Guidance for Resolution Plan Submissions of Certain Foreign-Based Covered Companies

CourtFederal Deposit Insurance Corporation,Federal Reserve System
Citation85 FR 15449
Record Number2020-05513
SectionNotices
Published date18 March 2020
Federal Register, Volume 85 Issue 53 (Wednesday, March 18, 2020)
[Federal Register Volume 85, Number 53 (Wednesday, March 18, 2020)]
                [Notices]
                [Pages 15449-15474]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-05513]
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                FEDERAL DEPOSIT INSURANCE CORPORATION
                RIN 3064-ZA15
                FEDERAL RESERVE SYSTEM
                [Docket No. OP-1699]
                Guidance for Resolution Plan Submissions of Certain Foreign-Based
                Covered Companies
                AGENCY: Board of Governors of the Federal Reserve System (Board) and
                Federal Deposit Insurance Corporation (FDIC).
                ACTION: Proposed guidance; request for comments.
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                SUMMARY: The Board and the FDIC (together, the ``agencies'') are
                inviting comments on proposed guidance for the 2021 and subsequent
                resolution plan submissions by certain foreign banking organizations
                (``FBOs''). The proposed guidance is meant to assist these firms in
                developing their resolution plans, which are required to be submitted
                pursuant to Section 165(d) of the Dodd-Frank Wall Street Reform and
                Consumer Protection Act (the ``Dodd-Frank Act''). The scope of
                application of the proposed guidance would be FBOs that are triennial
                full filers and whose intermediate holding companies (``U.S. IHCs'')
                have a score of 250 or more under the second methodology (``method 2'')
                of the global systemically important bank (``GSIB'') surcharge
                framework. The proposed guidance, which is largely based on prior
                guidance, describes the agencies' expectations regarding a number of
                key vulnerabilities in plans for a rapid and orderly resolution under
                the U.S. Bankruptcy Code (i.e., capital; liquidity; governance
                mechanisms; operational; legal entity rationalization and separability;
                and derivatives and trading activities). The proposed guidance also
                updates certain aspects of prior guidance based, in part, on the
                agencies' review of certain FBOs' most recent resolution plan
                submissions and changes to the resolution planning rule. The agencies
                invite public comment on all aspects of the proposed guidance.
                DATES: Comments should be received on or before May 5, 2020.
                ADDRESSES: Interested parties are encouraged to submit written comments
                jointly to both agencies. Comments should be directed to:
                 Board: You may submit comments, identified by Docket No. OP-1699,
                by any of the following methods:
                 Agency website: http://www.federalreserve.gov. Follow the
                instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
                 Email: [email protected]. Include docket
                number in the subject line of the message.
                 Fax: (202) 452-3819 or (202) 452-3102.
                 Mail: Ann E. Misback, Secretary, Board of Governors of the
                Federal Reserve System, 20th Street and Constitution Avenue NW,
                Washington, DC 20551.
                 All public comments will be made available on the Board's website
                at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfms as
                submitted, unless modified for technical reasons or to remove personal
                information at the commenter's request. Accordingly, comments will not
                be edited to remove any identifying or contact information. Public
                comments may also be viewed electronically or in paper form in Room
                146, 1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m.
                and 5:00 p.m. on weekdays.
                 FDIC: You may submit comments, identified by RIN 3064-ZA15, by any
                of the following methods:
                 Agency website: https://www.fdic.gov/regulations/laws/federal. Follow the instructions for submitting comments on the Agency
                website.
                 Email: [email protected]. Include ``RIN 3064-ZA15'' on the
                subject line of the message.
                 Mail: Executive Secretary, Attention: Comments, Federal
                Deposit Insurance Corporation, 550 17th Street NW, Washington, DC
                20429.
                 Hand Delivery/Courier: Guard station at the rear of the
                550 17th Street NW Building (located on F Street) on business days
                between 7 a.m. and 5 p.m.
                 Public Inspection: All comments received, including any
                personal information provided, will be posted generally without change
                to https://www.fdic.gov/regulations/laws/federal.
                FOR FURTHER INFORMATION CONTACT:
                 Board: Mona Elliot, Deputy Associate Director, (202) 452-4688,
                Division of Supervision and Regulation, Laurie Schaffer, Deputy General
                Counsel, (202) 452-2272, Jay Schwarz, Special Counsel, (202) 452-2970,
                Steve Bowne, Senior Counsel, (202) 452-3900, or Sarah Podrygula,
                Attorney (202) 912-4658, Legal Division. Users of Telecommunications
                Device for the Deaf (TDD) may call (202) 263-4869.
                 FDIC: Alexandra Steinberg Barrage, Associate Director, Policy and
                Data Analytics, [email protected]; Heidilynne Schultheiss, Chief,
                Resolution Strategy Section, [email protected]; Yan Zhou, Chief,
                Supervisory Programs Section, [email protected]; Ronald W. Crawley, Jr.,
                Senior Resolution Policy Specialist, [email protected], Division of
                Complex Institution Supervision and Resolution; David N. Wall,
                Assistant General Counsel, [email protected]; Celia Van Gorder,
                Supervisory Counsel, [email protected]; or Esther Rabin, Counsel,
                [email protected], Legal Division, Federal Deposit Insurance Corporation,
                550 17th Street NW, Washington, DC 20429.
                SUPPLEMENTARY INFORMATION:
                Table of Contents
                I. Background
                II. Overview of the Proposed Guidance
                III. Proposed Changes From Prior Guidance
                IV. Paperwork Reduction Act
                V. Text of the Proposed Guidance
                I. Background
                 Section 165(d) of the Dodd-Frank Act \1\ and the jointly issued
                implementing regulation \2\ require certain financial companies,
                including certain foreign-based firms, to report periodically to the
                Board and the FDIC their plans for rapid and orderly resolution under
                the U.S. Bankruptcy Code (the ``Bankruptcy Code'') in the event of
                material financial distress or failure. With respect to a covered
                company \3\ that is organized or incorporated in a jurisdiction other
                than the United States or that is an FBO, the Rule requires that the
                firm's U.S. resolution plan include specified information with respect
                to the
                [[Page 15450]]
                subsidiaries, branches, and agencies, and identified critical
                operations and core business lines, as applicable, that are domiciled
                in the United States or conducted in whole or material part in the
                United States.\4\ The Rule also requires, among other things, each
                financial company's full resolution plan to include a strategic
                analysis of the plan's components, a description of the range of
                specific actions the company proposes to take in resolution, and a
                description of the company's organizational structure, material
                entities, and interconnections and interdependencies.\5\ In addition,
                the Rule requires that all resolution plans include a confidential
                section that contains any confidential supervisory and proprietary
                information submitted to the Board and the FDIC and a section that the
                agencies make available to the public. Public sections of resolution
                plans can be found on the agencies' websites.\6\
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                 \1\ 12 U.S.C. 5365(d).
                 \2\ 12 CFR part 243 and 12 CFR part 381 (the ``Rule''), as
                amended.
                 \3\ The terms ``covered company,'' ``material entities,''
                ``identified critical operations,'' ``core business lines,'' and
                similar terms used throughout the proposal all have the same meaning
                as in the Rule.
                 \4\ 12 CFR 243.5(a)(2)(i); 12 CFR 381.5(a)(2)(i).
                 \5\ Under the Rule, all filers must submit a full resolution
                plan, either every other time a resolution plan submission is
                required or as a firm's initial resolution plan submission. See 12
                CFR 243.4(a)(5)-(6), (b)(4)-(5), and (c)(4)-(5); 12 CFR 381.4(a)(5)-
                (6), (b)(4)-(5), and (c)(4)-(5).
                 \6\ The public sections of resolution plans submitted to the
                agencies are available at https://www.federalreserve.gov/supervisionreg/resolution-plans.htm and www.fdic.gov/regulations/reform/resplans/.
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                Objectives of the Resolution Planning Process
                 The goal of the Dodd-Frank Act resolution planning process is to
                help ensure that a covered company's failure would not have serious
                adverse effects on financial stability in the United States.
                Specifically, the resolution planning process requires covered
                companies to demonstrate that they have adequately assessed the
                challenges that their structures and business activities pose to
                resolution and that they have taken action to address those issues. For
                FBOs, the resolution planning process focuses on their U.S.
                subsidiaries and operations.
                 The agencies believe that the preferred resolution outcome for many
                FBOs is a successful home country resolution using a single point of
                entry (``SPOE'') resolution strategy where U.S. material entities are
                provided with sufficient capital and liquidity resources to allow them
                to stay out of resolution proceedings and maintain continuity of
                operations throughout the parent's resolution. However, since support
                from the foreign parent in stress cannot be ensured, the Rule provides
                that the U.S. resolution plan for foreign-based covered companies
                should specifically address a scenario where the U.S. operations
                experience material financial distress and not assume that the covered
                company takes resolution actions outside the United States that would
                eliminate the need for any U.S. subsidiaries to enter resolution
                proceedings.\7\ Nonetheless, the Rule also provides firms with
                appropriate flexibility to construct a U.S. resolution strategy in a
                way that is not inconsistent with a firm's global resolution strategy,
                as long as those assumptions support the firms' U.S. resolution
                strategy and adhere to the assumptions articulated in the Rule.
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                 \7\ 12 CFR 243.4(h)(3); 12 CFR 381.4(h)(3). Presently, the U.S.
                resolution strategy of each firm that would be subject to the
                proposed guidance is a U.S. SPOE resolution strategy, which is
                designed to have the U.S. IHC recapitalize and provide financial
                resources to its material entity subsidiaries prior to entering U.S.
                bankruptcy proceedings.
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                Recent Developments
                 Implementation of the Rule has been an iterative process aimed at
                strengthening the resolution planning capabilities of financial
                institutions subject to the Rule. The agencies have previously provided
                guidance and other feedback on several occasions to certain FBOs.\8\ In
                general, the guidance and feedback were intended to assist the
                recipients in their development of future resolution plan submissions
                and to provide additional clarity with respect to the agencies'
                expectations for the filers' future progress.
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                 \8\ See infra III. Consolidation of Prior Guidance.
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                 The agencies are now proposing to update aspects of the Guidance
                for 2018 Sec. 165(d) Annual Resolution Plan Submissions By Foreign-
                based Covered Companies that Submitted Resolution Plans in July 2015
                (``2018 FBO guidance'').\9\ The 2018 FBO guidance was provided to four
                FBOs.\10\
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                 \9\ Available at www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170324a21.pdf and www.fdic.gov/resauthority/2018subguidance.pdf.
                 \10\ Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG, and
                UBS AG.
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                 Several developments inform the proposed guidance:
                 The agencies' review of certain FBOs' most recent
                resolution plan submissions and the issuance of individual letters
                communicating the agencies' views on and shortcomings contained in the
                2018 resolution plans filed by the firms subject to the 2018 FBO
                guidance (``2018 feedback letters''); \11\
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                 \11\ Available at www.federalreserve.gov/newsevents/pressreleases/bcreg20181220c.htm.
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                 Revisions to the content related to payment, clearing, and
                settlement activities (``PCS'') and derivatives and trading activities
                (``DER'') in the updated guidance for the resolution plan submissions
                by the eight largest, most complex U.S. banking organizations in
                February 2019 (``2019 domestic guidance''); \12\ and
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                 \12\ Final Guidance for the 2019, 84 FR 1438 (February 4, 2019).
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                 The 2019 amendments to the Rule (``2019 revisions'').\13\
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                 \13\ Resolution Plans Required, 84 FR 59194 (November 1, 2019).
                The amendments became effective on December 31, 2019.
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                 In December 2018, the agencies issued the 2018 feedback letters,
                which communicated their views on and identified shortcomings contained
                in the 2018 resolution plans filed by the firms subject to the 2018 FBO
                guidance. These letters also described the meaningful resolvability
                improvements made by the FBOs. The FBOs that received this feedback are
                expected to address their shortcomings and complete the enhancement
                initiatives described in their 2018 resolution plans by July 1, 2020,
                as provided in the 2018 feedback letters and confirmed by the letters
                issued to the firms on July 26, 2019.\14\ The review of the resolution
                plan submissions that resulted in the 2018 feedback letters helped to
                inform changes to the 2018 FBO guidance, as described below.
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                 \14\ See https://www.federalreserve.gov/newsevents/pressreleases/bcreg20190726a.htm. For clarity, the shortcoming(s)
                and the remaining project(s) identified for each firm that would be
                subject to the proposed guidance in its 2018 feedback letter should
                be addressed as set forth in each firm's respective 2018 feedback
                letter, notwithstanding the consolidation of all relevant prior
                guidance into the proposed guidance.
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                 In February 2019, the agencies released the 2019 domestic guidance,
                which reiterated the agencies' expectations for eight domestic firms
                regarding several elements of their resolution plans and made material
                updates to guidance relating to PCS and DER. As described below, the
                agencies are proposing updates to the 2018 FBO guidance regarding PCS
                and DER, which will more closely align the agencies' expectations in
                these areas with the expectations described in the 2019 domestic
                guidance, taking into account issues specific to FBOs. The 2019
                domestic guidance also consolidated all prior guidance applicable to
                the eight firms to which it was directed. In the consultation period
                for the 2019 domestic guidance, the agencies received comments
                supporting the consolidation efforts and subsequently indicated their
                intent to similarly consolidate and request public comment on the 2018
                FBO guidance. Accordingly, the agencies are proposing to consolidate
                and supersede all prior
                [[Page 15451]]
                resolution planning guidance that has been directed to the FBOs to
                which this guidance is proposed to apply (``Specified FBOs'' or
                ``firms'').
                 More recently, in November 2019, the agencies finalized the 2019
                revisions, which amended the Rule to address changes to the Dodd-Frank
                Act made by the Economic Growth, Regulatory Relief, and Consumer
                Protection Act (``EGRRCPA'') \15\ and improve certain aspects of the
                Rule based on the agencies' experience implementing the Rule since its
                adoption. Among other things, the 2019 revisions modified the scope of
                application of the resolution planning requirement, the frequency of
                resolution plan submissions, informational content requirements
                (primarily through the introduction of new plan types), and the Rule's
                procedures for the identification of critical operations. Consistent
                with EGRRCPA, the 2019 revisions applied the resolution planning
                requirement to financial institutions that would be subject to category
                I, II, or III standards under the ``domestic tailoring rule'' or the
                ``foreign banking organization rule'' (together with the domestic
                tailoring rule, the ``tailoring rules'') \16\ and certain other covered
                companies.
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                 \15\ Public Law 115-174 (2018).
                 \16\ See Prudential Standards for Large Bank Holding Companies,
                Savings and Loan Holding Companies, and Foreign Banking
                Organizations, 84 FR 59032 (November 1, 2019); Changes to
                Applicability Thresholds for Regulatory Capital and Liquidity
                Requirements, 84 FR 59230 (November 1, 2019).
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                 Under the 2019 revisions and the proposed scope of guidance, each
                Specified FBO would be a triennial full filer and will be required to
                submit a resolution plan every three years, alternating between a full
                resolution plan and a targeted resolution plan. The 2019 revisions
                require all triennial full filers to submit a targeted resolution plan
                on or before July 1, 2021, followed by a full resolution plan in 2024.
                 In addition, the agencies indicated in the 2019 revisions that they
                would strive to provide final general guidance at least a year before
                the next resolution plan submission date of firms to which the general
                guidance is directed. The 2019 revisions also provided certain
                technical changes, including the clarification that FBOs should not
                assume that the foreign parent company takes resolution actions outside
                of the United States that would eliminate the need for any U.S.
                subsidiaries to enter into resolution proceedings.
                International Cooperation on Resolution Planning
                 The 2018 feedback letters also noted the importance of the
                agencies' engagement with non-U.S. regulators. The Specified FBOs are
                subject to their home country resolvability expectations, in addition
                to section 165(d) of the Dodd-Frank Act and the Rule. Resolution of the
                U.S. operations of a firm domiciled outside the United States with
                significant global activities (i.e., the Specified FBOs) will require
                substantial coordination between home and host country authorities. The
                agencies identified three areas in the 2018 feedback letters (legal
                entity rationalization; PCS; and derivatives booking practices) where
                enhanced cooperation between the agencies and each firm's home
                regulatory authorities would maximize resolvability under both the U.S.
                and home country resolution strategies.\17\ The agencies will continue
                to coordinate with non-U.S. authorities regarding these and other
                resolution matters (e.g., resources in resolution, communications),
                including developments in the U.S. and home country resolution
                capabilities of the Specified FBOs.
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                 \17\ Available at www.federalreserve.gov/newsevents/pressreleases/bcreg20181220c.htm.
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                Capital and Liquidity
                 The agencies received several comments on an array of resolution
                capital and liquidity issues during consideration of the 2019 domestic
                guidance, but declined to adopt any modifications in the final
                version.\18\ Instead, the agencies indicated that they would continue
                to consider those comments, coordinate with non-U.S. regulators, and
                provide additional information in the future on those topics. The
                agencies continue to evaluate the capital and liquidity guidance and
                expect that any future actions in these areas, whether guidance or
                rules, would be adopted through notice and comment procedures, which
                would provide an opportunity for public input. The agencies further
                expect to collaborate in taking such actions in a manner consistent
                with the Board's Total Loss-Absorbing Capacity rule.\19\ Therefore, the
                capital and liquidity sections of the proposed guidance remain
                unchanged from the 2018 FBO guidance with the exception of two minor
                clarifications to the capital section.
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                 \18\ See 84 FR 1442-43 (discussing, among other things, (i)
                tailoring liquidity flow assumptions; (ii) avoiding false positive
                resolution triggers; and (iii) other requests).
                 \19\ See generally Total Loss-Absorbing Capacity, Long-Term
                Debt, and Clean Holding Company Requirements for Systemically
                Important U.S. Bank Holding Companies and Intermediate Holding
                Companies of Systemically Important Foreign Banking Organizations,
                82 FR 8266 (January 24, 2017).
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                II. Overview of the Proposed Guidance
                 The proposed guidance begins with a description of the proposed
                scoping methodology and is then organized into eight substantive areas,
                consistent with the 2018 FBO guidance. These areas are:
                1. Capital
                2. Liquidity
                3. Governance mechanisms
                4. Operational
                5. Branches
                6. Group resolution plan
                7. Legal entity rationalization and separability
                8. Derivatives and trading activities
                 The proposed guidance is tailored for the Specified FBOs as
                compared to the U.S. GSIBs to account for differences between U.S.
                GSIBs and FBOs' U.S. footprints and operations. Each substantive area
                is important to firms in implementing their U.S. resolution strategy,
                as each plays a part in helping to ensure that the firms can be
                resolved in a rapid and orderly manner. The proposed guidance would
                describe the agencies' expectations for each of these areas.
                 The proposal is largely consistent with the 2018 FBO guidance and
                the 2019 domestic guidance. Accordingly, the agencies expect that the
                FBOs that would be Specified FBOs under the proposal have already
                incorporated significant aspects of the proposed guidance into their
                resolution planning. With respect to the 2019 domestic guidance, the
                proposed guidance differs in certain respects, given the circumstances
                under which a foreign-based covered company's U.S. resolution plan is
                most likely to be relevant.
                 As noted above, the proposal would update the PCS and DER areas of
                the 2018 FBO guidance to reflect the agencies' review of certain
                Specified FBOs' 2018 resolution plans and revisions contained in the
                2019 domestic guidance. It would also make minor clarifications to
                certain areas of the 2018 FBO guidance in light of the 2019 revisions.
                In general, the proposed revisions to the guidance are intended to
                streamline the firms' submissions and to provide additional clarity. In
                addition, the proposed guidance would consolidate all guidance
                applicable to the Specified FBOs into a single document, which would
                provide the public with one source of applicable guidance to which to
                refer. The proposed guidance is not meant to limit firms' consideration
                of additional
                [[Page 15452]]
                vulnerabilities or obstacles that might arise based on a firm's
                particular structure, operations, or resolution strategy and that
                should be factored into the firm's submission.
                Scope of Application
                 The agencies are proposing to apply the guidance to FBOs whose
                material financial distress or failure would present the greatest
                potential to disrupt U.S. financial stability. Specifically, the
                agencies are proposing to use the method 2 calculation of the GSIB
                surcharge framework for determining the applicability of this proposed
                guidance. Accordingly, the proposed guidance would apply to FBOs that
                are triennial full filers \20\ and whose U.S. IHCs have a method 2 GSIB
                score of 250 or more.\21\ The agencies seek comment on all aspects of
                the proposed scoping methodology.
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                 \20\ Currently, there are no FBOs that are triennial reduced
                filers and whose IHCs have method 2 scores of 250 or more. The
                agencies do not intend for the proposed guidance to apply to such an
                FBO.
                 \21\ The Specified FBOs as of the date of this proposal would be
                Barclays PLC, Credit Suisse Group AG, and Deutsche Bank AG.
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                 In proposing a scoping methodology, the agencies seek to provide a
                framework that is clear, predictable, and based on publicly reported
                quantitative data. Large bank holding companies, including FBOs' U.S.
                IHCs, already submit to the Board periodic public reports on their GSIB
                indicator scores. Since relevant data has been collected in comparable
                form for U.S. GSIBs, FBOs, and other banking organizations in the U.S.,
                a small number of FBOs (those FBOs that currently are expected to be
                Specified FBOs) have had consistently high method 2 GSIB scores that
                persist both in comparison to U.S. GSIBs and other FBOs during the
                periods for which data is available.
                 These comparably high method 2 scores have largely been driven by a
                reliance on short term wholesale funding (STWF). The STWF factor
                indicates the potential for significant liquidity outflows and large-
                scale funding runs associated with STWF in times of stress. Such
                funding runs may complicate the ability of an FBO to undergo an orderly
                resolution in times of stress, generating both safety and soundness and
                financial stability risks. While the agencies believe that there are
                compelling justifications for using a standalone risk-based measure of
                STWF as a basis for having heightened expectations for resolution
                planning, the agencies also understand that a single indicator may not
                account for other factors that are relevant to the resolvability of an
                FBO.
                 In contrast, method 2 of the GSIB surcharge framework is designed
                to provide a single, comprehensive, integrated assessment of a large
                bank holding company's systemic footprint. Specifically, the method 2
                score assesses a financial institution's asset size,
                interconnectedness, complexity (including over-the-counter derivatives
                trading), cross-jurisdictional activity, and reliance on STWF--all
                important factors in considering resolvability. Thus, the agencies
                believe that this methodology is an appropriate mechanism for
                determining the scope of applicability of the proposed guidance.
                 The agencies believe that a method 2 GSIB score of 250 or more
                indicates that an FBO has certain characteristics that could present
                barriers to a rapid and orderly resolution. For example, a firm that
                funds a large percentage of its assets with STWF--as noted above, a
                measure that suggests that a banking organization is more vulnerable to
                large-scale funding runs and thus increased resolvability risk--would
                have a method 2 GSIB score of 250 or more. Moreover, a substantial
                majority of U.S. GSIBs, which are the subject of heightened
                expectations regarding resolution planning,\22\ have a GSIB method 2
                score of 250 or more, suggesting the need to apply heightened
                resolution expectations to FBOs that present comparable resolvability
                challenges. In addition, the proposed guidance would only apply to FBOs
                with U.S. IHCs because those are the FBOs with the largest consolidated
                U.S. operations that are subject to resolution under the Bankruptcy
                Code.
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                 \22\ See 2019 domestic guidance.
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                 The agencies are not proposing to use the tailoring rules and the
                accompanying framework for sorting financial institutions into certain
                tailoring categories, other than to confirm that a firm is a triennial
                full filer. Several factors for determining a financial institution's
                tailoring category are important in the context of resolution and the
                application of this proposed guidance to the Specified FBOs. However,
                the tailoring rules and tailoring categories were developed to
                determine application of a broad range of enhanced prudential
                standards, including the general operation of resolution plan
                submissions, and were not focused on determining which covered
                companies should be subject to more detailed resolution planning
                guidance in light of longer resolution planning cycles and the need for
                greater coordination between home and host regulators.
                 Question [*]: Is the proposed scope of applicability of the
                proposed guidance appropriate? Should the agencies adopt a different
                methodology for determining the scope of the proposed guidance? For
                example, should the proposed guidance apply to FBOs whose U.S.
                operations have a systemic risk profile (as assessed by the method 1
                GSIB score) that is similar to the systemic risk profile of the U.S.
                financial institutions that are assigned to Category I under the
                Board's tailoring rules? Should the proposed guidance apply to FBOs
                that are subject to Category II standards (based on the firm's
                combined U.S. operations) under the Board's tailoring rules? Should
                the proposed guidance apply to FBOs that have exposure of a certain
                level (in the range of $50 to $100 billion) in one or more of the
                risk-based indicators identified in the Board's tailoring rules,
                such as nonbank assets and/or STWF? If the agencies adopt a
                different scope of application than what is being proposed, should
                the agencies also modify the content of the guidance, for example by
                removing certain sections of the guidance? Commenters are invited to
                explain in detail the basis for their positions.
                 Question [*]: Should the agencies outline in the final guidance
                their methodology and process for determining the FBOs to which the
                guidance should apply? Should the agencies specify in the final
                guidance an implementation period for any FBO that did not receive
                the 2018 FBO guidance, but to which the final guidance will apply?
                If so, should the implementation period be fixed or subject to
                adjustment by the agencies?
                 Capital: The ability to provide sufficient capital to U.S. non-
                branch material entities without disruption from creditors is important
                to ensure that such material entities can continue to provide critical
                services and maintain identified critical operations as the U.S. IHC is
                resolved. The proposal describes expectations concerning the
                appropriate positioning of capital and other loss-absorbing instruments
                (e.g., debt that the parent may forgive or convert to equity) among the
                U.S. IHC and its subsidiaries (resolution capital adequacy and
                positioning or RCAP).\23\ The proposal also describes expectations
                regarding a methodology for periodically estimating the amount of
                capital that may be needed to support each U.S. IHC subsidiary after
                the U.S. IHC's bankruptcy filing (resolution capital execution need or
                RCEN).
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                 \23\ The proposal also would make consistent with the 2019
                domestic guidance expectations about intercompany debt.
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                 Liquidity: A firm's ability to reliably estimate and meet the
                liquidity needs of the U.S. IHC and its subsidiaries prior to, and in,
                resolution (resolution liquidity execution need or RLEN) is important
                to the execution of a Specified FBO's U.S. resolution strategy.
                Maintaining sufficient and appropriately-positioned liquidity also
                [[Page 15453]]
                allows the U.S. IHC subsidiaries to continue to operate while the U.S.
                IHC is being resolved in accordance with the firm's U.S. resolution
                strategy. The proposal also describes expectations concerning a
                methodology for measuring the stand-alone liquidity position of each
                U.S. non-branch material entity.
                 Governance Mechanisms: An adequate governance structure with
                triggers that identify the onset, continuation, and increase of
                financial stress is important to ensure that there is sufficient time
                to communicate and coordinate with the foreign parent regarding the
                provision of financial support and other key actions. The governance
                mechanisms section proposes expectations that firms have playbooks that
                describe the board and senior management actions of the U.S. non-branch
                material entities necessary to execute the firm's U.S. resolution
                strategy. In addition, the proposal describes expectations that firms
                have triggers that are linked to specific actions outlined in these
                playbooks to ensure the timely escalation of information to both U.S.
                IHC and foreign parent governing bodies. The proposal also describes
                the expectations that firms identify and analyze potential legal
                challenges to planned U.S. IHC support mechanisms, and any defenses and
                mitigants to such challenges.
                 Currently, certain Specified FBOs have relied on contractually
                binding mechanisms (``CBMs'') to ensure that sufficient capital and
                liquidity is timely provided to material entity subsidiaries prior to
                the U.S. IHC commencing a bankruptcy case. These structures are
                designed, in part, to mitigate potential legal challenges to the
                provision of such support.\24\ With respect to legal challenges, the
                certain Specified FBOs assume, therefore, that creditors in a
                bankruptcy case of the U.S. IHC would exist and would bring a creditor
                challenge action in any bankruptcy case of the U.S. IHC.
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                 \24\ The U.S. GSIBs previously adopted CBMs for similar
                purposes.
                ---------------------------------------------------------------------------
                 Certain Specified FBOs have developed either (i) a secured support
                agreement whereby the U.S. IHC binds itself to provide pre-bankruptcy
                support to material entity subsidiaries, supported by perfected
                security interests in collateral granted by the U.S. IHC; \25\ or (ii)
                an unsecured equity purchase arrangement under which the U.S. IHC
                enters into one or more agreements with a material entity subsidiary to
                purchase additional equity from that subsidiary prior to the U.S. IHC's
                bankruptcy. Under this second approach, the subsidiary would, using the
                funds derived from the equity investment, provide capital and liquidity
                support to U.S. material entities.
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                 \25\ FBOs operating in the United States with U.S. non-branch
                assets of $50 billion or more, such as the firms that would be
                Specified FBOs under the proposed guidance, are required to
                consolidate certain U.S. subsidiaries under a single, top-tier
                intermediate holding company. 12 CFR 252.153. In this circumstance,
                the U.S. IHC would be the entity that enters into a secured support
                agreement with its U.S. subsidiaries. Separately, some U.S.-based
                financial institutions have established an intermediate holding
                company to facilitate the flow of capital and liquidity to material
                entities prior to bankruptcy.
                ---------------------------------------------------------------------------
                 Neither the proposed guidance nor the Rule recommend a specific
                strategy for ensuring that support is timely provided to material
                entity subsidiaries and reducing the risk of a successful legal
                challenge to pre-bankruptcy resolution-related actions. The agencies
                continue to evaluate the efficacy of CBMs for the Specified FBOs as
                tools to address each of these objectives. The agencies seek comment on
                the benefits and costs and relative advantages and disadvantages of
                each CBM approach for the Specified FBOs.
                 Question [*]: Is each CBM approach described above effective as
                a potential mitigant to potential legal challenges in the case of a
                U.S. IHC bankruptcy? Is each effective in ensuring the provision of
                capital and liquidity support to material entities in periods of
                financial stress? What are the benefits and costs and relative
                advantages and disadvantages associated with each of the CBM
                approaches?
                 Question [*]: Does each of the aforementioned CBM approaches
                appropriately balance the certainty associated with pre-positioning
                capital directly at U.S. IHC subsidiaries with the flexibility
                provided by holding recapitalization resources at the U.S. IHC
                (contributable resources) to meet unanticipated losses at the U.S.
                IHC subsidiaries? Does each of the aforementioned CBM approaches
                provide sufficient confidence that appropriate levels of capital and
                liquidity will be timely provided to material entity subsidiaries?
                Does the absence of a perfected security interest under the equity
                purchase arrangement materially affect the likelihood that resources
                would be available to material entity subsidiaries under that
                approach? Why or why not?
                 Question [*]: Are there alternative CBM approaches that would
                provide equivalent or greater effectiveness in the provision of
                capital and liquidity to material entities in periods of financial
                stress? Should the agencies prescribe a specific CBM approach or
                provide additional guidance on the subject, or neither?
                 Question [*]: Does the existence of a CBM that follows either of
                the aforementioned CBM approaches have the potential to facilitate
                or pose a potential conflict with a Specified FBO's home country
                global resolution strategy? If so, are there alternative approaches
                that would mitigate the conflict while providing sufficient
                confidence that appropriate levels of capital and liquidity will be
                timely provided to material entity subsidiaries?
                 Operational: The development and maintenance of operational
                capabilities is important to support and enable successful execution of
                a firm's U.S. resolution strategy, including providing for the
                continuation of identified critical operations and preventing or
                mitigating adverse impacts on U.S. financial stability. The proposed
                operational capabilities include:
                 Developing a framework and playbooks that consider
                contingency actions and alternative arrangements to be taken to
                maintain payment, clearing, and settlement activities and to maintain
                access to financial market utilities (``FMUs''), as further discussed
                below;
                 Possessing fully developed capabilities related to
                managing, identifying, and valuing the collateral that is received
                from, and posted to, external parties and its affiliates;
                 Having management information systems that readily produce
                key data on financial resources and positions on a U.S. legal entity
                basis, and that ensure data integrity and reliability; and
                 Maintaining an actionable plan to ensure the continuity of
                all of the shared and outsourced services on which identified critical
                operations rely.
                 In addition, the proposed guidance outlines expectations that
                firms' plans should reflect the current state of how the early
                termination of qualified financial contracts could impact resolution of
                the firm's U.S. operations.
                 Branches: U.S. branches of FBOs, while legally distinct from a U.S.
                IHC, can play a critical role in a firm's U.S. operations. Therefore,
                the proposal describes expectations regarding the mapping of
                interconnections and interdependencies between a U.S. branch that is a
                material entity and other material entities, core business lines, or
                identified critical operations. In addition, the Specified FBOs would
                be expected to show how branches would continue to facilitate the
                firm's FMU access for identified critical operations and to meet
                funding needs. The proposal also outlines expectations that the
                Specified FBOs analyze the effects on the firm's FMU access and
                identified critical operations of the cessation of operations of any
                U.S. branch that is significant to the activities of an identified
                critical operation.
                [[Page 15454]]
                 Group Resolution Plan: As noted above, the agencies recognize the
                preferred resolution outcome for the Specified FBOs is a successful
                home country resolution. U.S. operations of an FBO are often highly
                interconnected with the broader, global operations of the financial
                institution. The proposal outlines expectations for these firms to
                detail how resolution planning for U.S. domiciled entities or
                activities is integrated into the foreign-based covered company's
                overall resolution or other contingency planning process.
                 Legal Entity Rationalization and Separability: It is important that
                firms maintain a structure that facilitates orderly resolution. To
                achieve this, the proposal states that a firm should develop criteria
                supporting the U.S. resolution strategy and integrate them into day-to-
                day decision making processes. The criteria would be expected to
                consider the best alignment of legal entities and business lines and
                facilitate resolvability of U.S. operations as a firm's activities,
                technology, business models, or geographic footprint change over time.
                In addition, the proposed guidance provides that the firm should
                identify discrete U.S. operations that could be sold or transferred in
                resolution.
                 Derivatives and Trading Activities: It is important that a firm's
                derivatives and trading activities can be stabilized and de-risked
                during resolution without causing significant market disruption. As
                such, firms should have capabilities to identify and mitigate the risks
                associated with their U.S. derivatives and trading activities
                (including those activities originated from the U.S. entities (as
                defined below) and booked directly into a non-U.S. affiliate) and with
                the implementation of their preferred strategies, as further discussed
                below.
                III. Proposed Changes From Prior Guidance
                 The proposed guidance contains modifications and clarifications
                informed by the agencies' review of the certain Specified FBOs' 2018
                plans, particularly in the areas of DER and PCS. Generally, the
                agencies' expectations for the Specified FBOs' resolution plan
                submissions are consistent with their expectations for the U.S. GSIBs'
                resolution plan submissions, with appropriate tailoring to reflect the
                firms' foreign parents and their different organizational structures
                and operations. In addition, the proposed guidance would provide
                certain clarifications to address the 2019 revisions and changes within
                the financial industry. The following summarizes the changes relative
                to the 2018 FBO guidance to which the agencies are seeking comment:
                Scope
                 The agencies have eliminated from the 2018 FBO guidance the
                paragraph indicating that the expectations apply to certain Specified
                FBOs. As indicated above, the agencies are proposing to scope
                application of the proposed guidance by reference to a pre-existing
                framework for determining systemic risk. Specifically, the proposed
                guidance would apply to FBOs that are triennial full filers and whose
                U.S. IHCs have a method 2 GSIB score of 250 or more. The agencies also
                are considering the appropriate implementation period for any FBO that
                becomes subject to the forthcoming final guidance and that was not a
                recipient of the 2018 FBO guidance.
                Operational: Payment, Clearing, and Settlement Activities
                 The provision of PCS services by firms, FMUs, and agent banks is an
                essential component of the U.S. financial system, and maintaining the
                continuity of access to PCS services is important for the orderly
                resolution of the Specified FBOs' U.S. material entities, identified
                critical operations, and core business lines. Based upon the review of
                recent resolution plan submissions and the agencies' engagement with
                the firms, the agencies believe that the firms that would be Specified
                FBOs under the proposed guidance generally have continued to develop
                capabilities to identify and consider the risks associated with
                continuity of access to PCS services in a resolution under their U.S.
                resolution strategies. These capabilities are described in the firms'
                resolution plan methodologies and are included in playbooks for key
                FMUs and key agent banks.
                 The 2018 FBO guidance indicated that the resolution plan submission
                of an FBO to which the 2018 guidance applied should describe
                arrangements to facilitate continued access to PCS services through
                those FBOs' resolution. The agencies are now proposing guidance that
                clarifies the agencies' expectations with respect to the Specified
                FBOs' capabilities to maintain continued access to PCS services. First,
                the proposal would state that firms should develop frameworks that
                articulate their strategies for continued access to PCS services to
                focus the firms' consideration of this issue. Second, the proposed
                guidance would provide clarity regarding firms' playbooks for retaining
                access to PCS services. Finally, the proposal would distinguish between
                expectations related to users and providers of PCS services, to reflect
                the different financial and operational considerations associated with
                each activity. The agencies believe that the firms that would be
                Specified FBOs under the proposed guidance generally have methodologies
                and capabilities in place to address the expectations in this proposal.
                 Framework. The framework through which a firm maintains continued
                access to PCS services should incorporate the identification of key
                clients of a firm's U.S. operations,\26\ as well as key FMUs and key
                agent banks for a firm's U.S. material entities, identified critical
                operations, and core business lines, using both quantitative \27\ and
                qualitative criteria, and playbooks for each key FMU and key agent
                bank. The proposed guidance builds upon existing guidance by specifying
                that the framework should consider key clients of the firm's U.S.
                operations (which may include affiliates of the firm), key FMUs, and
                key agent banks.\28\ The agencies note that, while the 2018 FBO
                guidance does not expressly suggest the identification of and
                development of playbooks for key agent banks, the firms that would be
                Specified FBOs under the proposed guidance generally considered agent
                bank relationships in their most recent resolution plan submissions,
                with each providing a playbook for at least one key agent bank. Because
                agent
                [[Page 15455]]
                bank relationships may replicate PCS services provided by FMUs or
                facilitate access to FMUs, the agencies are proposing to expressly
                include the development of playbooks for key agent banks.
                ---------------------------------------------------------------------------
                 \26\ A client is an individual or entity, including affiliates
                of the firm, to whom the firm provides PCS services and, if credit
                or liquidity is offered, any related credit or liquidity offered in
                connection with those services. In an effort to provide additional
                clarity, the proposed guidance clarifies that a firm should consider
                any related credit or liquidity offered in connection with those
                services only if credit or liquidity is offered. Although this
                clarification is not expressly included in the 2019 domestic
                guidance, the agencies' expectation concerning the identification of
                key clients remains the same for both those U.S. banking
                organizations and the Specified FBOs.
                 \27\ In identifying entities as key, examples of quantitative
                criteria may include: For a client, transaction volume/value, market
                value of exposures, assets under custody, usage of PCS services, and
                if credit or liquidity is offered, any extension of related intraday
                credit or liquidity; for an FMU, the aggregate volumes and values of
                all transactions processed through such FMU; and, for an agent bank,
                assets under custody, the value of cash and securities settled, and
                extensions of intraday credit.
                 \28\ The agencies note that several footnotes have been modified
                from the corresponding footnotes in the 2019 domestic guidance.
                Compare 84 FR 1452 nn. 13-14 with V. Payment, Clearing, and
                Settlement Activities nn. 19-20. These modifications were made for
                clarification purposes and do not reflect a difference in
                expectations between Specified FBOs and the eight largest, complex
                U.S. banking organizations regarding the identification of key
                clients, key FMUs, and key agent banks.
                ---------------------------------------------------------------------------
                 In applying the framework, a firm would be expected to consider its
                role as a user or a provider of PCS services. The proposal refers to a
                user of PCS services as a firm that accesses the services of an FMU
                directly through its own membership in that FMU or indirectly through
                the membership of another entity, including an affiliate, that provides
                PCS services on an agency basis. A firm is a provider of PCS services
                under the proposed guidance if it provides its clients with access to
                an FMU or agent bank directly through the firm's membership in or
                relationship with that service provider, or indirectly through the
                firm's relationship with another entity, including a U.S. or non-U.S.
                affiliate or branch, that provides the firm with PCS services on an
                agency basis. A firm also would be a provider if it delivers PCS
                services to a client through the firm's own operations in the United
                States in a manner similar to an FMU.
                 The proposal provides that a firm's framework should take into
                account certain relevant relationships by providing a mapping of U.S.
                material entities, identified critical operations, core business lines,
                and key clients of the firm's U.S. operations to key FMUs and key agent
                banks. This framework would be expected to consider both direct
                relationships (e.g., a firm's direct membership in the FMU, a firm's
                provision of such key clients of the firm's U.S. operations with PCS
                services through its own operations in the United States, or a firm's
                contractual relationship with an agent bank) and indirect relationships
                (e.g., a firm indirectly accesses PCS services through its relationship
                with another entity, including U.S. and non-U.S. affiliates and
                branches, that provides the firm with PCS services on an agency basis).
                The agencies are not proposing to limit the framework to direct
                relationships and non-affiliates, since continuity of access in a
                resolution scenario to directly accessed and indirectly accessed PCS
                activities, including through affiliates, is likely to be essential to
                the rapid and orderly resolution of a Specified FBO.
                 By developing and evaluating these activities and relationships
                through a framework that incorporates the elements of the proposed
                guidance, a firm should be able to consider the issue of maintaining
                continuity of access to PCS services in a comprehensive manner.
                 Question [ ]. Is the proposed guidance sufficiently clear with
                respect to the following concepts: scope of PCS services, user vs.
                provider, and direct vs. indirect relationships? What additional
                clarifications or alternatives concerning the proposed framework or
                its elements, if any, should the agencies consider? For instance,
                would further examples of ways that a Specified FBO may act as
                provider of PCS services be useful? Should the agencies consider
                further distinguishing between providers based on the type of PCS
                service they provide?
                 Question [ ]. Is the proposed guidance sufficiently clear
                concerning expectations related to PCS services provided by a
                Specified FBO's U.S. material entities, whether branches or non-
                branches? Should the agencies consider applying different
                expectations for U.S. material entities based on whether they are
                branches or non-branch entities? If so, what should be the basis for
                such differing expectations, and what additional clarifications or
                alternatives should the agencies consider?
                 Playbooks for Continued Access to PCS Services. Under the proposal,
                it is expected that a firm would provide a playbook for each key FMU
                and key agent bank, whether there is a direct relationship or an
                indirect relationship (including indirect arrangements through any U.S.
                or non-U.S. affiliate or branch) between the firm and each key FMU and
                key agent bank. A Specified FBO also would be expected to provide a
                playbook for each key FMU and key agent bank that, among other things,
                includes financial and operational detail that would support continued
                access to PCS services for the firm and key clients of its U.S.
                operations under the firm's U.S. resolution strategy.\29\
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                 \29\ However, the firm is not expected to incorporate a scenario
                in which it loses key FMU or key agent bank access into its U.S.
                resolution strategy or its RLEN and RCEN estimates.
                ---------------------------------------------------------------------------
                 The proposed guidance differentiates the type of information to be
                included in a firm's key FMU and key agent bank playbooks based on
                whether a firm is a user of PCS services with respect to that FMU or
                agent bank, a provider of PCS services with respect to that FMU or
                agent bank, or both. To the extent a firm is both a user and a provider
                of PCS services with respect to a particular FMU or agent bank, the
                firm would be expected to provide the described content for both users
                and providers of PCS services. A firm would be able to do so either in
                the same playbook or in separate playbooks included in its resolution
                plan submission.
                 Content related to Users of PCS Services. Each playbook for an
                individual key FMU or key agent bank should include a description of
                the firm's direct or indirect relationship as a user with the key FMU
                or key agent bank and an identification and mapping of PCS services to
                the associated U.S. material entities, identified critical operations,
                and core business lines that use those PCS services, as well as a
                discussion of the potential range of adverse actions that could be
                taken by that key FMU or key agent bank when the firm is in resolution
                under its U.S. resolution strategy.\30\ Playbooks submitted as part of
                the 2018 resolution plan submissions generally mapped the PCS services
                provided to U.S. material entities, identified critical operations, and
                core business lines at a granular level, which enhanced the utility of
                these playbooks.
                ---------------------------------------------------------------------------
                 \30\ Examples of potential adverse actions may include increased
                collateral and margin requirements and enhanced reporting and
                monitoring.
                ---------------------------------------------------------------------------
                 In discussing the potential range of adverse actions that a key FMU
                or key agent bank could take, each playbook would be expected to
                address the operational and financial impact of such actions on each
                U.S. material entity, identified critical operation, and core business
                line, and discuss contingency arrangements that the firm could initiate
                in response to such adverse actions by the key FMU or key agent bank.
                Operational impacts could include effects on governance mechanisms or
                resource allocation (including human resources) of the Specified FBO's
                U.S. operations, as well as any expected enhanced communication with
                key stakeholders (e.g., regulators, FMUs, agent banks). Financial
                impacts could include those directly associated with liquidity or any
                additional costs incurred by the firm as a result of such adverse
                actions and contingency arrangements.
                 Content related to Providers of PCS Services. Under the proposal, a
                firm that is a direct or indirect provider of PCS services would be
                expected to identify, in its playbook for the relevant key FMU or key
                agent bank, key clients of its U.S. operations that rely upon PCS
                services provided by the firm's U.S. material entities, identified
                critical operations, and core business lines. Playbooks would be
                expected to describe the scale and way in which the firm's U.S.
                material entities, identified critical operations, and core business
                lines provide PCS services and any related credit or liquidity that may
                be offered by the firm in connection with such services. Similar to the
                content expected of users of PCS services, each playbook would be
                expected to include a mapping of the PCS services provided to
                [[Page 15456]]
                each U.S. material entity, identified critical operation, and core
                business line, as well as key clients of the firm's U.S. operations. If
                a firm provides PCS services through its own U.S. operations, the firm
                would be expected to produce a playbook for the U.S. material entity
                that provides those services, and the playbook would focus on
                continuity of access for key clients of the firm's U.S. operations.
                 The proposal states that playbooks should discuss the potential
                range of contingency actions available to the firm to minimize
                disruption to its provision of PCS services to key clients of its U.S.
                operations and the financial and operational impacts of such
                arrangements. Contingency arrangements may include viable transfer of
                client activity and any related assets or any alternative arrangements
                that would allow key clients of the firm's U.S. operations to maintain
                continued access to PCS services. Each playbook also would be expected
                to describe the range of contingency actions that the firm may take
                concerning its provision of intraday credit to key clients of its U.S.
                operations and to provide analysis quantifying the potential liquidity
                that the firm could generate by taking each such action in stress and
                in the resolution period. To the extent a firm would not take any such
                actions as part of its U.S. resolution strategy, the firm would be
                expected to describe its reasons for not taking any contingency action.
                 Under the proposal, a Specified FBO should communicate the
                potential impacts of implementation of any identified contingency
                arrangements or alternatives to key clients of its U.S. operations, and
                playbooks should describe the firm's methodology for determining
                whether it should provide any additional communication to some or all
                such key clients of its U.S. operations (e.g., due to the client's BAU
                usage of that access or related extensions of credit), as well as the
                expected timing and form of such communication. The agencies note that,
                in the most recent submissions of the firms that would be Specified
                FBOs under the proposed guidance, these firms generally addressed the
                issue of client communications and provided descriptions of planned or
                existing client communications. A firm would be expected to consider
                any benefit of communicating this information in multiple forms (e.g.,
                verbal or written) and at multiple time periods (e.g., business as
                usual, stress, or some point in time in advance of taking contingency
                actions) in order to provide adequate notice to key clients of its U.S.
                operations of the action and the potential impact on the client of that
                action.
                 In making decisions concerning communications to such key clients
                of its U.S. operations, the proposal states that the firm also should
                consider tailoring communications to different subsets of clients
                (e.g., based on levels of activity or credit usage) in form, timing, or
                both. Playbooks may include sample client contracts or agreements
                containing provisions related to the firm's provision, if any, of
                intraday credit or liquidity.\31\ Such sample contracts or agreements
                may be important to the extent that the firm believes those documents
                sufficiently convey to clients the contingency arrangements available
                to the firm and the potential impacts of implementing such contingency
                arrangements.
                ---------------------------------------------------------------------------
                 \31\ If these sample client contracts or agreements are included
                separately as part of the firm's resolution plan submission, they
                may be incorporated into the playbook by reference.
                 Question [ ]. Are the expectations with respect to playbook
                content for firms that are direct or indirect users or providers (or
                both) of PCS services sufficiently clear? What additional
                clarifications, alternatives, or additional information, if any,
                should the agencies consider?
                 Question [ ]. Should the guidance indicate that providers of PCS
                activities are expected to consider particular contingency
                arrangements (e.g., methods to transfer client activity to other
                firms with whom the clients have relationships, alternate agent bank
                relationships, etc.)? Should the guidance also indicate that firms
                should consider particular actions they may take concerning the
                provision of intraday credit to affiliate and third-party clients,
                such as requiring pre-funding? If so, what particular actions should
                these firms address?
                 Question [ ]. Specifically for direct and indirect users of PCS
                activities, should the guidance indicate that firms are expected to
                include PCS-related liquidity sources and uses, such as client pre-
                funding, or specific abilities to control intraday liquidity inflows
                and outflows, such as throttling or prioritizing of payments? If so,
                what particular sources and uses should firms be expected to
                include?
                 Question [ ]. Specifically for providers of PCS services, are
                the agencies' expectations concerning a firm's communication to key
                clients of its U.S. operations (including affiliates, as applicable)
                of the potential impacts of implementation of identified contingency
                arrangements sufficiently clear? What additional clarifications, if
                any, should the agencies consider? Should the agencies expect the
                firm to communicate this information to key clients of the U.S.
                operations at specific times or in specific formats?
                 Capabilities. Similar to prior guidance, the proposal includes
                expectations concerning a Specified FBO's capabilities for
                understanding and tracking its obligations and exposures associated
                with PCS activities, including contractual obligations and commitments.
                The proposed guidance indicates that those expectations would apply
                with respect to the obligations and exposures associated with PCS
                activities for each U.S. material entity, whether a branch or non-
                branch, as any such entity may provide access to PCS services.
                 Question [ ]. Are the agencies' expectations concerning these
                capabilities sufficiently clear? What additional clarifications, if
                any, should the agencies consider?
                Operational: Qualified Financial Contracts
                 The 2018 FBO guidance indicated that the FBOs that were the subject
                of the 2018 FBO guidance could discuss in their resolution plan
                submissions the deployment and impact of certain International Swaps
                and Derivatives Association (``ISDA'') protocol developments on their
                resolution plans. The Specified FBOs may use those ISDA protocols to
                comply with the qualified financial contract stay rules of the Board,
                Office of the Comptroller of the Currency, and FDIC (``QFC Stay
                Rules'').\32\ As firms may comply with the QFC Stay Rules by amending
                contracts directly, if desired, rather than using the ISDA protocols,
                and because those ISDA protocols are final and open for adherence, the
                agencies are proposing to remove language in the guidance related to
                these developments. The agencies propose to retain an expectation that
                firms' plans reflect the current state of how the early termination of
                qualified financial contracts could impact the resolution of the firm's
                U.S. operations.
                ---------------------------------------------------------------------------
                 \32\ 12 CFR part 47 (Office of the Comptroller of the Currency);
                12 CFR part 252, subpart I (Board); and 12 CFR part 382 (FDIC).
                ---------------------------------------------------------------------------
                Legal Entity Rationalization and Separability
                 The separability section of the proposed guidance has been updated
                to provide additional specificity on actionability and generally aligns
                with the agencies' expectations as described in the 2019 domestic
                guidance. A firm's separability options should be actionable and should
                identify impediments and related mitigation strategies in advance. The
                proposed guidance notes that the Specified FBOs should consider
                potential consequences to U.S. financial stability of executing each
                separability option, while also noting that detail and analysis should
                be
                [[Page 15457]]
                commensurate with each Specified FBO's U.S. risk profile and
                operations.
                 The proposed guidance has also been updated to reflect revised
                expectations around maintaining active virtual data rooms for
                separability options that involve a sale of U.S. operations or
                businesses (``objects of sale''). Consistent with expectations
                described in the 2019 domestic guidance, firms would be expected to
                have the capability to populate a data room with information pertinent
                to a potential divestiture in a timely manner, rather than to maintain
                an active data room. The agencies would expect to test this capability
                by asking firms to produce selected sale-related materials within a
                certain timeframe as part of future resolution plan reviews.
                Derivatives and Trading Activities
                 The size, scope, complexity, and potential for opacity of a
                Specified FBO's U.S. derivatives and trading activities \33\ may
                present significant risk to the resolvability of the firm's U.S.
                entities.\34\ Based on the agencies' review of these firms' most recent
                resolution plan submissions,\35\ the agencies have observed that the
                firms that would be Specified FBOs under the proposed guidance are
                increasingly booking U.S. derivatives and trading activities that
                originate from U.S. entities \36\ into non-U.S. affiliates. As a
                result, the booking of U.S. derivatives and trading activities
                regularly occurs across jurisdictions and creates interconnections and
                interdependencies among and between the U.S. entities and non-U.S.
                affiliates of firms that would be Specified FBOs under the proposed
                guidance.\37\ It can be difficult for the agencies to evaluate a firm's
                U.S. derivatives and trading activities, and related risks to U.S.
                financial stability during the execution of the firm's U.S. resolution
                strategy, without considering these activities on a broader basis
                (e.g., a cross-jurisdictional, business line basis). This is
                particularly true for the firm's U.S. derivatives and trading
                activities originated from U.S. entities that are booked directly into
                a non-U.S. affiliate. Greater transparency into these activities is
                important because the U.S. entities have ongoing responsibilities for
                U.S. derivatives and trading activities originated from U.S. entities
                such as management of client relationships, transaction settlement,
                management of risk limits, and maintenance of access to U.S. FMUs, in
                the period leading-up to and during execution of the U.S. resolution
                strategy.
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                 \33\ ``U.S. derivatives and trading activities'', means all
                derivatives and trading activities that are: (1) Related to a firm's
                identified critical operations or core business lines, including any
                such activities booked directly into a non-U.S. affiliate; (2)
                conducted on behalf of the firm, its clients, or counterparties that
                are originated from, booked into, traded through, or otherwise
                conducted (in whole or in material part) in a U.S. entity (as
                defined below); or (3) both of the foregoing. A firm should identify
                its U.S. derivatives and trading activities pursuant to a
                methodology and justify the methodology used.
                 \34\ ``U.S. entities'' means U.S. IHC subsidiaries and material
                entity branches.
                 \35\ Each of the 2018 resolution plans of the firms that would
                be Specified FBOs under the proposed guidance identifies certain
                U.S. derivatives and trading activities (including U.S. prime
                brokerage services) as an identified critical operation or core
                business line.
                 \36\ Activities ``originated'' from U.S. entities are those
                activities transacted or arranged by, or on behalf of those U.S.
                entities and their clients and counterparties, including any such
                activity for which the U.S. entity is compensated (directly or
                indirectly) by a non-U.S. affiliate. These activities also include,
                for example, those that are sourced or executed through personnel
                employed by or acting on behalf a U.S. entity. The agencies would
                expect that a U.S. entity that is significant to the origination of
                activities for an identified critical operation or core business
                line would be designated as a U.S. material entity.
                 \37\ The Rule requires a Specified FBO to identify, describe in
                detail, and map to the legal entity the interconnections and
                interdependencies among the U.S. subsidiaries, branches and
                agencies, and between those entities and the identified critical
                operations and core business lines of the Specified FBO, and any
                foreign-based affiliate. See 12 CFR 243.5(a)(2)(i); 12 CFR
                381.5(a)(2)(i).
                ---------------------------------------------------------------------------
                 Uncertainty about the execution risk, allocation of losses, and
                impact on clients and counterparties of the U.S. entities could
                contribute to a loss of confidence in the firm's U.S. resolution
                strategy. To facilitate an orderly resolution of its U.S. entities, a
                Specified FBO should be able to demonstrate the ability to monitor and
                manage its U.S. derivatives and trading activities in the period
                leading-up to and during execution of the U.S. resolution strategy
                without risk of a serious adverse effect on U.S. financial stability.
                The firms that would be Specified FBOs under the proposed guidance have
                been developing certain capabilities to identify and mitigate the risks
                associated with their U.S. derivatives and trading activities and with
                the implementation of their U.S. resolution strategies. These
                capabilities seek to facilitate a firm's planning, preparedness, and
                execution of an orderly resolution of its U.S. entities. Notably, they
                also may facilitate a home-country led strategy.\38\
                ---------------------------------------------------------------------------
                 \38\ An SPOE strategy has been identified as the preferred group
                resolution strategy for each of the firms that would be Specified
                FBOs under the proposed guidance. See supra Objectives of the
                Resolution Planning Process.
                ---------------------------------------------------------------------------
                 The proposed guidance would clarify the agencies' expectations with
                respect to such capabilities and a firm's analysis of its U.S.
                resolution strategy. The proposed guidance also would eliminate the
                expectations of the 2018 FBO guidance that a firm's U.S. resolution
                plan include separate passive and active wind-down scenario analyses,
                the agency-specified data templates, and rating agency playbooks, which
                is consistent with the 2019 domestic guidance. In addition, relative to
                the 2019 domestic guidance, the proposed guidance would modify certain
                expectations for the Specified FBOs to reflect better the structures
                and business activities of the firms that would be Specified FBOs under
                the proposed guidance, including the size and complexity of their U.S.
                derivatives and trading activities and the associated risks to the
                orderly resolution of their U.S. entities. In particular, the proposed
                modifications would change the scope of activities covered by the
                Booking Practices subsection from derivatives portfolios \39\ to U.S.
                derivatives and trading activities.\40\ The proposal would also replace
                the Inter-Affiliate Risk Monitoring and Controls subsection with a new
                U.S. Activities Monitoring subsection to place an appropriate focus on
                the firm's ability to provide timely transparency into the U.S.
                derivatives and trading activities, regardless of where the
                transactions are booked. Finally, in consideration of the relatively
                smaller size and less complex nature of the derivatives positions
                booked directly into U.S. IHC subsidiaries of the firms that would be
                Specified FBOs under the proposed guidance, the proposal would
                eliminate the ``ease of exit'' position analysis, ``application of exit
                cost methodology,'' and ``analysis of operational capacity''
                subsections.\41\ As described in more detail below, the proposed
                derivatives and trading activities guidance is organized into five
                subsections.
                ---------------------------------------------------------------------------
                 \39\ A firm's derivatives portfolios include its derivatives
                positions and linked non-derivatives trading positions.
                 \40\ This modification would extend the scope of the booking
                practices beyond derivatives portfolios to include, for example,
                securities financing transactions originated from the firm's U.S.
                prime brokerage business on behalf of a U.S. client but booked
                directly into a non-U.S. affiliate.
                 \41\ While this modification would eliminate the more detailed
                expectations in subsections on ``application of exit cost
                methodology'' and ``analysis of operational capacity,'' similar
                considerations specific to the analysis of a firm's derivatives
                strategy are still captured within the ``derivatives stabilization
                and de-risking strategy'' section.
                ---------------------------------------------------------------------------
                 Booking practices. To minimize uncertainty, complexity, and opacity
                around cross-jurisdictional booking practices that could frustrate a
                firm's resolution preparedness, a firm's resolution capabilities should
                include booking practices for its U.S. derivatives
                [[Page 15458]]
                and trading activities that are commensurate with the size, scope, and
                complexity of a firm's U.S. derivatives and trading activities. A firm
                should have booking practices that provide timely and up-to-date
                information regarding the structure of and risks associated with the
                management of its U.S. derivatives and trading activities. In addition
                to providing transparency with respect to those positions booked into
                U.S. entities, the booking framework should provide transparency with
                respect to U.S. derivatives and trading activities booked directly to
                non-U.S. affiliates. As noted above, due to the cross-border nature of
                these activities, it can be difficult to evaluate the activities and
                the related risk in the period leading-up to and during the execution
                of the firm's U.S. resolution strategy without considering certain
                activities on a cross-jurisdictional, business line basis.\42\
                Therefore, the proposed guidance would clarify the capabilities a firm
                is expected to have related to its booking practices, including
                descriptions of its booking model framework and demonstrations of its
                ability to identify, assess, and report on each U.S. entity that
                originates or otherwise conducts (in whole or in material part) any
                significant aspect of the firm's U.S. derivatives or trading
                activities.
                ---------------------------------------------------------------------------
                 \42\ The scope of the proposed guidance is larger and broader
                for a Specified FBO relative to the 2019 domestic guidance and
                includes, for example, account balances and securities financing
                transactions related to prime brokerage services and other
                derivatives trading businesses because a Specified FBO's U.S
                resolution plan may not provide a full (global) legal entity view of
                its U.S. derivatives and trading activities originated from U.S.
                entities. In order to understand better the potential risk in
                resolution (e.g., potential impacts on the stability of U.S.
                financial markets), the agencies need to understand the material
                interconnections and interdependencies among and between the firm's
                U.S. entities and its non-U.S. affiliates that are created through
                its U.S. derivatives and trading activities, including those
                positions originated from the U.S. entities and booked directly into
                a non-U.S. affiliate.
                ---------------------------------------------------------------------------
                 U.S. activities monitoring. The booking, funding, and risk transfer
                arrangements \43\ underlying a firm's U.S. derivatives and trading
                activities create interconnections and interdependencies among and
                between a firm's U.S. entities and their non-U.S. affiliates that, if
                disrupted, could affect materially the funding or operations of the
                U.S. entities that conduct the U.S. derivative and trading activities
                or their clients and counterparties. As noted above, the U.S. entities
                may maintain ongoing responsibilities for U.S. derivatives and trading
                activities originated from U.S. entities in the period leading-up to
                and during the execution of the firm's U.S. resolution strategy and a
                lack of transparency into how these activities are managed could create
                uncertainty that may impact negatively the orderly resolution of the
                firm's U.S. entities.
                ---------------------------------------------------------------------------
                 \43\ Risk transfer arrangements often apply to a range of
                services and activities (e.g., trading, management, sales,
                infrastructure) that are provided, conducted, or used by U.S.
                entities. The relevant services and activities include those
                conducted in whole or in material part in the United States. In some
                instances, risk transfer arrangements may account for a material
                portion of the U.S. IHC's revenue. Disruption to these risk transfer
                arrangements could result in unexpected losses to or disruption of
                U.S. operations.
                ---------------------------------------------------------------------------
                 For example, through their derivatives and trading activities, the
                firms that would be Specified FBOs under the proposed guidance provide
                trade execution, hedging, securities financing, custody, clearing, and
                related services for banking firms, hedge funds and other institutional
                clients and counterparties. Many of these clients and counterparties
                rely on the firm's execution and financing services to support their
                participation in U.S. financial markets. The derivatives and trading
                activities that are originated from the firm's U.S. entities, and then
                booked to the firm's non-U.S. affiliates, create operational and
                financial connectivity with the firm's non-U.S. entities; as a client's
                assets, positions and balances can be booked to or utilized by numerous
                U.S. and non-U.S. affiliates. In resolution, the U.S. entities may
                continue to have responsibilities for managing U.S. client
                relationships and facilitating the unwind of client positions, the
                settlement of client liabilities, and the transfer of client accounts,
                regardless of the entity within the global firm to which those
                positions or assets have been booked.
                 The rapid withdrawal of client account balances, may have negative
                impacts (e.g., loss of internalization) on the funding or operations of
                the firm and its affiliates. Yet, the untimely transfer or other
                prolonged disruptions in the clients' ability to execute transactions
                may have negative impacts to those clients or the U.S. financial
                markets in which they participate. Therefore, the proposal clarifies
                the agencies' expectations that a firm address this risk by being able
                to provide timely transparency into the management of its U.S.
                derivatives and trading activities, including those originated from
                U.S. entities and booked directly into non-U.S. affiliates. A firm also
                should be able to assess the potential impact on the firm's clients and
                counterparties engaged in U.S. derivatives and trading activities and
                related risk transfer arrangements among and between the U.S. entities
                and non-U.S. affiliates.
                 Prime brokerage customer account transfers. The rapid withdrawal
                from a firm by U.S. prime brokerage clients can contribute to a
                disorderly resolution. The firm's resolution plan should address the
                risk that during a resolution, the firm's U.S. prime brokerage clients
                may seek to withdraw or transfer customer accounts balances in rates
                significantly higher than normal business conditions. The proposed
                guidance confirms that a firm should have the capabilities to
                facilitate the orderly transfer of U.S. prime brokerage account
                balances \44\ to peer prime brokers and describes the agencies' related
                expectations in greater detail. In particular, the proposed guidance
                clarifies that a firm's U.S. resolution plan should describe and
                demonstrate its ability to segment and analyze the quality and
                composition of such account balances.
                ---------------------------------------------------------------------------
                 \44\ ``U.S. prime brokerage account'' or ``U.S. prime brokerage
                account balances'' should include the account positions and balances
                of a client of the U.S. prime brokerage business, regardless of
                where the positions or balances are booked.
                ---------------------------------------------------------------------------
                 Portfolio segmentation. The ability to identify quickly and
                reliably problematic derivatives positions and portfolios is critical
                to minimizing uncertainty and estimating resource needs to enable an
                orderly resolution of the firm's U.S. entities. The proposal confirms
                that a firm should have the capabilities to produce analyses that
                reflect granular portfolio segmentation, taking into account trade-
                level characteristics and at an entity level, for any derivatives
                portfolio of a U.S. entity.
                 Derivatives stabilization and de-risking strategy. A key risk to
                the orderly resolution of the firm's U.S. entities is a volatile and
                risky derivatives portfolio. In the event of material financial
                distress or failure, the resolvability risks related to a firm's U.S.
                derivatives and trading activities could be a key obstacle to the
                firm's rapid and orderly resolution of any U.S. IHC subsidiary with a
                derivatives portfolio. The firms' resolution plans should address this
                obstacle. The proposed guidance confirms that a firm's plan should
                provide a detailed analysis of its strategy to stabilize and de-risk
                any derivatives portfolio of any U.S. IHC subsidiary that continues to
                operate after the U.S. IHC enters into a U.S. bankruptcy proceeding
                (U.S. derivatives strategy) and provides additional detail regarding
                the agencies' expectations.\45\
                [[Page 15459]]
                In particular, the proposed guidance clarifies that a firm should
                incorporate into its U.S. derivatives strategy assumptions consistent
                with a lack of access to the bilateral OTC derivatives market at the
                start of its resolution period. The proposed guidance also confirms and
                clarifies expectations related to other elements that should be
                addressed in the firm's analysis of its U.S. derivatives strategy,
                including the incorporation of resource needs into its RLEN and RCEN
                estimates (forecasts of resource needs); an analysis of any potential
                derivatives portfolio remaining after the resolution period (potential
                residual derivatives portfolio); a method to apply sensitivity analyses
                to the key drivers of the derivatives-related costs and liquidity flows
                under its U.S. derivatives strategy (sensitivity analysis); and the
                impact from the assumed failure of a U.S. IHC subsidiary with a
                derivatives portfolio (non-surviving entity analysis).
                ---------------------------------------------------------------------------
                 \45\ Subject to certain constraints, a firm's U.S. derivatives
                strategy may take the form of a going concern strategy, an
                accelerated de-risking strategy (e.g., active wind-down), or an
                alternative, third strategy so long as the firm's U.S. resolution
                plan supports adequately the firm's ability to execute the chosen
                strategy.
                 Question [ ]: Should the proposed guidance incorporate a set of
                criteria explaining the circumstances under which the expectations
                related to derivatives and trading activities apply to firms that
                would be Specified FBOs under the proposed guidance? If so, what
                criteria would be the most relevant indicators of a derivatives and
                trading portfolio that may pose risks to the orderly resolution of a
                firm? For example, should the agencies consider some or all of the
                following indicia: being a foreign GSIB subject to U.S. Internal
                TLAC requirements, having an identified critical operation or a core
                business line related to U.S. derivatives and trading activities, or
                other indicia?
                 Question [ ]: Is the proposed guidance sufficiently clear with
                respect to the following concepts: U.S. derivatives and trading
                activities, activities originated from U.S. entities, risk transfer
                arrangements, and U.S. prime brokerage accounts? What additional
                clarifications or alternatives concerning the proposed derivatives
                and trading practices framework or its elements, if any, should the
                agencies consider?
                 Question [ ]: Is the proposed guidance sufficiently clear
                concerning the scope of expectations related to the Booking
                Practices and U.S. Activities Monitoring subsections? Should the
                agencies consider applying a different scope of expectations for
                these subsections? For instance, should the scope of these
                subsections only include U.S. derivatives activities, instead of
                both U.S. derivatives and trading activities (e.g., securities
                financing transactions)? If so, what should be the basis for such
                differing expectations, and what additional clarifications or
                alternatives should the agencies consider?
                 Question [ ]: Is the proposed guidance sufficiently clear
                concerning the scope of expectations related to the Prime Brokerage
                Customer Account Transfers subsection? Should the agencies consider
                applying a different scope of expectations for this subsection? For
                instance, should the scope of this subsection only apply to account
                positions and balances that are booked into U.S. IHC subsidiaries?
                If so, what should be the basis for such differing expectations, and
                what additional clarifications or alternatives should the agencies
                consider?
                 Question [ ]: Is the proposed guidance sufficiently clear
                concerning the scope of expectations related to the Portfolio
                Segmentation subsection? Should the agencies consider applying a
                different scope of expectations for this subsection? For instance,
                should the scope of this subsection only apply to U.S. IHC
                subsidiaries with a derivatives portfolio, instead of both U.S. IHC
                subsidiaries and U.S. material entity branches with a derivatives
                portfolio? If so, what should be the basis for such differing
                expectations, and what additional clarifications or alternatives
                should the agencies consider?
                Format and Structure of Plans
                 This section has been added to the proposed guidance as part of the
                consolidation of the prior guidance with the proposed guidance. The
                proposed guidance states the agencies' preferred presentation regarding
                the format, assumptions, and structure of resolution plans. Plans
                should contain an executive summary, a narrative of the firm's
                resolution strategy, relevant technical appendices, and a public
                section as detailed in the Rule. The proposed format, structure, and
                assumptions are similar to those incorporated into the 2019 domestic
                guidance.
                 Question [*]: Do the topics in the proposed guidance discussed
                above represent the key vulnerabilities of the Specified FBOs in
                resolution? If not, what key vulnerabilities are not captured?
                 Question [*]: The proposal incorporates portions of, and is
                generally aligned with, the 2018 FBO guidance and components of the
                2019 domestic guidance. Are there any components of the proposal
                that should be augmented or removed? If so, which provisions? Are
                there any elements of the proposed guidance that are not relevant to
                the Specified FBOs? If such is the case, commenters are invited to
                explain in detail and provide evidence to support their views.
                Consolidation of Prior Guidance
                 In addition to the 2018 FBO guidance, the agencies have also issued
                and provided to certain FBOs: The Guidance for 2013 Sec. 165(d) Annual
                Resolution Plan Submissions by Foreign-Based Covered Companies that
                Submitted Initial Resolution Plans in 2012; firm-specific feedback
                letters issued in 2014 and 2018; the February 2015 staff communication
                regarding the 2016 plan submissions; and the July 2017 Resolution Plan
                Frequently Asked Questions (taken together, ``Prior Guidance''). The
                agencies are proposing to consolidate all Prior Guidance into a single
                document, which would provide the public with one source of applicable
                guidance to which to refer. Under the proposal, Prior Guidance would be
                superseded to the extent not incorporated in or appended to the
                guidance.
                 Question [*]: The proposed guidance reflects consolidation of
                all applicable Prior Guidance. Should the Agencies consolidate all
                applicable Prior Guidance? If so, are there additional aspects of
                Prior Guidance that warrant inclusion, additional clarification, or
                modification?
                Identified Critical Operations
                 In the 2019 revisions, the agencies adopted a new definition,
                ``identified critical operations,'' to clarify that critical operations
                can be identified by either a covered company or jointly identified by
                the agencies.\46\ The agencies are proposing to incorporate this new
                definition throughout the proposed guidance where, previously, the term
                ``critical operations'' was used. This modification does not change the
                substance of the proposed guidance.
                ---------------------------------------------------------------------------
                 \46\ 84 FR 59210; 59218.
                ---------------------------------------------------------------------------
                IV. Paperwork Reduction Act
                 Certain provisions of the proposal contain ``collection of
                information'' requirements within the meaning of the Paperwork
                Reduction Act of 1995 (44 U.S.C. 3501-3521) (``PRA''). In accordance
                with the requirements of the PRA, the agencies may not conduct or
                sponsor, and a respondent is not required to respond to, an information
                collection unless it displays a currently valid Office of Management
                and Budget (``OMB'') control number.
                 As detailed above, the proposal is largely consistent with the 2018
                FBO guidance. The proposed changes are mainly in the areas of
                derivatives and trading activities and payment, clearing and settlement
                activities. After considering these proposed changes and any potential
                PRA impacts, the agencies have determined that, generally, the proposal
                would not revise the reporting requirements that have been previously
                cleared by the OMB under the Board's control number (7100-0346) and
                under the FDIC's control number (3064-0210). However, as a result of
                the proposed guidance, for purposes of the PRA analysis, one covered
                company currently categorized in the 2019 revisions as a triennial full
                complex foreign filer would be re-categorized as a triennial full
                foreign filer. Because of the nature of the split in burden between the
                Board and the FDIC, the FDIC will make an adjustment to its PRA
                clearance (3064-0210) to account
                [[Page 15460]]
                for the one-firm shift in category. The proposal would not add any
                recordkeeping or third-party disclosure requirements under the PRA. The
                agencies invite public comment on this assessment.
                 Comments are invited on:
                 (a) Whether the collections of information are necessary for the
                proper performance of the Board's and the FDIC's functions, including
                whether the information has practical utility;
                 (b) The accuracy of the estimate of the burden of the information
                collections, including the validity of the methodology and assumptions
                used;
                 (c) Ways to enhance the quality, utility, and clarity of the
                information to be collected;
                 (d) Ways to minimize the burden of information collections on
                respondents, including through the use of automated collection
                techniques or other forms of information technology;
                 (e) Estimates of capital or start-up costs and costs of operation,
                maintenance, and purchase of services to provide information; and
                 (f) Burden estimates for preparation of the waiver request and the
                calculation of any associated reduction in burden.
                V. Text of the Proposed Guidance
                Guidance for Resolution Plan Submissions of Certain Foreign-Based
                Covered Companies
                I. Introduction
                II. Capital
                 a. Resolution Capital Adequacy and Positioning (RCAP)
                 b. Resolution Capital Execution Need (RCEN)
                III. Liquidity
                 a. Capabilities
                 b. Resolution Adequacy and Positioning (RLAP)
                 c. Resolution Liquidity Execution Need (RLEN)
                IV. Governance Mechanisms
                 a. Playbooks, Foreign Parent Support, and Triggers
                 b. Support Within the United States
                V. Operational
                 a. Payment, Clearing and Settlement Activities
                 b. Managing, Identifying, and Valuing Collateral
                 c. Management Information Systems
                 d. Shared and Outsourced Services
                 e. Qualified Financial Contracts
                VI. Branches
                VII. Group Resolution Plan
                VIII. Legal Entity Rationalization and Separability
                IX. Derivatives and Trading Activities
                X. Format and Structure of Plans
                XI. Public Section
                 Appendix: Frequently Asked Questions
                Guidance for Resolution Plan Submissions of Certain Foreign-based
                Covered Companies
                I. Introduction
                 Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer
                Protection Act (12 U.S.C. 5365(d)) requires certain foreign-based
                financial companies to report periodically to the Board of Governors of
                the Federal Reserve System (the Federal Reserve or Board) and the
                Federal Deposit Insurance Corporation (the FDIC) (together the
                Agencies) their plans for rapid and orderly resolution in the event of
                material financial distress or failure. On November 1, 2011, the
                Agencies promulgated a joint rule implementing the provisions of
                Section 165(d).\1\ Subsequently, in November 2019, the Agencies
                finalized amendments to the joint rule addressing amendments to the
                Dodd-Frank Act made by the Economic Growth, Regulatory Relief, and
                Consumer Protection Act and improving certain aspects of the joint rule
                based on the Agencies' experience implementing the joint rule since its
                adoption.\2\ Financial companies meeting criteria set out in the Rule
                must file a resolution plan (Plan) according to the schedule specified
                in the Rule.
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                 \1\ 76 FR 67323 (November 1, 2011), codified at 12 CFR parts 243
                and 381.
                 \2\ Resolution Plans Required, 84 FR 59194 (November 1, 2019).
                The amendments became effective December 31, 2019. ``Rule'' means
                the joint rule as amended in 2019. Capitalized terms not defined
                herein have the meanings set forth in the Rule.
                ---------------------------------------------------------------------------
                 This document is intended to provide guidance to certain foreign
                banking organizations regarding development of their respective U.S.
                resolution strategies (Specified FBOs or firms). Specifically, the
                guidance applies to FBOs that are triennial full filers \3\ and whose
                intermediate holding companies required to be formed pursuant to 12 CFR
                252 have a method 2 GSIB score of 250 or more. The document is intended
                to assist these firms in further developing their U.S. resolution
                strategies. The document does not have the force and effect of law.
                Rather, it describes the Agencies' expectations and priorities
                regarding these firms' Plans and the Agencies' general views regarding
                specific areas where additional detail should be provided and where
                certain capabilities or optionality should be developed and maintained
                to demonstrate that each firm has considered fully, and is able to
                mitigate, obstacles to the successful implementation of their U.S.
                resolution strategy.\4\
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                 \3\ See 12 CFR 243.4(b)(1); 12 CFR 381.4(b)(1).
                 \4\ This guidance consolidates the Guidance for 2018 Sec.
                165(d) Annual Resolution Plan Submissions by Foreign-Based Covered
                Companies that Submitted Resolution Plans in July 2015; the July
                2017 Resolution Plan Frequently Asked Questions; feedback letters
                issued to certain foreign-based Covered Companies in December 2018
                and in August 2014; the communications the Agencies made to certain
                foreign-based Covered Companies in February 2015; and the Guidance
                for 2013 Sec. 165(d) Annual Resolution Plan Submissions by Foreign-
                Based Covered Companies that Submitted Initial Resolution Plans in
                2012 (taken together, prior guidance). To the extent not
                incorporated in or appended to this guidance, prior guidance is
                superseded.
                ---------------------------------------------------------------------------
                 The Agencies are providing guidance to the Specified FBOs to assist
                their further development of a resolution plan for their U.S.
                operations for their July 1, 2021 and subsequent resolution plan
                submissions.\5\ The guidance for Specified FBOs differs in certain
                respects from the guidance issued in December 2018 for certain U.S.-
                based covered companies given the circumstances under which a U.S.
                resolution plan is most likely to be relevant. The U.S. resolution plan
                for a Specified FBO would address a scenario where the U.S. operations
                experience material financial distress and the foreign parent is unable
                or unwilling to provide sufficient financial support for the
                continuation of U.S. operations, and at least the top tier U.S.
                Intermediate Holding Company (U.S. IHC) files for Chapter 11
                bankruptcy. Under such a scenario, the Plan should provide for the
                rapid and orderly resolution of the Specified FBO's U.S. material
                entities and operations.
                ---------------------------------------------------------------------------
                 \5\ Consistent with prior communications to the firms that would
                be Specified FBOs under the proposed guidance, they are required to
                submit resolution plans on or before July 1, 2020 that may be
                limited to describing changes that those FBOs have made to their
                July 2018 resolution plans to address shortcomings identified in
                those resolution plans.
                ---------------------------------------------------------------------------
                 In general, this document is organized around a number of key
                vulnerabilities in resolution (e.g., capital; liquidity; governance
                mechanisms; operational; legal entity rationalization and separability;
                and derivatives and trading activities) that apply across resolution
                plans. Additional vulnerabilities or obstacles may arise based on a
                firm's particular structure, operations, or resolution strategy. Each
                firm is expected to satisfactorily address these vulnerabilities in its
                Plan--e.g., by developing sensitivity analysis for certain underlying
                assumptions, enhancing capabilities, providing detailed analysis, or
                increasing optionality development, as indicated below.
                 The Agencies will review the Plan to determine if it satisfactorily
                addresses
                [[Page 15461]]
                key potential vulnerabilities, including those detailed below. If the
                Agencies jointly decide that these matters are not satisfactorily
                addressed in the Plan, the Agencies may determine jointly that the Plan
                is not credible or would not facilitate an orderly resolution under the
                U.S. Bankruptcy Code.
                II. Capital
                 Resolution Capital Adequacy and Positioning (RCAP): In order to
                help ensure that a firm's U.S. non-branch material entities \6\ could
                be resolved in an orderly manner, the firm's U.S. IHC should have an
                adequate amount of loss-absorbing capacity to execute its U.S.
                resolution strategy. Thus, a firm's U.S. IHC should hold total loss-
                absorbing capital, as well as long-term debt, to help ensure that the
                firm has adequate capacity to meet that need at a consolidated level of
                the U.S. IHC (IHC TLAC).\7\
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                 \6\ The terms ``material entities,'' ``identified critical
                operations,'' and ``core business lines'' have the same meaning as
                in the Rule. The term ``U.S. material entity'' means any subsidiary,
                branch, or agency that is a material entity and is domiciled in the
                United States. The term ``U.S. non-branch material entity'' means a
                material entity organized or incorporated in the U.S. including, in
                all cases, the U.S. IHC. The term ``U.S. IHC subsidiaries'' means
                all U.S. non-branch material entities other than the U.S. IHC.
                 \7\ Total Loss-Absorbing Capacity, Long-Term Debt, and Clean
                Holding Company Requirements for Systemically Important U.S. Bank
                Holding Companies and Intermediate Holding Companies of Systemically
                Important Foreign Banking Organizations, 82 FR 8266 (January 24,
                2017).
                ---------------------------------------------------------------------------
                 A firm's IHC TLAC should be complemented by appropriate positioning
                of that loss-absorbing capacity between the U.S. IHC and the U.S. IHC
                subsidiaries. The positioning of a firm's IHC TLAC should balance the
                certainty associated with pre-positioning internal TLAC directly at
                U.S. IHC subsidiaries with the flexibility provided by holding
                recapitalization resources at the U.S. IHC (contributable resources) to
                meet unanticipated losses at the U.S. IHC subsidiaries. That balance
                should take account of both pre-positioning at U.S. IHC subsidiaries
                and holding resources at the U.S. IHC, and the obstacles associated
                with each. The firm should not rely exclusively on either full pre-
                positioning or U.S. IHC contributable resources to execute its U.S.
                resolution strategy, unless it has only one U.S. IHC subsidiary that is
                an operating subsidiary. The plan should describe the positioning of
                internal TLAC among the U.S. IHC and the U.S. IHC subsidiaries, along
                with analysis supporting such positioning.
                 Finally, to the extent that pre-positioned internal TLAC at a U.S.
                IHC subsidiary is in the form of intercompany debt and there are one or
                more entities between the lender and the borrower, the firm should
                structure the instruments so as to ensure that the U.S. IHC subsidiary
                can be recapitalized.
                 Resolution Capital Execution Need (RCEN): To the extent required by
                the firm's U.S. resolution strategy, U.S. non-branch material entities
                need to be recapitalized to a level that allows for an orderly
                resolution. The firm should have a methodology for periodically
                estimating the amount of capital that may be needed to support each
                U.S. IHC subsidiary after the U.S. IHC bankruptcy filing (RCEN). The
                firm's positioning of IHC TLAC should be able to support the RCEN
                estimates.
                 The firm's RCEN methodology should use conservative forecasts for
                losses and risk-weighted assets and incorporate estimates of potential
                additional capital needs through the resolution period,\8\ consistent
                with the firm's resolution strategy for its U.S. operations. The
                methodology is not required to produce aggregate losses that are
                greater than the amount of IHC TLAC that would be required for the firm
                under the Board's final rule.\9\ The RCEN methodology should be
                calibrated such that recapitalized U.S. IHC subsidiaries have
                sufficient capital to maintain market confidence as required under the
                U.S resolution strategy. Capital levels should meet or exceed all
                applicable regulatory capital requirements for ``well-capitalized''
                status and meet estimated additional capital needs throughout
                resolution. U.S. IHC subsidiaries that are not subject to capital
                requirements may be considered sufficiently recapitalized when they
                have achieved capital levels typically required to obtain an
                investment-grade credit rating or, if the entity is not rated, an
                equivalent level of financial soundness. Finally, the methodology
                should be independently reviewed, consistent with the firm's corporate
                governance processes and controls for the use of models and
                methodologies.
                ---------------------------------------------------------------------------
                 \8\ The resolution period begins immediately after the U.S. IHC
                bankruptcy filing and extends through the completion of the U.S.
                resolution strategy.
                 \9\ 82 FR 8266 (January 24, 2017).
                ---------------------------------------------------------------------------
                III. Liquidity
                 The firm should have the liquidity capabilities necessary to
                execute its U.S resolution strategy, including those described below.
                For resolution purposes, these capabilities should include having an
                appropriate model and process for estimating and maintaining sufficient
                liquidity at--or readily available from the U.S. IHC to--U.S. IHC
                subsidiaries, and a methodology for estimating the liquidity needed to
                successfully execute the U.S. resolution strategy, as described below.
                 Capabilities: A firm is expected to have a comprehensive
                understanding of funding sources, uses, and risks at material entities
                and identified critical operations, including how funding sources may
                be affected under stress. For example, a firm should have and describe
                its capabilities to:
                 Evaluate the funding requirements necessary to perform
                identified critical operations, including shared and outsourced
                services and access to financial market utilities (FMUs); \10\
                ---------------------------------------------------------------------------
                 \10\ 12 CFR 252.156(g)(3).
                ---------------------------------------------------------------------------
                 Monitor liquidity reserves and relevant custodial
                arrangements by jurisdiction and material entity; \11\
                ---------------------------------------------------------------------------
                 \11\ 12 CFR 252.156(g)(2).
                ---------------------------------------------------------------------------
                 Routinely test funding and liquidity outflows and inflows
                for U.S. non-branch material entities at the legal entity level under a
                range of adverse stress scenarios, taking into account the effect on
                intra-day, overnight, and term funding flows between affiliates and
                across jurisdictions;
                 Assess existing and potential restrictions on the transfer
                of liquidity between U.S. non-branch material entities; \12\ and
                ---------------------------------------------------------------------------
                 \12\ Id.
                ---------------------------------------------------------------------------
                 Develop contingency strategies to maintain funding for
                U.S. non-branch material entities and identified critical operations in
                the event of a disruption in the Specified FBO's current funding
                model.\13\
                ---------------------------------------------------------------------------
                 \13\ 12 CFR 252.156(e).
                ---------------------------------------------------------------------------
                 Resolution Liquidity Adequacy and Positioning (RLAP): With respect
                to RLAP, the firm should be able to measure the stand-alone liquidity
                position of each U.S. non-branch material entity--i.e., the high-
                quality liquid assets (HQLA) at the U.S. non-branch material entity
                less net outflows to third parties and affiliates--and ensure that
                liquidity is readily available to meet any deficits. The RLAP model
                should cover a period of at least 30 days and reflect the idiosyncratic
                liquidity profile of the U.S. IHC and risk of each U.S. IHC subsidiary.
                The model should balance the reduction in frictions associated with
                holding liquidity directly at the U.S. IHC subsidiary with the
                flexibility provided by holding HQLA at the U.S. IHC or at a U.S. IHC
                subsidiary available to meet unanticipated outflows at other U.S. IHC
                subsidiaries.\14\ The firm should not
                [[Page 15462]]
                rely exclusively on either full pre-positioning or U.S. IHC
                contributable resources to execute its U.S. resolution strategy, unless
                it has only one U.S. IHC subsidiary that is an operating subsidiary.
                ---------------------------------------------------------------------------
                 \14\ To the extent HQLA is held at the U.S. IHC or at a U.S. IHC
                subsidiary, the model must consider whether such funds are freely
                available. To be freely available, the HQLA must be free of legal,
                regulatory, contractual, and other restrictions on the ability of
                the material entity to liquidate, sell, or transfer the asset.
                ---------------------------------------------------------------------------
                 The model \15\ should ensure that on a consolidated basis the U.S.
                IHC holds sufficient HQLA to cover net liquidity outflows of the U.S.
                non-branch material entities. The model should also measure the stand-
                alone net liquidity positions of each U.S. non-branch material entity.
                The stand-alone net liquidity position of each U.S. non-branch material
                entity (HQLA less net outflows) should be measured using the firm's
                internal liquidity stress test assumptions and should treat inter-
                affiliate exposures in the same manner as third-party exposures. For
                example, an overnight unsecured exposure to a non-U.S. affiliate should
                be assumed to mature. Finally, the firm should not assume that a net
                liquidity surplus at any U.S. IHC subsidiary that is a depository
                institution could be moved to meet net liquidity deficits at an
                affiliate, or to augment U.S. IHC resources, consistent with Regulation
                W.
                ---------------------------------------------------------------------------
                 \15\ ``Model'' refers to the set of calculations required by
                Regulation YY that estimate the U.S. IHC's liquidity position.
                ---------------------------------------------------------------------------
                 Additionally, the RLAP methodology should take into account for
                each of the U.S. IHC, U.S. IHC subsidiaries, and any branch that is a
                material entity (A) the daily contractual mismatches between their
                respective inflows and outflows; (B) their respective daily flows from
                movement of cash and collateral for all inter-affiliate transactions;
                and (C) their respective daily stressed liquidity flows and trapped
                liquidity as a result of actions taken by clients, counterparties, key
                FMUs, and foreign supervisors, among others.
                 In calculating its RLAP estimate, the U.S. IHC should calculate its
                liquidity position with respect to its foreign parent, branches and
                agencies, and other affiliates (together, affiliates) separately from
                its liquidity position with respect to third parties, and should not
                offset inflows from affiliated parties against outflows to external
                parties. In addition, a U.S. IHC should use cash-flow sources from its
                affiliates to offset cash-flow needs of its affiliates only to the
                extent that the term of the cash-flow source from its affiliates is the
                same as, or shorter than, the term of the cash-flow need of its
                affiliates.\16\
                ---------------------------------------------------------------------------
                 \16\ The U.S. IHC should calculate its cash-flow sources from
                its affiliates consistent with the net internal stressed cash-flow
                need calculation in Sec. 252.157(c)(2)(iv) of Regulation YY.
                ---------------------------------------------------------------------------
                 Resolution Liquidity Execution Need (RLEN): The firm should have a
                methodology for estimating the liquidity needed after the U.S. IHC's
                bankruptcy filing to stabilize any surviving U.S. IHC subsidiaries and
                to allow those entities to operate post-filing, in accordance with the
                U.S. strategy.
                 The firm's RLEN methodology should:
                 (A) Estimate the minimum operating liquidity (MOL) needed at
                each U.S. IHC subsidiary to ensure those entities could continue to
                operate, to the extent relied upon in the U.S. resolution strategy,
                after implementation of the U.S. resolution strategy and/or to
                support a wind-down strategy;
                 (B) Provide daily cash flow forecasts by U.S. IHC subsidiary to
                support estimation of peak funding needs to stabilize each entity
                under resolution;
                 (C) Provide a comprehensive breakout of all inter-affiliate
                transactions and arrangements that could impact the MOL or peak
                funding needs estimates for the U.S. IHC subsidiaries; and
                 (D) Estimate the minimum amount of liquidity required at each
                U.S. IHC subsidiary to meet the MOL and peak needs noted above,
                which would inform the provision of financial resources from the
                foreign parent to the U.S. IHC, or if the foreign parent is unable
                or unwilling to provide such financial support, any preparatory
                resolution-related actions.
                 The MOL estimates should capture U.S. IHC subsidiaries' intraday
                liquidity requirements, operating expenses, working capital needs, and
                inter-affiliate funding frictions to ensure that U.S. IHC subsidiaries
                could operate without disruption during the resolution.
                 The peak funding needs estimates should be projected for each U.S.
                IHC subsidiary and cover the length of time the firm expects it would
                take to stabilize that U.S. IHC subsidiary. Inter-affiliate funding
                frictions should be taken into account in the estimation process.
                 The firm's forecasts of MOL and peak funding needs should ensure
                that U.S. IHC subsidiaries could operate through resolution consistent
                with regulatory requirements, market expectations, and the firm's post-
                failure strategy. These forecasts should inform the RLEN estimate,
                i.e., the minimum amount of HQLA required to facilitate the execution
                of the firm's strategy for the U.S. IHC subsidiaries.
                 For nonsurviving U.S. IHC subsidiaries, the firm should provide
                analysis and an explanation of how the material entity's resolution
                could be accomplished within a reasonable period of time and in a
                manner that substantially mitigates the risk of serious adverse effects
                on U.S. financial stability. For example, if a U.S. IHC subsidiary that
                is a broker-dealer is assumed to fail and enter resolution under the
                Securities Investor Protection Act (SIPA), the firm should provide an
                analysis of the potential impacts on funding and asset markets and on
                prime brokerage clients, bearing in mind the objective of an orderly
                resolution.
                IV. Governance Mechanisms
                 A firm should identify the governance mechanisms that would ensure
                that communication and coordination occurs between the boards of the
                U.S. IHC or a U.S. IHC subsidiary and the foreign parent to facilitate
                the provision of financial support, or if not forthcoming, any
                preparatory resolution-related actions to facilitate an orderly
                resolution.
                 Playbooks, Foreign Parent Support, and Triggers: Governance
                playbooks should detail the board and senior management actions of U.S.
                non-branch material entities that would be needed under the firm's U.S.
                resolution strategy. The governance playbooks should also include a
                discussion of (A) the firm's proposed U.S. communications strategy,
                both internal and external; \17\ (B) the fiduciary responsibilities of
                the applicable board(s) of directors or other similar governing bodies
                and how planned actions would be consistent with such responsibilities
                applicable at the time actions are expected to be taken; (C) potential
                conflicts of interest, including interlocking boards of directors; (D)
                any employee retention policy; and (E) any other limitations on the
                authority of the U.S. IHC and the U.S. IHC subsidiary boards and senior
                management to implement the U.S. resolution strategy. All responsible
                parties and timeframes for action should be identified. Governance
                playbooks should be updated periodically for each entity whose
                governing body would need to act under the firm's U.S. resolution
                strategy.
                ---------------------------------------------------------------------------
                 \17\ External communications include those with U.S. and foreign
                authorities and other external stakeholders.
                ---------------------------------------------------------------------------
                 In order to meet liquidity needs at the U.S. non-branch material
                entities, the firm may either fully pre-position liquidity in the U.S.
                non-branch material entities or develop a mechanism for planned foreign
                parent support, of any amount not pre-positioned, for the successful
                execution of the U.S. strategy. Mechanisms to
                [[Page 15463]]
                support readily available liquidity may include a term liquidity
                facility between the U.S. IHC and the foreign parent that can be drawn
                as needed and as informed by the firm's RLEN estimates and liquidity
                positioning. The plan should include analysis of how the U.S. IHC/
                foreign parent facility is funded or buffered for by the foreign
                parent. The sufficiency of the liquidity should be informed by the
                firm's RLAP and RLEN estimates for the U.S. non-branch material
                entities. Additionally, the plan should include analysis of the
                potential challenges to the planned foreign parent support mechanism
                and associated mitigants. Where applicable, the analysis should discuss
                applicable non-U.S. law and cross-border legal challenges (e.g.,
                challenges related to enforcing contracts governed by foreign law). The
                analysis should identify the mitigant(s) to such challenges that the
                firm considers most effective.
                 The firm should be prepared to increase communication and
                coordination at the appropriate time in order to mitigate financial,
                operational, legal, and regulatory vulnerabilities. To facilitate this
                communication and coordination, the firm should establish clearly
                identified triggers linked to specific actions for:
                 (A) The escalation of information to U.S. senior management,
                U.S. risk committee and U.S. governing bodies to potentially take
                the corresponding actions as the U.S. operations experience material
                financial distress, leading eventually to the decision to implement
                the U.S. resolution strategy.
                 i. Triggers should identify when and under what conditions the
                U.S. material entities would transition from business-as-usual
                conditions to a stress period.
                 ii. Triggers should also take into consideration changes in the
                foreign parent's condition from business-as-usual conditions through
                resolution.
                 (B) The escalation of information to and discussions with the
                appropriate governing bodies to confirm whether the governing bodies
                are able and willing to provide financial resources to support U.S.
                operations.
                 i. Triggers should be based on the firm's methodology for
                forecasting the liquidity and capital needed to facilitate the U.S.
                strategy. For example, triggers may be established that reflect U.S.
                non-branch material entities' financial resources approaching RCEN/
                RLEN estimates, with corresponding actions to confirm the foreign
                parent's financial capability and willingness to provide sufficient
                support.
                 Corresponding escalation procedures, actions, and timeframes should
                be constructed so that breach of the triggers will allow prerequisite
                actions to be completed. For example, breach of the triggers needs to
                occur early enough to provide for communication, coordination, and
                confirmation of the provision of resources from the foreign parent.
                 Support Within the United States: If the plan provides for the
                provision of capital and liquidity by a U.S. material entity (e.g., the
                U.S. IHC) to its U.S. affiliates prior to the U.S. IHC's bankruptcy
                filing (Support), the plan should also include a detailed legal
                analysis of the potential state law and bankruptcy law challenges and
                mitigants to providing the Support. Specifically, the analysis should
                identify potential legal obstacles and explain how the firm would seek
                to ensure that Support would be provided as planned. Legal obstacles
                include claims of fraudulent transfer, preference, breach of fiduciary
                duty, and any other applicable legal theory identified by the firm. The
                analysis also should include related claims that may prevent or delay
                an effective recapitalization, such as equitable claims to enjoin the
                transfer (e.g., imposition of a constructive trust by the court). The
                analysis should apply the actions contemplated in the plan regarding
                each element of the claim, the anticipated timing for commencement and
                resolution of the claims, and the extent to which adjudication of such
                claim could affect execution of the firm's U.S. resolution strategy.
                The analysis should include mitigants to the potential challenges to
                the planned Support. The plan should identify the mitigant(s) to such
                challenges that the firm considers most effective.
                 Furthermore, the plan should describe key motions to be filed at
                the initiation of any bankruptcy proceeding related to (as appropriate)
                asset sales and other non-routine matters.
                V. Operational
                Payment, Clearing, and Settlement Activities
                 Framework. Maintaining continuity of payment, clearing, and
                settlement (PCS) services is critical for the orderly resolution of
                firms that are either users or providers,\18\ or both, of PCS services.
                A firm should demonstrate capabilities for continued access to PCS
                services essential to an orderly resolution under its U.S. resolution
                strategy through a framework to support such access by:
                ---------------------------------------------------------------------------
                 \18\ A firm is a user of PCS services if it accesses PCS
                services through an agent bank or it uses the services of an FMU
                through its membership in that FMU or through an agent bank. A firm
                is a provider of PCS services if it provides PCS services to clients
                as an agent bank or it provides clients with access to an FMU or
                agent bank through the firm's membership in or relationship with
                that service provider. A firm is also a provider if it provides
                clients with PCS services through the firm's own operations in the
                United States (e.g., payment services or custody services).
                ---------------------------------------------------------------------------
                 Identifying clients,\19\ FMUs, and agent banks as key from
                the firm's perspective for the firm's U.S. material entities,
                identified critical operations, and core business lines, using both
                quantitative (volume and value) \20\ and qualitative criteria;
                ---------------------------------------------------------------------------
                 \19\ For purposes of this section V, a client is an individual
                or entity, including affiliates of the firm, to whom the firm
                provides PCS services and, if credit or liquidity is offered, any
                related credit or liquidity offered in connection with those
                services.
                 \20\ In identifying entities as key, examples of quantitative
                criteria may include: for a client, transaction volume/value, market
                value of exposures, assets under custody, usage of PCS services, and
                if credit or liquidity is offered, any extension of related intraday
                credit or liquidity; for an FMU, the aggregate volumes and values of
                all transactions processed through such FMU; and for an agent bank,
                assets under custody, the value of cash and securities settled, and
                extensions of intraday credit.
                ---------------------------------------------------------------------------
                 Mapping U.S. material entities, identified critical
                operations, core business lines, and key clients of the firm's U.S.
                operations to both key FMUs and key agent banks; and
                 Developing a playbook for each key FMU and key agent bank
                essential to an orderly resolution under its U.S. resolution strategy
                that reflects the firm's role(s) as a user and/or provider of PCS
                services.
                 The framework should address both direct relationships (e.g., a
                firm's direct membership in an FMU, a firm's provision of clients with
                PCS services through its own operations in the United States, or a
                firm's contractual relationship with an agent bank) and indirect
                relationships (e.g., a firm's provision of clients with access to the
                relevant FMU or agent bank through the firm's membership in or
                relationship with that FMU or agent bank, or a firm's U.S. and non-U.S.
                affiliate and branch provision of U.S. material entities and key
                clients of the firm's U.S. operations with access to an FMU or agent
                bank). The framework also should address the potential impact of any
                disruption to, curtailment of, or termination of such direct and
                indirect relationships on the firm's U.S. material entities, identified
                critical operations, and core business lines, as well as any
                corresponding impact on key clients of the firm's U.S. operations.
                 Playbooks for Continued Access to PCS Services. The firm is
                expected to provide a playbook for each key FMU and key agent bank that
                addresses considerations that would assist the firm and key clients of
                the firm's U.S. operations in maintaining continued access to PCS
                services in the period leading up to and including the firm's
                resolution under its U.S. resolution
                [[Page 15464]]
                strategy. Each playbook should provide analysis of the financial and
                operational impact of adverse actions that may be taken by a key FMU or
                a key agent bank and contingency actions that may be taken by the firm.
                Each playbook also should discuss any possible alternative arrangements
                that would allow continued access to PCS services for the firm's U.S.
                material entities, identified critical operations and core business
                lines, and key clients of the firm's U.S. operations, while the firm is
                in resolution under its U.S. resolution strategy. The firm is not
                expected to incorporate a scenario in which it loses key FMU or key
                agent bank access into its U.S. resolution strategy or its RLEN and
                RCEN estimates. The firm should continue to engage with key FMUs, key
                agent banks, and key clients of the firm's U.S. operations, and
                playbooks should reflect any feedback received during such ongoing
                outreach.
                 Content Related to Users of PCS Services. Individual key FMU and
                key agent bank playbooks should include:
                 Descriptions of the firm's relationship as a user,
                including through indirect access, with the key FMU or key agent bank
                and the identification and mapping of PCS services to the firm's U.S.
                material entities, identified critical operations, and core business
                lines that use those PCS services;
                 Discussion of the potential range of adverse actions that
                may be taken by that key FMU or key agent bank when the firm is in
                resolution under its U.S. resolution strategy,\21\ the operational and
                financial impact of such actions on the firm's U.S. material entities,
                identified critical operations, and core business lines, and
                contingency arrangements that may be initiated by the firm in response
                to potential adverse actions by the key FMU or key agent bank; and
                ---------------------------------------------------------------------------
                 \21\ Examples of potential adverse actions may include increased
                collateral and margin requirements and enhanced reporting and
                monitoring.
                ---------------------------------------------------------------------------
                 Discussion of PCS-related liquidity sources and uses in
                business-as-usual (BAU), in stress, and in the resolution period,
                presented by currency type (with U.S. dollar equivalent) and by U.S.
                material entity.
                 [cir] PCS Liquidity Sources: These may include the amounts of
                intraday extensions of credit, liquidity buffer, inflows from FMU
                participants, and prefunded amounts of key clients of the firm's U.S.
                operations in BAU, in stress, and in the resolution period. The
                playbook also should describe intraday credit arrangements (e.g.,
                facilities of the key FMU, key agent bank, or a central bank) and any
                similar custodial arrangements that allow ready access to a firm's
                funds for PCS-related key FMU and key agent bank obligations (including
                margin requirements) in various currencies, including placements of
                firm liquidity at central banks, key FMUs, and key agent banks.
                 [cir] PCS Liquidity Uses: These may include margin and prefunding
                by the firm and key clients of the firm's U.S. operations, and intraday
                extensions of credit, including incremental amounts required during
                resolution.
                 [cir] Intraday Liquidity Inflows and Outflows: The playbook should
                describe the firm's ability to control intraday liquidity inflows and
                outflows and to identify and prioritize time-specific payments. The
                playbook also should describe any account features that might restrict
                the firm's ready access to its liquidity sources.
                 Content Related to Providers of PCS Services.\22\ Individual key
                FMU and key agent bank playbooks should include:
                ---------------------------------------------------------------------------
                 \22\ Where a firm is a provider of PCS services through the
                firm's own operations in the United States, the firm is expected to
                produce a playbook for the U.S. material entities that provide those
                services, addressing each of the items described under ``Content
                Related to Providers of PCS Services,'' which include contingency
                arrangements to permit the firm's key clients of the firm's U.S.
                operations to maintain continued access to PCS services.
                ---------------------------------------------------------------------------
                 Identification and mapping of PCS services to the firm's
                U.S. material entities, identified critical operations, and core
                business lines that provide those PCS services, and a description of
                the scale and the way in which each provides PCS services;
                 Identification and mapping of PCS services to key clients
                of the firm's U.S. operations to whom the firm's U.S. material
                entities, identified critical operations, and core business lines
                provide such PCS services and any related credit or liquidity offered
                in connection with such services;
                 Discussion of the potential range of firm contingency
                arrangements available to minimize disruption to the provision of PCS
                services to key clients of the firm's U.S. operations, including the
                viability of transferring activity and any related assets of key
                clients of the firm's U.S. operations, as well as any alternative
                arrangements that would allow the key clients of the firm's U.S.
                operations continued access to PCS services if the firm could no longer
                provide such access (e.g., due to the firm's loss of key FMU or key
                agent bank access), and the financial and operational impacts of such
                arrangements from the firm's perspective;
                 Descriptions of the range of contingency actions that the
                firm may take concerning its provision of intraday credit to key
                clients of the firm's U.S. operations, including analysis quantifying
                the potential liquidity the firm could generate by taking such actions
                in stress and in the resolution period, such as (i) requiring key
                clients of the firm's U.S. operations to designate or appropriately
                pre-position liquidity, including through prefunding of settlement
                activity, for PCS-related key FMU and key agent bank obligations at
                specific material entities of the firm (e.g., direct members of key
                FMUs) or any similar custodial arrangements that allow ready access to
                funds for such obligations in various currencies of key clients of the
                firm's U.S. operations; (ii) delaying or restricting PCS activity of
                key clients of the firm's U.S. operations; and (iii) restricting,
                imposing conditions upon (e.g., requiring collateral), or eliminating
                the provision of intraday credit or liquidity to key clients of the
                firm's U.S. operations; and
                 Descriptions of how the firm will communicate to key
                clients of the firm's U.S. operations the potential impacts of
                implementation of any identified contingency arrangements or
                alternatives, including a description of the firm's methodology for
                determining whether any additional communication should be provided to
                some or all key clients of the firm's U.S. operations (e.g., due to BAU
                usage of that access and/or related intraday credit or liquidity of the
                key client of the firm's U.S. operations), and the expected timing and
                form of such communication.
                 Capabilities. Firms are expected to have and describe capabilities
                to understand, for each U.S. material entity, its obligations and
                exposures associated with PCS activities, including contractual
                obligations and commitments. For example, firms should be able to:
                 Track the following items by U.S. material entity and,
                with respect to customers, counterparties, and agents and service
                providers, by location/jurisdiction:
                 [cir] PCS activities, with each activity mapped to the relevant
                material entities and core business lines;\23\
                ---------------------------------------------------------------------------
                 \23\ 12 CFR 243.5(e)(12); 12 CFR 381.5(e)(12).
                ---------------------------------------------------------------------------
                 [cir] Customers and counterparties for PCS activities, including
                values and volumes of various transaction types, as well as used and
                unused capacity for all lines of credit; \24\
                ---------------------------------------------------------------------------
                 \24\ Id.
                ---------------------------------------------------------------------------
                [[Page 15465]]
                 [cir] Exposures to and volumes transacted with FMUs, Nostro agents,
                and custodians; and \25\
                ---------------------------------------------------------------------------
                 \25\ 12 CFR 252.156(g).
                ---------------------------------------------------------------------------
                 [cir] Services provided and service level agreements for other
                current agents and service providers (internal and external).\26\
                ---------------------------------------------------------------------------
                 \26\ 12 CFR 243.5(f)(l)(i); 12 CFR 381.5(f)(1)(i).
                ---------------------------------------------------------------------------
                 Assess the potential effects of adverse actions by FMUs,
                Nostro agents, custodians, and other agents and service providers,
                including suspension or termination of membership or services, on the
                firm's U.S. operations and customers and counterparties of those U.S.
                operations; \27\
                ---------------------------------------------------------------------------
                 \27\ 12 CFR 252.156(e).
                ---------------------------------------------------------------------------
                 Develop contingency arrangements in the event of such
                adverse actions; \28\ and
                ---------------------------------------------------------------------------
                 \28\ Id.
                ---------------------------------------------------------------------------
                 Quantify the liquidity needs and operational capacity
                required to meet all PCS obligations, including any change in demand
                for and sources of liquidity needed to meet such obligations.
                 Managing, Identifying, and Valuing Collateral: The firm is expected
                to have and describe its capabilities to manage, identify, and value
                the collateral that the U.S. non-branch material entities receive from
                and post to external parties and affiliates. Specifically, the firm
                should:
                 Be able to query and provide aggregate statistics for all
                qualified financial contracts concerning cross-default clauses,
                downgrade triggers, and other key collateral-related contract terms--
                not just those terms that may be impacted in an adverse economic
                environment--across contract types, business lines, legal entities, and
                jurisdictions;
                 Be able to track both firm collateral sources (i.e.,
                counterparties that have pledged collateral) and uses (i.e.,
                counterparties to whom collateral has been pledged) at the CUSIP level
                on at least a t+1 basis;
                 Have robust risk measurements for cross-entity and cross-
                contract netting, including consideration of where collateral is held
                and pledged;
                 Be able to identify CUSIP and asset class level
                information on collateral pledged to specific central counterparties by
                legal entity on at least a t+1 basis;
                 Be able to track and report on inter-branch collateral
                pledged and received on at least a t+1 basis and have clear policies
                explaining the rationale for such inter-branch pledges, including any
                regulatory considerations; and
                 Have a comprehensive collateral management policy that
                outlines how the firm as a whole approaches collateral and serves as a
                single source for governance.\29\
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                 \29\ The policy may reference subsidiary or related policies
                already in place, as implementation may differ based on business
                line or other factors.
                ---------------------------------------------------------------------------
                 In addition, as of the conclusion of any business day, the firm
                should be able to:
                 Identify the legal entity and geographic jurisdiction
                where counterparty collateral is held;
                 Document all netting and re-hypothecation arrangements
                with affiliates and external parties, by legal entity; and
                 Track and manage collateral requirements associated with
                counterparty credit risk exposures between affiliates, including
                foreign branches.
                 At least on a quarterly basis, the firm should be able to:
                 Review the material terms and provisions of International
                Swaps and Derivatives Association Master Agreements and the Credit
                Support Annexes, such as termination events, for triggers that may be
                breached as a result of changes in market conditions;
                 Identify legal and operational differences and potential
                challenges in managing collateral within specific jurisdictions,
                agreement types, counterparty types, collateral forms, or other
                distinguishing characteristics; and
                 Forecast changes in collateral requirements and cash and
                non-cash collateral flows under a variety of stress scenarios.
                 Management Information Systems: The firm should have the management
                information systems (MIS) capabilities to readily produce data on a
                U.S. legal entity basis (including any U.S. branch) and have controls
                to ensure data integrity and reliability, as described below.\30\ The
                firm also should perform a detailed analysis of the specific types of
                financial and risk data that would be required to execute the U.S.
                resolution strategy and how frequently the firm would need to produce
                the information, with the appropriate level of granularity.
                ---------------------------------------------------------------------------
                 \30\ MIS infrastructure projects were expected to be completed
                by 2018.
                ---------------------------------------------------------------------------
                 A firm is expected to have and describe capabilities to produce the
                following types of information by material entity on a timely basis:
                 Financial statements for each material entity (at least
                monthly);
                 External and inter-affiliate credit exposures, both on-
                and off-balance sheet, by type of exposure, counterparty, maturity, and
                gross payable and receivable;
                 Gross and net risk positions with internal and external
                counterparties;
                 Guarantees, cross holdings, financial commitments and
                other transactions between material entities;
                 Data to facilitate third-party valuation of assets and
                businesses, including risk metrics;
                 Key third party contracts, including the provider,
                provider's location, service(s) provided, legal entities that are a
                party to or a beneficiary of the contract, and key contractual rights
                (for example, termination and change in control clauses);
                 Legal agreement information, including parties to the
                agreement and key terms and interdependencies (for example, change in
                control, collateralization, governing law, termination events,
                guarantees, and cross-default provisions);
                 Service level agreements between affiliates, including the
                service(s) provided, the legal entity providing the service, legal
                entities receiving the service, and any termination/transferability
                provisions;
                 Licenses and memberships to all exchanges and value
                transfer networks, including FMUs;
                 Key management and support personnel, including dual
                hatted employees, and any associated retention agreements;
                 Agreements and other legal documents related to property,
                including facilities, technology systems, software, and intellectual
                property rights. The information should include ownership, physical
                location, where the property is managed and names of legal entities and
                lines of business that the property supports; and
                 Updated legal records for domestic and foreign entities,
                including entity type and purpose (for example, holding company, bank,
                broker dealer, and service entity), jurisdiction(s), ownership, and
                regulator(s).
                 Shared and Outsourced Services: The firm should maintain a fully
                actionable implementation plan to ensure the continuity of shared
                services that support identified critical operations \31\ and robust
                arrangements to support the continuity of shared and outsourced
                services, including, without limitation, appropriate plans to retain
                key personnel relevant to the execution of the firm's strategy. If a
                material entity provides shared services that support
                [[Page 15466]]
                identified critical operations,\32\ and the continuity of these shared
                services relies on the assumed cooperation, forbearance, or other non-
                intervention of regulator(s) in any jurisdiction, the Plan should
                discuss the extent to which the resolution or insolvency of any other
                group entities operating in that same jurisdiction may adversely affect
                the assumed cooperation, forbearance, or other regulatory non-
                intervention. If a material entity providing shared services that
                support identified critical operations is located outside of the United
                States, the Plan should discuss how the firm will ensure the
                operational continuity of such shared services through resolution.
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                 \31\ ``Shared services that support identified critical
                operations'' or ``critical shared services'' are those that support
                identified critical operations conducted in whole or in material
                part in the United States.
                 \32\ This should be interpreted to include data access and
                intellectual property rights.
                ---------------------------------------------------------------------------
                 The firm should (A) maintain an identification of all shared
                services that support identified critical operations; (B) maintain a
                mapping of how/where these services support U.S. core business lines
                and identified critical operations; (C) incorporate such mapping into
                legal entity rationalization criteria and implementation efforts; and
                (D) mitigate identified continuity risks through establishment of
                service-level agreements (SLAs) for all critical shared services.
                 SLAs should fully describe the services provided, reflect pricing
                considerations on an arm's-length basis where appropriate, and
                incorporate appropriate terms and conditions to (A) prevent automatic
                termination upon certain resolution-related events and (B) achieve
                continued provision of such services during resolution.\33\ The firm
                should also store SLAs in a central repository or repositories located
                in or immediately accessible from the U.S. at all times, including in
                resolution (and subject to enforceable access arrangements) in a
                searchable format. In addition, the firm should ensure the financial
                resilience of internal shared service providers by maintaining working
                capital for six months (or through the period of stabilization as
                required in the firm's U.S. resolution strategy) in such entities
                sufficient to cover contract costs, consistent with the U.S. resolution
                strategy. The firm should demonstrate that such working capital is held
                in a manner that ensures its availability for its intended purpose.
                ---------------------------------------------------------------------------
                 \33\ The firm should consider whether these SLAs should be
                governed by the laws of a U.S. state and expressly subject to the
                jurisdiction of a court in the U.S.
                ---------------------------------------------------------------------------
                 The firm should identify all service providers and critical
                outsourced services that support identified critical operations and
                identify any that could not be promptly substituted. The firm should
                (A) evaluate the agreements governing these services to determine
                whether there are any that could be terminated upon commencement of any
                resolution despite continued performance; and (B) update contracts to
                incorporate appropriate terms and conditions to prevent automatic
                termination upon commencement of any resolution proceeding and
                facilitate continued provision of such services. Relying on entities
                projected to survive during resolution to avoid contract termination is
                insufficient to ensure continuity. In the Plan, the firm should
                document the amendment of any such agreements governing these services.
                The Plan must also discuss arrangements to ensure the operational
                continuity of shared services that support identified critical
                operations in resolution in the event of the disruption of those shared
                services.
                 A firm is expected to have robust arrangements in place for the
                continued provision of shared or outsourced services needed to maintain
                identified critical operations. For example, firms should:
                 Evaluate internal and external dependencies and develop
                documented strategies and contingency arrangements for the continuity
                or replacement of the shared and outsourced services that are necessary
                to maintain identified critical operations.\34\ Examples may include
                personnel, facilities, systems, data warehouses, and intellectual
                property; and
                ---------------------------------------------------------------------------
                 \34\ 12 CFR 243.5(g); 12 CFR 381.5(g).
                ---------------------------------------------------------------------------
                 Maintain current cost estimates for implementing such
                strategies and contingency arrangements.
                 Qualified Financial Contracts: The plan should reflect the current
                state of how the early termination of qualified financial contracts
                could impact the resolution of the firm's U.S. operations.
                Specifically, the plan is expected to reflect the firm's progress in
                implementing the applicable domestic and foreign requirements regarding
                contractual stays in qualified financial contracts as of the date the
                firm submits its plan or as of a specified earlier date.
                VI. Branches \35\
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                 \35\ Note that the PCS framework guidance in Section V. is not
                limited to U.S. branches, since continuity of access to PCS
                activities, including through non-U.S. branches, is likely to be
                essential to the orderly resolution of a firm's U.S. material
                entities, identified critical operations, and core business lines.
                ---------------------------------------------------------------------------
                 Mapping: For each U.S. branch that is a material entity, the Plan
                should identify and map the financial and operational interconnections
                to identified critical operations, core business lines, and other
                material entities. The mapping should also identify any
                interconnections that, if disrupted, would materially affect identified
                critical operations, core business lines, or U.S. non-branch material
                entities, or the U.S. resolution strategy.
                 Continuity of Operations: If the Plan assumes that federal or state
                regulators, as applicable, do not take possession of any U.S. branch
                that is a material entity, the Plan must support that assumption.
                 For any U.S. branch that is significant to the activities of an
                identified critical operation, the Plan should describe and demonstrate
                how the branch would continue to facilitate FMU access for identified
                critical operations and meet funding needs. Such a U.S. branch would
                also be required to describe how it would meet supervisory requirements
                imposed by state regulators or the appropriate Federal banking agency,
                as appropriate, including maintaining a net due to position and
                complying with heightened asset maintenance requirements.\36\ In
                addition, the plan should describe how such a U.S. branch's third-party
                creditors would be protected such that the state regulator or
                appropriate Federal banking agency would allow the branch to continue
                operations.
                ---------------------------------------------------------------------------
                 \36\ Firms should take into consideration historical practice,
                by applicable regulators, regarding asset maintenance requirements
                imposed during stress.
                ---------------------------------------------------------------------------
                 To maintain appropriate liquidity for the purposes of resolution
                planning, a firm should maintain a liquidity buffer sufficient to meet
                the net cash outflows for its U.S. branches and agencies on an
                aggregate basis for the first 14 days of a 30-day stress horizon. In
                determining the aggregate need of the branches and agencies, the firm
                should calculate its liquidity position with respect to its foreign
                parent, U.S. IHC, and other affiliates separately from its liquidity
                position with respect to external parties, and cannot offset inflows
                from affiliated parties against outflows to external parties. In
                addition, a firm may use cash-flow sources from its affiliates to a
                branch or agency to offset cash-flow needs of its affiliates from a
                branch or agency only to the extent that the term of the cash-flow
                source from the affiliates is the same as, or shorter than, the term of
                the cash-flow need of the affiliate. This assumption addresses the
                scenario where the head office may be unable or unwilling to return
                funds to the branch or agency when those funds are most needed.
                 Impact of the Cessation of Operations: The firm must provide an
                analysis of the impact of the cessation of operations of
                [[Page 15467]]
                any U.S. branch that is significant to the activities of an identified
                critical operation on the firm's FMU access and identified critical
                operations, even if such scenario is not contemplated as part of the
                U.S. resolution strategy. The analysis should include a description of
                how identified critical operations could be transferred to a U.S. IHC
                subsidiary or sold in resolution, the obstacles presented by the
                cessation of shared services that support identified critical
                operations provided by any U.S. branch that is a material entity, and
                mitigants that could address such obstacles in a timely manner.
                VII. Group Resolution Plan
                 Consistent with the Rule, a firm's resolution plan should include a
                detailed explanation of how resolution planning for the subsidiaries,
                branches and agencies, and identified critical operations and core
                business lines of the firm that are domiciled in the United States or
                conducted in whole or material part in the United States is integrated
                into the firm's overall resolution or other contingency planning
                process. In particular, the plan should describe the impact on U.S.
                operations of executing the global plan.
                VIII. Legal Entity Rationalization And Separability
                 Legal Entity Rationalization Criteria (LER Criteria): A firm should
                develop and implement legal entity rationalization criteria that
                support the firm's U.S. resolution strategy and minimize risk to U.S.
                financial stability in the event of resolution. LER Criteria should
                consider the best alignment of legal entities and business lines to
                improve the resolvability of U.S. operations under different market
                conditions. LER Criteria should govern the corporate structure and
                arrangements between the U.S. subsidiaries and U.S. branches in a way
                that facilitates resolvability of the firm's U.S. operations as the
                firm's U.S. activities, technology, business models, or geographic
                footprint change over time.
                 Specifically, application of the criteria should:
                 (A) Ensure that the allocation of activities across the firm's
                U.S. branches and U.S. non-branch material entities support the
                firm's U.S. resolution strategy and minimize risk to U.S. financial
                stability in the event of resolution;
                 (B) Facilitate the recapitalization and liquidity support of
                U.S. IHC subsidiaries, as required by the firm's U.S. resolution
                strategy. Such criteria should include clean lines of ownership and
                clean funding pathways between the foreign parent, the U.S. IHC, and
                U.S. IHC subsidiaries;
                 (C) Facilitate the sale, transfer, or wind-down of certain
                discrete operations within a timeframe that would meaningfully
                increase the likelihood of an orderly resolution in the United
                States, including provisions for the continuity of associated
                services and mitigation of financial, operational, and legal
                challenges to separation and disposition;
                 (D) Adequately protect U.S. subsidiary insured depository
                institutions from risks arising from the activities of any nonbank
                U.S. subsidiaries (other than those that are subsidiaries of an
                insured depository institution); and
                 (E) Minimize complexity that could impede an orderly resolution
                in the United States and minimize redundant and dormant entities.
                 These criteria should be built into the firm's ongoing process for
                creating, maintaining, and optimizing the firm's U.S. structure and
                operations on a continuous basis.
                 Separability: The firm should identify discrete U.S. operations
                that could be sold or transferred in resolution, which would provide
                optionality in resolution under different market conditions. A firm's
                separability options should be actionable, and impediments to their
                projected mitigation strategies should be identified in advance. Firms
                should consider potential consequences for U.S. financial stability of
                executing each option, taking into consideration impacts on
                counterparties, creditors, clients, depositors, and markets for
                specific assets. The level of detail and analysis should vary based on
                a firm's risk profile and scope of operations. Additionally,
                information systems should be robust enough to produce the required
                data and information needed to execute separability options.
                 Further, the firm should have, and be able to demonstrate, the
                capability to populate in a timely manner a data room with information
                pertinent to a potential divestiture of the business (including, but
                not limited to, carve-out financial statements, valuation analysis, and
                a legal risk assessment). Within the plan, the firm should demonstrate
                how the firm's LER Criteria and implementation efforts meet the
                guidance above. The plan should also provide the separability analysis
                noted above. Finally, the plan should include a description of the
                firm's legal entity rationalization governance process.
                IX. Derivatives And Trading Activities
                 A Specified FBO's plan should address the following areas.
                Booking Practices
                 A firm should have booking practices commensurate with the size,
                scope, and complexity of its U.S. derivatives and trading
                activities,\37\ including systems capabilities to track and monitor any
                such activities booked directly into a non-U.S. affiliate. The
                following booking practices-related capabilities should be addressed in
                a firm's resolution plan:
                ---------------------------------------------------------------------------
                 \37\ ``U.S. derivatives and trading activities'', means all
                derivatives and trading activities that are: (1) Related to a firm's
                identified critical operations or core business lines, including any
                such activities booked directly into a non-U.S. affiliate; (2)
                conducted on behalf of the firm, its clients, or counterparties that
                are originated from, booked into, traded through, or otherwise
                conducted (in whole or in material part) in a U.S. entity (as
                defined below); or (3) both of the foregoing. A firm should identify
                its U.S. derivatives and trading activities pursuant to a
                methodology and justify the methodology used.
                ---------------------------------------------------------------------------
                 Derivatives and trading booking framework. A firm should have a
                comprehensive booking model framework that articulates the principles,
                rationales, and approach to implementing its booking practices for all
                of its U.S. derivatives and trading activities, including derivatives
                and trading activities originated from U.S. entities \38\ that are
                booked directly into a non-U.S. affiliate.\39\ The framework and its
                underlying components should be documented and adequately supported by
                internal controls (e.g., procedures, systems, processes). Taken
                together, the booking framework and its components should provide
                transparency with respect to (i) what is being booked (e.g., product,
                counterparty), (ii) where it is being originated and booked (e.g.,
                legal entity, geography), (iii) by whom it is originated and booked
                (e.g., business or trading desk), (iv) why it is booked that way (e.g.,
                drivers or rationales for that arrangement), and (v) what controls the
                firm has in place to monitor and manage those practices (e.g.,
                governance or information systems).\40\
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                 \38\ ``U.S. entities'' means U.S. IHC subsidiaries and material
                entity branches.
                 \39\ Activities ``originated'' from U.S. entities are those
                activities transacted or arranged by, or on behalf of those U.S.
                entities and their clients and counterparties, including any such
                activity for which the U.S. entity is compensated (directly or
                indirectly) by a non-U.S. affiliate. These activities also include,
                for example, those that are sourced or executed through personnel
                employed by or acting on behalf of a U.S. entity. The agencies would
                expect that a U.S. entity that is significant to the origination of
                activities for an identified critical operation or core business
                line would be designated as a U.S. material entity.
                 \40\ The description of controls should include any components
                of any firm-wide market, credit, or liquidity risk management
                framework that is material to the management of the firm's U.S.
                derivatives and trading activities.
                ---------------------------------------------------------------------------
                 The firm's resolution plan should include detailed descriptions of
                the framework and each of its material components. In particular, a
                firm's resolution plan should include
                [[Page 15468]]
                descriptions of documented booking models covering the full range of
                its U.S. derivatives and trading activities.\41\ These descriptions
                should provide clarity with respect to the underlying booking flows
                (e.g., the mapping of trade flows based on multiple trade
                characteristics as decision points that determine on which entity a
                trade is directly booked and the applicability of any risk transfer
                arrangements). Furthermore, a firm's resolution plan should describe
                its end-to-end booking and reporting processes, including a description
                of the current scope of automation (e.g., automated trade flows,
                detective monitoring) of the systems controls applied to the firm's
                documented booking models. The plan should also discuss why the firm
                believes its current (or planned) scope of automation is sufficient for
                managing its U.S. derivatives and trading activities during the
                execution of its U.S. resolution strategy.\42\
                ---------------------------------------------------------------------------
                 \41\ The booking models should represent the vast majority
                (e.g., 95 percent) of a firm's U.S. derivatives and trading
                activities, including U.S. derivatives and trading transactions that
                are originated from U.S. entities and booked directly into a non-
                U.S. affiliate, measured by, for example, trade notional and gross
                market value (for derivatives) and client positions and balances
                (for prime brokerage client accounts).
                 \42\ Effective preventative (up-front) and detective (post-
                booking) controls embedded in a firm's booking processes can help
                avoid and/or timely remediate trades that do not align with a
                documented booking model or related risk limit. Firms typically use
                a combination of manual and automated control functions. Although
                automation may not be best suited for all control functions, as
                compared to manual methods, it can improve consistency and
                traceability with respect to booking practices. However, non-
                automated methods also can be effective when supported by other
                internal controls (e.g., robust detective monitoring, escalation
                protocols).
                ---------------------------------------------------------------------------
                 Derivatives and trading entity analysis and reporting. A firm
                should have the ability to identify, assess, and report on each U.S.
                entity that originates or otherwise conducts (in whole or in material
                part) any significant aspect of the firm's U.S. derivatives and trading
                activities (a ``derivatives or trading entity''). First, the firm's
                resolution plan should describe its method (which may include both
                qualitative and quantitative criteria) for evaluating the significance
                of each derivatives or trading entity both with respect to the firm's
                current U.S. derivatives and trading activities and its U.S. resolution
                strategy.\43\ Second, a firm's resolution plan should demonstrate
                (including through use of illustrative samples) the firm's ability to
                readily generate current derivatives or trading entity profiles that
                (i) cover all derivatives or trading entities, (ii) are reportable in a
                consistent manner, and (iii) include information regarding current
                legal ownership structure, business activities and volume, and risk
                profile of the entity (including relevant risk transfer arrangements).
                ---------------------------------------------------------------------------
                 \43\ The firm should leverage any existing methods and criteria
                it uses for other entity assessments (e.g., legal entity
                rationalization or the prepositioning of internal loss-absorbing
                resources). The firm's method for determining the significance of
                derivatives or trading entities may diverge from the parameters for
                material entity designation under the Rule (i.e., entities
                significant to the activities of an identified critical operation or
                core business line); however, any differences should be adequately
                supported and explained.
                ---------------------------------------------------------------------------
                U.S. Activities Monitoring
                 A firm should be able to assess how the management of U.S.
                derivatives and trading activities could be affected in the period
                leading up to and during the execution of its U.S. resolution strategy,
                including disruptions that could affect materially the funding or
                operations of the U.S. entities that conduct the U.S. derivatives and
                trading activities or their clients and counterparties. Therefore, a
                firm should have capabilities to provide timely transparency into the
                management of its U.S. derivatives and trading activities, including
                such activities booked directly into a non-U.S. affiliate, in the
                period leading up to and during the execution of its U.S. resolution
                strategy by maintaining a monitoring framework for U.S. derivatives and
                trading activities, which consists of at least the following two
                components:
                 1. A method for identifying U.S. derivatives and trading
                activities, and measuring, monitoring, and reporting on those
                activities on a business line and legal entity basis; and
                 2. A method for identifying, assessing, and reporting the
                potential impact on (i) clients and counterparties of U.S. entities
                that conduct the U.S. derivatives and trading activities and (ii)
                any related risk transfer arrangements \44\ among and between U.S.
                entities and their non-U.S. affiliates.
                 \44\ For example, risk transfer arrangements might include
                transfer pricing, profit sharing, loss limiting, or intragroup
                hedging arrangements.
                ---------------------------------------------------------------------------
                Prime Brokerage Customer Account Transfers
                 A firm should have the operational capacity to facilitate the
                orderly transfer of U.S. prime brokerage accounts,\45\ including
                account positions of a client of the firm's U.S. prime brokerage
                business that are booked directly into a non-U.S. affiliate, to peer
                prime brokers in periods of material financial distress and during the
                execution of its U.S. resolution strategy. The firm's plan should
                include an assessment of how it would transfer such accounts. This
                assessment should be informed by clients' relationships with other
                prime brokers, the use of automated and manual transaction processes,
                clients' overall long and short positions as facilitated by the firm,
                and the liquidity of clients' portfolios. The assessment should also
                analyze the risks and loss mitigants of customer-to-customer
                internalization (e.g., the inability to fund customer longs with
                customer shorts) and operational challenges (including insufficient
                staffing) that the firm may experience in effecting the scale and speed
                of prime brokerage account transfers envisioned under the firm's U.S.
                resolution strategy.
                ---------------------------------------------------------------------------
                 \45\ ``U.S. prime brokerage account'' or ``U.S. prime brokerage
                account balances'' should include the account positions and balances
                of a client of the firm's U.S. prime brokerage business, regardless
                of where those positions or balances are booked.
                ---------------------------------------------------------------------------
                 In addition, a firm should describe and demonstrate its ability to
                segment and analyze the quality and composition of U.S. prime brokerage
                account balances based on a set of well-defined and consistently
                applied segmentation criteria (e.g., size, single-prime, platform, use
                of leverage, non-rehypothecatable securities, liquidity of underlying
                assets). The capabilities should cover U.S. prime brokerage account
                balances and the resulting segments should represent a range in
                potential transfer speed (e.g., from fastest to longest to transfer,
                from most liquid to least liquid). The selected segmentation criteria
                should reflect characteristics \46\ that the firm believes could affect
                the speed at which the U.S. prime brokerage account would be
                transferred to an alternate prime broker.
                ---------------------------------------------------------------------------
                 \46\ For example, relevant characteristics might include
                product, size, clearability, currency, maturity, level of
                collateralization, and other risk characteristics.
                ---------------------------------------------------------------------------
                Portfolio Segmentation
                 A firm should have the capabilities to produce analysis that
                reflects derivatives portfolio \47\ segmentation and differentiation of
                assumptions, taking into account trade-level characteristics. More
                specifically, a firm should have systems capabilities that would allow
                it to produce a spectrum of derivatives portfolio segmentation analysis
                using multiple segmentation dimensions for each U.S. entity with a
                derivatives portfolio--namely, (1) trading desk or product, (2) cleared
                vs. clearable vs. non-clearable trades, (3) counterparty type, (4)
                currency, (5) maturity, (6) level of collateralization, and (7) netting
                set.\48\ A firm should also
                [[Page 15469]]
                have the capabilities to segment and analyze the full contractual
                maturity (run-off) profile of the derivatives portfolios in its U.S.
                entities. The firm's resolution plan should describe and demonstrate
                the firm's ability to segment and analyze the derivatives portfolios
                booked into its U.S. entities using the relevant segmentation
                dimensions and to report the results of such segmentation and analysis.
                ---------------------------------------------------------------------------
                 \47\ A firm's derivatives portfolios include its derivatives
                positions and linked non-derivatives trading positions.
                 \48\ The enumerated segmentation dimensions are not intended as
                an exhaustive list of relevant dimensions. With respect to any
                product or asset class, a firm may have reasons for not capturing
                data on (or not using) one or more of the enumerated segmentation
                dimensions. In that case, however, the firm should explain those
                reasons.
                ---------------------------------------------------------------------------
                Derivatives Stabilization and De-Risking Strategy
                 To the extent the U.S. resolution strategy assumes the continuation
                of a U.S. IHC subsidiary with a derivatives portfolio after the entry
                of the U.S. IHC into a U.S. bankruptcy proceeding (surviving
                derivatives subsidiary), the firm's plan should provide a detailed
                analysis of the strategy to stabilize and de-risk any derivatives
                portfolio of the surviving derivatives subsidiary (U.S. derivatives
                strategy) that has been incorporated into its U.S. resolution
                strategy.\49\ In developing its U.S. derivatives strategy, a firm
                should apply the following assumption constraints:
                ---------------------------------------------------------------------------
                 \49\ Subject to the relevant constraints, a firm's U.S.
                derivatives strategy may take the form of a going-concern strategy,
                an accelerated de-risking strategy (e.g., active wind-down) or an
                alternative, third strategy so long as the firm's resolution plan
                adequately supports the execution of the chosen strategy. For
                example, a firm may choose a going-concern scenario (e.g., surviving
                derivatives subsidiary reestablishes investment grade status and
                does not enter any wind-down) as its derivatives strategy. Likewise,
                a firm may choose to adopt a combination of going-concern and
                accelerated de-risking scenarios as its U.S. derivatives strategy.
                For example, the U.S. derivatives strategy could be a stabilization
                scenario for the U.S. bank entity and an accelerated de-risking
                scenario for U.S. broker-dealer entities.
                ---------------------------------------------------------------------------
                 OTC derivatives market access: At or before the start of
                the resolution period, each surviving derivatives subsidiary should be
                assumed to lack an investment grade credit rating (e.g., unrated or
                downgraded below investment grade). Each surviving derivatives
                subsidiary also should be assumed to have failed to establish or
                reestablish investment grade status for the duration of the resolution
                period, unless the plan provides well-supported analysis to the
                contrary. As the subsidiary is not investment grade, it further should
                be assumed that each surviving derivatives subsidiary has no access to
                bilateral OTC derivatives markets and must use exchange-traded or
                centrally cleared instruments for any new hedging needs that arise
                during the resolution period. Nevertheless, a firm may assume the
                ability to engage in certain risk-reducing derivatives trades with
                bilateral OTC derivatives counterparties during the resolution period
                to facilitate novations with third parties and to close out inter-
                affiliate trades.\50\
                ---------------------------------------------------------------------------
                 \50\ A firm may engage in bilateral OTC derivatives trades with,
                for example, (i) external counterparties, to effect the novation of
                the firm's side of a derivatives contract to a new, acquiring
                counterparty; and (ii) inter-affiliate counterparties, where the
                trades with inter-affiliate counterparties do not materially
                increase either the credit exposure of any participating
                counterparty or the market risk of any such counterparty on a
                standalone basis, after taking into account any hedging with
                exchange-traded and centrally-cleared instruments. The firm should
                provide analysis to support the risk of the trade on the basis of
                information that would be known to the firm at the time of the
                transaction.
                ---------------------------------------------------------------------------
                 Early exits (break clauses): A firm should assume that
                counterparties (both external and affiliates) will exercise any
                contractual termination or other right, including any rights stayed by
                contract (including amendments) or in compliance with the rules
                establishing restrictions on qualified financial contracts of the
                Board, the FDIC, or the Office of the Comptroller of the Currency \51\
                or any other regulatory requirements, (i) that is available to the
                counterparty at or following the start of the resolution period; and
                (ii) if exercising such right would economically benefit the
                counterparty (counterparty-initiated termination).
                ---------------------------------------------------------------------------
                 \51\ See 12 CFR part 47 (OCC); 252, subpart I (Board); 382
                (FDIC).
                ---------------------------------------------------------------------------
                 Time horizon: The duration of the resolution period should
                be between 12 and 24 months. The resolution period begins immediately
                after the U.S. IHC bankruptcy filing and extends through the completion
                of the U.S. resolution strategy.\52\
                ---------------------------------------------------------------------------
                 \52\ The firm may consider a resolution period of less than 12
                months as long as the length of the resolution period is adequately
                supported by the firm's analysis of the size, composition,
                complexity, and maturity profile of the derivatives portfolios in
                its U.S. IHC subsidiaries.
                ---------------------------------------------------------------------------
                 A firm's analysis of its U.S. derivatives strategy should take into
                account (i) the starting profile of any derivatives portfolio of each
                surviving derivatives subsidiary (e.g., nature, concentration,
                maturity, clearability, liquidity of positions); (ii) the profile and
                function of any surviving derivatives subsidiary during the resolution
                period; (iii) the means, challenges, and capacity of the surviving
                derivatives subsidiary to manage and de-risk its derivatives portfolios
                (e.g., method for timely segmenting, packaging, and selling the
                derivatives positions; challenges with novating less liquid positions;
                re-hedging strategy); (iv) the financial and operational resources
                required to effect the derivatives strategy; and (v) any potential
                residual portfolio (further discussed below). In addition, the firm's
                resolution plan should address the following areas in the analysis of
                its derivatives strategy:
                 Forecasts of resource needs. The forecasts of capital and liquidity
                resource needs of U.S. IHC subsidiaries required to support adequately
                the firm's U.S. derivatives strategy should be incorporated into the
                firm's RCEN and RLEN estimates for its overall U.S. resolution
                strategy. These include, for example, the costs and liquidity flows
                resulting from (i) the close-out of OTC derivatives, (ii) the hedging
                of derivatives portfolios, (iii) the quantified losses that could be
                incurred due to basis and other risks that would result from hedging
                with only exchange-traded and centrally cleared instruments in a
                severely adverse stress environment, and (iv) operational costs.\53\
                ---------------------------------------------------------------------------
                 \53\ A firm may choose not to isolate and separately model the
                operational costs solely related to executing its derivatives
                strategy. However, the firm should provide transparency around
                operational cost estimation at a more granular level than material
                entity (e.g., business line level within a material entity, subject
                to wind-down).
                ---------------------------------------------------------------------------
                 Sensitivity analysis. A firm should have a method to apply
                sensitivity analyses to the key drivers of the derivatives-related
                costs and liquidity flows under its U.S. resolution strategy. A firm's
                resolution plan should describe its method for (i) evaluating the
                materiality of assumptions and (ii) identifying those assumptions (or
                combinations of assumptions) that constitute the key drivers for its
                forecasts of derivatives-related operational and financial resource
                needs under the U.S. resolution strategy. In addition, using its U.S.
                resolution strategy as a baseline, the firm's resolution plan should
                describe and demonstrate its approach to testing the sensitivities of
                the identified key drivers and the potential impact on its forecasts of
                resource needs.\54\
                ---------------------------------------------------------------------------
                 \54\ For example, key drivers of derivatives-related costs and
                liquidity flows might include the timing of derivatives unwind, cost
                of capital-related assumptions (e.g., target return on equity,
                discount rate, weighted average life, capital constraints, tax
                rate), operational cost reduction rate, and operational capacity for
                novations. Other examples of key drivers likely also include central
                counterparty margin flow assumptions and risk-weighted asset
                forecast assumptions.
                ---------------------------------------------------------------------------
                 Potential residual derivatives portfolio. A firm's resolution plan
                should include a method for estimating the composition of any potential
                residual derivatives portfolio transactions booked in a U.S. IHC
                subsidiary remaining at the end of the resolution period under its U.S.
                [[Page 15470]]
                resolution strategy. The firm's plan also should provide detailed
                descriptions of the trade characteristics used to identify such
                potential residual portfolio and of the resulting trades (or categories
                of trades).\55\ A firm should assess the risk profile of such potential
                residual portfolio (including its anticipated size, composition,
                complexity, and counterparties), and the potential counterparty and
                market impacts of non-performance by the firm on the stability of U.S.
                financial markets (e.g., on funding markets, on underlying asset
                markets, on clients and counterparties).
                ---------------------------------------------------------------------------
                 \55\ If, under the firm's U.S. resolution strategy, any
                derivatives portfolios are transferred during the resolution period
                by way of a line of business sale (or similar transaction), then
                those portfolios nonetheless should be included within the firm's
                potential residual portfolio analysis.
                ---------------------------------------------------------------------------
                 Non-surviving entity analysis. To the extent the U.S. resolution
                strategy assumes a U.S. IHC subsidiary with a derivatives portfolio
                enters its own resolution proceeding after the entry of the U.S. IHC
                into a U.S. bankruptcy proceeding (a non-surviving derivatives
                subsidiary), the firm should provide a detailed analysis of how the
                non-surviving derivatives subsidiary's resolution can be accomplished
                within a reasonable period of time and in a manner that substantially
                mitigates the risk of serious adverse effects on U.S. financial
                stability and on the orderly execution of the firm's U.S. resolution
                strategy. In particular, the firm should provide an analysis of the
                potential impacts on funding markets, on underlying asset markets, on
                clients and counterparties (including affiliates), and on the firm's
                U.S. resolution strategy.
                X. Format and Structure of Plans
                Format of Plan
                 Executive Summary. The Plan should contain an executive summary
                consistent with the Rule, which must include, among other things, a
                concise description of the key elements of the firm's U.S. strategy for
                an orderly resolution. In addition, the executive summary should
                include a discussion of the firm's assessment of any impediments to the
                firm's U.S. resolution strategy and its execution, as well as the steps
                it has taken to address any identified impediments.
                 Narrative. The Plan should include a strategic analysis consistent
                with the Rule. This analysis should take the form of a concise
                narrative that enhances the readability and understanding of the firm's
                discussion of its U.S. strategy for rapid and orderly resolution in
                bankruptcy or other applicable insolvency regimes (Narrative). The
                Narrative also should include a high-level discussion of how the firm
                is addressing key vulnerabilities jointly identified by the Agencies.
                This is not an exhaustive list and does not preclude identification of
                further vulnerabilities or impediments.
                 Appendices. The Plan should contain a sufficient level of detail
                and analysis to substantiate and support the strategy described in the
                Narrative. Such detail and analysis should be included in appendices
                that are distinct from and clearly referenced in the related parts of
                the Narrative (Appendices).
                 Public Section. The Plan must be divided into a public section and
                a confidential section consistent with the requirements of the Rule.
                 Other Informational Requirements. The Plan must comply with all
                other informational requirements of the Rule. The firm may incorporate
                by reference previously submitted information as provided in the Rule.
                Guidance Regarding Assumptions
                 1. The Plan should be based on the current state of the applicable
                legal and policy frameworks. Pending legislation or regulatory actions
                may be discussed as additional considerations.
                 2. The firm must submit a plan that does not rely on the provision
                of extraordinary support by the United States or any other government
                to the firm or its subsidiaries to prevent the failure of the firm.
                 3. The firm should not assume that it will be able to sell
                identified critical operations or core business lines, or that
                unsecured funding will be available immediately prior to filing for
                bankruptcy.
                 4. The Plan should assume the Dodd-Frank Act Stress Test (DFAST)
                severely adverse scenario for the first quarter of the calendar year in
                which the Plan is submitted is the domestic and international economic
                environment at the time of the firm's failure and throughout the
                resolution process.
                 5. The resolution strategy may be based on an idiosyncratic event
                or action. The firm should justify use of that assumption, consistent
                with the conditions of the economic scenario.
                 6. Within the context of the applicable idiosyncratic scenario,
                markets are functioning and competitors are in a position to take on
                business. If a firm's Plan assumes the sale of assets, the firm should
                take into account all issues surrounding its ability to sell in market
                conditions present in the applicable economic condition at the time of
                sale (i.e., the firm should take into consideration the size and scale
                of its operations as well as issues of separation and transfer.)
                 7. The firm should not assume any waivers of section 23A or 23B of
                the Federal Reserve Act in connection with the actions proposed to be
                taken prior to or in resolution.
                 8. The firm may assume that its depository institutions will have
                access to the Discount Window only for a few days after the point of
                failure to facilitate orderly resolution. However, the firm should not
                assume its subsidiary depository institutions will have access to the
                Discount Window while critically undercapitalized, in FDIC
                receivership, or operating as a bridge bank, nor should it assume any
                lending from a Federal Reserve credit facility to a non-bank affiliate.
                Financial Statements and Projections
                 The Plan should include the actual balance sheet for each material
                entity and the consolidating balance sheet adjustments between material
                entities as well as pro forma balance sheets for each material entity
                at the point of failure and at key junctures in the execution of the
                resolution strategy. It should also include projected statements of
                sources and uses of funds for the interim periods. The pro forma
                financial statements and accompanying notes in the Plan must clearly
                evidence the failure trigger event; the Plan's assumptions; and any
                transactions that are critical to the execution of the Plan's preferred
                strategy, such as recapitalizations, the creation of new legal
                entities, transfers of assets, and asset sales and unwinds.
                Material Entities
                 Material entities should encompass those entities, including
                subsidiaries, branches and agencies (collectively, Offices), which are
                significant to the activities of an identified critical operation or
                core business line. If the abrupt disruption or cessation of a core
                business line might have systemic consequences to U.S. financial
                stability, the entities essential to the continuation of such core
                business line should be considered for material entity designation.
                Material entities should include the following types of entities:
                 a. Any Office, wherever located, that is significant to the
                activities of an identified critical operation.
                 b. Any Office, wherever located, whose provision or support of
                global treasury operations, funding, or liquidity activities (inclusive
                of intercompany transactions) is significant to the activities of an
                identified critical operation.
                [[Page 15471]]
                 c. Any Office, wherever located, that would provide material
                operational support in resolution (key personnel, information
                technology, data centers, real estate or other shared services) to the
                activities of an identified critical operation.
                 d. Any Office, wherever located, that is engaged in derivatives
                booking activity that is significant to the activities of an identified
                critical operation, including those that conduct either the internal
                hedge side or the client-facing side of a transaction.
                 e. Any Office, wherever located, engaged in asset custody or asset
                management that are significant to the activities of an identified
                critical operation.
                 f. Any Office, wherever located, holding licenses or memberships in
                clearinghouses, exchanges, or other FMUs that are significant to the
                activities of an identified critical operation.
                 For each material entity (including a branch), the Plan should
                enumerate, on a jurisdiction-by-jurisdiction basis, the specific
                mandatory and discretionary actions or forbearances that regulatory and
                resolution authorities would take during resolution, including any
                regulatory filings and notifications that would be required as part of
                the U.S. resolution strategy, and explain how the Plan addresses the
                actions and forbearances. The Plan should describe the consequences for
                the firm's U.S. resolution strategy if specific actions in each
                jurisdiction were not taken, delayed, or forgone, as relevant.
                XI. Public Section
                 The purpose of the public section is to inform the public's
                understanding of the firm's resolution strategy and how it works.
                 The public section should discuss the steps that the firm is taking
                to improve resolvability under the U.S. Bankruptcy Code. The public
                section should provide background information on each material entity
                and should be enhanced by including the firm's rationale for
                designating material entities. The public section should also discuss,
                at a high level, the firm's intra-group financial and operational
                interconnectedness (including the types of guarantees or support
                obligations in place that could impact the execution of the firm's
                strategy). There should also be a high-level discussion of the
                liquidity resources and loss-absorbing capacity of the U.S. IHC.
                 The discussion of strategy in the public section should broadly
                explain how the firm has addressed any deficiencies, shortcomings, and
                other key vulnerabilities that the Agencies have identified in prior
                Plan submissions. For each material entity, it should be clear how the
                strategy provides for continuity, transfer, or orderly wind-down of the
                entity and its operations. There should also be a description of the
                resulting organization upon completion of the resolution process.
                 The public section may note that the resolution plan is not binding
                on a bankruptcy court or other resolution authority and that the
                proposed failure scenario and associated assumptions are hypothetical
                and do not necessarily reflect an event or events to which the firm is
                or may become subject.
                Appendix: Frequently Asked Questions
                 In March 2017, the Agencies issued guidance for use in
                developing the 2018 resolution plan submissions by certain foreign
                banking organizations.
                 In response to frequently asked questions regarding that
                guidance from the recipients of that guidance, Board and FDIC staff
                jointly developed answers and provided those answers to the guidance
                recipients in 2017 so that they could take this information into
                account in developing their next resolution plan submissions.\56\
                ---------------------------------------------------------------------------
                 \56\ The FAQs represent the views of staff of the Board of
                Governors of the Federal Reserve System and the Federal Deposit
                Insurance Corporation and do not bind the Board or the FDIC.
                ---------------------------------------------------------------------------
                 The questions in this Appendix:
                 Comprise common questions asked by different covered
                companies. Not every question is applicable to every firm; not every
                aspect of the proposed guidance applies to each firm's preferred
                strategy/structure; and
                 Reflect updated references to correspond to this
                proposed guidance for the Specified FBOs (Proposed Guidance).
                 As indicated below, those questions and answers that are deemed
                to be no longer meaningful or relevant have not been consolidated in
                this Appendix and are superseded.
                Capital
                CAP 1. Capital Pre-Positioning and Balance
                 Q. How should a firm determine the appropriate balance between
                resources pre-positioned at the U.S. IHC subsidiaries and held at
                the U.S. IHC?
                 A. The Proposed Guidance addresses this issue in the Capital
                section. The Agencies are not prescribing a specific percentage
                allocation of resources pre-positioned at the U.S. IHC subsidiaries
                versus resources held at the U.S. IHC. In considering the balance
                between certainty and flexibility, the Agencies note that the risk
                profile of each U.S. IHC subsidiary should inform the
                ``unanticipated losses'' at the entity, which should be taken into
                account in determining the appropriate balance.
                CAP 2. Definition of ``Well-Capitalized'' Status
                 Q. How should firms apply the term ``well-capitalized''?
                 A. U.S. non-branch material entities must comply with the
                capital requirements and expectations of their primary regulator.
                U.S. non-branch material entities should be recapitalized to meet
                jurisdictional requirements and to maintain market confidence as
                required under the U.S. resolution strategy.
                CAP 3. RCEN Relationship to DFAST Severely Adverse Scenario
                 Q. How should the firm's RCEN and RLEN estimates relate to the
                DFAST Severely Adverse scenario? Can those estimates be recalibrated
                in actual stress conditions?
                 A. For resolution plan submission purposes, the estimation of
                RLEN and RCEN should assume macroeconomic conditions consistent with
                the DFAST Severely Adverse scenario. However, the RLEN and RCEN
                methodologies should have the flexibility to incorporate
                macroeconomic conditions that may deviate from the DFAST Severely
                Adverse scenario in order to facilitate execution of the U.S.
                resolution strategy.
                CAP 4. Not Consolidated
                Liquidity
                LIQ 1. Inter-Company ``Frictions''
                 Q. Can the Agencies clarify what kinds of frictions might occur
                between affiliates beyond regulatory ring-fencing?
                 A. Frictions are any impediments to the free flow of funds,
                collateral and other transactions between material entities.
                Examples include regulatory, legal, financial (i.e., tax
                consequences), market, or operational constraints or requirements.
                LIQ 2. Distinction Between Liquidity Forecasting Periods
                 Q1. How long is the stabilization period?
                 A1. The stabilization period begins immediately after the U.S.
                IHC bankruptcy filing and extends until each material entity
                reestablishes market confidence. The stabilization period may not be
                less than 30 days. The reestablishment of market confidence may be
                reflected by the maintaining, reestablishing, or establishing of
                investment grade ratings or the equivalent financial condition for
                each entity. The stabilization period may vary by material entity,
                given differences in regulatory, counterparty, and other stakeholder
                interests in each entity.
                 Q2. How should we distinguish between the runway, resolution,
                and stabilization periods on the one hand, and RLAP and RLEN on the
                other, in terms of their length, sequencing, and liquidity
                thresholds?
                 A2. The Agencies have not specified a direct mathematical
                relationship between the runway period, the RLAP model, and RLEN
                model. As noted in prior guidance, firms may assume a runway period
                of up to 30 days prior to entering bankruptcy provided the period is
                sufficient for management to contemplate the necessary actions
                preceding the filing of bankruptcy. The RLAP model should provide
                for the adequate sizing and positioning of HQLA at material entities
                for
                [[Page 15472]]
                anticipated net liquidity outflows for a period of at least 30 days.
                The RLEN model estimates the liquidity needed after the U.S. IHC's
                bankruptcy filing to stabilize the surviving material entities and
                to allow those entities to operate post-filing. See ``LIQ 4. RLEN
                and Minimum Operating Liquidity (MOL),'' Question 1, for further
                detail on the components of the RLEN model.
                 Q3. What is the resolution period?
                 A3. The resolution period begins immediately after the U.S.
                IHC's bankruptcy filing and extends through the completion of the
                U.S. strategy. After the stabilization period (see ``LIQ 2.
                Distinction between Liquidity Forecasting Periods,'' Question 1,
                regarding ``stabilization period''), financial statements and
                projections may be provided at quarterly intervals through the
                remainder of the resolution period.
                LIQ 3. Inter-Affiliate Transaction Assumptions
                 Q. Does inter-affiliate funding refer to all kinds of
                intercompany transactions, including both unsecured and secured?
                 A. Yes.
                LIQ 4. RLEN and Minimum Operating Liquidity (MOL)
                 Q1. How should firms distinguish between the minimum operating
                liquidity (MOL) and peak funding needs during the RLEN period?
                 A1. The peak funding needs represent the peak cumulative net
                out-flows during the stabilization period. The components of peak
                funding needs, including the monetization of assets and other
                management actions, should be transparent in the RLEN projections.
                The peak funding needs should be supported by projections of daily
                sources and uses of cash for each U.S. IHC subsidiary, incorporating
                inter-affiliate and third-party exposures. In mathematical terms,
                RLEN = MOL + peak funding needs during the stabilization period.
                RLEN should also incorporate liquidity execution needs of the U.S.
                resolution strategy for derivatives (see Derivatives and Trading
                Activities section).
                 Q2. Should the MOL per entity make explicit the allocation for
                intraday liquidity requirements, inter-affiliate and other funding
                frictions, operating expenses, and working capital needs?
                 A2. Yes, the components of the MOL estimates for each surviving
                U.S. IHC subsidiary should be transparent and supported.
                 Q3. Can MOLs decrease as surviving U.S. IHC subsidiaries wind
                down?
                 A3. MOL estimates can decline as long as they are sufficiently
                supported by the firm's methodology and assumptions.
                LIQ 5. Not Consolidated
                LIQ 6. Inter-Affiliate Transactions With Optionality
                 Q. How should firms treat an inter-affiliate transaction with an
                embedded option that may affect the contractual maturity date?
                 A. For the purpose of calculating a firm's net liquidity
                position at a material entity, RLAP and RLEN models should assume
                that these transactions mature at the earliest possible exercise
                date; this adjusted maturity should be applied symmetrically to both
                material entities involved in the transaction.
                LIQ 7. Stabilization and Regulatory Liquidity Requirements
                 Q. As it relates to the RLEN model and actions necessary to re-
                establish market confidence, what assumptions should firms make
                regarding compliance with regulatory liquidity requirements?
                 A. Firms should consider the applicable regulatory expectations
                for each U.S. IHC subsidiary to achieve the stabilization needed to
                execute the U.S. resolution strategy. Firms' assumptions in the RLEN
                model regarding the actions necessary to reestablish market
                confidence during the stabilization period may vary by U.S. IHC
                subsidiary, for example, based on differences in regulatory,
                counterparty, other stakeholder interests, and based on the U.S.
                resolution strategy for each U.S. IHC subsidiary. See also ``LIQ 2.
                Distinction between Liquidity Forecasting Periods.''
                LIQ 8. HQLA and Assets Not Eligible as HQLA in RLAP and RLEN Models
                 Q. The Proposed Guidance states that HQLA should be used to meet
                estimated net liquidity deficits in the RLAP model and that the RLEN
                estimate should be based on the minimum amount of HQLA required to
                facilitate the execution of the firm's U.S. resolution strategy. How
                should firms incorporate any expected liquidity value of assets that
                are not eligible as HQLA (non-HQLA) into RLAP and RLEN models?
                 A. A firm's RLAP model should assume that only HQLA are
                available to meet net liquidity deficits at U.S. IHC subsidiaries.
                For a firm's RLEN model, firms may incorporate conservative
                estimates of potential liquidity that may be generated through the
                monetization of non-HQLA. The estimated liquidity value of non-HQLA
                should be supported by thorough analysis of the potential market
                constraints and asset value haircuts that may be required.
                Assumptions for the monetization of non-HQLA should be consistent
                with the U.S. resolution strategy for each U.S. IHC subsidiary.
                LIQ 9. Components of Minimum Operating Liquidity
                 Q. Do the agencies have particular definitions of the ``intraday
                liquidity requirements,'' ``operating expenses,'' and ``working
                capital needs'' components of minimum operating liquidity (MOL)
                estimates?
                 A. No. A firm may use its internal definitions of the components
                of MOL estimates. The components of MOL estimates should be well-
                supported by a firm's internal methodologies and calibrated to the
                specifics of each U.S. IHC subsidiary.
                LIQ 10. RLEN Model and Net Revenue Recognition
                 Q. Can firms assume in the RLEN model that cash-based net
                revenue generated by U.S. IHC subsidiaries after the U.S. IHC's
                bankruptcy filing is available to offset estimated liquidity needs?
                 A. Yes. Firms may incorporate cash revenue generated by U.S. IHC
                subsidiaries in the RLEN model. Cash revenue projections should be
                conservatively estimated and consistent with the operating
                environment and the U.S. strategy for each U.S. IHC subsidiary.
                LIQ 11. RLEN Model and Inter-Affiliate Frictions
                 Q. Can a firm modify its assumptions regarding one or more
                inter-affiliate frictions during the stabilization or post-
                stabilization period in the RLEN model?
                 A. Once a U.S. IHC subsidiary has achieved market confidence
                necessary for stabilization consistent with the U.S. resolution
                strategy, a firm may modify one or more inter-affiliate frictions,
                provided the firm provides sufficient analysis to support this
                assumption.
                LIQ 12. RLEN Relationship to DFAST Severely Adverse Scenario
                (See ``CAP 3. RCEN Relationship to DFAST Severely Adverse Scenario''
                in the Capital section.)
                LIQ 13. Liquidity Positioning and Foreign Parent Support
                 Q1. May firms consider available liquidity at the foreign parent
                for meeting RLAP and RLEN estimates for U.S. non-branch material
                entities?
                 A1. For a 30-day RLAP model, firms should use the requirements
                of Regulation YY in estimating the standalone liquidity position of
                each U.S. non-branch material entities. Firms should not rely on
                available liquidity at the foreign parent to meet net liquidity
                outflows of U.S. non-branch material entities. The firm's RLAP model
                should ensure that the consolidated U.S. IHC holds sufficient HQLA
                to cover net liquidity outflows of the U.S. non-branch material
                entities. For an RLAP model that extends beyond 30 days, firms may
                consider (after 30 days) available liquidity at the foreign parent
                to meet the needs for U.S. non-branch material entities.
                 To meet the liquidity needs informed by the RLEN methodology,
                firms may either fully pre-position liquidity in the U.S. non-branch
                material entities or develop a mechanism for planned foreign parent
                support of any amount not pre- positioned for the successful
                execution of the U.S. strategy. Mechanisms to support readily
                available liquidity may include a term liquidity facility between
                the U.S. IHC and the foreign parent that can be drawn as needed. If
                a firm's plan relies on foreign parent support, the plan should
                include analysis of how the U.S. IHC/foreign parent facility is
                funded or buffered for by the foreign parent.
                LIQ 14. RLAP Model Time Horizon and Inter-Affiliate Transactions
                 Q. How should firms treat cash flow sources from affiliates in
                the RLAP model for models that use time periods in excess of 30
                days, given the affiliate cash flow calculation requirements in
                section 252.157(c)(2)(iv) of Regulation YY?
                 A. An RLAP model that includes time periods beyond 30 days is
                not required to adopt the affiliate cash flow calculation
                requirements in section 252.157(c)(2)(iv) of Regulation YY for
                inter-affiliate cash flows beyond 30 days. However, beyond 30 days,
                the RLAP methodology still should take into account for each of the
                U.S. IHC, U.S. IHC subsidiaries, and any branch that is a material
                entity the considerations detailed in
                [[Page 15473]]
                (A), (B), and (C) in the RLAP subsection of the Proposed Guidance.
                See Resolution Liquidity Adequacy and Positioning (RLAP) section.
                LIQ 15. U.S. Branches and Agencies Liquidity Modeling
                 Q1. Are firms required to develop a RLAP model for U.S. branches
                and agencies?
                 A1. Firms are not required to develop a RLAP model for material
                U.S. branches and agencies; however, as described in the Liquidity
                section of the Proposed Guidance, a firm should maintain a liquidity
                buffer sufficient to meet the net cash outflows for its U.S.
                branches and agencies on an aggregate basis for the first 14 days of
                a 30-day stress horizon. These expectations are consistent with the
                stress testing and liquidity buffer requirements in section
                252.157(c)(3) of Regulation YY.
                 Q2. The Proposed Guidance states that in calculating RLAP
                estimates the U.S. IHC should calculate its liquidity position with
                respect to its foreign parent, branches and agencies, and other
                affiliates separately from its liquidity position with respect to
                third parties. How should firms interpret the RLAP requirements
                since RLAP is not required for U.S. branches and agencies?
                 A2. The RLAP estimates for U.S. non-branch material entities
                should take into account how cash flows and the stand-alone
                liquidity profile may be affected by all inter-affiliate
                transactions, which may include the impact on the U.S. non-branch
                material entities from flows transacted with U.S. branches and
                agencies.
                LIQ 16. Material Service Entity Liquidity
                 Q. Is a standalone liquidity position estimate needed for
                material service entities?
                 A. For material service entities with no other operations other
                than providing services only to their affiliates and having no
                third-party debt obligations, a standalone liquidity position
                estimate is not required.
                Operational: Shared Services
                OPS SS 1. Not Consolidated
                OPS SS 2. Working Capital
                 Q1. Must working capital be maintained for third party and
                internal shared service costs?
                 A1. Where a firm maintains shared service companies to provide
                services to affiliates, working capital should be maintained in
                those entities sufficient to permit those entities to continue to
                provide services for six months or through the period of
                stabilization as required in the firm's U.S. resolution strategy.
                 Costs related to third-party vendors and inter-affiliate
                services should be captured through the working capital element of
                the MOL estimate (RLEN).
                 Q2. When does the six month working capital requirement period
                begin?
                 A2. The measurement of the six month working capital expectation
                begins upon the bankruptcy filing of the U.S. IHC. The expectation
                for maintaining the working capital is effective upon the July 2018
                submission.
                OPS SS 3. Not Consolidated
                OPS SS 4. Not Consolidated
                Operations: Payments, Clearing and Settlement
                 To the extent relevant, the PCS FAQs have been consolidated into
                the updated section of the Proposed Guidance.
                Legal Entity Rationalization and Separability
                LER 1. Data Room
                 Q. What information should be in the data room?
                 A. The Proposed Guidance addresses the data room in the section
                regarding Legal Entity Rationalization and Separability. The data
                room should contain the necessary information on discrete sales
                options to facilitate buyer due diligence. Including only a table of
                contents of information that could be provided when needed would not
                be sufficient.
                 Q2. Are firms expected to include in a data room described in
                the Proposed Guidance lists of individual employee names and
                compensation levels?
                 A2. The firm should include the necessary information to
                facilitate buyer due diligence. In the circumstance where employee
                information would be important to buyer due diligence the firm
                should demonstrate the capability to provide such information in a
                timely manner. For individual employee names and compensation, the
                data room may include a representative sample and may have
                personally identifiable information redacted.
                LER 2. Legal Entity Rationalization Criteria
                 Q. Is it acceptable to take into account business-related
                criteria, in addition to the resolution requirements, so that the
                LER Criteria can be used for both resolution planning and business
                operations purposes?
                 A. Yes, LER criteria may incorporate both business and
                resolution considerations. In determining the best alignment of
                legal entities and business lines to improve the firm's
                resolvability under different market conditions, business
                considerations should not be prioritized over resolution needs.
                LER 3. Creation of Additional Legal Entities
                 Q. Is the addition of legal entities acceptable, so long as it
                is consistent with the LER criteria?
                 A. Yes.
                LER 4. Clean Funding Pathways
                 Q1. Can you provide additional context around what is meant by
                clean lines of ownership and clean funding pathways in the legal
                entity rationalization criteria? Additionally, what types of funding
                are covered by the requirements?
                 A1. The funding pathways between the foreign parent, U.S. IHC,
                and U.S. IHC subsidiaries should minimize uncertainty in the
                provision of funds and facilitate recapitalization. Also, the
                complexity of ownership should not impede the flow of funding to a
                U.S. non-branch material entity under the firm's U.S. resolution
                strategy. Potential sources of additional complexity could include,
                for example, multiple intermediate holding companies, tenor
                mismatches, or complicated ownership structures (including those
                involving multiple jurisdictions or fractional ownerships).
                Ownership should be as clean and simple as practicable, supporting
                the U.S. strategy and actionable sales, transfers, or wind-downs
                under varying market conditions. The clean funding pathways
                expectation applies to all funding provided to a U.S. non-branch
                material entity regardless of type and should not be viewed solely
                to apply to internal TLAC.
                 Q2. The Proposed Guidance regarding legal entity rationalization
                criteria discusses ``clean lines of ownership'' and ``clean funding
                pathways.'' Does this statement mean that firms' legal entity
                rationalization criteria should require funding pathways and
                recapitalization to always follow lines of ownership?
                 A2. No. However, the firm should identify and address or
                mitigate any legal, regulatory, financial, operational, and other
                factors that could complicate the recapitalization and/or liquidity
                support of U.S. non-branch material entities.
                LER 5. Separability Options Information
                 Q. How should a firm approach inclusion of legal risk
                assessments and other buyer due diligence information into
                separability options?
                 A. The legal assessment should consider both buyer and seller
                legal aspects that could impede the timely or successful execution
                of the divestiture option. Where impediments are identified,
                mitigation strategies should be developed.
                LER 6. Market Conditions
                 Q. What is meant by the phrase ``under different market
                conditions'' in the Legal Entity Rationalization and Separability
                section of the Proposed Guidance?
                 A. The phrase ``under different market conditions'' is meant to
                ensure that a firm has a menu of divestiture options from which at
                least some could be executed under different market stresses.
                LER 7. Application of Legal Entity Rationalization Criteria
                 Q1. Which legal entities should be covered under the LER
                framework?
                 A1. The scope of a firm's LER criteria should apply to the
                entire U.S. operations.
                 Q2. To the extent a firm has a large number of similar U.S. non-
                material entities (such as single-purpose entities formed for
                Community Reinvestment Act purposes), may a firm apply its legal
                entity rationalization criteria to these entities as a group, rather
                than at the individual entity level?
                 A2. Yes.
                LER 8. Application of LER Criteria.
                 Q. Under the Proposed Guidance, is there an expectation that the
                LER criteria be applied to the legal structure outside of the U.S.
                operations (e.g., outside of the U.S. IHC or U.S. branch)?
                 A. The LER criteria serve to govern the corporate structure and
                arrangements between U.S. subsidiaries and U.S. branches in a manner
                that facilitates the resolvability of U.S. operations. The Proposed
                Guidance is not intended to govern the corporate structure in
                jurisdictions outside the U.S.
                [[Page 15474]]
                The application of the LER criteria should, among other things,
                ensure that the allocation of activities across the firm's U.S.
                branches and U.S. non-branch material entities support the firm's
                U.S. resolution strategy and minimize risk to U.S. financial
                stability in the event of resolution.
                 Moreover, LER works with other components to improve
                resolvability. For example, with regard to shared services the firm
                should identify all shared services that support identified critical
                operations, maintain a mapping of how/where these services support
                core business lines and identified critical operations, and include
                this mapping into the legal rationalization criteria and
                implementation efforts.
                Derivatives and Trading Activities
                 To the extent relevant, the derivatives and trading FAQs have
                been consolidated into the updated section of the Proposed Guidance.
                Legal
                LEG 1. Support Within the United States
                 Q. Could the Agencies clarify what further legal analysis would
                be expected regarding the impact of potential state law and
                bankruptcy law challenges and mitigants to the planned provision of
                Support?
                 A. The firms should address developments from the firm's own
                analysis of potential legal challenges regarding the Support and
                should also address any additional potential legal challenges
                identified by the Agencies in the Support within the United States
                section of the Proposed Guidance. A legal analysis should include a
                detailed discussion of the relevant facts, legal challenges, and
                Federal or State law and precedent. The analysis also should
                evaluate in detail the legal challenges identified in the Support
                within the United States section of the Proposed Guidance, any other
                legal challenges identified by the firm, and the efficacy of
                potential mitigants to those challenges. Firms should identify each
                factual assumption underlying their legal analyses and discuss how
                the analyses and mitigants would change if the assumption were not
                to hold. Moreover, the analysis need not take the form of a legal
                opinion.
                LEG 2. Contractually Binding Mechanisms
                 The Proposed Guidance states that the legal analysis described
                under the heading ``Support Within the United States'' should
                include mitigants to the potential challenges to the planned Support
                and that the plan should identify the mitigant(s) to such challenges
                that the firm considers most effective. The Proposed Guidance does
                not specifically reference consideration of a contractually binding
                mechanism. However, the following questions and answers may be
                useful to a firm that chooses to consider a contractually binding
                mechanism as a mitigant to the potential challenges to the planned
                Support.
                 Q1. Do the Agencies have any preference as to whether capital is
                down-streamed to key subsidiaries (including an IDI subsidiary) in
                the form of capital contributions vs. forgiveness of debt?
                 A1. No. The Agencies do not have a preference as to the form of
                capital contribution or liquidity support.
                 Q2. Should a contractually binding mechanism relate to the
                provision of capital or liquidity? What classes of assets would be
                deemed to provide capital vs. liquidity?
                 A2. Contractually binding mechanism is a generic term and
                includes the down-streaming of capital and/or liquidity as
                contemplated by the U.S. resolution strategy. Furthermore, it is up
                to the firm, as informed by any relevant guidance of the Agencies,
                to identify what assets would satisfy a U.S. affiliate's need for
                capital and/or liquidity.
                 Q3. Is there a minimum acceptable duration for a contractually
                binding mechanism? Would an ``evergreen'' arrangement, renewable on
                a periodic basis (and with notice to the Agencies), be acceptable?
                 A3. To the extent a firm utilizes a contractually binding
                mechanism, such mechanism, including its duration, should be
                appropriate for the firm's U.S. resolution strategy, including
                adequately addressing relevant financial, operational, and legal
                requirements and challenges.
                 Q4. Not consolidated.
                 Q5. Not consolidated.
                 Q6. The firm may need to amend its contractually binding
                mechanism from time to time resulting potentially from changes in
                relevant law, new or different regulatory expectations, etc. Is a
                firm able to do this as long as there is no undue risk to the
                enforceability (e.g., no signs of financial stress sufficient to
                unduly threaten the agreement's enforceability as a result of
                fraudulent transfer)?
                 A6. Yes, however the Agencies should be informed of the proposed
                duration of the agreement, as well as any terms and conditions on
                renewal and/or amendment. Any amendments should be identified and
                discussed as part of the firm's next U.S. resolution plan
                submission.
                 Q7. Not consolidated.
                 Q8. Should firms include a formal regulatory trigger by which
                the Agencies can directly trigger a contractually binding mechanism?
                 A8. No
                General
                 None of the general FAQs were consolidated.
                 By order of the Board of Governors of the Federal Reserve
                System, March 11, 2020.
                Margaret McCloskey Shanks,
                Deputy Secretary of the Board.
                Federal Deposit Insurance Corporation.
                 By order of the Board of Directors.
                 Dated at Washington, DC, on March 5, 2020.
                Annmarie H. Boyd,
                Assistant Executive Secretary.
                [FR Doc. 2020-05513 Filed 3-17-20; 8:45 am]
                BILLING CODE 6210-01-P
                

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