[Federal Register Volume 79, Number 146 (Wednesday, July 30, 2014)]
[Rules and Regulations]
[Pages 44120-44125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17858]
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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
[Regulation Q; Docket No. R-1488]
RIN 7100-AE17
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 324
RIN 3064-AE13
Regulatory Capital Rules: Advanced Approaches Risk-Based Capital
Rule, Revisions to the Definition of Eligible Guarantee
AGENCIES: Office of the Comptroller of the Currency, Treasury; the
Board of Governors of the Federal Reserve System; and the Federal
Deposit Insurance Corporation.
ACTION: Final rule.
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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
adopting a final rule that revises the definition of eligible guarantee
in the agencies' advanced approaches risk-based capital rule, adopted
in the agencies' July 2013 regulatory capital rule (2013 capital rule).
The final rule removes 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 risk-based capital rule as incorporated
into the 2013 capital rule (advanced approaches). The change to the
definition of eligible guarantee applies to all banks, savings
associations, bank holding companies, and savings and loan holding
companies that are subject to the advanced approaches.
DATES: This rule is effective on October 1, 2014. Any company subject
to the rule may elect to adopt it before this date.
FOR FURTHER INFORMATION CONTACT:
OCC: Margot Schwadron, Senior Risk Expert; or Roger Tufts, Senior
Economic Advisor, Capital Policy, (202) 649-6370; 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, Supervisory 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, [email protected]; Ryan
Billingsley, Chief, Capital Policy Section, [email protected];
Benedetto Bosco, Capital Markets Policy Analyst, [email protected],
Capital Markets Branch, Division of Risk Management Supervision,
[email protected] or (202) 898-6888; or Michael Phillips,
Counsel, [email protected]; Rachel Ackmann, Senior Attorney,
[email protected]; or Grace Pyun, Senior Attorney, [email protected],
Supervision Branch, Legal Division, Federal Deposit Insurance
Corporation, 550 17th Street NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
On May 1, 2014, 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) published in the Federal Register a joint notice of proposed
rulemaking (NPR or proposed rule)\1\ seeking public comment on
revisions to the definition of eligible guarantee for purposes of
calculating the risk-weighted assets of an exposure (other than a
securitization exposure) under the advanced approaches risk-based
capital rule as incorporated into subpart E (advanced approaches) of
the agencies' July 2013 regulatory capital rule (2013 capital rule).\2\
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\1\ 79 FR 24618 (May 1, 2014).
\2\ 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.
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Among other changes, the 2013 capital rule amended the
methodologies for calculating risk-weighted assets under the advanced
approaches, as well as the standardized approach for regulatory capital
in subpart D (standardized approach) of the 2013 capital rule, which is
generally consistent with the methodologies for calculating risk-
weighted assets established by the Basel Committee on Banking
Supervision (BCBS) through its international framework.\3\
Specifically, the 2013 capital rule included a definition of ``eligible
guarantee'' for purposes of both the standardized approach and the
advanced approaches and introduced a definition of ``eligible
guarantor.''
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\3\ 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 definition of eligible guarantee provided that an eligible
guarantee could be provided only by an eligible guarantor. The
definition of eligible guarantor includes a sovereign, the Bank for
International Settlements, the
[[Page 44121]]
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, and a qualifying
central counterparty. The definition of eligible guarantor also
includes 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).
Following the release of the 2013 capital rule, the agencies
received comments raising concerns about the definition of eligible
guarantee. Commenters noted 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 \4\
observed that middle market and commercial real estate loans often
involve guarantors that do not meet the definition of eligible
guarantor. The guarantors for such transactions are often related
parties such as owners or sponsors that have not issued investment
grade debt securities. These commenters argued that such guarantees
provide valuable credit risk mitigation that should be recognized under
the advanced approaches capital requirements.
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\4\ Advanced approaches banking organizations generally refers
to 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.
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As explained in the proposal, the agencies did not intend for the
revisions to the definition of eligible guarantee in the 2013 capital
rule to prevent advanced approaches banking organizations from
recognizing the risk-mitigation benefits of the aforementioned types of
guarantees. The agencies believe that these guarantees should continue
to qualify as credit risk mitigants for purposes of the advanced
approaches because they provide banking organizations with credit
enhancement with respect to their exposures.
On May 1, 2014, the agencies published in the Federal Register, a
proposed rule to effectively revert to the previous treatment of
eligible guarantees under the 2007 advanced approaches final rule \5\
for non-securitization exposures.\6\ Under the proposal, the
requirement that an eligible guarantee be provided by an eligible
guarantor for exposures that are not securitizations for the purpose of
the advanced approaches would be removed from the definition of
eligible guarantee. However, the proposed rule would have retained 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.
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\5\ 72 FR 69288 (December 7, 2007).
\6\ 79 FR 24618 (May 1, 2014).
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II. Comments
The agencies received two comment letters on the proposed change to
the eligible guarantee definition, one from a trade association and the
other from a monoline insurance company. The trade association fully
supported the proposal, and urged timely adoption of the proposed rule
without modification. The commenter also requested that the agencies
provide banking organizations with the option to elect the early
adoption of the proposed rule before its official effective date so
that the amended definition would be available for public disclosures
for advanced approaches banking organizations that have completed their
parallel run and will publicly disclose their risk-based capital ratios
determined using the advanced approaches beginning with the second
quarter of 2014.
The monoline insurance company commented that the proposed
revisions to the definition of eligible guarantee, and by extension the
definition of eligible guarantor under the 2013 capital rule, should be
further clarified and expanded under both the standardized approach and
advanced approaches to include monoline insurance companies (monoline
insurers) that meet certain conditions. According to the commenter, the
agencies' definition of eligible guarantor in the 2013 capital rule
intended to include monoline insurers that are subsidiaries of
depository institution holding companies or nonbank financial companies
supervised by the Board pursuant to the Dodd-Frank Wall Street Reform
and Consumer Protection Act because these subsidiaries are subject to
extensive supervisory and regulatory standards. The commenter further
argued that expanding the definition to include monoline insurers could
reduce systemic and prudential risks by reducing interconnectedness as
well as reliance on guarantees from the public sector, such as
guarantees from sovereigns and government-sponsored enterprises. The
commenter also sought clarification as to whether, by virtue of the
definition's exclusion of monoline insurers, the agencies also
inadvertently excluded from the definition of eligible guarantor
depository institution holding companies and nonbank systemically
important financial institutions designated by the Financial Stability
Oversight Council.
The definition of eligible guarantor in the 2013 capital rule
explicitly states that an insurance company engaged predominately in
the business of providing credit protection (such as a monoline bond
insurer or re-insurer) does not qualify as an eligible guarantor. As
stated in the preamble to the 2013 capital rule, the agencies believe
that guarantees issued by monoline insurers, including financial
guaranty and private mortgage insurers, can exhibit significant wrong-
way risk.\7\ Thus, modifying the definition of eligible guarantor to
include these entities would be contrary to one of the key objectives
of the capital framework, which is to mitigate interconnectedness and
systemic vulnerabilities within the financial system. The agencies are,
therefore, retaining the 2013 capital rule's definition of eligible
guarantor. The definition of eligible guarantor in the 2013 capital
rule includes depository institution holding companies as well as
nonbank financial companies that meet the qualifying criteria included
in the definition of eligible guarantor.
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\7\ 78 FR 62104 (October 11, 2013) (OCC and FRB) and 78 FR 55422
(September 10, 2013) (FDIC).
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III. Final Rule
After carefully considering the comments the agencies are adopting
as a final rule the eligible guarantee definition as proposed in the
NPR. Under the final rule, an eligible guarantee must 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
[[Page 44122]]
part of the beneficiary of the guarantee or a third party (for example,
meeting servicing requirements). The guarantee also must 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 must not be
unilaterally cancelable by the protection provider for reasons other
than the breach of the contract by the beneficiary, and it must 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 also must 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 may 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 Sec. Sec. --.141 to --.145 of the advanced approaches
and of the standardized approach, the guarantee would have to be
provided by an eligible guarantor.
IV. Early Compliance
The final rule will be effective October 1, 2014; however, any
advanced approaches banking organization may elect to adopt the
requirements in the final rule before the effective date.
Subject to certain exceptions, 12 U.S.C. 4802(b) provides that new
regulations and amendments to regulations prescribed by a Federal
banking agency which impose additional reporting, disclosures, or other
new requirements on an insured depository institution shall take effect
on the first day of a calendar quarter which begins on or after the
date on which the regulations are published in final form. The agencies
note that this final rule does not impose any additional reporting or
disclosure requirements. Instead, this final rule revises an existing
requirement to remove a restriction on the recognition of guarantors
for the purpose of calculating minimum risk-based capital requirements.
Additionally, section 4802(b) permits persons who are subject to the
Federal banking agency regulations to comply with a regulation before
its effective date. Accordingly, the agencies will not object if an
institution wishes to apply the provisions of this final rule beginning
with the date it is published in the Federal Register.
V. Regulatory Analyses
A. Paperwork Reduction Act
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 have reviewed the final
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 final rulemaking, to
prepare a Final Regulatory Flexibility Act analysis describing the
impact of the rule on small entities (defined by the Small Business
Administration (SBA) for purposes of the RFA to include banking
entities with total assets of $550 million or less) or to certify that
the rule will not have a significant economic impact on a substantial
number of small entities.
Using the SBA's size standards effective on July 14, 2014, the OCC
currently supervises approximately 1,200 small entities (361 Federal
savings associations, 818 national banks, and 21 trust companies).\8\
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\8\ The OCC calculated the number of small entities using the
SBA's size thresholds for commercial banks and savings institutions,
and trust companies, which, effective July 14, 2014, are $550
million and $38.5 million, respectively. Consistent with the General
Principles of Affiliation 13 CFR 121.103(a), the OCC counted the
assets of affiliated financial institutions when determining whether
to classify an OCC-supervised entity 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 SBA's Table of Size Standards.
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As described in the SUPPLEMENTARY INFORMATION section of the
preamble, the final rule applies 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 final rule applies only
to advanced approaches banking organizations, it does not impact any
OCC-supervised small entities. Therefore, the OCC certifies that the
final rule will not have a significant economic impact on a substantial
number of OCC-supervised small entities.
Board: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA)
requires an agency to provide a final regulatory flexibility analysis
with a final rule or to certify that the rule will not have a
significant economic impact on a substantial number of small entities.
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 $550 million or
less (a small banking organization).\9\ As of March 31, 2014, there
were approximately 653 small state member banks. As of December 31,
2013, there were approximately 3,783 small bank holding companies and
approximately 276 small savings and loan holding companies.
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\9\ See 13 CFR 121.201. Effective July 14, 2014, the Small
Business Administration revised the size standards for banking
organizations to $550 million in assets from $500 million in assets.
79 FR 33647 (June 12, 2014).
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The Board is providing a final regulatory flexibility analysis with
respect to this final rule. As discussed above, this final 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). The Board received no public comments related to
the initial Regulatory Flexibility Act analysis in the proposed rule
from members of the general public or from the Chief Counsel for
Advocacy of the Small Business Administration. Thus,
[[Page 44123]]
no issues were raised in public comments related to the Board's initial
Regulatory Flexibility Act analysis and no changes are being made in
response to such comments.
The final 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 final rule would rely on their parent
banking organization for compliance and would not bear additional
costs.
The Board believes that the final 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 rule that would reduce the economic impact on small banking
organizations supervised by the Board.
FDIC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA),
requires an agency, in connection with a notice of final rulemaking, to
prepare a Final Regulatory Flexibility Act analysis describing the
impact of the rule on small entities (defined by the Small Business
Administration for purposes of the RFA to include banking entities with
total assets of $550 million or less) or to certify that the rule will
not have a significant economic impact on a substantial number of small
entities.
As of March 31, 2014, the FDIC supervised 3,604 small entities. As
described in the SUPPLEMENTARY INFORMATION section of the preamble,
however, the final rule applies 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 March 31, 2014 based on a $550 million threshold, 2 (out of 3,296)
small state nonmember banks and no (out of 308) small state savings
associations were under the advanced approaches. Therefore, the FDIC
does not believe that the final rule will result in a significant
economic impact on a substantial number of small entities under its
supervisory jurisdiction.
The FDIC certifies that the final rule will 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 final 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 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 final rule
revises 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 rule removes that requirement for the
purposes of calculating the risk-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 rule, these guarantees will qualify as credit
risk mitigants for purposes of the wholesale framework in the advanced
approaches risk-based capital rule.
This final rule does not increase the minimum capital requirements
for any institutions subject to the OCC's risk-based capital rules.
After comparing existing capital levels with these requirements, and
considering the burden and other compliance costs associated with the
changes, the OCC has determined that its final 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 final rule in a simple and straightforward manner, and did not
receive any comments on the use of plain language.
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 amends
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;
[[Page 44124]]
(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 through 3.145 and 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 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 is revised 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.
* * * * *
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 through 217.145 and 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 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
[[Page 44125]]
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 through 324.145 and subpart
D of this part, is provided by an eligible guarantor.
* * * * *
Dated: July 15, 2014.
Thomas J. Curry,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, July 23, 2014.
Robert deV. Frierson,
Secretary of the Board.
Dated at Washington, DC, this 15th day of July, 2014.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2014-17858 Filed 7-29-14; 8:45 am]
BILLING CODE P