Enterprise Regulatory Capital Framework-Public Disclosures for the Standardized Approach

Published date03 November 2021
Record Number2021-23780
SectionProposed rules
CourtFederal Housing Finance Agency
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
Proposed Rules Federal Register
60589
Vol. 86, No. 210
Wednesday, November 3, 2021
1
In conservatorships, the Enterprises are
supported by Senior Preferred Stock Purchase
Agreements (PSPAs) between the U.S. Department
of the Treasury (Treasury) and each Enterprise,
through FHFA as its conservator (Fannie Mae’s
Amended and Restated Senior Preferred Stock
Purchase Agreement with Treasury (September 26,
2008), https://www.fhfa.gov/Conservatorship/
Documents/Senior-Preferred-Stock-Agree/FNM/
SPSPA-amends/FNM-Amend-and-Restated-SPSPA_
09-26-2008.pdf; Freddie Mac’s Amended and
Restated Senior Preferred Stock Purchase
Agreement with Treasury (September 26, 2008),
https://www.fhfa.gov/Conservatorship/Documents/
Senior-Preferred-Stock-Agree/FRE/SPSPA-amends/
FRE-Amended-and-Restated-SPSPA_09-26-
2008.pdf). The PSPAs, as amended by letter
agreements executed by the parties on January 14,
2021 (2021 Fannie Mae Letter Agreement, https://
home.treasury.gov/system/files/136/Executed-
Letter-Agreement-for-Fannie-Mae.pdf; 2021 Freddie
Mac Letter Agreement, https://home.treasury.gov/
system/files/136/Executed-Letter-Agreement-for-
Freddie%20Mac.pdf), include a covenant at section
5.15 which states: ‘‘[The Enterprise] shall comply
with the Enterprise Regulatory Capital Framework
[published in the Federal Register at 85 FR 82150
on December 17, 2020] disregarding any subsequent
amendment or other modifications to that rule.’’
Modifying that covenant will require agreement
between the Treasury and FHFA under section 6.3
of the PSPAs.
FEDERAL HOUSING FINANCE
AGENCY
12 CFR Part 1240
RIN 2590–AB18
Enterprise Regulatory Capital
Framework—Public Disclosures for the
Standardized Approach
AGENCY
: Federal Housing Finance
Agency.
ACTION
: Notice of proposed rulemaking:
Request for comments.
SUMMARY
: The Federal Housing Finance
Agency (FHFA or the Agency) is seeking
comments on a notice of proposed
rulemaking (proposed rule) that would
introduce new standardized approach
disclosure requirements for the Federal
National Mortgage Association (Fannie
Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac, and
with Fannie Mae, each an Enterprise),
including disclosures related to
regulatory capital instruments and risk-
weighted assets calculated under the
Enterprise Regulatory Capital
Framework (ERCF).
DATES
: Comments must be received on
or before January 3, 2022.
ADDRESSES
: You may submit your
comments on the proposed rule,
identified by regulatory information
number (RIN) 2590–AB18, by any one of
the following methods:
Agency website: www.fhfa.gov/
open-for-comment-or-input.
Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
instructions for submitting comments. If
you submit your comment to the
Federal eRulemaking Portal, please also
send it by email to FHFA at
RegComments@fhfa.gov to ensure
timely receipt by FHFA. Include the
following information in the subject line
of your submission: Comments/RIN
2590–AB18.
Hand Delivered/Courier: The hand
delivery address is: Clinton Jones,
General Counsel, Attention: Comments/
RIN 2590–AB18, Federal Housing
Finance Agency, 400 Seventh Street
SW, Washington, DC 20219. Deliver the
package at the Seventh Street entrance
Guard Desk, First Floor, on business
days between 9 a.m. and 5 p.m.
U.S. Mail, United Parcel Service,
Federal Express, or Other Mail Service:
The mailing address for comments is:
Clinton Jones, General Counsel,
Attention: Comments/RIN 2590–AB18,
Federal Housing Finance Agency, 400
Seventh Street SW, Washington, DC
20219. Please note that all mail sent to
FHFA via U.S. Mail is routed through a
national irradiation facility, a process
that may delay delivery by
approximately two weeks. For any time-
sensitive correspondence, please plan
accordingly.
FOR FURTHER INFORMATION CONTACT
:
Andrew Varrieur, Senior Associate
Director, Office of Capital Policy, (202)
649–3141, Andrew.Varrieur@fhfa.gov;
Christopher Vincent, Senior Financial
Analyst, Office of Capital Policy, (202)
649–3685, Christopher.Vincent@
fhfa.gov; or James Jordan, Associate
General Counsel, Office of General
Counsel, (202) 649–3075,
James.Jordan@fhfa.gov. These are not
toll-free numbers. For TTY/TRS users
with hearing and speech disabilities,
dial 711 and ask to be connected to any
of the contact numbers above.
SUPPLEMENTARY INFORMATION
:
Comments
FHFA invites comments on all aspects
of the proposed rule. Copies of all
comments will be posted without
change and will include any personal
information you provide, such as your
name, address, email address, and
telephone number, on the FHFA website
at https://www.fhfa.gov. In addition,
copies of all comments received will be
available for examination by the public
through the electronic rulemaking
docket for this proposed rule also
located on the FHFA website.
Table of Contents
I. Introduction
II. Proposed Disclosure Requirements
A. General Requirements
B. Standardized Approach
C. Market Risk
III. Frequency of Disclosures
IV. Compliance Period
V. Location of Disclosures and Audit
Requirements
VI. Proprietary and Confidential Information
VII. Specific Public Disclosure Requirements
VIII. Paperwork Reduction Act
IX. Regulatory Flexibility Act
I. Introduction
FHFA is seeking comments on new
public disclosure requirements for the
Enterprises. This proposed rule would
expand the disclosure requirements set
forth in the ERCF published in the
Federal Register on December 17, 2020
(85 FR 82150) in order to improve
market discipline and encourage sound
risk-management practices through
meaningful public disclosure.
1
With
public disclosures that are clear,
comprehensive, useful, consistent over
time, and comparable across
Enterprises, FHFA believes that market
participants would have sufficient
information to assess an Enterprise’s
material risks and capital adequacy,
contributing to the safety and soundness
of the Enterprises and decreasing risk to
the U.S. taxpayers.
The proposed rule would implement
standardized approach public
disclosure requirements for the
Enterprises that align with many of the
public disclosure requirements for large
banking organizations under the
regulatory capital framework adopted by
United States banking regulators (U.S.
banking framework). Modern bank
disclosure requirements were initially
contemplated by the Basel Committee
on Banking Supervision (BCBS) under
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60590
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
Pillar 3 of Basel II in order to
complement the minimum capital
requirements and the supervisory
review process and were later expanded
with additional requirements in Basel
III. In much the same way, the public
disclosure requirements in the proposed
rule would complement the ERCF as it
aims to ensure that each Enterprise
operates in a safe and sound manner
and is positioned to fulfill its statutory
mission to provide stability and ongoing
assistance to the secondary mortgage
market across the economic cycle, in
particular during periods of financial
stress.
Consistent with these stated
objectives, and complementary to the
Enterprises’ statutory duties and
purposes, the proposed rule would
implement disclosure requirements
related to risk management, corporate
governance, and regulatory capital,
including risk-weighted assets
calculated under the ERCF’s
standardized approach, statutory capital
requirements, supplemental capital
requirements, and capital buffers. In
contrast to U.S. banking organizations
that are each either a standardized
approach institution or an advanced
approaches institution, an Enterprise is
required to satisfy all requirements
under both the standardized approach
and the advanced approach in the
ERCF, including any associated
disclosure requirements. Therefore, the
proposed rule adapts the public
disclosure requirements in the U.S.
banking framework to reflect the ERCF’s
standardized approach, blending
elements from the U.S. banking
framework’s standardized and advanced
approaches and establishing a level
playing field for public disclosures
between the Enterprises and large,
domestic banking organizations. While
the proposed rule would implement
disclosure requirements for the ERCF’s
standardized approach only, FHFA may
in the future consider additional
disclosure requirements related to the
advanced approaches. FHFA seeks
comments on all elements of the
proposed public disclosure
requirements.
II. Proposed Disclosure Requirements
A. General Requirements
The proposed public disclosure
requirements are designed to facilitate
market discipline of the Enterprises. By
allowing market participants to assess
key information about an Enterprise’s
risk profile and its associated levels of
capital, FHFA believes the proposed
rule would encourage sound risk
management practices and foster
financial stability both during and after
conservatorship. However, enhanced
public disclosures would necessarily be
somewhat costly for the Enterprises.
With the proposed rule, FHFA aims to
strike an appropriate balance between
the market benefits of disclosure and the
additional financial burden to an
Enterprise that provides the disclosures.
Importantly, an Enterprise may be able
to fulfill some of the proposed
disclosure requirements by relying on
similar disclosures made in accordance
with accounting standards or Securities
and Exchange Commission (SEC)
mandates. In addition, an Enterprise
could use information provided in
regulatory reports to fulfill the
disclosure requirements. In these
situations, an Enterprise would be
required to explain any material
differences between the accounting or
other disclosures and the disclosures
required under the proposed rule.
Market participants consider many
factors when making their assessment of
an Enterprise, including the Enterprise’s
risk profile and the techniques it uses to
identify, measure, monitor, and control
the risks to which the Enterprise is
exposed. Accordingly, the proposed rule
would require an Enterprise to have a
formal disclosure policy approved by its
board of directors that addresses the
Enterprise’s approach for determining
which disclosures are necessary and
appropriate. The policy would be
required to address internal controls,
disclosure controls, and procedures.
The board of directors and senior
management would ensure the
appropriate review of the disclosures
and that effective internal controls,
disclosure controls, and procedures are
maintained. One or more senior officers
of the Enterprise would be required to
attest that the disclosures meet the
requirements of the proposed rule.
For items not explicitly identified in
the proposed rule and in a manner
similar to the requirements for U.S.
banking organizations, an Enterprise
would decide which additional
disclosures are relevant based on a
materiality concept. Information is
material if its omission or misstatement
could change or influence the
assessment or decision of a user relying
on that information for the purpose of
making investment decisions. The
materiality concept is designed to
ensure that improvements in public
disclosures come not only from
regulatory standards, but also as a result
of efforts made by management at the
Enterprises to communicate advances in
risk management processes and internal
reporting systems to public shareholders
and other market participants.
Accordingly, FHFA encourages the
management of each Enterprise to
regularly review its public disclosures
and enhance these disclosures, where
appropriate, to clearly identify all
significant risk exposures and their
effects on the Enterprise’s financial
condition and performance, cash flow,
and earnings potential.
Question 1: What additional general
disclosure requirements should FHFA
consider, and why?
B. Standardized Approach
The standardized approach
disclosures in the proposed rule are
described across eleven categories, each
detailing qualitative disclosures,
quantitative disclosures, or both. The
categories are: (1) Capital structure; (2)
capital adequacy; (3) capital buffers; (4)
credit risk: General disclosures; (5)
general disclosure for counterparty
credit risk-related exposures; (6) credit
risk mitigation; (7) credit risk transfers
(CRT) and securitization; (8) equities; (9)
interest rate risk for non-trading
activities; (10) operational risk; and (11)
tier 1 leverage ratio. Many of the
disclosures described within the
categories are identical to the
disclosures applicable to U.S. banking
organizations subject to the
standardized approach. Others have
been modified to reflect the ERCF, such
as those referring to statutory core
capital and statutory total capital,
adjusted total capital, the prescribed
capital conservation buffer amount
(PCCBA), and CRT. In addition, FHFA
has excluded several disclosure items
that are included in the U.S. banking
framework for activities or
categorizations not relevant in the
ERCF, such as exposures to foreign
banks, statutory multifamily mortgages,
and high volatility commercial real
estate (HVCRE).
The standardized approach in the
ERCF differs broadly from the U.S.
banking standardized approach in its
inclusion of risk-weighted assets for
operational risk and market risk, in its
application of capital buffers, and in its
application of leverage ratio
requirements. In contrast to capital
requirements for banking organizations
subject to the standardized approach in
the U.S. banking framework, the
standardized approach in the ERCF
requires an Enterprise to capitalize
operational and market risks, to apply
every component of the PCCBA
including the countercyclical capital
buffer, and to apply the same leverage
ratio requirements and prescribed
leverage buffer amount (PLBA)
regardless of approach. Accordingly, the
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60591
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
proposed rule would require an
Enterprise to publicly disclose
qualitative and quantitative information
related to these items in the
standardized approach. The proposed
rule’s disclosure requirements for
market risk are described in section II.C.
Several of the proposed rule’s
qualitative disclosure requirements for
operational risk pertain to the advanced
measurement approach (AMA). These
disclosures would include a description
of the AMA, as well as a discussion of
relevant internal and external factors
considered in the Enterprise’s
measurement approach. Because the
Enterprises are not required to
implement the AMA approach until at
least January 1, 2025, FHFA would
expect the AMA-related disclosures to
begin at the same time. Until then, and
after as well, the Enterprises are subject
to an operational risk capital
requirement floor of 15 basis points of
adjusted total assets.
Advanced approaches banking
organizations must disclose information
related to total leverage exposure (TLE)
and the supplementary leverage ratio,
while standardized approach banking
institutions are not required to do so.
The ERCF analog to the concept of TLE
is adjusted total assets, and the analog
to the concept of the supplementary
leverage ratio is the tier 1 leverage ratio.
In contrast to the U.S. banking
framework, the ERCF tier 1 leverage
ratio requirement is the same for an
Enterprise operating under the
standardized or advanced approaches.
For this reason, FHFA is including the
leverage disclosure category within the
standardized approach section of the
ERCF.
Many of the disclosure requirements
for the standardized approach are also
applicable to the advanced approach.
For example, the disclosure items
described within the categories for
capital structure, PCCBA, PLBA,
operational risk, and leverage would not
differ conditional on whether an
Enterprise’s total risk-weighted assets
are higher under the standardized
approach or the advanced approach.
Because these items are applicable to
the standardized approach, the
proposed rule includes them. In
contrast, the proposed rule excludes
disclosure requirements specific to the
advanced approaches such as the
amount of credit risk-weighted assets
calculated using an Enterprise’s internal
models.
C. Market Risk
The proposed rule includes market
risk disclosure requirements for covered
positions under the standardized
approach. These requirements include a
formal disclosure policy approved by
the board of directors that addresses the
Enterprise’s approach for determining
its market risk disclosures. The policy
would address the associated internal
controls and disclosure controls and
procedures and would contain
requirements related to the verification
and attestation of disclosures and the
ongoing maintaining of effective
controls and procedures. The
requirements would also include
quarterly quantitative disclosures for
each material portfolio of covered
positions related to exposure and risk-
weighted asset amounts as well as the
aggregate amount of on-balance sheet
and off-balance sheet securitization
positions by exposure type.
In addition, an Enterprise would be
required to make annual public
disclosures for each material portfolio of
covered positions related generally to
portfolio composition and valuation
policies, procedures, and
methodologies. These disclosures would
include, among other things, key
valuation assumptions and information
on significant changes, model
characteristics used to calculate risk-
weighted assets for market risk, and a
description of the approaches used for
validating and evaluating the accuracy
of internal models and modeling
processes. In addition, the annual
disclosures would include a description
of the Enterprise’s processes for
monitoring changes in the credit and
market risk of securitization positions
and a description of the Enterprise’s
policy governing the use of credit risk
mitigation to mitigate the risks of
securitization and resecuritization
positions.
III. Frequency of Disclosures
The proposed rule would require the
Enterprises to make quantitative
disclosures on a quarterly basis,
consistent with the disclosure
requirements for most regulated
financial institutions and frequently
enough to capture most changes in risk
profiles. However, qualitative
disclosures that provide a general
summary of an Enterprise’s risk-
management objectives and policies,
reporting system, and definitions may
be disclosed annually, provided any
significant changes are disclosed in the
interim.
The proposed rule would also require
that the disclosures are timely. As
described above, an Enterprise may be
able to fulfill some of the proposed
disclosure requirements by relying on
similar disclosures made in accordance
with accounting standards or SEC
mandates. FHFA acknowledges that
timing of disclosures required under
other federal laws, including disclosures
required under the federal securities
laws and their implementing regulations
by the SEC, may not always align with
the timing of required Enterprise
disclosures. For calendar quarters that
do not correspond to fiscal year-end,
FHFA would consider those disclosures
that are made within 45 days as timely.
In general, where an Enterprise’s fiscal
year-end coincides with the end of a
calendar quarter, FHFA would consider
disclosures to be timely if they are made
no later than the applicable SEC
disclosure deadline for the
corresponding Form 10–K annual
report. In cases where an Enterprise’s
fiscal year-end does not coincide with
the end of a calendar quarter, FHFA
would consider the timeliness of
disclosures on a case-by-case basis. In
some cases, management may determine
that a significant change has occurred,
such that the most recent reported
amounts do not reflect the Enterprise’s
capital adequacy and risk profile. In
those cases, an Enterprise would need to
disclose the general nature of these
changes and briefly describe how they
are likely to affect public disclosures
going forward. An Enterprise would
make these interim disclosures as soon
as practicable after the determination
that a significant change has occurred.
IV. Compliance Period
The standardized approach disclosure
requirements in the proposed rule
would promote market discipline and
prudent risk management practices at
the Enterprises regardless of the
conservatorship status of either
Enterprise. Therefore, an Enterprise’s
compliance date for the disclosure
requirements outlined in the proposed
rule would be six months from the date
of publication of the final rule in the
Federal Register.
The proposed rule would also amend
the reporting requirement compliance
dates in § 1240.4(b) to remove references
to parts of the ERCF that do not contain
reporting requirements. Specifically, the
proposed rule would remove references
to compliance dates for reporting
requirements in subparts C and G of 12
CFR 1240, §§ 1240.162(d) and 1240.204,
as these parts do not contain reporting
requirements. The proposed rule would
retain without modification the January
1, 2022 compliance dates for reporting
requirements outlined in §§ 1240.1(f)
and 1240.41.
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60592
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
V. Location of Disclosures and Audit
Requirements
The proposed rule would require an
Enterprise to ensure that required
disclosures are publicly available (for
example, included on a public website)
for each of the last three years or such
shorter time period beginning when the
proposed rule, if adopted as a final rule,
comes into effect. In general,
management of an Enterprise would
have some discretion to determine the
appropriate medium and location of the
disclosures, provided the Enterprise
meets the requirements related to cross-
referencing described below.
Furthermore, an Enterprise would have
flexibility in formatting its public
disclosures unless otherwise ordered by
FHFA under its general authority to
follow specific reporting guidelines or
procedures, including potentially
utilizing specified templates for certain
quantitative disclosure elements. For
example, FHFA may determine that
standardizing the way the Enterprises
present a subset of the required
quantitative disclosures would facilitate
the ability of market participants to
compare attributes or results across
Enterprises and better assess the risk
profile and capital adequacy of each
Enterprise. Conversely, there may be
aspects of the required disclosures that
cannot easily be standardized or where
comparison across Enterprises may be
less meaningful to market participants,
such as descriptions of an Enterprise’s
risk management practices or certain
analyses that contain bespoke risk
metrics.
FHFA encourages each Enterprise to
make all required disclosures available
in one place on the Enterprise’s public
website, the address of which should be
communicated in the Enterprise’s
regulatory report. However, the
proposed rule would permit an
Enterprise to provide the disclosures in
more than one place, such as in its
public financial reports (for example, in
Management’s Discussion and Analysis
included in SEC filings) or other
regulatory reports, as long as the
Enterprise also provides a summary
table on its public website that
specifically indicates where all the
disclosures may be found (for example,
regulatory report schedules, page
numbers in annual reports).
The proposed rule would require an
Enterprise to reconcile disclosures of
regulatory capital elements as the
elements relate to an Enterprise’s
balance sheet in any audited
consolidated financial statements.
However, disclosures not included in
the footnotes to the audited financial
statements would not be subject to
external audit reports for financial
statements or internal control reports
from management and the external
auditor. Under the proposed rule, the
audit requirements for an Enterprise’s
required public disclosures would be
identical to the audit requirements for a
banking organization’s required public
disclosures in the U.S. banking
framework.
VI. Proprietary and Confidential
Information
FHFA believes that the proposed
disclosure requirements strike an
appropriate balance between the need
for meaningful disclosure and the
protection of proprietary and
confidential information. Accordingly,
FHFA believes that an Enterprise would
be able to provide all these disclosures
without revealing proprietary and
confidential information. Only in rare
circumstances might disclosure of
certain items of information required by
the proposed rule compel an Enterprise
to reveal confidential and proprietary
information. In these unusual situations,
FHFA proposes that if an Enterprise
believes that disclosure of specific
commercial or financial information
would compromise its position by
making public information that is either
proprietary or confidential in nature, the
Enterprise need not disclose those
specific items. Instead, the Enterprise
must disclose more general information
about the subject matter of the
requirement, together with the fact that,
and the reason why, the specific items
of information have not been disclosed.
This provision would apply only to
those disclosures included in this
proposed rule and does not apply to
disclosure requirements imposed by
accounting standards or other regulatory
agencies.
Question 2: In terms of proprietary and
confidential information, are any of
the proposed disclosure requirements
problematic, and why?
VII. Specific Public Disclosure
Requirements
The public disclosure requirements
are designed to provide important
information to market participants on
capital, risk exposures, risk assessment
processes, and, thus, the capital
adequacy of an Enterprise. The
substantive content of the tables in the
proposed rule is the focus of the
disclosure requirements, not the tables
themselves.
An Enterprise would make the
disclosures described in tables 1
through 11 to proposed § 1240.63 and
market risk disclosures described in
proposed § 1240.205. The Enterprise
would make these disclosures publicly
available for each of the last three years
or such shorter time period beginning
when the proposed requirements come
into effect.
Table 1 disclosures, ‘‘Capital
Structure,’’ would provide summary
information on the terms and conditions
of the main features of regulatory capital
instruments, which would allow for an
evaluation of the quality of the capital
available to absorb losses within an
Enterprise. An Enterprise also would
disclose the total amount of common
equity tier 1, core, tier 1, total, and
adjusted total capital, with separate
disclosures for deductions and
adjustments to capital.
Table 2 disclosures, ‘‘Capital
Adequacy,’’ would provide information
on an Enterprise’s approach for
categorizing and risk-weighting its
exposures, as well as the amount of total
risk-weighted assets. The table would
also include common equity tier 1, tier
1, and adjusted total risk-based capital
ratios.
Table 3 disclosures, ‘‘Capital Buffers,’’
would require an Enterprise to disclose
the prescribed capital conservation
buffer amount, the prescribed leverage
buffer amount, eligible retained income,
and any limitations on capital
distributions and certain discretionary
bonus payments, as applicable.
Tables 4, 5, and 6 disclosures, related
to credit risk, counterparty credit risk,
and credit risk mitigation, respectively,
would provide market participants with
insight into different types and
concentrations of credit risk to which an
Enterprise is exposed and the
techniques it uses to measure, monitor,
and mitigate those risks. These
disclosures are intended to enable
market participants to assess the credit
risk exposures of the Enterprise without
revealing proprietary information.
Table 7 disclosures, ‘‘CRT and
Securitization,’’ would provide
information to market participants on
the amount of credit risk transferred and
retained by an Enterprise through CRT
and securitization transactions, the
types of products securitized by the
Enterprise, the risks inherent in the
Enterprise’s securitized assets, the
Enterprise’s policies regarding credit
risk mitigation, and the names of any
entities that provide external credit
assessments of a securitization. These
disclosures would provide a better
understanding of how securitization
transactions impact the credit risk of an
Enterprise. For purposes of these
disclosures, ‘‘exposures securitized’’
include underlying exposures originated
by an Enterprise, whether generated by
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60593
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
the Enterprise or purchased from third
parties, and third-party exposures
included in sponsored programs.
Securitization transactions in which the
originating Enterprise does not retain
any securitization exposure would be
shown separately and would only be
reported for the year of inception.
Table 8 disclosures, ‘‘Equities,’’
would provide market participants with
an understanding of the types of equity
securities held by the Enterprise and
how they are valued. The table would
also provide information on the capital
allocated to different equity products
and the amount of unrealized gains and
losses. (In comparison with bank
holding companies subject to the
Federal Reserve Board’s Regulation Q,
on which this proposed regulation is
based, the types of equity securities that
may be held by the Enterprises are
limited. Their capital treatment is
governed by 12 CFR 1240.51 and
1240.52.)
Table 9 disclosures, ‘‘Interest Rate
Risk for Non-trading Activities,’’ would
require an Enterprise to provide certain
quantitative and qualitative disclosures
regarding the Enterprise’s management
of interest rate risks.
Table 10 disclosures, ‘‘Operational
Risk,’’ would require an Enterprise to
provide certain qualitative disclosures
regarding the advanced measurement
approach, when applicable, and a
description of the use of insurance for
the purpose of mitigating operational
risk. These disclosures would include a
description of the AMA, as well as a
discussion of relevant internal and
external factors considered in the
Enterprise’s measurement approach.
Table 11 disclosures, ‘‘Tier 1 Leverage
Ratio,’’ would provide information
related to an Enterprise’s adjusted total
assets, including adjustments for
fiduciary assets, derivative exposures,
repo-style transactions, and off-balance
sheet exposures. The table would also
include an Enterprise’s tier 1 leverage
ratio. These disclosures are intended to
enable market participants to assess the
aggregate exposure to risk at an
Enterprise and to consider that risk
against the Enterprise’s capital backstop.
The market risk disclosures would
provide quantitative and qualitative
information related to an Enterprise’s
market risk profile, market risk
valuation strategies, internal controls,
and disclosure controls and procedures.
The quantitative disclosures would
detail exposure amounts and risk-
weighted assets for material portfolios of
covered positions, as well as on-balance
sheet and off-balance sheet
securitization positions by exposure
type.
Question 3: Should FHFA consider any
additional specific public disclosure
requirements?
Question 4: Should FHFA consider
requiring additional disclosures
pertaining to the single-family
countercyclical adjustment?
VIII. Paperwork Reduction Act
The Paperwork Reduction Act (PRA)
(44 U.S.C. 3501 et seq.) requires that
regulations involving the collection of
information receive clearance from the
Office of Management and Budget
(OMB). The proposed rule contains no
such collection of information requiring
OMB approval under the PRA.
Therefore, no information has been
submitted to OMB for review.
IX. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) requires that a
regulation that has a significant
economic impact on a substantial
number of small entities, small
businesses, or small organizations must
include an initial regulatory flexibility
analysis describing the regulation’s
impact on small entities. FHFA need not
undertake such an analysis if the agency
has certified that the regulation will not
have a significant economic impact on
a substantial number of small entities. 5
U.S.C. 605(b). FHFA has considered the
impact of the proposed rule under the
Regulatory Flexibility Act. FHFA
certifies that the proposed rule, if
adopted as a final rule, would not have
a significant economic impact on a
substantial number of small entities
because the proposed rule is applicable
only to the Enterprises, which are not
small entities for purposes of the
Regulatory Flexibility Act.
Proposed Rule
List of Subjects for 12 CFR Part 1240
Capital, Credit, Enterprise,
Investments, Reporting and
recordkeeping requirements.
Authority and Issuance
For the reasons stated in the
Preamble, under the authority of 12
U.S.C. 4511, 4513, 4513b, 4514, 4515–
17, 4526, 4611–4612, 4631–36, FHFA
proposes to amend part 1240 of title 12
of the Code of Federal Regulation as
follows:
CHAPTER XII—FEDERAL HOUSING
FINANCE AGENCY
SUBCHAPTER C—ENTERPRISES
PART 1240—CAPITAL ADEQUACY OF
ENTERPRISES
1. The authority citation for part 1240
is revised to read as follows:
Authority: 12 U.S.C. 4511, 4513, 4513b,
4514, 4515, 4517, 4526, 4611–4612, 4631–36.
2. Amend § 1240.4 by revising
paragraph (b) to read as follows:
§ 1240.4 Transition.
* * * * *
(b) Reporting Requirements. (1) For
any reporting requirement under
§ 1240.1(f) or 1240.41, the compliance
date will be January 1, 2022.
(2) For any reporting requirement
under §§ 1240.61 through 1240.63, the
compliance date will be six months
from the date of publication of the final
rule for §§ 1240.61 through 1240.63 in
the Federal Register.
(3) For any reporting requirement
under § 1240.205, the compliance date
will be six months from the date of
publication of the final rule for
§ 1240.205 in the Federal Register.
* * * * *
3. Add §§ 1240.61 through 1240.63 to
Subpart D to read as follows:
Subpart D—Risk-Weighted Assets—
Standardized Approach
* * * * *
Risk-Weighted Assets for Standardized
Approach Disclosures
§ 1240.61 Purpose and scope.
Sections 1240.61 through 1240.63 of
this subpart establish public disclosure
requirements related to the capital
requirements described in subpart B.
§ 1240.62 Disclosure requirements.
(a) An Enterprise must provide timely
public disclosures each calendar quarter
of the information in the applicable
tables in § 1240.63. If a significant
change occurs, such that the most recent
reported amounts are no longer
reflective of the Enterprise’s capital
adequacy and risk profile, then a brief
discussion of this change and its likely
impact must be disclosed as soon as
practicable thereafter, and no later than
the end of the next calendar quarter.
Qualitative disclosures that have not
changed from the prior quarter (for
example, a general summary of the
Enterprise’s risk management objectives
and policies, reporting system, and
definitions) may be omitted from the
next quarterly disclosure, but must be
disclosed at least annually after the end
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60594
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
of the fourth calendar quarter. Unless
otherwise directed by FHFA, the
Enterprise’s management may provide
all of the disclosures required by
§§ 1240.61 through 1240.63 in one place
on the Enterprise’s public website or
may provide the disclosures in more
than one public financial report or other
regulatory reports, provided that the
Enterprise publicly provides a summary
table specifically indicating the
location(s) of all such disclosures.
(b) An Enterprise must have a formal
disclosure policy approved by the board
of directors that addresses its approach
for determining the disclosures it
makes. The policy must address the
associated internal controls and
disclosure controls and procedures. The
board of directors and senior
management are responsible for
establishing and maintaining an
effective internal control structure over
financial reporting, including the
disclosures required by this subpart,
and must ensure that appropriate review
of the disclosures takes place. The Chief
Risk Officer and the Chief Financial
Officer of the Enterprise must attest that
the disclosures meet the requirements of
this subpart.
(c) If an Enterprise concludes that
specific commercial or financial
information that it would otherwise be
required to disclose under this section
would be exempt from disclosure by
FHFA under the Freedom of
Information Act (5 U.S.C. 552), then the
Enterprise is not required to disclose
that specific information pursuant to
this section, unless otherwise directed
by FHFA to amend the disclosure, but
must disclose more general information
about the subject matter of the
requirement, together with the fact that,
and the reason why, the specific items
of information have not been disclosed.
(d) An Enterprise must publicly
disclose each quarter its tier 1 leverage
ratio and the components thereof (that
is, tier 1 capital and adjusted total
assets) as calculated under subpart B of
this part beginning with the calendar
quarter immediately following the
quarter in which this § 1240.62 becomes
effective, if adopted as a final rule.
§ 1240.63 Disclosures.
(a) Except as provided in § 1240.62,
an Enterprise must make the disclosures
described in Tables 1 through 11 of this
section publicly available for each of the
last three years (that is, twelve quarters)
or such shorter period until an
Enterprise has made twelve quarterly
disclosures pursuant to this part
beginning on Month Day Year.
(b) An Enterprise must publicly
disclose each quarter the following:
(1) Regulatory capital ratios for
common equity tier 1 capital, additional
tier 1 capital, tier 1 capital, tier 2
capital, total capital, core capital, and
adjusted total capital, including the
regulatory capital elements and all the
regulatory adjustments and deductions
needed to calculate the numerator of
such ratios;
(2) Total risk-weighted assets,
including the different regulatory
adjustments and deductions needed to
calculate total risk-weighted assets; and
(3) A reconciliation of regulatory
capital elements as they relate to its
balance sheet in any audited
consolidated financial statements.
T
ABLE
1
TO
P
ARAGRAPH
(b)(3): C
APITAL
S
TRUCTURE
Qualitative Disclosures (a) Summary information on the terms and conditions of the main features of all regulatory capital instru-
ments.
Quantitative Disclosures (b) The amount of common equity tier 1 capital, with separate disclosure of:
(1) Common stock and related surplus;
(2) Retained earnings;
(3) AOCI (net of tax) and other reserves; and
(4) Regulatory adjustments and deductions made to common equity tier 1 capital.
(c) The amount of core capital, with separate disclosure of:
(1) The par or stated value of outstanding common stock;
(2) The par or stated value of outstanding perpetual, noncumulative preferred stock;
(3) Paid-in capital; and
(4) Retained earnings.
(d) The amount of tier 1 capital, with separate disclosure of:
(1) Additional tier 1 capital elements, including additional tier 1 capital instruments and tier 1 minor-
ity interest not included in common equity tier 1 capital; and
(2) Regulatory adjustments and deductions made to tier 1 capital.
(e) The amount of total capital, with separate disclosure of:
(1) The general allowance for foreclosure losses; and
(2) Other amounts from sources of funds available to absorb losses incurred by the Enterprise that
the Director by regulation determines are appropriate to include in determining total capital.
(f) The amount of adjusted total capital, with separate disclosure of:
(1) Tier 2 capital elements, including tier 2 capital instruments; and
(2) Regulatory adjustments and deductions made to adjusted total capital.
T
ABLE
2
TO
P
ARAGRAPH
(b)(3): C
APITAL
A
DEQUACY
Qualitative disclosures (a) A summary discussion of the Enterprise’s approach to assessing the adequacy of its capital to support
current and future activities.
Quantitative disclosures (b) Risk-weighted assets for:
(1) Exposures to sovereign entities;
(2) Exposures to certain supranational entities and MDBs;
(3) Exposures to GSEs;
(4) Exposures to depository institutions and credit unions;
(5) Exposures to PSEs;
(6) Corporate exposures;
(7) Aggregate single-family mortgage exposures categorized by:
(i) Performing loans;
(ii) Non-modified re-performing loans;
(iii) Modified re-performing loans;
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60595
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
T
ABLE
2
TO
P
ARAGRAPH
(b)(3): C
APITAL
A
DEQUACY
—Continued
(iv) Non-performing loans;
(8) Aggregate multifamily mortgage exposures categorized by:
(i) Multifamily fixed-rate exposures;
(ii) Multifamily adjustable-rate exposures;
(9) Past due loans;
(10) Other assets;
(11) Insurance assets;
(12) Off-balance sheet exposures;
(13) Cleared transactions;
(14) Default fund contributions;
(15) Unsettled transactions;
(16) CRT and other securitization exposures; and
(17) Equity exposures.
(c) Standardized market risk-weighted assets as calculated under subpart F of this part.
(d) Risk-weighted assets for operational risk.
(e) Common equity tier 1, tier 1, and adjusted total risk-based capital ratios.
(f) Total standardized risk-weighted assets.
T
ABLE
3
TO
P
ARAGRAPH
(b)(3): C
APITAL
B
UFFERS
Qualitative disclosures (a) A summary discussion of the Enterprise’s capital buffers and the differential effects, if any, the buffers
have on an Enterprise’s business by geographic breakdown.
1
Quantitative Disclosures (b) At least quarterly, the Enterprise must calculate and publicly disclose the prescribed capital conserva-
tion buffer amount and all its components as described under § 1240.11.
(c) At least quarterly, the Enterprise must calculate and publicly disclose the prescribed leverage buffer
amount as described under § 1240.11.
(d) At least quarterly, the Enterprise must calculate and publicly disclose the eligible retained income of the
Enterprise, as described under § 1240.11.
(e) At least quarterly, the Enterprise must calculate and publicly disclose any limitations it has on distribu-
tions and discretionary bonus payments resulting from the capital buffer framework described under
§ 1240.11, including the maximum payout amount for the quarter.
1
The geographic breakdown must consist of areas within the United States and territories.
(c) For each separate risk area
described in Tables 4 through 9, the
Enterprise must, as a general qualitative
disclosure requirement, describe its risk
management objectives and policies,
including: Strategies and processes; the
structure and organization of the
relevant risk management function; the
scope and nature of risk reporting and/
or measurement systems; policies for
hedging and/or mitigating risk and
strategies and processes for monitoring
the continuing effectiveness of hedges/
mitigants.
T
ABLE
4
TO
P
ARAGRAPH
(c):
1
C
REDIT
R
ISK
: G
ENERAL
D
ISCLOSURES
Qualitative Disclosures (a) The general qualitative disclosure requirement with respect to credit risk (excluding counterparty credit
risk disclosed in accordance with Table 5 of this section), including the:
(1) Policy for determining past due or delinquency status;
(2) Policy for placing loans on nonaccrual;
(3) Policy for returning loans to accrual status;
(4) Description of the methodology that the Enterprise uses to estimate its adjusted allowance for
credit losses, including statistical methods used where applicable;
(5) Policy for charging-off uncollectible amounts; and
(6) Discussion of the Enterprise’s credit risk management policy.
Quantitative Disclosures (b) Total credit risk exposures and average credit risk exposures, after accounting offsets in accordance
with GAAP, without taking into account the effects of credit risk mitigation techniques (for example, col-
lateral and netting not permitted under GAAP), over the period categorized by major types of credit ex-
posure. For example, the Enterprises could use categories similar to that used for financial statement
purposes. Such categories might include, for instance.
(1) Loans, off-balance sheet commitments, and other non-derivative off-balance sheet exposures;
(2) Debt securities; and
(3) OTC derivatives.
(c) Geographic distribution of exposures, categorized in significant areas by major types of credit expo-
sure.
2
(d) Industry or counterparty type distribution of exposures, categorized by major types of credit exposure.
(e) By major industry or counterparty type:
(1) Amount of loans not past due or past due less than 30 days;
(2) Amount of loans past due 30 days but less than 90 days;
(3) Amount of loans past due 90 days and on nonaccrual;
(4) Amount of loans past due 90 days and still accruing;
3
(5) The balance in the adjusted allowance for credit losses at the end of each period, disaggregated
on the basis of loans not past due or past due less than 30 days, loans past due 30 days but less
than 90 days, loans past due 90 days and on nonaccrual, and loans past due 90 days and still ac-
cruing; and
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60596
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
T
ABLE
4
TO
P
ARAGRAPH
(c):
1
C
REDIT
R
ISK
: G
ENERAL
D
ISCLOSURES
—Continued
(6) Charge-offs during the period.
(f) Amount of past due loans categorized by significant geographic areas including, if practical, the
amounts of allowances related to each geographical area,
4
further categorized as required by GAAP.
(g) Reconciliation of changes in the adjusted allowance for credit losses.
5
(h) Remaining contractual maturity delineation (for example, one year or less) of the whole portfolio, cat-
egorized by credit exposure.
1
Table 4 does not cover equity exposures, which should be reported in Table 8 of this section.
2
Geographical areas consist of areas within the United States and territories. An Enterprise might choose to define the geographical areas
based on the way the Enterprise’s portfolio is geographically managed. The criteria used to allocate the loans to geographical areas must be
specified.
3
An Enterprise is encouraged also to provide an analysis of the aging of past-due loans.
4
The portion of the general allowance that is not allocated to a geographical area should be disclosed separately.
5
The reconciliation should include the following: A description of the allowance; the opening balance of the allowance; charge-offs taken
against the allowance during the period; amounts provided (or reversed) for estimated expected credit losses during the period; any other adjust-
ments (for example, exchange rate differences, business combinations, acquisitions and disposals of subsidiaries), including transfers between
allowances; and the closing balance of the allowance. Charge-offs and recoveries that have been recorded directly to the income statement
should be disclosed separately.
T
ABLE
5
TO
P
ARAGRAPH
(c): G
ENERAL
D
ISCLOSURE FOR
C
OUNTERPARTY
C
REDIT
R
ISK
-R
ELATED
E
XPOSURES
Qualitative Disclosures (a) The general qualitative disclosure requirement with respect to OTC derivatives, eligible margin loans,
and repo-style transactions, including a discussion of:
(1) The methodology used to assign credit limits for counterparty credit exposures;
(2) Policies for securing collateral, valuing and managing collateral, and establishing credit reserves;
(3) The primary types of collateral taken; and
(4) The impact of the amount of collateral the Enterprise would have to provide given a deterioration in
the Enterprise’s own creditworthiness.
Quantitative Disclosures ................. (b) Gross positive fair value of contracts, collateral held (including type, for example, cash, government se-
curities), and net unsecured credit exposure.
1
An Enterprise also must disclose the notional value of
credit derivative hedges purchased for counterparty credit risk protection and the distribution of current
credit exposure by exposure type.
2
(c) Notional amount of purchased and sold credit derivatives, segregated between use for the Enterprise’s
own credit portfolio and in its intermediation activities, including the distribution of the credit derivative
products used, categorized further by protection bought and sold within each product group.
1
Net unsecured credit exposure is the credit exposure after considering both the benefits from legally enforceable netting agreements and col-
lateral arrangements without taking into account haircuts for price volatility, liquidity, etc.
2
This may include interest rate derivative contracts, foreign exchange derivative contracts, equity derivative contracts, credit derivatives, com-
modity or other derivative contracts, repo-style transactions, and eligible margin loans.
T
ABLE
6
TO
P
ARAGRAPH
(c): C
REDIT
R
ISK
M
ITIGATION
12
Qualitative Disclosures (a) The general qualitative disclosure requirement with respect to credit risk mitigation, including:
(1) Policies and processes for collateral valuation and management;
(2) A description of the main types of collateral taken by the Enterprise;
(3) The main types of guarantors/credit derivative counterparties and their creditworthiness; and
(4) Information about (market or credit) risk concentrations with respect to credit risk mitigation.
Quantitative Disclosures (b) For each separately disclosed credit risk portfolio, the total exposure that is covered by eligible financial
collateral, and after the application of haircuts.
(c) For each separately disclosed portfolio, the total exposure that is covered by guarantees/credit deriva-
tives and the risk-weighted asset amount associated with that exposure.
1
At a minimum, an Enterprise must provide the disclosures in Table 6 in relation to credit risk mitigation that has been recognized for the pur-
poses of reducing capital requirements under this subpart. Where relevant, the Enterprises are encouraged to give further information about
mitigants that have not been recognized for that purpose.
2
Credit derivatives that are treated, for the purposes of this subpart, as synthetic securitization exposures should be excluded from the credit
risk mitigation disclosures and included within those relating to securitization (Table 7 of this section).
T
ABLE
7
TO
P
ARAGRAPH
(c): CRT
AND
S
ECURITIZATION
Qualitative Disclosures (a) The general qualitative disclosure requirement with respect to a securitization (including synthetic
securitizations), including a discussion of:
(1) The Enterprise’s objectives for securitizing assets, including the extent to which these activities
transfer credit risk of the underlying exposures away from the Enterprise to other entities and includ-
ing the type of risks assumed and retained with resecuritization activity;
1
(2) The nature of the risks (e.g., liquidity risk) inherent in the securitized assets;
(3) The roles played by the Enterprise in the securitization process
2
and an indication of the extent of
the Enterprise’s involvement in each of them;
(4) The processes in place to monitor changes in the credit and market risk of securitization expo-
sures including how those processes differ for resecuritization exposures;
(5) The Enterprise’s policy for mitigating the credit risk retained through securitization and
resecuritization exposures; and
(6) The risk-based capital approaches that the Enterprise follows for its securitization exposures in-
cluding the type of securitization exposure to which each approach applies.
(b) A list of:
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60597
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
T
ABLE
7
TO
P
ARAGRAPH
(c): CRT
AND
S
ECURITIZATION
—Continued
(1) The type of securitization SPEs that the Enterprise, as sponsor, uses to securitize third-party expo-
sures. The Enterprise must indicate whether it has exposure to these SPEs, either on- or off-bal-
ance sheet; and
(2) Affiliated entities:
(i) That the Enterprise manages or advises; and
(ii) That invest either in the securitization exposures that the Enterprise has securitized or in
securitization SPEs that the Enterprise sponsors.
3
(c) Summary of the Enterprise’s accounting policies for CRT and securitization activities, including:
(1) Whether the transactions are treated as sales (i.e., sale accounting has been obtained) or
financings;
(2) Recognition of gain-on-sale;
(3) Methods and key assumptions applied in valuing retained or purchased interests;
(4) Changes in methods and key assumptions from the previous period for valuing retained interests
and impact of the changes;
(5) Treatment of synthetic securitizations;
(6) How exposures intended to be securitized are valued and whether they are recorded under sub-
part D of this part; and
(7) Policies for recognizing liabilities on the balance sheet for arrangements that could require the En-
terprise to provide financial support for securitized assets.
(d) An explanation of significant changes to any quantitative information since the last reporting period.
Quantitative Disclosures ................. (e) The total outstanding exposures securitized by the Enterprise in securitizations that meet the oper-
ational criteria provided in § 1240.41 (categorized into traditional and synthetic securitizations), by expo-
sure type, separately for securitizations of third-party exposures for which the bank acts only as spon-
sor.
4
(f) For exposures securitized by the Enterprise in securitizations that meet the operational criteria in
§ 1240.41:
(1) Amount of securitized assets that are past due categorized by exposure type; and
(2) Losses recognized by the Enterprise during the current period categorized by exposure type.
5
(g) The total amount of outstanding exposures intended to be securitized categorized by exposure type.
(h) Aggregate amount of:
(1) On-balance sheet securitization exposures retained or purchased categorized by exposure type;
and
(2) Off-balance sheet securitization exposures categorized by exposure type.
(i)(1) Aggregate amount of securitization exposures retained or purchased and the associated capital re-
quirements for these exposures, categorized between securitization and resecuritization exposures, fur-
ther categorized into a meaningful number of risk weight bands and by risk-based capital approach (e.g.,
CRTA, SSFA); and
(2) Aggregate amount disclosed separately by type of underlying exposure in the pool of any:
(i) After-tax gain-on-sale on a securitization that has been deducted from common equity tier 1
capital; and
(ii) Credit-enhancing interest-only strip that is assigned a 1,250 percent risk weight.
(j) Summary of current year’s securitization activity, including the amount of exposures securitized (by ex-
posure type), and recognized gain or loss onsale by exposure type.
(k) Aggregate amount of resecuritization exposures retained or purchased categorized according to:
(1) Exposures to which credit risk mitigation is applied and those not applied; and
(2) Exposures to guarantors categorized according to guarantor creditworthiness categories or guar-
antor name.
1
The Enterprise should describe the structure of resecuritizations in which it participates; this description should be provided for the main cat-
egories of resecuritization products in which the Enterprise is active.
2
For example, these roles may include originator, investor, servicer, provider of credit enhancement, sponsor, liquidity provider, or swap pro-
vider.
3
Such affiliated entities may include, for example, money market funds, to be listed individually, and personal and private trusts, to be noted
collectively.
4
‘‘Exposures securitized’’ include underlying exposures originated by the Enterprise, whether generated by them or purchased, and recognized
in the balance sheet, from third parties, and third-party exposures included in sponsored transactions. Securitization transactions (including un-
derlying exposures originally on the Enterprise’s balance sheet and underlying exposures acquired by the Enterprise from third-party entities) in
which the originating Enterprise does not retain any securitization exposure should be shown separately but need only be reported for the year of
inception. Enterprises are required to disclose exposures regardless of whether there is a capital charge under this part.
5
For example, charge-offs/allowances (if the assets remain on the Enterprise’s balance sheet) or credit-related write-off of interest-only strips
and other retained residual interests, as well as recognition of liabilities for probable future financial support required of the bank with respect to
securitized assets.
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60598
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
T
ABLE
8
TO
P
ARAGRAPH
(c): E
QUITIES
Qualitative Disclosures (a) The general qualitative disclosure requirement with respect to equity risk for equities, including:
(1) Differentiation between holdings on which capital gains are expected and those taken under other
objectives including for relationship and strategic reasons; and
(2) Discussion of important policies covering the valuation of and accounting for equity holdings. This
includes the accounting techniques and valuation methodologies used, including key assumptions
and practices affecting valuation as well as significant changes in these practices.
Quantitative Disclosures ................. (b) Carrying value disclosed on the balance sheet of investments, as well as the fair value of those invest-
ments; for securities that are publicly traded, a comparison to publicly-quoted share values where the
share price is materially different from fair value.
(c) The types and nature of investments, including the amount that is:
(1) Publicly traded; and
(2) Non publicly traded.
(d) The cumulative realized gains (losses) arising from sales and liquidations in the reporting period.
(e)(1) Total unrealized gains (losses) recognized on the balance sheet but not through earnings.
(2) Total unrealized gains (losses) not recognized either on the balance sheet or through earnings.
(3) Any amounts of the above included in tier 1 or tier 2 capital.
(f) Capital requirements categorized by appropriate equity groupings, consistent with the Enterprise’s meth-
odology, as well as the aggregate amounts and the type of equity investments subject to any super-
visory transition regarding regulatory capital requirements.
1
1
This disclosure must include a breakdown of equities that are subject to the 0 percent, 20 percent, 100 percent, 300 percent, 400 percent,
and 600 percent risk weights, as applicable.
T
ABLE
9
TO
P
ARAGRAPH
(c): I
NTEREST
R
ATE
R
ISK FOR
N
ON
-T
RADING
A
CTIVITIES
Qualitative disclo-
sures (a) The general qualitative disclosure requirement, including the nature of interest rate risk for non-trading activities and
key assumptions, including assumptions regarding loan prepayments and frequency of measurement of interest rate
risk for non-trading activities.
Quantitative disclo-
sures (b) The increase (decline) in earnings or economic value (or relevant measure used by management) for upward and
downward rate shocks according to management’s method for measuring interest rate risk for non-trading activities,
categorized by currency (as appropriate).
T
ABLE
10
TO
P
ARAGRAPH
(c): O
PERATIONAL
R
ISK
Qualitative disclosures (a) The general qualitative disclosure requirement for operational risk.
(b) Description of the AMA, when applicable, including a discussion of relevant internal and external factors con-
sidered in the Enterprise’s measurement approach.
(c) A description of the use of insurance for the purpose of mitigating operational risk.
T
ABLE
11
TO
P
ARAGRAPH
(c): T
IER
1 L
EVERAGE
R
ATIO
Dollar amounts in thousands
Tril Bil Mil Thou
Part 1: Summary comparison of accounting assets and adjusted total assets
1 Total consolidated assets as reported in published financial statements
2 Adjustment for fiduciary assets recognized on balance sheet but excluded from total leverage exposure
3 Adjustment for derivative exposures
4 Adjustment for repo-style transactions
5 Adjustment for off-balance sheet exposures (that is, conversion to credit equivalent amounts of off-balance
sheet exposures)
6 Other adjustments
7 Adjusted total assets (sum of lines 1 to 6)
Part 2: Tier 1 leverage ratio
On-balance sheet exposures
1 On-balance sheet assets (excluding on-balance sheet assets for repo-style transactions and derivative expo-
sures, but including cash collateral received in derivative transactions)
2 LESS: Amounts deducted from tier 1 capital
3 Total on-balance sheet exposures (excluding on-balance sheet assets for repo-style transactions and deriva-
tive exposures, but including cash collateral received in derivative transactions) (sum of lines 1 and 2)
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60599
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
T
ABLE
11
TO
P
ARAGRAPH
(c): T
IER
1 L
EVERAGE
R
ATIO
—Continued
Dollar amounts in thousands
Tril Bil Mil Thou
Derivative exposures
4 Current exposure for derivative exposures (that is, net of cash variation margin)
5 Add-on amounts for potential future exposure (PFE) for derivative exposures
6 Gross-up for cash collateral posted if deducted from the on-balance sheet assets, except for cash variation
margin
7 LESS: Deductions of receivable assets for cash variation margin posted in derivative transactions, if included
in on-balance sheet assets
8 LESS: Exempted CCP leg of client-cleared transactions
9 Effective notional principal amount of sold credit protection
10 LESS: Effective notional principal amount offsets and PFE adjustments for sold credit protection
11 Total derivative exposures (sum of lines 4 to 10)
Repo-style transactions
12 On-balance sheet assets for repo-style transactions, except include the gross value of receivables for re-
verse repurchase transactions. Exclude from this item the value of securities received in a security-for-secu-
rity repo-style transaction where the securities lender has not sold or re-hypothecated the securities re-
ceived. Include in this item the value of securities that qualified for sales treatment that must be reversed
13 LESS: Reduction of the gross value of receivables in reverse repurchase transactions by cash payables in
repurchase transactions under netting agreements
14 Counterparty credit risk for all repo-style transactions
15 Exposure for repo-style transactions where a banking organization acts as an agent
16 Total exposures for repo-style transactions (sum of lines 12 to 15)
Other off-balance sheet exposures
17 Off-balance sheet exposures at gross notional amounts
18 LESS: Adjustments for conversion to credit equivalent amounts
19 Off-balance sheet exposures (sum of lines 17 and 18)
Capital and adjusted total assets
20 Tier 1 capital
21 Adjusted total assets (sum of lines 3, 11, 16 and 19)
Tier 1 leverage ratio
22 Tier 1 leverage ratio (in percent)
4. Add § 1240.205 to Subpart F to read
as follows:
Subpart F—Risk-weighted Assets—
Market Risk
* * * * *
§ 1240.205 Market risk disclosures.
(a) Scope. An Enterprise must make
timely public disclosures each calendar
quarter. If a significant change occurs,
such that the most recent reporting
amounts are no longer reflective of the
Enterprise’s capital adequacy and risk
profile, then a brief discussion of this
change and its likely impact must be
provided as soon as practicable
thereafter. Qualitative disclosures that
typically do not change each quarter
may be disclosed annually, provided
any significant changes are disclosed in
the interim. If an Enterprise believes
that disclosure of specific commercial or
financial information would prejudice
seriously its position by making public
certain information that is either
proprietary or confidential in nature, the
Enterprise is not required to disclose
these specific items, but must disclose
more general information about the
subject matter of the requirement,
together with the fact that, and the
reason why, the specific items of
information have not been disclosed.
The Enterprise’s management may
provide all of the disclosures required
by this section in one place on the
Enterprise’s public website or may
provide the disclosures in more than
one public financial report or other
regulatory reports, provided that the
Enterprise publicly provides a summary
table specifically indicating the
location(s) of all such disclosures.
(b) Disclosure policy. The Enterprise
must have a formal disclosure policy
approved by the board of directors that
addresses the Enterprise’s approach for
determining its market risk disclosures.
The policy must address the associated
internal controls and disclosure controls
and procedures. The board of directors
and senior management must ensure
that appropriate verification of the
disclosures takes place and that
effective internal controls and
disclosure controls and procedures are
maintained. The Chief Risk Officer and
the Chief Financial Officer of the
Enterprise must attest that the
disclosures meet the requirements of
this subpart, and the board of directors
and senior management are responsible
for establishing and maintaining an
effective internal control structure over
financial reporting, including the
disclosures required by this section.
(c) Quantitative disclosures. (1) For
each material portfolio of covered
positions, the Enterprise must provide
timely public disclosures of the
following information at least quarterly:
(i) Exposure amounts for each product
type included in covered positions as
described in § 1240.202;
(ii) Risk-weighted assets for each
product type included in covered
positions as described in § 1240.202.
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
60600
Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Proposed Rules
(2) In addition, the Enterprise must
disclose publicly the aggregate amount
of on-balance sheet and off-balance
sheet securitization positions by
exposure type at least quarterly.
(d) Qualitative disclosures. For each
material portfolio of covered positions
as identified using the definitions in
§ 1240.202, the Enterprise must provide
timely public disclosures of the
following information at least annually
after the end of the fourth calendar
quarter, or more frequently in the event
of material changes for each portfolio:
(1) The composition of material
portfolios of covered positions;
(2) The Enterprise’s valuation
policies, procedures, and methodologies
for covered positions including, for
securitization positions, the methods
and key assumptions used for valuing
such positions, any significant changes
since the last reporting period, and the
impact of such change;
(3) The characteristics of the internal
models used for purposes of this
subpart;
(4) A description of the approaches
used for validating and evaluating the
accuracy of internal models and
modeling processes for purposes of this
subpart;
(5) For each market risk category (that
is, interest rate risk, credit spread risk,
equity price risk, foreign exchange risk,
and commodity price risk), a
description of the stress tests applied to
the positions subject to the factor;
(6) The results of the comparison of
the Enterprise’s internal estimates for
purposes of this subpart with actual
outcomes during a sample period not
used in model development;
(7) A description of the Enterprise’s
processes for monitoring changes in the
credit and market risk of securitization
positions, including how those
processes differ for resecuritization
positions; and
(8) A description of the Enterprise’s
policy governing the use of credit risk
mitigation to mitigate the risks of
securitization and resecuritization
positions.
Sandra L. Thompson,
Acting Director, Federal Housing Finance
Agency.
[FR Doc. 2021–23780 Filed 11–2–21; 8:45 am]
BILLING CODE 8070–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2021–0952; Project
Identifier 2019–CE–039–AD]
RIN 2120–AA64
Airworthiness Directives; Diamond
Aircraft Industries GmbH Airplanes
AGENCY
: Federal Aviation
Administration (FAA), DOT.
ACTION
: Notice of proposed rulemaking
(NPRM).
SUMMARY
: The FAA proposes to adopt a
new airworthiness directive (AD) for
certain Diamond Aircraft Industries
GmbH (DAI) Model DA 42, DA 42 M–
NG, and DA 42 NG airplanes. This
proposed AD was prompted by
mandatory continuing airworthiness
information (MCAI) issued by the
aviation authority of another country to
identify and correct an unsafe condition
on an aviation product. The MCAI
describes the unsafe condition as
dissolved or detached fuel tank hose
material entering the main fuel tank
chambers, which could result in
restricted fuel flow with consequent fuel
starvation. This proposed AD would
require removing the fuel tank
connection hoses from service and
inspecting the fuel tank connection
hoses for damage and detached rubber
material. The FAA is proposing this AD
to address the unsafe condition on these
products.
DATES
: The FAA must receive comments
on this proposed AD by December 20,
2021.
ADDRESSES
: You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
Fax: (202) 493–2251.
Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
For service information identified in
this NPRM, contact Diamond Aircraft
Industries GmbH, N.A. Otto-Stra+e 5,
A–2700 Wiener Neustadt, Austria;
phone: +43 2622 26700; fax: +43 2622
26780; email: office@diamond-air.at;
website: https://www.diamond
aircraft.com. You may view this service
information at the FAA, Airworthiness
Products Section, Operational Safety
Branch, 901 Locust, Kansas City, MO
64106. For information on the
availability of this material at the FAA,
call (816) 329–4148.
Examining the AD Docket
You may examine the AD docket at
https://www.regulations.gov by
searching for and locating Docket No.
FAA–2021–0952; or in person at Docket
Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays. The AD docket contains this
NPRM, the MCAI, any comments
received, and other information. The
street address for Docket Operations is
listed above.
FOR FURTHER INFORMATION CONTACT
:
Penelope Trease, Aviation Safety
Engineer, General Aviation & Rotorcraft
Section, International Validation
Branch, FAA, 26805 E. 68th Avenue,
Denver, CO 80249; phone: (303) 342–
1094; fax: (303) 342–1088; email:
penelope.trease@faa.gov.
SUPPLEMENTARY INFORMATION
:
Comments Invited
The FAA invites you to send any
written relevant data, views, or
arguments about this proposal. Send
your comments to an address listed
under
ADDRESSES
. Include ‘‘Docket No.
FAA–2021–0952; Project Identifier
2019–CE–039–AD’’ at the beginning of
your comments. The most helpful
comments reference a specific portion of
the proposal, explain the reason for any
recommended change, and include
supporting data. The FAA will consider
all comments received by the closing
date and may amend this proposal
because of those comments.
Except for Confidential Business
Information (CBI) as described in the
following paragraph, and other
information as described in 14 CFR
11.35, the FAA will post all comments
received, without change, to https://
www.regulations.gov, including any
personal information you provide. The
agency will also post a report
summarizing each substantive verbal
contact received about this NPRM.
Confidential Business Information
CBI is commercial or financial
information that is both customarily and
actually treated as private by its owner.
Under the Freedom of Information Act
(FOIA) (5 U.S.C. 552), CBI is exempt
from public disclosure. If your
comments responsive to this NPRM
contain commercial or financial
information that is customarily treated
as private, that you actually treat as
VerDate Sep<11>2014 17:30 Nov 02, 2021 Jkt 256001 PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 E:\FR\FM\03NOP1.SGM 03NOP1
khammond on DSKJM1Z7X2PROD with PROPOSALS

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT