Source: https://www.federalregister.gov/documents/2018/08/06/2018-16132/proposed-agency-information-collection-activities-comment-request
Timestamp: 2019-06-27 08:51:48
Document Index: 420646804

Matched Legal Cases: ['§\u2009252', '§\u2009252', '§\u2009252', '§\u2009252', '§\u2009252', '§\u2009252', '§\u2009252', '§\u2009252', '§\u2009252', '§\u2009252', '§\u2009252', 'art 217', '§\u2009252', '§\u2009252', '§\u2009252', 'art 252', '§\u2009252', '§\u2009252', 'art 252', '§\u2009252', '§\u2009252', '§\u2009252']

A Notice by the Federal Reserve System on 08/06/2018
Comments must be submitted on or before October 5, 2018.
83 FR 38303
38303-38306 (4 pages)
Proposal To Approve Under OMB Delegated Authority the Implementation of a New Information Collection
Detailed Discussion of Proposed Information Collection Activity
Schedule G-1: General Exposures
Schedule G-2: Repurchase Agreement Exposures
Schedule G-3: Securities Lending Exposures
Schedule G-4: Derivatives Exposures
Schedule G-5: Risk-Shifting Exposures
Schedule M-1: Eligible Collateral
Schedule M-2: General Risk Mitigants
Schedule A-1: Economic Interdependence
Schedule A-2: Control Relationships
https://www.federalregister.gov/d/2018-16132 https://www.federalregister.gov/d/2018-16132
The Board of Governors of the Federal Reserve System (Board) invites comment on a proposal to implement a new information collection, the Single-Counterparty Credit Limits (SCCL) (FR 2590; OMB No. 7100-NEW) and associated notice requirements in connection with the final SCCL rule published elsewhere in this issue of the Federal Register.
You may submit comments, identified by FR 2590, by any of the following methods:
All public comments are available from the Board's website at http://www.federalreserve.gov/​apps/​foia/​proposedregs.aspx as submitted, unless modified for technical reasons or to remove personal identifying information at the commenter's request. Public comments may also be viewed electronically or in paper form in Room 3515, 1801 K Street NW (between 18th and 19th Streets NW), Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on weekdays. For security reasons, the Board requires that visitors make an appointment to inspect comments. You may do so by calling (202) 452-3684. Upon arrival, visitors will be required to present valid government-issued photo identification and to submit to security screening in order to inspect and photocopy comments. Additionally, commenters may send a copy of their comments to the OMB Desk Officer—Shagufta Ahmed—Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503 or by fax to (202) 395-6974.
A copy of the PRA OMB submission, including the proposed reporting form and instructions, supporting statement, and other documentation will be placed into OMB's public docket files, once approved. These documents will also be made available on the Federal Reserve Board's public website at: http://www.federalreserve.gov/​apps/​reportforms/​review.aspx or may be requested from the agency clearance officer, whose name appears below. Federal Reserve Board Clearance Officer—Nuha Elmaghrabi—Office of the Chief Data Officer, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3829. Telecommunications Device for the Deaf (TDD) users may contact (202) 263-4869, Board of Governors of the Federal Reserve System, Washington, DC 20551.
Agency form number: FR 2590.Start Printed Page 38304
Frequency: Quarterly; event-generated for requests for temporary relief.
Respondents: U.S. bank holding companies (BHCs) with total consolidated assets that equal or exceed $250 billion, foreign banking organizations (FBOs) with U.S. banking operations and total consolidated assets that equal or exceed $250 billion, and the U.S. intermediate holding companies (IHCs) of such FBOs with total consolidated assets of at least $50 billion. Based on data as of December 31, 2017, this respondent panel would include 10 U.S. BHCs, 12 U.S. IHCs, and 82 FBOs.
Estimated number of respondents: 104; 3 for requests for temporary relief.
Estimated average hours per response: 254 for ongoing and 1,273 for one-time implementation and 10 for requests for temporary relief.
Estimated annual burden hours: 237,982 (which includes 132,392 for one-time implementation and 30 for requests for temporary relief).
General description of report: The proposed reporting form would provide the Federal Reserve with information to monitor a covered company's or a covered foreign entity's compliance with the SCCL set forth in the final SCCL rule published elsewhere in this issue of the Federal Register. The report would comprehensively capture the credit exposures of a respondent organization to its counterparties in accordance with the SCCL rule. A covered company is any U.S. BHC identified as a global systemically important BHC (GSIB) under the Board's Regulation Q and any other U.S. BHC with total consolidated assets that equal or exceed $250 billion. A covered foreign entity is any entity that is part of the combined U.S. operations of an FBO with total global consolidated assets that equal or exceed $250 billion, and any U.S. IHC of such an FBO with total consolidated assets that equal or exceed $50 billion.
The reporting form first asks for general information about the respondent organization (e.g., the respondent organization's full legal name; the amount of its capital stock and surplus; whether the respondent would be considered a major covered company, major foreign banking organization, or major U.S. intermediate holding company under the final SCCL rule).[1] The reporting form also permits any respondent that is an FBO to certify that it is subject to and complies with large exposure standards on a consolidated basis established by its home-country supervisor that are consistent with the large exposures framework published by the Basel Committee on Banking Supervision. The reporting form then requests data required to calculate the respondent organization's credit exposures and requires identification of counterparties by name and by entity type (e.g., sovereign entities, securitization funds). The form would require each respondent organization to report its top 50 counterparties.[2]
The FR 2590 includes nine schedules. Five of these schedules (Schedules G-1 through G-5) collect information related to the gross exposures of the respondent organization to various counterparties, as calculated pursuant to the methods in § 252.73 and 252.173, respectively, of the SCCL rule. A respondent organization must add the exposure amounts in the five G schedules to calculate its aggregate gross credit exposure.
A respondent organization would then calculate its net credit exposure by adjusting its gross credit exposures using Schedules M-1 and M-2, which collect information related to eligible collateral and other eligible risk mitigants (e.g., eligible guarantees), respectively, pursuant to § 252.74 and 252.174 of the SCCL rule.
The respondent organization must take into account special provisions in the SCCL rule that require aggregation of certain connected counterparties due to economic interdependence—meaning the underlying risk of one counterparty's financial distress or failure would cause the financial distress or failure of another counterparty, as indicated by the presence of certain enumerated factors in the SCCL rule—or due to the presence of certain control relationships described in the SCCL rule.[3] Data relevant to understanding the presence of any relationships that require such aggregation are reported in Schedules A-1 and A-2.
In filling out the schedules described above, the respondent organization must report exposures by counterparty, with a single counterparty in each row. The reporting form requires each respondent organization to report its top 50 counterparties.
This schedule contains seven general gross credit exposure categories that are described in § 252.73, 252.75, 252.173, and 252.175 of the SCCL rule: (i) Deposits; (ii) loans and leases; (iii) debt securities or investments; (iv) equity securities or investments; (v) committed credit lines; (vi) guarantees and letters of credit; and (vii) securitization arising from the look-through approach.[4] These gross exposures are summed together, by counterparty, in the final column of Schedule G-1.
This schedule collects gross credit exposures arising from repurchase agreements and reverse repurchase agreements as provided in § 252.73 and 252.173 of the SCCL rule. It requires the respondent organization to identify the assets transferred and received in the transaction. Examples include sovereign entity debt, non-sovereign entity debt, main index equities,[5] and cash. The penultimate column asks for the total gross credit exposure under bilateral netting agreements. The final column tallies the total gross credit exposure resulting from these transactions by counterparty.
This schedule collects similar information to that collected in Schedule G-2 with respect to securities lending and securities borrowing transactions. Again, the final column tallies the total gross credit exposure resulting from these transactions by counterparty.
Schedule G-4 requires the respondent organization to report the gross notional amount of its derivatives transactions—interest rate, foreign exchange rate, credit, equity, commodity, or other—by counterparty, consistent with § 252.73 and 252.173 of the SCCL rule. If the respondent organization has been authorized by the Board to use internal models to value such transactions, then Start Printed Page 38305it can report its exposures using the “Internal Model Method” columns.[6] Another column in Schedule G-4 is available for a respondent organization to report gross credit exposures resulting from qualifying master netting agreements.[7] All respondent organizations are required to complete the total gross credit exposure column.
Schedule G-5 collects information related to gross credit exposures that have been impacted by the risk shifting requirements of § 252.74 and 252.174 of the SCCL rule. Risk-shifting is required when a respondent organization employs five types of credit risk mitigants: (i) Eligible collateral; (ii) eligible guarantees; (iii) eligible credit derivatives; (iv) other eligible hedges; or (v) unused portion of certain extensions of credit. Risk-shifting may also be required in connection with credit transactions involving exempt counterparties.[8] The final column aggregates the total gross exposure, by counterparty, due to risk-shifting.
Sections 252.74 and 252.174 of the SCCL rule permit a respondent organization to subtract the value of any “eligible collateral” provided by a counterparty in connection with a particular transaction from its gross credit exposure for that transaction.[9] The value of all such eligible collateral is reported in Schedule M-1. Eligible collateral include, but are not limited to, sovereign debt, non-sovereign debt, main index equities, other publicly traded equities, and cash. The final column sums the total credit risk mitigation impact due to eligible collateral, by counterparty.
Schedule M-2 collects information related to credit risk mitigation techniques other than the receipt of eligible collateral used by the firm to reduce its gross credit exposure in a given transaction. Permitted credit risk mitigation methods, described in § 252.74 and 252.174 of the SCCL rule, are (i) eligible guarantees; (ii) eligible credit derivatives; (iii) other eligible hedges; (iv) unused portion of certain extensions of credit; and (v) credit transactions involving exempt entities. The final column sums the total credit risk mitigation effected by use of these techniques, by counterparty.
The reporting form contains a summary sheet that sums the respondent organization's aggregate gross credit exposure (as reported in the final columns of each of the five G schedules); calculates the respondent organization's aggregate net credit exposures by reducing its aggregate gross credit exposure by its aggregate credit risk mitigants (calculated by taking the sum of the final columns of the two M schedules); and divides the respondent organization's aggregate net credit exposure by its eligible capital base.[10] The resulting ratio shows whether the respondent organization's aggregate net credit exposures comply with the limits of the SCCL rule.
Sections 252.76(b) and 252.176(b) of the SCCL rule require a covered company, a covered foreign entity, or U.S. IHC with total consolidated assets that equal or exceed $250 billion to aggregate its net credit exposures to counterparties that are economically interdependent—meaning that the underlying risk of one counterparty's financial distress or failure would cause the financial distress or failure of another counterparty.[11] Those sections enumerate specific factors that those covered companies or covered foreign entities must consider in order to assess whether counterparties are economically interdependent. Such factors include whether 50 percent or more of one counterparty's gross revenue is derived from the other counterparty, or whether two or more counterparties rely on the same source for the majority of their funding.[12] The SCCL rule requires that counterparties that must be aggregated be treated as a single counterparty (reported in Schedule A-1 as an “interconnected counterparty group”) for purposes of the aggregate net credit exposure limits of the SCCL rule. Schedule A-1 requires the respondent organization to provide its aggregate net credit exposure to each member of the interconnected counterparty group (one per column). The final column of Schedule A-1 sums the total net credit exposure of the respondent organization to each connected counterparty group.
Sections 252.76(c) and 252.176(c) of the SCCL rule require a covered company, a covered foreign entity, or U.S. IHC with total consolidated assets that equal or exceed $250 billion to aggregate exposures to counterparties due to the presence of certain control relationships.[13] These sections require that counterparties that are connected by certain specified control relationships must be treated as a single counterparty (reported in Schedule A-2 as a “control counterparty group”) for purposes of the aggregate net credit exposure limits of the SCCL rule. Schedule A-2 requires the respondent organization to provide its aggregate net credit exposure to each member of the control counterparty group (one per column). The final column of Schedule A-2 sums the total net credit exposure of the respondent organization to each control counterparty group.
In addition, certain provisions in the SCCL rule permit a covered company or covered foreign entity to request temporary relief from specific requirements of the rule. Specifically, the SCCL rule permits a covered company or covered foreign entity to request temporary relief from Start Printed Page 38306requirements to aggregate one or more counterparties even if one or more factors indicating economic interdependence or control relationships are met, subject to certain conditions, including that such relief be in the public interest and consistent with the purpose of the rule.[14] The SCCL rule also permits a covered company or covered foreign entity that is not in compliance with the requirements of the rule to request a special temporary credit exposure limit exemption from the Board to permit continued credit transactions with that counterparty, based upon a finding that those transactions are necessary or appropriate to preserve the safety and soundness of the covered company or U.S. financial stability.[15]
Legal authorization and confidentiality: Section 165(e) of the Dodd-Frank Act (12 U.S.C. 5365(e)) and section 5(c)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c)(1)) authorize the Board to require these BHCs, FBOs, and U.S. IHCs to file a reporting form such as the proposed FR 2590 with the Board. The proposed FR 2590 would be mandatory for U.S. BHCs with total consolidated assets that equal or exceed $250 billion, FBOs with U.S. banking operations and total consolidated assets that equal or exceed $250 billion, and U.S. IHCs of such FBOs with at least $50 billion in total consolidated assets.
The data collected on this proposed form includes financial information that is not normally disclosed by the respondent organizations, the release of which would likely cause substantial harm to the competitive position of the respondent organization if made publicly available. Therefore, the data collected on this form would be kept confidential under exemption 4 of the Freedom of Information Act, which protects from disclosure trade secrets and commercial or financial information (5 U.S.C. 552(b)(4)).
Regarding notices associated with requests for temporary relief from specific requirements of the SCCL rule, a firm that wishes information in these notices to be kept confidential in accordance with exemption 4 of the Freedom of Information Act (5 U.S.C. 552(b)(4)) may request confidential treatment under the Board's rules regarding confidential treatment of information at 12 CFR 261.15. The Board's Legal Division will be asked to review the confidentiality status of such notices.
By order of the Board of Governors of the Federal Reserve System, July 24, 2018.
1. “Major covered company,” “major foreign banking organization,” and “major U.S. intermediate holding company” are defined terms in the final SCCL rule. See § 252.71(y), 252.171(z), 252.171(aa).
2. “Counterparty” is a defined term in the final SCCL rule. See § 252.71(e), 252.171(f).
3. The requirement to aggregate counterparties based on these relationships can be found in § 252.76 and 252.176 of the SCCL rule.
4. Calculation of gross credit exposure as a result of item (vii) (securitization arising from the look-through approach) is described in § 252.75 and 252.175 of the SCCL rule. Gross credit exposure to a securitization that does not require application of the look-through approach would be reported as either item (iii) (debt securities or investments) or item (iv) (equity securities or investments), as applicable.
5. “Main index” is defined in the Board's capital rules, 12 CFR part 217.
6. If the respondent organization has not been authorized by the Board to use internal models, these columns would remain blank.
7. “Qualifying master netting agreement” is defined in § 252.71(cc) and 252.171(ee) of the SCCL rule.
8. See § 252.74(g) and 252.174(g) of the SCCL rule. “Exempt counterparty” is defined in the SCCL rule to mean an entity that is expressly exempted from or otherwise excluded from the requirements of the SCCL rule. See §§ 252.71(q) and 252.171(r) of the SCCL rule.
9. “Eligible collateral” is defined in sections 252.71(k) and 252.171(l).
10. As noted above, a respondent organization's aggregate net credit exposure limits under the SCCL rule are based on a percentage of either its capital stock and surplus or its tier 1 capital, depending on the size of the respondent organization. “Eligible capital base,” as reported on this form, refers to either the respondent organization's capital stock and surplus or its tier 1 capital, as applicable.
11. This requirement does not apply to U.S. IHCs with total consolidated assets of less than $250 billion, unless the Board determines in writing after notice and opportunity for hearing that the covered foreign entity must aggregate its exposures to two or more counterparties to prevent evasions of the purposes of subpart Q of Regulation YY (12 CFR part 252, subpart Q). See § 252.176 of the SCCL rule.
12. A covered company, foreign banking organization that is a covered foreign entity, or U.S. IHC with total consolidated assets that equal or exceed $250 billion is required to conduct an assessment for economic interdependence only if its aggregate net credit exposure to a counterparty exceeds 5 percent of its tier 1 capital. See §§ 252.76(b) and 252.176(b) of the SCCL rule. If none of the enumerated factors are met, then the covered company or covered foreign entity need not aggregate exposures to those counterparties unless the Board determines that one or more other counterparties of the covered company or covered foreign entity are economically interdependent. Id.
13. This requirement does not apply to U.S. IHCs with total consolidated assets of less than $250 billion, unless the Board determines in writing after notice and opportunity for hearing that a covered company must aggregate its exposures to two or more counterparties to prevent evasions of the purposes of subpart Q of Regulation YY (12 CFR part 252, subpart Q). See § 252.176 of the SCCL rule.
14. See §§ 252.76(b)(3), 252.76(c)(2), 252.176(b)(3), and 252.176(c)(2) of the SCCL rule.
15. See § 252.78(c)(2) and 252.178(c)(2) of the SCCL rule.
[FR Doc. 2018-16132 Filed 8-3-18; 8:45 am]