Resolution Plans Required
| Published date | 14 May 2019 |
| Citation | 84 FR 21600 |
| Record Number | 2019-08478 |
| Section | Proposed rules |
| Court | Federal Deposit Insurance Corporation |
Federal Register, Volume 84 Issue 93 (Tuesday, May 14, 2019)
[Federal Register Volume 84, Number 93 (Tuesday, May 14, 2019)]
[Proposed Rules]
[Pages 21600-21631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08478]
[[Page 21599]]
Vol. 84
Tuesday,
No. 93
May 14, 2019
Part III Federal Reserve System-----------------------------------------------------------------------12 CFR Part 243Federal Deposit Insurance Corporation-----------------------------------------------------------------------
12 CFR Part 381 Resolution Plans Required; Proposed Rule
Federal Register / Vol. 84 , No. 93 / Tuesday, May 14, 2019 /
Proposed Rules
[[Page 21600]]
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FEDERAL RESERVE SYSTEM
12 CFR Part 243
[Regulation QQ; Docket No. R-1660]
RIN 7100-AF47
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 381
RIN 3064-AE93
Resolution Plans Required
AGENCY: Board of Governors of the Federal Reserve System (Board) and
Federal Deposit Insurance Corporation (Corporation).
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Board and the Corporation (together, the agencies) are
inviting comment on a proposal to amend and restate the jointly issued
regulation (the Rule) implementing the resolution planning requirements
of section 165(d) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the Dodd-Frank Act). The proposal is intended to
reflect improvements identified since the Rule was finalized in
November 2011 and to address amendments to the Dodd-Frank Act made by
the Economic Growth, Regulatory Relief, and Consumer Protection Act
(EGRRCPA). The proposed amendments to the Rule include a proposal by
the Board to establish risk-based categories for determining the
application of the resolution planning requirement to certain U.S. and
foreign banking organizations, consistent with section 401 of EGRRCPA,
and a proposal by the agencies to extend the default resolution plan
filing cycle, allow for more focused resolution plan submissions, and
improve certain aspects of the Rule.
DATES: Comments should be received by June 21, 2019.
ADDRESSES:
Board: You may submit comments, identified by Docket No. R-1660 and
RIN No. 7100-AF 47, 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 the
docket number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Ann 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.cfm as submitted, unless modified for technical reasons or
to remove personally identifiable information at the commenter's
request. Accordingly, your comments will not be edited to remove any
identifying or contact information. Public comments may also be viewed
electronically or in paper in Room 146, 1709 New York Avenue NW,
Washington, DC 20006, between 9:00 a.m. and 5:00 p.m. on weekdays.
Corporation: You may submit comments, identified by RIN 3064-AE93,
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-AE93 on the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments/RIN 3064-AE93, Federal Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
Hand Delivery/Courier: Comments may be hand delivered to
the guard station at the rear of the 550 17th Street Building (located
on F Street) on business days between 7 a.m. and 5 p.m. All comments
received must include the agency name (FDIC) and RIN 3064-AE93.
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: Michael Hsu, Associate Director, (202) 452-4330, Catherine
Tilford, Assistant Director, (202) 452-5240, and Kathryn Ballintine,
Lead Financial Institution Policy Analyst, (202) 452-2555, Division of
Supervision and Regulation; or Laurie Schaffer, Associate General
Counsel, (202) 452-2272, Jay Schwarz, Special Counsel, (202) 452-2970,
or Steve Bowne, Counsel, (202) 452-3900, Legal Division, Board of
Governors of the Federal Reserve System, 20th and C Streets NW,
Washington, DC 20551. For users of Telecommunications Device for the
Deaf (TDD), (202) 263-4869.
Corporation: Lori J. Quigley, Deputy Director, Institutions
Monitoring Group, [email protected]; Robert C. Connors, Associate
Director, Large Bank Supervision Branch, [email protected], Division of
Risk Management Supervision; Alexandra Steinberg Barrage, Associate
Director, Resolution Strategy and Policy, Office of Complex Financial
Institutions, [email protected]; David N. Wall, Assistant General
Counsel, [email protected]; Pauline E. Calande, Senior Counsel,
[email protected]; Celia Van Gorder, Supervisory Counsel,
[email protected], or Dena S. Kessler, Counsel, [email protected],
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street
NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Overview of the Resolution Planning Process to Date
III. Overview of the Resolution Plan Proposal
A. Identification of Firms Subject to the Resolution Planning
Requirement and Filing Groups
B. Resolution Plan Content
C. Critical Operations Methodology and Reconsideration Process
D. Clarifications to the Rule
E. Alternative Scoping and Tailoring Criteria
IV. Transition Period
V. Impact Analysis
VI. Regulatory Analysis
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Riegle Community Development and Regulatory Improvement Act
of 1994
D. Solicitation of Comments on the Use of Plain Language
I. Introduction
Section 165(d) of the Dodd-Frank Act and the jointly-issued Rule
require certain financial companies (covered companies) to report
periodically to the agencies their plans for rapid and orderly
resolution under the U.S. Bankruptcy Code in the event of material
financial distress or failure. 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. The Dodd-Frank Act and the Rule require a covered
company to submit a resolution plan for review by the agencies. The
resolution planning process requires covered companies to demonstrate
that they have adequately assessed the challenges that their structures
and business activities pose to a rapid and orderly resolution in the
event of material financial distress or failure and that they have
taken action to address those issues, including through the development
of appropriate capabilities by those firms more likely to pose a risk
to U.S. financial stability.
[[Page 21601]]
Among other requirements, the Rule requires each covered company to
submit an annual resolution plan that includes a strategic analysis of
the plan's components, a description of the range of specific actions
the covered company proposes to take in resolution, and descriptions of
the covered company's organizational structure, material entities, and
interconnections and interdependencies. The Rule also requires that
resolution plans include a confidential section that contains
confidential supervisory and proprietary information submitted to the
agencies, and a separate section that the agencies make available to
the public.
II. Overview of the Resolution Planning Process to Date
The implementation of the Rule has been an iterative process aimed
at strengthening the resolvability and resolution planning capabilities
of covered companies. Since the finalization of the Rule in 2011, the
agencies have reviewed multiple resolution plan submissions and have
provided feedback and guidance to assist the covered companies in their
development of subsequent resolution plan submissions. As part of the
iterative process, the agencies have increasingly tailored feedback and
guidance to take into account characteristics of covered companies
including their size, business models, and risk profiles, and, for a
foreign-based organization, the scope of operations in the United
States. Based on these factors, the agencies have allowed certain
covered companies to file resolution plans containing a subset of a
full resolution plan's informational content.
The resolution plans' informational content and strategic analysis
and the covered companies' capabilities to execute their resolution
strategies have developed over time. As both the covered companies'
submissions and the agencies' feedback have matured over several
resolution plan cycles, the Rule's annual filing requirement has been a
challenging constraint for both the agencies and covered companies and
has become less necessary. The agencies have noted that the annual
filing cycle does not always permit sufficient time for the review of
resolution plan submissions and the development of meaningful feedback
and guidance. The agencies also recognize that covered companies
require time to understand and address the feedback and to incorporate
any changes into their next resolution plan filings. In recognition of
the challenges associated with an annual resolution plan filing, the
agencies have extended plan filing deadlines over the last few
submission cycles to provide at least two years between resolution plan
filings.
The resolution planning process and other resolution-related
regulatory changes have focused the covered companies on developing
both resolution plan informational content, including strategic
analysis, and the capabilities to improve their resolvability. Given
the complexity of their operations, the U.S. global systemically
important banks (U.S. GSIBs), in particular, have taken significant and
material actions to address their resolvability. Over the past several
years, these covered companies have enhanced their resolution
strategies and addressed key resolution vulnerabilities by modelling
resolution liquidity and capital needs, rationalizing legal structures,
developing governance mechanisms to increase the likelihood of timely
entry into resolution, and more clearly identifying and mitigating
organizational dependencies, among other changes. Consistent with the
agencies' feedback, firms have continued to build upon their respective
capabilities to support their resolvability amidst ongoing changes in
their businesses and in markets. If the agencies jointly determine that
a resolution plan is not credible or would not facilitate an orderly
resolution, the covered company must remedy the deficiencies in the
resolution plan jointly identified by the agencies. If the covered
company fails to adequately remedy the deficiencies within the time
period specified by the agencies, the agencies may jointly impose more
stringent prudential requirements on the company until the deficiencies
are remedied.\1\
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\1\ 12 U.S.C. 5365(d)(4), (5); 12 CFR 243.5(b), .6(a); 12 CFR
381.5(b), .6(a).
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EGRRCPA revised the resolution planning requirement as part of the
changes the law made to application of the enhanced prudential
standards in section 165 of the Dodd-Frank Act. Specifically, EGRRCPA
raised the $50 billion minimum asset threshold for general application
of the resolution planning requirement to $250 billion in total
consolidated assets, and provides the Board with discretion to apply
the resolution planning requirement to firms with total consolidated
assets of $100 billion or more, but less than $250 billion in total
consolidated assets.\2\ The threshold increase occurs in two stages.
Immediately on the date of enactment, firms with total consolidated
assets of less than $100 billion (for foreign banking organizations,
$100 billion in total global assets) were no longer subject to the
resolution planning requirement.
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\2\ EGRRCPA also provides that any bank holding company,
regardless of asset size, that has been identified as a U.S. GSIB
under the Board's U.S. GSIB surcharge rule shall be considered a
bank holding company with $250 billion or more in total consolidated
assets for purposes of the application of the resolution planning
requirement. EGRRCPA section 401(f).
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Eighteen months after the date of EGRRCPA's enactment, the
threshold is raised to $250 billion in total consolidated assets.
However, EGRRCPA provides the Board with the authority to apply
resolution planning requirements to firms with $100 billion or more and
less than $250 billion in total consolidated assets. Specifically,
under section 165(a)(2)(C) of the Dodd-Frank Act, as revised by
EGRRCPA, the Board may, by order or rule, apply the resolution planning
requirement to any firm or firms with total consolidated assets of $100
billion (for foreign banking organizations, $100 billion in total
global assets) or more.\3\
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\3\ 12 U.S.C. 5365(a); EGRRCPA section 401(a)(1)(B)(iii) (to be
codified at 12 U.S.C. 5365(a)(2)(C)). See also EGRRCPA section
401(g).
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Consistent with section 401 of EGRRCPA, the Board has issued two
separate proposals to revise the framework for determining the
prudential standards that should apply to large U.S. banking
organizations (domestic tailoring proposal) \4\ and to large foreign
banking organizations (FBO tailoring proposal \5\ and together with the
domestic tailoring proposal, the tailoring proposals). Among other
provisions, the tailoring proposals identify distinct standards
applicable to firms for the purpose of calibrating requirements. The
tailoring categories established in the tailoring proposals \6\ are as
follows:
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\4\ Prudential Standards for Large Bank Holding Companies and
Savings and Loan Holding Companies (Proposed Rule), 83 FR 61408
(November 29, 2018).
\5\ Prudential Standards for Large Foreign Banking
Organizations; Revisions to Proposed Prudential Standards for Large
Domestic Bank Holding Companies and Savings and Loan Holding
Companies (April 8, 2019), https://www.federalreserve.gov/newsevents/pressreleases/files/foreign-bank-fr-notice-1-20190408.pdf.
\6\ In the case of capital standards for foreign banking
organizations, categories would apply based on the characteristics
of the firm's U.S. intermediate holding company. That methodology is
not relevant to this proposal.
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Category I standards would apply to:
[cir] U.S. GSIBs,
Category II standards would apply to:
[[Page 21602]]
[cir] U.S. firms that are not subject to Category I standards with
(a) $700 billion or more in total consolidated assets, or (b) $100
billion or more in total consolidated assets that have $75 billion or
more in the following risk-based indicator: Cross-jurisdictional
activity, and
[cir] Foreign banking organizations with (a) $700 billion or more
in combined U.S. assets,\7\ or (b) $100 billion or more in combined
U.S. assets that have $75 billion or more in the following risk-based
indicator measured based on the combined U.S. operations: \8\ Cross-
jurisdictional activity,\9\
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\7\ Combined U.S. assets means the sum of the consolidated
assets of each top-tier U.S. subsidiary of the foreign banking
organization (excluding any section 2(h)(2) company as defined in
section 2(h)(2) of the Bank Holding Company Act (12 U.S.C.
1841(h)(2)), if applicable) and the total assets of each U.S. branch
and U.S. agency of the foreign banking organization, as reported by
the foreign banking organization on the FR Y-7Q.
\8\ The combined U.S. operations of a foreign banking
organization include any U.S. subsidiaries (including any U.S.
intermediate holding company, which would reflect on a consolidated
basis any U.S. depository institution subsidiaries thereof), U.S.
branches, and U.S. agencies. In addition, for a foreign banking
organization that is not required to form a U.S. intermediate
holding company, combined U.S. operations refer to its U.S. branch
and agency network and the U.S. subsidiaries of the foreign banking
organization (excluding any section 2(h)(2) company as defined in
section 2(h)(2) of the Bank Holding Company Act (12 U.S.C.
1841(h)(2), if applicable) and any subsidiaries of such U.S.
subsidiaries.
\9\ Cross-jurisdictional activity would be measured excluding
transactions with non-U.S. affiliates.
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Category III standards would apply to:
[cir] U.S. firms that are not subject to Category I or Category II
standards with (a) $250 billion or more in total consolidated assets,
or (b) $100 billion or more in total consolidated assets that have $75
billion or more in any of the following risk-based indicators: Nonbank
assets, weighted short-term wholesale funding, or off-balance sheet
exposure, and
[cir] Foreign banking organizations that are not subject to
Category II standards with (a) $250 billion or more in combined U.S.
assets, or (b) $100 billion or more in combined U.S. assets that have
$75 billion or more in any of the following risk-based indicators
measured based on the combined U.S. operations: Nonbank assets,
weighted short-term wholesale funding, or off-balance sheet exposure,
and
Category IV standards would apply to:
[cir] U.S. firms with $100 billion or more in total consolidated
assets that do not meet any of the thresholds specified for Categories
I through III, and
[cir] Foreign banking organizations with $100 billion or more in
combined U.S. assets that do not meet any of the thresholds specified
for Categories II or III.
These categories form the basis for this proposal's framework for
imposing resolution planning requirements, with adjustments where
appropriate. The categories would also be used to tailor the content of
the resolution planning requirements, taking into account covered
companies' particular geographical footprints, operations, and
activities.
III. Overview of the Resolution Plan Proposal
The agencies are proposing modifications to the Rule, which are
intended to streamline, clarify, and improve the resolution plan
submission and review processes and timelines. The agencies are seeking
to achieve three key goals with the proposal: First, the proposal is
intended to improve efficiency and balance burden by allowing more
focused full resolution plan submissions, as well as periodic targeted
resolution plan submissions for some filers, and reduced resolution
plans for the remaining filers. Second, the proposal would establish by
rule a biennial filing cycle for the U.S. GSIBs and balance burden by
extending the filing cycle to every three years for all other filers.
Third, the proposal would improve certain aspects of the Rule, such as
the process for identifying critical operations, based on the agencies'
experience in applying the Rule over time. These changes are expected
to permit covered companies to build on previous work more effectively.
Specifically, the agencies' proposal:
Divides the firms that have resolution planning
requirements, including those identified by the Board pursuant to
EGRRCPA, into groups of filers for plan content tailoring purposes,
Enhances transparency and provides greater predictability
by formalizing the current reduced resolution plan category,
Establishes multi-year submission cycles for each group of
filers,
Introduces a new category of plans distinguished by
informational content,
Supersedes the existing tailored plan category, and
Updates certain procedural elements of the Rule.
A. Identification of Firms Subject to the Resolution Planning
Requirement and Filing Groups
1. Firms Subject to the Resolution Planning Requirement
Following EGRRCPA, three types of firms are statutorily subject to
the resolution planning requirement:
U.S. and foreign banking organizations with $250 billion
or more in total consolidated assets,
U.S. banking organizations identified as U.S. GSIBs, and
Any designated nonbank financial companies that the
Financial Stability Oversight Council (Council) has determined under
section 113 of the Dodd-Frank Act should be supervised by the Board.
In addition and as discussed above, following EGRRCPA, the Board
has the authority to apply the resolution planning requirement to firms
with $100 billion or more and less than $250 billion in total
consolidated assets.\10\ The risk-based indicators established in the
tailoring proposals to define firms subject to Category II and III
standards are important indicia of a firm's complexity and serve to
gauge the likely impact of a firm's failure on U.S. financial
stability. Therefore, the Board proposes to use these risk-based
indicators to identify those U.S. firms with total consolidated assets
equal to $100 billion or more and less than $250 billion to be subject
to a resolution planning requirement. Consistent with the domestic
tailoring proposal, the Board is proposing to apply resolution planning
requirements to U.S. bank holding companies with (a) total consolidated
assets equal to $100 billion or more and less than $250 billion and (b)
$75 billion or more in any of the following risk-based indicators:
Cross-jurisdictional activity, nonbank assets, weighted short-term
wholesale funding, or off-balance-sheet exposure. Consistent with the
FBO tailoring proposal, the Board is proposing to apply resolution
planning requirements to foreign banking organizations \11\ with (a)
total global assets equal to $100 billion or more and less than $250
billion, (b) combined U.S. assets equal to $100 billion or more, and
(c) $75
[[Page 21603]]
billion or more in any of the risk-based indicators measured based on
combined U.S. operations.
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\10\ 12 U.S.C. 5365(a); EGRRCPA section 401(a)(1)(B)(iii) (to be
codified at 12 U.S.C. 5365(a)(2)(C)). See also EGRRCPA section
401(g).
\11\ For purposes of the Rule and the proposal, a foreign
banking organization is a foreign bank that has a banking presence
in the United States by virtue of operating a branch, agency, or
commercial lending subsidiary in the United States or controlling a
bank in the United States; or any company of which the foreign bank
is a subsidiary. See 12 CFR 243.2(i); 12 CFR 381.2(i); Sec.
____.2(n) of the proposal.
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In addition, the agencies propose to use the risk-based indicators
to divide U.S. and foreign firms into groups for the purposes of
determining the frequency and informational content of resolution plan
filings. For a summary of the proposal's resolution plan filing
categories, please see the Resolution Plan Filing Groups visual below.
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\12\ Please see the accompanying visual ``Proposed Resolution
Plan Submission Dates'' for a visualization of proposed future
submissions.
\13\ Firms subject to Category I standards would be the U.S.
GSIBs. Any future Council-designated nonbank would file full and
targeted plans on a two-year cycle, unless the agencies jointly
determine the firm should file full and targeted plans on a three-
year cycle.
\14\ Firms subject to Category II standards would be: (1) U.S.
firms with (a) >=$700b total consolidated assets; or (b) >=$100b
total consolidated assets with >=$75b in cross-jurisdictional
activity and (2) foreign banking organizations (FBOs) with (a)
>=$700b combined U.S. assets; or (b) >=$100b combined U.S. assets
with >=$75b in cross-jurisdictional activity.
\15\ Firms subject to Category III standards would be: (1) U.S.
firms with (a) >=$250b and =$100b total consolidated assets with >=$75b in nonbank assets,
weighted short-term wholesale funding (wSTWF), or off-balance sheet
exposure and (2) FBOs with (a) >=$250b and =$100b combined U.S. assets with >=$75b in nonbank
assets, wSTWF, or off-balance sheet exposure.
\16\ Other FBOs subject to resolution planning pursuant to
statute are FBOs with >=$250b global consolidated assets that are
not subject to Category II or Category III standards.
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BILLING CODE 6210-01-P
[GRAPHIC] [TIFF OMITTED] TP14MY19.129
BILLING CODE 6210-01-C
U.S. Covered Companies With $100 Billion or More and Less Than $250
Billion in Total Consolidated Assets
While the failure of some U.S. firms with $100 billion or more and
less than $250 billion in total consolidated assets may not pose a
significant threat to U.S. financial stability, the nature of an
individual firm's particular activities and organizational footprint
may present significant challenges to an orderly resolution. The
thresholds and risk-based indicators identified in the categories above
are designed to take these challenges and complexities into account.
The Board is proposing to apply a uniform threshold of $75 billion for
each of these risk-based indicators, based on the degree of
concentration this amount would represent for each firm and the
proportion of the risk factor among all U.S. firms with $100 billion or
more in total consolidated assets that would be included by the
threshold. In each case, a threshold of $75 billion would represent at
least 30 percent and as much as 75 percent of total consolidated assets
for U.S. firms with $100 billion or more and less than $250 billion in
total consolidated assets. Setting the indicators at $75 billion would
also ensure that firms that account for the vast majority--over 85
percent--of the total amount of each risk factor among all U.S.
depository institution holding companies with $100 billion or more in
total consolidated assets would be subject to resolution planning
requirements that address the associated challenges these factors may
pose to orderly resolution. This would facilitate consistent treatment
of these challenges across firms.
[[Page 21604]]
For example, where a firm is heavily engaged in cross-
jurisdictional activity, that activity increases operational
complexity. It may be more difficult to resolve or unwind the firm's
positions due to the multiple jurisdictions and regulatory authorities
involved and potential legal or regulatory barriers to transferring
financial resources across borders. The proposal would thus continue to
apply resolution planning requirements to U.S. firms with $75 billion
or more in cross-jurisdictional activity.
Similarly, bank holding companies with significant nonbank assets
are more likely to be engaged in activities such as prime brokerage, or
complex derivatives and capital markets activities. These activities
can pose risks to the financial system and, if a firm has not engaged
in planning to address these particular challenges, it is less likely
the firm's resolution would proceed in an orderly manner without unduly
impacting other firms. Moreover, certain of these activities may not be
permitted in insured depository institutions because of their risk and
tend to be conducted in legal entities that are resolved through
bankruptcy, making the resolution planning requirement more relevant.
The Board proposes to continue to apply resolution planning
requirements to U.S. firms with this risk-based indicator. Continued
resolution planning may increase the likelihood that any complex
capital markets, securities, or derivatives activities could be
resolved in an orderly manner.
In the 2008 financial crisis, it was apparent that liquidity
stresses can lead to solvency challenges in short order if not
addressed. Where a firm is particularly reliant on short-term funding
sources, it may be more vulnerable to large-scale funding runs or
``fire sale'' effects on asset prices. The proposal would continue to
apply resolution planning requirements to U.S. firms with higher levels
of potential liquidity vulnerability, as measured by the firm's
weighted short-term wholesale funding. Weighted short-term wholesale
funding is a measure of liquidity vulnerability, as reliance on short-
term, generally uninsured funding from highly sophisticated
counterparties can create vulnerability to large-scale funding runs.
Specifically, banking organizations that fund long-term assets with
short-term liabilities from financial intermediaries like pension funds
and money market mutual funds may need to rapidly sell less liquid
assets to maintain their operations in a time of stress. This can lead
to a sudden drop in asset prices that may, in turn, lead to rapid
deterioration in the firm's financial condition and negatively impact
broader financial stability. Through the resolution plan development
process, the agencies expect that firms will develop and maintain
robust liquidity measurement and risk management processes (including
robust capabilities to measure and manage liquidity needs for those
firms whose failure is more likely to pose a risk to U.S. financial
stability), with the goal of leaving firms better positioned to manage
liquidity stresses in the event of resolution, reducing negative
effects on U.S. financial stability.
Where a firm's activities result in large off-balance sheet
exposure, the firm may be more vulnerable to significant draws on
capital and liquidity in times of stress. In the 2008 financial crisis,
for example, vulnerabilities at individual firms were exacerbated by
margin calls on derivative exposures, calls on commitments, and support
provided to sponsored funds. Successful execution of a resolution
strategy depends in part on there being sufficient capital and
liquidity resources to execute the firm's strategy. The proposal would
continue to apply resolution planning requirements to U.S. firms with
this risk-based indicator. Through the resolution planning submission
process, firms whose failure is more likely to pose risk to U.S.
financial stability are expected to develop a more robust capacity to
measure capital and liquidity needs for resolution and a strategy to
deploy financial resources as needed, and to maintain the capabilities
to measure capital and liquidity needs.
Question 1: What would be the advantages and disadvantages of
having similar applicable resolution planning requirements for bank
holding companies with total consolidated assets of $100 billion or
more based on the proposed categories? What would be the advantages and
disadvantages of having different standards?
Question 2: For purposes of the Board's discretion to apply the
resolution planning requirement to U.S. firms with total consolidated
assets of $100 billion or more, but less than $250 billion in total
consolidated assets, what are the advantages and disadvantages of the
proposed risk-based indicators? What different indicators should the
Board use, and why?
Question 3: For purposes of the Board's discretion to apply the
resolution planning requirement to U.S. firms with total consolidated
assets of $100 billion or more, but less than $250 billion in total
consolidated assets, at what level should the threshold for each
indicator be set, and why? Commenters are encouraged to provide data
supporting their recommendations.
Question 4: For purposes of the Board's discretion to apply the
resolution planning requirements to U.S. firms with total consolidated
assets of $100 billion or more, but less than $250 billion in total
consolidated assets, the Board is considering whether Category II
standards should apply based on a firm's weighted short-term wholesale
funding, nonbank assets, and off-balance sheet exposure, using a higher
threshold than the $75 billion that would apply for Category III
standards, in addition to the thresholds discussed above based on asset
size and cross-jurisdictional activity. For example, a firm could be
subject to Category II standards if one or more of these indicators
equaled or exceeded a level such as $100 billion or $200 billion. A
threshold of $200 billion would represent at least 30 percent and as
much as 80 percent of total consolidated assets for firms with between
$250 billion and $700 billion in assets. If the Board were to adopt
additional indicators for purposes of identifying firms that should be
subject to Category II standards, at what level should the threshold
for each indicator be set, and why? Commenters are encouraged to
provide data supporting their recommendations.
When a firm does not have one of the risk-based indicators listed
above and its total asset size is less than $250 billion, it is less
likely that the firm's failure would present a risk of serious adverse
effects on U.S. financial stability. In these instances, requiring a
plan for rapid and orderly resolution in bankruptcy would impose burden
without sufficient corresponding benefit. Accordingly, under the
proposal, resolution planning requirements would no longer apply to
U.S. firms with total consolidated assets of $100 billion or more and
less than $250 billion that do not have any of the risk-based factors
noted above. Based on their experience of reviewing resolution plans
for firms in this category, the agencies have not identified
deficiencies or shortcomings that required remediation.
Foreign-Based Covered Companies With $100 Billion or More and Less Than
$250 Billion in Total Global Assets
Under the proposal, the Board is proposing to apply resolution
planning requirements to foreign banking organizations with (a) total
global assets equal to $100 billion or more and less
[[Page 21605]]
than $250 billion, (b) combined U.S. assets equal to $100 billion or
more, and (c) $75 billion or more in any of the following risk-based
indicators measured based on combined U.S. operations: Cross-
jurisdictional activity, nonbank assets, weighted short-term wholesale
funding, or off-balance-sheet exposure. For the reasons described above
with respect to domestic firms and as further discussed below in the
triennial full filers section, the Board is proposing to use the risk-
based indicators to determine whether a foreign banking organization
with a significant U.S. footprint should be subject to resolution
planning.
Under the proposal, the Board, however, would no longer require
resolution plan submissions from foreign banking organizations with
total global assets equal to $100 billion or more and less than $250
billion where (a) the firm has combined U.S. assets below $100 billion
or (b) the firm does not have $75 billion or more in any of the risk-
based indicators measured based on combined U.S. operations. The
majority of foreign banking organizations with total global assets less
than $250 billion have limited U.S. activities and more limited
interconnections with other U.S. market participants. Generally, such
filers are likely to be foreign banking organizations with limited U.S.
banking operations primarily conducted in a branch, which would not be
resolved through bankruptcy. In the view of the Board, continuing to
require even limited scope resolution plan submissions from this set of
foreign banking organizations absent a significant amount of U.S.
assets or any of the risk-based indicators does not seem warranted
given the lower probability that the failure of these institutions
would threaten U.S. financial stability.
Exiting Covered Company Status
The proposal would update the methodology for ascertaining when a
firm ceases to be a covered company. With respect to a decrease in
assets, under the proposal, a U.S. firm would cease to be a covered
company when its total consolidated assets are less than $250 billion
based on total consolidated assets for each of the four most recent
calendar quarters (and it is not otherwise subject to Category II or
Category III standards based on the risk-based indicators identified
above). A foreign banking organization that files quarterly reports on
Form FR Y-7Q similarly would be assessed on the basis of its total
global assets for each of the four most recent calendar quarters. A
foreign banking organization that files the Y-7Q report annually rather
than quarterly would be assessed based on its total global assets over
two consecutive years. The agencies would retain the discretion to
jointly determine that a firm is no longer a covered company at an
earlier time than it would be pursuant to its quarterly or annual
reports. Firms that cease to be, or to be treated as, bank holding
companies or that are de-designated by the Council for supervision by
the Board are no longer covered companies and do not have any further
resolution planning requirements as of the effective date of the
applicable action unless there is a subsequent change to their status.
2. Filing Groups
The proposal divides covered companies required to file resolution
plans into three groups of filers, commensurate with the potential
impact of such companies' failure on U.S. financial stability. The
proposal differentiates, for each group of filers, the resolution plan
filing cycle length and information content requirements. The three
groups of resolution plan filers are defined as: (a) Biennial filers;
(b) triennial full filers; and (c) triennial reduced filers. Under the
proposal, all covered companies would have a July 1 submission date, in
place of the current division between July 1 and December 31. This
change is intended to streamline the overall resolution planning
framework.
Biennial Filers
The biennial filers in the proposal comprise firms subject to
Category I standards, or U.S. GSIBs, which are the largest, most
systemically important U.S. bank holding companies, as well as any
nonbank financial company supervised by the Board that has not been
jointly designated as a triennial full filer by the agencies. Any such
designation of a nonbank financial company would be made taking into
account the relevant facts and circumstances, including the degree of
systemic risk posed by the particular covered company's failure. The
failure of a firm in this group would pose the most serious threat to
U.S. financial stability, and accordingly the proposal provides that
this group be subject to the most stringent resolution planning
requirements in terms of both submission frequency and information
content. Under the methodology in the U.S. GSIB surcharge rule,\17\
eight U.S. bank holding companies are currently identified as U.S.
GSIBs,\18\ and would therefore become subject to the proposed
resolution planning requirements for this group.
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\17\ 12 CFR part 217, subpart H.
\18\ Bank of America Corporation; The Bank of New York Mellon
Corporation; Citigroup, Inc.; The Goldman Sachs Group, Inc.;
JPMorgan Chase & Co.; Morgan Stanley; State Street Corporation; and
Wells Fargo & Company.
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For a biennial filer, the proposal would require submission of a
resolution plan every two years, alternating between a full resolution
plan, subject to the waiver option detailed below, and a targeted
resolution plan, described below. Given that the U.S. GSIBs' resolution
plans have matured over time and that these firms have taken meaningful
steps to develop the foundational capabilities necessary for the
implementation of their resolution strategies, the agencies have
determined that a two-year filing cycle is appropriate.
Triennial Full Filers
The proposal would create a second filing group, triennial full
filers, comprising firms subject to Category II or III standards, as
well as any nonbank financial company supervised by the Board that has
been designated as a triennial full filer by the agencies. As indicated
above, the agencies' designation of a nonbank financial company's plan
type would take into account the relevant facts and circumstances.
Triennial full filers would include any of the following firms that do
not meet the criteria to be biennial filers:
U.S. firms with $250 billion or more in total consolidated
assets,
U.S. firms with total consolidated assets of $100 billion
or more and less than $250 billion that have $75 billion or more in any
of the following risk-based indicators: Cross-jurisdictional activity,
nonbank assets, weighted short-term wholesale funding, or off-balance
sheet exposure,
Foreign banking organizations with $250 billion or more in
combined U.S. assets, and
Foreign banking organizations with $100 billion or more
and less than $250 billion in combined U.S. assets that have $75
billion or more in any of the following risk-based indicators measured
based on combined U.S. operations: Cross-jurisdictional activity,
nonbank assets, weighted short-term wholesale funding, or off-balance
sheet exposure.
Consistent with the tailoring proposals, the agencies would also
consider the level of cross-jurisdictional activity, nonbank assets,
weighted short-term wholesale funding, and off-balance
[[Page 21606]]
sheet exposure levels of a foreign banking organization's U.S.
operations to determine the applicable filing group. The agencies
propose to apply a uniform threshold of $75 billion for each of these
risk-based indicators. A threshold of $75 billion would represent at
least 30 percent and as much as 75 percent of the size of the U.S.
operations of a foreign banking organization with combined U.S. assets
equal to $100 billion or more and less than $250 billion. The Board
proposed a $75 billion threshold for these indicators in the tailoring
proposals. Setting the thresholds for these risk-based indicators at
$75 billion would ensure that domestic banking organizations and the
U.S. operations of foreign banking organizations that account for the
vast majority--over 70 percent--of the total amount of each risk-based
indicator would be subject to resolution planning requirements that
account for the risks associated with these indicators.
For example, foreign banking organizations with U.S. operations
that engage in significant cross-jurisdictional activity \19\ may
present increased operational complexities for resolution. Where
multiple jurisdictions and regulatory authorities are involved, there
could be further legal or regulatory barriers preventing transfer of
financial resources across borders. The agencies propose that foreign
banking organizations with $75 billion or more in cross-jurisdictional
activity (i.e., foreign banking organizations subject to Category II
standards) be triennial full filers in order to understand how these
firms would address these challenges in resolution.
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\19\ Consistent with the domestic tailoring proposal, cross-
jurisdictional activity for U.S. firms would be defined as the sum
of cross jurisdictional assets and liabilities, as each is reported
on the Banking Organization Systemic Risk Report (FR Y-15).
Consistent with the FBO tailoring proposal, a foreign banking
organization would measure cross-jurisdictional activity as the sum
of the cross-jurisdictional assets and liabilities of its combined
U.S. operations excluding intercompany liabilities and
collateralized intercompany claims. As discussed in more detail in
the FBO tailoring proposal, cross-jurisdictional activity would be
measured excluding cross-jurisdictional liabilities to non-U.S.
affiliates and cross-jurisdictional claims on non-U.S. affiliates to
the extent that these claims are secured by eligible financial
collateral.
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Similarly, foreign banking organizations with significant nonbank
assets may have increased operational complexity that could present
challenges to resolution. Specifically, banking organizations with
significant investments in nonbank subsidiaries are more likely to have
complex corporate structures, inter-affiliate transactions, and funding
relationships. In a resolution scenario, it may be more challenging to
resolve these activities in an orderly manner without unduly impacting
other firms.
Additionally, nonbank activities may involve a broader range of
risks than those associated with banking activities, and can increase
interconnectedness with other financial market participants, presenting
increased risks to the financial system. If a firm is not engaged in
planning to address these challenges, the firm's resolution may be more
difficult. The distress or failure of a nonbank subsidiary could also
be destabilizing to the U.S. operations of a foreign banking
organization and to the foreign banking organization itself, causing
counterparties and creditors to lose confidence in its global
operations. The agencies propose that firms with this risk-based
indicator be triennial full filers as resolution planning may increase
the likelihood that capital markets, securities, or derivatives
activities could be resolved in an orderly manner.
In the 2008 financial crisis, liquidity stresses resulted in
solvency challenges for firms. Where the U.S. operations of a foreign
banking organization is particularly reliant on short-term, generally
uninsured funding from sophisticated counterparties such as investment
funds, these operations may be more vulnerable to large-scale funding
runs. In particular, foreign banking organizations with U.S. operations
that fund long-term assets with short-term liabilities from financial
intermediaries such as investment funds may need to rapidly sell less
liquid assets to meet withdrawals and maintain their operations in a
time of stress, which they may be able to do only at ``fire sale''
prices. Such asset fire sales can cause rapid deterioration in a
foreign banking organization's financial condition and may adversely
affect U.S. financial stability by driving down asset prices across the
market. The agencies propose that firms with this risk-based indicator
be triennial full filers since the development and maintenance of
liquidity measurement and risk management may result in the firms being
better positioned to manage liquidity stresses in the event of
resolution.
Where a firm's activities result in large off-balance sheet
exposure, the firm's customers or counterparties may be exposed to a
risk of loss or suffer a disruption in the provision of services. The
firm may also be more vulnerable to significant future draws on
liquidity, particularly in times of stress. In the 2008 financial
crisis, for example, vulnerabilities among the U.S. operations of
foreign banking organizations were exacerbated by margin calls on
derivative exposures and draws on commitments. Successful execution of
a resolution strategy depends in part on there being sufficient capital
and liquidity resources to execute the firm's strategy. The proposal
would make firms with this risk-based indicator triennial full filers.
Through the resolution planning submission process, firms may develop a
more robust capacity to measure capital and liquidity needs for
resolution and a strategy to deploy financial resources as needed.
Question 5: For purposes of defining resolution plan filing groups,
what are the advantages and disadvantages of the proposed risk-based
indicators? Should the agencies use different indicators, and if so,
why?
Question 6: For purposes of defining resolution plan filing groups,
at what level should the threshold for each indicator be set for
foreign banking organization's U.S. operations, and why? Commenters are
encouraged to provide data supporting their recommendations.
The failure of a triennial full filer could pose a threat to U.S.
financial stability, though it is generally less likely than a firm in
the biennial filers group. The proposal would therefore require these
firms to submit resolution plans as triennial full filers; however,
under the proposal, the filing cycle for triennial full filers would be
one year longer than that of the biennial filers.
Specifically, the proposal would require triennial full filers to
submit a resolution plan every three years, alternating between a full
resolution plan, subject to the waiver option detailed below, and a
targeted resolution plan, described below. The agencies have determined
that this longer filing cycle is appropriate in light of the lesser
degree of systemic risk posed by the failure of a firm in this group.
Notably, this filing group includes the foreign banking
organizations that have received detailed guidance from the
agencies.\20\ The agencies believe that it is appropriate that these
firms be part of the triennial full filing group and submit plans on
the three-year filing cycle because the preferred outcome for each of
these foreign banking organizations is a successful home country
resolution using a single point of entry resolution
[[Page 21607]]
strategy, not the resolution strategy described in its U.S. resolution
plan.
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\20\ See, e.g., Guidance for 2018 Sec. 165(d) Annual Resolution
Plan Submissions By Foreign-based Covered Companies that Submitted
Resolution Plans in July 2015, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170324a21.pdf.
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The filing group would also include non-bank financial companies
designated by the Council for supervision by the Board that the
agencies jointly designate to be triennial full filers. Given that the
Council must determine that material financial distress at a nonbank
financial company supervised by the Board could pose a threat to U.S.
financial stability,\21\ under the proposal, nonbank financial
companies would automatically be deemed biennial filers. However, the
agencies are retaining the discretion to obtain plans from these
companies on a triennial basis based on the facts and circumstances of
a particular company.
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\21\ 12 U.S.C. 5323.
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Triennial Reduced Filers
The proposal identifies a third group, triennial reduced filers,
which consists of any covered company that is not subject to Category
I, II, or III standards or is not a nonbank financial company
supervised by the Board; that is, any covered company that is not a
biennial or triennial full filer. The firms in this population do not
pose the same risks to U.S. financial stability because they do not
have the same size or complexity as the firms subject to Category I,
II, or III standards. Accordingly, the proposal would apply less
stringent resolution planning requirements to these firms. Triennial
reduced filers would include foreign banking organizations with $250
billion or more in total global assets that are not subject to Category
II or III standards.\22\
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\22\ These foreign banking organizations would be required to
submit resolution plans because they would have at least $250
billion in total global assets. See EGRRCPA section 401(a).
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The proposal would require a firm that becomes a covered company
and that is a triennial reduced filer to submit as its initial
submission a full resolution plan, subject to the waiver option
detailed below, and thereafter, every three years, a reduced resolution
plan, described below. The agencies have determined that extending the
filing cycle and reducing the informational requirements is appropriate
given these firms' limited U.S. operations and smaller U.S. footprints.
Moving Filing Dates
As a covered company's resolution plan matures over time and as the
risks presented by individual firms and the market change, a different
filing cycle may be appropriate, commensurate with the risks posed by
the failure of the firm to U.S. financial stability and the extent of
current and relevant information available to support the agencies'
advance planning efforts. Accordingly, the proposal would provide the
agencies with flexibility to move filing dates when appropriate. The
agencies would notify a covered company that has previously submitted a
resolution plan at least 180 days prior to the new filing date. The
agencies would notify a new covered company at least 12 months prior to
the new filing date.
Question 7: Are the risk-based indicators and thresholds
appropriate for identifying and distinguishing between groups of
resolution plan filers (i.e., biennial, triennial full, and triennial
reduced)?
Question 8: The agencies invite public comment on whether the
proposed resolution plan submission cycle (i.e., U.S. GSIBs submitting
resolution plans every two years, and other covered companies
submitting resolution plans every three years) is appropriate. Would a
longer or shorter interval between submissions be appropriate for any
group of resolution plan filers?
B. Resolution Plan Content
1. Full Resolution Plan
The proposal would not generally modify the components or
informational requirements of a full resolution plan.\23\ Through
numerous resolution plan submissions, the agencies and firms have
gained familiarity with the format and content of the information
currently required to be submitted pursuant to the Rule. The agencies
also recognize the utility of the existing information requirements for
full resolution plans. Focus on these items has facilitated resolution
plan and resolvability improvements, particularly by the largest and
most complex firms. Applicable guidance previously issued to specific
full resolution plan filers concerning the content of their upcoming
submissions would continue to apply to those individual firms.\24\
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\23\ The proposal would modify the requirements for a full
resolution plan's executive summary by requiring a firm to include a
description of material changes (as defined in the proposal) since
the filing of the firm's previously submitted resolution plan and a
description of the changes the firm has made to its resolution plan
in response. The proposal would also require the executive summary
to describe changes made to the firm's resolution plan, including
its resolvability or resolution strategy or how the strategy is
implemented, in response to feedback provided by the agencies,
guidance issued by the agencies, or legal or regulatory changes. The
requirements for targeted resolution plans would be consistent with
these requirements.
\24\ E.g., Guidance for Sec. [thinsp]165(d) Resolution Plan
Submissions by Domestic Covered Companies applicable to the Eight
Largest, Complex U.S. Banking Organizations, 84 FR 1438, 1449
(February 4, 2019).
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Question 9: The agencies invite comment on whether there are
specific elements in Sec. __.4 (Informational content of a resolution
plan) of the current Rule that should be omitted or modified.
2. Waiver
Through a covered company's repeated resolution plan submissions,
certain aspects of its resolution plan may reach a steady state or
become less material such that regular updates would not be useful to
the agencies in their review of the plan. In acknowledgement of this,
the proposal would continue to permit the agencies to waive certain
informational content requirements for one or more firms on the
agencies' joint initiative.\25\ Waivers could be granted for one or
more filing cycles.
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\25\ The current Rule permits the agencies to grant exemptions
for one or more of the informational requirements of the Rule. 12
CFR 243.4(k); 12 CFR 381.4(k). The proposal would supersede this
provision with the new waiver provisions found in Sec. __.4(d)(6)
of the proposal, which would provide similar authority.
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The proposal also lays out a process for a covered company that has
previously submitted a resolution plan to apply for a waiver of certain
informational content requirements of a full resolution plan (waivers
could not be applied for with respect to targeted or reduced resolution
plans). Where the covered company would like to omit certain
information from its next full resolution plan submission, the covered
company would need to apply for the waiver at least 15 months in
advance of the filing date.
In order to limit administrative burden and maximize transparency,
covered companies would be limited to making one waiver request for
each filing cycle, and the public section of the waiver request,
containing the list of the requirements sought to be waived, would be
made public. Waivers would be automatically granted on the date that is
nine months prior to the plan it relates to is due if the agencies do
not jointly deny the waiver prior to that date. The agencies may deny a
waiver if, for example, they find that the information sought to be
waived could be relevant to the agencies' review of the covered
company's plan. The proposal provides that covered companies would not
be able to request waivers for certain informational content
requirements of the Rule. These include the core elements required in a
targeted resolution plan, discussed below; information about changes
the covered company has made to its resolution plan in response to a
material change;
[[Page 21608]]
information required in the public section of a full resolution plan;
information about a deficiency or shortcoming that has not been
adequately remedied or satisfactorily addressed; and information that
is specifically required to be included in a resolution plan pursuant
to section 165(d) of the Dodd-Frank Act.\26\ The agencies note,
however, that covered companies may be able to incorporate by reference
to a previous plan submission certain information that would not be
eligible for a waiver if the information meets the proposed
requirements for incorporation by reference.
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\26\ 12 U.S.C. 5365(d)(1)(A)-(C).
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The agencies expect that waivers would be granted in appropriate
circumstances. For example, waivers could be appropriate to reduce
burden for informational content that may be of limited utility to the
agencies, such as where the agencies have recently completed an in-
depth review of a particular business line and are satisfied that they
are in possession of current information relevant to a firm's ability
to resolve that business line. More specifically, if the agencies have
recently undertaken a comprehensive review of a firm's Payments,
Clearing, and Settlement (PCS) activities, it may be appropriate to
waive the requirement for that firm to submit information relevant to
these activities in its next resolution plan submission. As another
example, for a covered company that would currently be eligible to file
a tailored resolution plan, the agencies could grant a waiver that
would limit the firm's required plan content in a manner that is
similar to the current tailored resolution plan provisions of the
Rule.\27\
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\27\ The current Rule's tailored resolution plan provisions
allow covered companies with less than $100 billion in total nonbank
assets that predominately operate through one or more insured
depository institutions (i.e., the company's insured depository
institution subsidiaries comprise at least 85 percent of its total
consolidated assets or, in the case of a foreign-based covered
company, the assets of the U.S. insured depository institution
operations, branches, and agencies comprise 85 percent or more of
the company's U.S. total consolidated assets), to seek approval from
the Board and the Corporation to submit a tailored resolution plan
that focuses on the nonbank operations of the covered company.
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A firm would need to provide all information necessary to support
its request, including an explanation of why approval of the request
would be appropriate, why the information for which a waiver is sought
would not be relevant to the agencies' review of the firm's resolution
plan, and confirmation that the request meets the eligibility
requirements for a waiver under the Rule (i.e., that it is not a core
element, not related to an identified deficiency that has not been
adequately remedied, etc.). In order to ensure that the agencies have
the information necessary to evaluate a waiver request, the proposal
provides that covered companies would be required to explain why the
information sought to be waived would not be relevant to the agencies'
review of the covered company's next full resolution plan and why a
waiver of the requirement would be appropriate. Failure to provide
appropriate explanation or any information requested by the agencies in
a timely manner could lead the agencies to deny a waiver request on the
basis that insufficient explanation or a lack of information makes it
impossible to determine that the information sought to be waived would
not be relevant to their review of the resolution plan.
A full resolution plan should specify content omitted due to a
waiver request that was granted.
Question 10: The agencies invite comment on the process identified
for covered companies to request waivers. Does the proposed timeline
provide sufficient time for covered companies to request waivers and
for the agencies to review those requests? Should waivers be presumed
to be granted unless the agencies jointly deny them or presumed to be
denied unless the agencies jointly grant them? The agencies invite
comment on the list of requirements with respect to which a waiver is
not available. For example, are there any additional requirements under
the proposal with respect to which a waiver should not be available?
Should the public section of waiver requests be required to contain any
additional information?
Question 11: The agencies invite comment on areas where the
agencies should consider granting a waiver on the agencies' joint
initiative in the next plan submissions of the covered companies. The
agencies note they do not anticipate soliciting such feedback regularly
or periodically in advance of future resolution plan submissions, but
rather are inviting general comments on this topic to help inform the
initial application of this proposed waiver mechanism.
3. Targeted Resolution Plan
The proposal would also amend the Rule to include a new type of
resolution plan submission: A targeted resolution plan. As resolution
plans develop and solidify over time, it is appropriate that certain
information be refreshed or updated rather than resubmitted in full.
The agencies are proposing the creation of the targeted resolution plan
submission to strike the appropriate balance between providing a means
to continue receiving updated information on structural or other
changes that may affect a firm's resolution strategy while not
requiring submission of information that remains largely unchanged
since the previous submission. A targeted resolution plan would be a
subset of a full resolution plan.
The targeted resolution plan elements are proposed to be as
follows:
Certain Resolution Plan Core Elements: Each targeted resolution
plan would include an update of the information required to be included
in a full resolution plan regarding capital, liquidity, and the covered
company's plan for executing any recapitalization contemplated in its
resolution plan, including updated quantitative financial information
and analyses important to the execution of the covered company's
resolution strategy. For firms that have received detailed guidance
from the agencies applicable to their upcoming submissions regarding
capital, liquidity, and governance mechanisms, the targeted resolution
plans should address these elements consistent with the applicable
guidance.\28\ A firm that has not received detailed guidance would be
required to describe the capital and liquidity needed to execute the
firm's resolution strategy consistent with Sec. __.5(c), (d)(1)(i),
(iii), and (iv), (e)(1)(ii), (e)(2), (3), and (5), (f)(1)(v), and (g)
of the proposal and, to the extent its resolution plan contemplates
recapitalization, the covered company's plan for executing the
recapitalization consistent with Sec. __.5(c)(5) of the proposal.
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\28\ For example, a targeted resolution plan could discuss
changes to a firm's methodology for modeling liquidity needs for its
material entities during periods of financial stress, as well as
changes to the firm's means for providing capital and liquidity to
such entities as would be needed to successfully execute the firm's
resolution strategy. These updates could, for example, involve
changes to triggers upon which the firm relies to execute a
recapitalization, including triggers based on capital or liquidity
modeling. See, e.g., Guidance for section[thinsp]165(d) Resolution
Plan Submissions by Domestic Covered Companies applicable to the
Eight Largest, Complex U.S. Banking Organizations, 84 FR 1438, 1449
(February 4, 2019); Guidance for 2018 Sec. 165(d) Annual Resolution
Plan Submissions By Foreign-based Covered Companies that Submitted
Resolution Plans in July 2015, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170324a21.pdf. The firms that
received this guidance would be expected to address Resolution
Capital Adequacy and Positioning (RCAP), Resolution Liquidity
Execution Need (RLEN), and governance mechanisms as part of their
updates concerning capital, liquidity and any plans for executing a
recapitalization, respectively.
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Material Changes: Each targeted resolution plan would include a
description of material changes since
[[Page 21609]]
the filing of the covered company's previously submitted resolution
plan and a description of the changes the covered company has made to
its resolution plan in response.\29\ A material change is defined to be
any event, occurrence, change in conditions or circumstances, or other
change that results in, or could reasonably be foreseen to have a
material effect on the resolvability of the covered company, the
covered company's resolution strategy, or how the covered company's
resolution strategy is implemented. Such changes include the
identification of a new critical operation or core business line; the
identification of a new material entity or the de-identification of a
material entity; significant increases or decreases in the business,
operations, or funding of a material entity; or changes in the primary
regulatory authorities of a material entity or the covered company on a
consolidated basis.
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\29\ Section 165(d)(1) of the Dodd-Frank Act requires that
certain information be periodically reported to the agencies in
covered companies' resolution plans (required information). 12
U.S.C. 5365(d)(1). If a covered company does not include in its
targeted resolution plan a description of changes to the required
information from its previously submitted plan, the required
information that it included in its previously submitted plan would
be incorporated by reference into its targeted resolution plan.
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Other such changes include material changes in operational and
financial interconnectivity, both those that are intra-firm and
external. Examples of such operational interconnectivity include
reliance on affiliates for access to key financial market utilities or
critical services, or significant reliance on the covered company by
other firms for certain PCS services, including agent bank clearing or
nostro account clearing, or government securities settlement services.
Examples of such financial interconnectivity include a material entity
becoming reliant on an affiliate as a source for funding or collateral,
or the covered company becoming a major over-the-counter derivatives
dealer.
Changes in Response to Regulatory Requirements, Guidance, or
Feedback: Each targeted resolution plan would discuss changes made to
the covered company's resolution plan, including its resolvability or
resolution strategy or how the strategy is implemented, in response to
feedback provided by the agencies, guidance issued by the agencies, or
legal or regulatory changes.
Public Section: Each targeted resolution plan would contain a
public section with the same content required of a full resolution
plan's public section.
Targeted Areas of Interest: Each targeted resolution plan would
discuss targeted areas of interest identified by the agencies that
either an individual covered company or a group of similarly situated
covered companies in a particular filing group \30\ should address to
enhance their resolution plan submissions. The agencies would notify
covered companies of such targeted areas of interest at least 12 months
prior to the applicable resolution plan submission date. Examples of a
targeted area of interest could include the potential effects of Brexit
on a covered company's resolvability because of material changes to
booking practices or to the firm's organizational structure as a result
of regulatory and market developments.
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\30\ E.g., U.S. GSIBs, or foreign banking organizations that are
triennial full filers.
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Question 12: The agencies invite comment on the proposed content of
targeted resolution plans. Is it sufficiently clear what information is
required to be included in a targeted resolution plan, including with
respect to the proposed definition of the core elements? If not, how
should the agencies clarify these requirements? Are there any
information requirements that should be added to or removed from the
proposed content of targeted resolution plans? Do the paragraphs of
Sec. __.5 identified in the proposal's core elements definition
identify the appropriate sections of the full resolution plan where
core elements can be found?
4. Reduced Resolution Plan
The proposal would also codify the reduced resolution plan type.
For foreign banking organizations with limited U.S. operations, the
agencies have generally agreed, on a case-by-case basis, to limit the
informational requirements of these firms' recent submissions to
material changes and improvements to the firms' resolution strategies.
The proposal would formalize the information requirements for this type
of resolution plan and lay out the criteria (as discussed above) for
firms to be permitted to file reduced resolution plans.
The proposal lays out the reduced resolution plan components as
follows: A description of material changes experienced by the covered
company since the filing of the covered company's previously submitted
resolution plan and changes made to the strategic analysis that was
presented in the firm's previously submitted resolution plan in
response to these changes and changes made in response to feedback
provided by the agencies, guidance issued by the agencies, or legal or
regulatory changes.\31\ Receiving updates of this information would
permit the agencies to continue to monitor significant changes in
structure or activities while appropriately focusing on the
informational components of these firms' resolution plans.
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\31\ As described above, section 165(d)(1) of the Dodd-Frank Act
mandates that required information be included in covered companies'
resolution plans. 12 U.S.C. 5365(d)(1). If a triennial reduced filer
does not include in its reduced resolution plan a description of
changes to the required information from its previously submitted
plan, the required information that it included in its previously
submitted plan would be incorporated by reference into its reduced
resolution plan.
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For the public section of a reduced resolution plan, the proposal
would modify the content currently required in the public section of
all plans. The reduced resolution plan public section would be limited
to the following elements: Names of material entities, a description of
core business lines, the identities of principal officers, and a high-
level description of the firm's resolution strategy, referencing the
applicable resolution regimes for its material entities.
Question 13: The agencies invite comment on the proposed content of
reduced resolution plans. Are there any information requirements that
should be added to or removed from the proposed content of reduced
resolution plans?
5. Tailored Plans
The Rule currently provides for a tailored plan, a means for
certain bank-centric firms to request that their resolution plan
submissions focus on nonbank activities that may pose challenges to
executing the firm's resolution strategy. Pursuant to the Rule, firms
must apply to the agencies to file a tailored plan rather than a full
resolution plan every year that a submission is required.
The agencies propose to eliminate the tailored plan category. The
introduction of the waiver process and the targeted resolution plan
would provide effective substitutes for this type of focused submission
in appropriate circumstances. Additionally, many of the covered
companies currently eligible for a tailored plan either have ceased,
post-EGRRCPA, to be subject to the resolution plan submission
requirement or would become triennial reduced filers, which would focus
their future plan submissions on material changes.
Question 14: The agencies invite comment on whether the tailored
plan category should be retained.
[[Page 21610]]
C. Critical Operations Methodology and Reconsideration Process
The current Rule provides for critical operations to be identified
by the firms or at the agencies' joint direction. In 2012, the agencies
established a process and methodology for jointly identifying critical
operations for both U.S. and foreign-based covered companies. The
agencies assessed the significance of activities and markets with
respect to U.S. financial stability in the following four areas:
Capital markets; funding and liquidity; retail and commercial banking;
and payments, clearing, and settlement. The agencies then considered
the significance of individual covered companies as a provider or
participant in those activities and markets using criteria such as
market share data, level of market concentration, size of market
activity, and ease of substitutability.\32\
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\32\ For example, a critical operation of a covered company
would include an operation, such as a clearing, payment, or
settlement system, that plays a role in the financial markets for
which other firms lack the expertise or capacity to provide a ready
substitute.
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The agencies' original critical operations identifications from
2012 have remained largely unchanged. As covered companies have made
changes to their operating structures, realigned business entities, and
adapted to changing market conditions, some have submitted ad hoc
requests to the agencies seeking reconsideration of certain critical
operations identifications. The agencies have reviewed these requests
and communicated their decisions to firms on a rolling basis.
Given that both firms and markets continually evolve and change,
the agencies have determined that a periodic, comprehensive review of
critical operations identifications would help to ensure that
resolution planning remains appropriately focused on key areas.
The proposal would establish processes for firms and the agencies
to identify particular operations of covered companies as critical
operations and to rescind prior critical operations identifications
made by the agencies. In addition, the proposal would specify a process
for a covered company to request reconsideration of operations
previously identified by the agencies as critical, and require that
covered companies notify the agencies if the covered company ceases to
identify an operation as a critical operation. The intended result
would be a process that yields a relatively stable population of
identified critical operations while allowing for recognition of new,
or changes to existing, markets or activities as well as changes to
individual firms' participation in those markets or activities, among
other factors. The agencies expect that the proposed processes would
cause covered companies' resolution plans to be more clearly focused on
the actions a covered company would need to take to facilitate a rapid
and orderly resolution.\33\
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\33\ See 12 CFR 243.4(c)(1)(ii); 12 CFR 381.4(c)(1)(ii); Sec.
__.5(c)(1)(ii) of the proposal.
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1. Changes to Definitions
The agencies are proposing to modify the definition of ``critical
operations'' to reflect the proposed requirements and processes in new
Sec. __.3. Under the proposal, ``critical operations'' means those
operations, including associated services, functions, and support, the
failure or discontinuance of which would pose a threat to the financial
stability of the United States. In addition, the proposal would include
a new definition, ``identified critical operations,'' to clarify that
critical operations can be identified by either the covered company or
jointly identified by the agencies and that until such an operation has
been identified by either method, the operation does not need to be
addressed as a critical operation in a resolution plan.
2. Identification of Critical Operations by Covered Companies
In general, covered companies have developed processes within their
broader resolution planning framework to identify critical operations.
The proposal would require a subset of covered companies, specifically
biennial filers and triennial full filers (i.e., generally those with
currently identified critical operations) to maintain a process for the
identification of critical operations on a scale that reflects the
nature, size, complexity, and scope of their operations.
The proposal would require that the firm's process include a
methodology for identifying critical operations. Specifically, the
methodology must first identify and assess economic functions engaged
in by the firm. These economic functions may include the core banking
functions of deposit taking; lending; payments, clearing and
settlement; custody; wholesale funding; and capital markets and
investment activities. In general, an economic function is most likely
to present a critical operation of the firm where both (a) a market or
activity engaged in by the firm is significant to U.S. financial
stability and (b) the firm is a significant provider or participant in
such a market or activity. Factors relevant for determining whether a
market or activity is significant to U.S. financial stability, or
whether a firm is a significant provider or participant in such a
market or activity, may include substitutability, market concentration,
interconnectedness, and the impact of cessation. The firm's analysis
should focus on the significance of the activity to U.S. financial
stability, not whether a particular activity is significant for a
foreign parent or other foreign affiliates of the firm.\34\ The process
undertaken by a firm in completing such an analysis should be
commensurate with the nature, size, complexity, and scope of its
operations.\35\
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\34\ Where a firm's operation, such as U.S. dollar deposit
taking, is significant to the firm, but the failure or
discontinuance of that activity would not pose a threat to the
financial stability of the United States, that operation would not
be an identified critical operation under the proposal.
\35\ For a foreign firm, the critical operations identification
process and methodology should be commensurate with the nature,
size, complexity, and scope of its U. S. operations.
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The agencies propose that the covered company's critical operations
review process occur at least as frequently as its resolution plan
submission cycle and that the review process be documented in the
covered company's corporate governance policies and procedures.\36\
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\36\ See 12 CFR 243.4(d)(1)(i); 12 CFR 381.4(d)(1)(i); Sec.
__.5(d)(1)(i) of the proposal.
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The proposal lays out a process for a covered company that has
previously submitted a resolution plan but does not currently have an
identified critical operation under the Rule to apply for a waiver of
the requirement to have a process and methodology to identify critical
operations. Where the covered company would like a waiver of the
requirement with respect to its next plan submission, the covered
company would need to apply for the waiver at least 15 months in
advance of the filing date for that resolution plan.
In its waiver request, the covered company must explain why a
waiver of the requirement would be appropriate, including an
explanation of why the process and methodology are not likely to
identify any critical operation given its business model, operations,
and organizational structure. For example, for a covered company that
has not experienced any significant changes in its business,
operations, or organizational structure since its most recent
resolution plan, a waiver request that so states, with reasonable
supporting detail, could provide sufficient information for the
agencies to evaluate the request. Alternatively, if
[[Page 21611]]
one of a covered company's operations gained significant market share
since it submitted its most recent resolution plan submission, the
waiver request should include this information, a description of the
operation, and a discussion of why this change would not warrant the
development of a methodology for identifying critical operations.
Failure to provide appropriate information jointly requested by the
agencies in a timely manner could lead the agencies to deny a waiver
request on the basis that a lack of information makes it impossible to
determine that the information sought to be waived would not be
relevant to their review of the resolution plan.
The public section of the waiver request, describing that a waiver
of the requirement is being sought, would be made public. Waivers would
be automatically granted on the date that is nine months prior to the
date that the resolution plan it relates to is due if the agencies do
not jointly deny the waiver prior to that date.
Question 15: If granted, how long should the waiver from the
critical operations methodology be valid? For example, should the
waiver be valid for each submission cycle (e.g., three years) or for a
full resolution plan submission and the following targeted plan
submission (e.g., six years)? In addition, should the waiver become
invalid upon the occurrence of certain events (e.g., the occurrence of
a material change (as defined in the proposal))?
Question 16: The agencies propose that any critical operations
identification process undertaken by a firm be commensurate with the
nature, size, complexity, and scope of its operations, and that a firm
that does not currently have an identified critical operation be
permitted to seek a waiver from the requirement to have such a process.
Are there benefits from having firms that do not have currently
identified critical operations develop and maintain a process for
identifying critical operations, or should these firms be able to
request a waiver from the proposed critical operations identification
process requirement? Should a firm that moves to a more stringent
category (e.g., from being a triennial reduced filer to being a firm
that is subject to Category II standards and, accordingly, a triennial
full filer) and does not have a currently identified critical operation
be permitted to seek a waiver from the critical operations
identification process requirement?
3. Identification and Rescission of Critical Operations by the
Agencies; Periodic Agency Review
Under the proposal, the agencies would be able to identify a
critical operation or rescind a prior identification at any time. In
addition, the proposal would provide for the agencies to review all
identified critical operations and the operations of covered companies
for consideration as critical operations at least every six years. In
connection with these reviews, the agencies would jointly identify any
additional critical operation or rescind any prior identification if
they jointly find that the operation is not a critical operation.
4. Requests for Reconsideration
Under the proposal, a covered company would be able to request that
the agencies reconsider a critical operation identification made
jointly by the agencies by submitting a written request that presents
the company's arguments, all relevant information that the company
expects the agencies to consider, and, if applicable, a description of
the material differences between the current request and the most
recent prior reconsideration request for the same critical operation. A
covered company would be required to submit a request for
reconsideration sufficiently before its next resolution plan to provide
the agencies with a reasonable period to reconsider the identification.
The agencies would generally complete their reconsideration no later
than 90 days after receipt of all requested information from the
covered company.
5. De-Identification by Covered Companies of Self-Identified Critical
Operations
Under the proposal, a covered company would be required to notify
the agencies if the covered company ceases to identify an operation as
a critical operation. The notice would be required to explain why the
firm previously identified the operation as a critical operation and
why the firm no longer identifies the operation as a critical
operation. The notice is meant to provide the agencies with sufficient
time to consider whether to jointly identify the operation as a
critical operation, if they have not already done so. Accordingly, a
covered company would generally be required to continue to treat an
operation as a self-identified critical operation in any resolution
plan the covered company is required to submit within 12 months of the
notification.
Question 17: How often should the agencies conduct a new
identification process and review existing critical operations
identifications for each covered company? Should, for example, the
frequency of the agencies' critical operations identification review
processes occur on the same cycle with the agencies' review of covered
companies' full resolution plan submission?
Question 18: What particular information should the agencies
consider in addressing a covered company's rescission request under the
Rule?
Question 19: The agencies invite comment on all aspects of the
proposal for firms to establish and implement a process designed to
identify their critical operations. Are the elements of the critical
operations identification methodology sufficiently clear? For example,
is it sufficiently clear how a covered company should analyze the
significance to U.S. financial stability of the markets and activities
through which it engages in economic functions? Should this requirement
apply to a broader or narrower set of firms? For example, should the
requirement apply only to global systemically important bank holding
companies? Should firms' reviews of their critical operations
designations be required to occur on a more or less frequent basis? In
what ways, if any, do the proposed requirements differ from covered
companies' current processes for identifying their critical operations?
D. Clarifications to the Rule
1. Resolution Strategy for Foreign-Based Covered Companies
The Rule does not specify the assumptions a foreign banking
organization should make with respect to how resolution actions it
takes outside of the United States should be addressed in its
resolution plan. This issue is particularly acute for a foreign banking
organization that expects to undertake a single point of entry
resolution strategy in its home country. If such a strategy were to be
successfully undertaken, a firm's U.S. operations would not need to
enter resolution, which conflicts with the statutory requirement that a
covered company present a plan for its orderly resolution under the
U.S. Bankruptcy Code. Therefore, the proposal would clarify that
covered companies that are foreign banking organizations should not
assume that the covered company takes resolution actions outside of the
United States that would eliminate the need for any U.S. subsidiaries
to enter into
[[Page 21612]]
resolution proceedings. This is consistent with guidance that the
agencies have previously provided.\37\
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\37\ See https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170324a21.pdf, p. 4, https://www.fdic.gov/resauthority/2018subguidance.pdf, p. 4 and https://www.federalreserve.gov/newsevents/pressreleases/bcreg20180129a.htm,
https://www.fdic.gov/news/news/press/2018/pr18006.html.
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2. Covered Company in Multi-Tier Foreign Banking Organization Holding
Companies
The definition of covered company in the Rule includes the top tier
entity in a multi-tier holding company structure of any foreign bank or
company that is a bank holding company or is treated as a bank holding
company under section 8(a) of the International Banking Act of
1978.\38\ The top tier holding company of certain foreign banks is a
government, sovereign entity, or family trust. There is no benefit to
the agencies in obtaining resolution plan information concerning such
types of entities. To date, the agencies have addressed these issues on
a case-by-case basis and have identified alternate filers in the
corporate structure, such as the entity in the structure that is
directly supervised by the Board. In the interest of clarity, the
proposal includes a formal process by which the agencies would identify
a subsidiary in a multi-tiered FBO holding company structure to serve
as the covered company that would be required to file the resolution
plan.
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\38\ 12 CFR 243.2(f)(1)(iii); 12 CFR 381.2(f)(1)(iii).
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3. Removal of the Incompleteness Concept and Related Review
The Rule includes a requirement that the agencies review a
resolution plan within 60 days of submission and jointly inform the
covered company if the plan is informationally incomplete or additional
information is required to facilitate review of the plan.\39\ This
process led to a limited number of resubmissions in 2012 when the first
resolution plans were submitted, but has not been used since. As
resolution plans have developed over time, the agencies have not found
that this requirement facilitates their review of the resolution plans
and are therefore proposing to remove it.
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\39\ 12 CFR 243.5(a); 12 CFR 381.5(a).
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Question 20: The agencies invite comment on whether the
incompleteness concept and related review should be retained.
4. Assessment of New Covered Companies
The Rule provides that covered company status for a foreign banking
organizations may be based on annual or quarterly reports based on
availability of such reports but does not clarify whether firms that
file quarterly reports would be assessed for covered company status on
a quarterly basis or annually at the same time firms that report
annually are assessed. The proposal would clarify that a foreign
banking organization's status as a covered company would be assessed
quarterly for foreign banking organizations that file the Federal
Reserve's Form FR Y-7Q (FR Y-7Q) on a quarterly basis and annually for
foreign banking organizations that file the Y-7Q on an annual basis
only. In each case, the assessment would be based on total consolidated
assets as averaged over the preceding four calendar quarters as
reported on the FR Y-7Q.
In addition, the proposal would also address the process for
assessing a firm whose assets have grown due to a merger, acquisition,
combination, or similar transaction for covered company status. Under
these circumstances, the agencies would have the discretion to
alternatively consider, to the extent and in the manner the agencies
jointly consider appropriate, the relevant assets reflected on the one
or more of the four most recent reports of the pre-combination entities
(the FR Y-9C in the case of a U.S. firm and the FR Y-7Q in the case of
a foreign banking organization). For example, if Firm A, which
previously reported total consolidated assets of $175 billion over the
preceding four calendar quarters, acquired Firm B, which previously
reported total consolidated assets of $80 billion over the same
preceding four calendar quarters, the agencies could determine that
immediately following the closing of the transaction, Firm A is a
covered company. Similarly, if Firm A acquired assets from Firm B,
which assets had been reported over the preceding four calendar
quarters to have a value of $80 billion, the agencies could determine
that Firm A became a covered company as of the closing of the
acquisition.
5. Timing of New Filings, Firms That Change Filing Categories, and
Notices of Extraordinary Events
To address the new filing cycles for biennial, triennial full, and
triennial reduced filers, the proposal includes related modifications
to the timing of the initial submission for new filers. When a firm
becomes a covered company, the proposal provides that its first
submission would be a full resolution plan and that the initial plan
would be due the next time its filing group (biennial, triennial full,
or triennial reduced) submits resolution plans as long as the
submission deadline is at least 12 months after the time the firm
becomes a covered company. For example, if a firm becomes a triennial
full filer, its first resolution plan would be due when the triennial
full filing group next submits resolution plans, so long as such date
is at least 12 months after the firm becomes a triennial full filer. If
the triennial full filers' next plan submission is a targeted
resolution plan, the new filer would still need to submit a full
resolution plan as its initial plan. After its initial plan, subsequent
plans would be of the same type (full or targeted) as other triennial
full filers. The proposal would also include a reservation of
authority, however, permitting the agencies to require the initial plan
earlier than the date of the filing group's next filing, so long as the
submission deadline would be at least 12 months from the date on which
the agencies jointly determined to require the covered company to
submit its resolution plan.
Similarly, if a covered company changes groups (e.g., a triennial
reduced filer becomes a triennial full filer or a triennial full filer
becomes a triennial reduced filer), the proposal specifies the timing
and type of resolution plan it would be required to next submit:
If the resolution plan submission deadline for the covered
company's new group were the same as the prior group, the covered
company would be required to submit a resolution plan by the deadline.
If the deadline were within 12 months, the covered company would be
required to submit the type of resolution plan based on its prior group
status or its new group status (e.g., if a triennial full filer became
a triennial reduced filer, it could submit either the full or targeted
resolution plan it would have submitted as a triennial full filer, or
it could submit a reduced resolution plan as permitted by its status as
a triennial reduced filer). If the deadline were 12 months or later,
the covered company would be required to submit the type of resolution
plan based on its new group status.
If the resolution plan submission deadline for the new
group were different than the prior group and:
[cir] The new deadline were at least 12 months in the future, the
covered company would be required to submit a resolution plan of the
type required by its new group status by the new deadline.
[cir] the new deadline were within 12 months, the covered company
would not be required to submit a resolution plan on the new deadline.
Instead, the
[[Page 21613]]
covered company would be required to submit a resolution plan of the
type required by its new group status by the following submission
deadline for the new group.
A former triennial reduced filer that has become a
triennial full filer would in all cases be required to submit a full
resolution plan no later than its next deadline that occurs at least 12
months in the future. A triennial reduced filer would become a
triennial full filer where its combined U.S. assets grow over $250
billion or it has $75 billion or more of one or more of the risk-based
indicators (cross-jurisdictional activity, nonbank assets, weighted
short-term wholesale funding, or off-balance-sheet exposure) within its
U.S. operations. Because these events would represent significant
changes to the firm's U.S. operations, submission of a full resolution
plan would be useful to allow the agencies to evaluate whether there
could be any related challenges to the firm's resolvability. After the
covered company submits a full resolution plan, it would submit on
future submission dates the same type of resolution plan as the other
members of the new group.
The proposal retains the agencies' authority to require a covered
company to submit a resolution plan earlier than the deadline for the
new group's submission, so long as the agencies notify the covered
company of the revised submission deadline at least 180 days in
advance.
The proposal would also permit the agencies to require a full
resolution plan to be submitted within such time period as specified by
the agencies.\40\ In this instance, a firm may be required to submit a
resolution plan at a different time or of a different plan type
relative to its filing group. For example, a triennial reduced filer
may become a triennial full filer due to a merger or acquisition of
assets, but may not be required to submit a full resolution plan for a
number of years due to the timing of the transaction. If the new,
larger covered company has assets or operations that are of particular
importance to U.S. financial stability, the agencies may jointly
require it to submit a full resolution plan earlier than the rest of
its new filing group.
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\40\ When requiring a covered company to file a full resolution
plan within a time period different from that of other covered
companies in the same filing group, the agencies believe that 12
months is presumptively a reasonable period of time. However, a
shorter time period may be reasonable in light of the relevant facts
and circumstances.
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The notice of material events requirement has been revised and
clarified to reflect the creation of a material changes definition. The
agencies determined that the material changes definition was too broad
to merit a notice requirement and instead propose the concept of
extraordinary events that would require a notice. An extraordinary
event is a material merger, acquisition of assets or other similar
transaction, or a fundamental change to a covered company's resolution
strategy (such as a change from single point of entry to multiple point
of entry).
Question 21: The agencies invite comment on whether the listed
events that are proposed to constitute extraordinary events are
appropriate, or if there are additional events should be identified.
6. Clarification of the Mapping Expectations for Foreign Banking
Organizations
The proposal would amend the language governing the expectations
regarding the mapping of intragroup interconnections and
interdependencies by foreign banking organizations.\41\ The proposal
would clarify that foreign banking organizations would be expected to
map (a) the interconnections and interdependencies among their U.S.
subsidiaries, branches, and agencies, (b) the interconnections and
interdependencies between these U.S. entities and any critical
operations and core business lines, and (c) the interconnections and
interdependencies between these U.S. entities and any foreign-based
affiliates.
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\41\ 12 CFR 243.4(a)(2)(i); 12 CFR 381.4(a)(2)(i); Sec.
__.5(a)(2)(i) of the proposal.
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7. Standard of Review
In reviewing resolution plans, the agencies have identified
``deficiencies'' and ``shortcomings'' in plans and have issued letters
to covered companies describing the rationale for the findings and
suggesting potential alternatives for how the identified deficiencies
and shortcomings could be addressed. While the agencies have defined
these terms in a public statement, they are not defined in the
Rule.\42\ To provide an opportunity for public comment on these terms
and a clearer articulation of the standards the agencies apply in
identifying deficiencies and shortcomings, the proposal would define a
deficiency and a shortcoming.
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\42\ Resolution Plan Assessment Framework and Firm
Determinations (2016), April 13, 2016, https://www.fdic.gov/news/news/press/2016/pr16031a.pdf.
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The proposed definition of deficiency is as follows: An aspect of a
firm's resolution plan that the agencies jointly determine presents a
weakness that individually or in conjunction with other aspects could
undermine the feasibility of the firm's plan. Where a deficiency has
been identified, the covered company must correct the identified
weakness and resubmit a revised resolution plan to avoid being subject
to more stringent regulatory requirements or restrictions, as described
in section 165(d)(5) of the Dodd-Frank Act and Sec. Sec. __.5 and __.6
of the Rule.
The proposal also includes a definition of a shortcoming. A
shortcoming would be defined as a weakness or gap that raises questions
about the feasibility of a firm's plan, but does not rise to the level
of a deficiency for both agencies. In some instances, a weakness that
only one agency considers a deficiency may constitute a shortcoming for
purposes of resolution plan feedback or guidance. A shortcoming may
require additional analysis from the covered company or additional work
by the covered company, or both. Although a shortcoming would not
require a firm to resubmit a revised resolution plan prior to its next
plan submission date, the agencies may require a firm to provide an
interim update regarding progress made to address the shortcoming prior
to the firm's next resolution plan submission date pursuant to Sec.
__.4(d)(3) of the proposal. If the issue is not satisfactorily
explained or addressed in the covered company's next resolution plan,
it may be found to be a deficiency in the covered company's next
resolution plan. It is not necessary for the agencies to identify an
issue as a shortcoming before identifying it as a deficiency.\43\ In
addition, the agencies may identify issues and weaknesses in a covered
company's resolution plan in feedback provided to the firm without
jointly classifying them as deficiencies or shortcomings.
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\43\ As noted above, as part of codifying definitions for the
terms ``deficiency'' and ``shortcoming,'' the proposal would clarify
that the agencies may jointly identify an issue as a deficiency
without first identifying it as a shortcoming.
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Both deficiencies and shortcomings reflect weaknesses that the
agencies consider important and should be addressed in the firm's next
resolution plan submission. The agencies' correspondence to a firm
identifying one or more deficiencies or shortcomings will normally
suggest a manner in which the covered company may address the
deficiencies or shortcomings. These suggestions do not preclude the
covered company from pursuing a different means of addressing the
deficiency or shortcoming.
Question 22: The agencies invite comment on all aspects of the
proposed
[[Page 21614]]
definitions of ``deficiency'' and ``shortcoming.''
8. Deletion of ``deficiencies'' Relating to Management Information
Systems
The Rule requires a resolution plan to include information about a
covered company's management information systems, including a
description and analysis of the system's ``deficiencies, gaps or
weaknesses'' in the system's capabilities. The proposal deletes the
term ``deficiencies'' from this informational content requirement
solely to avoid confusion with the proposal's new definition of
``deficiencies'' in Sec. __.8(b) of the proposal, and not to change
the informational requirement relating to a covered company's
management information systems.
9. Incorporation by Reference
Similar to the current Rule, the proposal would continue to allow a
covered company to incorporate by reference information from its
previously submitted resolution plans, subject to restrictions that the
covered company clearly identifies the information it is incorporating
and the specific location of the information in the previously
submitted plan by, for example, indicating the relevant page range or
subsection of the resolution plan. The proposal would require the
referenced information to remain accurate in all respects that are
material to the covered company's resolution plan. The agencies intend
that this clarification regarding the material accuracy of referenced
information provide covered companies greater flexibility in their
ability to incorporate by reference information, thereby reducing
duplication and further streamlining the resolution planning process.
The proposal's incorporation of the waiver concept should not be
interpreted to conflict with the ability to incorporate items by
reference. In particular, if the agencies were to deny a waiver
request, the covered company would not be precluded from incorporating
by reference elements that it sought to have waived, so long as the
information remains accurate in all respects that are material to the
covered company's resolution plan. The agencies note that any
information incorporated by reference would remain subject to the
contemporaneous certification requirement specified in the Rule.
E. Alternative Scoping and Tailoring Criteria
In its tailoring proposals, the Board presented an alternative
approach for assessing the risk profile and systemic footprint of a
U.S. banking organization and of a foreign banking organization's
combined U.S. operations or U.S. intermediate holding company using a
single, comprehensive score. The Board uses an identification
methodology (scoring methodology) to identify a U.S. bank holding
company as a U.S. GSIB and apply risk-based capital surcharges to these
firms. The Board could use this same scoring methodology to determine
whether to apply the resolution planning requirements to firms with
$100 billion or more but less than $250 billion in total consolidated
assets. The agencies could likewise use this same scoring methodology
to divide U.S. and foreign firms into groups for the purposes of
determining the frequency and informational content of resolution plan
filings.
1. Alternative Scoping Criteria for U.S. Firms
The scoring methodology in the Board's regulations is used to
calculate a U.S. GSIB's capital surcharge under two methods.\44\ The
first method is based on the sum of a firm's systemic indicator scores
reflecting its size, interconnectedness, cross-jurisdictional activity,
substitutability, and complexity (method 1). The second method is based
on the sum of these same measures of risk, except that the
substitutability measures are replaced with a measure of the firm's
reliance on short-term wholesale funding (method 2).
---------------------------------------------------------------------------
\44\ 12 CFR part 217, subpart H.
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The Board designed the scoring methodology to provide a single,
comprehensive, integrated assessment of a large bank holding company's
systemic footprint. Accordingly, the indicators in the scoring
methodology measure the extent to which the failure or distress of a
bank holding company could pose a threat to U.S. financial stability or
inflict material damage on the broader economy. The Board could also
use the indicators in the scoring methodology to help identify banking
organizations that have heightened risk profiles and would closely
align with the risk-based factors specified in section 165 of the Dodd-
Frank Act for applying enhanced prudential standards, including the
resolution planning requirement. Importantly, large bank holding
companies already submit to the Board periodic public reports on their
indicator scores in the scoring methodology. Accordingly, use of the
scoring methodology more broadly for tailoring of resolution planning
requirements may promote transparency and could economize on compliance
costs for large bank holding companies.
Under the alternative scoring methodology, a banking organization's
size and either its method 1 or method 2 score from the scoring
methodology would be used to determine which category of standards
would apply to the firm. In light of the changes made by EGRRCPA, the
Board in its domestic tailoring proposal conducted an analysis of the
distribution of method 1 and method 2 scores of bank holding companies
and covered savings and loan holding companies with at least $100
billion in total consolidated assets.
Category I. As under the domestic tailoring proposal and under the
Board's existing enhanced prudential standards framework, Category I
standards would continue to apply to U.S. GSIBs, which would continue
to be defined as U.S. banking organizations with a method 1 score of
130 or more.
Category II. Category II banking organizations were defined in the
domestic tailoring proposal as those whose failure or distress could
impose costs on the U.S. financial system and economy that are higher
than the costs imposed by the failure or distress of an average banking
organization with total consolidated assets of $250 billion or more.
In selecting the ranges of method 1 or method 2 scores that could
define the application of Category II standards in the domestic
tailoring proposal, the Board considered the potential of a firm's
material distress or failure to disrupt the U.S. financial system or
economy. As noted in section III.A and III.C of the domestic tailoring
proposal, during the 2008 financial crisis, significant losses at
Wachovia Corporation, which had $780 billion in total consolidated
assets at the time of being acquired in distress, had a destabilizing
effect on the financial system. In the domestic tailoring proposal, the
Board estimated method 1 and method 2 scores for Wachovia Corporation,
based on available data, and also calculated the scores of banking
organizations with more than $250 billion in total consolidated assets
that are not U.S. GSIBs assuming that each had $700 billion in total
consolidated assets (the asset size threshold used to define Category
II in the Board's domestic tailoring proposal). In the domestic
tailoring proposal, the Board also considered the outlier method 1 and
method 2 scores for banking organizations with more than $250 billion
in total consolidated assets that are not U.S. GSIBs.
Based on this analysis, under the alternative methodology, the
Board
[[Page 21615]]
would apply Category II standards to any non-U.S. GSIB banking
organization with $100 billion or more in total consolidated assets and
with a method 1 score between 60 and 80 or a method 2 score between 100
and 150. If the Board were to establish a scoring methodology for these
purposes in the final rule, the Board would set a single score within
the listed ranges for application of Category II standards. The Board
invites comment on what score within these ranges would be appropriate.
Category III. As noted, section 165 of the Dodd-Frank Act, as
amended by EGRRCPA, requires the Board to apply enhanced prudential
standards (including the resolution planning requirement) to any bank
holding company with total consolidated assets of $250 billion or more
and authorizes the Board to apply these standards to bank holding
companies with $100 billion or more and less than $250 billion in total
consolidated assets. In order to determine a scoring methodology
threshold for application of Category III standards to banking
organizations with $100 billion or more and less than $250 billion in
total consolidated assets, the Board in the domestic tailoring proposal
considered the scores of these banking organizations as compared to the
scores of banking organizations with $250 billion or more in total
consolidated assets that are not U.S. GSIBs. Based on the analysis in
the domestic tailoring proposal, the Board, under a scoring methodology
approach, would apply Category III standards to banking organizations
with total consolidated assets of $100 billion or more and less than
$250 billion that have a method 1 score between 25 and 45. Banking
organizations with a score in this range would have a score similar to
that of the average firm with $250 billion or more in total
consolidated assets. Using method 2 scores, the Board would apply
Category III standards to any banking organization with total
consolidated assets $100 billion or more and less than $250 billion
that have a method 2 score between 50 and 85. Again, if the Board were
to establish a scoring methodology for these purposes in the final
rule, the Board would pick a single score within the listed ranges. The
Board invites comment on what score within these ranges would be
appropriate.
Category IV. Under a score-based approach and similar to the
domestic tailoring proposal, the Board would apply Category IV
standards to banking organizations with $100 billion or more in total
consolidated assets that do not meet any of the thresholds specified
for Categories I through III (that is, a method 1 score of less than 25
to 45 or a method 2 score of less than 50 to 85). If the score-based
approach is adopted, the Board may or may not exercise its discretion
to apply resolution planning requirements to these firms.
Question 23: What are the advantages and disadvantages to using the
alternative scoring methodology and category thresholds described above
relative to the proposed thresholds for U.S. firms?
Question 24: If the Board were to use the alternative scoring
methodology for purposes of determining whether to apply the resolution
planning requirements to U.S. firms with $100 billion or more and less
than $250 billion in total consolidated assets, should the Board use
method 1 scores, method 2 scores, or both?
Question 25: If the Board adopts the alternative scoring
methodology, what would be the advantages or disadvantages of the Board
requiring banking organizations to calculate their scores at a
frequency greater than annually, including, for example, requiring a
banking organization to calculate its score on a quarterly basis?
Question 26: With respect to each category of standards described
above, at what level should the method 1 or method 2 score thresholds
be set for U.S. firms and why, and discuss how those levels could be
impacted by considering additional data, or by considering possible
changes in the banking system. Commenters are encouraged to provide
data supporting their recommendations.
Question 27: What other approaches should the Board consider in
setting thresholds for determining whether to apply the resolution
planning requirements to U.S. firms with $100 billion or more and less
than $250 billion in total consolidated assets?
2. Alternative Scoping Criteria for Foreign Banking Organizations
Similar to the alternative approach for U.S. firms outlined above,
an alternative approach for tailoring the application of resolution
planning requirements to a foreign banking organization would be to use
a single, comprehensive score to assess the risk profile and systemic
footprint of a foreign banking organization's combined U.S. operations.
As mentioned above, the Board uses a scoring methodology to identify
U.S. GSIBs and apply risk-based capital surcharges to these firms. As
an alternative in both tailoring proposals, the Board proposed a
scoring methodology that also could be used to tailor resolution
planning requirements for foreign banking organizations.
As mentioned above, the scoring methodology in the Board's
regulations is used to calculate a U.S. GSIB's capital surcharge under
two methods.\45\ Consistent with the tailoring proposals and as an
alternative to the threshold approach under this proposal, the Board is
seeking comment on use of the scoring methodology to apply the
resolution planning requirement to foreign banking organizations with
$100 billion or more and less than $250 billion in total consolidated
assets.
---------------------------------------------------------------------------
\45\ See 12 CFR part 217, subpart H.
---------------------------------------------------------------------------
As discussed in further detail in the tailoring proposals, the
scoring methodology was designed to identify and assess the systemic
risk of a large banking organization, and can be similarly used to
measure the risks posed by the U.S. operations of foreign banking
organizations. Like the thresholds-based approach in this proposal and
the tailoring proposals, the indicators used in the scoring methodology
closely align with the risk-based factors specified in section 165 of
the Dodd-Frank Act. Because this information would be reported
publicly, use of the scoring methodology may promote transparency in
the application of such standards to foreign banking organizations.
Under the alternative scoring methodology, the size of a foreign
banking organization's combined U.S. assets, together with the method 1
or method 2 score of its U.S. operations under the scoring methodology,
would be used to determine which category of standards would apply.
Consistent with the FBO tailoring proposal, tailoring of the resolution
planning requirement would be based on the method 1 or method 2 score
applicable to a foreign banking organization's combined U.S.
operations. U.S. intermediate holding companies already report
information required to calculate method 1 and method 2 scores, and in
connection with the FBO tailoring proposal, the reporting requirements
would be extended to include a foreign banking organization's combined
U.S. operations.\46\
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\46\ As discussed in detail in the FBO tailoring proposal, the
FR Y-15 would be amended to collect risk-indicator data for the
combined U.S. operations of foreign banking organizations.
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To determine which category of standards would apply under the
alternative scoring methodology, the Board in its FBO tailoring
proposal considered the distribution of method 1 and method 2 scores of
the U.S. operations of foreign banking
[[Page 21616]]
organizations, U.S. intermediate holding companies, U.S. bank holding
companies, and certain savings and loan holding companies with $100
billion or more in total consolidated assets.\47\
---------------------------------------------------------------------------
\47\ In conducting its analysis, the Board considered method 1
and method 2 scores as of September 30, 2018.
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Category II. In the FBO tailoring proposal, the Board considered
the potential of a firm's material distress or failure to disrupt the
U.S. financial system or economy in selecting the ranges of method 1 or
method 2 scores that could define the application of Category II
standards.
Based on the Board's analysis in the FBO tailoring proposal and to
maintain comparability to the domestic tailoring proposal, under the
alternative scoring methodology the Board would apply Category II
standards to any foreign banking organization with at least $100
billion in combined U.S. assets whose combined U.S. operations have (a)
a method 1 score that meets or exceeds a minimum score between 60 and
80 or (b) a method 2 score that meets or exceeds a minimum score
between 100 to 150.
If the Board were to establish a scoring methodology for these
purposes in the final rule, the Board would set a single score within
the listed ranges for the application of Category II standards. The
Board invites comment on what score within these ranges would be
appropriate.
Category III. Under the FBO tailoring proposal, the Board would
apply category III standards to a foreign banking organization with
combined U.S. assets of $250 billion or more, reflecting, among other
things, the crisis experience of U.S. banking organizations with total
consolidated assets of $250 billion or more, which presented materially
different risks to U.S. financial stability relative to firms with less
than $250 billion in assets. Similarly, under the domestic tailoring
proposal, the Board would at a minimum apply Category III standards to
a firm with assets of $250 billion or more, reflecting the threshold
above which the Board must apply enhanced prudential standards under
section 165 of the Dodd-Frank Act.
In the domestic tailoring proposal, the Board sought comment on an
alternative scoring methodology under which a firm with total
consolidated assets of $100 billion or more and less than $250 billion
that had a method 1 or method 2 score within a specified range would be
subject to Category III standards. Specifically, the Board proposed
selecting a minimum score for application of Category III standards
between 25 and 45 under method 1, or between 50 and 85 under method 2.
The maximum score for application of the Category III standards would
be one point lower than the minimum score selected for application of
Category II standards. In selecting these ranges, the Board compared
the scores of U.S. firms with total consolidated assets of $100 billion
or more and less than $250 billion with those of firms with total
consolidated assets of $250 billion or more. In the FBO tailoring
proposal, the Board is proposing the same thresholds for application of
Category III standards to foreign banking organizations under the
alternative scoring methodology.
In this proposal, the Board proposes to use the same range for
foreign banking organizations, such that Category III standards would
apply to a foreign banking organization with combined U.S. assets of
$100 billion or more and less than $250 billion with a method 1 score
that meets or exceeds a minimum score between 25 and 45 or a method 2
score that meets or exceeds a minimum score between 50 and 85, and in
either case is below the score threshold for Category II standards. The
Board invites comment on what score within these ranges would be
appropriate.
Category IV. The Board proposes that under the alternative scoring
methodology, Category IV standards would apply to a foreign banking
organization with $100 billion or more in combined U.S. assets whose
method 1 or method 2 score for its combined U.S. operations is below
the minimum score threshold for Category III. If the score-based
approach is adopted, the Board may or may not exercise its discretion
to apply resolution planning requirements to these firms.
Question 28: What are the advantages and disadvantages to the use
of the alternative scoring methodology and category thresholds
described above instead of the proposed thresholds for foreign banking
organizations?
Question 29: If the Board were to use the alternative scoring
methodology for purposes of determining whether to apply the resolution
planning requirements to foreign banking organizations with $100
billion or more and less than $250 billion in total consolidated
assets, should the Board use method 1 scores, method 2 scores, or both?
What are the challenges of applying the scoring methodologies to the
combined U.S. operations of a foreign banking organization? What
modifications to the scoring methodology, if any, should the Board
consider (e.g., should intercompany transactions be reflected in the
calculation of indicators)?
Question 30: If the Board adopts the alternative scoring
methodology, what would be the advantages or disadvantages of the Board
requiring scores to be calculated for the U.S. operations of a foreign
banking organization at a frequency greater than annually, including,
for example, requiring scores to be calculated on a quarterly basis?
Question 31: With respect to each category of standards described
above, at what level should the method 1 or method 2 score thresholds
be set and why? Commenters are encouraged to provide data supporting
their recommendations.
Question 32: What other approaches should the Board consider in
setting thresholds for determining whether to apply the resolution
planning requirements to foreign banking organizations with $100
billion or more and less than $250 billion in total consolidated assets
and why? How would any such approach affect the comparability of
requirements across U.S. banking organizations and foreign banking
organizations?
3. Alternative Tailoring Criteria
If the Board were to use the alternative scoring methodology for
purposes of determining whether to apply the resolution planning
requirements to firms with $100 billion or more and less than $250
billion in total consolidated assets, the agencies may also use the
scoring methodology to differentiate among U.S. and foreign firms to
which the resolution planning requirements would apply. For example,
the agencies could divide covered companies required to file resolution
plans into the three groups of filers as follows:
The biennial filers group could comprise firms subject to
Category I standards under the alternative scoring methodology, which
would continue to be U.S. GSIBs, as well as any nonbank financial
company supervised by the Board that has not been jointly designated as
a triennial full filer by the agencies.
The triennial full filers group could comprise firms
subject to Category II and III standards under the alternative scoring
methodology, as well as any nonbank financial company supervised by the
Board that has been designated as a triennial full filer by the
agencies.
The triennial reduced filers group could comprise covered
companies that are neither subject to Category I, II, or III standards
under the alternative scoring methodology, nor nonbank
[[Page 21617]]
financial companies supervised by the Board. This would include foreign
banking organizations with $250 billion or more in total global assets
that are not subject to Category II or Category III standards under the
alternative scoring methodology.
The agencies are seeking comment on use of the alternative scoring
methodology to tailor the application of the resolution planning
requirement to covered companies.
Question 33: If the Board were to use the alternative scoring
methodology for purposes of determining whether to apply the resolution
planning requirements to firms with $100 billion or more and less than
$250 billion in total consolidated assets, should the agencies use the
same scoring methodology for purposes of tailoring resolution planning
requirements? What are the advantages and disadvantages in using the
alternative scoring methodology to categorize U.S. firms with systemic
footprints smaller than the U.S. GSIBs for purposes of tailoring the
resolution planning requirements?
Question 34: What other approaches should the agencies consider in
setting thresholds for tailoring resolution planning requirements?
IV. Transition Period
Under the proposal, the rule would take effect no earlier than (a)
the first day of the first calendar quarter after the issuance of the
final rule and (b) November 24, 2019. Financial institutions that are
covered companies when the final rule is issued would be required to
comply with the proposed requirements beginning on the effective date.
The following summary describes the proposed submission dates for
each new group of filers in the coming years. There currently are no
nonbank financial companies designated for Board supervision by the
Council so the summary does not address this type of firm.
Biennial filers (all firms subject to Category I standards): All
U.S. firms identified as U.S. GSIBs and subject to Category I standards
would be biennial filers. Firms in this group of filers would submit
resolution plans on a biennial basis. The biennial filers are currently
required to submit resolution plans under the Rule by July 1, 2019. If
the proposal is adopted, their subsequent submission would be due by
July 1, 2021. This submission would be a targeted resolution plan.
Thereafter, the biennial filers would alternate between filing full and
targeted resolution plans on a biennial basis going forward.
Triennial full filers (all firms subject to Category II or Category
III standards): Firms in this filing group would submit resolution
plans on a triennial basis and alternate between filing full resolution
plans and targeted resolution plans. If the proposal is adopted, each
triennial full filer would submit its first full resolution plan by
July 1, 2021 and alternate between filing full and targeted resolution
plans on a triennial basis going forward. For firms in this filing
group with outstanding shortcomings or deficiencies, it is expected
that remediation and related timelines established by the agencies
would continue to apply. For example, the four foreign banking
organizations that received feedback letters on December 20, 2018
(Barclays plc, Credit Suisse Group AG, Deutsche Bank AG, and UBS Group
AG) would be expected to address their shortcomings and complete their
respective project plans by July 1, 2020, as provided in the feedback
letters. Consistent with previous communications to the firm, Northern
Trust Corporation would be expected to provide an update in response to
the agencies' joint feedback letter regarding its December 2017
resolution plan.
Triennial reduced filers (all other filers): Firms in this filing
group would submit reduced resolution plans on a triennial basis. If
the proposal is adopted, each triennial reduced filer would be required
to submit its first reduced resolution plan by July 1, 2022, and then
every three years going forward.
Question 35: The agencies invite comment on the proposed transition
period. Are there other alternatives to consider as the agencies
finalize the rule?
V. Impact Analysis
The proposal would modify the expected costs imposed by the Rule
while seeking to preserve the benefits to U.S. financial stability
provided by the Rule.
Consistent with EGRRCPA, the proposal would change the asset
thresholds at which all firms are required to file resolution plans
from $50 billion to $250 billion in total consolidated assets. The
proposal also would require the submission of resolution plans by
certain firms with $100 billion or more and less than $250 billion in
total consolidated assets, including those that have certain risk-based
indicators. As of June 30, 2018, firms with total consolidated assets
between $50 and $100 billion accounted for less than 2.5 percent of
total U.S. industry assets, and firms with $100 billion or more and
less than $250 billion in total consolidated assets accounted for 17
percent of total U.S. industry assets.\48\ The net impact of these
threshold changes would reduce the number of U.S. filers from 27 to 12
and the number of foreign banking organization filers from 108 to 62.
This reduction in resolution plan filers would decrease costs as fewer
firms would be required to prepare plans.
---------------------------------------------------------------------------
\48\ Assets as reported on form FR Y-9C for the quarter ending
June 30, 2018.
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The proposal would also seek to minimize the impact of this change
on benefits to U.S. financial stability provided from resolution plan
filings by maintaining filing requirements for certain firms with $100
billion or more and less than $250 billion in total consolidated
assets, including those that have certain risk-based indictors.
The proposal would also reduce the frequency of required resolution
plan submissions for the remaining resolution plan filers, including
the largest and most complex resolution plan filers, by extending the
default filing cycle between resolution plan submissions. The proposal
would modify the filing cycle in the Rule to every two years for U.S.
GSIBs and certain systemically important nonbank financial companies
and to every three years for all other resolution plan filers. This
change formalizes a practice that has developed over time to extend
firms' resolution plan submission dates to allow at least two years
between plan submissions and should reduce costs.
In the August 2018 proposal to extend mandatory Reporting
Requirements Associated with Regulation QQ, the estimate of total
annual burden for resolution plan filings was estimated to be 1,137,797
hours.\49\ The revised annual burden, incorporating proposed
modifications to the resolution plan rule is 425,523 hours. At an
estimated mean wage of $56.05 per hour,\50\ this reduction in the
number of resolution plan filers has an estimated wage savings of
approximately $39,922,958 per year. Impacts on resolution preparedness
that could arise from the reduced frequency of filing would be
mitigated by the proposal authorizing the agencies to require a firm to
file a resolution plan with appropriate notice. This authority would
address circumstances where the agencies
[[Page 21618]]
determine that waiting for a firm to submit on its regular submission
cycle could present excess risk.
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\49\ Agency Information Collection Activities: Announcement of
Board Approval Under Delegated Authority and Submission to OMB, 83
FR 42296 (August 21, 2018).
\50\ Mean hourly wages retrieved from the Bureau of Labor and
Statistics (BLS), Occupational Employment and Wages May 2017,
published March 30, 2018, www.bls.gov/news.release/ocwage.t01.htm.
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Finally, the proposal is also expected to improve efficiency by
streamlining the information requirements for the resolution plan
submissions: The proposal includes a mechanism for firms to request a
waiver from certain informational requirements in full resolution plan
submissions; a new, more focused plan submission (i.e., targeted
resolution plan); and formalizes the conditions and content for reduced
resolution plans. These resolution plan modifications are appropriate
because the firms' resolution plans have matured and become more stable
through multiple submissions. Further, the resolution plan
modifications should reduce the costs of preparing and reviewing the
plans without having a material impact on the benefits provided by the
plans.
In short, as detailed in this section, the proposal would provide
estimated wage savings, to the institutions affected by it, totaling
$39,922,958 due to the reduction of 712,274 burden hours needed to
comply with the Rule. Moreover, firms could reallocate the 712,274
hours used to comply with the Rule to other activities considered to be
more beneficial. Thus, the total economic benefits of the proposal
could be greater than the dollar amount estimated.
Question 36: The agencies invite comment on all aspects of this
evaluation of costs and benefits.
VI. Regulatory Analysis
A. 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. The agencies reviewed the proposal and
determined that the proposal would revise the reporting requirements
that have been previously cleared by the OMB under the Board's control
number (7100-0346). When the Rule was adopted in 2011, the Board took
the entire burden associated with the Rule even though the Board and
the Corporation are both legally authorized to receive and review
resolution plans. The agencies have decided to now share equally in the
burden associated with the proposal. As a result, the Corporation will
request approval from the OMB for one half of the Board's PRA burden,
as revised by the proposal, and the OMB will assign an OMB control
number. The Board has reviewed the proposal under the authority
delegated to the Board by the OMB and at the final rule stage, will
revise and extend its information collection for three years.
Comments are invited on:
Whether the collections of information are necessary for
the proper performance of the Board's functions, including whether the
information has practical utility;
The accuracy of the estimate of the burden of the
information collections, including the validity of the methodology and
assumptions used;
Ways to enhance the quality, utility, and clarity of the
information to be collected;
Ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology;
Estimates of capital or start-up costs and costs of
operation, maintenance, and purchase of services to provide
information; and
Burden estimates for preparation of waiver requests and
the calculation of any associated reduction in burden.
All comments will become a matter of public record. Comments on the
collection of information should be sent to the addresses listed in the
ADDRESSES section of this document. A copy of the comments may also be
submitted to the OMB desk officer: By mail to U.S. Office of Management
and Budget, 725 17th Street NW, #10235, Washington, DC 20503, or by
facsimile to 202-395-6974; or email to [email protected],
Attention, Federal Banking Agency Desk Officer.
Proposed Information Collection
Title of Information Collection: Reporting Requirements Associated
with Resolution Planning.
Agency Form Number: FR QQ.
OMB Control Number: 7100-0346.
Frequency of Response: Biennially, Triennially.
Respondents: Bank holding companies \51\ with total consolidated
assets of $250 billion or more, bank holding companies with $100
billion or more in total consolidated assets with certain
characteristics specified in the proposal, and nonbank financial firms
designated by the Council for supervision by the Board.
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\51\ This includes any foreign bank or company that is, or is
treated as, a bank holding company under section 8(a) of the
International Banking Act of 1978, and meets the relevant total
consolidated assets threshold.
----------------------------------------------------------------------------------------------------------------
Number of Estimated Estimated
FR QQ respondents Annual average hours annual burden
\52\ frequency per response hours
----------------------------------------------------------------------------------------------------------------
Current
----------------------------------------------------------------------------------------------------------------
Reduced Reporters............................... 72 1 60 4,320
December Filers:
Tailored Reporters:
Domestic................................ 11 1 9,000 99,000
Foreign................................. 6 1 1,130 6,780
Full Reporters:
Domestic................................ 3 1 26,000 78,000
Foreign................................. 6 1 2,000 12,000
Complex Filers:
Domestic.................................... 9 1 \53\ 79,522 715,697
Foreign..................................... 4 1 55,500 222,000
---------------------------------------------------------------
Current Total........................... .............. .............. .............. 1,137,797
----------------------------------------------------------------------------------------------------------------
[[Page 21619]]
Proposed
----------------------------------------------------------------------------------------------------------------
Triennial Reduced............................... 53 1 20 1,060
Triennial Full:
Complex Foreign............................. 4 1 13,135 52,540
Foreign and Domestic........................ 9 1 5,667 51,003
Biennial Filers:
Domestic.................................... 8 1 40,115 320,920
Waivers \54\.................................... 1 1 1 1
---------------------------------------------------------------
Current Total............................... .............. .............. .............. 425,523
---------------------------------------------------------------
Change.................................. .............. .............. .............. 712,274
----------------------------------------------------------------------------------------------------------------
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,
generally requires an agency, in connection with a proposed rule, to
prepare and make available for public comment an initial regulatory
flexibility analysis that describes the impact of a proposed rule on
small entities.\55\ However, a regulatory flexibility analysis is not
required if the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
The Small Business Administration (SBA) has defined ``small entities''
to include banking organizations with total assets of less than or
equal to $550 million.\56\
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\52\ Of these respondents, none are small entities as defined by
the Small Business Administration (i.e., entities with less than
$550 million in total assets) https://www.sba.gov/document/support-table-size-standards.
\53\ This estimate captures the annual time that complex
domestic filers will spend complying with this collection, given
that eight of these filers will only submit two resolution plans
over the three-year period covered by this document. The estimate
therefore represents two-thirds of the time these firms are
estimated to spend on each resolution plan submission.
\54\ The agencies cannot reasonably estimate how many of the 21
firms expected to file full resolution plans may submit waiver
requests, nor how long it would take to prepare a waiver request.
Accordingly, the agencies are including this line as a placeholder.
\55\ 5 U.S.C. 601 et seq.
\56\ The SBA defines a small banking organization as having $550
million or less in assets, where ``a financial institution's assets
are determined by averaging the assets reported on its four
quarterly financial statements for the preceding year.'' See 13 CFR
121.201 (as amended, effective December 2, 2014). ``SBA counts the
receipts, employees, or other measure of size of the concern whose
size is at issue and all of its domestic and foreign affiliates.''
See 13 CFR 121.103. Following these regulations, the agencies use a
covered entity's affiliated and acquired assets, averaged over the
preceding four quarters, to determine whether the covered entity is
``small'' for the purposes of RFA.
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The agencies have considered the potential impact of the proposal
on small entities in accordance with the RFA. As discussed below, the
Board believes and the Corporation certifies that the proposal is not
expected to have a significant impact on a substantial number of small
entities, including small banking organizations.
As discussed in detail above, section 165(d) of the Dodd-Frank Act
requires certain financial companies to report periodically to the
agencies their plans for rapid and orderly resolution under the U.S.
Bankruptcy Code in the event of material financial distress or failure.
This provision of the Dodd-Frank Act has recently been amended by
EGRRCPA.
In accordance with section 165(d) of the Dodd-Frank Act as amended
by EGRRCPA, the Board is proposing to amend Regulation QQ (12 CFR part
243) and the Corporation is proposing to amend part 381 (12 CFR part
381) to amend the requirements that a covered company periodically
submit a resolution plan to the agencies.\57\ The proposal would also
modify the procedures for joint review of a resolution plan by the
agencies. The reasons and justification for the proposal are described
in the Supplementary Information.
---------------------------------------------------------------------------
\57\ See 12 U.S.C. 5365(d).
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Under regulations issued by the SBA, a ``small entity'' includes
those firms within the ``Finance and Insurance'' sector with total
consolidated assets totaling less than $550 million.\58\ The agencies
believe that the Finance and Insurance sector constitutes a reasonable
universe of firms for these purposes because such firms generally
engage in activities that are financial in nature. Consequently, banks,
bank holding companies or nonbank financial companies with total
consolidated assets of $550 million or less are small entities for
purposes of the RFA. As of June 30, 2018, there were 4,106 insured
depository institutions and six bank holding companies considered
``small'' by the SBA under the RFA.\59\
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\58\ 13 CFR 121.201.
\59\ FFIEC Call reports, June 30, 2018.
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As discussed in the SUPPLEMENTARY INFORMATION, the proposal would
apply to covered companies, which includes only bank holding companies
and foreign banks that are or are treated as a bank holding company
(foreign banking organization) with at least $100 billion in total
consolidated assets, and nonbank financial companies that the Council
has determined under section 113 of the Dodd-Frank Act must be
supervised by the Board and for which such determination is in effect.
The assets of a covered company substantially exceed the $550 million
asset threshold at which a banking organization is considered a ``small
entity'' under SBA regulations.\60\ The proposal would apply to a
nonbank financial company designated by the Council under section 113
of the Dodd-Frank Act regardless of such a company's asset size.
Although the asset size of nonbank financial companies may not be the
determinative factor of whether such companies may pose systemic risks
and would be designated by the Council for supervision by the Board, it
is an important consideration.\61\ It is therefore unlikely that a
financial firm that is at or below the $550 million asset threshold
would be designated by the Council under section 113 of the Dodd-Frank
Act because material financial distress at such firms, or the nature,
scope, size, scale, concentration, interconnectedness, or mix of it
activities, are not likely to pose a threat to the financial stability
of the United States.
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\60\ The Dodd-Frank Act provides that the Board may, on the
recommendation of the Council, increase the asset threshold for the
application of the resolution planning requirements. See 12 U.S.C.
5365(a)(2)(B). However, neither the Board nor the Council has the
authority to lower such threshold.
\61\ See 12 CFR 1310.11.
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[[Page 21620]]
Because the proposal is not likely to apply to any company with
assets of $550 million or less, if adopted in final form, it is not
expected to apply to any small entity for purposes of the RFA.
Moreover, as discussed in the Supplementary Information, the Dodd-Frank
Act requires the agencies jointly to adopt rules implementing the
provisions of section 165(d) of the Dodd-Frank Act. The agencies do not
believe that the proposal duplicates, overlaps, or conflicts with any
other Federal rules.
In light of the foregoing, the Board believes and the Corporation
certifies that the proposal, if adopted in final form, will not have a
significant economic impact on a substantial number of small entities
supervised. Nonetheless, the agencies invite comment on whether the
proposal would have significant effects on small organizations, and
whether the potential burdens or consequences of such effects could be
minimized in a manner consistent with section 165(d) of the Dodd-Frank
Act.
Question 37: The agencies invite written comments regarding this
analysis, and request that commenters describe the nature of any impact
on small entities and provide empirical data to illustrate and support
the extent of the impact. A final regulatory flexibility analysis will
be conducted after consideration of comment received during the public
comment period.
C. Riegle Community Development and Regulatory Improvement Act of 1994
The Riegle Community Development and Regulatory Improvement Act of
1994 (RCDRIA) requires that each Federal banking agency, in determining
the effective date and administrative compliance requirements for new
regulations that impose additional reporting, disclosure, or other
requirements on insured depository institutions, consider, consistent
with principles of safety and soundness and the public interest, any
administrative burdens that such regulations would place on depository
institutions, including small depository institutions, and customers of
depository institutions, as well as the benefits of such regulations.
In addition, new regulations that impose additional reporting,
disclosures, or other new requirements on insured depository
institutions generally must take effect on the first day of a calendar
quarter that begins on or after the date on which the regulations are
published in final form.
Because the proposal would not impose additional reporting,
disclosure, or other requirements on insured depository institutions,
section 302 of the RCDRIA therefore does not apply. Nevertheless, the
requirements of RCDRIA will be considered as part of the overall
rulemaking process. In addition, the agencies invite any other comments
that further will inform the agencies' consideration of RCDRIA.
Question 38: The agencies invites comment on this section,
including any additional comments that will inform the agencies'
consideration of the requirements of RCDRIA.
D. Solicitation of Comments on the Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000.\62\ The agencies have sought to
present the proposal in a simple and straightforward manner, and invite
comment on the use of plain language. For example:
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\62\ 12 U.S.C. 4809(a).
---------------------------------------------------------------------------
Question 39: Have the agencies organized the material to suit your
needs? If not, how could they present the rule more clearly?
Question 40: Are the requirements of the proposal clearly stated?
If not, how could they be stated more clearly?
Question 41: Does the proposal contain unclear technical language
or jargon? If so, which language requires clarification?
Question 42: Would a different format (such as a different grouping
and ordering of sections, a different use of section headings, or a
different organization of paragraphs) make the regulation easier to
understand? If so, what changes would make the proposal clearer?
Question 43: What else could the agencies do to make the proposal
clearer and easier to understand?
Appendix A: Foreign Banking Organizations That Would Be Triennial
Reduced Filers
Agricultural Bank of China
Australia and New Zealand Banking Group
Banco Bradesco
Banco De Sabadell
Banco Do Brasil
Banco Santander
Bank of China
Bank of Communications
Bank of Montreal
Bank of Nova Scotia
Bayerische Landesbank
BBVA Compass
BNP Paribas
BPCE Group
Caisse Federale de Credit Mutuel
Canadian Imperial Bank of Commerce
China Construction Bank Corporation
China Merchants Bank
CITIC Group Corporation
Commerzbank
Commonwealth Bank of Australia
Cooperative Rabobank
Credit Agricole Corporate and Investment Bank
DNB Bank
DZ Bank
Erste Group Bank AG
Hana Financial Group
Industrial and Commercial Bank of China
Industrial Bank of Korea
Intesa Sanpaolo
Itau Unibanco
KB Financial Group
KBC Bank
Landesbank Baden-Weurttemberg
Lloyds Banking Group
National Agricultural Cooperative Federation
National Australia Bank
Nordea Group
Norinchukin Bank
Oversea-Chinese Banking Corporation
Shinhan Bank
Skandinaviska Enskilda Banken
Societe Generale
Standard Chartered Bank
State Bank of India
Sumitomo Mitsui Financial Group
Sumitomo Mitsui Trust Holdings
Svenska Handelsbanken
Swedbank
UniCredit Bank
United Overseas Bank
Westpac Banking Corporation
Woori Bank
Text of the Common Rules
(All Agencies)
The text of the common rules appears below:
PART [ ]--RESOLUTION PLANS
Sec.
__.1 Authority and scope.
__.2 Definitions.
__.3 Critical operations.
__.4 Resolution plan required.
__.5 Informational content of a full resolution plan.
__.6 Informational content of a targeted resolution plan.
__.7 Informational content of a reduced resolution plan.
__.8 Review of resolution plans; resubmission of deficient
resolution plans.
__.9 Failure to cure deficiencies on resubmission of a resolution
plan.
__.10 Consultation.
__.11 No limiting effect or private right of action; confidentiality
of resolution plans.
__.12 Enforcement.
[[Page 21621]]
Sec. __.1 Authority and scope.
(a) Authority. This part is issued pursuant to section 165(d)(8) of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L.
111-203, 124 Stat. 1376, 1426-1427), as amended by the Economic Growth,
Regulatory Relief, and Consumer Protection Act (Pub. L. 115-174, 132
Stat. 1296) (the Dodd-Frank Act), 12 U.S.C. 5365(d)(8), which requires
the Board of Governors of the Federal Reserve System (Board) and the
Federal Deposit Insurance Corporation (Corporation) to jointly issue
rules implementing the provisions of section 165(d) of the Dodd-Frank
Act.
(b) Scope. This part applies to each covered company and
establishes rules and requirements regarding the submission and content
of a resolution plan, as well as procedures for review by the Board and
Corporation of a resolution plan.
Sec. __.2 Definitions.
For purposes of this part:
Bankruptcy Code means Title 11 of the United States Code.
Biennial filer is defined in Sec. __.4(a)(1).
Category II banking organization means a covered company that is a
category II banking organization pursuant to Sec. 252.5 of this title.
Category III banking organization means a covered company that is a
category III banking organization pursuant to Sec. 252.5 of this
title.
Company means a corporation, partnership, limited liability
company, depository institution, business trust, special purpose
entity, association, or similar organization, but does not include any
organization, the majority of the voting securities of which are owned
by the United States.
Control. A company controls another company when the first company,
directly or indirectly, owns, or holds with power to vote, 25 percent
or more of any class of the second company's outstanding voting
securities.
Core business lines means those business lines of the covered
company, including associated operations, services, functions and
support, that, in the view of the covered company, upon failure would
result in a material loss of revenue, profit, or franchise value.
Core elements mean the information required to be included in a
full resolution plan pursuant to Sec. __.5(c), (d)(1)(i), (iii), and
(iv), (e)(1)(ii), (e)(2), (3), and (5), (f)(1)(v), and (g) regarding
capital, liquidity, and the covered company's plan for executing any
recapitalization contemplated in its resolution plan, including updated
quantitative financial information and analyses important to the
execution of the covered company's resolution strategy.
Council means the Financial Stability Oversight Council established
by section 111 of the Dodd-Frank Act (12 U.S.C. 5321).
Covered company--(1) In general. A covered company means:
(i) Any nonbank financial company supervised by the Board;
(ii) Any global systemically important BHC;
(iii) Any bank holding company, as that term is defined in section
2 of the Bank Holding Company Act, as amended (12 U.S.C. 1841), and
part 225 of this title (the Board's Regulation Y), that has $250
billion or more in total consolidated assets, as determined based on
the average of the company's four most recent Consolidated Financial
Statements for Holding Companies as reported on the Federal Reserve's
Form FR Y-9C; provided that in the case of a company whose total
consolidated assets have increased as the result of a merger,
acquisition, combination, or similar transaction, the Board and the
Corporation may alternatively consider, in their discretion, to the
extent and in the manner the Board and the Corporation jointly consider
to be appropriate, one or more of the four most recent Consolidated
Financial Statements for Holding Companies as reported on the Federal
Reserve's Form FR Y-9C or Capital and Asset Reports for Foreign Banking
Organizations as reported on the Federal Reserve's Form FR Y-7Q of the
companies that were party to the merger, acquisition, combination or
similar transaction;
(iv) Any foreign bank or company that is a bank holding company or
is treated as a bank holding company under section 8(a) of the
International Banking Act of 1978 (12 U.S.C. 3106(a)), and that has
$250 billion or more in total consolidated assets, as determined
annually based on the foreign bank's or company's most recent annual
or, as applicable, quarterly based on the average of the foreign bank's
or company's four most recent quarterly Capital and Asset Reports for
Foreign Banking Organizations as reported on the Federal Reserve's Form
FR Y-7Q; provided that in the case of a company whose total
consolidated assets have increased as the result of a merger,
acquisition, combination, or similar transaction, the Board and the
Corporation may alternatively consider, in their discretion, to the
extent and in the manner the Board and the Corporation jointly consider
to be appropriate, one or more of the four most recent Consolidated
Financial Statements for Holding Companies as reported on the Federal
Reserve's Form FR Y-9C or Capital and Asset Reports for Foreign Banking
Organizations as reported on the Federal Reserve's Form FR Y-7Q of the
companies that were party to the merger, acquisition, combination or
similar transaction; and
(v) Any additional covered company as determined pursuant to Sec.
243.13.
(2) Cessation of covered company status for nonbank financial
companies supervised by the Board and global systemically important
BHCs. Once a covered company meets the requirements described in
paragraph (j)(1)(i) or (ii) of this section, the company shall remain a
covered company until it no longer meets any of the requirements
described in paragraph (j)(1) of this section.
(3) Cessation of covered company status for other covered
companies. Once a company meets the requirements described in paragraph
(j)(1)(iii) or (iv) of this section, the company shall remain a covered
company until--
(i) In the case of a covered company described in paragraph
(j)(1)(iii) of this section or a covered company described in paragraph
(j)(1)(iv) of this section that files quarterly Capital and Asset
Reports for Foreign Banking Organizations on the Federal Reserve's Form
FR Y-7Q, the company has reported total consolidated assets that are
below $250 billion for each of four consecutive quarters, as determined
based on its average total consolidated assets as reported on its four
most recent Consolidated Financial Statements for Holding Companies on
the Federal Reserve's Form FR Y-9C or Capital and Asset Reports for
Foreign Banking Organizations on the Federal Reserve's Form FR Y-7Q, as
applicable; or
(ii) In the case of a covered company described in paragraph
(j)(1)(iv) of this section that does not file quarterly Capital and
Asset Reports for Foreign Banking Organizations on the Federal
Reserve's Form FR Y-7Q, the company has reported total consolidated
assets that are below $250 billion for each of two consecutive years,
as determined based on its average total consolidated assets as
reported on its two most recent annual Capital and Asset Reports for
Foreign Banking Organizations on the Federal Reserve's Form FR Y-7Q, or
such earlier time as jointly determined by the Board and the
Corporation.
(4) Multi-tiered holding company. In a multi-tiered holding company
structure, covered company means the top-tier of the multi-tiered
holding company unless the Board and the Corporation
[[Page 21622]]
jointly identify a different holding company to satisfy the
requirements that apply to the covered company. In making this
determination, the Board and the Corporation shall consider:
(i) The ownership structure of the foreign banking organization,
including whether the foreign banking organization is owned or
controlled by a foreign government;
(ii) Whether the action would be consistent with the purposes of
this part; and
(iii) Any other factors that the Board and the Corporation
determine are relevant.
(5) Asset threshold for bank holding companies and foreign banking
organizations. The Board may, pursuant to a recommendation of the
Council, raise any asset threshold specified in paragraph (j)(1)(iii)
or (iv) of this section.
(6) Exclusion. A bridge financial company chartered pursuant to 12
U.S.C. 5390(h) shall not be deemed to be a covered company hereunder.
Critical operations means those operations of the covered company,
including associated services, functions and support, the failure or
discontinuance of which would pose a threat to the financial stability
of the United States.
Deficiency is defined in Sec. __.8(b).
Depository institution has the same meaning as in section 3(c)(1)
of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(1)) and
includes a state-licensed uninsured branch, agency, or commercial
lending subsidiary of a foreign bank.
Foreign banking organization means--
(1) A foreign bank, as defined in section 1(b)(7) of the
International Banking Act of 1978 (12 U.S.C. 3101(7)), that:
(i) Operates a branch, agency, or commercial lending company
subsidiary in the United States;
(ii) Controls a bank in the United States; or
(iii) Controls an Edge corporation acquired after March 5, 1987;
and
(2) Any company of which the foreign bank is a subsidiary.
Foreign-based company means any covered company that is not
incorporated or organized under the laws of the United States.
Full resolution plan means a full resolution plan described in
Sec. __.5.
Functionally regulated subsidiary has the same meaning as in
section 5(c)(5) of the Bank Holding Company Act, as amended (12 U.S.C.
1844(c)(5)).
Global systemically important BHC means a covered company that is a
global systemically important BHC pursuant to Sec. 252.5 of this
title.
Identified critical operations means the critical operations of the
covered company identified by the covered company or jointly identified
by the Board and the Corporation under Sec. __.3(b)(2).
Material change means an event, occurrence, change in conditions or
circumstances, or other change that results in, or could reasonably be
foreseen to have, a material effect on:
(1) The resolvability of the covered company;
(2) The covered company's resolution strategy; or
(3) How the covered company's resolution strategy is implemented.
Such changes include, but are not limited to:
(i) The identification of a new critical operation or core business
line;
(ii) The identification of a new material entity or the de-
identification of a material entity;
(iii) Significant increases or decreases in the business,
operations, or funding or interconnections of a material entity; or
(iv) Changes in the primary regulatory authorities of a material
entity or the covered company on a consolidated basis.
Material entity means a subsidiary or foreign office of the covered
company that is significant to the activities of an identified critical
operation or core business line, or is financially or operationally
significant to the resolution of the covered company.
Material financial distress with regard to a covered company means
that:
(1) The covered company has incurred, or is likely to incur, losses
that will deplete all or substantially all of its capital, and there is
no reasonable prospect for the company to avoid such depletion;
(2) The assets of the covered company are, or are likely to be,
less than its obligations to creditors and others; or
(3) The covered company is, or is likely to be, unable to pay its
obligations (other than those subject to a bona fide dispute) in the
normal course of business.
Nonbank financial company supervised by the Board means a nonbank
financial company or other company that the Council has determined
under section 113 of the Dodd-Frank Act (12 U.S.C. 5323) shall be
supervised by the Board and for which such determination is still in
effect.
Rapid and orderly resolution means a reorganization or liquidation
of the covered company (or, in the case of a covered company that is
incorporated or organized in a jurisdiction other than the United
States, the subsidiaries and operations of such foreign company that
are domiciled in the United States) under the Bankruptcy Code that can
be accomplished within a reasonable period of time and in a manner that
substantially mitigates the risk that the failure of the covered
company would have serious adverse effects on financial stability in
the United States.
Reduced resolution plan means a reduced resolution plan described
in Sec. __.7.
Shortcoming is defined in Sec. __.8(e).
Subsidiary means a company that is controlled by another company,
and an indirect subsidiary is a company that is controlled by a
subsidiary of a company.
Targeted resolution plan means a targeted resolution plan described
in Sec. __.6.
Triennial full filer is defined in Sec. __.4(b)(1).
Triennial reduced filer is defined in Sec. __.4(c)(1).
United States means the United States and includes any state of the
United States, the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, and the Virgin Islands.
Sec. __.3 Critical operations.
(a) Identification of critical operations by covered companies--(1)
Process and methodology required. (i) Each biennial filer and triennial
full filer shall establish and implement a process designed to identify
each of its critical operations. The scale of the process must be
appropriate to the nature, size, complexity, and scope of the covered
company's operations. The covered company must review its process
periodically and update it as necessary to ensure its continued
effectiveness. The covered company shall describe its process and how
it is applied as part of its corporate governance relating to
resolution planning under Sec. __.5(d)(1). The covered company must
conduct the process described in this paragraph (a)(1) sufficiently in
advance of its next resolution plan submission so that the covered
company is prepared to submit the information required under Sec. Sec.
__.5 through __.7 for each identified critical operation.
(ii) The process required under paragraph (a)(1)(i) of this section
must include a methodology for evaluating the covered company's
participation in activities and markets that may be critical to the
financial stability of the United States. The methodology must be
designed, taking into account the nature, size, complexity, and scope
of
[[Page 21623]]
the covered company's operations, to identify and assess:
(A) The economic functions engaged in by the covered company;
(B) The markets and activities through which the covered company
engages in those economic functions;
(C) The significance of those markets and activities with respect
to the financial stability of the United States; and
(D) The significance of the covered company as a provider or other
participant in those markets and activities.
(2) Waiver requests. In connection with the submission of a
resolution plan, a covered company that has previously submitted a
resolution plan under this part and does not currently have an
identified critical operation under this part may request a waiver of
the requirement to have a process and methodology under paragraph
(a)(1) of this section in accordance with this paragraph (a)(2).
(i) Each waiver request shall be divided into a public section and
a confidential section. A covered company shall segregate and
separately identify the public section from the confidential section. A
covered company shall include in the confidential section of a waiver
request its rationale for why a waiver of the requirement would be
appropriate, including an explanation of why the process and
methodology are not likely to identify any critical operation given its
business model, operations, and organizational structure. A covered
company shall describe in the public section of a waiver request that
it is seeking to waive the requirement.
(ii) Any waiver request must be made in writing at least 15 months
before the date on which the covered company is required to submit the
resolution plan.
(iii) The Board and Corporation may jointly deny a waiver request
in their discretion. Unless the Board and the Corporation have jointly
denied a waiver request, the waiver request will be deemed approved on
the date that is 9 months prior to the date that the covered company is
required to submit the resolution plan to which the waiver request
relates.
(b) Joint identification of critical operations by the Board and
the Corporation. (1) The Board and the Corporation shall, not less
frequently than every six years, jointly review the operations of
covered companies to determine whether to jointly identify critical
operations of any covered company in accordance with paragraph (b)(2)
of this section, or to jointly rescind any currently effective joint
identification in accordance with paragraph (b)(3) of this section.
(2) If the Board and the Corporation jointly identify a covered
company's operation as a critical operation, the Board and the
Corporation shall jointly notify the covered company in writing. A
covered company is not required to include the information required
under Sec. Sec. __.5 through __.7 for the identified critical operation
in any resolution plan that the covered company is required to submit
within 180 days after the joint notification unless the operation had
been identified by the covered company as a critical operation prior to
when the Board and the Corporation jointly notified the covered
company.
(3) The Board and the Corporation may jointly rescind a joint
identification under paragraph (b)(2) of this section by providing the
covered company with joint notice of the rescission. Upon the
notification, the covered company is not required to include the
information regarding the operation required for identified critical
operations under Sec. Sec. __.5 through __.7 in any subsequent
resolution plan unless:
(i) The covered company identifies the operation as a critical
operation; or
(ii) The Board and the Corporation subsequently provide a joint
notification under paragraph (b)(2) of this section to the covered
company regarding the operation.
(4) A joint notification provided by the Board and the Corporation
to a covered company before [effective date of final rule] that
identifies any of its operations as a critical operation and not
previously jointly rescinded is deemed to be a joint identification
under paragraph (b)(2) of this section.
(c) Request for reconsideration of jointly identified critical
operations. A covered company may request that the Board and the
Corporation reconsider a joint identification under paragraph (b)(2) of
this section in accordance with this paragraph (c).
(1) Written request for reconsideration. The covered company must
submit a written request for reconsideration to the Board and the
Corporation that includes a clear and complete statement of all
arguments and all relevant, material information that the covered
company expects to have considered. If a covered company has previously
requested reconsideration regarding the operation, the written request
must also describe the material differences between the new request and
the most recent prior request.
(2) Timing. (i) A covered company shall submit a request for
reconsideration sufficiently before its next resolution plan to provide
the Board and the Corporation with a reasonable period of time to
reconsider the joint identification.
(ii) If a covered company submits a request for reconsideration at
least 270 days before the date on which it is required to submit its
next resolution plan, the Board and the Corporation will complete their
reconsideration at least 180 days before the date on which the covered
company is required to submit its next resolution plan, except the
Board and the Corporation may jointly extend the period for their
reconsideration by no more than 90 days. If the Board and the
Corporation jointly find that additional information from the covered
company is required to complete their reconsideration, the Board and
the Corporation will jointly request in writing the additional
information from the covered company. The Board and the Corporation
will then complete their reconsideration no later than 90 days after
receipt of all additional information from the covered company.
(iii) If a covered company submits a request for reconsideration
less than 270 days before the date on which it is required to submit
its next resolution plan, the Board and the Corporation may, in their
discretion, defer reconsideration of the joint identification until
after the submission of that resolution plan, with the result that the
covered company must include the identified critical operation in that
resolution plan.
(3) Joint communication following reconsideration. The Board and
the Corporation will communicate jointly the results of their
reconsideration in writing to the covered company.
(d) De-identification by covered company of self-identified
critical operations. A covered company may cease to include in its
resolution plans the information required under Sec. Sec. __.5 through
__.7 regarding an operation previously identified only by the covered
company (and not also jointly by the Board and the Corporation) as a
critical operation only in accordance with this paragraph (d).
(1) Notice of de-identification. If a covered company ceases to
identify an operation as a critical operation, the covered company must
notify the Board and the Corporation of its de-identification. The
notice must be in writing and include a clear and complete explanation
of:
(i) Why the covered company previously identified the operation as
a critical operation; and
(ii) Why the covered company no longer identifies the operation as
a critical operation.
[[Page 21624]]
(2) Timing. Notwithstanding a covered company's de-identification,
and unless otherwise notified in writing jointly by the Board and the
Corporation, a covered company shall include the applicable information
required under Sec. Sec. __.5 through __.7 regarding an operation
previously identified by the covered company as a critical operation in
any resolution plan the covered company is required to submit during
the period ending 12 months after the covered company notifies the
Board and the Corporation in accordance with paragraph (d)(1) of this
section.
(3) No effect on joint identifications. Neither a covered company's
de-identification nor notice thereof under paragraph (d)(1) of this
section rescinds a joint identification made by the Board and the
Corporation under paragraph (b)(2) of this section.
Sec. __.4 Resolution plan required.
(a) Biennial filers--(1) Group members. Biennial filer means:
(i) Any global systemically important BHC; and
(ii) Any nonbank financial company supervised by the Board that has
not been jointly designated a triennial full filer by the Board and
Corporation under paragraph (a)(2) of this section or that has been
jointly re-designated a biennial filer by the Board and the Corporation
under paragraph (a)(2) of this section.
(2) Nonbank financial companies. The Board and the Corporation may
jointly designate a nonbank financial company supervised by the Board
as a triennial full filer in their discretion, taking into account
facts and circumstances that each of the Board and the Corporation in
its discretion determines to be relevant. The Board and the Corporation
may in their discretion jointly re-designate as a biennial filer a
nonbank financial company that the Board and the Corporation had
previously designated as a triennial filer, taking into account facts
and circumstances that each of the Board and the Corporation in its
discretion determines to be relevant.
(3) Frequency of submission. Biennial filers shall each submit a
resolution plan to the Board and the Corporation every two years.
(4) Submission date. Biennial filers shall submit their plans by
July 1 of each year in which a plan is due.
(5) Type of plan required to be submitted. Biennial filers shall
alternate submitting a full resolution plan and a targeted resolution
plan.
(6) New covered companies that are biennial filers. A company that
becomes a covered company and a biennial filer after [effective date of
final rule] shall submit a full resolution plan on the next date on
which other biennial filers are required to submit resolution plans
pursuant to paragraph (a)(4) of this section that occurs no earlier
than 12 months after the date on which the company became a covered
company. The company's subsequent plans shall be of the type required
to be submitted by the other biennial filers.
(b) Triennial full filers--(1) Group members. Triennial full filer
means:
(i) Any category II banking organization;
(ii) Any category III banking organization; and
(iii) Any nonbank financial company supervised by the Board that is
jointly designated a triennial full filer by the Board and Corporation
under paragraph (a)(2) of this section.
(2) Frequency of submission. Triennial full filers shall each
submit a resolution plan to the Board and the Corporation every three
years.
(3) Submission date. Triennial full filers shall submit their plans
by July 1 of each year in which a plan is due.
(4) Type of plan required to be submitted. Triennial full filers
shall alternate submitting a full resolution plan and a targeted
resolution plan.
(5) New covered companies that are triennial full filers. A company
that becomes a covered company and a triennial full filer after
[effective date of final rule] shall submit a full resolution plan on
the next date on which other triennial full filers are required to
submit resolution plans pursuant to paragraph (b)(3) of this section
that occurs no earlier than 12 months after the date on which the
company became a covered company. The company's subsequent plans shall
be of the type required to be submitted by the other triennial full
filers.
(c) Triennial reduced filers--(1) Group members. Triennial reduced
filer means any covered company that is not a global systemically
important BHC, nonbank financial company supervised by the Board,
category II banking organization, or category III banking organization.
(2) Frequency of submission. Triennial reduced filers shall each
submit a resolution plan to the Board and the Corporation every three
years.
(3) Submission date. Triennial reduced filers shall submit their
plans by July 1 of each year in which a plan is due.
(4) Type of plan required to be submitted. Triennial reduced filers
shall submit a reduced resolution plan.
(5) New covered companies that are triennial reduced filers. A
company that becomes a covered company and a triennial reduced filer
after [effective date of final rule] shall submit a full resolution
plan on the next date on which other triennial reduced filers are
required to submit resolution plans pursuant to paragraph (c)(3) of
this section that occurs no earlier than 12 months after the date on
which the company became a covered company. The company's subsequent
plans shall be reduced resolution plans.
(d) General--(1) Changing filing groups. If a covered company that
is a member of a filing group specified in paragraphs (a) through (c)
of this section (``original group filer'') becomes a member of a
different filing group specified in paragraphs (a) through (c) of this
section (``new group filer''), then the covered company shall submit
its next resolution plan as follows:
(i) If the next date on which the original group filers are
required to submit their next resolution plans is the same date on
which the other new group filers are required to submit their next
resolution plans and:
(A) That date is less than 12 months after the covered company
became a new group filer, the covered company shall submit its next
resolution plan on that date. The resolution plan may be the type of
plan that the original group filers are required to submit on that date
or the type of plan that the other new group filers are required to
submit on that date.
(B) That date is 12 months or more after the covered company became
a new group filer, the covered company shall submit on that date the
type of resolution plan the other new group filers are required to
submit on that date.
(ii) If the next date on which the original group filers are
required to submit their next resolution plan is different from the
date on which the new group filers are required to submit their next
resolution plans, the covered company shall submit its next resolution
plan on the next date on which the other new group filers are required
to submit a resolution plan that occurs no earlier than 12 months after
the date on which the covered company became a new group filer. The
covered company shall submit the type of resolution plan that the other
new group filers are required to submit on the date the covered company
must submit its next resolution plan.
(iii) Notwithstanding paragraph (d)(1)(i) or (ii) of this section,
any triennial reduced filer that becomes a biennial filer or a
triennial full filer
[[Page 21625]]
shall submit a full resolution plan no later than the next date on
which the other new group filers are required to submit their next
resolution plans that occurs no earlier than 12 months after the date
on which the covered company became a new group filer. After submitting
a full resolution plan, the covered company shall submit, on the next
date that the other new group filers are required to submit their next
resolution plans, the type of resolution plan the other new group
filers are required to submit on that date.
(2) Altering submission dates. Notwithstanding anything to the
contrary in this part, the Board and Corporation may jointly determine
that a covered company shall file its resolution plan by a date other
than as provided in paragraphs (a) through (d) of this section. The
Board and the Corporation shall provide a covered company with written
notice of a determination under this paragraph (d)(2) no later than 180
days prior to the date on which the Board and Corporation jointly
determined to require the covered company to submit its resolution
plan, unless the covered company has not previously submitted a
resolution plan, in which case the Board and Corporation shall provide
the written notice no later than 12 months prior to the date on which
the Board and Corporation jointly determined to require the covered
company to submit its resolution plan.
(3) Authority to require interim updates. The Board and the
Corporation may jointly require that a covered company file an update
to a resolution plan submitted under this part, within a reasonable
amount of time, as jointly determined by the Board and Corporation. The
Board and the Corporation shall notify the covered company of its
requirement to file an update under this paragraph (d)(3) in writing,
and shall specify the portions or aspects of the resolution plan the
covered company shall update.
(4) Notice of extraordinary events--(i) In general. Each covered
company shall provide the Board and the Corporation with a notice no
later than 45 days after any material merger, acquisition of assets, or
similar transaction or fundamental change to the covered company's
resolution strategy. Such notice should describe the event and explain
how the event would affect the resolvability of the covered company.
The covered company shall address any event with respect to which it
has provided notice pursuant to this paragraph (d)(4)(i) in the
following resolution plan submitted by the covered company.
(ii) Exception. A covered company shall not be required to file a
notice under paragraph (d)(4)(i) of this section if the date on which
the covered company would be required to submit the notice under
paragraph (d)(3)(i) of this section would be within 90 days prior to
the date on which the covered company is required to file a resolution
plan under this section.
(5) Authority to require a full resolution plan submission.
Notwithstanding anything to the contrary in this part, the Board and
Corporation may jointly require that a covered company submit a full
resolution plan within a reasonable period of time.
(6) Waivers--(i) Authority to waive requirements. The Board and the
Corporation may jointly waive one or more of the resolution plan
requirements of Sec. __.5, Sec. __.6, or Sec. __.7 for one or more
covered companies for any number of resolution plan submissions. A
request pursuant to paragraph (d)(6)(ii) of this section is not
required for the Board and Corporation to take action pursuant to this
paragraph (d)(6)(i).
(ii) Waiver requests by covered companies. In connection with the
submission of a full resolution plan, a covered company that has
previously submitted a resolution plan under this part may request a
waiver of one or more of the informational content requirements of
Sec. __.5 in accordance with this paragraph (d)(6)(ii).
(A) A requirement to include any of the following information is
not eligible for a waiver at the request of a covered company:
(1) Information specified in section 165(d)(1)(A) through (C) of
the Dodd-Frank Act (12 U.S.C. 5365(d)(1)(A) through (C));
(2) Any core element;
(3) Information required to be included in the public section of a
full resolution plan under Sec. __.11(c)(2);
(4) Information about the remediation of any previously identified
deficiency or shortcoming unless the Board and the Corporation have
jointly determined that the covered company has satisfactorily remedied
the deficiency or addressed the shortcoming prior to the covered
company's submission of the waiver request; or
(5) Information about changes to the covered company's last
submitted resolution plan resulting from any:
(i) Change in law;
(ii) Change in regulation;
(iii) Guidance from the Board and the Corporation; or
(iv) Feedback from the Board and the Corporation, or any material
change experienced by the covered company since the covered company
submitted that resolution plan.
(B) Each waiver request shall be divided into a public section and
a confidential section. A covered company shall segregate and
separately identify the public section from the confidential section. A
covered company shall include in the confidential section of a waiver
request a clear and complete explanation of why:
(1) Each requirement sought to be waived is not a requirement
described in paragraph (d)(6)(ii)(A) of this section;
(2) The information sought to be waived would not be relevant to
the Board's and Corporation's review of the covered company's next full
resolution plan; and
(3) A waiver of each requirement would be appropriate. A covered
company shall include in the public section of a waiver request a list
of the requirements that the covered company is requesting be waived.
(C) A covered company may not make more than one waiver request for
any full resolution plan submission and any waiver request must be made
in writing at least 15 months before the date on which the covered
company is required to submit the full resolution plan.
(D) The Board and Corporation may jointly deny a waiver request in
their discretion. Unless the Board and the Corporation have jointly
denied a waiver request, the waiver request will be deemed approved on
the date that is 9 months prior to the date that the covered company is
required to submit the full resolution plan to which the waiver request
relates.
(e) Access to information. In order to allow evaluation of a
resolution plan, each covered company must provide the Board and the
Corporation such information and access to personnel of the covered
company as the Board and the Corporation jointly determine during the
period for reviewing the resolution plan is necessary to assess the
credibility of the resolution plan and the ability of the covered
company to implement the resolution plan. In order to facilitate review
of any waiver request by a covered company under Sec. __.3(a)(2) or
paragraph (d)(6)(ii) of this section, or any joint identification of a
critical operation of a covered company under Sec. __.3(b), each
covered company must provide such information and access to personnel
of the covered company as the Board and the Corporation jointly
determine is necessary to evaluate the waiver request or whether the
operation is a critical operation. The Board and the
[[Page 21626]]
Corporation will rely to the fullest extent possible on examinations
conducted by or on behalf of the appropriate Federal banking agency for
the relevant company.
(f) Board of directors approval of resolution plan. Prior to
submission of a resolution plan under paragraphs (a) through (c) of
this section, the resolution plan of a covered company shall be
approved by:
(1) The board of directors of the covered company and noted in the
minutes; or
(2) In the case of a foreign-based covered company only, a delegee
acting under the express authority of the board of directors of the
covered company to approve the resolution plan.
(g) Resolution plans provided to the Council. The Board shall make
the resolution plans and updates submitted by the covered company
pursuant to this section available to the Council upon request.
(h) Required and prohibited assumptions. In preparing its
resolution plan, a covered company shall:
(1) Take into account that the material financial distress or
failure of the covered company may occur under the severely adverse
economic conditions provided to the covered company by the Board
pursuant to 12 U.S.C. 5365(i)(1)(B);
(2) Not rely on the provision of extraordinary support by the
United States or any other government to the covered company or its
subsidiaries to prevent the failure of the covered company, including
any resolution actions taken outside the United States that would
eliminate the need for any of a covered company's U.S. subsidiaries to
enter into resolution proceedings; and
(3) With respect to foreign banking organizations, not assume that
the covered company takes resolution actions outside of the United
States that would eliminate the need for any U.S. subsidiaries to enter
into resolution proceedings.
(i) Point of contact. Each covered company shall identify a senior
management official at the covered company responsible for serving as a
point of contact regarding the resolution plan of the covered company.
(j) Incorporation of previously submitted resolution plan
information by reference. Any resolution plan submitted by a covered
company may incorporate by reference information from a resolution plan
previously submitted by the covered company to the Board and the
Corporation, provided that:
(1) The resolution plan seeking to incorporate information by
reference clearly indicates:
(i) The information the covered company is incorporating by
reference; and
(ii) Which of the covered company's previously submitted resolution
plan(s) originally contained the information the covered company is
incorporating by reference and the specific location of the information
in the covered company's previously submitted resolution plan; and
(2) The covered company certifies that the information the covered
company is incorporating by reference remains accurate in all respects
that are material to the covered company's resolution plan.
Sec. __.5 Informational content of a full resolution plan.
(a) In general--(1) Domestic covered companies. A full resolution
plan of a covered company that is organized or incorporated in the
United States shall include the information specified in paragraphs (b)
through (h) of this section with respect to the subsidiaries and
operations that are domiciled in the United States as well as the
foreign subsidiaries, offices, and operations of the covered company.
(2) Foreign-based covered companies. A full resolution plan of a
covered company that is organized or incorporated in a jurisdiction
other than the United States (other than a bank holding company) or
that is a foreign banking organization shall include:
(i) The information specified in paragraphs (b) through (h) of this
section with respect to the 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. With respect to the information
specified in paragraph (g) of this section, the resolution plan of a
foreign-based covered company shall also identify, describe in detail,
and map to legal entity the interconnections and interdependencies
among the U.S. subsidiaries, branches, and agencies, and between those
entities and:
(A) The identified critical operations and core business lines of
the foreign-based covered company; and
(B) Any foreign-based affiliate; and
(ii) A detailed explanation of how resolution planning for the
subsidiaries, branches and agencies, and identified critical operations
and core business lines of the foreign-based covered company that are
domiciled in the United States or conducted in whole or material part
in the United States is integrated into the foreign-based covered
company's overall resolution or other contingency planning process.
(b) Executive summary. Each full resolution plan of a covered
company shall include an executive summary describing:
(1) The key elements of the covered company's strategic plan for
rapid and orderly resolution in the event of material financial
distress at or failure of the covered company;
(2) A description of each material change experienced by the
covered company since the filing of the covered company's previously
submitted resolution plan;
(3) Changes to the covered company's previously submitted
resolution plan resulting from any:
(i) Change in law or regulation;
(ii) Guidance or feedback from the Board and the Corporation; or
(iii) Material change described pursuant to paragraph (b)(2) of
this section; and
(4) Any actions taken by the covered company since filing of the
previous resolution plan to improve the effectiveness of the covered
company's resolution plan or remediate or otherwise mitigate any
material weaknesses or impediments to effective and timely execution of
the resolution plan.
(c) Strategic analysis. Each full resolution plan shall include a
strategic analysis describing the covered company's plan for rapid and
orderly resolution in the event of material financial distress or
failure of the covered company. Such analysis shall:
(1) Include detailed descriptions of the:
(i) Key assumptions and supporting analysis underlying the covered
company's resolution plan, including any assumptions made concerning
the economic or financial conditions that would be present at the time
the covered company sought to implement such plan;
(ii) Range of specific actions to be taken by the covered company
to facilitate a rapid and orderly resolution of the covered company,
its material entities, and its identified critical operations and core
business lines in the event of material financial distress or failure
of the covered company;
(iii) Funding, liquidity and capital needs of, and resources
available to, the covered company and its material entities, which
shall be mapped to its identified critical operations and core business
lines, in the ordinary course of business and in the event of material
[[Page 21627]]
financial distress at or failure of the covered company;
(iv) Covered company's strategy for maintaining operations of, and
funding for, the covered company and its material entities, which shall
be mapped to its identified critical operations and core business
lines;
(v) Covered company's strategy in the event of a failure or
discontinuation of a material entity, core business line or identified
critical operation, and the actions that will be taken by the covered
company to prevent or mitigate any adverse effects of such failure or
discontinuation on the financial stability of the United States;
provided, however, if any such material entity is subject to an
insolvency regime other than the Bankruptcy Code, a covered company may
exclude that entity from its strategic analysis unless that entity
either has $50 billion or more in total assets or conducts an
identified critical operation; and
(vi) Covered company's strategy for ensuring that any insured
depository institution subsidiary of the covered company will be
adequately protected from risks arising from the activities of any
nonbank subsidiaries of the covered company (other than those that are
subsidiaries of an insured depository institution);
(2) Identify the time period(s) the covered company expects would
be needed for the covered company to successfully execute each material
aspect and step of the covered company's plan;
(3) Identify and describe any potential material weaknesses or
impediments to effective and timely execution of the covered company's
plan;
(4) Discuss the actions and steps the covered company has taken or
proposes to take to remediate or otherwise mitigate the weaknesses or
impediments identified by the covered company, including a timeline for
the remedial or other mitigatory action; and
(5) Provide a detailed description of the processes the covered
company employs for:
(i) Determining the current market values and marketability of the
core business lines, identified critical operations, and material asset
holdings of the covered company;
(ii) Assessing the feasibility of the covered company's plans
(including timeframes) for executing any sales, divestitures,
restructurings, recapitalizations, or other similar actions
contemplated in the covered company's resolution plan; and
(iii) Assessing the impact of any sales, divestitures,
restructurings, recapitalizations, or other similar actions on the
value, funding, and operations of the covered company, its material
entities, identified critical operations and core business lines.
(d) Corporate governance relating to resolution planning. Each full
resolution plan shall:
(1) Include a detailed description of:
(i) How resolution planning is integrated into the corporate
governance structure and processes of the covered company;
(ii) The covered company's policies, procedures, and internal
controls governing preparation and approval of the covered company's
resolution plan;
(iii) The identity and position of the senior management
official(s) of the covered company that is primarily responsible for
overseeing the development, maintenance, implementation, and filing of
the covered company's resolution plan and for the covered company's
compliance with this part; and
(iv) The nature, extent, and frequency of reporting to senior
executive officers and the board of directors of the covered company
regarding the development, maintenance, and implementation of the
covered company's resolution plan;
(2) Describe the nature, extent, and results of any contingency
planning or similar exercise conducted by the covered company since the
date of the covered company's most recently filed resolution plan to
assess the viability of or improve the resolution plan of the covered
company; and
(3) Identify and describe the relevant risk measures used by the
covered company to report credit risk exposures both internally to its
senior management and board of directors, as well as any relevant risk
measures reported externally to investors or to the covered company's
appropriate Federal regulator.
(e) Organizational structure and related information. Each full
resolution plan shall:
(1) Provide a detailed description of the covered company's
organizational structure, including:
(i) A hierarchical list of all material entities within the covered
company's organization (including legal entities that directly or
indirectly hold such material entities) that:
(A) Identifies the direct holder and the percentage of voting and
nonvoting equity of each legal entity and foreign office listed; and
(B) The location, jurisdiction of incorporation, licensing, and key
management associated with each material legal entity and foreign
office identified;
(ii) A mapping of the covered company's identified critical
operations and core business lines, including material asset holdings
and liabilities related to such identified critical operations and core
business lines, to material entities;
(2) Provide an unconsolidated balance sheet for the covered company
and a consolidating schedule for all material entities that are subject
to consolidation by the covered company;
(3) Include a description of the material components of the
liabilities of the covered company, its material entities, identified
critical operations and core business lines that, at a minimum,
separately identifies types and amounts of the short-term and long-term
liabilities, the secured and unsecured liabilities, and subordinated
liabilities;
(4) Identify and describe the processes used by the covered company
to:
(i) Determine to whom the covered company has pledged collateral;
(ii) Identify the person or entity that holds such collateral; and
(iii) Identify the jurisdiction in which the collateral is located,
and, if different, the jurisdiction in which the security interest in
the collateral is enforceable against the covered company;
(5) Describe any material off-balance sheet exposures (including
guarantees and contractual obligations) of the covered company and its
material entities, including a mapping to its identified critical
operations and core business lines;
(6) Describe the practices of the covered company, its material
entities and its core business lines related to the booking of trading
and derivatives activities;
(7) Identify material hedges of the covered company, its material
entities, and its core business lines related to trading and derivative
activities, including a mapping to legal entity;
(8) Describe the hedging strategies of the covered company;
(9) Describe the process undertaken by the covered company to
establish exposure limits;
(10) Identify the major counterparties of the covered company and
describe the interconnections, interdependencies and relationships with
such major counterparties;
(11) Analyze whether the failure of each major counterparty would
likely have an adverse impact on or result in the material financial
distress or failure of the covered company; and
(12) Identify each trading, payment, clearing, or settlement system
of which the covered company, directly or indirectly, is a member and
on which
[[Page 21628]]
the covered company conducts a material number or value amount of
trades or transactions. Map membership in each such system to the
covered company's material entities, identified critical operations and
core business lines.
(f) Management information systems. (1) Each full resolution plan
shall include:
(i) A detailed inventory and description of the key management
information systems and applications, including systems and
applications for risk management, accounting, and financial and
regulatory reporting, used by the covered company and its material
entities. The description of each system or application provided shall
identify the legal owner or licensor, the use or function of the system
or application, service level agreements related thereto, any software
and system licenses, and any intellectual property associated
therewith;
(ii) A mapping of the key management information systems and
applications to the material entities, identified critical operations
and core business lines of the covered company that use or rely on such
systems and applications;
(iii) An identification of the scope, content, and frequency of the
key internal reports that senior management of the covered company, its
material entities, identified critical operations and core business
lines use to monitor the financial health, risks, and operation of the
covered company, its material entities, identified critical operations
and core business lines; and
(iv) A description of the process for the appropriate supervisory
or regulatory agencies to access the management information systems and
applications identified in paragraph (f) of this section; and
(v) A description and analysis of:
(A) The capabilities of the covered company's management
information systems to collect, maintain, and report, in a timely
manner to management of the covered company, and to the Board, the
information and data underlying the resolution plan; and
(B) Any gaps or weaknesses in such capabilities, and a description
of the actions the covered company intends to take to promptly address
such gaps, or weaknesses, and the time frame for implementing such
actions.
(2) The Board will use its examination authority to review the
demonstrated capabilities of each covered company to satisfy the
requirements of paragraph (f)(1)(v) of this section. The Board will
share with the Corporation information regarding the capabilities of
the covered company to collect, maintain, and report in a timely manner
information and data underlying the resolution plan.
(g) Interconnections and interdependencies. To the extent not
provided elsewhere in this part, each full resolution plan shall
identify and map to the material entities the interconnections and
interdependencies among the covered company and its material entities,
and among the identified critical operations and core business lines of
the covered company that, if disrupted, would materially affect the
funding or operations of the covered company, its material entities, or
its identified critical operations or core business lines. Such
interconnections and interdependencies may include:
(1) Common or shared personnel, facilities, or systems (including
information technology platforms, management information systems, risk
management systems, and accounting and recordkeeping systems);
(2) Capital, funding, or liquidity arrangements;
(3) Existing or contingent credit exposures;
(4) Cross-guarantee arrangements, cross-collateral arrangements,
cross-default provisions, and cross-affiliate netting agreements;
(5) Risk transfers; and
(6) Service level agreements.
(h) Supervisory and regulatory information. Each full resolution
plan shall:
(1) Identify any:
(i) Federal, state, or foreign agency or authority (other than a
Federal banking agency) with supervisory authority or responsibility
for ensuring the safety and soundness of the covered company, its
material entities, identified critical operations and core business
lines; and
(ii) Other Federal, state, or foreign agency or authority (other
than a Federal banking agency) with significant supervisory or
regulatory authority over the covered company, and its material
entities and identified critical operations and core business lines.
(2) Identify any foreign agency or authority responsible for
resolving a foreign-based material entity and identified critical
operations or core business lines of the covered company; and
(3) Include contact information for each agency identified in
paragraphs (h)(1) and (2) of this section.
Sec. __.6 Informational content of a targeted resolution plan.
(a) In general. A targeted resolution plan is a subset of a full
resolution plan and shall include core elements of a full resolution
plan and information concerning key areas of focus as set forth in this
section.
(b) Targeted resolution plan content. Each targeted resolution plan
of a covered company shall include:
(1) The core elements;
(2) Such targeted information as the Board and Corporation may
jointly identify pursuant to paragraph (c) of this section;
(3) A description of each material change experienced by the
covered company since the filing of the covered company's previously
submitted resolution plan; and
(4) A description of changes to the covered company's previously
submitted resolution plan resulting from any;
(i) Change in law or regulation;
(ii) Guidance or feedback from the Board and the Corporation; or
(iii) Material change described pursuant to paragraph (b)(3) of
this section.
(c) Targeted information requests. No less than 12 months prior to
the date a covered company's targeted resolution plan is due, the Board
and Corporation may jointly identify resolution-related key areas of
focus, questions and issues that must also be addressed in the covered
company's targeted resolution plan.
(d) Deemed incorporation by reference. If a covered company does
not include in its targeted resolution plan a description of changes to
any information set forth in section 165(d)(1)(A), (B), or (C) of the
Dodd-Frank Act (12 U.S.C. 5365(d)(1)(A), (B), or (C)) since its
previously submitted plan, such information from its previously
submitted plan are incorporated by reference into its targeted
resolution plan.
Sec. __.7 Informational content of a reduced resolution plan.
(a) Reduced resolution plan content. Each reduced resolution plan
of a covered company shall include:
(1) A description of each material change experienced by the
covered company since the filing of the covered company's previously
submitted resolution plan; and
(2) A description of changes to the strategic analysis that was
presented in the covered company's previously submitted resolution plan
resulting from any:
(i) Change in law or regulation;
(ii) Guidance or feedback from the Board and the Corporation; or
(iii) Material changes described pursuant to paragraph (a)(1) of
this section.
(b) Deemed incorporation by reference. If a covered company does
[[Page 21629]]
not include in its reduced resolution plan a description of changes to
any information set forth in section 165(d)(1)(A), (B), or (C) of the
Dodd-Frank Act (12 U.S.C. 5365(d)(1)(A), (B), or (C)) since its
previously submitted plan, such information from its previously
submitted plan are incorporated by reference into its reduced
resolution plan.
Sec. __.8 Review of resolution plans; resubmission of deficient
resolution plans
(a) Review of resolution plans. The Board and Corporation will seek
to coordinate their activities concerning the review of resolution
plans, including planning for, reviewing, and assessing the resolution
plans, as well as such activities that occur during the periods between
plan submissions.
(b) Joint determination regarding deficient resolution plans. If
the Board and Corporation jointly determine that the resolution plan of
a covered company submitted under Sec. __.4 is not credible or would
not facilitate an orderly resolution of the covered company under the
Bankruptcy Code, the Board and Corporation shall jointly notify the
covered company in writing of such determination. Any joint notice
provided under this paragraph (b) shall identify the deficiencies
identified by the Board and Corporation in the resolution plan. A
deficiency is an aspect of a covered company's resolution plan that the
Board and Corporation jointly determine presents a weakness that
individually or in conjunction with other aspects could undermine the
feasibility of the covered company's resolution plan.
(c) Resubmission of a resolution plan. Within 90 days of receiving
a notice of deficiencies issued pursuant to paragraph (b) of this
section, or such shorter or longer period as the Board and Corporation
may jointly determine, a covered company shall submit a revised
resolution plan to the Board and Corporation that addresses the
deficiencies jointly identified by the Board and Corporation, and that
discusses in detail:
(1) The revisions made by the covered company to address the
deficiencies jointly identified by the Board and the Corporation;
(2) Any changes to the covered company's business operations and
corporate structure that the covered company proposes to undertake to
facilitate implementation of the revised resolution plan (including a
timeline for the execution of such planned changes); and
(3) Why the covered company believes that the revised resolution
plan is credible and would result in an orderly resolution of the
covered company under the Bankruptcy Code.
(d) Extensions of time. Upon their own initiative or a written
request by a covered company, the Board and Corporation may jointly
extend any time period under this section. Each extension request shall
be supported by a written statement of the covered company describing
the basis and justification for the request.
(e) Joint determination regarding shortcomings in resolution plans.
The Board and Corporation may also jointly identify one or more
shortcomings in a covered company's resolution plan. A shortcoming is a
weakness or gap that raises questions about the feasibility of a
covered company's resolution plan, but does not rise to the level of a
deficiency for both the Board and Corporation. If a shortcoming is not
satisfactorily explained or addressed in or prior to the submission of
the covered company's next resolution plan, it may be found to be a
deficiency in the covered company's next resolution plan. The Board and
the Corporation may identify an aspect of a covered company's
resolution plan as a deficiency even if such aspect was not identified
as a shortcoming in an earlier resolution plan submission.
Sec. __.9 Failure to cure deficiencies on resubmission of a resolution
plan
(a) In general. The Board and Corporation may jointly determine
that a covered company or any subsidiary of a covered company shall be
subject to more stringent capital, leverage, or liquidity requirements,
or restrictions on the growth, activities, or operations of the covered
company or the subsidiary if:
(1) The covered company fails to submit a revised resolution plan
under Sec. __.8(c) within the required time period; or
(2) The Board and the Corporation jointly determine that a revised
resolution plan submitted under Sec. __.8(c) does not adequately
remedy the deficiencies jointly identified by the Board and the
Corporation under Sec. __.8(b).
(b) Duration of requirements or restrictions. Any requirements or
restrictions imposed on a covered company or a subsidiary thereof
pursuant to paragraph (a) of this section shall cease to apply to the
covered company or subsidiary, respectively, on the date that the Board
and the Corporation jointly determine the covered company has submitted
a revised resolution plan that adequately remedies the deficiencies
jointly identified by the Board and the Corporation under Sec.
__.8(b).
(c) Divestiture. The Board and Corporation, in consultation with
the Council, may jointly, by order, direct the covered company to
divest such assets or operations as are jointly identified by the Board
and Corporation if:
(1) The Board and Corporation have jointly determined that the
covered company or a subsidiary thereof shall be subject to
requirements or restrictions pursuant to paragraph (a) of this section;
and
(2) The covered company has failed, within the 2-year period
beginning on the date on which the determination to impose such
requirements or restrictions under paragraph (a) of this section was
made, to submit a revised resolution plan that adequately remedies the
deficiencies jointly identified by the Board and the Corporation under
Sec. __.8(b); and
(3) The Board and Corporation jointly determine that the
divestiture of such assets or operations is necessary to facilitate an
orderly resolution of the covered company under the Bankruptcy Code in
the event the company was to fail.
Sec. __.10 Consultation.
Prior to issuing any notice of deficiencies under Sec. __.8(b),
determining to impose requirements or restrictions under Sec. __.9(a),
or issuing a divestiture order pursuant to Sec. __.9(c) with respect
to a covered company that is likely to have a significant impact on a
functionally regulated subsidiary or a depository institution
subsidiary of the covered company, the Board--
(a) Shall consult with each Council member that primarily
supervises any such subsidiary; and
(b) May consult with any other Federal, state, or foreign
supervisor as the Board considers appropriate.
Sec. __.11 No limiting effect or private right of action;
confidentiality of resolution plans
(a) No limiting effect on bankruptcy or other resolution
proceedings. A resolution plan submitted pursuant to this part shall
not have any binding effect on:
(1) A court or trustee in a proceeding commenced under the
Bankruptcy Code;
(2) A receiver appointed under title II of the Dodd-Frank Act (12
U.S.C. 5381 et seq.);
[[Page 21630]]
(3) A bridge financial company chartered pursuant to 12 U.S.C.
5390(h); or
(4) Any other authority that is authorized or required to resolve a
covered company (including any subsidiary or affiliate thereof) under
any other provision of Federal, state, or foreign law.
(b) No private right of action. Nothing in this part creates or is
intended to create a private right of action based on a resolution plan
prepared or submitted under this part or based on any action taken by
the Board or the Corporation with respect to any resolution plan
submitted under this part.
(c) Form of resolution plans--(1) Generally. Each full, targeted,
and reduced resolution plan of a covered company shall be divided into
a public section and a confidential section. Each covered company shall
segregate and separately identify the public section from the
confidential section.
(2) Public section of full and targeted resolution plans. The
public section of a full or targeted resolution plan shall consist of
an executive summary of the resolution plan that describes the business
of the covered company and includes, to the extent material to an
understanding of the covered company:
(i) The names of material entities;
(ii) A description of core business lines;
(iii) Consolidated or segment financial information regarding
assets, liabilities, capital and major funding sources;
(iv) A description of derivative activities and hedging activities;
(v) A list of memberships in material payment, clearing and
settlement systems;
(vi) A description of foreign operations;
(vii) The identities of material supervisory authorities;
(viii) The identities of the principal officers;
(ix) A description of the corporate governance structure and
processes related to resolution planning;
(x) A description of material management information systems; and
(xi) A description, at a high level, of the covered company's
resolution strategy, covering such items as the range of potential
purchasers of the covered company, its material entities, and its core
business lines.
(3) Public section of reduced resolution plans. The public section
of a reduced resolution plan shall consist of an executive summary of
the resolution plan that describes the business of the covered company
and includes, to the extent material to an understanding of the covered
company:
(i) The names of material entities;
(ii) A description of core business lines;
(iii) The identities of the principal officers; and
(iv) A description, at a high level, of the covered company's
resolution strategy, referencing the applicable resolution regimes for
its material entities.
(d) Confidential treatment of resolution plans. (1) The
confidentiality of resolution plans and related materials shall be
determined in accordance with applicable exemptions under the Freedom
of Information Act (5 U.S.C. 552(b)), 12 CFR part 261 (the Board's
Rules Regarding Availability of Information), and 12 CFR part 309 (the
Corporation's Disclosure of Information rules).
(2) Any covered company submitting a resolution plan or related
materials pursuant to this part that desires confidential treatment of
the information under 5 U.S.C. 552(b)(4), 12 CFR part 261 (the Board's
Rules Regarding Availability of Information), and 12 CFR part 309 (the
Corporation's Disclosure of Information rules) may file a request for
confidential treatment in accordance with those rules.
(3) To the extent permitted by law, information comprising the
Confidential Section of a resolution plan will be treated as
confidential.
(4) To the extent permitted by law, the submission of any nonpublic
data or information under this part shall not constitute a waiver of,
or otherwise affect, any privilege arising under Federal or state law
(including the rules of any Federal or state court) to which the data
or information is otherwise subject. Privileges that apply to
resolution plans and related materials are protected pursuant to
Section 18(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1828(x).
Sec. __.12 Enforcement
The Board and Corporation may jointly enforce an order jointly
issued by the Board and Corporation under Sec. __.9(a) or (c). The
Board, in consultation with the Corporation, may take any action to
address any violation of this part by a covered company under section 8
of the Federal Deposit Insurance Act (12 U.S.C. 1818).
[END OF COMMON TEXT]
List of Subjects
12 CFR Part 243
Administrative practice and procedure, Banks, Banking, Holding
companies, Reporting and recordkeeping requirements, Securities.
12 CFR Part 381
Administrative practice and procedure, Banks, Banking, Holding
companies, Reporting and recordkeeping requirements, Resolution plans.
Adoption of the Common Rule Text
The adoption of the common rules by the agencies, as modified by
agency-specific text, is set forth below:
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the preamble, the Board of Governors
of the Federal Reserve System proposes to revise part 243 to 12 CFR
chapter II as set forth in the text of the common rule at the end of
the preamble and further amend 12 CFR part 243 as follows:
PART 243--RESOLUTION PLANS (REGULATION QQ)
0
1. The authority citation for part 243 continues to read as follows:
Authority: 12 U.S.C. 5365.
0
2. The heading of part 243 is revised to read as set forth above.
0
3. Amend Sec. 243.1(a) by adding a sentence at the end of the
paragraph to read as follows:
Sec. 243.1 Authority and scope.
(a) * * * The Board is also issuing this part pursuant to section
165(a)(2)(C) of the Dodd-Frank Act.
* * * * *
0
4. Add Sec. 243.13 to read as follows:
Sec. 243.13 Additional covered companies.
An additional covered company is any bank holding company or any
foreign bank or company that is a bank holding company or is treated as
a bank holding company under section 8(a) of the International Banking
Act of 1978 (12 U.S.C. 3106(a)) that is:
(a) Identified as a category II banking organization pursuant to
Sec. 252.5 of this title;
(b) Identified as a category III banking organization pursuant to
Sec. 252.5 of this title; or
(c) Made subject to this part by order of the Board.
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the preamble, the Federal Deposit
Insurance Corporation proposes to revise part 381
[[Page 21631]]
to 12 CFR chapter III as set forth in the text of the common rule at
the end of the preamble and further amend 12 part 381 as follows:
PART 381--RESOLUTION PLANS
0
5. The authority citation for part 381 continues to read as follows:
Authority: 12 U.S.C.5365 (d).
Sec. 381.2 [Amended]
0
6. In Sec. 381.2(j)(1)(v), add the words ``of this title'' after the
phrase ``pursuant to Sec. 243.13''.
By order of the Board of Governors of the Federal Reserve
System.
Ann E. Misback,
Secretary of the Board.
Dated at Washington, DC, on April 16, 2019.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 2019-08478 Filed 5-9-19; 8:45 am]
BILLING CODE 6210-01-P; 6714-01-P
