[Federal Register Volume 74, Number 24 (Friday, February 6, 2009)]
[Rules and Regulations]
[Pages 6223-6225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-2336]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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Federal Register / Vol. 74, No. 24 / Friday, February 6, 2009 / Rules
and Regulations
[[Page 6223]]
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H and Y; Docket No. 1332]
Risk-Based Capital Guidelines; Leverage Capital Guidelines
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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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, the Asset-Backed Commercial Paper Money Market
Mutual Fund Lending Facility (AMLF) that enables depository
institutions and bank holding companies to borrow from the Federal
Reserve Bank of Boston on a nonrecourse basis if they use the proceeds
of the loan to purchase certain types of asset-backed commercial paper
(ABCP) from money market mutual funds. To facilitate this Federal
Reserve lending program, the Board of Governors of the Federal Reserve
System (Board) also adopted an exemption from its leverage and risk-
based capital rules for ABCP held by a state member bank or bank
holding company as a result of its participation in this program.
DATES: Effective January 30, 2009.
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; Barbara J. Bouchard, Associate Director,
(202) 452-3072, or Juan C. Climent, Senior Supervisory Financial
Analyst, (202) 872-7526, 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 markets for
ABCP and on the operations of money market mutual funds, the Board
adopted the AMLF on September 19, 2008. Under the AMLF, depository
institutions and bank holding companies (banking organizations) are
able to borrow from the Federal Reserve Bank of Boston on a nonrecourse
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 AMLF 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 AMLF, which was initially
scheduled to expire on January 31, 2009, has been extended to April 30,
2009.\1\
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\1\ Board of Governors of the Federal Reserve System (2008),
``Federal Reserve announces the extension of three liquidity
facilities through April 30, 2009,'' press release, December 2.
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Banking organizations that participate in the AMLF must acquire and
hold ABCP on their balance sheet. These ABCP holdings attract leverage
and risk-based capital charges under the Board's regulatory capital
rules for state member banks and bank holding companies. To facilitate
the AMLF, and for the reasons discussed below, on September 19, 2008,
the Board adopted, on an interim final basis, and requested public
comment on, an exemption from its leverage and risk-based capital rules
for ABCP purchased by a state member bank or bank holding company as a
result of its participation in the facility.\2\ Specifically, the
interim final rule (i) amended the Board's risk-based capital rules for
state member banks and bank holding companies to assign a zero percent
risk weight to ABCP purchased by the banking organization as a result
of its participation in the facility; and (ii) amended the Board's
leverage capital rules for state member banks and bank holding
companies to permit banking organizations to exclude from average total
consolidated assets--the denominator of the leverage ratio--ABCP
purchased by the banking organization as a result of its participation
in the facility.
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\2\ 73 FR 55706 (2008).
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After considering the comments, the Board has adopted a final rule
that is largely identical to the interim final rule but includes minor
changes to reflect the extended duration of the AMLF. The interim final
rule provided that the exemptions applied only to ABCP purchased
between September 19, 2008, and January 30, 2009 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). This
timeframe coincided with the dates of the AMLF. In the final rule, the
date range for eligible ABCP purchases has been eliminated, but the
rule continues to provide that the exemptions are available only for
ABCP that are purchased in order to secure borrowing from the AMLF. As
a result, the exemptions effectively will no longer be available once
the AMLF expires.
The Board has determined that the current leverage and risk-based
capital requirements for ABCP acquired by a banking organization
pursuant to the AMLF do not reflect the substantial protections
provided to the organization by the Federal Reserve in connection with
the facility. Because of the non-recourse nature of the Federal
Reserve's credit extension to the banking organization, the
organization is not exposed to the credit or market risk of the ABCP
purchased by the organization and pledged to the Federal Reserve.
Therefore, the Board believes that it is appropriate--and consistent
with the economic substance of the transactions--not to impose
regulatory capital requirements on the ABCP purchased by a banking
organization in connection with its service as an intermediary in the
AMLF.
Administrative Procedure Act
Pursuant to sections 553(d) of the Administrative Procedure Act (5
U.S.C. Sec. 553(d)), the Board finds that there is good cause for
making the rule effective immediately on January 30, 2009. 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 AMLF.
[[Page 6224]]
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 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 state member banks and bank holding companies by granting an
exemption from the leverage and risk-based capital rules for state
member banks and bank holding companies that purchase ABCP from money
market mutual funds pursuant to the Federal Reserve's ABCP lending
program.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3506; 5
CFR 1320 Appendix A.1), the Board has reviewed the 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 final rule in a simple
and straightforward manner. The Board invited comment on whether it
could take additional steps to make the rule easier to understand. The
Board received no comments on this subject.
List of Subjects
12 CFR Part 208
Confidential business information, Crime, Currency, Federal Reserve
System, Mortgages, Reporting and recordkeeping requirements,
Securities.
12 CFR Part 225
Administrative practice and procedure, Banks, banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
Authority and Issuance
0
For the reasons stated in the preamble, the Board of Governors of the
Federal Reserve System amends parts 208 and 225 of chapter II of title
12 of the Code of Federal Regulations as follows:
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
0
1. The authority citation for part 208 continues to read as follows:
Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a,
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j),
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1835a, 1882, 2901-2907,
3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 78l(b), 78l(g),
78l(i), 78o-4(c)(5), 78q, 78q-1, and 78w, 6801, and 6805; 31 U.S.C.
5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
0
2. In appendix A to part 208, amend section III.C.1. by revising the
last undesignated paragraph to read as follows:
Appendix A to Part 208--Capital Adequacy Guidelines for State Member
Banks: Risk-Based Measure
* * * * *
III. * * *
C. * * *
1. * * *
* * * * *
This category also includes ABCP (i) purchased on or after
September 19, 2008, by a bank from an 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) and (ii) pledged by the bank to a
Federal Reserve Bank to secure financing from the ABCP lending facility
(AMLF) established by the Board on September 19, 2008.
* * * * *
0
3.In appendix B to part 208, amend section II. by revising paragraph h.
to read as follows:
Appendix B to Part 208--Capital Adequacy Guidelines for State Member
Banks: Tier 1 Leverage Measure
* * * * *
h. Notwithstanding anything in this appendix to the contrary, a
bank may deduct from its average total consolidated assets the amount
of any asset-backed commercial paper (i) purchased by the bank on or
after September 19, 2008, from an 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) and (ii) pledged by the bank to a Federal
Reserve Bank to secure financing from the ABCP lending facility (AMLF)
established by the Board on September 19, 2008.
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
0
1. The authority citation for part 225 continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3907, and
3909; 15 U.S.C. 6801 and 6805.
0
2. In appendix A to part 225, amend section III.C.1. by revising the
last undesignated paragraph to read as follows:
Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Risk-Based Measure
* * * * *
III. * * *
C. * * *
1. * * *
* * * * *
This category also includes ABCP (i) purchased by a bank holding
company on or after September 19, 2008, from an 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) and (ii) pledged by the bank
holding company to a Federal Reserve Bank to secure financing from the
ABCP lending facility (AMLF) established by the Board on September 19,
2008.
* * * * *
0
3. In appendix D to part 225, amend section II. by revising paragraph
d. to read as follows:
Appendix D to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Tier 1 Leverage Measure
* * * * *
d. Notwithstanding anything in this appendix to the contrary, a
bank holding company may deduct from its average total consolidated
assets the amount of any asset-backed commercial paper (i) purchased by
the bank holding company on or after September 19, 2008, from an 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) and (ii)
pledged by the bank holding company to a Federal Reserve Bank to secure
financing from the ABCP lending facility (AMLF) established by the
Board on September 19, 2008.
[[Page 6225]]
By order of the Board of Governors of the Federal Reserve
System, January 28, 2009.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E9-2336 Filed 2-5-09; 8:45 am]
BILLING CODE 6210-01-P