[Federal Register Volume 84, Number 246 (Monday, December 23, 2019)]
[Rules and Regulations]
[Pages 70413-70415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27225]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Chapter III
RIN 3064-ZA11
Rescission of Statements of Policy
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Rescission of Statements of Policy.
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SUMMARY: In an ongoing effort to streamline issuances by the FDIC to
the public and to ensure that such issuances are timely, relevant, and
effective, the FDIC initiated a comprehensive review
[[Page 70414]]
of its Statements of Policy to identify those that were outdated.
Additionally, the FDIC, in the 2017 report required by the Economic
Growth and Regulatory Paperwork Reduction Act, committed to reviewing
published guidance to identify any guidance that should be revised or
rescinded because it is out-of-date or otherwise no longer relevant. In
furtherance of these initiatives, the FDIC Board of Directors approved
a proposal to rescind four FDIC Statements of Policy, which was
published in the Federal Register on September 30, 2019, with a 30-day
comment period. The FDIC did not receive any comments on the proposed
rescission of these Statements of Policy and is rescinding them
effective December 31, 2019.
DATES: Effective December 31, 2019.
FOR FURTHER INFORMATION CONTACT:
Applicability of the Glass-Steagall Act to the Securities
Activities of Subsidiaries of Insured Nonmember Banks:
William R. Baxter, Senior Policy Analyst, (202) 898-8514,
[email protected]; Michael B. Phillips, Counsel, (202) 898-3581
[email protected].
Treatment of Collateralized Letters of Credit After Appointment of
the FDIC as Conservator or Receiver and Treatment of Collateralized Put
Obligations After Appointment of the FDIC as Conservator or Receiver:
Thomas P. Bolt, Senior Counsel, (703) 562-2046, [email protected];
Philip Mangano, Deputy Director, (571) 858-8279, [email protected];
Scott A. Greenup, Associate Director, (571) 858-8207,
[email protected]; George H. Williamson, Manager, (571) 858-8199,
[email protected].
Contracting With Firms That Have Unresolved Audit Issues With FDIC:
Thomas D. Harris, Deputy Director, (703) 562-2203,
[email protected]; Robert J. Brown, Supervisory Counsel, (703) 562-6068,
[email protected].
SUPPLEMENTARY INFORMATION: After a comprehensive review of FDIC
Statements of Policy and following publication of notice \1\ and a 30-
day comment period which ended on October 30, 2019, during which no
comments were received, the FDIC is rescinding the following four
Statements of Policy effective December 31, 2019:
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\1\ 84 FR 51467 (Sept. 30, 2019).
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Applicability of the Glass-Steagall Act to Securities Activities of
Subsidiaries of Insured Nonmember Banks;
Treatment of Collateralized Letters of Credit After Appointment of
the FDIC as Conservator or Receiver;
Treatment of Collateralized Put Obligations After Appointment of
the FDIC as Conservator or Receiver; and
Contracting with Firms that have Unresolved Audit Issues with the
FDIC.
Although these Statements of Policy were not subject to public
comment prior to their adoption, the FDIC Board, on a discretionary
basis, elected to provide a period for public comment on the proposed
rescission of these Policy Statements. The FDIC did not receive any
comments regarding the proposed rescissions and therefore is rescinding
the Statements of Policy effective December 31, 2019.
Rescission of Statements of Policy
(a) Statement of Policy on Applicability of the Glass-Steagall Act to
Securities Activities of Subsidiaries of Insured Nonmember Banks
This 1982 Statement of Policy addresses the applicability of
sections 20 and 32 of the Banking Act of 1933 (Glass Steagall Act) to
the securities activities of subsidiaries of insured nonmember
banks.\2\ The Statement of Policy states the opinion of the FDIC Board
that the Glass Steagall Act does not prohibit an insured nonmember bank
from establishing an affiliate relationship with, or organizing or
acquiring, a subsidiary corporation that engages in the business of
issuing, underwriting, selling, or distributing stocks, bonds, or other
securities. The 1982 Statement of Policy was superseded in its entirety
by the enactment of the Gramm-Leach-Bliley Act (GLBA).\3\ GLBA allowed
commercial banks, investment banks, securities firms, and insurance
companies to consolidate and operate as financial conglomerates.
Therefore, the information and guidance contained in the 1982 Statement
of Policy is out-of-date. For this reason, the FDIC is rescinding the
1982 Statement of Policy effective December 31, 2019.
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\2\ 47 FR 38984. (https://www.govinfo.gov/content/pkg/FR-1982-09-03/pdf/FR-1982-09-03.pdf).
\3\ Public Law 106-102, 113 Stat. 1338, section 101 (1999).
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(b) Statement of Policy on Treatment of Collateralized Letters of
Credit After Appointment of the FDIC as Conservator or Receiver
This Statement of Policy was adopted by the FDIC on May 19, 1995,
in order to clarify how the FDIC as conservator or receiver of a failed
insured depository institution (IDI) would treat certain capital
markets financing transactions using collateralized letters of credit
(CLOCs) issued by IDIs prior to August 9, 1989, the date on which the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
\4\ (FIRREA) was signed into law.\5\ The Statement of Policy applies
only to CLOCs (i) utilized in capital markets financing transactions
originally issued by IDIs prior to August 9, 1989, and any subsequent
renewal, replacement or extension of such CLOCs; and (ii) where the
security interest in collateral pledged by the IDI was both perfected
and legally enforceable under applicable law. The Statement of Policy
does not apply to trade letters of credit or letters of credit issued
for any other purpose.
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\4\ Public Law 101-73, 103 Stat. 103 (1989).
\5\ 60 FR 27976. (https://www.govinfo.gov/content/pkg/FR-1995-05-26/pdf/95-12992.pdf).
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The Statement of Policy provides that after its appointment as
conservator or receiver of a failed IDI, the FDIC may either (i)
continue any CLOCs as enforceable under the terms of the contract
during the pendency of the conservatorship or receivership, or (ii)
call, redeem or prepay any CLOC by its statutory power to repudiate or
disaffirm contracts entered into by the IDI.
Based on market research, the FDIC has concluded, to the best of
its knowledge, that it is unlikely that any public or privately issued
transactions of the type covered by the Statement of Policy remain
outstanding at this time. Therefore, the FDIC is rescinding the
Statement of Policy effective December 31, 2019.
(c) Statement of Policy on Treatment of Collateralized Put Obligations
After Appointment of the FDIC as Conservator or Receiver
This Statement of Policy was adopted by the FDIC on July 9, 1991,
in order to explain how the FDIC as conservator or receiver of a failed
IDI would treat certain capital markets financing transactions using
collateralized put obligations--also referred to as ``collateralized
put options'' (CPOs)--issued by IDIs prior to August 9, 1989, the date
on which FIRREA was signed into law.\6\ The Statement of Policy applies
only to CPOs (i) issued by IDIs in connection with capital markets
financing transactions, including the formation of publicly offered
unit investment trusts and other sales of an IDI's portfolio
securities, prior to August 9, 1989, and any subsequent renewal,
replacement or extension of such CPOs; and (ii) collateralized by
property owned and pledged by the IDI, and in which the security
interest granted is both perfected and legally enforceable.
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\6\ 56 FR 36152. (https://cdn.loc.gov/service/ll/fedreg/fr056/fr056147/fr056147.pdf).
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[[Page 70415]]
The Statement of Policy explains that the FDIC as conservator or
receiver has the right to call, redeem or prepay any CPOs by
repudiation or disaffirmance of the applicable written contract entered
into by the IDI, either directly by cash payment in exchange for
release of collateral or by liquidation of the collateral by a trustee
or other secured party.
Based on market research, the FDIC has concluded, to the best of
its knowledge, that it is unlikely that any public or privately issued
transactions of this type remain outstanding at this time. Therefore,
the FDIC is rescinding the Statement of Policy effective December 31,
2019.
(d) Statement of Policy on Contracting With Firms That Have Unresolved
Audit Issues With FDIC
The Statement of Policy on Contracting with Firms That Have
Unresolved Audit Issues With FDIC (1997 Statement of Policy) was not
approved by the FDIC Board but it is being consolidated in this notice
for convenience and completeness.
The 1997 Statement of Policy was adopted to address situations in
which the FDIC seeks to contract with firms with which there are
unresolved audit issues.\7\ The 1997 Statement of Policy established
certain rights and procedures for the handling of contracting parties
that have unresolved audit issues, as determined by various FDIC
auditing agents. After review of the relevant Statement of Policy, the
FDIC concluded that the document may give rise to de facto exclusions
from future FDIC contracting opportunities in a manner that is
inconsistent with procedural protections specified in 12 CFR 367.
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\7\ 62 FR 13382. (https://www.govinfo.gov/content/pkg/FR-1997-03-20/pdf/97-6995.pdf).
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In determining whether to revise or rescind the Statement of
Policy, the FDIC considered a variety of factors, including whether or
not the Policy provided the FDIC and its various audit agents with
essential or additional protections regarding the repayment of
challenged amounts. The FDIC determined that existing remedies are
sufficient to allow the FDIC and its agents to pursue such challenged
amounts without the need for those measures specified in the Statement
of Policy. Therefore, the FDIC is rescinding this Statement of Policy
effective December 31, 2019.
(Authority: 12 U.S.C. 1811 et seq.)
Dated at Washington, DC, on December 12, 2019.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Annmarie H. Boyd,
Assistant Executive Secretary.
[FR Doc. 2019-27225 Filed 12-20-19; 8:45 am]
BILLING CODE 6714-01-P