Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 / Proposed Rules 42619 

on file for the participant during the 

period of military service. 

PART 1650—METHODS OF 

WITHDRAWING FUNDS FROM THE 

THRIFT SAVINGS PLAN 

■ 20. The authority citation for part 

1650 continues to read as follows: 

Authority: 5 U.S.C. 8351, 8432d, 8433, 

8434, 8435, 8474(b)(5) and 8474(c)(1). 

■ 21. Amend § 1650.33 to revise the 

second sentence of paragraph (b) to read 

as follows: 

§ 1650.33 Contributing to the TSP after an 

in-service withdrawal. 

* * * * * 

(b) * * * Therefore, the participant’s 

employing agency will discontinue his 

or her contributions (and any applicable 

Agency Matching Contributions) for six 

months after the agency is notified by 

the TSP; in the case of a FERS or BRS 

participant, Agency Automatic (1%) 

Contributions will continue. * * * 

PART 1690—THRIFT SAVINGS PLAN 

■ 22. The authority citation for part 

1690 continues to read as follows: 

Authority: 5 U.S.C. 8474. 

■ 23. Amend § 1690.1 as follows: 

■ a. Revise the definitions of Agency 

Automatic (1%) Contributions, Agency 

Matching Contributions, Bonus 

contribution, Civilian employee, 

Employer contributions, Employing 

agency, Uniformed service member, and 

Uniformed services. 

■ b. Add definitions for BRS, BRS 

participant, Employee and PEBD in 

alphabetical order. 

§ 1690.1 Definitions. 

* * * * * 

Agency Automatic (1%) Contributions 

means any contributions made under 5 

U.S.C. 8432(c)(1) and (c)(3). It also 

includes service automatic (1%) 

contributions made under 5 U.S.C. 

8440e(e)(3)(A). 

Agency Matching Contributions 

means any contributions made under 5 

U.S.C. 8432(c)(2). It also includes 

service matching contributions under 5 

U.S.C. 8440e(e)(3)(B). 

* * * * * 

Bonus contributions means 

contributions made by a participant 

from any part of any special or incentive 

pay that the participant receives under 

chapter 5 of title 37. 

* * * * * 

BRS means the blended retirement 

system as established by the National 

Defense Authorization Act for FY 2016, 

Public Law 114–92, §§ 631–635 (2015). 

BRS participant means a TSP 

participant covered by BRS. 

* * * * * 

Civilian employee or civilian 

participant means a TSP participant 

covered by the Federal Employees’ 

Retirement System, the Civil Service 

Retirement System, or equivalent 

retirement plan. 

* * * * * 

Employer contributions means 

Agency Automatic (1%) Contributions 

under 5 U.S.C. 8432(c)(1), 8432(c)(3), or 

5 U.S.C. 8440e(e)(3)(A) and Agency 

Matching Contributions under 5 U.S.C. 

8432(c)(2) or 5 U.S.C. 8440e(e)(3)(B). 

Employing agency means the 

organization (or the payroll office that 

services the organization) that employs 

an individual eligible to contribute to 

the TSP and that has authority to make 

personnel compensation decisions for 

the individual. It includes the 

employing service for members of the 

uniformed services. 

* * * * * 

PEBD means the pay entry base date 

(or pay entry basic date for some 

services), which is determined by each 

uniformed service and is used to 

calculate how much time in service a 

member has for the purpose of 

determining longevity pay rates. 

* * * * * 

Uniformed service member or 

uniformed services participant means a 

TSP participant who is a member of the 

uniformed services on active duty or a 

member of the Ready Reserve in any pay 

status. 

* * * * * 

Uniformed services means the Army, 

Navy, Air Force, Marine Corps, Coast 

Guard, Public Health Service 

Commissioned Corps, and the National 

Oceanic and Atmospheric 

Administration Commissioned Officer 

Corps. 

[FR Doc. 2017–18838 Filed 9–8–17; 8:45 am] 

BILLING CODE 6760–01–P 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Parts 12 and 151 

[Docket ID OCC–2017–0013] 

RIN 1557–AE24 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 344 

RIN 3064–AE64 

Securities Transaction Settlement 

Cycle 

AGENCY: Office of the Comptroller of the 

Currency, Treasury (OCC); and Federal 

Deposit Insurance Corporation (FDIC). 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The OCC and the FDIC 

(‘‘Agencies’’) are proposing to shorten 

the standard settlement cycle for 

securities purchased or sold by national 

banks, federal savings associations, and 

FDIC-supervised institutions. The 

Agencies’ proposal is consistent with an 

industry-wide transition to a twobusiness-day settlement cycle, which is 

designed to reduce settlement exposure 

and align settlement practices across all 

market participants. 

DATES: You must submit comments by 

October 11, 2017. 

ADDRESSES: Interested parties are 

encouraged to submit written comments 

jointly to both of the Agencies. 

Commenters are encouraged to use the 

title ‘‘Securities Transaction Settlement 

Cycle’’ to facilitate the organization and 

distribution of comments among the 

Agencies. 

OCC 

You may submit comments to the 

OCC by any of the methods set forth 

below. Because paper mail in the 

Washington, DC area and at the OCC is 

subject to delay, commenters are 

encouraged to submit comments 

through the Federal eRulemaking Portal 

or email, if possible. You may submit 

comments by any of the following 

methods: 

• Federal eRulemaking Portal— 

‘‘Regulations.gov’’: Go to 

www.regulations.gov. Enter ‘‘Docket ID 

OCC–2017–0013’’ in the Search Box and 

click ‘‘Search.’’ Click on ‘‘Comment 

Now’’ to submit public comments. 

• Click on the ‘‘Help’’ tab on the 

Regulations.gov home page to get 

information on using Regulations.gov, 

including instructions for submitting 

public comments. 


asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
42620 Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 / Proposed Rules 

1 ‘‘FDIC-supervised institution’’ means any 

insured depository institution for which the FDIC 

is the appropriate Federal banking agency pursuant 

to section 3(q) of the Federal Deposit Insurance Act, 

12 U.S.C. 1813(q). 12 CFR 344.3(h). Pursuant to 

section 3(q), the FDIC is the appropriate Federal 

banking agency with respect to: (1) Any State 

nonmember insured bank; (2) any foreign bank 

having an insured branch; and (3) any State savings 

association. 12 U.S.C. 1813(q)(2). 

2Sections 12.9, 151.130, and 344.7 also include 

special provisions for settlement in connection with 

a firm commitment underwriting and exceptions for 

certain securities and contracts. 3On March 29, 2017, the SEC published an 

amendment to its securities transaction settlement 

cycle rule. The amendment shortens the standard 

settlement cycle from T+3 to T+2 for many U.S. 

securities, including equities, corporate bonds, and 

unit investment trusts, and financial instruments 

composed of these products, when these securities 

are traded on the secondary market. Refer to SEC 

Rule 15c6–1(a) under the Securities Exchange Act 

of 1934. 17 CFR 240.15c6–1. Also refer to 82 FR 

15564, ‘‘Securities Transaction Settlement Cycle,’’ 

March 29, 2017. 

• Email: regs.comments@

occ.treas.gov. 

• Mail: Legislative and Regulatory 

Activities Division, Office of the 

Comptroller of the Currency, 400 7th 

Street SW., Suite 3E–218, Mail Stop 

9W–11, Washington, DC 20219. 

• Hand Delivery/Courier: 400 7th 

Street SW., Suite 3E–218, Washington, 

DC 20219. 

• Fax: (571) 465–4326. 

Instructions: You must include 

‘‘OCC’’ as the agency name and ‘‘Docket 

ID OCC–2017–0013’’ in your comment. 

In general, the OCC will enter all 

comments received into the docket and 

publish them on the Regulations.gov 

Web site without change, including any 

business or personal information that 

you provide, such as name and address 

information, email addresses, or phone 

numbers. Comments received, including 

attachments and other supporting 

materials, are part of the public record 

and subject to public disclosure. Do not 

include any information in your 

comment or supporting materials that 

you consider confidential or 

inappropriate for public disclosure. 

You may review comments and other 

related materials that pertain to this 

rulemaking action by any of the 

following methods: 

• Viewing Comments Electronically: 

Go to www.regulations.gov. Enter 

‘‘Docket ID OCC–2017–0013’’ in the 

Search box and click ‘‘Search.’’ Click on 

‘‘Open Docket Folder’’ on the right side 

of the screen. Comments and supporting 

materials can be filtered by clicking on 

‘‘View all documents and comments in 

this docket’’ and then using the filtering 

tools on the left side of the screen. 

• Click on the ‘‘Help’’ tab on the 

Regulations.gov home page to get 

information on using Regulations.gov. 

The docket may be viewed after the 

close of the comment period in the same 

manner as during the comment period. 

• Viewing Comments Personally: You 

may personally inspect and photocopy 

comments at the OCC, 400 7th Street 

SW., Washington, DC. For security 

reasons, the OCC requires that visitors 

make an appointment to inspect 

comments. You may do so by calling 

(202) 649–6700 or, for persons who are 

deaf or hard of hearing, TTY, (202) 649– 

5597. Upon arrival, visitors will be 

required to present valid governmentissued photo identification and submit 

to security screening in order to inspect 

and photocopy comments. 

FDIC 

You may submit comments, identified 

by RIN number, by any of the following 

methods: 

• Agency Web site: https://

www.fdic.gov/regulations/laws/ 

publiccomments/. Follow instructions 

for submitting comments on the Agency 

Web site. 

• Email: Comments@fdic.gov. Include 

the RIN number 3064–AE64 on the 

subject line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street NW., Washington, DC 20429. 

• Hand Delivery: Comments may be 

hand delivered to the guard station at 

the rear of the 550 17th Street Building 

(located on F Street) on business days 

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

• Public Inspection: All comments 

received must include the agency name 

and RIN 3064–AE64 for this rulemaking. 

All comments received will be posted 

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

regulations/laws/publiccomments/, 

including any personal information 

provided. Paper copies of public 

comments may be ordered from the 

FDIC Public Information Center, 3501 

North Fairfax Drive, Room E–I002, 

Arlington, VA 22226 by telephone at 1 

(877) 275–3342 or 1 (703) 562–2200. 

FOR FURTHER INFORMATION CONTACT: 

OCC: David Stankiewicz, Special 

Counsel, Securities and Corporate 

Practices Division, (202) 649–5510; 

Daniel Perez, Attorney, Legislative and 

Regulatory Activities Division, (202) 

649–5490 or, for persons who are deaf 

or hard of hearing, TTY, (202) 649– 

5597; or Patricia Dalton, Technical 

Expert, Asset Management Group, 

Market Risk, at (202) 649–6360. 

FDIC: Thomas F. Lyons, Chief, Policy 

& Program Development, (202) 898– 

6850; Michael W. Orange, Senior Trust 

Examination Specialist, Policy & 

Program Development, (678) 916–2289, 

Risk Management Policy Branch, 

Division of Risk Management 

Supervision; Annmarie H. Boyd, 

Counsel, Bank Activities Unit, (202) 

898–3714; Benjamin J. Klein, Counsel, 

Bank Activities Unit, (202) 898–7027, 

Supervision and Legislation Branch, 

Legal Division. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Pursuant to 12 CFR 12.9 and 151.130, 

a national bank or federal savings 

association (‘‘FSA’’) (collectively, ‘‘OCCsupervised institutions’’) generally may 

not effect or enter into a contract for the 

purchase or sale of a security that 

provides for payment of funds and 

delivery of securities later than the third 

business day after the date of the 

contract, unless otherwise expressly 

agreed to by the parties at the time of 

the transaction. Similarly, pursuant to 

12 CFR 344.7, an FDIC-supervised 

institution 1 (together with OCCsupervised institutions, ‘‘banks’’) 

generally may not effect or enter into a 

contract for the purchase or sale of a 

security that provides for payment of 

funds and delivery of securities later 

than the third business day after the 

date of the contract, unless otherwise 

expressly agreed to by the parties at the 

time of the transaction.2 The three-day 

settlement cycle, which is the current 

standard for the securities industry in 

the United States, is known as ‘‘T+3’’— 

shorthand for ‘‘trade date plus three 

days.’’ The Agencies are proposing to 

amend 12 CFR 12.9, 151.130, and 344.7 

by shortening the settlement cycle from 

three days to two (i.e., a ‘‘T+2’’ 

settlement cycle). By shortening the 

settlement cycle, the proposed change 

will directly reduce banks’ exposure to 

their trade counterparties during the 

settlement period and thus mitigate 

banks’ operational and systemic risk. 

The Agencies’ proposal is part of a 

larger, industry-wide shift to a T+2 

settlement cycle that includes a multiyear securities industry initiative and 

rule changes being implemented by 

other financial regulators and securities 

self-regulatory organizations. The 

industry’s compliance date for this 

initiative is September 5, 2017, 

consistent with the compliance date for 

the Securities and Exchange 

Commission’s (‘‘SEC’’) T+2 rule.3 The 

self-regulatory organizations overseeing 

transactions in securities for their 

respective registrants that would be 

covered by the T+2 standard, including 

the Financial Industry Regulatory 

Authority (‘‘FINRA’’) and the Municipal 

Securities Rulemaking Board (‘‘MSRB’’), 

have finalized or will finalize rule 

changes necessary to implement the 


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Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 / Proposed Rules 42621 

4For example, refer to MSRB Regulatory Notice 

2017–07, ‘‘MSRB Announces Date of Transition to 

a Two-Day Settlement Cycle for Municipal 

Securities Transactions’’; FINRA Regulatory Notice 

17–19, ‘‘Shortening the Securities Settlement Cycle 

for Securities to T+2’’ (May 2017); and SEC, SelfRegulatory Organization, Release No. 34–80020 

(February 10, 2017) (granting approval to a rule 

change for the New York Stock Exchange). 

5FDIC-supervised institutions include State 

nonmember insured banks, foreign banks having 

insured branches, and State savings associations. 

See supra note 1. In addition to stating the general 

settlement period requirement, §§ 12.9, 151.130, 

and 344.7 include special provisions for settlement 

in connection with a firm commitment 

underwriting and exceptions to the general 

requirement for certain securities and contracts. 

6 5 U.S.C. 601 et seq. 

7 13 CFR 121.201 (as amended, effective 

December 2, 2014). 

8FDIC-supervised institutions are set forth in 12 

U.S.C. 1813(q)(2). 

9FDIC Call Report, June 30, 2017. 

10 Id. 

new settlement cycle and related 

processes.4 On June 9, 2017, the OCC 

issued Bulletin 2017–22, which notified 

OCC-supervised institutions that they 

should comply with the T+2 settlement 

standard as of the SEC’s compliance 

date. The FDIC issued similar guidance 

applicable to FDIC-supervised 

institutions through Financial 

Institution Letter 32–2017 on July 26, 

2017. The Agencies expect that as of the 

compliance date, September 5, 2017, 

OCC- and FDIC-supervised institutions 

will adhere to industry standards and 

applicable securities and self-regulatory 

organizations’ rules for T+2 securities 

clearance and settlement. 

The Agencies expect that most banks 

have already made substantial progress 

toward compliance with the T+2 

settlement cycle. By aligning their 

settlement practices with those of their 

securities counterparties, banks’ 

transition to the T+2 settlement cycle 

will help mitigate operational risk and 

promote safety and soundness. 

Altogether, the Agencies expect that the 

proposed rule change, in conjunction 

with the industry-wide movement to the 

T+2 settlement cycle, will produce 

safety and soundness benefits by 

reducing banks’ counterparty settlement 

risks, reducing the procyclical margin 

and liquidity demands associated with 

securities clearing and settlement, and 

by improving banks’ overall financial 

condition during periods of heightened 

market volatility or activity. 

II. Description of the Proposed Rule 

Regulations governing recordkeeping 

and confirmation requirements for the 

securities transactions of national banks 

and FSAs, both for the bank’s own 

account and for customers, are set out 

in parts 12 and 151 of the OCC’s 

regulations, respectively. Regulations 

governing the same for FDIC-supervised 

institutions are set out in part 344 of the 

FDIC’s regulations. As noted above, 

§§ 12.9, 151.130, and 344.7 require that 

banks generally not effect or enter into 

a contract for the purchase or sale of a 

security that provides for payment of 

funds and delivery of securities later 

than the third business day after the 

date of the contract, unless otherwise 

expressly agreed to by the parties at the 

time of the transaction. Section 12.9 

applies to national banks, § 151.130 

applies to FSAs, and § 344.7 applies to 

FDIC-supervised institutions.5

The Agencies propose to amend the 

general requirement that banks must 

settle their securities transactions no 

later than the third business day after 

the date of the contract by shortening 

the permissible settlement period from 

three business days to two. The 

proposal does not otherwise affect the 

regulatory requirements, exceptions, 

and conditions provided in §§ 12.9, 

151.130, or 344.7. 

The Agencies may consider, as an 

alternative to the approach described 

above, implementing the two-businessday settlement requirement by crossreference to the standard settlement 

cycle provided under SEC Rule 15c6– 

1(a) (17 CFR 240.15c6–1(a)). Under this 

alternative approach, securities 

transactions would generally be 

required to settle ‘‘within the number of 

business days in the standard settlement 

cycle for the security followed by 

registered broker dealers in the United 

States,’’ unless otherwise agreed to by 

the parties at the time of the transaction. 

‘‘Standard settlement cycle’’ would be 

defined by reference to SEC Rule 15c6– 

1(a). The Agencies invite comment on 

this alternative approach. The Agencies 

also invite comment on the use and 

definition of the term ‘‘standard 

settlement cycle.’’ 

III. Request for Comment 

The Agencies invite comment on all 

aspects of this proposal, including the 

alternative approach described in part II 

of this SUPPLEMENTARY INFORMATION. 

IV. Regulatory Analysis 

Paperwork Reduction Act 

Under the Paperwork Reduction Act 

(‘‘PRA’’), 44 U.S.C. 3501–3520, the 

Agencies may not conduct or sponsor, 

and a person is not required to respond 

to, an information collection unless the 

information collection displays a valid 

Office of Management and Budget 

(‘‘OMB’’) control number. This proposal 

does not introduce or change any 

collections of information; therefore, it 

does not require a submission to OMB. 

Nonetheless, the Agencies invite 

comment on their PRA determination. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 

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

agency, in connection with a proposed 

rule, to prepare an Initial Regulatory 

Flexibility Analysis describing the 

impact of the proposed rule on small 

entities (defined by the Small Business 

Administration (‘‘SBA’’) for purposes of 

the RFA to include banking entities 

with total assets of $550 million or less) 

or to certify that the proposed rule 

would not have a significant economic 

impact on a substantial number of small 

entities. 

FDIC: The RFA generally requires 

that, in connection with a notice of 

proposed rulemaking, an agency prepare 

and make available for public comment 

an initial regulatory flexibility analysis 

describing the impact of the proposed 

rule on small entities.6 A regulatory 

flexibility analysis is not required, 

however, if the agency certifies that the 

rule will not have a significant 

economic impact on a substantial 

number of small entities. The SBA has 

defined ‘‘small entities’’ to include 

banking organizations with total assets 

less than or equal to $550 million.7 For 

the reasons described below and 

pursuant to section 605(b) of the RFA, 

the FDIC certifies that the final rule will 

not have a significant economic impact 

on a substantial number of small 

entities. 

The FDIC supervises 3,171 depository 

institutions,8 of which 2,990 are defined 

as small banking entities by the terms of 

the RFA.9 The proposed rule will 

reduce by one day the settlement time 

of transactions for equities, corporate 

bonds, municipal bonds, unit 

investment trusts, mutual funds, 

exchange-traded funds, exchange-traded 

products, American depository receipts, 

options, rights, and warrants. According 

to recent Call Report data, 2,742 FDICsupervised small entities reported 

holding some volume of equities that 

are likely to be affected by the new 

securities settlement cycle, provide 

custodial banking services, or possess a 

subsidiary classified as a securities 

dealer.10 The effects on small entities 

will vary according to the degree of 

participation in securities transactions. 

According to recent Call Report data one 

small entity identified itself as 

providing custodial banking services, 

while seven small entities have a 


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42622 Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 / Proposed Rules 

11 ‘‘Cost benefit analysis of shortening the 

settlement cycle,’’ Prepared by the Boston 

Consulting Group—Commissioned by the 

Depository Trust and Clearing Corporation (DTCC), 

October 2012. 

12 Id. 13 Id. 

14 Id. 

15The OCC calculated the number of small 

entities using the SBA’s size thresholds for 

commercial banks and savings institutions, and 

trust companies, which are $550 million and $38.5 

million, respectively. Consistent with the General 

Principles of Affiliation, 13 CFR 121.103(a), the 

OCC counted the assets of affiliated financial 

institutions when determining whether to classify 

a national bank or federal savings association as a 

small entity. The OCC used December 31, 2016, to 

determine size because a ‘‘financial institution’s 

assets are determined by averaging the assets 

reported on its four quarterly financial statements 

for the preceding year.’’ See footnote 8 of the SBA’s 

Table of Size Standards. 

subsidiary classified as a securities 

dealer according to data from the 

Federal Reserve’s National Information 

Center (NIC). 

Costs 

The proposed rule is likely to pose 

some small costs for custodian banks 

whose role is administering assets for a 

corporation or an individual. Banks 

engaged in custodial activities will 

likely incur costs to increase 

infrastructure capabilities and 

efficiencies, as well as standardizing 

data formats and communication 

protocols. These changes are in addition 

to any documentation and process 

changes. The 2012 DTCC study 

estimated that a large custodian bank 

will have to invest $4 million in order 

to conform to the two-day settlement 

cycle.11 Therefore, the one FDICsupervised small institution that is 

engaged in custodial activities is 

conservatively estimated to incur a total 

of $4 million in costs associated with 

the industry-led effort to adopt a shorter 

settlement cycle. However, given that 

the industry’s planned commencement 

date for the shorter settlement cycle will 

take place before the effective date of 

the proposed rule, the FDIC assumes 

that little or none of these costs will 

result from actions taken by covered 

institutions to comply with the 

proposed rule. 

The proposed rule is likely to pose 

some small costs for covered 

institutions that possess a subsidiary 

that is a securities broker-dealer. Banks 

that possess a securities broker 

subsidiary will likely have to incur 

analysis and testing costs for any 

associated changes to their transaction 

platform necessary to comply with the 

shorter settlement cycle, as well as 

improvements in the management of 

securities inventories. These changes 

are in addition to any documentation 

and process changes. The 2012 DTCC 

study estimated that broker-dealers will 

likely have to invest $4 million in order 

to conform to the 2-day settlement 

cycle.12 Therefore, the seven FDICsupervised small institutions that 

operate a subsidiary classified as a 

securities broker are estimated to incur 

a total of $28 million in costs associated 

in the industry-led effort to adopt a 

shorter settlement cycle. However, given 

that the industry’s planned 

commencement date for the shorter 

settlement cycle will take place before 

the effective date of the proposed rule, 

the FDIC assumes that little or none of 

these costs will result from actions 

taken by covered institutions to comply 

with the proposed rule. 

The proposed rule is likely to pose 

little or no costs for covered institutions 

that do not provide custodial banking 

services or possess a broker-dealer 

subsidiary. Covered institutions that 

transact securities but do not manage 

securities transactions could incur some 

costs related to documentation changes. 

However, the FDIC assumes that most of 

these institutions rely on third-party 

security transaction platforms or brokerdealers to complete their transactions, 

and therefore will incur little to no cost 

in adopting the shorter settlement cycle. 

Benefits 

Banks offering custodial services for 

securities and banks with broker-dealer 

subsidiaries are likely to incur some 

small benefits associated with the 

proposed rule. The infrastructure 

investments and process improvements 

necessary to complete the adoption of 

the industry’s goal of a two-day 

settlement cycle should result in a 

reduction in operational costs. 

Additionally, the shorter settlement 

cycle should reduce the duration of 

unsecured, uninsured settlement cycle 

funding provided by broker-dealers. 

This, in turn, should reduce 

counterparty risk associated with the 

settlement process. The shorter 

settlement cycle should also improve 

the efficiency of capital utilization for 

broker-dealers and custodian banks by 

reducing pro-cyclical margin demands, 

especially during episodes of 

heightened market volatility. The 2012 

DTCC study estimated that brokerdealers and custodian banks will realize 

$55 million and $40 million, 

respectively, in costs savings over three 

years resulting from risk reduction, 

capital optimization, and improvements 

in operational efficiency.13 However, 

given that the industry-planned 

commencement date for the shorter 

settlement cycle will take place before 

the effective date of the proposed rule, 

the FDIC assumes that little or none of 

these benefits will result from actions 

taken by covered institutions to comply 

with the proposed rule. 

Improved operational efficiency of 

transaction settlement, particularly the 

reduction in the exchange of physical 

securities, may benefit some covered 

institutions that do not provide 

custodial banking services or possess a 

broker-dealer subsidiary. The 2012 

DTCC study estimated that covered 

institutions who transact securities but 

do not manage securities transactions 

could realize $30 million in costs 

savings over three years.14 However, the 

cost savings for smaller market 

participants is likely to be much lower, 

and given that the industry-planned 

commencement date for the shorter 

settlement cycle will take place before 

the effective date of the proposed rule, 

the FDIC assumes that little or none of 

these benefits will result from actions 

taken by covered institutions to comply 

with the proposed rule. 

Although the new settlement cycle 

does affect a significant number of small 

FDIC-supervised institutions, the 

economic effects that directly result 

from the proposed rule are likely to be 

very small. This rule is being proposed 

in concert with an industry-led effort to 

reduce the securities settlement cycle. 

The planning and adoption of 

infrastructure and procedural 

improvements necessary to meet the 

commencement date of September 5, 

2017, established by the industry predates this proposed rulemaking. 

Therefore, very little or none of the 

compliance costs or operational benefits 

that result from adopting a shorter 

securities settlement cycle are a direct 

result of the proposed rule. 

OCC: As of December 31, 2016, the 

OCC supervised approximately 956 

small entities.15 Because the proposed 

rule does not contain any new 

recordkeeping, reporting, or compliance 

requirements, the OCC anticipates that 

it will not impose costs on any OCCsupervised institutions. Thus, the 

proposed rule will not have a 

substantial impact on any OCCsupervised small entities. Therefore, the 

OCC certifies that the proposed rule 

would not have a significant economic 

impact on a substantial number of OCCsupervised small entities. 

Unfunded Mandates Reform Act of 1995 

Determination 

The OCC analyzed the proposed rule 

under the factors set forth in the 

Unfunded Mandates Reform Act of 1995 

(2 U.S.C. 1532). Under this analysis, the 


asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 / Proposed Rules 42623 

OCC considered whether the proposed 

rule includes a federal mandate that 

may result in the expenditure by state, 

local, and Tribal governments, in the 

aggregate, or by the private sector, of 

$100 million or more in any one year 

(adjusted annually for inflation). 

The proposed rule does not impose 

new mandates. Therefore, the OCC 

concludes that implementation of the 

proposed rule will not result in an 

expenditure of $100 million or more 

annually by state, local, and tribal 

governments, or by the private sector. 

Riegle Community Development and 

Regulatory Improvement Act 

The Riegle Community Development 

and Regulatory Improvement Act 

(‘‘RCDRIA’’) requires that the Agencies, 

in determining the effective date and 

administrative compliance requirements 

of new regulations that impose 

additional reporting, disclosure, or other 

requirements on insured depository 

institutions (‘‘IDIs’’), consider, 

consistent with principles of safety and 

soundness and the public interest, any 

administrative burdens that such 

regulations would place on depository 

institutions, including small depository 

institutions, and customers of 

depository institutions, as well as the 

benefits of such regulations. 12 U.S.C. 

4802. In addition, in order to provide an 

adequate transition period, new 

regulations that impose additional 

reporting, disclosures, or other new 

requirements on IDIs generally must 

take effect on the first day of a calendar 

quarter that begins on or after the date 

on which the regulations are published 

in final form. 

The proposed rule includes no 

additional reporting or disclosure 

requirements on IDIs, including small 

depository institutions, nor on the 

customers of depository institutions. 

Nonetheless, in connection with 

determining an effective date for the 

proposed rule, the Agencies invite 

comment on any administrative burdens 

that the proposed rule would place on 

depository institutions, including small 

depository institutions, and customers 

of depository institutions. 

Plain Language 

Section 722 of the Gramm-LeachBliley Act requires the Agencies to use 

plain language in all proposed and final 

rules published after January 1, 2000. 

The Agencies invite comment on how to 

make this proposed rule easier to 

understand. 

For example: 

• Have the Agencies organized the 

material to inform your needs? If not, 

how could the Agencies present the 

proposed rule more clearly? 

• Are the requirements in the 

proposed rule clearly stated? If not, how 

could the proposal be more clearly 

stated? 

• Does the proposed regulation 

contain technical language or jargon that 

is not clear? If so, which language 

requires clarification? 

• Would a different format (grouping 

and order of sections, use of headings, 

paragraphing) make the proposed 

regulation easier to understand? If so, 

what changes would achieve that? 

• Is this section format adequate? If 

not, which of the sections should be 

changed and how? 

• What other changes can the 

agencies incorporate to make the 

proposed regulation easier to 

understand? 

List of Subjects 

12 CFR Parts 12 and 151 

Banks, Banking, Federal savings 

associations, National banks, Reporting 

and recordkeeping requirements, 

Securities. 

12 CFR Part 344 

Banks, Banking, Reporting and 

recordkeeping requirements, Savings 

associations. 

OCC proposes to amend 12 CFR parts 

12 and 151 and FDIC proposes to amend 

12 CFR part 344 as follows: 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

PART 12—RECORDKEEPING AND 

CONFIRMATION REQUIREMENTS FOR 

SECURITIES TRANSACTIONS 

■ 1. The authority citation for part 12 

continues to read as follows: 

Authority: 12 U.S.C. 24, 92a, and 93a. 

■ 2. Section 12.9 is amended by revising 

paragraph (a) to read as follows: 

§ 12.9 Settlement of securities 

transactions. 

(a) A national bank shall not effect or 

enter into a contract for the purchase or 

sale of a security (other than an 

exempted security as defined in 15 

U.S.C. 78c(a)(12), government security, 

municipal security, commercial paper, 

bankers’ acceptances, or commercial 

bills) that provides for payment of funds 

and delivery of securities later than the 

second business day after the date of the 

contract, unless otherwise expressly 

agreed to by the parties at the time of 

the transaction. 

* * * * * 

PART 151—RECORDKEEPING AND 

CONFIRMATION REQUIREMENTS FOR 

SECURITIES TRANSACTIONS 

■ 3. The authority citation for part 151 

continues to read as follows: 

Authority: 12 U.S.C. 1462a, 1463, 1464, 

5412(b)(2)(B). 

■ 4. Section 151.130 is amended by 

republishing paragraph (a) introductory 

text and revising the first sentence of 

paragraph (a)(1) to read as follows: 

§ 151.130 When must I settle a securities 

transaction? 

(a) You may not effect or enter into a 

contract for the purchase or sale of a 

security that provides for payment of 

funds and delivery of securities later 

than the latest of: 

(1) The second business day after the 

date of the contract. * * * 

* * * * * 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

PART 344—RECORDKEEPING AND 

CONFIRMATION REQUIREMENTS FOR 

SECURITIES TRANSACTIONS 

■ 5. The authority citation for part 344 

continues to read as follows: 

Authority: 12 U.S.C. 1817, 1818, 1819, and 

5412. 

■ 6. Section 344.7 is amended by 

revising paragraph (a) to read as follows: 

(a) An FDIC-supervised institution 

shall not effect or enter into a contract 

for the purchase or sale of a security 

(other than an exempted security as 

defined in 15 U.S.C. 78c(a)(12), 

government security, municipal 

security, commercial paper, bankers’ 

acceptances, or commercial bills) that 

provides for payment of funds and 

delivery of securities later than the 

second business day after the date of the 

contract, unless otherwise expressly 

agreed to by the parties at the time of 

the transaction. 

* * * * * 

Dated: August 29, 2017. 

Keith A. Noreika, 

Acting Comptroller of the Currency. 

Dated at Washington, DC this 31st of 

August 2017. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2017–19008 Filed 9–8–17; 8:45 am] 

BILLING CODE 4810–33–P 6714–01–P 


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