[Federal Register Volume 84, Number 209 (Tuesday, October 29, 2019)]
[Notices]
[Pages 57869-57874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23527]
[[Page 57869]]
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FEDERAL DEPOSIT INSURANCE CORPORATION
Agency Information Collection Activities: Proposed Collection
Renewal; Comment Request (OMB No. 3064-0029; -0030; -0070; -0104; -
0204)
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Notice and request for comment.
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SUMMARY: The FDIC, as part of its obligations under the Paperwork
Reduction Act of 1995 (PRA), invites the general public and other
Federal agencies to take this opportunity to comment on the renewal of
the existing information collections described below (OMB No. 3064-
0029; -0030; -0070; -0104; -0204).
DATES: Comments must be submitted on or before December 30, 2019.
ADDRESSES: Interested parties are invited to submit written comments to
the FDIC by any of the following methods:
https://www.FDIC.gov/regulations/laws/federal.
Email: [email protected]. Include the name and number of
the collection in the subject line of the message.
Mail: Manny Cabeza (202-898-3767), Regulatory Counsel, MB-
3128, 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 17th Street building (located on F Street),
on business days between 7:00 a.m. and 5:00 p.m.
All comments should refer to the relevant OMB control number. A
copy of the comments may also be submitted to the OMB desk officer for
the FDIC: Office of Information and Regulatory Affairs, Office of
Management and Budget, New Executive Office Building, Washington, DC
20503.
FOR FURTHER INFORMATION CONTACT: Manny Cabeza, Regulatory Counsel, 202-
898-3767, [email protected], MB-3128, Federal Deposit Insurance
Corporation, 550 17th Street NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Proposal to renew the following currently approved collections of
information:
1. Title: Notification of Performance of Bank Services.
OMB Number: 3064-0029.
Form Number: 6120/06.
Affected Public: Insured state nonmember banks and state savings
associations.
Burden Estimate:
Summary of Annual Burden
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Estimated Estimated
Estimated Estimated frequency of time per annual
Information collection description Type of burden Obligation to respond number of responses response burden
respondents (minutes) (hours)
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Notification of Performance of Bank Reporting............... Mandatory.............. 634 On Occasion............ 30 318
Services (FDIC Form 6120/06).
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Total Estimated Annual Burden: 318.
General Description of Collection: Insured state nonmember banks
are required to notify the FDIC, under section 7 of the Bank Service
Company Act (12 U.S.C. 1867), of the relationship with a bank service
company. The Form FDIC 6120/06, Notification of Performance of Bank
Services, may be used by banks to satisfy the notification requirement.
There is no change in the method or substance of the collection. The
estimated number of respondents is estimated to increase based on the
response rate observed over the last three years. The estimated time
per response and the frequency of response is expected to remain the
same.
2. Title: Securities of State Nonmember Banks and State Savings
Associations.
OMB Number: 3064-0030.
Affected Public: Insured state nonmember banks and state savings
associations.
Type of Burden: Reporting.
Obligation to Respond: Mandatory.
Burden Estimate:
Summary of Burden
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Estimated
Estimated Estimated time Frequency of number of Estimated
number of to respond response responses per annual burden
responses (hours) year (hours)
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Form 3--Initial Statement of 58 1 On Occasion....... 1 58
Beneficial Ownership.
Form 4--Statement of Changes 297 0.5 On Occasion....... 4 594
in Beneficial Ownership.
Form 5--Annual Statement of 69 1 Annual............ 1 69
Beneficial Ownership.
Form 8-A.................... 2 3 On Occasion....... 2 12
Form 8-C.................... 2 2 On Occasion....... 1 4
Form 8-K.................... 21 2 On Occasion....... 4 168
Form 10..................... 2 215 On Occasion....... 1 430
Form 10-C................... 1 1 On Occasion....... 1 1
Form10-K.................... 21 140 Annual............ 1 2,940
Form 10-Q................... 21 100 Quarterly......... 3 6,300
Form 12b-25................. 6 3 On Occasion....... 1 18
Form 15..................... 2 1 On Occasion....... 1 2
Form 25..................... 2 1 On Occasion....... 1 2
Schedule 13D................ 2 3 On Occasion....... 1 6
Schedule 13E-3.............. 2 3 On Occasion....... 1 6
Schedule 13G................ 2 3 On Occasion....... 1 6
Schedule 14A................ 21 40 Annual............ 1 840
Schedule 14C................ 2 40 On Occasion....... 1 80
Schedule 14D-1 (Schedule TO) 2 5 On Occasion....... 1 10
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[[Page 57870]]
Total Estimated Annual .............. .............. .................. .............. 11,546
Burden.
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General Description of Collection: Section 12(i) of the Exchange
Act grants authority to the Federal banking agencies to administer and
enforce sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of
the Exchange Act and sections 302, 303, 304, 306, 401(b), 404, 406, and
407 of the Sarbanes-Oxley Act of 2002. Pursuant to section 12(i), the
FDIC has the authority, including rulemaking authority, to administer
and enforce these enumerated provisions as may be necessary with
respect to state nonmember banks and state savings associations over
which it has been designated the appropriate Federal banking agency.
Section 12(i) generally requires the FDIC to issue regulations
substantially similar to those issued by the Securities and Exchange
Commission (SEC) regulations to carry out these responsibilities. Thus,
part 335 of the FDIC regulations incorporates by cross-reference the
SEC rules and regulations regarding the disclosure and filing
requirements of registered securities of state nonmember banks and
state savings associations.
This information collection includes the following:
Beneficial Ownership Forms: FDIC Forms 3, 4, and 5 (FDIC Form
Numbers 6800/03, 6800/04, and 6800/05). Pursuant to section 16 of the
Exchange Act, every director, officer, and owner of more than ten
percent of a class of equity securities registered with the FDIC under
section 12 of the Exchange Act must file with the FDIC a statement of
ownership regarding such securities. The initial filing is on Form 3
and changes are reported on Form 4. The Annual Statement of beneficial
ownership of securities is on Form 5. The forms contain information on
the reporting person's relationship to the company and on purchases and
sales of such equity securities. 12 CFR 335.601 through 336.613 of the
FDIC's regulations, which cross-reference 17 CFR 240.16a of the SEC's
regulations, provide the FDIC form requirements for FDIC Forms 3, 4,
and 5 in lieu of SEC Forms 3, 4, and 5, which are described at 17 CFR
249.103 (Form 3), 249.104 (Form 4), and 249.105 (Form 5).
Forms 8-A and 8-C for Registration of Certain Classes of
Securities. Form 8-A is used for registration pursuant to section 12(b)
or (g) of the Exchange Act of any class of securities of any issuer
which is required to file reports pursuant to section 13 or 15(d) of
that Act or pursuant to an order exempting the exchange on which the
issuer has securities listed from registration as a national securities
exchange. Form 8-C has been replaced by Form 8-A. Form 8-A is described
at 17 CFR 249.208a. There is no actual ``Form 8-A'' as filers must
produce a customized narrative document in compliance with the
requirements in accordance with the filer's particular circumstances.
Form 8-K: Current Report. This is the current report that is used
to report the occurrence of any material events or corporate changes
that are of importance to investors or security holders and have not
been reported previously by the registrant. It provides more current
information on certain specified events than would Forms 10-Q and 10-K.
The form description is at 17 CFR 249.308. There is no actual ``Form 8-
K'' as filers must produce a customized narrative document in
compliance with the requirements in accordance with the filer's
particular circumstances.
Forms 10 and 10-C: Forms for Registration of Securities. Form 10 is
the general reporting form for registration of securities pursuant to
section 12(b) or (g) of the Exchange Act of classes of securities of
issuers for which no other reporting form is prescribed. It requires
certain business and financial information about the issuer. Form 10-C
has been replaced by Form 10. Form 10 is described at 17 CFR 249.210.
There is no actual ``Form 10'' as filers must produce a customized
narrative document in compliance with the requirements in accordance
with the filer's particular circumstances.
Form 10-K: Annual Report. This annual report is used by issuers
registered under the Exchange Act to provide information described in
Regulation S-K, 17 CFR 229. The form is described at 17 CFR 249.310.
There is no actual ``Form 10-K'' as filers must produce a customized
narrative document in compliance with the requirements in accordance
with the filer's particular circumstances.
Form 10-Q: Quarterly Reports. The Form 10-Q is a report filed
quarterly by most reporting companies. It includes unaudited financial
statements and provides a continuing overview of major changes in the
company's financial position during the year, as compared to the prior
corresponding period. The report must be filed for each of the first
three fiscal quarters of the company's fiscal year and is due within 40
or 45 days of the close of the quarter, depending on the size of the
reporting company. The description of Form 10-Q is at 17 CFR 249.308a.
There is no actual ``Form 10-Q'' as filers must produce a customized
narrative document in compliance with the requirements in accordance
with the filer's particular circumstances.
Form 12b-25: Notification of Late Filing. This notification extends
the reporting deadlines for filing quarterly and annual reports for
qualifying companies. There is no FDIC Form 12b-25. The form is
described at 17 CFR 249.322.
Form 15: Certification and Notice of Termination of Registration.
This form is filed by each issuer to certify that the number of holders
of record of a class of security registered under section 12(g) of the
Exchange Act is reduced to a specified level in order to terminate the
registration of the class of security. For a bank, the number of
holders of record of a class of registered security must be reduced to
less than 1,200 persons. For a savings association, the number of
record holders of a class of registered security must be reduced to (1)
less than 300 persons or (2) less than 500 persons and the total assets
of the issuer have not exceeded $10 million on the last day of each of
the issuer's most recent three fiscal years. In general, registration
terminates 90 days after the filing of the certification. There is no
FDIC Form 15. This form is described at 17 CFR 249.323.
Schedule 13D: Certain Beneficial Ownership Changes. This Schedule
discloses beneficial ownership of certain registered equity securities.
Any person or group of persons who acquire a beneficial ownership of
more than 5 percent of a class of registered equity securities of
certain issuers must file a Schedule 13D reporting such acquisition
together with certain other information within ten days after such
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acquisition. Moreover, any material changes in the facts set forth in
the Schedule generally precipitates a duty to promptly file an
amendment on Schedule 13D. The SEC's rules define the term beneficial
owner to be any person who directly or indirectly shares voting power
or investment power (the power to sell the security). There is no FDIC
form for Schadule13D. This schedule is described at 17 CFR 240.13d-101.
Schedule 13E-3: Going Private Transactions by Certain Issuers or
Their Affiliates. This schedule must be filed if an issuer engages in a
solicitation subject to Regulation 14A or a distribution subject to
Regulation 14C, in connection with a going private merger with its
affiliate. An affiliate and an issuer may be required to complete,
file, and disseminate a Schedule 13E-3, which directs that each person
filing the schedule state whether it reasonably believes that the Rule
13e-3 transaction is fair or unfair to unaffiliated security holders.
There is no FDIC form for Schedule13E-3. This schedule is described at
17 CFR 240.13e-100.
Schedule 13G: Certain Acquisitions of Stock. Certain acquisitions
of stock that are over than 5 percent of an issuer must be reported to
the public. Schedule 13G is a much abbreviated version of Schedule 13D
that is only available for use by a limited category of persons (such
as banks, broker/dealers, and insurance companies) and even then only
when the securities were acquired in the ordinary course of business
and not with the purpose or effect of changing or influencing the
control of the issuer. There is no FDIC form for Schadule13G. This
schedule is described at 17 CFR 240.13d-102.
Schedule 14A: Proxy Statements. State law governs the circumstances
under which shareholders are entitled to vote. When a shareholder vote
is required and any person solicits proxies with respect to securities
registered under section 12 of the Exchange Act, that person generally
is required to furnish a proxy statement containing the information
specified by Schedule 14A. The proxy statement is intended to provide
shareholders with the proxy information necessary to enable them to
vote in an informed manner on matters intended to be acted upon at
shareholders' meetings, whether the traditional annual meeting or a
special meeting. Typically, a shareholder is also provided with a proxy
card to authorize designated persons to vote his or her securities on
the shareholder's behalf in the event the holder does not vote in
person at the meeting. Copies of preliminary and definitive (final)
proxy statements and proxy cards are filed with the FDIC. There is no
FDIC form for Schadule14A. The description of this schedule is at 17
CFR 240.14a-101.
Schedule 14C: Information Required in Information Statements. An
information statement prepared in accordance with the requirements of
the SEC's Regulation 14C is required whenever matters are submitted for
shareholder action at an annual or special meeting when there is no
proxy solicitation under the SEC's Regulation 14A. There is no FDIC
form for Schadule14C. This schedule is described at 17 CFR 240.14c-101.
Schedule 14D-1: Tender Offer. This schedule is also known as
Schedule TO. Any person, other than the issuer itself, making a tender
offer for certain equity securities registered pursuant to section 12
of the Exchange Act is required to file this schedule if acceptance of
the offer would cause that person to own over 5 percent of that class
of the securities. This schedule must be filed and sent to various
parties, such as the issuer and any competing bidders. In addition, the
SEC's Regulation 14D sets forth certain requirements that must be
complied with in connection with a tender offer. This schedule is
described at 17 CFR 240.14d-100. There is no actual form for Schedule
14D-1 as filers must produce a customized narrative document in
compliance with the requirements in accordance with the filer's
particular circumstances.
There is no change in the method or substance of the collection.
The estimated number of respondents, as well as the estimated time per
response and the frequency of response, is expected to remain the same.
3. Title: Application for a Bank to Establish a Branch or Move its
Main Office or a Branch.
OMB Number: 3064-0070.
Affected Public: Insured state nonmember banks and state savings
associations.
Type of Burden: Reporting.
Obligation to Respond: Mandatory.
Burden Estimate:
Summary of Annual Burden
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Estimated Estimated
Estimated Estimated frequency of time per annual
Information collection description Type of burden Obligation to respond number of response response burden
respondents (hours) (hours)
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Application to Establish a Branch, Reporting............... Mandatory.............. 718 On Occasion............ 5 3,590
Move Main Office or Move Branch.
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Total Estimated Annual Burden: 3,590.
General Description of Collection: Section 18(d) of the Federal
Deposit Insurance Act (12 U.S.C. 1828(d)) (FDI Act) provides that no
FDIC insured state nonmember bank or state savings association shall
establish and operate any new domestic branch or move its main office
or any such branch from one location to another without the prior
written consent of the FDIC. In granting or withholding consent to the
applicant, FDIC considers: (a) The financial history and condition of
the depository institution; (b) the adequacy of its capital structure;
(c) its future earnings prospects; (d) the general character and
fitness of its management; (e) the risk presented by the depository
institution to the Deposit Insurance Fund; (f) the convenience and
needs of the community to be served; and (g) whether its corporate
powers are consistent with the purposes of the FDI Act. FDIC
regulations found at 12 CFR 303, subpart C, specify the steps that
respondents must take to comply with the statutory mandate. There is no
change in the method or substance of the collection. The estimated
number of respondents has been revised based on the number of responses
recorded over the last three years. The estimated time per response and
the frequency of response, is expected to remain the same.
4. Title: Activities and Investments of Savings Associations.
OMB Number: 3064-0104.
Affected Public: Insured state savings associations.
Type of Burden: Reporting.
Obligation to Respond: Mandatory.
Burden Estimate:
[[Page 57872]]
Summary of Annual Burden
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Estimated Estimated
Estimated Estimated frequency of time per annual
Information collection description Type of burden Obligation to respond number of response response burden
respondents (hours) (hours)
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Application for Exemption--Sec. 28 Reporting............... Mandatory.............. 18 On Occasion............ 12 216
and Subsidiary Notice--Sec. 18(m).
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Total Estimated Annual Burden.... ........................ ....................... ........... ....................... ........... 216
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General Description of Collection: Section 28 of the Federal
Deposit Insurance Act limits the powers of state savings associations
to acquire or retain equity investments of a type or amount not
permitted for a federal savings association. Section 28 also prohibits
insured state savings associations and their subsidiaries from engaging
as principal in any activity of a type or in an amount that is not
permitted for a federal savings association or its subsidiaries.
Section 28 charges the FDIC with the responsibility of enforcing the
restrictions and filing requirements, and permits the FDIC to grant
exceptions under certain circumstances.
12 CFR part 362 details the activities that state savings
associations and/or their subsidiaries may engage in, under certain
criteria and conditions, and identifies the information that banks must
furnish to the FDIC in order to obtain the FDIC's approval or non-
objection.
There is no change in the method or substance of the collection.
The estimated number of respondents has been revised upward based on
the number of responses recorded over the last three years. The
estimated time per response and the frequency of response, is expected
to remain the same.
5. Title: Margin and Capital Requirements for Covered Swap
Entities.
OMB Number: 3064-0204.
Affected Public: Any FDIC-insured state-chartered bank that is not
a member of the Federal Reserve System or FDIC-insured state-chartered
savings association that is registered as a swap dealer, major swap
participant, security-based swap dealer, or major security-based swap
participant.
Obligation to Respond: Mandatory.
Burden Estimate:
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Estimated Estimated Estimated
Regulation Type of burden Number of annual average hours annual burden
respondents frequency per response hours
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Sec. 349.1(d)(1), (d)(2) Meeting criteria for Reporting.............................. 1 1 1,000 1,000
exemption.
Sec. 349.1(h)................................ Disclosure............................. 1 1 10 10
Sec. 349.2 Definition of ``Eligible Master Recordkeeping.......................... 1 1 5 5
Netting Agreement,'' paragraphs (4)(i) and
(ii).
Sec. 349.8(g) Documentation..................
Sec. 349.10 Documentation of Margin Matters..
40+50++20+20++10++250+Sec. 349.5(c)(2)(i) Recordkeeping.......................... 1 1 4 4
Required Margin.
Sec. 349.7(c) Custody Agreement.............. Recordkeeping.......................... 1 1 100 100
Sec. 349.8(c) and (d) Initial Margin Model... Reporting.............................. 1 1 240 240
Sec. 349.8(e) Periodic Review................ Recordkeeping.......................... 1 1 40 40
Sec. 349.8(f) Control, Oversight, and
Validation Mechanisms..
Sec. 349.8(f)(3) Initial Margin Modeling Reporting.............................. 1 1 50 50
Report.
Sec. 349.8(h) Escalation Procedures.......... Recordkeeping.......................... 1 1 20 20
Sec. 349.9(e) Requests for Determinations.... Reporting.............................. 1 3 10 30
Sec. 349.11(b)(1) Posting Initial Margin..... Recordkeeping.......................... 1 250 1 250
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Totals..................................... ....................................... .............. .............. .............. 1,749
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General Description of Collection: The Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act) required the Office
of the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System, the FDIC, the Farm Credit Administration, and
Federal Home Finance Agency (each, an agency, and collectively, the
agencies) to jointly adopt rules that establish capital and margin
requirements for swap entities that are prudentially regulated by one
of the agencies (covered swap entities).\1\ These capital and margin
requirements apply to swaps that are not cleared by a registered
derivatives clearing organization or a registered clearing agency (non-
cleared swaps).\2\ The agencies published regulations that require swap
dealers and security-based swap dealers under the agencies' respective
jurisdictions to exchange margin with their counterparties for swaps
that are not centrally cleared (Swap Margin Rule or Rule). First issued
in 2015, the Swap Margin Rule includes
[[Page 57873]]
a phased compliance schedule from 2016 to 2020 and generally applies
only to a non-cleared swap entered into on or after the applicable
compliance date. A non-cleared swap entered into prior to an entity's
applicable compliance date is ``grandfathered'' by this regulatory
provision and is generally not subject to the margin requirements in
the Swap Margin Rule (legacy swap) unless it is amended or novated on
or after the applicable compliance date. The FDIC's Swap Margin Rule
can be found at 12 CFR part 349.
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\1\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010). See 7 U.S.C. 6s; 15
U.S.C. 78o-10. Sections 731 and 764 of the Dodd-Frank Act added a
new section 4s to the Commodity Exchange Act of 1936, as amended,
and a new section, section 15F, to the Securities Exchange Act of
1934, as amended, respectively, which require registration with the
Commodity Futures Trading Commission (CFTC) of swap dealers and
major swap participants and the U.S. Securities and Exchange
Commission (SEC) of security-based swap dealers and major security-
based swap participants (each a swap entity and, collectively, swap
entities). Section 1a(39) of the Commodity Exchange Act of 1936, as
amended, defines the term ``prudential regulator'' for purposes of
the margin requirements applicable to swap dealers, major swap
participants, security-based swap dealers and major security-based
swap participants. See 7 U.S.C. 1a(39).
\2\ A ``swap'' is defined in section 721 of the Dodd-Frank Act
to include, among other things, an interest rate swap, commodity
swap, equity swap, and credit default swap, and a security-based
swap is defined in section 761 of the Dodd-Frank Act to include a
swap based on a single security or loan or on a narrow-based
security index. See 7 U.S.C. 1a(47); 15 U.S.C. 78c(a)(68).
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The reporting requirements found in 12 CFR 349.1(d) refer to
statutory provisions that set forth conditions for an exemption from
clearing. Section 349.1(d)(1) provides an exemption for non-cleared
swaps if one of the counterparties to the swap is not a financial
entity, is using swaps to hedge or mitigate commercial risk, and
notifies the Commodity Futures Trading Commission of how it generally
meets its financial obligations associated with entering into non-
cleared swaps. Section 349.1(d)(2) provides an exemption for security-
based swaps if the counterparty notifies the Securities and Exchange
Commission (SEC) of how it generally meets its financial obligations
associated with entering into non-cleared security-based swaps. Section
349.2 defines terms used in part 349, including the definition of
``eligible master netting agreement,'' which provides that a covered
swap entity that relies on the agreement for purpose of calculating the
required margin must: (1) Conduct sufficient legal review of the
agreement to conclude with a well-founded basis that the agreement
meets specified criteria; and (2) establish and maintain written
procedures for monitoring relevant changes in law and to ensure that
the agreement continues to satisfy the requirements of this section.
The term ``eligible master netting agreement'' is used elsewhere in
part 349 to specify instances in which a covered swap entity may: (1)
Calculate variation margin on an aggregate basis across multiple non-
cleared swaps and security-based swaps and (2) calculate initial margin
requirements under an initial margin model for one or more swaps and
security-based swaps. Section 349.5(c)(2)(i) specifies that a covered
swap entity shall not be deemed to have violated its obligation to
collect or post margin from or to a counterparty if the covered swap
entity has made the necessary efforts to collect or post the required
margin, including the timely initiation and continued pursuit of formal
dispute resolution mechanisms, or has otherwise demonstrated upon
request to the satisfaction of the agency that it has made appropriate
efforts to collect or post the required margin. Section 349.7 generally
requires a covered swap entity to ensure that any initial margin
collateral that it collects or posts is held at a third-party
custodian. Section 349.7(c) requires the custodian to act pursuant to a
custody agreement that: (1) Prohibits the custodian from
rehypothecating, repledging, reusing, or otherwise transferring
(through securities lending, securities borrowing, repurchase
agreement, reverse repurchase agreement or other means) the collateral
held by the custodian, except that cash collateral may be held in a
general deposit account with the custodian if the funds in the account
are used to purchase an asset held in compliance with Sec. 349.7, and
such purchase takes place within a time period reasonably necessary to
consummate such purchase after the cash collateral is posted as initial
margin and (2) is a legal, valid, binding, and enforceable agreement
under the laws of all relevant jurisdictions, including in the event of
bankruptcy, insolvency, or a similar proceeding. A custody agreement
may permit the posting party to substitute or direct any reinvestment
of posted collateral held by the custodian under certain conditions.
With respect to collateral collected by a covered swap entity pursuant
to Sec. 349.3(a) or posted by a covered swap entity pursuant to Sec.
349.3(b), the agreement must require the posting party to substitute
only funds or other property that would qualify as eligible collateral
under Sec. 349.6 and for which the amount net of applicable discounts
described in Appendix B would be sufficient to meet the requirements of
Sec. 349.3 and direct reinvestment of funds only in assets that would
qualify as eligible collateral under Sec. 349.6. Section 349.8
establishes standards for the use of initial margin models. These
standards include: (1) A requirement that the covered swap entity
receive prior approval from the relevant Agency based on demonstration
that the initial margin model meets specific requirements (Sec. Sec.
349.8(c)(1) and 349.8(c)(2)); (2) a requirement that a covered swap
entity notify the relevant Agency in writing 60 days before extending
use of the model to additional product types, making certain changes to
the initial margin model, or making material changes to modeling
assumptions (Sec. 349.8(c)(3)); and (3) a variety of quantitative
requirements, including requirements that the covered swap entity
validate and demonstrate the reasonableness of its process for modeling
and measuring hedging benefits, demonstrate to the satisfaction of the
relevant Agency that the omission of any risk factor from the
calculation of its initial margin is appropriate, demonstrate to the
satisfaction of the relevant Agency that incorporation of any proxy or
approximation used to capture the risks of the covered swap entity's
non-cleared swaps or noncleared security-based swaps is appropriate,
periodically review and, as necessary, revise the data used to
calibrate the initial margin model to ensure that the data incorporate
an appropriate period of significant financial stress (Sec. Sec.
349.8(d)(5), 349.8(d)(10), 349.8(d)(11), 349.8(d)(12), and
349.8(d)(13)). Also, if the validation process reveals any material
problems with the initial margin model, the covered swap entity must
promptly notify the Agency of the problems, describe to the Agency any
remedial actions being taken, and adjust the initial margin model to
ensure an appropriately conservative amount of required initial margin
is being calculated (Sec. 349.8(f)(3)). Section 349.8 also establishes
requirements for the ongoing review and documentation of initial margin
models. These standards include: (1) A requirement that a covered swap
entity review its initial margin model annually (Sec. 349.8(e)); (2) a
requirement that the covered swap entity validate its initial margin
model at the outset and on an ongoing basis, describe to the relevant
Agency any remedial actions being taken, and report internal audit
findings regarding the effectiveness of the initial margin model to the
covered swap entity's board of directors or a committee thereof
(Sec. Sec. 349.8(f)(2), 349.8(f)(3), and 349.8(f)(4)); (3) a
requirement that the covered swap entity adequately document all
material aspects of its initial margin model (Sec. 349.8(g)); and (4)
that the covered swap entity must adequately document internal
authorization procedures, including escalation procedures, that require
review and approval of any change to the initial margin calculation
under the initial margin model, demonstrable analysis that any basis
for any such change is consistent with the requirements of this
section, and independent review of such demonstrable analysis and
approval (Sec. 349.8(h)). Section 349.9 addresses the treatment of
cross-border transactions and, in certain limited situations, will
permit a covered swap entity to comply with a foreign regulatory
framework for
[[Page 57874]]
noncleared swaps (as a substitute for compliance with the prudential
regulators' rule) if the prudential regulators jointly determine that
the foreign regulatory framework is comparable to the requirements in
the prudential regulators' rule. Section 349.9(e) allows a covered swap
entity to request that the prudential regulators make a substituted
compliance determination and must provide the reasons therefore and
other required supporting documentation. A request for a substituted
compliance determination must include: (1) A description of the scope
and objectives of the foreign regulatory framework for non-cleared
swaps and non-cleared security-based swaps; (2) the specific provisions
of the foreign regulatory framework for non-cleared swaps and security-
based swaps (scope of transactions covered; determination of the amount
of initial and variation margin required; timing of margin
requirements; documentation requirements; forms of eligible collateral;
segregation and rehypothecation requirements; and approval process and
standards for models); (3) the supervisory compliance program and
enforcement authority exercised by a foreign financial regulatory
authority or authorities in such system to support its oversight of the
application of the non-cleared swap and security-based swap regulatory
framework; and (4) any other descriptions and documentation that the
prudential regulators determine are appropriate. A covered swap entity
may make a request under this section only if directly supervised by
the authorities administering the foreign regulatory framework for non-
cleared swaps and non-cleared security-based swaps. Section 349.10
requires a covered swap entity to execute trading documentation with
each counterparty that is either a swap entity or financial end user
regarding credit support arrangements that: (1) Provides the
contractual right to collect and post initial margin and variation
margin in such amounts, in such form, and under such circumstances as
are required and (2) specifies the methods, procedures, rules, and
inputs for determining the value of each non-cleared swap or noncleared
security-based swap for purposes of calculating variation margin
requirements and the procedures for resolving any disputes concerning
valuation. Section 349.11(b)(1) provides that the requirement for a
covered swap entity to post initial margin under Sec. 349.3(b) does
not apply with respect to any noncleared swap or non-cleared security
based swap with a counterparty that is an affiliate. A covered swap
entity shall calculate the amount of initial margin that would be
required to be posted to an affiliate that is a financial end user with
material swaps exposure pursuant to Sec. 349.3(b) and provide
documentation of such amount to each affiliate on a daily basis.
There is no change in the method or substance of the collection.
The FDIC currently does not supervise any institutions that are subject
to this information collection but is reporting one respondent as a
placeholder to preserve the burden estimates. For clarity, the burden
presentation has been changed to correspond to the burden presentation
made by the other agencies in their respective information collections.
There is no change in the total estimated annual burden.
Request for Comment
Comments are invited on: (a) Whether the collection of information
is necessary for the proper performance of the FDIC's functions,
including whether the information has practical utility; (b) the
accuracy of the estimates of the burden of the information collection,
including the validity of the methodology and assumptions used; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology. All
comments will become a matter of public record.
Federal Deposit Insurance Corporation.
Dated at Washington, DC, on October 23, 2019.
Annmarie H. Boyd,
Assistant Executive Secretary.
[FR Doc. 2019-23527 Filed 10-28-19; 8:45 am]
BILLING CODE 6714-01-P