Standardized Approach for Calculating the Exposure Amount of Derivative Contracts; Correction
| Published date | 17 September 2020 |
| Citation | 85 FR 57956 |
| Record Number | 2020-17744 |
| Section | Rules and Regulations |
| Court | The Comptroller Of The Currency Office,Treasury Department |
57956
Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations
13
The importation of such bovines, as well as that
of all other bovines covered by this section, is still
subject to all other relevant restrictions of this
chapter.
the Federal Register announcing the
revised classification and setting forth
the reasons for this reclassification.
(Approved by the Office of Management and
Budget under control number 0579–0442)
■17. Section 93.442 is added to read as
follows:
§ 93.442 Importation of ruminants from
certain regions of the world; brucellosis.
(a) Importation of certain ruminants
prohibited. Notwithstanding any other
provisions of this section, ruminants
that are known to be infected with or
exposed to brucellosis are prohibited
importation into the United States.
(b) Identification of bovines imported
for any purpose. Unless otherwise
specified by the Administrator, bovines
imported into the United States for any
purpose must be officially identified
and accompanied by a certificate, issued
in accordance with § 93.405(a), that lists
the official identification of the animals
presented for import.
(c) Importation of steers and spayed
heifers. Unless otherwise specified by
the Administrator, steers and spayed
heifers may be imported into the United
States from a region in accordance with
paragraph (b) of this section, without
further restrictions under this part.
(d) Importation of sexually intact
bovines from Level I regions. Unless
specified otherwise by the
Administrator, sexually intact bovines
may be imported into the United States
from a Level I region for brucellosis in
accordance with paragraph (b) of this
section.
13
(e) Importation of sexually intact
bovines from a Level II region. (1)
Sexually intact bovines directly from
currently accredited herds for
brucellosis. Sexually intact bovines may
be imported into the United States for
purposes other than immediate
slaughter from a currently accredited
herd for brucellosis in a Level II region
for brucellosis, provided that the
bovines are accompanied by a
certificate, issued in accordance with
§ 93.405(a), with an additional
statement that the bovines originate
directly from a currently accredited
herd for brucellosis.
(2) Sexually intact bovines that do not
originate directly from a currently
accredited herd for brucellosis. Sexually
intact bovines that do not originate
directly from a currently accredited
herd for brucellosis may be imported
into the United States from a Level II
region for brucellosis for purposes other
than immediate slaughter, provided
that:
(i) The bovines originate from a herd
that was subjected to a whole herd test
for brucellosis on its premises of origin
no more than 90 days and no less than
30 days prior to the export of the
bovines to the United States, with
negative results; and
(ii) The bovines are subjected to an
additional individual test for brucellosis
at the port of entry into the United
States or during post-arrival quarantine
in accordance with § 93.411, with
negative results; and
(iii) The bovines are accompanied by
a certificate, issued in accordance with
§ 93.405(a), with an additional
statement that the bovines meet the
requirements in paragraph (d)(2)(i) of
this section.
(f) Importation of sexually intact
bovines from a Level III region. (1)
Sexually intact bovines directly from
currently accredited herds for
brucellosis. Sexually intact bovines may
be imported into the United States for
purposes other than immediate
slaughter from a currently accredited
herd for brucellosis in a Level III region
for brucellosis, provided that:
(i) The bovines are subjected to an
individual test for brucellosis at the port
of entry into the United States or during
post-arrival quarantine in accordance
with § 93.411, with negative results;
and
(ii) The bovines are accompanied by
a certificate, issued in accordance with
§ 93.405(a), with an additional
statement that the bovines originate
directly from a currently accredited
herd for brucellosis.
(2) Sexually intact bovines that do not
originate directly from a currently
accredited herd for brucellosis. Sexually
intact bovines that do not originate
directly from a currently accredited
herd for brucellosis may be imported
into the United States from a Level III
region for brucellosis for purposes other
than immediate slaughter, provided
that:
(i) The bovines originate from a herd
that was subjected to two whole herd
tests for brucellosis on its premises of
origin conducted no less than 9 months
and no more than 15 months apart, with
the second test taking place no more
than 90 days and no less than 30 days
prior to the export of the bovines to the
United States, with negative results each
time; and
(ii) The bovines are subjected to an
additional individual test for brucellosis
at the port of entry into the United
States or during post-arrival quarantine
in accordance with § 93.411, with
negative results; and
(iii) The bovines are accompanied by
a certificate, issued in accordance with
§ 93.405(a), with an additional
statement that the bovines meet the
requirements in paragraph (e)(2)(i) of
this section.
(Approved by the Office of Management and
Budget under control number 0579–0442)
Done in Washington, DC, this 14th day of
September 2020.
Lorren Walker,
Acting Undersecretary, Marketing and
Regulatory Programs.
[FR Doc. 2020–20552 Filed 9–16–20; 8:45 am]
BILLING CODE 3410–34–P
DEPARTMENT OF TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket ID OCC–2018–0030]
RIN 1557–AE93
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Docket R–1629]
RIN 7100–AF22
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 324
RIN 3064–AF52
Standardized Approach for Calculating
the Exposure Amount of Derivative
Contracts; Correction
AGENCY
: The Office of the Comptroller
of the Currency, Treasury; Board of
Governors of the Federal Reserve
System; and Federal Deposit Insurance
Corporation.
ACTION
: Final rule; correcting
amendments.
SUMMARY
: The Office of the Comptroller
of the Currency (OCC), the Board of
Governors of the Federal Reserve
System (Board), and the Federal Deposit
Insurance Corporation (FDIC) are
issuing this final rule to make technical
corrections to certain provisions of the
capital rule related to the standardized
approach for counterparty credit risk,
which is used for calculating the
exposure amount of derivative contracts
and was adopted in a final rule
published on January 24, 2020.
DATES
: This final rule is effective
September 17, 2020.
FOR FURTHER INFORMATION CONTACT
:
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1
Standardized Approach for Calculating the
Exposure Amount of Derivative Contracts, 85 FR
4362 (January 24, 2020). The SA–CCR final rule
took effect on April 1, 2020. The agencies also
recently issued a notice stating that banking
organizations could elect to adopt SA–CCR for the
first quarter of 2020, on a best-efforts basis. 85 FR
17721 (March 31, 2020).
2
See 85 FR 4362 at 4394–95. Specifically, the
agencies stated that a banking organization subject
to the supplementary leverage ratio may choose to
exclude from the potential future exposures (PFE)
component of the exposure amount calculation the
portion of a written credit derivative that is not
offset according to §l.10(c)(4)(ii)(D)(1)–(2) and for
which the effective notional amount of the written
credit derivative is included in total leverage
exposure.
3
See 85 FR 4362 at 4387.
OCC: Margot Schwadron, Director, or
Guowei Zhang, Risk Expert, Capital and
Regulatory Policy, (202) 649–6370; or
Kevin Korzeniewski, Counsel, Daniel
Perez, Senior Attorney, or Daniel
Sufranski, Attorney, Chief Counsel’s
Office, (202) 649–5490; or, for persons
who are deaf or hearing impaired, TTY,
(202) 649–5597; the Office of the
Comptroller of the Currency, 400 7th
Street SW, Washington, DC 20219.
Board: Benjamin McDonough,
Assistant General Counsel, (202) 452–
2036; Mark Buresh, Senior Counsel,
(202) 452–5270; Gillian Burgess, Senior
Counsel, (202) 736–5564; or Andrew
Hartlage, Counsel, (202) 452–6483,
Legal Division, Board of Governors of
the Federal Reserve System, 20th Street
and Constitution Avenue NW,
Washington, DC 20551. Users of
Telecommunications Device for the Deaf
(TDD) only, call (202) 263–4869.
FDIC: Michael Phillips, Counsel,
mphillips@fdic.gov, (202) 898–3581;
Catherine Wood, Counsel, cawood@
fdic.gov, (202) 898–3788; Francis Kuo,
Counsel, fkuo@fdic.gov, (202) 898–6654;
Supervision Branch, Legal Division,
Federal Deposit Insurance Corporation,
550 17th Street NW, Washington, DC
20429.
SUPPLEMENTARY INFORMATION
: The Office
of the Comptroller of the Currency
(OCC), the Board of Governors of the
Federal Reserve System (Board), and the
Federal Deposit Insurance Corporation
(FDIC) (collectively, the ‘‘agencies’’) are
making technical corrections to certain
provisions of the capital rule relating to
the standardized approach for
counterparty credit risk (SA–CCR),
which is used for calculating the
exposure amount of derivative contracts
and was adopted in a final rule
published on January 24, 2020 (the SA–
CCR final rule).
1
The amendatory text of
the SA–CCR final rule did not
accurately reflect the treatment
described in the Supplementary
Information section of the SA–CCR final
rule for the items described below. This
final rule corrects the agencies’ capital
rule consistent with the Supplementary
Information section of the SA–CCR final
rule. The agencies are also making
corrections to certain cross-references
within the capital rule that are no longer
accurate as of the SA–CCR final rule’s
effective date.
Specifically, these technical
corrections revise the capital rule for the
following items:
•In § l.10(c)(4)(ii)(B)(1), related to
the definition of total leverage exposure,
two cross-references are being updated
to reflect the renumbering of a provision
in § l.34 in the SA–CCR final rule. The
SA–CCR final rule modified the
previous § l.34(b) to become §l.34(c),
but the current capital rule erroneously
continues to refer to § l.34(b).
•In § l.10(c)(4)(ii)(B)(2), related to
the definition of total leverage exposure,
the agencies are consolidating the text of
paragraphs (i) and (ii) into a single new
paragraph (i). Also, a new paragraph (ii)
is being added to correspond to
paragraphs (c)(4)(ii)(B)(1)(i) and (ii). As
a result of these revisions, a banking
organization that uses SA–CCR will be
permitted to exclude the potential
future exposure (PFE) of all credit
derivatives or other similar instruments
through which it provides credit
protection from total leverage exposure,
provided that it does so consistently
over time. The option to exclude the
PFE of certain credit derivatives is
available to banking organizations that
use the current exposure methodology
(CEM) and the technical correction
provides such option to banking
organizations that use SA–CCR. The
agencies indicated in the
SUPPLEMENTARY INFORMATION
section of
the SA–CCR final rule that they would
adopt the same treatment under SA–
CCR as under CEM.
2
•In § l.10, each use of the term
‘‘U.S. GAAP’’ is being replaced with
‘‘GAAP’’ because ‘‘GAAP’’ is the
appropriate defined term in § l.2.
Under § l.2, ‘‘GAAP’’ is defined as
generally accepted accounting
principles as used in the United States.
•In § l.32(f)(1), related to the
general risk weight for corporate
exposures and the exceptions for certain
exposures to a qualifying central
counterparty (QCCP), the cross-
reference is being updated to refer to
both paragraph (f)(2) and paragraph
(f)(3). The SA–CCR final rule added
paragraph (f)(3), but the current capital
rule refers only to paragraph (f)(2).
•In § l.37(c)(2)(i)(B), related to the
calculation of exposure amount for
collateralized transactions, cross-
references to § l.34(a)(1)–(2) are being
updated to reflect the renumbering of a
provision in § l.34 in the SA–CCR final
rule. The SA–CCR final rule modified
the previous § l.34(a) to become §l
.34(b).
•In § l.132(c)(8)(iii) and (iv), and
§l.132(c)(9)(i), references to table 2 for
applicable supervisory factor
determination are being updated to
reflect the renumbering of the table.
•In § l.132(c)(9)(ii)(A)(1), related to
the adjusted notional amount for an
interest rate derivative contract or a
credit derivative contract, the formula
for supervisory duration is being
updated to correct a typographical error.
•In § l.132(c)(9)(iv)(A)(3), related to
the maturity factor, the revision
provides that the higher margin period
of risk set forth in that section must be
used if there have been ‘‘more than two’’
outstanding margin disputes in the
netting set during the prior two quarters.
The Supplementary Information section
of the SA–CCR final rule indicated that
the agencies intended to align the
criteria for applying the higher margin
period of risk in SA–CCR with that in
the internal models methodology, which
applies only if more than two margin
disputes in a netting set have occurred
over the two previous quarters.
3
In other
sections of the capital rule, the SA–CCR
final rule included language referencing
‘‘more than two’’ margin disputes.
However, in this section, the phrase
‘‘two or more’’ was used instead. The
revised language thus implements the
intended treatment as provided in the
SUPPLEMENTARY INFORMATION
section of
the SA–CCR final rule.
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4
5 U.S.C. 553.
5
5 U.S.C. 553(b)(B).
6
5 U.S.C. 553(d).
7
5 U.S.C. 801 et seq.
8
5 U.S.C. 801(a)(3).
9
5 U.S.C. 808.
10
5 U.S.C. 601 et seq.
11
Under regulations issued by the Small Business
Administration, a small entity includes a depository
institution, bank holding company, or savings and
loan holding company with total assets of $600
million or less and trust companies with average
annual receipts of $41.5 million or less. See 13 CFR
121.201.
12
12 U.S.C. 4802(a).
•In § l.133(d)(5) and (6), related to
the exposure of a clearing member
banking organization to a QCCP arising
from a default fund contribution, the
revision corrects the calculation of the
hypothetical capital requirement of a
QCCP (K
CCP
) and adds appropriate
subscripts. The term EAD
i
is amended to
equal the exposure of the QCCP to each
clearing member of the QCCP. While the
SUPPLEMENTARY INFORMATION
section of
the SA–CCR final rule had discussed
this treatment, the amendatory text
referred to the exposure of each clearing
member to the QCCP. The agencies also
are making conforming corrections to
the calculation of EAD for repo-style
transactions in § l.133(d)(6)(iii). In
addition, references to ‘‘CCP’’ in these
paragraphs are being replaced by
‘‘QCCP’’ for clarity, as the paragraphs
already only apply in the context of a
QCCP.
Administrative Law
A. Administrative Procedure Act
The agencies are issuing this final rule
without prior notice and the
opportunity for public comment and the
30-day delayed effective date ordinarily
prescribed by the Administrative
Procedure Act (APA).
4
Pursuant to
section 553(b)(B) of the APA, general
notice and the opportunity for public
comment are not required with respect
to a rulemaking when an ‘‘agency for
good cause finds (and incorporates the
finding and a brief statement of reasons
therefor in the rules issued) that notice
and public procedure thereon are
impracticable, unnecessary, or contrary
to the public interest.’’
5
The agencies believe that the public
interest is best served by implementing
the final rule as soon as possible. Public
comment is unnecessary, as the SA–
CCR final rule was previously issued for
comment, and the technical edits
discussed here merely correct errors in
the SA–CCR final rule.
The technical corrections made by
this final rule will reduce ambiguity and
ensure that banking organizations
implement the SA–CCR provisions of
the capital rule in a consistent manner
and as described in the
SUPPLEMENTARY
INFORMATION
section of the SA–CCR
final rule. This will facilitate the ability
of banking organizations to make the
changes necessary to implement the
SA–CCR final rule.
The APA also requires a 30-day
delayed effective date, except for (1)
substantive rules which grant or
recognize an exemption or relieve a
restriction; (2) interpretative rules and
statements of policy; or (3) as otherwise
provided by the agency for good cause.
6
The agencies find good cause to publish
the final rule correction with an
immediate effective date for the same
reasons set forth above under the
discussion of section 553(b)(B) of the
APA.
B. Congressional Review Act
For purposes of Congressional Review
Act, the OMB makes a determination as
to whether a final rule constitutes a
‘‘major’’ rule.
7
If a rule is deemed a
‘‘major rule’’ by the Office of
Management and Budget (OMB), the
Congressional Review Act generally
provides that the rule may not take
effect until at least 60 days following its
publication.
8
In the event that the final rule is
deemed a ‘‘major’’ rule for purposes of
the Congressional Review Act, the
agencies are adopting the final rule
without the delayed effective date
generally prescribed under the
Congressional Review Act. The delayed
effective date required by the
Congressional Review Act does not
apply to any rule for which an agency
for good cause finds (and incorporates
the finding and a brief statement of
reasons therefor in the rule issued) that
notice and public procedure thereon are
impracticable, unnecessary, or contrary
to the public interest.
9
As described
above, the agencies believe that delaying
the effective date of this final rule
would be contrary to the public interest.
As required by the Congressional
Review Act, the agencies will submit
the final rule and other appropriate
reports to Congress and the Government
Accountability Office for review.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3521) (PRA) states that
no agency may conduct or sponsor, nor
is the respondent required to respond
to, an information collection unless it
displays a currently valid OMB control
number. This final rule does not contain
any information collection requirements
and therefore, no submissions will be
made by the agencies to OMB in
connection with this final rule.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act
(RFA)
10
requires an agency to consider
whether the rules it proposes will have
a significant economic impact on a
substantial number of small entities.
11
The RFA applies only to rules for which
an agency publishes a general notice of
proposed rulemaking pursuant to 5
U.S.C. 553(b). As discussed previously,
consistent with section 553(b)(B) of the
APA, the agencies have determined for
good cause that general notice and
opportunity for public comment is
unnecessary and contrary to the public’s
interest, and therefore the agencies are
not issuing a notice of proposed
rulemaking. Accordingly, the Agencies
have concluded that the RFA’s
requirements relating to an initial and
final regulatory flexibility analysis do
not apply.
E. Riegle Community Development and
Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the
Riegle Community Development and
Regulatory Improvement Act
(RCDRIA),
12
in determining the effective
date and administrative compliance
requirements for new regulations that
impose additional reporting, disclosure,
or other requirements on insured
depository institutions (IDIs), each
Federal banking agency must consider,
consistent with the principle of safety
and soundness and the public interest,
any administrative burdens that such
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13
12 U.S.C. 4802.
14
12 U.S.C. 4809.
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,
section 302(b) of RCDRIA requires new
regulations and amendments to
regulations that impose additional
reporting, disclosures, or other new
requirements on IDIs generally to 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, with certain exceptions,
including for good cause.
13
For the
reasons described above, the agencies
find good cause exists under section 302
of RCDRIA to publish this final rule
with an immediate effective date.
F. Plain Language
Section 722 of the Gramm-Leach-
Bliley Act
14
requires the Federal
banking agencies to use ‘‘plain
language’’ in all proposed and final
rules published after January 1, 2000. In
light of this requirement, the agencies
have sought to present the final rule in
a simple and straightforward manner.
G. OCC Unfunded Mandates Reform Act
of 1995 Determination
As a general matter, the Unfunded
Mandates Act of 1995 (UMRA), 2 U.S.C.
1531 et seq., requires the preparation of
a budgetary impact statement before
promulgating a rule that includes a
Federal mandate that may result in the
expenditure by State, local, and tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
in any one year. However, the UMRA
does not apply to final rules for which
a general notice of proposed rulemaking
was not published. See 2 U.S.C. 1532(a).
Therefore, because the OCC has found
good cause to dispense with notice and
comment for this final rule, the OCC has
not prepared an economic analysis of
the rule under the UMRA.
List of Subjects
12 CFR Part 3
Administrative practice and
procedure, Capital, National banks,
Risk.
12 CFR Part 217
Administrative practice and
procedure, Banks, Banking, Capital,
Federal Reserve System, Holding
companies, Reporting and
recordkeeping requirements, Risk,
Securities.
12 CFR Part 324
Administrative practice and
procedure, Banks, Reporting and
recordkeeping requirements, Savings
associations, State non-member banks.
Office of the Comptroller of the
Currency
12 CFR Chapter I
Authority and Issuance
For the reasons set forth in the
preamble, the OCC amends 12 CFR part
3 as follows:
PART 3—CAPITAL ADEQUACY
STANDARDS
■1. The authority citation for part 3
continues to read as follows:
Authority: 12 U.S.C. 93a, 161, 1462, 1462a,
1463, 1464, 1818, 1828(n), 1828 note, 1831n
note, 1835, 3907, 3909, 5412(b)(2)(B), and
Pub. L. 116–136, 134 Stat. 281.
■2. Amend § 3.10 by:
■a. Removing, in paragraphs
(c)(4)(ii)(A), (c)(4)(ii)(B)(1) introductory
text, (c)(4)(ii)(C)(2)(i), and (c)(4)(ii)(H),
the phrase ‘‘U.S. GAAP’’ and by adding
in its place the phrase ‘‘GAAP’’;
■b. Removing, in paragraphs
(c)(4)(ii)(B)(1) introductory text and
(c)(4)(ii)(B)(1)(i), the phrase ‘‘without
regard to § 3.34(b)’’ and by adding in its
place the phrase ‘‘without regard to
§ 3.34(c)’’; and
■c. Revising paragraphs
(c)(4)(ii)(B)(2)(i) and (ii).
The revisions read as follows:
§ 3.10 Minimum capital requirements.
* * * * *
(c) * * *
(4) * * *
(ii) * * *
(B) * * *
(2)(i) For a national bank or Federal
savings association that uses the
standardized approach for counterparty
credit risk under section § 3.132(c) for
its standardized risk-weighted assets,
the PFE for each netting set to which the
national bank or Federal savings
association is a counterparty (including
cleared transactions except as provided
in paragraph (c)(4)(ii)(I) of this section
and, at the discretion of the national
bank or Federal savings association,
excluding a forward agreement treated
as a derivative contract that is part of a
repurchase or reverse repurchase or a
securities borrowing or lending
transaction that qualifies for sales
treatment under GAAP), as determined
under § 3.132(c)(7), in which the term C
in § 3.132(c)(7)(i) equals zero, and, for
any counterparty that is not a
commercial end-user, multiplied by 1.4.
For purposes of this paragraph
(c)(4)(ii)(B)(2)(i), a national bank or
Federal savings association may set the
value of the term C in § 3.132(c)(7)(i)
equal to the amount of collateral posted
by a clearing member client of the
national bank or Federal savings
association in connection with the
client-facing derivative transactions
within the netting set; and
(ii) A national bank or Federal savings
association may choose to exclude the
PFE of all credit derivatives or other
similar instruments through which it
provides credit protection when
calculating the PFE under § 3.132(c),
provided that it does so consistently
over time for the calculation of the PFE
for all such instruments;
* * * * *
■3. Section 3.32 is amended by revising
paragraph (f)(1) to read as follows:
§ 3.32 General risk weights.
* * * * *
(f) * * * (1) A national bank or
Federal savings association must assign
a 100 percent risk weight to all its
corporate exposures, except as provided
in paragraphs (f)(2) and (f)(3) of this
section.
* * * * *
§ 3.37 [Amended]
■4. Section 3.37 is amended by, in
paragraph (c)(2)(i)(B), removing
‘‘§ 3.34(a)(1) or (2)’’ and adding in its
place ‘‘§ 3.34(b)(1) or (2).’’
■5. Amend § 3.132 by:
■a. In paragraphs (c)(8)(iii) and (iv), and
(c)(9)(i), removing ‘‘Table 2’’ and adding
in its place ‘‘Table 3’’; and
■b. Revising paragraphs (c)(9)(ii)(A)(1)
and (c)(9)(iv)(A)(3).
The revisions read as follows:
§ 3.132 Counterparty credit risk of repo-
style transactions, eligible margin loans,
and OTC derivative contracts.
* * * * *
(c) * * *
(9) * * *
(ii) * * *
(A)(1) For an interest rate derivative
contract or a credit derivative contract,
the adjusted notional amount equals the
product of the notional amount of the
derivative contract, as measured in U.S.
dollars using the exchange rate on the
date of the calculation, and the
supervisory duration, as calculated by
the following formula:
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Where:
S is the number of business days from the
present day until the start date of the
derivative contract, or zero if the start
date has already passed; and
E is the number of business days from the
present day until the end date of the
derivative contract.
* * * * *
(iv) * * *
(A) * * *
(3) Notwithstanding paragraphs
(c)(9)(iv)(A)(1) and (2) of this section, for
a netting set subject to more than two
outstanding disputes over margin that
lasted longer than the MPOR over the
previous two quarters, the applicable
floor is twice the amount provided in
paragraphs (c)(9)(iv)(A)(1) and (2) of this
section.
* * * * *
■6. Section 3.133 is amended by
revising paragraphs (d)(4) and (5), (d)(6)
paragraph introductory text, and
paragraphs (d)(6)(i) through (iii) to read
as follows:
§ 3.133 Cleared transactions.
* * * * *
(d) * * *
(4) Capital requirement for default
fund contributions to a QCCP. A
clearing member national bank’s or
Federal savings association’s capital
requirement for its default fund
contribution to a QCCP (K
CM
) is equal
to:
(5) Hypothetical capital requirement
of a QCCP. Where a QCCP has provided
its K
CCP
, a national bank or Federal
savings association must rely on such
disclosed figure instead of calculating
K
CCP
under this paragraph (d)(5), unless
the national bank or Federal savings
association determines that a more
conservative figure is appropriate based
on the nature, structure, or
characteristics of the QCCP. The
hypothetical capital requirement of a
QCCP (K
CCP
), as determined by the
national bank or Federal savings
association, is equal to:
K
CCP
= S
CM
i
EAD
i
* 1.6 percent
Where:
CM
i
is each clearing member of the QCCP;
and
EAD
i
is the exposure amount of the QCCP to
each clearing member of the QCCP, as
determined under paragraph (d)(6) of
this section.
(6) EAD of a QCCP to a clearing
member. (i) The EAD of a QCCP to a
clearing member is equal to the sum of
the EAD for derivative contracts
determined under paragraph (d)(6)(ii) of
this section and the EAD for repo-style
transactions determined under
paragraph (d)(6)(iii) of this section.
(ii) With respect to any derivative
contracts between the QCCP and the
clearing member that are cleared
transactions and any guarantees that the
clearing member has provided to the
QCCP with respect to performance of a
clearing member client on a derivative
contract, the EAD is equal to the
exposure amount of the QCCP to the
clearing member for all such derivative
contracts and guarantees of derivative
contracts calculated under SA–CCR in
§ 3.132(c) (or, with respect to a QCCP
located outside the United States, under
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a substantially identical methodology in
effect in the jurisdiction) using a value
of 10 business days for purposes of
§ 3.132(c)(9)(iv); less the value of all
collateral held by the QCCP posted by
the clearing member or a client of the
clearing member in connection with a
derivative contract for which the
clearing member has provided a
guarantee to the QCCP and the amount
of the prefunded default fund
contribution of the clearing member to
the QCCP.
(iii) With respect to any repo-style
transactions between the QCCP and a
clearing member that are cleared
transactions, EAD is equal to:
EAD
i
= max{EBRM
i
¥IM
i
¥DF
i
; 0}
Where:
EBRM
i
is the exposure amount of the QCCP
to each clearing member for all repo-
style transactions between the QCCP and
the clearing member, as determined
under § 3.132(b)(2) and without
recognition of the initial margin
collateral posted by the clearing member
to the QCCP with respect to the repo-
style transactions or the prefunded
default fund contribution of the clearing
member institution to the QCCP;
IM
i
is the initial margin collateral posted
by each clearing member to the QCCP with
respect to the repo-style transactions; and
DF
i
is the prefunded default fund
contribution of each clearing member to the
QCCP that is not already deducted in
paragraph (d)(6)(ii) of this section.
* * * * *
Board of Governors of the Federal
Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the
preamble, chapter II of title 12 of the
Code of Federal Regulations is amended
as follows:
PART 217—CAPITAL ADEQUACY OF
BANK HOLDING COMPANIES,
SAVINGS AND LOAN HOLDING
COMPANIES, AND STATE MEMBER
BANKS (REGULATION Q)
■7. The authority citation for part 217
continues to read as follows:
Authority: 12 U.S.C. 248(a), 321–338a,
481–486, 1462a, 1467a, 1818, 1828, 1831n,
1831o, 1831p–1, 1831w, 1835, 1844(b), 1851,
3904, 3906–3909, 4808, 5365, 5368, 5371,
and 5371 note; Pub. L. 116–136, 134 Stat.
281.
■8. Amend § 217.10 by:
■a. Removing, in paragraphs
(c)(4)(ii)(A), (c)(4)(ii)(B)(1),
(c)(4)(ii)(B)(2)(i), and (c)(4)(ii)(H), the
phrase ‘‘U.S. GAAP’’ and by adding in
its place the phrase ‘‘GAAP’’;
■b. Removing, in paragraphs
(c)(4)(ii)(B)(1) introductory text and
(c)(4)(ii)(B)(1)(i), the phrase ‘‘without
regard to § 217.34(b)’’ and by adding in
its place the phrase ‘‘without regard to
§ 217.34(c)’’; and
■c. Revising paragraphs
(c)(4)(ii)(B)(2)(i) and (ii).
The revisions read as follows:
§ 217.10 Minimum capital requirements.
* * * * *
(c) * * *
(4) * * *
(ii) * * *
(B) * * *
(2)(i) For a Board-regulated institution
that uses the standardized approach for
counterparty credit risk under section
§ 217.132(c) for its standardized risk-
weighted assets, the PFE for each
netting set to which the Board-regulated
institution is a counterparty (including
cleared transactions except as provided
in paragraph (c)(4)(ii)(I) of this section
and, at the discretion of the Board-
regulated institution, excluding a
forward agreement treated as a
derivative contract that is part of a
repurchase or reverse repurchase or a
securities borrowing or lending
transaction that qualifies for sales
treatment under GAAP), as determined
under § 217.132(c)(7), in which the term
C in § 217.132(c)(7)(i) equals zero, and,
for any counterparty that is not a
commercial end-user, multiplied by 1.4.
For purposes of this paragraph
(c)(4)(ii)(B)(2)(i), a Board-regulated
institution may set the value of the term
C in § 217.132(c)(7)(i) equal to the
amount of collateral posted by a clearing
member client of the Board-regulated
institution in connection with the
client-facing derivative transactions
within the netting set; and
(ii) A Board-regulated institution may
choose to exclude the PFE of all credit
derivatives or other similar instruments
through which it provides credit
protection when calculating the PFE
under § 217.132(c), provided that it does
so consistently over time for the
calculation of the PFE for all such
instruments;
* * * * *
■9. Section 217.32 is amended by
revising paragraph (f)(1) to read as
follows:
§217.32 General risk weights.
* * * * *
(f) * * * (1) A Board-regulated
institution must assign a 100 percent
risk weight to all its corporate
exposures, except as provided in
paragraphs (f)(2) and (f)(3) of this
section.
* * * * *
§ 217.37 [Amended]
■10. Section 217.37 is amended by, in
paragraph (c)(2)(i)(B), removing
‘‘§ 217.34(a)(1) or (2)’’ and adding in its
place ‘‘§ 217.34(b)(1) or (2).’’
■11. Amend § 217.132 by:
■a. In paragraphs (c)(8)(iii) and (iv), and
(c)(9)(i), removing the words ‘‘Table 2’’
and adding in its place ‘‘Table 3’’; and
■b. Revising paragraphs (c)(9)(ii)(A)(1)
and (c)(9)(iv)(A)(3).
The revisions read as follows:
§ 217.132 Counterparty credit risk of repo-
style transactions, eligible margin loans,
and OTC derivative contracts.
* * * * *
(c) * * *
(9) * * *
(ii) * * *
(A)(1) For an interest rate derivative
contract or a credit derivative contract,
the adjusted notional amount equals the
product of the notional amount of the
derivative contract, as measured in U.S.
dollars using the exchange rate on the
date of the calculation, and the
supervisory duration, as calculated by
the following formula:
Where:
S is the number of business days from the
present day until the start date of the
derivative contract, or zero if the start
date has already passed; and
E is the number of business days from the
present day until the end date of the
derivative contract.
* * * * *
(iv) * * *
(A) * * *
(3) Notwithstanding paragraphs
(c)(9)(iv)(A)(1) and (2) of this section, for
a netting set subject to more than two
outstanding disputes over margin that
lasted longer than the MPOR over the
previous two quarters, the applicable
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floor is twice the amount provided in
paragraphs (c)(9)(iv)(A)(1) and (2) of this
section.
* * * * *
■12. Section 217.133 is amended by
revising paragraphs (d)(4) and (5), (d)(6)
introductory text, and paragraphs
(d)(6)(i) through (iii) to read as follows:
§ 217.133 Cleared transactions.
* * * * *
(d) * * *
(4) Capital requirement for default
fund contributions to a QCCP. A
clearing member Board-regulated
institution’s capital requirement for its
default fund contribution to a QCCP
(K
CM
) is equal to:
(5) Hypothetical capital requirement
of a QCCP. Where a QCCP has provided
its K
CCP
, a Board-regulated institution
must rely on such disclosed figure
instead of calculating K
CCP
under this
paragraph (d)(5), unless the Board-
regulated institution determines that a
more conservative figure is appropriate
based on the nature, structure, or
characteristics of the QCCP. The
hypothetical capital requirement of a
QCCP (K
CCP
), as determined by the
Board-regulated institution, is equal to:
K
CCP
= S
CMi
EAD
i
* 1.6 percent
Where:
CM
i
is each clearing member of the QCCP;
and
EAD
i
is the exposure amount of the QCCP to
each clearing member of the QCCP, as
determined under paragraph (d)(6) of
this section.
(6) EAD of a QCCP to a clearing
member. (i) The EAD of a QCCP to a
clearing member is equal to the sum of
the EAD for derivative contracts
determined under paragraph (d)(6)(ii) of
this section and the EAD for repo-style
transactions determined under
paragraph (d)(6)(iii) of this section.
(ii) With respect to any derivative
contracts between the QCCP and the
clearing member that are cleared
transactions and any guarantees that the
clearing member has provided to the
QCCP with respect to performance of a
clearing member client on a derivative
contract, the EAD is equal to the
exposure amount of the QCCP to the
clearing member for all such derivative
contracts and guarantees of derivative
contracts calculated under SA–CCR in
§ 217.132(c) (or, with respect to a QCCP
located outside the United States, under
a substantially identical methodology in
effect in the jurisdiction) using a value
of 10 business days for purposes of
§ 217.132(c)(9)(iv); less the value of all
collateral held by the QCCP posted by
the clearing member or a client of the
clearing member in connection with a
derivative contract for which the
clearing member has provided a
guarantee to the QCCP and the amount
of the prefunded default fund
contribution of the clearing member to
the QCCP.
(iii) With respect to any repo-style
transactions between the QCCP and a
clearing member that are cleared
transactions, EAD is equal to:
EAD
i
= max{EBRM
i
¥IM
i
¥DF
i
;0}
Where:
EBRM
i
is the exposure amount of the QCCP
to each clearing member for all repo-
style transactions between the QCCP and
the clearing member, as determined
under § 217.132(b)(2) and without
recognition of the initial margin
collateral posted by the clearing member
to the QCCP with respect to the repo-
style transactions or the prefunded
default fund contribution of the clearing
member institution to the QCCP;
IM
i
is the initial margin collateral posted by
each clearing member to the QCCP with
respect to the repo-style transactions;
and
DF
i
is the prefunded default fund
contribution of each clearing member to
the QCCP that is not already deducted in
paragraph (d)(6)(ii) of this section.
* * * * *
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Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the
preamble, chapter III of title 12 of the
Code of Federal Regulations is amended
as follows:
PART 324—CAPITAL ADEQUACY OF
FDIC–SUPERVISED INSTITUTIONS
■13. The authority citation for part 324
continues to read as follows:
Authority: 12 U.S.C. 1815(a), 1815(b),
1816, 1818(a), 1818(b), 1818(c), 1818(t),
1819(Tenth), 1828(c), 1828(d), 1828(i),
1828(n), 1828(o), 1831o, 1835, 3907, 3909,
4808; 5371; 5412; Pub. L. 102–233, 105 Stat.
1761, 1789, 1790 (12 U.S.C. 1831n note); Pub.
L. 102–242, 105 Stat. 2236, 2355, as amended
by Pub. L. 103–325, 108 Stat. 2160, 2233 (12
U.S.C. 1828 note); Pub. L. 102–242, 105 Stat.
2236, 2386, as amended by Pub. L. 102–550,
106 Stat. 3672, 4089 (12 U.S.C. 1828 note);
Pub. L. 111–203, 124 Stat. 1376, 1887 (15
U.S.C. 78o–7 note); Pub. L. 115–174; Pub. L.
116–136, 134 Stat. 281.
■14. Amend § 324.10 by:
■a. Removing, in paragraphs
(c)(4)(ii)(A), (c)(4)(ii)(B)(1),
(c)(4)(ii)(B)(2)(i), and (c)(4)(ii)(H), the
phrase ‘‘U.S. GAAP’’ and by adding in
its place the phrase ‘‘GAAP’’;
■b. Removing, in paragraphs
(c)(4)(ii)(B)(1) introductory text and
(c)(4)(ii)(B)(1)(i), the phrase ‘‘without
regard to § 324.34(b)’’ and by adding in
its place the phrase ‘‘without regard to
§ 324.34(c)’’; and
■c. Revising paragraphs
(c)(4)(ii)(B)(2)(i) and (ii).
The revisions read as follows:
§ 324.10 Minimum capital requirements.
* * * * *
(c) * * *
(4) * * *
(ii) * * *
(B) * * *
(2)(i) For an FDIC-supervised
institution that uses the standardized
approach for counterparty credit risk
under section § 324.132(c) for its
standardized risk-weighted assets, the
PFE for each netting set to which the
FDIC-supervised institution is a
counterparty (including cleared
transactions except as provided in
paragraph (c)(4)(ii)(I) of this section and,
at the discretion of the FDIC-supervised
institution, excluding a forward
agreement treated as a derivative
contract that is part of a repurchase or
reverse repurchase or a securities
borrowing or lending transaction that
qualifies for sales treatment under
GAAP), as determined under
§ 324.132(c)(7), in which the term C in
§ 324.132(c)(7)(i) equals zero, and, for
any counterparty that is not a
commercial end-user, multiplied by 1.4.
For purposes of this paragraph
(c)(4)(ii)(B)(2)(i), an FDIC-supervised
institution may set the value of the term
C in § 324.132(c)(7)(i) equal to the
amount of collateral posted by a clearing
member client of the FDIC-supervised
institution in connection with the
client-facing derivative transactions
within the netting set; and
(ii) An FDIC-supervised institution
may choose to exclude the PFE of all
credit derivatives or other similar
instruments through which it provides
credit protection when calculating the
PFE under § 324.132(c), provided that it
does so consistently over time for the
calculation of the PFE for all such
instruments;
* * * * *
■15. Section 324.32 is amended by
revising paragraph (f)(1) to read as
follows:
§ 324.32 General risk weights.
* * * * *
(f) * * * (1) An FDIC-supervised
institution must assign a 100 percent
risk weight to all its corporate
exposures, except as provided in
paragraphs (f)(2) and (f)(3) of this
section.
* * * * *
§ 324.37 [Amended]
■16. Section 324.37 is amended by, in
paragraph (c)(2)(i)(B), removing
‘‘§ 324.34(a)(1) or (2)’’ and adding in its
place ‘‘§ 324.34(b)(1) or (2).’’
■17. Amend § 324.132 by:
■a. In paragraphs (c)(8)(iii) and (iv), and
(c)(9)(i), removing ‘‘Table 2’’ and adding
in its place ‘‘Table 3’’; and
■b. Revising paragraphs (c)(9)(ii)(A)(1)
and (c)(9)(iv)(A)(3).
The revisions read as follows:
§ 324.132 Counterparty credit risk of repo-
style transactions, eligible margin loans,
and OTC derivative contracts.
* * * * *
(c) * * *
(9) * * *
(ii) * * *
(A)(1) For an interest rate derivative
contract or a credit derivative contract,
the adjusted notional amount equals the
product of the notional amount of the
derivative contract, as measured in U.S.
dollars using the exchange rate on the
date of the calculation, and the
supervisory duration, as calculated by
the following formula:
Where:
S is the number of business days from the
present day until the start date of the
derivative contract, or zero if the start
date has already passed; and
E is the number of business days from the
present day until the end date of the
derivative contract.
* * * * *
(iv) * * *
(A) * * *
(3) Notwithstanding paragraphs
(c)(9)(iv)(A)(1) and (2) of this section, for
a netting set subject to more than two
outstanding disputes over margin that
lasted longer than the MPOR over the
previous two quarters, the applicable
floor is twice the amount provided in
paragraphs (c)(9)(iv)(A)(1) and (2) of this
section.
* * * * *
■18. Section 324.133 is amended by
revising paragraphs (d)(4) and (5), (d)(6)
introductory text, and (d)(6)(i) through
(iii) to read as follows:
§ 324.133 Cleared transactions.
* * * * *
(d) * * *
(4) Capital requirement for default
fund contributions to a QCCP. A
clearing member FDIC-supervised
institution’s capital requirement for its
default fund contribution to a QCCP
(K
CM
) is equal to:
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(5) Hypothetical capital requirement
of a QCCP. Where a QCCP has provided
its K
CCP
, an FDIC-supervised institution
must rely on such disclosed figure
instead of calculating K
CCP
under this
paragraph (d)(5), unless the FDIC-
supervised institution determines that a
more conservative figure is appropriate
based on the nature, structure, or
characteristics of the QCCP. The
hypothetical capital requirement of a
QCCP (K
CCP
), as determined by the
FDIC-supervised institution, is equal to:
K
CCP
= S
CMi
EAD
i
* 1.6 percent
Where:
CMi
is each clearing member of the QCCP; and
EAD
i
is the exposure amount of the QCCP to
each clearing member of the QCCP, as
determined under paragraph (d)(6) of
this section.
(6) EAD of a QCCP to a clearing
member. (i) The EAD of a QCCP to a
clearing member is equal to the sum of
the EAD for derivative contracts
determined under paragraph (d)(6)(ii) of
this section and the EAD for repo-style
transactions determined under
paragraph (d)(6)(iii) of this section.
(ii) With respect to any derivative
contracts between the QCCP and the
clearing member that are cleared
transactions and any guarantees that the
clearing member has provided to the
QCCP with respect to performance of a
clearing member client on a derivative
contract, the EAD is equal to the
exposure amount of the QCCP to the
clearing member for all such derivative
contracts and guarantees of derivative
contracts calculated under SA–CCR in
§ 324.132(c) (or, with respect to a QCCP
located outside the United States, under
a substantially identical methodology in
effect in the jurisdiction) using a value
of 10 business days for purposes of
§ 324.132(c)(9)(iv); less the value of all
collateral held by the QCCP posted by
the clearing member or a client of the
clearing member in connection with a
derivative contract for which the
clearing member has provided a
guarantee to the QCCP and the amount
of the prefunded default fund
contribution of the clearing member to
the QCCP.
(iii) With respect to any repo-style
transactions between the QCCP and a
clearing member that are cleared
transactions, EAD is equal to:
EAD
I
= max{EBRM
I
¥IM
i
¥DF
I
;0}
Where:
EBRM
i
is the exposure amount of the QCCP
to each clearing member for all repo-
style transactions between the QCCP and
the clearing member, as determined
under § 324.132(b)(2) and without
recognition of the initial margin
collateral posted by the clearing member
to the QCCP with respect to the repo-
style transactions or the prefunded
default fund contribution of the clearing
member institution to the QCCP;
IM
i
is the initial margin collateral posted by
each clearing member to the QCCP with
respect to the repo-style transactions;
and
DF
i
is the prefunded default fund
contribution of each clearing member to
the QCCP that is not already deducted in
paragraph (d)(6)(ii) of this section.
* * * * *
Brian P. Brooks,
Acting Comptroller of the Currency.
By order of the Board of Governors of the
Federal Reserve System.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
Federal Deposit Insurance Corporation.
Dated at Washington, DC, on or about July
31, 2020.
James P. Sheesley,
Acting Assistant Secretary.
[FR Doc. 2020–17744 Filed 9–16–20; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P
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