enable the FDIC as 

receiver to evaluate the treatment of 

QFCs under such contracts, including 

any support by or linkage to a parent 

entity or affiliate and the identification 

of any transfer restrictions and nonstandard covenants. Table A–4 includes 

additional collateral detail data, such as 

the collateral jurisdiction, the collateral 

segregation status, and whether the 

collateral may be subject to rehypothecation by the counterparty. 

These additional data are necessary to 

enable the FDIC to assess risks 

associated with the collateral and 

improve the FDIC’s ability to analyze 

various QFC transfer or termination 

scenarios. For example, for cross-border 

transactions, this information would 

help the FDIC evaluate the availability 

of collateral in different jurisdictions 

and the related close-out risks if the 

receiver cannot arrange for the transfer 

of QFC positions under local law. 

Because the information requirements 

of the Proposed Rules are more 

extensive than Part 371, the Secretary, 

in consultation with the FDIC, has also 

proposed to allow for a longer 

compliance period than the compliance 

period set forth under Part 371. An 

insured depository institution subject to 

the FDIC’s Part 371 recordkeeping 

requirements must comply within 60 

days of notification.103 Under the 

Proposed Rules, a financial company 

would be required to comply with the 

recordkeeping requirements within 270 

days of becoming a records entity. 

The Secretary seeks comment on the 

following questions: Are any of the 

proposed recordkeeping requirements 

not necessary or appropriate to assist 

the FDIC as receiver? Please include the 

rationale for why these requirements are 

not necessary or appropriate. Should the 

determination on whether some records 

are not necessary or appropriate be 

based on the type of records entity? 

Would any of the contemplated records 

(including any of the data fields in the 

appendix) or data result in unnecessary 

burden on records entities? Are there 

ways to further align the recordkeeping 

requirements set forth herein with the 

requirements of other recordkeeping 

and reporting rules to reduce regulatory 

burden (e.g., the respective CFTC and 

SEC regulations on swap and securitybased swap data recordkeeping and 

reporting?) If so, how should this 

burden be reduced? Do the proposed 

recordkeeping requirements 

appropriately measure and identify the 

size and complexity of entities that 

likely qualify as records entities? Are 

there any additional records or data that 

would assist the FDIC in its role as 

receiver with respect to a covered 

financial company? If so, please explain 

the rationale for why such additional 

records or data is necessary. 

c. Standardized Recordkeeping 

The Secretary determined that 

requiring records entities to have the 

capacity to maintain and generate QFC 

records in the uniform, standardized 

format set forth in the Appendix to the 

Proposed Rules is necessary to assist the 

FDIC in being able to effectively 

exercise its rights under the Act and 

fulfill its obligations under section 

210(c)(8), (9), or (10) of the Act. 

Specifically, when the FDIC is 

appointed as receiver of a covered 

financial company, the covered 

financial company’s QFC counterparties 

are prohibited from exercising their 

contractual right of termination until 5 

p.m. (eastern time) on the first business 

day following the date of appointment. 

After its appointment as receiver and 

prior to the close of the aforementioned 

5 p.m. deadline, the FDIC has three 

options in managing a covered financial 

company’s QFC portfolio. Specifically, 

with respect to all of the covered 

financial company’s QFCs with a 

particular counterparty and all its 

affiliates, the FDIC may: (1) Transfer the 

QFCs to a financial institution, 

including a bridge financial company 

established by the FDIC; (2) retain the 

QFCs within the receivership and allow 

the counterparty to exercise contractual 

remedies to terminate the QFCs; or (3) 

retain the QFCs within the receivership, 

disaffirm or repudiate the QFCs, and 

pay compensatory damages. If the FDIC 

transfers the QFCs to a financial 

institution, the counterparty may not 

terminate the QFCs solely by reason of 

the covered financial company’s 

financial condition or insolvency or the 

appointment of the FDIC as receiver. If 

the FDIC does not transfer the QFCs and 

does not repudiate such QFCs, the 

counterparty may exercise contractual 

remedies to terminate the QFCs and 

assert claims for payment from the 

covered financial company and may 

have rights to liquidate the collateral 

pledged by the covered financial 

company. 

The Secretary considered reducing 

recordkeeping burdens by requiring the 

maintenance of non-standardized 

records. After consulting with the FDIC, 

the Secretary determined that this 

alternative may reduce the FDIC’s 

flexibility in managing the QFC 

portfolio, increase systemic risk, and 

impair the FDIC’s ability as receiver to 

manage the assets of the covered 

financial company in terms of 


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994 Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 

104 12 U.S.C. 5390(a)(1)(B)(iv). 105See FDIC article, ‘‘The Orderly Liquidation of 

Lehman Brothers Holdings Inc. under the DoddFrank Act’’ (2011), p.8, available at http://www.fdic.

gov/regulations/reform/lehman.html. 

maximizing the value of the assets in 

the context of orderly liquidation.104 For 

example, in the absence of updated and 

standardized information, it is possible 

that QFCs could be transferred to a 

bridge financial company, when leaving 

them in the receivership would be a 

better course of action. If such QFCs 

were transferred to the bridge financial 

company, the bridge financial company 

would be required to perform the 

obligations under the QFCs, including 

meeting collateral requirements, and, to 

the extent set forth in the QFCs, would 

be liable for losses under the 

contracts.105 Alternatively, QFCs could 

be left in the receivership, when transfer 

to a solvent financial institution or a 

bridge financial company would be a 

better course of action. In such a case, 

the lack of uniform data may, among 

other things, prevent the FDIC from 

determining the value of any collateral 

pledged to secure the QFCs and from 

considering the impact QFC 

terminations may have on broader 

financial stability. 

However, while the Proposed Rules 

specify a standardized recordkeeping 

format, the Secretary also recognizes the 

need to provide flexibility for possible 

alternate recordkeeping formats if they 

are sufficient to meet the needs of the 

FDIC. The Proposed Rules provide the 

Secretary with the discretion to grant 

conditional or unconditional 

exemptions from compliance with one 

or more of the requirements of the 

Proposed Rules, which could include 

exemptions to the standardized 

recordkeeping format. For example, a 

conditional exemption could be granted 

if an alternate format, such as one used 

for a separate recordkeeping 

requirement, would still allow the FDIC 

to manipulate and analyze the data to 

determine the effect of FDIC decisions 

under Title II with respect to a covered 

financial company’s QFC portfolio and 

enable the FDIC to fulfill its obligations 

under section 210(c)(8), (9), or (10) of 

the Act within the narrow time window 

afforded by section 210(c)(10) of the 

Act. 

5. Affected Population 

Instead of requiring all financial 

companies to maintain records with 

respect to QFCs, the Secretary is 

limiting the scope of the Proposed Rules 

to a smaller subset of financial 

companies. Discretion to do so is 

afforded under section 210(c)(8)(H)(iv) 

of the Act, which authorizes 

differentiation among financial 

companies by taking into consideration, 

among other things, their size and risk. 

The Secretary is exercising this 

discretion to exclude from the scope of 

the Proposed Rules financial companies 

that do not meet one of the following 

three criteria: (1) Are designated 

pursuant to section 113 of the Act (12 

U.S.C. 5323) to be a nonbank financial 

company that could pose a threat to U.S. 

financial stability; (2) are designated 

pursuant to section 804 of the Act (12 

U.S.C. 5463) as a financial market utility 

that is, or is likely to become, 

systemically important; or (3) have total 

assets equal to or greater than $50 

billion. Since the Act’s enactment in 

2010 through 2013, eleven financial 

companies have been designated by the 

Council under categories (1) and (2), 

and the Secretary’s understanding is 

that each of those designated companies 

has revenues in excess of the Small 

Business Administration’s revised size 

standards for small entities. As a result, 

the Proposed Rules would only apply to 

large corporate groups (including a large 

corporate group’s affiliated financial 

companies, regardless of their size, if 

the affiliated financial company is a 

party to an open QFC or guarantees, 

supports or is linked to an open QFC of 

an affiliate and is not an ‘‘exempt 

entity’’ under the Proposed Rules). 

The types of financial companies that 

would qualify as records entities under 

the Proposed Rules include: Bank 

holding companies, savings and loan 

holding companies, broker-dealers, 

derivatives clearing organizations, 

payment and settlement systems, and 

registered clearing agencies. The 

Secretary proposes that the 

recordkeeping requirements in the 

Proposed Rules apply to all affiliated 

financial companies in a large corporate 

group that meet the definition of records 

entity, regardless of their size, because 

a broad exemption for small entities 

could significantly impair the FDIC’s 

ability to enforce certain QFCs of 

affiliates of covered financial companies 

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

within the narrow time window 

afforded by section 210(c)(10) of the 

Act. 

6. Assessment of Potential Costs and 

Benefits 

a. Potential Costs 

Based on discussions with the PFRAs 

who are familiar with financial 

company operations and have 

experience supervising financial 

companies with QFC portfolios, the 

Secretary believes that the costs of 

implementing the Proposed Rules may 

be mitigated by the fact that records 

entities should be maintaining most of 

the QFC records required by the 

Proposed Rules as part of their ordinary 

course of business. However, the 

Secretary recognizes that the Proposed 

Rules’ standardized form and 

availability requirements may impose 

costs and burdens on records entities. In 

order to comply with the Proposed 

Rules, each of the approximately 140 

large corporate groups that the Secretary 

estimates would be subject to the 

recordkeeping requirements will need to 

have network infrastructure to maintain 

data in the required format. The 

Secretary expects that this will likely 

impose one-time initial costs on each 

large corporate group in connection 

with necessary updates to their 

recordkeeping systems, such as systems 

development or modifications. The 

initial costs to set up network 

infrastructure will depend on whether a 

large corporate group already holds and 

maintains QFC data in an organized 

electronic format, and if so, whether the 

data currently reside on different 

systems rather than on one centralized 

system. Large corporate groups may 

need to amend internal procedures, 

reprogram systems, reconfigure data 

tables, and implement compliance 

processes. Moreover, they may need to 

standardize the data and create tables to 

match the format required by the 

Proposed Rules. However, the Secretary 

believes that the large corporate groups 

that would be subject to the Proposed 

Rules are likely to rely on existing 

centralized systems for recording and 

reporting QFC activities to perform most 

of the recordkeeping and reporting 

requirements set forth herein. The entity 

within the corporate group responsible 

for this centralized system will likely 

operate and maintain a technology 

shared services model with the majority 

of technology applications, systems, and 

data shared by the affiliated financial 

companies within the large corporate 

group. Therefore, the Proposed Rules 

will likely impose the most significant 

costs on the entities responsible for the 

centralized systems within the large 

corporate group, and not on the 

affiliated financial companies. The 

affiliated financial companies will likely 

have much lower costs because they can 

utilize and rely upon the technology 

and network infrastructure operated and 

maintained by the entity responsible for 

the centralized system within the large 

corporate group. 

It is estimated that the initial 

recordkeeping burden for all records 

entities will be approximately 62,063 

hours with a total one-time initial cost 


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106This amount includes $3,500,000 in systems 

development/modification costs. Specifically, based 

in part on staff-level discussions with several of the 

PFRAs, it is expected that each of the 

approximately 140 large corporate groups will incur 

approximately $25,000 in systems development/

modification costs, including the purchase of 

computer software, with a total cost of 

approximately $3,500,000. These costs will likely 

be borne by the entity responsible for maintaining 

the centralized system within each large corporate 

group. Additionally, the total estimated initial cost 

for large corporate group respondents to comply 

with the initial recordkeeping burden is $3,679,200, 

based on the following formula: Initial burden 

hours multiplied by the average hourly wage rate 

for recordkeepers (50,400 hours multiplied by $73/ 

hour). The total estimated initial cost for affiliated 

financial company respondents to comply with the 

initial recordkeeping burden is $851,399, based on 

the following formula: Initial burden hours 

multiplied by the average hourly wage rate for 

recordkeepers (11,663 hours multiplied by $73/

hour). 

107The $73 hourly wage rate is based on the 

average hourly wage rates for senior programmers, 

programmer analysts, senior system analysts, 

compliance managers, compliance clerks, directors 

of compliance, and compliance attorneys that will 

conduct the recordkeeping. 

108The $155 hourly wage rate is based on the 

average hourly wage rates for compliance managers, 

directors of compliance, and compliance attorneys 

that will conduct the reporting. 

109 12 U.S.C. 5365(i); 12 CFR part 252. 

110 12 U.S.C. 5365(d). 

111 Government Accountability Office, Financial 

Regulatory Reform: Financial Crisis Losses and 

Potential Impacts of the Dodd-Frank Act, GAO–13– 

180 at 15–16 (January 16, 2013). 

of approximately $8,030,599.106 The 

total estimated annual recordkeeping 

burden for all records entities will be 

approximately 28,463 hours with a total 

annual cost of approximately 

$2,077,799. The estimated average 

hourly wage rate for recordkeepers to 

comply with the initial and annual 

recordkeeping burden is approximately 

$73 per hour based in part on the U.S. 

Department of Labor, Bureau of Labor 

Statistics’ national occupational 

employment statistics and wage 

statistics, dated May 2012.107

With regard to reporting burdens 

under the Proposed Rules, a records 

entity may request in writing an 

extension of time with respect to 

compliance with the recordkeeping 

requirements or a specific exemption 

from the recordkeeping requirements. 

The total estimated annual reporting 

burden under the Proposed Rules will 

be approximately 3,500 hours with a 

total annual cost of approximately 

$542,500. The estimated average hourly 

rate for recordkeepers to comply with 

the annual reporting burden is 

approximately $155 per hour based on 

the U.S. Department of Labor, Bureau of 

Labor Statistics’ national occupational 

employment statistics and wage 

statistics, dated May 2012.108

The Secretary seeks comment on 

whether the cost estimates are 

reasonable. 

b. Potential Benefits 

As noted earlier, QFCs tend to 

increase the interconnectedness of the 

financial system and systemic risk, and 

the recent financial crisis demonstrated 

that the management of QFC positions 

can be an important element of a 

resolution strategy which, if not 

handled properly, may magnify market 

instability. The recordkeeping 

requirements of the Proposed Rules are 

designed to ensure that the FDIC, as 

receiver of a covered financial company, 

will have comprehensive information 

about the QFC portfolio of such 

financial company subject to orderly 

resolution, and enable the FDIC to carry 

out the rapid and orderly resolution of 

a financial company’s QFC portfolio in 

the event of insolvency, for example, by 

transferring QFCs to a bridge financial 

company within the narrow time 

window afforded by the Act. Given the 

short time frame for FDIC decisions 

regarding a QFC portfolio of significant 

size or complexity, the Proposed Rules 

would require the use of an updated and 

standardized format to allow the FDIC 

to process the large amount of QFC 

information quickly. In the absence of 

updated and standardized information, 

it is conceivable that, for example, the 

FDIC could leave QFCs in the 

receivership when transferring to a 

bridge financial company or other 

solvent financial institution would have 

been the preferred course of action had 

better information been available. 

Specifically, if the FDIC does not 

transfer the QFCs and does not 

repudiate such QFCs, counterparties 

may terminate the QFCs and assert 

claims for payment from the covered 

financial company and may have rights 

to liquidate the collateral pledged by the 

covered financial company. Because a 

large, interconnected financial company 

can often hold very large positions in 

QFCs involving numerous 

counterparties, the disorderly 

unwinding of QFCs, including the rapid 

liquidation of collateral, could cause 

severe negative consequences for U.S. 

financial stability. The FDIC as receiver 

may also wish to make sure that 

affiliates of the covered financial 

company continue to perform their QFC 

obligations in order to preserve the 

critical operations of the covered 

financial company and its affiliates. In 

such cases, the FDIC may need to 

arrange for additional liquidity, support 

or collateral to the affiliates to enable 

them to meet collateral obligations and 

generally perform their QFC obligations. 

While there could be significant 

benefits from the Proposed Rules, such 

benefits are difficult to quantify, as the 

Proposed Rules are only one component 

of the orderly liquidation authority and 

the benefits of the Proposed Rules 

would only be realized upon such 

authority being exercised. In addition, 

implementation of the Dodd-Frank Act 

will: (1) Subject large, interconnected 

financial companies to stronger 

supervision, and as a result, reduce the 

likelihood of their failure; and (2) blunt 

the impact of any such failure on U.S. 

financial stability and the economy. For 

example, bank holding companies with 

total consolidated assets of $50 billion 

or more and nonbank financial 

companies supervised by the Board are 

subject to supervisory and company-run 

stress tests to help the Board and the 

company measure the sufficiency of 

capital available to support the 

company’s operations throughout 

periods of stress.109 These financial 

companies also are or will be subject to 

more stringent prudential standards, 

including risk-based capital and 

liquidity requirements, which will make 

their failure less likely. However, if such 

a financial company does fail, the 

implementation of the Dodd-Frank Act 

is also intended to ensure that its failure 

and resolution under the Bankruptcy 

Code may occur without adverse effects 

on U.S. financial stability. For example, 

each of these large bank holding 

companies and nonbank financial 

companies supervised by the Board will 

have in place resolution plans/‘‘living 

wills’’ to facilitate their rapid and 

orderly resolution under the Bankruptcy 

Code in the event of material financial 

distress or failure.110 The Title II orderly 

liquidation authority will only be used 

to resolve a failing financial company if 

its resolution under the Bankruptcy 

Code would have serious adverse effects 

on U.S. financial stability. In addition, 

there are substantial procedural 

safeguards to prevent the unwarranted 

use of the Title II orderly liquidation 

authority. 

Nevertheless, one way to gauge the 

potential benefits of the Proposed Rules 

is to examine the effect of the recent 

financial crisis on the real economy and 

how the Title II orderly liquidation 

authority as a whole will help reduce 

the probability or severity of a future 

financial crisis. For example, in a 2013 

Government Accountability Office 

(GAO) report, GAO stated that there is 

some research that suggests that U.S. 

output losses associated with the 2007– 

2009 financial crisis could range from 

several trillion dollars to over $10 

trillion.111 GAO also surveyed financial 


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112 Id. at 33–34. GAO added that the experts it 

surveyed had differing views on these provisions 

but that many expect some or all of the provisions 

to improve the financial system’s resilience to 

shocks. 

113 Id. at 33. 

market regulators, academics, and 

industry and public interest groups who 

identified, inter alia, the more stringent 

prudential standards discussed above 

and the orderly liquidation authority as 

not only enhancing financial stability, at 

least in principle, but also helping to 

reduce the probability or severity of a 

future crisis.112

However, as discussed above, even if 

the benefits of preventing future 

financial crises are significant, it is 

difficult to quantify what portion of 

such benefits would be attributable to 

any single provision of the Dodd-Frank 

Act, let alone those benefits directly 

attributable to the Proposed Rules. For 

example, GAO also noted that such 

benefits are not assured and will depend 

on, among other things, how regulators 

implement the provisions.113 In 

addition, the benefits would not be 

attributable solely to the Proposed 

Rules, as a number of other reforms are 

also intended to reduce the probability 

and severity of future financial crises. 

Finally, as discussed above, the benefits 

associated with the Proposed Rules 

would only be realized if the Title II 

orderly liquidation authority is 

exercised and, even if utilized, the 

Proposed Rules are only one component 

of the orderly liquidation authority and 

the resulting benefits. 

7. Retrospective Analysis 

Executive Order 13563 also directs 

the Secretary to develop a plan, 

consistent with law and resources and 

regulatory priorities, to conduct a 

periodic retrospective analysis of 

significant regulations to determine 

whether such regulations should be 

modified, streamlined, expanded, or 

repealed so as to make the regulations 

more effective and less burdensome. 

The Secretary expects to conduct a 

retrospective analysis not later than 

seven years after the effective date of the 

rule. This review will consider whether 

the recordkeeping requirements are 

necessary or appropriate to assist the 

FDIC as receiver in being able to 

exercise its rights under the Act and 

fulfill its obligations under section 

210(c)(8), (9), or (10) of the Dodd-Frank 

Act, and may result in proposed 

amendments to the rule. For example, 

the Secretary will review whether the 

data set forth in Tables A–1 through A– 

4 to the Appendix are necessary or 

appropriate to assist the FDIC as 

receiver, and/or whether maintaining 

additional, less, or different data is 

necessary or appropriate. The Secretary 

seeks comment on the following 

question: Is it appropriate for the 

Secretary to conduct the ‘‘lookback 

review’’ not later than seven years after 

the effective date of the rule, or would 

a different period be preferable? 

Text of the Proposed Rules 

List of Subjects in 31 CFR Part 148 

Reporting and recordkeeping 

requirements. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Department of the 

Treasury proposes to add part 148 to 31 

CFR chapter I to read as follows: 

Part 148—Qualified Financial 

Contracts Recordkeeping Related to 

the FDIC Orderly Liquidation Authority 

Sec. 

148.1 Scope, purpose, effective date, and 

compliance dates. 

148.2 Definitions. 

148.3 Form, availability and maintenance of 

records. 

148.4 Content of records. 

Appendix to Part 148—File Structure for 

Qualified Financial Contract Records 

Authority: 31 U.S.C. 321(b) and 12 U.S.C 

5390(c)(8)(H). 

PART 148—QUALIFIED FINANCIAL 

CONTRACTS RECORDKEEPING 

RELATED TO THE FDIC ORDERLY 

LIQUIDATION AUTHORITY 

§ 148.1 Scope, purpose, effective date, and 

compliance dates. 

(a) Scope. This part applies to each 

financial company that qualifies under 

the definition of ‘‘records entity’’ set 

forth in § 148.2 of this part. 

(b) Purpose. This part establishes 

recordkeeping requirements with 

respect to qualified financial contracts 

for a records entity in order to assist the 

Federal Deposit Insurance Corporation 

(‘‘FDIC’’) as receiver for a covered 

financial company (as defined in 12 

U.S.C. 5381(a)(8)) in being able to 

exercise its rights and fulfill its 

obligations under 12 U.S.C. 5390(c)(8), 

(9), or (10). 

(c) Effective date. This part shall 

become effective 60 days after 

publication of the final rule in the 

Federal Register. 

(d) Compliance dates—(1) Initial 

compliance dates. A records entity must 

comply with § 148.3(a)(3) on the 

effective date and with all other 

requirements of this part within 270 

days from first becoming subject to this 

part. In the case of a financial company 

that becomes a records entity subject to 

this part after the effective date, such 

records entity must comply with 

§ 148.3(a)(3) within 60 days of becoming 

a records entity and with all other 

requirements of this part within 270 

days from first becoming subject to this 

part. 

(2) Subsequent compliance date. If a 

financial company ceases to be a records 

entity subject to this part after the initial 

compliance dates, and remains so for at 

least one year (calculated on a rolling 

12-month basis), it is no longer required 

to comply with this part. However, if at 

any time after the one-year period, such 

financial company again becomes a 

records entity subject to this part, it 

must comply with all of the 

requirements of this part no later than 

90 days after becoming subject to this 

part. 

§ 148.2 Definitions. 

For purposes of this part: 

Affiliate means any entity that 

controls, is controlled by, or is under 

common control with a financial 

company or counterparty. 

Control. An ‘‘entity controls another 

entity’’ if it: 

(1) Directly or indirectly or acting 

through one or more other persons 

owns, controls, or has the power to vote 

25 percent or more of any class of voting 

securities of another entity; 

(2) Controls in any manner the 

election of a majority of the directors or 

trustees of another entity; or 

(3) Must consolidate another entity for 

financial or regulatory reporting 

purposes. 

Corporate group means an entity and 

all affiliates of that entity. 

Counterparty means any natural 

person or entity (or separate non-U.S. 

branch of any entity) that is a party to 

a QFC with a records entity, including 

any affiliate or any non-U.S. branch of 

such records entity if such affiliate or 

branch is a party to a QFC with such 

records entity, or is a party to a QFC that 

is guaranteed or supported by a records 

entity. 

Exempt entity means: 

(1) An insured depository institution 

as defined in 12 U.S.C. 1813(c)(2); 

(2) A subsidiary of an insured 

depository institution that is not a 

functionally regulated subsidiary as 

defined in 12 U.S.C. 1844(c)(5), a 

security-based swap dealer as defined in 

15 U.S.C. 78c(a)(71) or a major securitybased swap participant as defined in 15 

U.S.C. 78c(a)(67); or 

(3) A financial company that is not a 

party to a QFC and controls only exempt 

entities as defined in paragraphs (1) and 

(2) of this definition. 


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Financial company has the meaning 

set forth in 12 U.S.C. 5381(a)(11). 

Guarantees, supports and guaranteed 

or supported mean to: 

(1) Guarantee, indemnify, or 

undertake to make any loan or advance; 

(2) Undertake to make capital 

contributions; or 

(3) Be contractually obligated to 

provide any other financial assistance. 

Linked. A QFC is ‘‘linked’’ to a 

financial company if it contains a 

specified financial condition clause that 

specifies such financial company. A 

‘‘specified financial condition clause’’ 

means any provision of any QFC 

(whether expressly stated in the QFC or 

incorporated by reference in any other 

contract, agreement or document) that 

permits a contract counterparty to 

terminate, accelerate, liquidate or 

exercise any other remedy under any 

QFC or other contract to which an 

affiliate of the financial company is a 

party or to obtain possession or exercise 

control over any property of such 

affiliate or affect any contractual rights 

of such affiliate directly or indirectly 

based upon or by reason of: 

(1) A change in the financial 

condition or the insolvency of a 

financial company; 

(2) The appointment of the FDIC as 

receiver for the financial company or 

any actions incidental thereto, 

including, without limitation, the filing 

of a petition seeking judicial action with 

respect to the appointment of the FDIC 

as receiver for the financial company or 

the issuance of recommendations or 

determination of systemic risk; 

(3) The exercise of rights or powers by 

the FDIC as receiver for the financial 

company, including, without limitation, 

the appointment of the Securities 

Investor Protection Corporation (SIPC) 

as trustee in the case of a financial 

company that is a covered broker or 

dealer and the exercise by SIPC of its 

rights and powers as trustee; 

(4) The transfer of assets or liabilities 

to a bridge financial company or other 

qualified transferee; 

(5) Any actions taken by the FDIC as 

receiver for the financial company to 

effectuate the liquidation of the 

financial company; or 

(6) Any actions taken by or on behalf 

of the bridge financial company to 

operate and terminate the bridge 

financial company, including the 

dissolution, conversion, merger or 

termination of the bridge financial 

company or actions incidental or related 

thereto. Without limiting the foregoing, 

a specified financial condition clause 

includes a ‘‘walkaway clause’’ as 

defined in 12 U.S.C. 5390(c)(8)(F)(iii) or 

any regulations promulgated 

thereunder. 

Position means the rights and 

obligations of a party to an individual 

transaction under a QFC. 

Primary financial regulatory agency 

means, with respect to each financial 

company, each primary financial 

regulatory agency as specified for such 

financial company in subparagraphs 

(A), (B), (C), and (E) of 12 U.S.C. 

5301(12). 

Qualified financial contract or ‘‘QFC’’ 

means any qualified financial contract 

defined in 12 U.S.C. 5390(c)(8)(D), 

including without limitation, any 

‘‘swap’’ defined in section 1a(47) of the 

Commodities Exchange Act (7 U.S.C. 

1a(47)) and in any rules or regulations 

issued by the Commodity Futures 

Trading Commission (CFTC) pursuant 

to such section; any ‘‘security-based 

swap’’ defined in section 3(a) of the 

Securities Exchange Act of 1934 (15 

U.S.C. 78c(a)) and in any rules or 

regulations issued by the Securities and 

Exchange Commission (SEC) pursuant 

to such section; and any securities 

contract, commodity contract, forward 

contract, repurchase agreement, swap 

agreement, and any similar agreement 

that the FDIC determines by regulation, 

resolution, or order to be a qualified 

financial contract as provided in 12 

U.S.C. 5390(c)(8)(D). 

Records entity—(1) Records entity 

means a financial company that: 

(i) Is not an exempt entity; 

(ii) Is a party to an open QFC or 

guarantees, supports or is linked to an 

open QFC; and 

(iii) (A) Has been determined 

pursuant to 12 U.S.C. 5323 to be an 

entity that could pose a threat to the 

financial stability of the United States; 

(B) Has been designated pursuant to 

12 U.S.C. 5463 as a financial market 

utility that is, or is likely to become, 

systemically important; 

(C) Has total assets equal to or greater 

than $50 billion; or 

(D) Is: 

(1) A party to an open QFC or 

guarantees, supports or is linked to an 

open QFC of an affiliate; and 

(2) A member of a corporate group in 

which at least one financial company 

meets the criteria under paragraphs 

(1)(iii)(A), (B), or (C) of this definition. 

(2) For the purpose of this definition, 

‘‘total assets’’ means the total assets 

reported in the most recent year-end 

audited consolidated statement of 

financial condition of the applicable 

financial company filed with its primary 

financial regulatory agency, or, for 

financial companies not required to file 

such statements, the total assets shown 

on the consolidated balance sheet of the 

financial company for the most recent 

fiscal year end. 

SDR means any swap data repository 

or security-based swap data repository 

registered with the CFTC or the SEC and 

any other similar data repository 

established to enable reporting of QFC 

data. 

Secretary means the Secretary of the 

Treasury or the Secretary’s designee. 

Subsidiary means any company that 

is controlled by another company. 

§ 148.3 Form, availability and maintenance 

of records. 

(a) Form and availability—(1) 

Electronic records. A records entity is 

required to maintain all records 

described in section 148.4 in electronic 

form and be able to generate data in the 

format set forth in Tables A–1 through 

A–4 of the appendix to this part. Such 

records shall be capable of being 

transmitted electronically to the records 

entity’s primary financial regulatory 

agencies and the FDIC. All affiliated 

records entities in a corporate group 

must be able to generate data in the 

format set forth in Tables A–1 through 

A–4 of the appendix to this part in the 

same data format and use the same 

unique counterparty identifiers to 

enable the aggregation of data both: 

(i) For all affiliated records entities in 

the corporate group; and 

(ii) By counterparty, for all records 

entities in a corporate group. 

(2) Position records. A records entity 

must maintain records for all QFCs to 

which it is a party, including interaffiliate QFCs to which it is a party. A 

records entity must also maintain 

records for all QFCs that are guaranteed 

or supported by such records entity. 

(3) Point of contact. A records entity 

must provide to each of its primary 

financial regulatory agencies and the 

FDIC a point of contact at the records 

entity who is responsible for 

recordkeeping under this part, by 

written notice to its primary financial 

regulatory agencies and the FDIC on the 

effective date of this part and, thereafter, 

within 30 days of any change in the 

point-of-contact information. 

(4) Access to records. A records entity 

that is regulated by a primary financial 

regulatory agency shall be capable of 

providing to such primary financial 

regulatory agency, within 24 hours of 

request, the records specified in § 148.4. 

(b) Maintenance and updating—(1) 

Daily updating. A records entity shall 

maintain the capacity to generate the 

data in the format set forth in Tables A– 

1 through A–4 of the appendix to this 

part, based on the previous end-of-day 

records and values. Data that are more 

current than previous end-of-day 


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records and values are deemed to satisfy 

this requirement. 

(2) Records maintenance. The records 

required under this part may be 

maintained on behalf of the records 

entity by any affiliate of such records 

entity, or any third-party service 

provider that maintains the records in 

the ordinary course of business. 

(3) Record retention. Unless otherwise 

indicated in this part, the requirement 

on a records entity to maintain records 

applies to records and values with 

respect to open QFC positions and any 

other QFC positions needed to generate 

reports based on end-of-day records and 

values for at least the five business days 

prior to the date of a request. 

(c) Exemptions—(1) General 

exemptions. Upon receipt of a written 

recommendation from the FDIC, 

prepared in consultation with the 

primary financial regulatory agencies for 

the applicable records entities that takes 

into consideration each of the factors 

referenced in 12 U.S.C. 

5390(c)(8)(H)(iv), the Secretary may 

grant conditional or unconditional 

exemptions from compliance with one 

or more of the requirements of this part 

by issuing an exemption to one or more 

types of records entities. In determining 

whether to grant a general exemption, 

the Secretary will consider any factors 

deemed necessary or appropriate by the 

Secretary, including whether 

application of one or more requirements 

of this part is not necessary to achieve 

the purpose of this part. 

(2) Specific exemptions. Upon written 

request by a records entity, the FDIC 

may recommend, after taking into 

consideration each of the factors 

referenced in 12 U.S.C. 

5390(c)(8)(H)(iv), that the Secretary 

grant a conditional or unconditional 

specific exemption from compliance 

with one or more of the requirements of 

this part. Upon receipt of a written 

recommendation from the FDIC, 

prepared in consultation with the 

primary financial regulatory agencies for 

the records entity, the Secretary may 

grant a conditional or unconditional 

specific exemption from compliance 

with one or more requirements of this 

part by issuing an exemption to such 

records entity. In determining whether 

to grant a specific exemption, the 

Secretary will consider any factors 

deemed necessary or appropriate, 

including whether application of one or 

more requirements of this part is not 

necessary to achieve the purpose of this 

part. 

(3) Extensions of time. The Secretary, 

in consultation with the FDIC, may 

grant one or more extensions of time for 

compliance with this part. A records 

entity may request an extension of time 

by submitting a written request to the 

Department of the Treasury, at least 30 

days prior to the deadline for its 

compliance with the requirements of 

this part. The written request for an 

extension must contain: 

(i) A statement of the reasons why the 

records entity cannot comply by the 

deadline for compliance; and 

(ii) A plan for achieving compliance 

during the requested extension period. 

§ 148.4 Content of records. 

(a) All records entities. Subject to 

§ 148.3(c), a records entity must 

maintain all records required under this 

part, including: 

(1) The position-level data listed in 

Table A–1 in the appendix of this part. 

(2) The counterparty collateral data 

listed in Table A–2 in the appendix of 

this part. 

(3) The legal agreements information 

listed in Table A–3 in the appendix of 

this part. 

(4) The collateral detail data listed in 

Table A–4 in the appendix of this part. 

(5) Any written data or information 

that is not listed in Tables A–1 through 

A–4 in the appendix to this part that the 

records entity is required to provide to 

an SDR, the CFTC, the SEC or any nonU.S. regulator with respect to any QFC, 

for any period that such data or 

information is required to be maintained 

by its primary financial regulatory 

agency. 

(6)(i) For each counterparty that is not 

an affiliate of the records entity, a list 

specifying all other counterparties that 

are members of the same corporate 

group as the counterparty and that are 

parties to open QFCs with the records 

entity or guarantee, support or are 

linked to such QFCs, as well as an 

organizational chart that explains the 

affiliate relationships of such 

counterparties. Such list shall include 

the unique counterparty identifier for 

each counterparty in the counterparty’s 

corporate group. The unique 

counterparty identifier shall be based on 

the global legal entity identifier issued 

by: 

(A) Utilities endorsed by the 

Regulatory Oversight Committee, whose 

charter was set forth by the Finance 

Ministers and Central Bank Governors 

of the Group of Twenty and the 

Financial Stability Board; or 

(B) Utilities endorsed or otherwise 

governed by the Global LEI Foundation, 

but must include additional identifiers 

in the event one counterparty transacts 

with the records entity as separate nonU.S. branches or divisions, as 

appropriate to enable the FDIC to 

aggregate or disaggregate the data for 

each counterparty and for the 

counterparty’s corporate group as 

necessary to determine the effects of 

potential QFC transfers or terminations, 

including the effects of any ring-fencing 

with regard to any such non-U.S. branch 

or division. 

(ii) All records entities in a corporate 

group must use the same unique 

counterparty identifier for each 

counterparty. 

(7) A list of all affiliates of the records 

entity that are parties to open QFCs or 

guarantee, support or are linked to open 

QFCs, as well as an organizational chart 

that explains the affiliate relationships 

for such records entities. Such list shall 

specify which affiliates are 

counterparties to inter-affiliate QFCs 

with such records entity for which the 

records entity is required to maintain 

records pursuant to this part. Such list 

shall include the unique counterparty 

identifier for each affiliated 

counterparty in the records entity’s 

corporate group as set forth in paragraph 

(a)(6) of this section. 

(8) Full-text searchable copies of all 

agreements that govern QFC 

transactions between the records entity 

and each counterparty, including 

without limitation, master agreements 

and annexes, supplements, or other 

modifications with respect to the 

agreements. 

(9) Copies of the active or ‘‘open’’ 

confirmations, if the position has been 

confirmed or the trade acknowledgment 

if the position has not been confirmed. 

(10) Full-text searchable copies of all 

credit support documents including, but 

not limited to, any credit support 

annexes, any guarantees, keep-well 

agreements, or net worth maintenance 

agreements that are relevant to one or 

more QFCs. 

(11) Full-text searchable copies of all 

assignment or novation documents, if 

applicable, including documents which 

confirm that all required consents, 

approvals, or other conditions precedent 

for such assignment or novation have 

been obtained or satisfied. 

(12) A list of vendors directly 

supporting the QFC-related activities of 

the records entity and the vendors’ 

contact information. 

(13) Risk metrics used to monitor the 

QFC portfolio, including without 

limitation, credit risk, market risk and 

liquidity risk measures. 

(14) Risk manager contact information 

for each portfolio that includes QFCs. 

Appendix to Part 148—File Structure 

for Qualified Financial Contract 

Records 

In maintaining the records required under 

this part, a records entity may leave an entry 


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blank or insert N/A for the data fields that do not apply to a given QFC transaction or 

agreement. 

TABLE A–1—POSITION-LEVEL DATA

[For a records entity] 

Field Example Data application 

Unique position identifier .................................... 20058953 ......................................................... Information needed to readily track and distinguish positions. 

Unique counterparty identifier 1 of records entity 999999999 ....................................................... Information needed to review position-level 

data by records entity. 

Unique counterparty identifier of counterparty to 

records entity (non-reporting party).

888888888 ....................................................... Information needed to identify and, if necessary, communicate with counterparty. 

Legal name of counterparty (non-reporting 

party).

John Doe & Co. ............................................... Information needed to identify and, if necessary, communicate with counterparty. 

Industry code (GIC or SIC code) of 

counterparty to records entity (non-reporting 

party).

2096 ................................................................. Information needed to analyze knock-on effects by industry. 

Internal booking location identifier (for headquarters or branch where the position is 

booked).

XY12Z .............................................................. Information needed to determine the headquarters or branch where the position is 

booked, including the system on which the 

trade is booked, as well as the system on 

which the trade is settled. 

Unique booking unit or desk identifier ................ xxxxxx .............................................................. Additional information to help determine purpose of position. 

Unique booking unit or desk description ............ North American Trading Desk ......................... Additional information to help determine purpose of position. 

Contact information of person responsible for 

position, including name, phone number and 

e-mail address.

John Smith x-xxx-xxx-xxxx jsmith@domain.com.Information needed to maintain a point of contact with the records entity. 

Unique master agreement or governing documentation identifier.xxxxxx .............................................................. Information needed to identify master agreement or governing documentation. 

Form of master agreement or governing documentation.ISDA 1992 ........................................................ Information needed to determine whether a 

standard form agreement governs the 

transaction. 

Unique master netting agreement identifier ....... xxxxxxxxx ......................................................... Information needed to identify, and determine 

effects of, any cross-product and other 

master netting agreements (sometimes 

called ‘‘master master agreements’’). 

Name of master netting agreement ................... [Agreement name] ........................................... Information needed to identify, and determine 

effects of, any cross-product and other 

master netting agreements. 

Position standardized asset class (or QFC 

asset class of the reference asset or interest 

rate).

Credit; equity; foreign exchange; interest rate 

(including cross-currency); other commodity; securities repurchase agreement; 

securities lending; loan repurchase agreement.

Information needed to determine the extent to 

which the entity is involved in any particular 

QFC market. 

Position standardized contract type (or QFC 

contract type of the reference asset or interest rate) 2.

Mortgage loan repurchase agreement ............ Information needed to determine the extent to 

which the entity is involved in any particular 

QFC market. 

Purpose of the position (if the purpose consists 

of hedging strategies, include the general 

category of the item(s) hedged).

Trading or hedging (e.g., hedging mortgage 

servicing or hedging a mortgage pipeline).

Information needed to determine the role of 

the QFC in the records entity and the corporate group’s business strategy. For example, if the purpose of a QFC is to hedge 

a non-QFC arrangement, the FDIC has the 

potential for a broken-hedge because the 

non-QFC arrangement is not subject to the 

‘‘all or none’’ QFC transfer and repudiation 

rule. 

Issue date ........................................................... 6/31/2010 ......................................................... Information needed to determine the date the 

entity entered into the agreement. 

Termination date (date the position terminates 

or is expected to terminate, expire, mature, 

or when final performance is required).

3/31/2014 Overnight Open .............................. Information needed to determine when the 

entity’s rights and obligations regarding the 

position are expected to end. 

Next call, put, or cancellation date ..................... 9/30/2014 ......................................................... Information needed to determine when a call, 

put, or cancellation may occur with respect 

to a position. 

Next payment date ............................................. 9/30/2014 ......................................................... Information needed to anticipate potential upcoming obligations. 

Local currency of position (e.g. USD, GBP, 

EUR, JPY).

USD .................................................................. Information needed to determine currency. 

Current market value of the position in local 

currency (as of the date of the file).

995,000 ............................................................ Information needed to determine the current 

size of the obligation/benefit in association 

with the QFC. 


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1000 Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 

TABLE A–1—POSITION-LEVEL DATA—Continued 

[For a records entity] 

Field Example Data application 

Current market value of the position in USD 

equivalent (as of the date of the file).

995,000 ............................................................ Information needed to determine the current 

size of the obligation/benefit in association 

with the QFC. 

Notional or principal amount of the position in 

local currency (as applicable).

1,000,000 ......................................................... Information needed to help evaluate the position. 

Notional or principal amount of the position in 

USD equivalent (as applicable).

1,000,000 ......................................................... Information needed to help evaluate the position. 

Documentation status of the position ................. Affirmed, confirmed, or neither affirmed nor 

confirmed.

Information needed to determine reliability of 

the position and its legal status. 

Credit support documents (including any security agreement or guarantee) (If more than 

one, delimit each with a comma.).

Credit Support Annex ...................................... Information needed to identify and review 

credit support related to the position, including any applicable covenants. 

Name of position or agreement guarantor, if applicable.Holdco .............................................................. Information needed to identify entity with potential credit exposure. 

Unique counterparty identifier of guarantor ........ 888888888 ....................................................... Information needed to identify the guarantor’s 

exposure to swaps of affiliates. 

Reference number of guarantee agreement ...... xxxxxx .............................................................. Information needed to be able to connect data 

on Table A–1 with Table A–2. 

Unique counterparty identifier of counterparty to 

related inter-affiliate position(s) with other 

records entity in the corporate group (If more 

than one, delimit each with a comma.).

777777777 ....................................................... Information needed to identify counterparty to 

inter-affiliate position that is back-to-back 

with, or otherwise related to, this position. 

Name of counterparty to related inter-affiliate 

position(s) (If more than one, delimit each 

with a comma.).

Jane Doe & Co. ............................................... Information needed to identify counterparty to 

inter-affiliate position that is back-to-back 

with, or otherwise related to, this position. 

Related inter-affiliate position ID(s) .................... Unique position ID(s) for related inter-affiliate 

position (If more than one, delimit each with 

a comma.).

Information needed to identify all related positions, i.e., each position with an affiliated 

records entity that is back-to-back with, or 

otherwise relates to, this position. 

Reference number for any related loan (If more 

than one, delimit each with a comma.).

Unique reference number(s) for loans related 

to this position.

Information necessary to identify any loan(s) 

within the corporate group that are related 

to this position. 

Legal name of records entity or any affiliate of 

the records entity that is lender of related 

loan (If more than one, delimit each with a 

comma.).

[Insert legal name of each records entity that 

is lender of related loan].

Information needed to identify lender. 

Classification under GAAP or IFRS ................... Level 1, Level 2, Level 3 ................................. Information with respect to carrying value for 

the position. 

1The unique counterparty identifier shall be based on the global legal entity identifier, but must include additional identifiers in the event one 

counterparty transacts with the records entity as separate non-U.S. branches or divisions, as appropriate to enable the FDIC to aggregate or 

disaggregate the data for each counterparty and for the counterparty’s corporate group as necessary to determine the effects of potential QFC 

transfers or terminations, including the effects of any ring-fencing with regard to any such non-U.S. branch or division. All records entities in an 

affiliated group must use the same unique counterparty identifier for a specific counterparty. 2Position ‘‘types’’ shall be used consistently for all records entities within the corporate group. If the OFR adopts or authorizes a unique product identifier for a given type of position/transaction, then within 180 days after such action, the records entity shall substitute such identifier for 

‘‘Type of Position,’’ and shall utilize such identifier for purposes of this part for all records entities within its corporate group. 

TABLE A–2—COUNTERPARTY COLLATERAL DATA 1

[For positions between a records entity and each counterparty 2] 

Field Example Data application 

Unique counterparty identifier 3 of records entity 999999999 ....................................................... Information needed to review counterpartlevel data by records entity. 

Unique counterparty identifier of counterparty to 

records entity (non-reporting party).

888888888 ....................................................... Information needed to aggregate positions by 

counterparty. 

Legal name of counterparty ............................... John Doe & Co. ............................................... Information needed to aggregate positions by 

counterparty. 

Industry code (GIC or SIC code) of 

counterparty.

2096 ................................................................. Information needed to analyze knock-on effects by industry 

Contact information for counterparty, including 

name, phone number, and email address.

xxxxxxxx ........................................................... Information needed to maintain a point of contact with the counterparty for the portfolio. 

Master Netting Agreement for counterparty’s 

corporate group (Y/N).

Yes ................................................................... Information needed to determine how positions of a records entity can be transferred. 

Name of each master agreement, master netting agreement or governing documentation 

related to netting among affiliates in a 

counterparty’s corporate group 4 (if more than 

one, list each).

ISDA Master Agreement .................................. Information needed to identify the agreement. 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 1001 

TABLE A–2—COUNTERPARTY COLLATERAL DATA 1—Continued 

[For positions between a records entity and each counterparty 2] 

Field Example Data application 

Unique master agreement, master netting 

agreement or governing documentation identifier for agreements related to netting among 

affiliates in a counterparty’s corporate group 

(if more than one, list each).

xxxxxx .............................................................. Internal reference number of the master 

agreement or governing documentation. 

Current market value in USD equivalent of all 

positions, as aggregated and, to the extent 

permitted under each applicable agreement, 

netted.

(1,000,000) ....................................................... Information needed to help evaluate the positions. 

Current market value in USD equivalent of all 

collateral, if any, posted against all positions 

of the records entity with the counterparty by 

collateral provider.

950,000 ............................................................ Information needed to determine the extent to 

which collateral has been provided. 

Current market value in USD equivalent of all 

collateral posted against all positions of the 

records entity with the counterparty that is 

subject to re-hypothecation by the 

counterparty, if any, by collateral provider.

950,000 ............................................................ Information needed to determine exposure of 

a records entity or other collateral provider(s) to the creditworthiness of a 

counterparty 

Current market value in USD equivalent of all 

collateral, if any, posted against all 

counterparty positions with the records entity 

by collateral provider.

50,000 .............................................................. Information needed to determine the extent to 

which collateral has been provided on behalf of a counterparty. 

Current market value in USD equivalent of all 

collateral posted against all positions of the 

counterparty with the records entity that is 

subject to re-hypothecation by the records 

entity, if any, by collateral provider.

50,000 .............................................................. Information needed to determine uncollateralized liability of records entity to a 

counterparty or other collateral provider(s) 

for re-hypothecated collateral 

With respect to all collateral posted against the 

record entity’s positions, collateral excess or 

deficiency (including pending margin calls in 

this calculation) in USD equivalent with respect to all of the records entity’s positions, 

as determined under each applicable agreement, including thresholds and haircuts 

where applicable.5

(25,000) ............................................................ Information needed to determine the extent to 

which the records entity has satisfied collateral requirements under each applicable 

agreement. 

With respect to all collateral posted against 

each counterparty’s positions collateral excess or deficiency (including pending margin 

calls in this calculation) in USD equivalent 

with respect to all of such counterparty’s positions with the records entity, as determined 

under each applicable agreement, including 

thresholds and haircuts where applicable.

150,000 ............................................................ Information needed to determine the extent to 

which the counterparty has satisfied collateral requirements under each applicable 

agreement. 

With respect to all collateral posted against the 

records entity’s positions, collateral excess or 

deficiency (including pending margin calls in 

this calculation) in USD equivalent with respect to all the positions, based on the aggregate market value of the positions of a 

counterparty (after netting to the extent permitted under each applicable agreement) and 

the aggregate market value of all collateral 

posted against the records entity’s positions, 

in whole or in part.

(50,000) ............................................................ Information needed to determine the extent to 

which the record entity’s obligations regarding the positions may be unsecured. 

Collateral safekeeping agent contact information, including name, email address, phone 

number.

xxxxxxxx ........................................................... Information needed to maintain a point of contact with the collateral safekeeping agent. 

For each records entity, current market value of 

all inter-affiliate positions with this records entity (multiple entries depending on number of 

entities and complexity of inter-company 

transactions).

Records entity 1, Records entity 2, 

Counterparty xxx, aggregate current market 

value.

Information needed to assess both cross border positions as well as transfer links. 

Risk or relationship manager contact information, including name, phone number and 

email address.

xxxxxxxx ........................................................... Information needed to maintain a point of contact for the counterparty relationship. 

Master Netting Agreement for records entity’s 

corporate group (Y/N).

Yes ................................................................... Information needed to determine how positions are netted among records entities. 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS
1002 Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 

TABLE A–2—COUNTERPARTY COLLATERAL DATA 1—Continued 

[For positions between a records entity and each counterparty 2] 

Field Example Data application 

Name of each master agreement, master netting agreement or governing documentation 

related to netting among records entities (if 

more than one, list each).

ISDA Master Agreement .................................. Information needed to identify the agreement. 

Unique master agreement, master netting 

agreement or governing documentation identifier for agreements related to netting among 

records entities (if more than one, list each).

xxxxxx .............................................................. Internal reference number of the master 

agreement or governing documentation. 

Legal name of master agreement guarantor, if 

any.

xxxxxx .............................................................. Information needed to determine credit exposure of the guarantor. 

Unique counterparty identifier of guarantor ........ xxxxxx .............................................................. Information needed to determine credit exposure of the guarantor. 

1All amounts shall be provided in U.S. Dollar equivalent. For collateral denominated in non-U.S. currency, the value in such non-U.S. currency 

shall also be provided. 2Table A–2 shall be provided at the first level of netting under a master agreement. If a master agreement includes Annexes or other provisions that are subject to intermediate netting, each netting set shall be reported separately. The table shall have a separate entry for each netting agreement that is applicable to one or more counterparties in the counterparty corporate group. The FDIC intends to use the data both to 

determine net positions between each counterparty and a records entity and to determine the records entity’s aggregated position with respect to 

all affiliates in a counterparty’s corporate group based on the enforceability of the netting agreements. 3The unique counterparty identifier shall be based on the global legal entity identifier, but must include additional identifiers in the event one 

counterparty transacts with the records entity as separate non-U.S. branches or divisions, as appropriate to enable the FDIC to aggregate or 

disaggregate the data for each counterparty and for the counterparty’s corporate group as necessary to determine the effects of potential QFC 

transfers or terminations, including the effects of any ring-fencing with regard to any such non-U.S. branch or division. All records entities in an 

affiliated group must use the same unique counterparty identifier for a specific counterparty. 4 If one or more positions cannot be netted against others, they shall be maintained as separate entries and each such entry shall identify the 

applicable netting agreement, if any, to which it relates (if none, specify ‘‘none’’). 5 If all positions are not secured by the same collateral, then separate entries shall be maintained for each position or set of positions secured 

by the same collateral and each such entry shall identify the applicable credit support document, if any, to which it relates (if none, specify 

‘‘none’’). 

TABLE A–3—LEGAL AGREEMENTS

[For each QFC agreement or master agreement between a records entity and each counterparty] 

Field Example Data application 

Name of agreement ........................................... ISDA Master Agreement .................................. Information needed to identify the agreement. 

Reference Number ............................................. xxxxxx .............................................................. Internal reference number of the master 

agreement or governing documentation. 

Basic form of agreement .................................... [1992/2002] version ......................................... Information needed to identify the basic form 

of agreement. 

Agreement governing law .................................. [State/Country] ................................................. Information needed to determine the law governing contract disputes. 

Cross defaults (Y/N and description of type of 

cross default and identity of cross-default entity).

Y .......................................................................

Insolvency. 

[parent]. 

Information needed to determine exposure to 

affiliates or other entities. 

Transfer restrictions (Y/N and description of 

transfer restriction).

Y .......................................................................

Counterparty consent required. 

Information needed to determine QFC transfer 

limitations per agreement terms. 

Events of Default/Termination Events added to 

the basic form of agreement (Y/N and brief 

description or excerpts of each).

Y .......................................................................

Counterparty stock price declines by more 

than $xx.

Information needed to determine whether 

there are events of default or termination 

events that have been added to those provided in the basic form of agreement and 

the likelihood of occurrence of event of default. 

Events of Default/Termination Events deleted 

from the basic form of agreement (Y/N and 

excerpts of each).

Y .......................................................................

Credit event upon merger. 

Information needed to determine if there are 

any events of default or termination events 

of the basic form of agreement that have 

been removed. 

Guarantee agreement with respect to records 

entity obligations (Y/N).

Y ....................................................................... Information needed to determine if there is 

credit exposure because of a guaranty. 

Reference number of guarantee agreement ...... xxxxxxx ............................................................. Internal reference number to enable aggregation of exposures to a guarantor. 

Legal name of guarantor of records entity obligations, if any.xxxxxxx ............................................................. Information needed to identify the guarantor. 

Unique counterparty identifier of guarantor of 

records entity obligations.

xxxxxxx ............................................................. Information needed to identify the guarantor. 

Unique counterparty identifier of counterparty to 

records entity (non-reporting party).

888888888 ....................................................... Information needed to aggregate information 

by counterparty. 

Legal name of Counterparty .............................. John Doe & Co. ............................................... Information needed to aggregate information 

by counterparty. 

Industry code (GIC or SIC code) of 

counterparty.

2096 ................................................................. Information needed to analyze knock-on effects by industry. 


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Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 1003 

TABLE A–3—LEGAL AGREEMENTS—Continued 

[For each QFC agreement or master agreement between a records entity and each counterparty] 

Field Example Data application 

Contact information for counterparty, including 

name, phone number, and email address.

.......................................................................... Information needed to maintain a point of contact with the counterparty for the portfolio. 

Guarantee agreement with respect to 

counterparty obligation (Y/N).

Y ....................................................................... Information needed to determine if there is 

guarantor exposure with respect to the 

counterparty. 

Reference number of counterparty guarantee 

agreement.

xxxxxxx ............................................................. Internal reference number to enable aggregation of guarantor exposure. 

Legal name of guarantor of counterparty obligations, if any.xxxxxxx ............................................................. Information needed to determine credit exposure of guarantor for counterparty obligations. 

Unique counterparty identifier of counterparty 

guarantor.

xxxxxxx ............................................................. Information needed to determine credit exposure of guarantor for counterparty obligations. 

TABLE A–4—COLLATERAL DETAIL DATA

[For a records entity with respect to each counterparty, and for each counterparty with respect to a records entity and aggregated for such record 

entity’s corporate group as well as such counterparty corporate group to the extent required or permitted by any applicable netting agreements] 

Field Example Data application 

Unique collateral identifier for a collateral item .. CUSIPs ............................................................ Reference required to identify individual collateral posted. 

Local currency of collateral item (e.g. USD, 

GBP, EUR, JPY).

USD .................................................................. Information needed to determine the type of 

collateral 

Original face amount of collateral item in local 

currency.

1,500,000 ......................................................... Information needed to evaluate collateral sufficiency and marketability. 

Original face amount of collateral item in USD 

equivalent.

1,500,000 ......................................................... Information needed to evaluate collateral sufficiency and marketability and to assist in aggregation across currencies. 

Current end of day market value amount of collateral item in local currency.850,000 ............................................................ Information needed to evaluate collateral sufficiency and marketability. 

Current end of day market value amount of collateral item in USD equivalent.850,000 ............................................................ Information needed to evaluate collateral sufficiency and marketability and to assist in aggregation across currencies. 

Description of collateral item or items ................ U.S. Treasury Strip, maturity 6/30/2020 .......... Information needed to evaluate collateral sufficiency and marketability. 

Collateral currency ............................................. USD .................................................................. Information needed to determine the type of 

collateral 

Collateral Code,1 if any, of the collateral that 

the records entity has posted against all positions with the counterparty.

xxxxx ................................................................ Information needed to identify and aggregate 

collateral. 

Unique entity identifier of collateral posting entity.999999999 ....................................................... Information needed to determine the headquarters or branch where the position is 

booked. 

Name of master agreement or governing documentation.ISDA Master Agreement .................................. Information needed to identify the agreement. 

Unique master agreement or governing documentation identifier.xxxxxx .............................................................. Internal reference number of the master 

agreement or governing documentation. 

Collateral or portfolio segregation status (Y/N/ 

and the scope of such segregation).

Y, segregated with third party custodian specified below.Information needed to evaluate the extent of 

segregation of the specific item of collateral 

or the related collateral portfolio. 

Credit support documents (including any security agreement) (If applicable, unique credit 

support document identifier.).

Credit Support Annex ......................................

NA. 

Information needed to identify and review 

credit support, including any applicable covenants. 

Unique counterparty identifier ............................ 888888888 ....................................................... Information needed to aggregate positions by 

counterparty. 

Legal name of counterparty ............................... John Doe & Co. ............................................... Information needed to identify counterparty. 

Collateral location ............................................... ABC Broker-Dealer (in safekeeping account of 

counterparty).

Information needed to identify location of collateral posted. 

Collateral jurisdiction .......................................... New York, NY .................................................. Information needed to identify jurisdiction of 

location of collateral posted. 

Is collateral re-hypothecation by the 

counterparty allowed (Y/N).

Yes ................................................................... Information needed to evaluate exposure of 

the records entity to the counterparty for rehypothecated collateral. 

Master (cross-product) netting agreement name NA .................................................................... Information needed to determine effects of 

any cross-product and other master netting 

agreements (sometimes referred to as 

‘‘master master agreements’’). 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS
1004 Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 / Proposed Rules 

TABLE A–4—COLLATERAL DETAIL DATA—Continued 

[For a records entity with respect to each counterparty, and for each counterparty with respect to a records entity and aggregated for such record 

entity’s corporate group as well as such counterparty corporate group to the extent required or permitted by any applicable netting agreements] 

Field Example Data application 

Master (cross-product) netting agreement 

unique identifier (If applicable, unique master 

netting agreement identifier. If not applicable, 

enter ‘‘N/A’’).

NA .................................................................... Information needed to determine effects of 

any cross-product and other master netting 

agreements. 

Classification under GAAP (FAS 157) ............... Level 1, Level 2, Level 3 ................................. Information with respect to carrying value for 

the position. 

1 CFTC collateral codes and collateral ‘‘types’’ shall be used consistently for collateral posted by a records entity or counterparty, as applicable. 

If the OFR adopts or authorizes a unique identifier for a given type of collateral, then within 180 days after such action, the records entity shall 

instead use such identifier as the code for such collateral for purposes of this part and shall utilize such identifier for purposes of this part for all 

records entities within its corporate group. For repurchase or securities lending agreements, separate collateral tables should be provided that list 

the type, CUSIP or ISEN number of such securities. 

Matthew Rutherford, 

Acting Under Secretary for Domestic Finance. 

[FR Doc. 2014–30734 Filed 1–6–15; 8:45 am] 

BILLING CODE 4810–35–P 


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