[Federal Register Volume 79, Number 84 (Thursday, May 1, 2014)]
[Proposed Rules]
[Pages 24618-24623]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09452]


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DEPARTMENT OF TREASURY

Office of the Comptroller of the Currency

12 CFR Part 3

[Docket ID OCC-2014-0012]
RIN 1557-AD83

FEDERAL RESERVE SYSTEM

12 CFR Part 217

[Docket No. R-1488; Regulation Q]
RIN 7100 AE17

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 324

RIN 3064-AE13


Regulatory Capital Rules: Advanced Approaches Risk-Based Capital 
Rule, Proposed Revisions to the Definition of Eligible Guarantee

AGENCY: Office of the Comptroller of the Currency, Treasury; the Board 
of Governors of the Federal Reserve System; and the Federal Deposit 
Insurance Corporation.

ACTION: Joint notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC), the Board 
of Governors of the Federal Reserve System (Board), and the Federal 
Deposit Insurance Corporation (FDIC) (collectively, the agencies) are 
seeking comment on a notice of proposed rulemaking (proposed rule) that 
would revise the definition of eligible guarantee as incorporated into 
the agencies' advanced approaches risk-based capital rule, adopted in 
the agencies' July 2013 regulatory capital rule (2013 capital rule).
    The agencies inadvertently limited the recognition of guarantees of 
wholesale exposures under the advanced approaches risk-based capital 
rule as incorporated into subpart E of the 2013 capital rule (advanced 
approaches). To address this matter, the proposed rule would remove the 
requirement that an eligible guarantee be made by an eligible guarantor 
for purposes of calculating the risk-weighted assets of an exposure 
(other than a securitization exposure) under the advanced approaches. 
The proposed change to the definition of eligible guarantee would apply 
to all banks, savings associations, bank holding companies, and savings 
and loan holding companies that are subject to the advanced approaches.

DATES: Comments must be received no later than June 13, 2014.

ADDRESSES: Comments should be directed to:
    OCC: Because paper mail in the Washington, DC area and at the OCC 
is subject to delay, commenters are encouraged to submit comments by 
the Federal eRulemaking Portal or email, if possible. Please use the 
title ``Regulatory Capital Rules: Regulatory Capital, Proposed 
Revisions to the Definition of Eligible Guarantee'' to facilitate the 
organization and distribution of the comments. You may submit comments 
by any of the following methods:
     Federal eRulemaking Portal--``regulations.gov'': Go to 
http://www.regulations.gov. Enter ``Docket ID OCC-2014-0012'' in the 
Search Box and click ``Search''. Results can be filtered

[[Page 24619]]

using the filtering tools on the left side of the screen. Click on 
``Comment Now'' to submit public comments.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting public comments.
     Email: regs.comments@occ.treas.gov.
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW., Suite 
3E-218, Mail Stop 9W-11, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, 
Mail Stop 9W-11, Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2014-0012'' in your comment. In general, OCC will enter 
all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically: Go to http://www.regulations.gov. Enter ``Docket ID OCC-2014-0012'' in the Search 
box and click ``Search''. Comments can be filtered by Agency using the 
filtering tools on the left side of the screen.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
viewing public comments, viewing other supporting and related 
materials, and viewing the docket after the close of the comment 
period.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 400 7th Street, SW., Washington, DC. 
For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 649-
6700. 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.
     Docket: You may also view or request available background 
documents and project summaries using the methods described above.
    Board: When submitting comments, please consider submitting your 
comments by email or fax because paper mail in the Washington, DC area 
and at the Board may be subject to delay. You may submit comments, 
identified by Docket No. R-1488, RIN 7100 AE17, by any of the following 
methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: regs.comments@federalreserve.gov. Include docket 
number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Robert de V. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Street NW., Washington, DC 20551) between 9:00 a.m. and 5:00 p.m. on 
weekdays.
    FDIC: You may submit comments, identified by RIN 3064-AE13, by any 
of the following methods:
    Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on the Agency 
Web site.
     Email: Comments@fdic.gov. Include the RIN 3064-AE13 on the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW., 
Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7:00 a.m. and 5:00 p.m.
    Public Inspection: All comments received must include the agency 
name and RIN 3064-AE13 for this rulemaking. All comments received will 
be posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html, including any personal information provided. 
Paper copies of public comments may be ordered from the FDIC Public 
Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, 
VA 22226 by telephone at (877) 275-3342 or (703) 562-2200.

FOR FURTHER INFORMATION CONTACT:
    OCC: Margot Schwadron, Senior Risk Expert, (202) 649-6982; or Roger 
Tufts, Senior Economic Advisor, (202) 649-6981, Capital Policy; or Carl 
Kaminski, Counsel, Legislative and Regulatory Activities Division, 
(202) 649-5490, for persons who are deaf or hard of hearing, TTY, (202) 
649-5597, Office of the Comptroller of the Currency, 400 7th Street 
SW., Washington, DC 20219.
    Board: Anna Lee Hewko, Deputy Associate Director, (202) 530-6260; 
Constance M. Horsley, Assistant Director, (202) 452-5239; Thomas 
Boemio, Manager, (202) 452-2982; Andrew Willis, Senior Financial 
Analyst, (202) 912-4323; or Justyna Milewski, Financial Analyst, (202) 
452-3607, Capital and Regulatory Policy, Division of Banking 
Supervision and Regulation; or Benjamin McDonough, Senior Counsel, 
(202) 452-2036; April C. Snyder, Senior Counsel, (202) 452-3099; 
Christine Graham, Counsel, 202 452 3005; or Mark Buresh, Attorney, 
(202) 452-5270, Legal Division, Board of Governors of the Federal 
Reserve System, 20th and C Streets NW., Washington, DC 20551. For the 
hearing impaired only, Telecommunication Device for the Deaf (TDD), 
(202) 263-4869.
    FDIC: Bobby R. Bean, Associate Director, bbean@fdic.gov; Ryan 
Billingsley, Chief, Capital Policy Section, rbillingsley@fdic.gov; 
Benedetto Bosco, Capital Markets Policy Analyst, bbosco@fdic.gov, 
Capital Markets Branch, Division of Risk Management Supervision, 
regulatorycapital@fdic.gov or (202) 898-6888; or Mark Handzlik, 
Counsel, mhandzlik@fdic.gov; Michael Phillips, Counsel, 
mphillips@fdic.gov; or Rachel Ackmann, Attorney, rackmann@fdic.gov; 
Supervision Branch, Legal Division, Federal Deposit Insurance 
Corporation, 550 17th Street NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION: 

I. Proposed Rule

    In 2013, the Office of the Comptroller of the Currency (OCC), the 
Board of Governors of the Federal Reserve System (Board), and the 
Federal Deposit Insurance Corporation (FDIC) (collectively, the 
agencies) comprehensively revised and strengthened the capital 
regulations

[[Page 24620]]

applicable to banking organizations (2013 capital rule).\1\ Among other 
changes, the 2013 capital rule revised the methodologies for 
calculating risk-weighted assets, including aspects of the standardized 
approach for calculating risk-weighted assets established by the Basel 
Committee on Banking Supervision (BCBS) through its international 
framework for regulatory capital in subpart D of the 2013 capital rule 
(standardized approach). The agencies amended the advanced approaches 
risk-based capital rule consistent with agreements reached by the BCBS, 
and incorporated the advanced approaches rule into subpart E of the 
2013 capital rule (advanced approaches).\2\
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    \1\ 78 FR 55340 (September 10, 2013) (FDIC) and 78 FR 62018 
(October 11, 2013) (OCC and Board). On April 8, 2014, the FDIC 
adopted as final the 2013 revised capital rule, with no substantive 
changes.
    \2\ See BCBS, ``Basel II: International Convergence of Capital 
Measurement and Capital Standards: A Revised Framework'' (November 
2005 and revised in June 2006), available at http://www.bis.org/publ/bcbs128.pdf. See BCBS, ``Basel III: A Global Regulatory 
Framework for More Resilient Banks and Banking Systems'' (December 
2010 and revised in June 2011), available at http://www.bis.org/publ/bcbs189.htm. The BCBS is a committee of banking supervisory 
authorities, which was established by the central bank governors of 
the G-10 countries in 1975. More information regarding the BCBS and 
its membership is available at http://www.bis.org/bcbs/about.htm. 
Documents issued by the BCBS are available through the Bank for 
International Settlements Web site at http://www.bis.org.
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    The agencies' 2013 capital rule included a definition of eligible 
guarantee for purposes of both the standardized approach and the 
advanced approaches and introduced the definition of ``eligible 
guarantor.'' The definition included the requirement that an eligible 
guarantee be provided by an eligible guarantor. An eligible guarantor 
under the 2013 capital rule is a sovereign, the Bank for International 
Settlements, the International Monetary Fund, the European Central 
Bank, the European Commission, a Federal Home Loan Bank, the Federal 
Agricultural Mortgage Corporation (Farmer Mac), a multilateral 
development bank (MDB), a depository institution, a bank holding 
company, a savings and loan holding company, a credit union, a foreign 
bank, or a qualifying central counterparty. It may also be an entity 
(other than a special purpose entity) that at the time the guarantee is 
issued or anytime thereafter, has issued and has outstanding an 
unsecured debt security that is investment grade; whose 
creditworthiness is not positively correlated with the credit risk of 
the exposures for which it has provided guarantees; and that is not an 
insurance company engaged predominately in the business of providing 
credit protection (such as a monoline bond insurer or re-insurer).
    The agencies received comments following the release of the 2013 
capital rule indicating that the revisions made to the definition of 
eligible guarantee changed the recognition of these guarantees for 
certain exposures under the advanced approaches wholesale framework. 
For example, several advanced approaches banking organizations noted 
that middle market and commercial real estate loans often involve 
guarantors that do not meet the definition of eligible guarantor. The 
guarantors are often related parties such as owners or sponsors that 
have not issued investment grade debt securities; nevertheless, 
advanced approaches banking organizations assert that such guarantees 
provide valuable credit risk mitigation that should be recognized under 
the advanced approaches. The agencies agree that the revisions to the 
2013 capital rule inadvertently limited the recognition of guarantees 
of wholesale exposures under the advanced approaches and that these 
guarantees should continue to qualify as credit risk mitigants for 
purposes of the advanced approaches because they provide credit 
enhancement. Therefore the agencies propose to effectively revert to 
the previous treatment of eligible guarantees under the 2007 advanced 
approaches final rule for such exposures.\3\
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    \3\ 72 FR 69288 (December 7, 2007).
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    The proposed rule would modify the definition of eligible guarantee 
for purposes of the advanced approaches by removing the requirement 
that an eligible guarantee be provided by an eligible guarantor for 
exposures that are not securitizations. The agencies would retain the 
definition of eligible guarantee in the 2013 capital rule for purposes 
of calculating risk-weighted assets under the standardized approach 
because the standardized approach generally assigns a single risk 
weight to exposures to most corporate borrowers and guarantors and does 
not incorporate the definition of eligible guarantee into a risk-
sensitive methodology like the advanced approaches.
    An eligible guarantee for purposes of the advanced approaches would 
need to be in writing and also be either an unconditional guarantee or 
a contingent obligation of the U.S. government or its agencies, the 
enforceability of which is dependent upon some affirmative action on 
the part of the beneficiary of the guarantee or a third party (for 
example, meeting servicing requirements). The guarantee would also have 
to cover all or a pro rata portion of all contractual payments of the 
obligated party on the reference exposure and give the beneficiary a 
direct claim against the protection provider. Additionally, the 
guarantee would not be unilaterally cancelable by the protection 
provider for reasons other than the breach of the contract by the 
beneficiary and would have to be legally enforceable against the 
protection provider in a jurisdiction where the protection provider has 
sufficient assets against which a judgment may be attached and enforced 
(except for a guarantee by a sovereign). The guarantee would require 
the protection provider to make payment to the beneficiary on the 
occurrence of a default (as defined in the guarantee) of the obligated 
party on the reference exposure in a timely manner without the 
beneficiary first having to take legal actions to pursue the obligor 
for payment and must not increase the beneficiary's cost of credit 
protection on the guarantee in response to deterioration in the credit 
quality of the reference exposure. Furthermore, the guarantee would not 
be provided by an affiliate of the banking organization, unless the 
affiliate is an insured depository institution, foreign bank, 
securities broker or dealer, or insurance company that does not control 
the banking organization and is subject to consolidated supervision and 
regulation comparable to that imposed on depository institutions, U.S. 
securities broker-dealers, or U.S. insurance companies (as the case may 
be) and for purposes of sections --.141 to --.145 and of the 
standardized approach, the guarantee would have to be provided by an 
eligible guarantor.

II. Regulatory Analyses

A. Paperwork Reduction Act (PRA)

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3521) (PRA), the agencies may not conduct or 
sponsor, and a respondent is not required to respond to, an information 
collection unless it displays a currently valid Office of Management 
and Budget (OMB) control number. The agencies reviewed the proposed 
rule and determined that the rule does not introduce any new collection 
of information pursuant to the PRA.

B. Regulatory Flexibility Act Analysis

    OCC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA), 
requires an agency, in connection with a notice of proposed rulemaking, 
to prepare an Initial Regulatory Flexibility Act analysis describing 
the impact of the

[[Page 24621]]

rule on small entities (defined by the Small Business Administration 
for purposes of the RFA to include banking entities with total assets 
of $500 million or less) or to certify that the rule will not have a 
significant economic impact on a substantial number of small entities.
    Using the SBA's size standards, as of December 31, 2013, the OCC 
supervised 1,195 small entities.\4\
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    \4\ The OCC calculated the number of small entities using the 
SBA's size thresholds for commercial banks and savings institutions, 
and trust companies, which are $500 million and $35.5 million, 
respectively. 78 FR 37409 (June 20, 2013). Consistent with the 
General Principles of Affiliation, 13 CFR 121.103(a), the OCC 
counted the assets of affiliated financial institutions when 
determining whether to classify a national bank or Federal savings 
association as a small entity. The OCC used December 31, 2013, to 
determine size because a ``financial institution's assets are 
determined by averaging the assets reported on its four quarterly 
financial statements for the preceding year.'' See footnote 8 of the 
U.S. Small Business Administration's Table of Size Standards.
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    As described in the SUPPLEMENTARY INFORMATION section of the 
preamble, the proposed rule would apply only to advanced approaches 
banking organizations. Advanced approaches banking organization is 
defined to include a national bank or Federal savings associations that 
has, or is a subsidiary of a bank holding company or savings and loan 
holding company that has, total consolidated assets of $250 billion or 
more, total consolidated on-balance sheet foreign exposure of $10 
billion or more, or that has elected to use the advanced approaches. 
After considering the SBA's size standards and General Principals of 
Affiliation to identify small entities, the OCC determined that no 
small national banks or Federal savings associations are advanced 
approaches banking organizations. Because the proposed rule applies 
only to advanced approaches banking organizations, it does not impact 
any OCC-supervised small entities. Therefore, the OCC certifies that 
the proposed rule will not have a significant economic impact on a 
substantial number of OCC-supervised small entities.
    Board: The Board is providing an initial regulatory flexibility 
analysis with respect to this proposed rule. As discussed above, this 
proposed rule would amend the definition of ``eligible guarantee'' in 
section 2 of Regulation Q (12 CFR part 217) for the purposes of 
calculating risk-weighted assets under the advanced approaches in 
Regulation Q (12 CFR part 217, subpart E).
    Under regulations issued by the Small Business Administration, a 
small entity includes a depository institution, bank holding company, 
or savings and loan holding company with total assets of $500 million 
or less (a small banking organization).\5\ As of December 31, 2013, 
there were approximately 627 small state member banks. As of December 
31, 2013, there were approximately 3,676 small bank holding companies 
and approximately 268 small savings and loan holding companies.\6\
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    \5\ See 13 CFR 121.201. Effective July 22, 2013, the Small 
Business Administration revised the size standards for banking 
organizations to $500 million in assets from $175 million in assets. 
78 FR 37409 (June 20, 2013).
    \6\ Under the prior Small Business Administration threshold of 
$175 million in assets, as of March 31, 2013 the Board supervised 
approximately 369 small state member banks. As of December 31, 2012, 
there were approximately 2,259 small bank holding companies.
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    The proposed rule would apply only to advanced approaches banking 
organizations, which, generally, are banking organizations with total 
consolidated assets of $250 billion or more, that have total 
consolidated on-balance sheet foreign exposure of $10 billion or more, 
are a subsidiary of an advanced approaches depository institution, or 
that elect to use the advanced approaches. Currently, no small top-tier 
bank holding company, top-tier savings and loan holding company, or 
state member bank is an advanced approaches banking organization, so 
there would be no additional projected compliance requirements imposed 
on small bank holding companies, savings and loan holding companies, or 
state member banks. The Board expects that any small bank holding 
companies, savings and loan holding companies, or state member banks 
that would be covered by this proposed rule would rely on their parent 
banking organization for compliance and would not bear additional 
costs.
    The Board is aware of no other Federal rules that duplicate, 
overlap, or conflict with the proposed rule. The Board believes that 
the proposed rule will not have a significant economic impact on small 
banking organizations supervised by the Board and therefore believes 
that there are no significant alternatives to the proposed rule that 
would reduce the economic impact on small banking organizations 
supervised by the Board.
    The Board welcomes comment on all aspects of its analysis. A final 
regulatory flexibility analysis will be conducted after consideration 
of comments received during the public comment period.
    FDIC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA), 
requires an agency, in connection with a notice of proposed rulemaking, 
to prepare an Initial Regulatory Flexibility Act analysis describing 
the impact of the proposed rule on small entities (defined by the Small 
Business Administration for purposes of the RFA to include banking 
entities with total assets of $500 million or less) or to certify that 
the proposed rule will not have a significant economic impact on a 
substantial number of small entities.
    Using the SBA's size standards, as of December 31, 2013, the FDIC 
supervised 1,195 small entities. As described in the Supplementary 
Information section of the preamble, however, the proposed rule would 
apply only to advanced approaches banking organizations. Advanced 
approaches banking organization is defined to include a state nonmember 
bank or a State savings association that has, or is a subsidiary of a 
bank holding company or savings and loan holding company that has, 
total consolidated assets of $250 billion or more, total consolidated 
on-balance sheet foreign exposure of $10 billion or more, or that has 
elected to use the advanced approaches. As of December 31, 2013, based 
on a $500 million threshold, 1 (out of 3,394) small state nonmember 
banks and no (out of 303) small state savings associations were under 
the advanced approaches. Therefore, the FDIC does not believe that the 
proposed rule will result in a significant economic impact on a 
substantial number of small entities under its supervisory 
jurisdiction.
    The FDIC certifies that the proposed rule would not have a 
significant economic impact on a substantial number of small FDIC-
supervised institutions.

C. OCC Unfunded Mandates Reform Act of 1995 Determination

    The OCC has analyzed the proposed rule under the factors in the 
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this 
analysis, the OCC considered whether the proposed rule includes a 
Federal mandate that may result in the expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year (adjusted annually for inflation). As 
detailed in the SUPPLEMENTARY INFORMATION section, the proposed rule 
would revise the definition of eligible guarantee as incorporated into 
the OCC's advanced approaches risk-based capital rule. In 2013, when 
the Federal banking agencies revised their respective risk-based 
capital requirements, they added a requirement that an eligible 
guarantee be from an eligible guarantor. This proposed rule would 
remove that requirement for the purposes of calculating the risk-

[[Page 24622]]

weighted asset amount for an exposure (other than for a securitization 
exposure) under the OCC's advanced approaches risk-based capital rule. 
For example, the OCC understands that advanced approaches banking 
organizations commonly obtain guarantees from guarantors that do not 
qualify as eligible guarantors for exposures in their commercial real 
estate and other wholesale portfolios. Under this proposed rule, these 
guarantees would continue to qualify as credit risk mitigants for 
purposes of the wholesale framework in the advanced approaches risk-
based capital rule.
    This proposed rule would not increase the minimum capital 
requirements for any institutions subject to the OCC's risk-based 
capital rules. After comparing existing capital levels with the 
proposed requirements, and considering the burden and other compliance 
costs associated with the proposed changes, the OCC has determined that 
its proposed rule will not result in expenditures by State, local, and 
Tribal governments, or by the private sector, of $100 million or more 
(adjusted annually for inflation). Accordingly, the OCC is not 
including a written statement to accompany this proposed rule.

D. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The agencies have sought to present 
the proposed rule in a simple and straightforward manner, and invite 
comment on the use of plain language. For example:
     Have the agencies organized the material to suit your 
needs? If not, how could they present the proposed rule more clearly?
     Are the requirements in the proposed rule clearly stated? 
If not, how could the proposed rule be more clearly stated?
     Do the regulations contain technical language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes would achieve that?
     Is this section format adequate? If not, which of the 
sections should be changed and how?
     What other changes can the agencies incorporate to make 
the regulation easier to understand?

List of Subjects

12 CFR Part 3

    Administrative practice and procedure, Capital, National banks, 
Reporting and recordkeeping requirements, Risk.

12 CFR Part 217

    Administrative practice and procedure, Banks, Banking, Capital, 
Federal Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Securities.

12 CFR Part 324

    Administrative practice and procedure, Banks, banking, Capital 
Adequacy, Reporting and recordkeeping requirements, Savings 
associations, State non-member banks.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Chapter I
Authority and Issuance
    For the reasons set forth in the preamble and under the authority 
of 12 U.S.C. 93a, 1462, 1462a, 1463, 1464, 3907, 3909, 1831o, and 
5412(b)(2)(B), the Office of the Comptroller of the Currency proposes 
to amend part 3 of chapter I of title 12, Code of Federal Regulations 
as follows:

PART 3--CAPITAL ADEQUACY STANDARDS

0
1. The authority citation for part 3 continues to read as follows:

    Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).
0
2. In Sec.  3.2, revise the definition of ``eligible guarantee'' to 
read as follows:


Sec.  3.2  Definitions.

* * * * *
    Eligible guarantee means a guarantee that:
    (1) Is written;
    (2) Is either:
    (i) Unconditional, or
    (ii) A contingent obligation of the U.S. government or its 
agencies, the enforceability of which is dependent upon some 
affirmative action on the part of the beneficiary of the guarantee or a 
third party (for example, meeting servicing requirements);
    (3) Covers all or a pro rata portion of all contractual payments of 
the obligated party on the reference exposure;
    (4) Gives the beneficiary a direct claim against the protection 
provider;
    (5) Is not unilaterally cancelable by the protection provider for 
reasons other than the breach of the contract by the beneficiary;
    (6) Except for a guarantee by a sovereign, is legally enforceable 
against the protection provider in a jurisdiction where the protection 
provider has sufficient assets against which a judgment may be attached 
and enforced;
    (7) Requires the protection provider to make payment to the 
beneficiary on the occurrence of a default (as defined in the 
guarantee) of the obligated party on the reference exposure in a timely 
manner without the beneficiary first having to take legal actions to 
pursue the obligor for payment;
    (8) Does not increase the beneficiary's cost of credit protection 
on the guarantee in response to deterioration in the credit quality of 
the reference exposure;
    (9) Is not provided by an affiliate of the national bank or Federal 
savings association, unless the affiliate is an insured depository 
institution, foreign bank, securities broker or dealer, or insurance 
company that:
    (i) Does not control the national bank or Federal savings 
association; and
    (ii) Is subject to consolidated supervision and regulation 
comparable to that imposed on depository institutions, U.S. securities 
broker-dealers, or U.S. insurance companies (as the case may be); and
    (10) For purposes of Sec. Sec.  3.141 to 3.145 and of subpart D of 
this part, is provided by an eligible guarantor.
* * * * *

Board of Governors of the Federal Reserve System

12 CFR Chapter II
Authority and Issuance
    For the reasons set forth in the preamble, part 217 of chapter II 
of title 12 of the Code of Federal Regulations is proposed to be 
amended as follows:

PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND 
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)

0
3. The authority citation for part 217 continues to read as follows:

    Authority: 12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a, 
1818, 1828, 1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 1851, 3904, 
3906-3909, 4808, 5365, 5368, 5371.

0
4. The heading of part 217 is revised to read as set forth above.
0
5. In Sec.  217.2, revise the definition of ``eligible guarantee'' to 
read as follows:


Sec.  217.2  Definitions.

* * * * *

[[Page 24623]]

    Eligible guarantee means a guarantee that:
    (1) Is written;
    (2) Is either:
    (i) Unconditional, or
    (ii) A contingent obligation of the U.S. government or its 
agencies, the enforceability of which is dependent upon some 
affirmative action on the part of the beneficiary of the guarantee or a 
third party (for example, meeting servicing requirements);
    (3) Covers all or a pro rata portion of all contractual payments of 
the obligated party on the reference exposure;
    (4) Gives the beneficiary a direct claim against the protection 
provider;
    (5) Is not unilaterally cancelable by the protection provider for 
reasons other than the breach of the contract by the beneficiary;
    (6) Except for a guarantee by a sovereign, is legally enforceable 
against the protection provider in a jurisdiction where the protection 
provider has sufficient assets against which a judgment may be attached 
and enforced;
    (7) Requires the protection provider to make payment to the 
beneficiary on the occurrence of a default (as defined in the 
guarantee) of the obligated party on the reference exposure in a timely 
manner without the beneficiary first having to take legal actions to 
pursue the obligor for payment;
    (8) Does not increase the beneficiary's cost of credit protection 
on the guarantee in response to deterioration in the credit quality of 
the reference exposure;
    (9) Is not provided by an affiliate of the Board-regulated 
institution, unless the affiliate is an insured depository institution, 
foreign bank, securities broker or dealer, or insurance company that:
    (i) Does not control the Board-regulated institution; and
    (ii) Is subject to consolidated supervision and regulation 
comparable to that imposed on depository institutions, U.S. securities 
broker-dealers, or U.S. insurance companies (as the case may be); and
    (10) For purposes of Sec. Sec.  217.141 to 217.145 and for purposes 
of subpart D of this part, is provided by an eligible guarantor.
* * * * *

Federal Deposit Insurance Corporation

12 CFR Chapter III
Authority and Issuance
    For the reasons set forth in the preamble, part 324 of chapter III 
of title 12 of the Code of Federal Regulations is proposed to be 
amended as follows:

PART 324--CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS

0
6. The authority citation for part 324 continues to read as follows:

    Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233, 
105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 
105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 
2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, 
as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 
note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note).

0
7. In Sec.  324.2, revise the definition of ``eligible guarantee'' to 
read as follows:


Sec.  324.2  Definitions.

* * * * *
    Eligible guarantee means a guarantee that:
    (1) Is written;
    (2) Is either:
    (i) Unconditional, or
    (ii) A contingent obligation of the U.S. government or its 
agencies, the enforceability of which is dependent upon some 
affirmative action on the part of the beneficiary of the guarantee or a 
third party (for example, meeting servicing requirements);
    (3) Covers all or a pro rata portion of all contractual payments of 
the obligated party on the reference exposure;
    (4) Gives the beneficiary a direct claim against the protection 
provider;
    (5) Is not unilaterally cancelable by the protection provider for 
reasons other than the breach of the contract by the beneficiary;
    (6) Except for a guarantee by a sovereign, is legally enforceable 
against the protection provider in a jurisdiction where the protection 
provider has sufficient assets against which a judgment may be attached 
and enforced;
    (7) Requires the protection provider to make payment to the 
beneficiary on the occurrence of a default (as defined in the 
guarantee) of the obligated party on the reference exposure in a timely 
manner without the beneficiary first having to take legal actions to 
pursue the obligor for payment;
    (8) Does not increase the beneficiary's cost of credit protection 
on the guarantee in response to deterioration in the credit quality of 
the reference exposure;
    (9) Is not provided by an affiliate of the FDIC-supervised 
institution, unless the affiliate is an insured depository institution, 
foreign bank, securities broker or dealer, or insurance company that:
    (i) Does not control the FDIC-supervised institution; and
    (ii) Is subject to consolidated supervision and regulation 
comparable to that imposed on depository institutions, U.S. securities 
broker-dealers, or U.S. insurance companies (as the case may be); and
    (10) For purposes of Sec. Sec.  324.141 to 324.145 and of subpart D 
of this part, is provided by an eligible guarantor.
* * * * *

    Dated: April 8, 2014.
Thomas J. Curry,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System, April 11, 2014.
Robert deV. Frierson,
Secretary of the Board.
    Dated at Washington, DC, this 8th day of April, 2014.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2014-09452 Filed 4-30-14; 8:45 am]
BILLING CODE P