Order of Temporary Extension of Maturity Limits for Short-Term Investment Funds
| Published date | 25 March 2020 |
| Citation | 85 FR 16887 |
| Record Number | 2020-06286 |
| Section | Rules and Regulations |
| Court | The Comptroller Of The Currency Office |
Federal Register, Volume 85 Issue 58 (Wednesday, March 25, 2020)
[Federal Register Volume 85, Number 58 (Wednesday, March 25, 2020)]
[Rules and Regulations]
[Pages 16887-16888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06286]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 85, No. 58 / Wednesday, March 25, 2020 /
Rules and Regulations
[[Page 16887]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 9
Order of Temporary Extension of Maturity Limits for Short-Term
Investment Funds
AGENCY: Office of the Comptroller of the Currency, Department of
Treasury.
ACTION: Order of temporary extension of maturity limits for short-term
investment funds.
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SUMMARY: The OCC has adopted an interim final rule adding a reservation
of authority provision to the OCC's short-term investment fund (STIF)
rule (STIF Rule) for national banks acting in a fiduciary capacity. The
reservation of authority addresses the STIF Rule's limits on weighted
average portfolio maturity, weighted average portfolio life maturity,
and the method for determining those limits. The OCC has also issued an
administrative order pursuant to the reservation of authority contained
in the interim final rule. The order states that banks seeking to
comply with the STIF Rule's portfolio maturity and life limits will be
deemed to be in compliance with those requirements, if the STIF
maintains a dollar-weighted average portfolio maturity of 120 days or
less, and the STIF maintains a dollar-weighted average portfolio life
maturity of 180 days or less.
DATES: The administrative order is effective March 23, 2020, and is
applicable beginning March 21, 2020.
FOR FURTHER INFORMATION CONTACT: Patricia Dalton, Director for Asset
Management Policy, Market Risk Policy Division, Bank Supervision
Policy, (202) 649-6401, Stephanie Boccio, Asset Management Lead Expert,
Systemic Risk Identification Support and Specialty Supervision, (202)
649-6397, or Jamey Basham, Assistant Director, Chief Counsel's Office,
(202) 649-5490, for persons who are deaf or hearing impaired, TTY,
(202) 649-5597, Office of the Comptroller of the Currency, 400 7th
Street SW, Washington, DC 20219.
SUPPLEMENTARY INFORMATION: Section 9.18 of the OCC's regulations (12
CFR 9.18) sets out regulatory requirements for certain bank-managed
fiduciary investment funds that hold pooled assets which are funded
through contributions by the fund's participants. For Short-term
Investment Funds (STIFs) subject to Sec. 9.18, these requirements
include Sec. 9.18(b)(4)(iii)(B), requiring the STIF to be operated
pursuant to a written, board-approved plan under 12 CFR 9.18(b)(1) \1\
that requires the fund to maintain a dollar-weighted average portfolio
maturity of 60 days or less and a dollar-weighted average portfolio
life maturity of 120 days or less, as determined in the same manner as
is required by the Securities and Exchange Commission pursuant to Rule
2a-7 for money market mutual funds (17 CFR 270.2a-7).
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\1\ Section 9.18(b)(a) also permits the written plan to be
approved by a committee authorized by the board.
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Pursuant to Sec. 9.18(b)(4)(iv), the OCC has reserved the
authority to, among other things, issue an order temporarily extending
these limits if the OCC determines the financial markets are in a
period of market stress negatively affecting, on a temporary basis, the
ability of banks to operate in compliance with the requirements of
Sec. 9.18(b)(4)(iii)(B).
Recent events have significantly and adversely impacted global
financial markets, and the OCC is concerned about the potential effects
on STIFs operated by national banks. The spread of the Coronavirus
Disease 2019 (COVID-2019) has slowed economic activity in many
countries, including the United States. Sudden disruptions in financial
markets have put increasing liquidity pressure on money market mutual
funds, as they have been faced with redemption requests from clients
with immediate cash needs. The Board of Governor of the Federal Reserve
System, with the approval of the Secretary of the Treasury, has
authorized the Federal Reserve Bank of Boston to establish the Money
Market Mutual Fund Liquidity Facility, pursuant to section 13(3) of the
Federal Reserve Act,\2\ as a measure to ameliorate these liquidity
pressures. Although STIFs do not serve the same broad investor market
as MMMFs, the OCC remains concerned that, in light of the acute effects
the COVID-2019 virus is triggering across the markets broadly, there
may be elevated participation interest withdrawals for STIFs operated
by national banks, notwithstanding these differences between STIFs and
MMMFs. Regulatory authorities supervising other categories of banks
operating STIFs--in accordance with the legal requirements governing
those banks and incorporating the OCC's STIF rules as part of those
requirements--have conveyed similar concerns to the OCC.
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\2\ 12 U.S.C. 343(3).
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In addition to the OCC's concerns about unusual withdrawal levels,
the OCC observes that STIF investment portfolios are generally made up
of the same types of securities and investments as those held by MMMFs.
Accordingly, liquidity pressures related to the COVID-2019 virus in the
marketplace for those assets raises similar concerns for STIFs as those
presented for MMMFs. Acute market-wide disturbances in the depth of
liquidity available for a bank seeking to purchase and sell portfolio
assets to maintain a STIF's liquidity put pressure on the bank's
ability to perform these functions.
In light of these reasons and pursuant to Sec. 9.18(b)(4)(iv), the
OCC hereby determines that, effective immediately, banks seeking to
comply with the requirements of section 9.18(b)(4)(iii)(B) will be
deemed to be in compliance with that section if:
1. The STIF maintains a dollar-weighted average portfolio maturity
of 120 days or less, as determined in the same manner as is required by
the Securities and Exchange Commission pursuant to Rule 2a-7 for money
market mutual funds (17 CFR 270.2a-7);
2. The STIF maintains a dollar-weighted average portfolio life
maturity of 180 days or less, as determined in the same manner as is
required by the Securities and Exchange Commission pursuant to Rule 2a-
7 for money market mutual funds (17 CFR 270.2a-7);
3. The bank makes a determination that using these temporary limits
would be in the best interests of the STIF under applicable law. This
determination may
[[Page 16888]]
be made under the bank's standard procedures for making such
determinations in regards to the best interests of its collective
investment funds; and
4. The bank must make any necessary amendments to the written plan
for the STIF to reflect these temporary changes.
5. The OCC also hereby determines that the relief provided by this
administrative order terminates on July 20, 2020, unless the OCC
revises this order to provide otherwise before that date.
By authority of the Comptroller of the Currency.
Dated: March 21, 2020.
Morris R. Morgan,
First Deputy Comptroller, Comptroller of the Currency.
[FR Doc. 2020-06286 Filed 3-23-20; 11:15 am]
BILLING CODE 4810-01-P
