Federal Register, Volume 77 Issue 98 (Monday, May 21, 2012)

[Federal Register Volume 77, Number 98 (Monday, May 21, 2012)]
[Rules and Regulations]
[Pages 29884-29895]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12047]

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DEPARTMENT OF THE TREASURY

31 CFR Part 150

RIN 1505--AC42

Assessment of Fees on Large Bank Holding Companies and Nonbank
Financial Companies Supervised by the Federal Reserve Board To Cover
the Expenses of the Financial Research Fund

AGENCY: Departmental Offices, Treasury.

ACTION: Final rule and interim final rule.

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SUMMARY: The Department of the Treasury is issuing this final rule and
interim final rule to implement Section 155 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (``Dodd-Frank Act''), which
directs the Treasury to establish by regulation an assessment schedule
for bank holding companies with total consolidated assets of $50
billion or greater and nonbank financial companies supervised by the
Board of Governors of the Federal Reserve (``the Board'') to collect
assessments equal to the total expenses of the Office of Financial
Research (``OFR'' or ``the Office''). Included in the Office's expenses
are expenses of the Financial Stability Oversight Council (``FSOC'' or
``the Council''), as provided under Section 118 of the Dodd-Frank Act,
and certain expenses of the Federal Deposit Insurance Corporation
(``FDIC''), as provided under Section 210 of the Dodd-Frank Act. The
portion of this rule concerning the assessment schedule for bank
holding companies is issued as a final rule. The portion of this rule
related to the assessments for nonbank financial companies supervised
by the Board is issued as an interim final rule, to allow for the
consideration of additional comments in conjunction with related FSOC
rules. This final rule and interim final rule establish the key
elements of Treasury's assessment program, which will collect
semiannual assessment fees from these companies beginning on July 20,
2012. These rules take into account the comments received on the
January 3, 2012 proposed rule and make minor revisions pursuant to the
comments.

DATES: Effective date for final rule: July 20, 2012. Effective date for
interim final rule: Sections 150.2, 150.3(b), 150.5, and 150.6(a) and
(b), which relate to nonbank financial companies, are effective on July
20, 2012 Comment due date: September 18, 2012. Comments are invited on
Sec. Sec. 150.2, 150.3(b)(4), 150.5, and 150.6(a) and (b), which
relate to nonbank financial companies.

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: Financial Research Fund Assessment 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: Jonathan Sokobin: (202) 927-8172.

SUPPLEMENTARY INFORMATION:

[[Page 29885]]

I. Executive Summary

A. Purpose of the Regulatory Action

1. Need for Regulatory Action
Section 155 of the Dodd-Frank Act, Public Law 111-203 (July 21,
2010), directs the Secretary of the Treasury to establish by
regulation, and with the approval of the Council, an assessment
schedule to collect assessments from certain companies equal to the
total expenses of the Office beginning on July 20, 2012. Section 155
describes these companies as:
(A) Bank holding companies having total consolidated assets of $50
billion or greater; and
(B) Nonbank financial companies supervised by the Board.
Under Section 118 of the Dodd-Frank Act, the expenses of the
Council are considered expenses of, and are paid by, the OFR. In
addition, under Section 210 implementation expenses associated with the
FDIC's orderly liquidation authorities are treated as expenses of the
Council,\1\ and the FDIC is directed to periodically submit requests
for reimbursement to the Council Chair. The total expenses for the OFR
thereby include the combined expenses of the OFR, the Council, and
certain expenses of the FDIC. All of these expenses are paid out of the
Financial Research Fund (FRF), a fund managed by the Department of the
Treasury for this sole purpose.
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\1\ Under Title II, Section 210(n)(10)(C) of the Dodd-Frank Act
the term implementation expenses ``(i) means costs incurred by [the
FDIC] beginning on the date of enactment of this Act, as part of its
efforts to implement [Title II] that do not relate to a particular
covered financial company; and (ii) includes the costs incurred in
connection with the development of policies, procedures, rules, and
regulations and other planning activities of the [FDIC] consistent
with carrying out [Title II].''
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The Council was established by the Dodd-Frank Act to coordinate
across agencies in monitoring risks and emerging threats to U.S.
financial stability. The OFR was established within the Treasury
Department by the Dodd-Frank Act to serve the Council, its member
agencies, and the public by improving the quality, transparency, and
accessibility of financial data and information, by conducting and
sponsoring research related to financial stability, and by promoting
best practices in risk management.
2. Legal Authority
The authority for this regulation is Section 155(d) of the Dodd-
Frank Act, which directs the Secretary of the Treasury to establish an
assessment schedule by regulation, including the assessment base and
rates, with the approval of the Council.

B. Summary of the Major Provisions of This Regulatory Action

This final rule and interim final rule direct (a) how the Treasury
will determine which companies will be subject to an assessment fee,
(b) how the Treasury will estimate the total expenses that are
necessary to carry out the activities to be covered by the assessment,
(c) how the Treasury will determine the assessment fee for each of
these companies, and (d) how the Treasury will bill and collect the
assessment fee from these companies. The final rule applies to bank
holding companies and foreign banking organizations; the interim final
rule applies to nonbank financial companies. The comment period for the
interim final rule is 120 days.
Bank holding companies that have eligible assets of $50 billion or
more will be subject to assessments, where eligible assets are
calculated as the average of a company's total consolidated assets for
the four quarters preceding the determination date. Foreign banking
organizations that have eligible assets of $50 billion or more will be
subject to assessments, where eligible assets are calculated as the
average of the company's total assets of combined U.S. operations for
the four quarters preceding the determination date. (For foreign
banking organizations that only report to the Federal Reserve annually,
eligible assets are calculated as the average of the company's total
assets of combined U.S. operations for the two years preceding the
determination date.) All nonbank financial companies supervised by the
Board will be subject to assessments.
For each assessment period, the Department will calculate an
assessment basis that is sufficient to replenish the FRF to a level
equivalent to the sum of the operating expenses of the OFR and the
Council for the assessment period, the capital expenses for the OFR and
the Council for the 12-month period beginning on the first day of the
assessment period, and an amount necessary to reimburse reasonable
implementation expenses of the FDIC orderly liquidation authorities.
For the initial assessment covering July 21, 2012 to March 31, 2013,
the assessment basis will be calculated as the sum of the operating
expenses for the OFR and the Council during this time period, the
capital expenses for the OFR and the Council for July 21, 2012 to April
30, 2013, and the amount necessary to reimburse reasonable
implementation expenses of the FDIC orderly liquidation authorities.
Assessments for each company will be calculated as the product of a
company's eligible assets and a fee rate, where the fee rate is set to
replenish the FRF to the levels defined in the preceding paragraph. Fee
rates will be published roughly one month prior to collections, with
billing at least 14 days prior to collections. Collections will be
managed through www.pay.gov, and will generally occur on March 15 and
September 15. Determination dates will generally be November 30 and May
31 of each year. The determination date for the initial assessment will
be December 31, 2011.

C. Costs and Benefits

The assessment and collection of fees described in this rule
represent an economic transfer from assessed companies to the
government, for purposes of providing the benefits associated with
coordinated identification and monitoring of risks to U.S. financial
stability, promoting market discipline, and responding to emerging
threats to the U.S. financial system. As such, the assessments do not
represent an economic cost. However, the allocation of the assessment
may have distributional impacts. Treasury estimates that approximately
50 companies will be determined as eligible for the initial assessment,
and in addition the estimated cost for each company of filling out the
forms and submitting payment to the Treasury Department will be $600.

II. Background

Section 155 of the Dodd-Frank Act, Public Law 111-203 (July 21,
2010), directs the Secretary of the Treasury to establish by
regulation, and with the approval of the Council, an assessment
schedule to collect assessments from certain companies equal to the
total expenses of the Office beginning on July 20, 2012. Section 155
describes these companies as:
(A) Bank holding companies having total consolidated assets of $50
billion or greater; and
(B) Nonbank financial companies supervised by the Board.
Under Section 118 of the Dodd-Frank Act, the expenses of the
Council are considered expenses of, and are paid by, the OFR. In
addition, under Section 210 implementation expenses associated with the
FDIC's orderly liquidation authorities are treated as expenses of the
Council,\2\ and the FDIC is directed to

[[Page 29886]]

periodically submit requests for reimbursement to the Council Chair.
The total expenses for the OFR thereby include the combined expenses of
the OFR, the Council, and certain expenses of the FDIC. All of these
expenses are paid out of the Financial Research Fund (FRF), a fund
managed by the Department of the Treasury.
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\2\ Under Title II, Section 210(n)(10)(C) of the Dodd-Frank Act
the term implementation expenses ``(i) means costs incurred by [the
FDIC] beginning on the date of enactment of this Act, as part of its
efforts to implement [Title II] that do not relate to a particular
covered financial company; and (ii) includes the costs incurred in
connection with the development of policies, procedures, rules, and
regulations and other planning activities of the [FDIC] consistent
with carrying out [Title II].''
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The Council was established by the Dodd-Frank Act to coordinate
across agencies in monitoring risks and emerging threats to U.S.
financial stability. The Council is chaired by the Secretary of the
Treasury and brings together all federal financial regulators, an
independent member with insurance expertise appointed by the President,
and certain state regulators. Under the Dodd-Frank Act, the Council is
tasked with identifying and monitoring risks to U.S. financial
stability, promoting market discipline, and responding to emerging
threats to the U.S. financial system.\3\
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\3\ As outlined in Section 112 of the Dodd-Frank Act, the
Council is tasked with the following:
1. To identify risks to the financial stability of the United
States that could arise from the material financial distress or
failure, or ongoing activities, of large, interconnected bank
holding companies or nonbank financial companies, or that could
arise outside the financial services marketplace.
2. To promote market discipline, by eliminating expectations on
the part of shareholders, creditors, and counterparties of such
companies that the Government will shield them from losses in the
event of failure.
3. To respond to emerging threats to the stability of the United
States financial system.
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The OFR was established within the Treasury Department by the Dodd-
Frank Act to serve the Council, its member agencies, and the public by
improving the quality, transparency, and accessibility of financial
data and information, by conducting and sponsoring research related to
financial stability, and by promoting best practices in risk
management. Among the OFR's key tasks are:
Measuring and analyzing factors affecting financial
stability and helping FSOC member agencies to develop policies to
promote it;
Collecting needed financial data, and promoting their
integrity, accuracy, and transparency for the benefit of market
participants, regulators, and research communities;
Reporting to the Congress and the public on the OFR's
assessment of significant financial market developments and potential
threats to financial stability; and
Collaborating with foreign policymakers and regulators,
multilateral organizations, and industry to establish global standards
for data and analysis of policies that promote financial stability.
On January 3, 2012, the Treasury published a proposed rule (77 FR
35) to establish procedures to estimate, bill, and collect, on an
ongoing basis beginning on July 20, 2012, the total budgeted expenses
of the OFR, including those estimated separately by the Council for the
Council's expenses, and expenses submitted by the FDIC.\4\ As described
in the proposed rule, the aggregate of these estimated expenses would
provide the basis for an assessment that the Treasury would collect
through a semiannual fee on individual companies based on each
company's total consolidated assets. For a foreign company, the
assessment fee would be based on the total consolidated assets of the
foreign company's combined U.S. operations.
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\4\ As proposed, the assessment basis would be determined so as
to replenish the FRF at the start of each assessment period to a
level equivalent to six months of budgeted operating expenses and
twelve months of capital expenses for the OFR and FSOC, as well as
covered FDIC expenses.
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The proposed rule outlined how the Treasury's assessment fee
program would be administered, including (a) how the Treasury would
determine which companies will be subject to an assessment fee, (b) how
the Treasury would estimate the total expenses that are necessary to
carry out the activities to be covered by the assessment, (c) how the
Treasury would determine the assessment fee for each of these
companies, and (d) how the Treasury would bill and collect the
assessment fee from these companies. Treasury sought comments on all
aspects of the proposed rulemaking. See 77 FR 35 for a complete
discussion of the proposal.

III. This Final Rule and Interim Final Rule

The final rule is adopted essentially as proposed for bank holding
companies and foreign banking organizations, with an adjustment to the
timeframe for assessment collections. The rule for nonbank financial
companies is issued as an interim final rule, reflecting the Treasury's
intent to evaluate the assessment schedule for nonbank financial
companies as the Council implements its authority to determine
companies for enhanced supervision by the Board.\5\ In response to
comments received, several technical and administrative changes were
made to clarify these rules, which are discussed below.
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\5\ ``Authority to Require Supervision and Regulation of Certain
Nonbank Financial Companies'', 77 FR 21637.
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The Treasury received 12 comment letters on the proposed rule. Six
comment letters were from associations that represent financial
institutions (including one joint letter sent by five associations);
two comment letters were from insurance companies; two comment letters
were from individuals; one comment letter was from an association that
represents financial professionals; and one comment letter was from a
public interest group. For the reasons that follow, the Treasury has
determined to adopt this rule and interim final rule as follows.

Comments and the Treasury's Responses

Comments were received in the following broad categories:
Assessment methodology
[cir] Use of total consolidated assets to calculate total
assessable assets
[cir] Other assessment methodology comments
Assessments on nonbank financial companies
Assessment basis and administration
Assessment timeframe
Term definitions
Comments of general support
Assessment Methodology
Use of Total Consolidated Assets To Calculate Total Assessable Assets
Six of the comment letters from associations that represent
financial institutions and insurance companies were critical of the
proposed use of total consolidated assets to allocate the assessment
basis to assessed companies. The letters argued that total consolidated
assets alone was an insufficient representation of the risk factors
outlined in Section 115(a)(2)(A) of the Dodd-Frank Act as referenced in
Section 155(d) of the Act, and would not be sufficient to differentiate
risk levels between companies for purposes of assessments. Two comment
letters suggested alternative assessment approaches. One commenter
suggested that the methodology be based on the six-category framework
used to evaluate the potential for a nonbank financial company to pose
a threat to U.S. financial stability, as outlined in the Council's rule
on determination of nonbank financial companies for heightened
supervision by the Board. Another commenter suggested that it be based
on the risk-adjusted assessment schedule used by the FDIC to collect
deposit insurance premiums from banks

[[Page 29887]]

and thrifts. Two of the comment letters, while expressing the concerns
described above, also noted that using total consolidated assets to
calculate assessable assets was simple, clear and transparent.
One comment letter supported the proposal to base calculation of
total assessable assets for foreign banking organizations on assets of
combined U.S. operations and to only assess those companies with more
than $50 billion in total assessable assets. The comment letter noted
that these two features of the rule will facilitate administration of
assessments and are consistent with the statutory requirement that the
assessment schedule take into account differences among assessed
companies, based on the considerations set forth in Section 115.
The Treasury's proposed implementation of Section 155 \6\ was
guided by the following principles:
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\6\ Section 155(d) of the Act reads:
PERMANENT SELF-FUNDING.--Beginning 2 years after the date of
enactment of this Act, the Secretary shall establish, by regulation,
and with the approval of the Council, an assessment schedule,
including the assessment base and rates, applicable to bank holding
companies with total consolidated assets of $50,000,000,000 or
greater and nonbank financial companies supervised by the Board of
Governors, that takes into account differences among such companies,
based on the considerations for establishing the prudential
standards under Section 115, to collect assessments equal to the
total expenses of the Office.
Section 115(a)(2) of the Act reads, in part:
RECOMMENDED APPLICATION OF REQUIRED STANDARDS.--In making
recommendations under this section, the Council may--
(A) differentiate among companies that are subject to heightened
standards on an individual basis or by category, taking into
consideration their capital structure, riskiness, complexity,
financial activities (including the financial activities of their
subsidiaries), size, and any other risk-related factors that the
Council deems appropriate.
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The assessment structure should be simple and transparent;
and
Allocation among companies should take into account
differences among such companies, based on the considerations for
establishing the prudential standards under Section 115 of the Dodd-
Frank Act as required by the Act.
As stated in the Preamble to the Notice of Public Rulemaking, the
Treasury believes there is significant benefit to adopting a standard
that is transparent, well-understood by market participants, and
reasonably estimable. Commenters suggested that this transparency and
predictability was particularly important for foreign entities
assessed. As discussed in the proposed rule, a number of different
assessment schedules for assessing companies were considered, based on
the two principles outlined above. After evaluating these different
assessment schedules, the Treasury proposed to allocate the assessment
basis among assessed companies based on the total consolidated assets
of each company. The Treasury, after considering the comments,
continues to believe that relying on the total consolidated assets of
each assessed company to allocate assessments on a percentage basis is
consistent with its legislative mandate and represents the best
approach to take into account differences among companies based on the
considerations in Section 115 while keeping the assessment structure
simple and transparent. Applying each Section 115 factor with respect
to each assessed firm could well require individualized subjective
determinations, which would be impracticable as well as opaque, and
would not be consistent with the statutory requirement to create an
``assessment schedule, including the assessment base and rates.'' \7\
Similarly, the Treasury considered relying on an established ratings
system, such as the CAMELS system employed by the FDIC, as suggested by
one commenter. The Treasury deemed such an approach as inappropriate
for the following reasons: first, the methodology to produce the CAMELS
ratings is non-public, the ratings are confidential supervisory
information ,\8\ and the rating system was developed for U.S.
depository institutions. Second, the broad rankings provided by such a
system (CAMELS ratings range from one to five) would require subjective
translation by the Treasury into assessment levels, introducing
complexity and opacity. The Treasury considered other methods to
calculate assessments based on risk-weighted assets, but these proved
unsatisfactory for similar reasons. After considering all of the
Section 115 factors, the Treasury has determined that an assessment
schedule based on total consolidated assets best achieves the statutory
purpose.
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\7\ Dodd-Frank Act, Title I, Section 155(d).
\8\ CAMELS ratings are confidential supervisory information per
12 CFR 309.5(g)(8), 309.6, 327.4(d).
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As discussed further below, the rule has been modified to include a
final rule applicable to bank holding companies and foreign banking
organizations, and an interim final rule applicable to those entities
that are identified by the Council's rulemaking for determination of
nonbank financial companies for heightened supervision by the Board.
Other Assessment Methodology Comments
Two comment letters (the joint associations' letter and a second
letter written by two authors of the joint letter) suggested that the
Board continue providing funds to the FRF after July 21, 2012. Even if
this suggestion could be reconciled with the statutory requirement that
``[b]eginning 2 years after the date of enactment,'' the Treasury shall
``collect assessments equal to the total expenses of the Office,'' \9\
the imposition of additional requirements on the Board of Governors
would be beyond the Treasury's authority under Section 155(d) and
outside the scope of this rulemaking.\10\
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\9\ Dodd-Frank Act, Title I, Section 155(d).
\10\ The comment letter from the public interest group stated
that OFR, the Council and implementation expenses of the FDIC should
be paid solely through the FRF assessment base after July 21, 2012,
as intended by the Dodd-Frank Act, and should not be paid by the
Board, as suggested in the two comment letters noted above. The
Treasury agrees with this comment, which is consistent with the
proposed and final rules.
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One comment letter suggested that since the Council and the OFR
will likely be investing a significantly larger proportion of their
resources researching and monitoring nonbank financial companies as
opposed to bank holding companies, the assessment methodology should
charge nonbank financial companies proportionately higher assessments.
The letter further suggested creation of a credit system whereby
previously assessed bank holding companies and nonbank financial
companies would pay lower assessment rates when new companies are
assessed. The Treasury notes that the Dodd-Frank Act requires that the
Council and the OFR monitor the financial system and respond to threats
to U.S. financial stability across the system. Mitigating current and
potential future threats to financial stability provides benefits for
financial market participants, including bank holding companies,
foreign banking organizations, and nonbank financial companies.
Likewise, previously assessed companies, as well as newly assessed
companies, are beneficiaries of these activities to mitigate threats to
financial stability. For these reasons, the Treasury believes that a
consistent allocation irrespective of sequence of inclusion in the
assessment pool or institution type is appropriate.
One comment letter suggested including language in the rule
prohibiting banking institutions from passing OFR assessments through
to retail or commercial customers in the form of fees or higher
interest rates. The Treasury has considered this concern, but believes
such a requirement would be difficult and costly to administer, and it
is questionable whether such an

[[Page 29888]]

approach would be permitted by the law.
One comment letter suggested that FDIC expenses associated with its
orderly liquidation authorities should be well-defined to avoid
shifting costs to OFR that should be borne by the FDIC. The Council and
the FDIC have established guidelines for these expenses to ensure that
only appropriate expenses are covered by the FRF.
Some commenters raised issues related to budget process, strategy
and the creation of an advisory committee that are outside the scope of
this rulemaking. Materials relevant to these issues may be found in the
OFR's Strategic Framework for FY2012-FY2014 published on March 15, 2012
\11\ and in the notice of interest to establish a Financial Research
Advisory Committee published in the Federal Register on March 22,
2012.\12\
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\11\ The FY2012-FY2014 Strategic Framework for the OFR, which
includes information on the OFR's budget process, can be found at:
http://www.treasury.gov/initiatives/wsr/ofr/Documents/OFRStrategicFramework.pdf.
\12\ 77 FR 16894.
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Assessments on Nonbank Financial Companies
Seven of the comment letters, including those from associations
that represent financial institutions and insurance companies,
expressed concerns about using unadjusted total consolidated assets to
allocate the assessment basis among nonbank financial companies. Three
comment letters (from an insurance company and two associations)
suggested that insurance separate accounts be excluded from total
consolidated assets for purposes of assessments. One association
suggested that private equity managed accounts be excluded from total
consolidated assets for purposes of assessments. Another association
suggested that all nonbank financial companies' non-financial assets be
excluded from total consolidated assets for purposes of assessments.
In addition, several comment letters suggested alternative methods
to assess nonbank financial companies or suggested that the Treasury
delay its final rulemaking until after the Council has made
determinations regarding nonbank financial companies for heightened
supervision by the Board. One comment letter from an insurer suggested
differentiating industries into classes based on their primary business
activity and developing class-specific assessments based on Section 155
criteria. Two comment letters suggested delaying rulemaking for nonbank
financial companies altogether until after the Council has made
determinations of nonbank financial companies for heightened
supervision by the Board. Two additional comment letters supported the
intent to re-evaluate the assessment schedule for nonbank financial
companies after the Council's rule on determination of nonbank
financial companies is finalized and the Council has begun making
determinations. One comment letter emphasized that assessments should
be reasonably and fairly allocated across bank holding companies and
nonbank financial companies. One comment letter requested clarification
on how non-public nonbank financial companies would be treated under
the rule and the manner in which information from these companies would
need to be reported to the Treasury for purposes of assessments.
After reviewing these comments, the Treasury has decided to issue a
final rule for bank holding companies and foreign banking
organizations, and an interim final rule for nonbank financial
companies. The comment period for the interim final rule for nonbank
financial companies will be open for 120 days after the publication
date of these rules, with possible extension. After the comment period,
the Treasury will review the assessments schedule for nonbank financial
companies and make adjustments to the nonbank financial company rule as
necessary.
The bank holding company and foreign banking organization final
rule and nonbank financial company interim final rule both rely on
total consolidated assets to calculate assessable assets. The Treasury
agrees that, to the extent practicable, the composition of total
consolidated assets used to calculate assessable assets for nonbank
financial companies, bank holding companies, and foreign banking
organizations should be comparable. As the Council implements its
authority to determine nonbank financial companies for heightened
supervision by the Board, the Treasury will evaluate substantive
accounting differences between total consolidated assets as reported by
nonbank financial companies supervised by the Board, bank holding
companies, and foreign banking organizations and review the need to
make adjustments to its definition of total consolidated assets for
nonbank financial companies.
Through its interim final rule, the Treasury continues to seek and
consider comment on whether the methodology adopted here for
determining the amount of the assessment for nonbank financial
companies is appropriate and what alternative methodologies might be
more appropriate. The Treasury also specifically seeks comments on the
question of whether a single methodology for determining the amount of
the assessment for nonbank financial companies is appropriate and, if
not, what an appropriate framework for differentiating between nonbank
financial companies might be.
Assessment Basis and Administration
The Treasury received comments on the assessment basis and
assessment administration from two commenters.
One comment letter suggested that collecting 12 months of capital
expenses, as opposed to six months of capital expenses, would result in
an unnecessarily large amount of unused resources. Given the
variability of timing for large-scale capital expenditures and the
importance of avoiding unnecessary interruptions in budgeted
investments, the Treasury believes it is necessary for each assessment
to replenish the FRF to a total of 12 months of capital expenditures.
The final rule and interim final rule retain the provision for each
assessment to replenish the FRF to a level equivalent to six months of
operating and 12 months of capital expenses for the FSOC and OFR.
One commenter noted that the initial assessment basis will include
operating expenses through March 31, 2013, capital expenses for the OFR
and the Council through April 30, 2013, and the FDIC's implementation
expenses through September 30, 2013. To clarify these dates, the first
assessment in July 2012 is transitional and includes operating expenses
for the remainder of fiscal year 2012 (July 21, 2012 to September 30,
2012), the first six months of fiscal year 2013 (October 1, 2012 to
March 31, 2013) and an amount necessary to reimburse reasonable
implementation expenses of the FDIC, as provided under section
210(n)(10) of the Dodd-Frank Act. Rather than collect 12 months of
capital expenses in the initial assessment, as a smoothing measure the
initial assessment includes capital expenses for the remainder of
FY2012 (July 21, 2012 to September 30, 2012) plus the first seven
months of FY2013 capital expenses (covering October 1, 2012 to April
30, 2013), for a total of approximately nine months of capital
expenses. The second assessment will bring capital funding in the FRF
up to the full 12-month level contemplated in the rule.
One comment letter expressed concern that the reports used to
calculate a foreign banking organization's U.S.-based assets in the

[[Page 29889]]

proposed rule do not report assets on a consolidated basis, so that
referencing data from multiple reports could result in double-counting.
The commenter requested greater clarity on what line items will be used
from each report to determine total assessable assets for foreign
banking organizations and suggested that the confirmation statement
sent to foreign banking organizations include a list of financial
report line items used to calculate assessable assets. Treasury will
make every effort to avoid double counting, consulting with the Board
and the affected firms as necessary. Any questions can be addressed
through the appeals process.
Assessment Timeframe
Under the proposed rule, semiannual determination dates for a
typical year would be December 31 and June 30. Confirmation statements
to assessed companies would be sent out approximately two weeks after
the determination date (and no later than 30 days prior to the first
day of the assessment period); publication of the Notice of Fees would
be about one month prior to the payment date; and billing would occur
at least 14 calendar days prior to the payment date. Two comment
letters noted that this time schedule for assessment collections
allowed too little time for assessed companies to prepare appeals to
assessments and too little time for companies with less liquid
portfolios to arrange payments. Ambiguities in the dates for issuance
of confirmation statements and publication of the Notice of Fees were
also noted in the letters. The commenters proposed extending the time
between issuance of the confirmation statement and billing date to
allow more time for appeals and payment arrangements.
The Treasury has considered these comments and is persuaded that an
adjustment, as described below, is appropriate. In this final rule and
interim final rule, the determination dates for a typical year are
moved back one month (to November 30 and May 31); confirmation
statements will be sent out 15 calendar days after the determination
date (December 15 and June 15); written appeals requesting a
redetermination would need to be provided by January 15 or July 15
(under the guidelines outlined in the NPRM); publication of the Notice
of Fees will be on February 15 and August 15; and billing will be on
March 1 and September 1 for payment on March 15 and September 15. (See
table below.) If the Treasury receives a written request for
redetermination from a company by these dates, the Treasury will
consider the company's request and respond with the results of a
redetermination within 21 calendar days, if the Treasury concludes that
a redetermination is warranted. If one of the dates referenced falls on
a holiday or weekend, aside from the Billing Date, the effective date
will be the next business day. (For the Billing Date, if the date
referenced falls on a holiday or weekend, the effective date will be
the first preceding business day.) The initial determination date,
confirmation statement date, publication of Notice of Fees, billing
date, and payment date are as outlined in the NPRM. These changes to
the rule will provide assessed companies additional time to prepare
appeals and make payment arrangements, as well as permit the Treasury
additional time to calculate assessments, administer the billing
process, and receive payments, as suggested in the comment letters. The
table below shows dates of the assessment billing and collection
process:

--------------------------------------------------------------------------------------------------------------------------------------------------------
Confirmation Publication of
Assessment period Determination date statement date notice of fees * Billing date Payment date
--------------------------------------------------------------------------------------------------------------------------------------------------------
Initial Assessment (July 2012 to December 31, 2011............ 7 calendar days About one month 14 calendar days July 20, 2012.
March 2013). after final rule prior to payment prior to payment
publication date. date. date.
1st semiannual Assessment (April- November 30.................. December 15 (or next February 15 (or next March 1 (or prior March 15 (or next
September). business day). business day). business day). business day).
2nd semiannual Assessment May 31....................... June 15 (or next August 15 (or next September 1 (or September 15 (or
(October-March). business day). business day). prior business day). next business day).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rate published in the Notice of Fees.

Term Definitions
Several comment letters suggested clarifications to term
definitions in the rule.
One comment letter requested clarification on the conditions and
procedure under which a company would cease to be an assessed company.
Another comment letter stated that companies that cease to be
assessable companies between the initial determination date and start
of the initial assessment period should not be assessed.
Under the definitions provided in this rule, companies meeting the
following conditions will not be determined to be assessable companies
on the determination date:
For bank holding companies as defined in Section 2 of the
Bank Holding Company Act of 1956, the average total consolidated assets
(Schedule HC--Consolidated Balance Sheet), as reported on the bank
holding company's four most recent Consolidated Financial Statements
for Bank Holding Companies (FR Y-9C; OMB No. 7100-0128) submissions, is
below $50 billion;
For foreign banking organizations, the average of total
assets at the end of a period (Part 1--Capital and Asset Information
for the Top-tier Consolidated Foreign Banking Organization), as
reported on the foreign banking organization's four most recent Capital
and Asset Information for the Top-tier Consolidated Foreign Banking
Organization (FR Y-7Q; OMB no. 7100-0125), is below $50 billion; \13\
---------------------------------------------------------------------------

\13\ For those foreign banking organizations that file the FR Y-
7Q annually instead of quarterly, the company's total consolidated
assets would be determined based on the average of total assets at
end of period as reported on the foreign banking organization's two
most recent FR Y-7Qs.
---------------------------------------------------------------------------

For nonbank financial companies, the company is not
determined by the Council to be required to be supervised by the Board
under Section 113 of the Dodd-Frank Act.
Companies that are determined to be assessable companies on the
determination date for an assessment period will be assessed for that
assessment period according to the rule. The assessment schedule is
structured so that the sum of assessments on individual companies
equals the sum

[[Page 29890]]

total necessary to support the duties of the Council and the OFR during
each period plus implementation expenses associated with the FDIC's
orderly liquidation authorities. Changes to one company's assessment
for a particular period would necessitate a change in all other
companies' assessments so that the aggregate of all assessment fees
equals the assessment basis for the period. The Treasury believes that
the burden and uncertainty that such changes would bring are too high
to warrant attempting to delineate a process to allow changes to the
information used by the Treasury to make its determinations, or adjust
the company's semiannual fee determined by the published assessment fee
schedule. The Treasury believes this burden and uncertainty would be
issues for the initial assessment period as they are for subsequent
assessment periods.
One comment letter requested the rule include a list of financial
reports that will be used to calculate total assessable assets for
foreign banking organizations. While the list of financial reports that
the Treasury anticipates it will use to calculate total assessable
assets for foreign banking organizations are listed in the Preamble of
the NPRM, it is possible that reporting requirements for foreign
banking organizations will change over time and the list of reports
will need to be adjusted. The rule does not include specific reference
to these reports to allow for the possibility of these changes. The
Treasury will provide a list of reports used to calculate assessments
to any assessed company, and will also maintain a list of reports used
to calculate assessments on its Web site for reference in advance of
the assessment period.
One comment letter requested that the definition of total
assessable assets for foreign banking organizations be clarified to
include U.S. branches and agencies in addition to subsidiaries. The
definition of total assessable assets for foreign banking organizations
in Section 150.2 has been modified to provide this clarity.
One comment letter requested that the rule provide clarity that
total assessable assets for foreign banking organizations will be
calculated as the average of the four most recent FR Y7-Q total assets
at end of period for quarterly filers and the average of the two most
recent annual FR Y7-Q total assets at end of period for annual filers.
(This distinction was provided in the Preamble of the NPRM but not the
text of the rule.) For reasons noted above, the Treasury has not
included a list of reference reports in the final rule, but language
was added to the rule clarifying that the average of four quarters of
data will be used to calculate assessments for quarterly filers and the
average of two years of annual data will be used to calculate
assessments for annual filers.
One comment letter requested that the definition of ``bank holding
company'' and ``foreign banking organization'' be clarified so that
foreign banking organizations are limited to international banks that
are subject to the Bank Holding Company Act of 1956 pursuant to Section
8(a) of the International Banking Act of 1978. The letter suggested
modifying the definition of ``bank holding company'' to specify U.S.-
domiciled bank holding companies and modify the definition of ``foreign
banking organization'' to incorporate by reference the definition of
that term in Section 211.21(o) of the Board's Regulation K. The letter
also suggested revising paragraphs (1) and (2) of the definition of
total assessable assets to reflect these revisions. The final rule
clarifies these definitions accordingly.
One comment letter suggested that the final rule clarify that only
total assets of combined U.S. operations of U.S. companies with foreign
affiliates would be assessable. The Dodd-Frank Act is silent on this
point. However, the Dodd-Frank Act requires that the Council and the
OFR monitor the financial system and respond to threats to U.S.
financial stability across the system. Mitigating current and potential
future threats to financial stability provides particular benefits for
companies that conduct a majority of their business in U.S. markets.
Treasury also notes that a significant disruption to foreign operations
could impact the parent company, and where the parent company is a U.S.
entity, it may have consequences for U.S. financial stability. The rule
consequently retains calculation of total assessable assets for U.S.-
based companies based on global total consolidated assets.
Comments of General Support
The two letters from individuals expressed general support for the
rule. One comment letter expressed support for assessing financial
institutions to fund the Office. One comment letter expressed support
for the permanent self-funding provisions reflected in the rule and the
mission of the Office.

III. Procedural Requirements

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,
requires agencies to prepare an initial regulatory flexibility analysis
(IRFA) to determine the economic impact of the rule on small entities.
Section 605(b) allows an agency to prepare a certification in lieu of
an IRFA if the rule will not have a significant economic impact on a
substantial number of small entities. Pursuant to 5 U.S.C. 605(b), it
is hereby certified that this rule will not have a significant economic
impact on a substantial number of small entities. The size standard for
determining whether a bank holding company or a nonbank financial
company is small is $7 million in average annual receipts. Under
Section 155 of the Dodd-Frank Act, only bank holding companies with
more than $50 billion in total consolidated assets or nonbank financial
companies regulated by the Federal Reserve will be subject to
assessment. As such, this rule will not apply to small entities and a
regulatory flexibility analysis is not required.

B. Paperwork Reduction Act

On a one-time basis, assessed entities would be required to set up
a bank account for fund transfers and provide the required information
to the Treasury Department on a form. The form includes bank account
routing information and contact information for the individuals at the
company that will be responsible for setting up the account and
ensuring that funds are available on the billing date. The Treasury
Department estimates that approximately 50 companies \14\ may be
affected, and that completing and submitting the form would take
approximately fifteen minutes. The aggregate paper work burden is
estimated at 12.5 hours.
---------------------------------------------------------------------------

\14\ The Treasury estimates that approximately 50 bank holding
companies and foreign banking organizations will be assessed in the
initial assessment. The number of eligible bank holding companies
and foreign banking organizations could increase or decrease over
time. The number of assessed companies could also increase if the
Council determines nonbank financial companies for heightened
supervision by the Board.
---------------------------------------------------------------------------

[[Page 29891]]

a collection of information unless it displays a valid OMB control
number.
The information collections are included in Sec. 150.6.

C. Regulatory Planning and Review (Executive Orders 12866 and 13563)

It has been determined that this regulation is a significant
regulatory action as defined in Executive Order 12866 as supplemented
by Executive Order 13563, in that this rule would have an annual effect
on the economy of $100 million or more. Accordingly, this rule has been
reviewed by the Office of Management and Budget. The Regulatory Impact
Assessment prepared by Treasury for this regulation is provided below.
1. Description of Need for the Regulatory Action
Section 155 of the Dodd-Frank Act directs the Board to provide
funding sufficient to cover the expenses of the OFR and FSOC during the
two-year period following enactment. (The Dodd-Frank Act was enacted on
July 21, 2010.) To provide funding after July 21, 2012, Section 155(d)
of the Dodd-Frank Act directs the Secretary of the Treasury to
establish by regulation, and with the approval of the FSOC, an
assessment schedule for bank holding companies with total consolidated
assets of $50 billion or greater and nonbank financial companies
supervised by the Board.
2. Provision--Affected Population
Section 155(d) of the Dodd-Frank Act defines the population of
assessed companies as bank holding companies with total consolidated
assets of $50 billion or greater and nonbank financial companies
supervised by the Board.
Under this definition, U.S bank holding companies and foreign
banking organizations with $50 billion or more in total worldwide
consolidated assets and nonbank financial companies supervised by the
Board qualify for assessment. However, under the rule only U.S.-based
assets of foreign banking organizations would be used to calculate
their assessments. Foreign banking organizations with less than $50
billion in U.S.-based assets would not be assessed. Based on
information provided by the Board, we estimate that forty-eight bank
holding companies qualified as assessed companies as of June 30, 2011.
Nonbank financial companies determined by the FSOC to require
heightened supervision under Title I would be assessed on the basis of
their total consolidated assets for U.S. entities and on the basis of
total consolidated assets of U.S. operations for foreign entities,
similar to bank holding companies. All such nonbank financial companies
would be assessed, regardless of their level of total consolidated
assets.\15\
---------------------------------------------------------------------------

\15\ To date, the Council has not made a determination regarding
the applicability of Board supervision under section 113 for a
nonbank financial company. Moreover, it is unclear as to what type
of nonbank financial companies the Council may consider for a
determination. For these reasons, as the Council begins to make
determinations regarding nonbank financial companies under section
113, the Treasury's methodology for determining the assessment fee
for these companies would be reviewed and, as needed, revised
through the rulemaking process to assure that the assessment fees
charged to these companies would be appropriate.
---------------------------------------------------------------------------

3. Baseline
The Dodd-Frank Act established the FSOC and the OFR, and vested the
FDIC with orderly liquidation authorities. Prior to passage of the Act,
these entities and authorities did not exist. Expenses associated with
these activities are directed by the Dodd-Frank Act to be funded by the
Board for a two-year period to end on July 21, 2012. After July 21,
2012, the Dodd-Frank Act requires the Secretary of the Treasury
establish an assessment schedule by regulation, with approval by the
Council, to collect funds necessary to cover these expenses. There is
no provision in the Dodd-Frank Act for the FSOC or the OFR to receive
appropriated funds. Section 152(e) of the Dodd-Frank Act allows
departments or agencies of government to provide funds, facilities,
staff, and other support services to the OFR as the OFR may determine
advisable. Section 152(e) and Section 111(j) allow for employees of the
Federal Government to be detailed to the OFR and the FSOC,
respectively, without reimbursement. Funding through departments or
agencies of government would not be sufficient to perform all of the
functions of the FSOC, the OFR, and the FDIC required by the Act.
Agencies funded by appropriations would be restricted in the amount of
funding support they could provide to the FSOC or the OFR. Agencies not
funded by appropriations would be restricted in the amount of funding
support they could provide for activities outside their primary
mandate. Restrictions on the availability of funds or lack of
predictability of funding would make it difficult to maintain
consistent program activities, and complete analysis required to
identify possible threats to financial stability. The implementation of
this rule is not expected to have a discernible effect on the structure
of the financial sector.
4. Assessment of Total Fees Collected
It is anticipated that the annual assessments for the FRF will
exceed $100 million, making the rule a significant regulatory action as
defined in Executive Order 12866.
The assessment and collection of fees described in this rule
represent an economic transfer from assessed companies to the
government, for purposes of providing the benefits described above. As
such, the assessments do not represent an economic cost for purposes of
this analysis. However, the allocation of the assessment may have
distributional impacts.
There is a wide range of possible assessment schedules which could
be used to collect funds for the OFR and the FSOC. For example, the
schedule could be structured to charge eligible companies a similar
fee, it could include tiered fees and rates, or it could include
assessments for all eligible companies as opposed to just entities with
$50 billion in U.S.-based assets (i.e., including foreign banking
organizations with more than $50 billion in worldwide assets but less
than $50 billion in U.S.-based assets). Having a simple, more
transparent assessment schedule reduces costs for government and for
assessed companies by making assessments easier to calculate, budget
for, and manage administratively. Executive Order 12866 specifically
requires that agencies ``design its regulations in the most cost-
effective manner to achieve the regulatory objective.''
The selection of the assessment schedule was governed by two
guiding principles:
The assessment structure should be simple and transparent;
and
Allocation should take into account differences among such
companies, based on the considerations for establishing the prudential
standards under section 115 of the Dodd-Frank Act as required by the
Act.
Under Section 155 of the Act, the assessment schedule is required
to take into account criteria for establishing prudential standards for
supervision and regulation of large bank holding companies and nonbank
financial companies as described in Section 115 of the Act. The
criteria in Section 115 include: ``Capital structure, riskiness,
complexity, financial activities (including the financial activities of
subsidiaries), size, and any other risk-related factors that the
Council deems appropriate.'' Selection of total consolidated assets as
the basis for assessments was intended to take into

[[Page 29892]]

account the criteria identified in Section 115, while providing a more
transparent and administratively cost effective metric. Using other
risk-related metrics as a base for calculation could dramatically
increase the cost of calculating assessments, as well as reduce a
company's ability to project their assessment level. As of June 30,
2011, companies meeting the criteria for assessment had $18.7 trillion
in total consolidated assets.
Under the assessment structure, each assessed company's eligible
assets would be multiplied by an assessment fee rate to determine their
assessment amount. (Eligible assets would be total worldwide
consolidated assets for U.S.-based bank holding companies and
designated U.S.-based nonbank financial companies, and total U.S.-based
assets for foreign banking organizations and foreign designated nonbank
financial companies.) Assessments would be made semiannually, generally
based on an average of the company's last four quarters of total
consolidated assets.
For example, based on data on assessable assets as of June 30,
2011, for every $100 million collected the range of assessments would
be $280,000 for the smallest assessed company (with just over $50
billion in assets) to $12.5 million for the largest assessed company
(with approximately $2.3 trillion in assets).\16\ Assessments on the
ten largest assessed companies would provide roughly two-thirds of the
total assessed amount.
---------------------------------------------------------------------------

\16\ Semiannual assessments will be set to maintain FRF balance
at 12 months of budgeted capital expenses and six months of budgeted
operating expenses. The initial assessment basis would be equivalent
to the budgeted expenses for the end of fiscal year 2012 (July 20,
2012 to September 30, 2012), seven months of budgeted capital
expenses and six months of budgeted operating expenses for FY 2013.
---------------------------------------------------------------------------

Based on currently available data, no assessed company will have
less than $50 billion in assets; thus no small businesses are directly
affected by the regulation. Under the structure of the rule, the only
assessed companies that could have less than $50 billion in assets
would be nonbank financial companies subject to enhanced prudential
supervision by the Board. While no such determinations have yet been
made, Treasury believes that the FSOC will not make such a
determination for any nonbank financial company that is a small
business. It is not anticipated that the regulation will unduly
interfere with state, local, and tribal governments in the exercise of
their governmental functions.
We estimate that there are certain direct costs associated with
complying with these rules. On a one-time basis, assessed entities
would be required to set up a bank account for fund transfers and
provide the required information to the Treasury Department through an
information collection form. The information collection form includes
bank account routing information and contact information for the
individuals at the company that will be responsible for setting up the
account and ensuring that funds are available on the billing date. We
estimate that approximately 50 companies could be affected, and that
the cost associated with filling out the form and submitting it to the
Treasury Department is approximately $600.\17\ We note that this
represents a conservative estimate of costs as some of these companies
may have already established an account for payments or collections to
the U.S. government.
---------------------------------------------------------------------------

\17\ The cost of this activity is calculated by multiplying the
50 companies by the time it takes to complete the form (15 minutes)
by an approximate hourly wage of $48 (assuming an annual salary of
$100,000).
---------------------------------------------------------------------------

On a semi-annual basis, assessed companies will have the
opportunity to review the confirmation statement and assessment bill.
The rules do not require the companies to conduct the review, but it
does permit it. We anticipate that at least some of the companies will
conduct reviews, in part because the cost associated with it is very
low.
5. Alternative Approaches Considered
We have noted that there are many possible assessment structures
which could be employed to collect assessments. As part of the
rulemaking process, Treasury contemplated a variety of structures for
determining how assessments would be allocated. Particularly, Treasury
considered alternate approaches with regard to the complexity of the
method of assessment. In addition, Treasury considered alternative
approaches with the following features: (1) Approaches designed to
charge assessed companies at a similar fee level, distributing
collections more evenly; (2) approaches designed to charge different
rates for different levels of total consolidated assets, creating a
``tiered'' structure of rates; and (3) approaches designed to charge
eligible bank holding companies and foreign banking organizations
against world-wide assets, as opposed to charging foreign banking
organizations against U.S.-based assets. We discuss these alternative
approaches below.
a. Complexity of Approach
In evaluating methodologies for determining individual company
assessments, the Treasury notes that there has been a variety of
assessment approaches employed by other federal and international
agencies which incorporate measures of risk that are similar to the
considerations mentioned in Section 115 of the Dodd-Frank Act. For
example, Basel III capital adequacy standards set minimum capital
requirements based on risk-weighted assets and also provide a mandatory
capital conservation buffer and a discretionary countercyclical buffer.
The risk-based calculations incorporate capital tiers, leverage, credit
valuation adjustments, and other factors. As required by the Dodd-Frank
Act, the FDIC recently revised how banks are charged deposit insurance
assessments. With some minor exceptions, the FDIC assessment base is
total consolidated assets minus tangible equity.
In the U.S., the FDIC uses the CAMELS system to assign risk ranking
to its regulated banks. As suggested by commenters, the Treasury
considered using CAMELS as a classification system for assigning
relative assessments, but deemed the approach inappropriate as the
methodology used to produce CAMELS ratings is non-public, the ratings
are confidential supervisory information, and the rating system was
developed to apply to U.S. depository institutions. The system also
provides broad rankings (ranging from one to five) which would require
subjective translation into assessment levels.
In each of these cases, and in other related determinations, the
complexity of the assessment methodology is tied to the goal of the
charge. For instance, the Dodd-Frank Act requires the Board to collect
assessments designed to cover the costs of heightened regulation and
supervision of large bank holding companies, large savings and loan
holding companies, and nonbank financial companies supervised by the
Board.
In evaluating these arrangements, Treasury notes that complexity in
the assessment design increases the administrative burden to assessed
companies, including planning for those assessments, and decreases
transparency to the public. Treasury does not believe that the benefits
of a complex methodology justify their increased costs in the context
of this rulemaking.

[[Page 29893]]

b. Charging Companies Fees at a Similar Level
Section 155 of the Dodd-Frank Act requires that the assessment
schedule take into account criteria for establishing prudential
standards for supervision and regulation of large bank holding
companies and nonbank financial companies as described in Section 115
of the Act. The criteria in Section 115 include: ``capital structure,
riskiness, complexity, financial activities (including the financial
activities of subsidiaries), size, and any other risk-related factors
that the Council deems appropriate.'' The option of charging companies
at a similar level was rejected as it would appear to contradict the
intent of the Act for the schedule to charge larger, more complex and
riskier firms higher fees. On the basis of size alone, we estimate that
the largest eligible companies have over 40 times the assessable assets
of smallest companies.
c. Charging Fees Under a Tiered Rate Structure
A number of regulators rely on tiered assessment schedules to
collect fees. The Office of the Comptroller of the Currency uses a
tiered assessment structure to collect fees associated with regulating
and supervising national banks. The Office of Thrift Supervision used a
tiered structure to collect fees to regulate and supervise thrifts. The
main benefit of a tiered structure is that it allows fees to be charged
at different rates to different companies. For example, supervision may
benefit from economies of scale, meaning that the additional resources
required for supervision do not grow dollar for dollar with the size of
the entity. Alternatively, larger companies may pose risks that are
disproportionately larger than their asset size, requiring even more
resources for supervision than do smaller companies. A tiered approach
could accommodate such differences by allowing different fee rates to
be charges against assessed assets by tier.
Consideration was given to establishing such a structure for FRF
assessments. The primary benefit would have been greater flexibility in
determining the relative amounts assessed on larger companies versus
smaller companies. However, these benefits were balanced against an
interest for assessment fees to be reasonably estimable and simpler to
calculate, reducing administrative costs both for assessed companies
and the Treasury, improving transparency, and allowing companies to
better anticipate assessment amounts. Given that all assessed companies
are large (generally with over $50 billion in assets) and systemically
important, and the activities of the FSOC, the OFR, and implementation
expenses of the FDIC correspond to all of them, the relative benefits
of a tiered structure over a fixed rate structure were unclear.
d. Charging All Eligible Bank Holding Companies
Based on the definition of ``bank holding company'' in Title I of
the Dodd-Frank Act, assessments can be made against any foreign banking
organizations with $50 billion or more in total consolidated assets.
Since many of these eligible foreign banking companies have a
relatively small percentage of their operations in the United States,
there is limited basis for assessing these companies. Consideration was
given to charging a small fee, so that all eligible companies would be
charged, but the additional costs associated with administering the fee
and cost of compliance by these companies outweighed the perceived
benefits of this choice. The final determination was to charge foreign
banking organizations with $50 billion or more in total U.S.-based
assets and U.S. based bank holding companies with $50 billion or more
in total consolidated assets.

D. Congressional Review Act

The Congressional Review Act, 5 U.S.C. 801 et seq., generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. A major rule cannot take effect until 60 days after it
is published in the Federal Register. This action is a ``major rule''
as defined by 5 U.S.C. 804(2) and will be effective 60 days after
publication.

E. Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a state, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Treasury believes that the
regulatory impact analysis provides the analysis required by the
Unfunded Mandates Reform Act.

F. Administrative Procedure Act

The Administrative Procedure Act (5 U.S.C. 551 et seq.) (APA)
generally requires public notice and comment procedures before
promulgation of regulations. See 5 U.S.C. 553(b). The Treasury
published a notice of proposed rulemaking requesting comment on the
proposed rule on January 3, 2012. The Treasury is finalizing the rule
as it relates to bank holding companies without an opportunity for
additional comment.
The comments that relate to nonbank financial companies have been
considered but have not been fully addressed in this interim rule
because the Department believes the rulemaking would benefit from
additional public comment prior to establishing it as a final rule.
The Department believes, however, that good cause exists under 5
U.S.C. 553(b) to effectuate the rule as it relates to nonbank financial
companies on an interim basis. As discussed in this preamble, nonbank
financial companies supervised by the Board pursuant to section 113 of
the Dodd-Frank Act are subject to assessments. To date, no nonbank
financial company has been subject to the section 113 supervision. Once
designated by the Council and subject to Board supervision, a nonbank
financial company will also be subject to assessments under the Dodd-
Frank Act. In order to be consistent with the requirements of section
155 of the Act in assessing designated nonbank financial companies, the
Treasury finds that it would be impracticable and contrary to the
public interest to delay implementation of the rule pending further
public comment. To implement the rule only as it relates to bank
holding companies would impose an increased burden on bank holding
companies and prevent the collection from designated nonbank financial
companies of the assessments required to be imposed by statute.
Accordingly, the Treasury is effectuating the rule as it relates to
nonbank financial companies, but also invites public comment on
portions of Sec. Sec. 150.2, 150.3, 150.4, 150.5, and 150.6 as they
relate to nonbank financial companies.

List of Subjects in 31 CFR Part 150

Bank holding companies, Nonbank financial companies, Financial
research fund.

For the reasons set forth in the preamble, the Treasury amends
Title 31, Chapter I of the Code of Federal Regulations by adding part
150 to read as follows:

[[Page 29894]]

PART 150--FINANCIAL RESEARCH FUND

Sec.
150.1 Scope.
150.2 Definitions.
150.3 Determination of assessed companies.
150.4 Calculation of assessment basis.
150.5 Calculation of assessments.
150.6 Notice and payment of assessments.

Authority: 12 U.S.C. 5345; 31 U.S.C. 321.

Sec. 150.1 Scope.

The assessments contained in this part are made pursuant to the
authority contained in 12 U.S.C. 5345.

Sec. 150.2 Definitions.

As used in this part:
Assessed company means:
(1) A bank holding company that has $50 billion or more in total
consolidated assets, based on the average of total consolidated assets
as reported on the bank holding company's four most recent quarterly
Consolidated Financial Statements for Bank Holding Companies (or, in
the case of a foreign banking organization, based on the average of
total assets at end of period as reported on such company's four most
recent quarterly Capital and Asset Information for the Top-tier
Consolidated Foreign Banking Organization submissions if filed
quarterly, or two most recent annual submissions if filed annually, as
appropriate); or
(2) A nonbank financial company required to be supervised by the
Board under section 113 of the Dodd-Frank Act.
Assessment basis means, for a given assessment period, an estimate
of the total expenses that are necessary or appropriate to carry out
the responsibilities of the Office and the Council as set out in the
Dodd-Frank Act (including an amount necessary to reimburse reasonable
implementation expenses of the Corporation that shall be treated as
expenses of the Council pursuant to section 210(n)(10) of the Dodd-
Frank).
Assessment fee rate, with regard to a particular assessment period,
means the rate published by the Department for the calculation of
assessment fees for that period.
Assessment payment date means:
(1) For the initial assessment period, July 20, 2012;
(2) For any semiannual assessment period ending on March 31 of a
given calendar year, September 15 of the prior calendar year; and
(3) For any semiannual assessment period ending on September 30 of
a given calendar year, March 15 of the same year.
Assessment period means any of:
(1) The initial assessment period; or
(2) Any semiannual assessment period.
Bank holding company means:
(1) A bank holding company as defined in section 2 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841); or
(2) A foreign banking organization.
Board means the Board of Governors of the Federal Reserve System.
Corporation means the Federal Deposit Insurance Corporation.
Council means the Financial Stability Oversight Council established
by section 111 of the Dodd-Frank Act.
Department means the Department of the Treasury.
Determination date means:
(1) For the initial assessment period, December 31, 2011.
(2) For any semiannual assessment period ending on March 31 of a
given calendar year, May 31 of the prior calendar year.
(3) For any semiannual assessment period ending on September 30 of
a given calendar year, November 30 of the prior calendar year.
Dodd-Frank Act means the Dodd-Frank Wall Street Reform and Consumer
Protection Act.
Foreign banking organization means a foreign bank or company that
is treated as a bank holding company for purposes of the Bank Holding
Company Act of 1956, pursuant to section 8(a) of the International
Banking Act of 1978 (12 U.S.C. 3106(a)).
Initial assessment period means the period of time beginning on
July 20, 2012 and ending on March 31, 2013.
Office means the Office of Financial Research established by
section 152 of the Dodd-Frank Act.
Semiannual assessment period means:
(1) Any period of time beginning after the initial assessment
period on October 1 and ending on March 31 of the following calendar
year; or
(2) Any period of time beginning after the initial assessment
period on April 1 and ending on September 30 of the same calendar year.
Total assessable assets means:
(1) For a bank holding company other than a foreign banking
organization, the average of total consolidated assets for the four
quarters preceding the determination date, as reported on the bank
holding company's four most recent FR Y-9C filings;
(2) For any other bank holding company that has $50 billion or more
in total consolidated assets, the average of the company's total assets
of combined U.S. operations for the four quarters preceding the
determination date, based on the combined total assets of the foreign
banking organization's U.S. branches, agencies, and subsidiaries as
reported on the foreign banking organization's four most recent
quarterly financial reports, or, if the company only files financial
reports annually, the average of the company's total assets of combined
U.S. operations for the two years preceding the determination date,
based on the combined total assets of the foreign banking
organization's U.S. branches, agencies, and subsidiaries as reported on
the foreign banking organization's two most recent annual financial
reports; or
(3) For a nonbank financial company supervised by the Board under
section 113 of the Dodd-Frank Act, either the average of total
consolidated assets for the four quarters preceding the determination
date, if the company is a U.S. company, or the average of total assets
of combined U.S. operations for the four quarters preceding the
determination date, if the company is a foreign company.

Sec. 150.3 Determination of assessed companies.

(a) The determination that a bank holding company or a nonbank
financial company is an assessed company will be made by the
Department.
(b) The Department will apply the following principles in
determining whether a company is an assessed company:
(1) For tiered bank holding companies for which a holding company
owns or controls, or is owned or controlled by, other holding
companies, the assessed company shall be the top-tier, regulated
holding company.
(2) In situations where more than one top-tier, regulated bank
holding company has a legal authority for control of a U.S. bank, each
of the top-tier regulated holding companies shall be designated as an
assessed company.
(3) In situations where a company has not filed four consecutive
quarters of the financial reports referenced above for the most recent
quarters (or two consecutive years for annual filers of the FR Y-7Q or
successor form), such as may be true for companies that recently
converted to a bank holding company, the Department will use, at its
discretion, other financial or annual reports filed by the company,
such as Securities and Exchange Commission (SEC) filings, to determine
a company's total consolidated assets.
(4) In situations where a company does not report total
consolidated assets in its public reports or where a company uses a
financial reporting methodology other than U.S. GAAP to report on its

[[Page 29895]]

U.S. operations, the Department will use, at its discretion, any
comparable financial information that the Department may require from
the company for this determination.
(c) Any company that the Department determines is an assessed
company on a given determination date will be an assessed company for
the entire assessment period related to such determination date, and
will be subject to the full assessment fee for that assessment period,
regardless of any changes in the company's assets or other attributes
that occur after the determination date.

Sec. 150.4 Calculation of assessment basis.

(a) For the initial assessment period, the Department will
calculate the assessment basis such that it is equivalent to the sum
of:
(1) Budgeted operating expenses for the Office for the period
beginning July 21, 2012 and ending March 31, 2013;
(2) Budgeted operating expenses for the Council for the period
beginning July 21, 2012 and ending March 31, 2013;
(3) Capital expenses for the Office for the period beginning July
21, 2012 and ending April 30, 2013; and
(4) Capital expenses for the Council for the period beginning July
21, 2012 and ending April 30, 2013; and
(5) An amount necessary to reimburse reasonable implementation
expenses of the Federal Deposit Insurance Corporation as provided under
section 210(n)(10) of the Dodd-Frank Act.
(b) For each subsequent assessment period, the Department will
calculate an assessment basis that shall be sufficient to replenish the
Financial Research Fund to a level equivalent to the sum of:
(1) Budgeted operating expenses for the Office for the applicable
assessment period;
(2) Budgeted operating expenses for the Council for the applicable
assessment period;
(3) Budgeted capital expenses for the Office for the 12-month
period beginning on the first day of the applicable assessment period;
(4) Budgeted capital expenses for the Council for the 12-month
period beginning on the first day of the applicable assessment period;
and
(5) An amount necessary to reimburse reasonable implementation
expenses of the Federal Deposit Insurance Corporation as provided under
section 210(n)(10) of the Dodd-Frank Act.

Sec. 150.5 Calculation of assessments.

(a) For each assessed company, the Department will calculate the
total assessable assets in accordance with the definition in Sec.
150.2.
(b) The Department will allocate the assessment basis to the
assessed companies in the following manner:
(1) Based on the sum of all assessed companies' total assessable
assets, the Department will calculate the assessment fee rate necessary
to collect the assessment basis for the applicable assessment period.
(2) The assessment payable by an assessed company for each
assessment period shall be equal to the assessment fee rate for that
assessment period multiplied by the total assessable assets of such
assessed company.
(3) Foreign banking organizations with less than $50 billion in
total assessable assets shall not be assessed.

Sec. 150.6 Notice and payment of assessments.

(a) No later than fifteen calendar days after the determination
date (or, in the case of the initial assessment period, no later than
seven days after the publication date of this rule), the Department
will send to each assessed company a statement that:
(1) Confirms that such company has been determined by the
Department to be an assessed company; and
(2) States the total assessable assets that the Department has
determined will be used for calculating the company's assessment.
(b) If a company that is required to make an assessment payment for
a given semiannual assessment period believes that the statement
referred to in paragraph (a) of this section contains an error, the
company may provide the Department with a written request for a revised
statement. Such request must be received by the Department via email
within one month and must include all facts that the company requests
the Department to consider. The Department will respond to all such
requests within 21 calendar days of receipt thereof.
(c) No later than the 14 calendar days prior to the payment date
for a given assessment period, the Department will send an electronic
billing notification to each assessed company, containing the final
assessment that is required to be paid by such assessed company.
(d) For the purpose of making the payments described in Sec.
150.5, each assessed company shall designate a deposit account for
direct debit by the Department through www.pay.gov or successor Web
site. No later than the later of 30 days prior to the payment date for
an assessment period, or the effective date of this rule, each such
company shall provide notice to the Department of the account
designated, including all information and authorizations required by
the Department for direct debit of the account. After the initial
notice of the designated account, no further notice is required unless
the company designates a different account for assessment debit by the
Department, in which case the requirements of the preceding sentence
apply.
(e) Each assessed company shall take all actions necessary to allow
the Department to debit assessments from such company's designated
deposit account. Each such company shall, prior to each assessment
payment date, ensure that funds in an amount at least equal to the
amount on the relevant electronic billing notification are available in
the designated deposit account for debit by the Department. Failure to
take any such action or to provide such funding of the account shall be
deemed to constitute nonpayment of the assessment. The Department will
cause the amount stated in the applicable electronic billing
notification to be directly debited on the appropriate payment date
from the deposit account so designated.
(f) In the event that, for a given assessment period, an assessed
company materially misstates or misrepresents any information that is
used by the Department in calculating that company's total assessable
assets, the Department may at any time re-calculate the assessment
payable by that company for that assessment period, and the assessed
company shall take all actions necessary to allow the Department to
immediately debit any additional payable amounts from such assessed
company's designated deposit account.
(g) If a due date under this section falls on a date that is not a
business day, the applicable date shall be the next business day.

Dated: May 14, 2012.
Mary Miller,
Under Secretary for Domestic Finance, Department of the Treasury.
[FR Doc. 2012-12047 Filed 5-18-12; 8:45 am]
BILLING CODE 4810-25-P