[Federal Register Volume 73, Number 188 (Friday, September 26, 2008)]
[Rules and Regulations]
[Pages 55708-55710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22701]
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FEDERAL RESERVE SYSTEM
12 CFR Part 223
[Regulation W; Docket No. R-1331]
Transactions Between Member Banks and Their Affiliates: Exemption
for Certain Purchases of Asset-Backed Commercial Paper by a Member Bank
From an Affiliate
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Interim final rule with request for public comment.
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SUMMARY: To reduce liquidity and other strains being experienced by
money market mutual funds, the Federal Reserve System adopted on
September 19, 2008, a special lending facility that enables depository
institutions and bank holding companies to borrow from the Federal
Reserve Bank of Boston on a non-recourse basis if they use the proceeds
of the loan to purchase certain types of asset-backed commercial paper
(ABCP) from money market mutual funds (ABCP Lending Facility). To
facilitate use of the ABCP Lending Facility by member banks, the Board
of Governors of the Federal Reserve System (Board) also has adopted, on
an interim final basis, regulatory exemptions for member banks from
certain provisions of sections 23A and 23B of the Federal Reserve Act
and the Board's Regulation W. The exemptions would increase the
capacity of a member bank to purchase ABCP from affiliated money market
mutual funds in connection with the ABCP Lending Facility.
DATES: The exemption became effective on September 19, 2008. Comments
must be received on or before October 31, 2008.
ADDRESSES: You may submit comments, identified by Docket No. R-1331, by
any of the following methods:
Agency Web Site: http://www.federalreserve.gov Follow the
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov
Follow the instructions for submitting comments.
E-mail: [email protected]. Include docket
number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper form in Room MP-500 of the Board's Martin Building (20th and C
Street, NW) between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Mark E. Van Der Weide, Assistant
General Counsel, (202) 452-2263, or Andrea R. Tokheim, Counsel, (202)
452-2300, Legal Division; or Norah M. Barger, Deputy Director, (202)
452-2402, Division of Banking Supervision and Regulation. For the
hearing impaired only, Telecommunication Device for the Deaf (TDD),
(202) 263-4869.
SUPPLEMENTARY INFORMATION: In light of the ongoing dislocations in the
financial markets, and the impact of such dislocations on the
functioning of the ABCP markets and on the operations of money market
mutual funds, the Board adopted the ABCP Lending Facility on September
19, 2008. Under the facility, depository institutions and bank holding
companies (banking organizations) are able to borrow from the Federal
Reserve Bank of Boston on a non-recourse basis on condition that the
organizations use the proceeds of the Federal Reserve credit to
purchase, at amortized cost, certain highly rated U.S. dollar-
denominated ABCP from money market mutual funds. The ABCP purchased
must be used to secure the borrowing from the Reserve Bank. The purpose
of the ABCP Lending Facility is to assist money market mutual funds to
obtain liquidity by enabling them to sell some of their high-credit-
quality secured assets at amortized cost. The
[[Page 55709]]
ABCP Lending Facility will expire on January 30, 2009 (unless extended
by the Board).
To facilitate usage of the ABCP Lending Facility, the Board has
adopted on an interim basis exemptions from sections 23A and 23B of the
Federal Reserve Act (12 U.S.C. 371c, 371c-1) and the Board's Regulation
W (12 CFR part 223). The exemptions increase the capacity of a member
bank to purchase ABCP from an affiliated money market mutual fund in
connection with the ABCP Lending Facility. In addition, a member bank
may use the exemptions only if the bank has not been specifically
informed by the Board, after consultation with the bank's appropriate
Federal banking agency, that the bank may not use these exemptions. If
the Board believes, after such consultation, that use of the exemptions
would not be appropriate for the member bank, the Board may withdraw
the exemptions for the bank or may impose supplemental conditions on
the bank's use of the exemptions.
The Board has determined that these exemptions are in the public
interest and consistent with the purposes of sections 23A and 23B. The
substantial protections provided to intermediaries by the Federal
Reserve in connection with the ABCP Lending Facility largely mitigate
the safety-and-soundness concerns that sections 23A and 23B were
designed to address. Because Federal Reserve extensions of credit to a
member bank under the ABCP Lending Facility are on a non-recourse
basis, the bank should bear no risk of loss from purchases of ABCP
under the facility. Therefore, the Board believes that it is
appropriate to exempt a member bank that serves as an intermediary in
the ABCP Lending Facility from the requirements of sections 23A and 23B
and Regulation W.
Consistent with its purpose to mitigate temporary stresses faced by
money market mutual funds, the interim final rule will expire on
January 30, 2009, unless extended by the Board.
Administrative Procedure Act
Pursuant to sections 553(b) and (d) of the Administrative Procedure
Act (5 U.S.C. 553(b) and (d)), the Board finds that there is good cause
for making the rule effective immediately on September 19, 2008, and
that it is impracticable, unnecessary, or contrary to the public
interest to issue a notice of proposed rulemaking and provide an
opportunity to comment before the effective date. The Board has adopted
the rule in light of, and to help address, the continuing unusual and
exigent circumstances in the financial markets. The rule will provide
immediate relief to depository institutions that elect to participate
in the ABCP Lending Facility. The Board is soliciting comment on all
aspects of the rule and will make any changes that it considers
appropriate or necessary after review of any comments received.
Regulatory Flexibility Act
The Regulatory Flexibility Act requires an agency that is issuing a
final rule to prepare and make available a regulatory flexibility
analysis that describes the impact of the final rule on small entities.
5 U.S.C. 603(a). The Regulatory Flexibility Act provides that an agency
is not required to prepare and publish a regulatory flexibility
analysis if the agency certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.
5 U.S.C. 605(b).
Pursuant to section 605(b), the Board certifies that this interim
final rule will not have a significant economic impact on a substantial
number of small entities. The rule reduces regulatory burden on large
and small insured depository institutions by granting exemptions from
the Federal transactions with affiliates regime for insured depository
institutions that purchase ABCP from affiliated money market mutual
funds pursuant to the ABCP Lending Facility.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3506; 5
CFR Part 1320 Appendix A.1), the Board has reviewed the interim final
rule under authority delegated to the Board by the Office of Management
and Budget. The rule contains no collections of information pursuant to
the Paperwork Reduction Act.
Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the Board to use
``plain language'' in all proposed and final rules. In light of this
requirement, the Board has sought to present the interim final rule in
a simple and straightforward manner. The Board invites comment on
whether it could take additional steps to make the rule easier to
understand.
List of Subjects in 12 CFR Part 223
Banks, Banking, Federal Reserve System.
Authority and Issuance
0
For the reasons set forth in the preamble, the Board amends Chapter II
of Title 12 of the Code of Federal Regulations as follows:
PART 223--TRANSACTIONS BETWEEN MEMBER BANKS AND THEIR AFFILIATES
(REGULATION W)
0
1. The authority citation for part 223 continues to read as follows:
Authority: 12 U.S.C. 371c and 371c-1.
0
2. In Sec. 223.42, add paragraph (o) to read as follows:
Sec. 223.42 What covered transactions are exempt from the
quantitative limits, collateral requirements, and low-quality asset
prohibition?
* * * * *
(o) Purchases of certain asset-backed commercial paper. Purchases
of asset-backed commercial paper from an affiliated SEC-registered
open-end investment company that holds itself out as a money market
mutual fund under SEC Rule 2a-7 (17 CFR 270.2a-7), if the member bank:
(1) Purchases the asset-backed commercial paper between September
19, 2008, and January 30, 2009 (unless extended by the Board), pursuant
to the asset-backed commercial paper lending facility established by
the Board on September 19, 2008; and
(2) Has not been specifically informed by the Board, after
consultation with the member bank's appropriate Federal banking agency,
that the member bank may not use this exemption.
0
3. Add a new Sec. 223.56 to subpart F to read as follows:
Sec. 223.56 What transactions are exempt from the market-terms
requirement of section 23B?
The following transactions are exempt from the market-terms
requirement of Sec. 223.51.
(a) Purchases of certain asset-backed commercial paper. Purchases
of asset-backed commercial paper from an affiliated SEC-registered
open-end investment company that holds itself out as a money market
mutual fund under SEC Rule 2a-7 (17 CFR 270.2a-7), if the member bank:
(1) Purchases the asset-backed commercial paper between September
19, 2008, and January 30, 2009 (unless extended by the Board), pursuant
to the asset-backed commercial paper lending facility established by
the Board on September 19, 2008; and
(2) Has not been specifically informed by the Board, after
consultation with the member bank's appropriate Federal banking agency,
that the member bank may not use this exemption.
(b) [Reserved]
[[Page 55710]]
By order of the Board of Governors of the Federal Reserve
System, September 19, 2008.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E8-22701 Filed 9-25-08; 8:45 am]
BILLING CODE 6210-01-P