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FIL-46-2004 Attachment

[Federal Register: April 26, 2004 (Volume 69, Number 80)]

[Rules and Regulations]

[Page 22382-22385]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr26ap04-3]


 

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DEPARTMENT OF THE TREASURY


 

Office of the Comptroller of the Currency


 

12 CFR Part 3


 

[Docket No. 04-10]

RIN 1557-AC76


 

FEDERAL RESERVE SYSTEM


 

12 CFR Parts 208 and 225


 

[Regulations H and Y; Docket No. R-1156]


 

FEDERAL DEPOSIT INSURANCE CORPORATION


 

12 CFR Part 325


 

RIN 3064-AC74


 

DEPARTMENT OF THE TREASURY


 

Office of Thrift Supervision


 

12 CFR Part 567


 

[No. 2004-15]

RIN 1550-AB79


 

 

Risk-Based Capital Guidelines; Capital Adequacy Guidelines;

Capital Maintenance: Interim Capital Treatment of Consolidated Asset-

Backed Commercial Paper Program Assets; Extension


 

AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of

Governors of the Federal Reserve System; Federal Deposit Insurance

Corporation; and Office of Thrift Supervision, Treasury.


 

ACTION: Interim final rule; extension of applicability date.


 

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SUMMARY: The Office of the Comptroller of the Currency (OCC), Board of

Governors of the Federal Reserve System (Board), Federal Deposit

Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS)

(collectively, the agencies) are extending the applicability date in

the interim final rule on the capital treatment of consolidated asset-

backed commercial paper (ABCP) programs that was issued on October 1,

2003 (68 FR 56530)


 

[[Page 22383]]


 

(October 2003 interim final rule). The October 2003 interim final rule

amended the agencies' risk-based capital standards by providing an

interim capital treatment for assets in ABCP programs that are

consolidated onto the balance sheets of sponsoring banks, bank holding

companies, and thrifts (collectively, sponsoring banking organizations)

as a result of Financial Accounting Standards Board Interpretation No.

46, Consolidation of Variable Interest Entities (FIN 46). The interim

capital treatment that is being extended allows a sponsoring banking

organization to remove the consolidated ABCP program assets from risk-

weighted assets for the purpose of calculating its risk-based capital

ratios. The October 2003 interim final rule indicated that the capital

treatment is applicable only for the regulatory reporting periods

ending September 30 and December 31, 2003, and March 31, 2004. This

extension permits affected institutions to apply the designated capital

treatment through July 1, 2004.


 

DATES: Effective Date: This interim final rule is effective April 26,

2004.


 

FOR FURTHER INFORMATION CONTACT:

OCC: Amrit Sekhon, Risk Expert, Capital Policy Division, (202) 874-

5211; Laura Goldman, Senior Attorney, or Ron Shimabukuro, Special

Counsel, Legislative and Regulatory Activities Division, (202) 874-

5090, Office of the Comptroller of the Currency, 250 E Street, SW.,

Washington, DC 20219.

Board: Thomas R. Boemio, Senior Project Manager, Policy, (202) 452-

2982, David Kerns, Supervisory Financial Analyst, (202) 452-2428,

Barbara Bouchard, Deputy Associate Director, (202) 452-3072, Division

of Banking Supervision and Regulation; or Mark E. Van Der Weide, Senior

Counsel, (202) 452-2263, Legal Division. For the hearing impaired only,

Telecommunication Device for the Deaf (TDD), (202) 263-4869.

FDIC: Jason C. Cave, Chief, Policy Section, Capital Markets Branch,

(202) 898-3548, Robert F. Storch, Chief Accountant, Division of

Supervision and Consumer Protection, (202) 898-8906; Michael B.

Phillips, Counsel, Supervision and Legislation Branch, Legal Division,

(202) 898-3581, Federal Deposit Insurance Corporation, 550 17th Street,

NW., Washington, DC 20429.

OTS: Christine A. Smith, Project Manager, Supervision Policy, (202)

906-5740; or Karen Osterloh, Special Counsel (202) 906-6639, Office of

Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.


 

SUPPLEMENTARY INFORMATION: In January 2003, the Financial Accounting

Standards Board (FASB) issued interpretation No. 46, ``Consolidation of

Variable Interest Entities'' (FIN 46), which requires the consolidation

of variable interest entities (VIEs) onto the balance sheets of

companies deemed to be the primary beneficiaries of those entities.\1\

On December 23, 2003, the FASB published interpretation 46-R (FIN 46-

R), which revised FIN 46 to clarify some of the provisions of FIN 46

and to exempt certain entities from its requirements. FIN 46-R (and its

predecessor FIN 46) resulted in the consolidation of many ABCP programs

onto the balance sheets of sponsoring banking organizations beginning

in the third quarter of 2003. In contrast, under pre-FIN 46 accounting

standards, banking organizations normally were not required to

consolidate the assets of these programs. Where a banking organization

is required to consolidate ABCP program assets under FIN 46 it must

include all of the program assets (mostly receivables and securities)

and liabilities (mainly commercial paper) on its balance sheets for

purposes of the bank Reports of Condition and Income (Call Report), the

Thrift Financial Report (TFR), and the bank holding company financial

statements (FR Y-9C Report).

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\1\ Under FIN 46, the FASB broadened the criteria for

determining when one entity is deemed to have a controlling

financial interest in another entity and, therefore, when an entity

must consolidate another entity in its financial statements. An

entity generally does not need to be analyzed under FIN 46 if it is

designed to have ``adequate capital'' as described in FIN 46 and its

shareholders control the entity with their share votes and are

allocated its profits and losses. If the entity fails these

criteria, it typically is deemed a VIE and each stakeholder in the

entity (a group that can include, but is not limited to, legal-form

equity holders, creditors, sponsors, guarantors, and servicers) must

assess whether it is the entity's ``primary beneficiary'' using the

FIN 46 criteria. This analysis considers whether effective control

exists by evaluating the entity's risks and rewards. The stakeholder

who holds the majority of the entity's risks or rewards is the

primary beneficiary and must consolidate the VIE.

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The agencies believe that the consolidation of ABCP program assets

onto the balance sheets of a sponsoring banking organization could

result in risk-based capital requirements that are excessive in light

of the risks faced by that organization. Accordingly, the agencies

published the October 2003 interim final rule providing temporary

capital relief for sponsoring banking organizations with assets in ABCP

programs that are consolidated onto the balance sheets of those

organizations as a result of FIN 46. See 68 FR 56530 (October 1, 2003).

The agencies requested public comment on the October 2003 interim final

rule. The comment period closed November 17, 2003. The agencies'

October 2003 interim final rule became effective on October 1, 2003,

and the applicability of the capital treatment guidelines expired on

April 1, 2004 (April 1st sunset date).

In addition, the agencies received comments on a notice of proposed

rulemaking (68 FR 56568) (proposed rule) issued concurrently with the

October 2003 interim final rule. That rulemaking proposed capital

charges on certain ABCP conduit exposures and indicated that the

October 2003 interim final rule would not be finalized until the issues

addressed in the proposed rule were resolved. The agencies are

continuing to work on developing a more risk-sensitive approach to

dealing with exposures to ABCP conduits, taking into account comments

received on the proposed rule.

Because the agencies have not yet fully resolved issues addressed

in the proposed rule, especially those related to banking organization

exposures to ABCP conduits, they are amending the October 2003 interim

final rule to extend the April 1st sunset date to July 1, 2004. The

agencies believe that an explicit extension of the April 1st sunset

date is necessary in order to eliminate potential industry confusion

and uncertainty with respect to the calculation of regulatory capital

ratios pending the issuance of a final rule.


 

Regulatory Flexibility Act Analysis


 

Pursuant to section 605(b) of the Regulatory Flexibility Act, the

agencies have determined that this interim final rule would not have a

significant impact on a substantial number of small entities in

accordance with the spirit and purposes of the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.). For purposes of the Regulatory Flexibility

Act, ``small entities'' are banking organizations having assets of $150

million or less. There are approximately 18 sponsoring banking

organization for purposes of this interim final rule, and all of them

are well over that asset size threshold. Accordingly, a regulatory

flexibility analysis is not required. In addition, the interim final

rule would reduce regulatory burden with respect to the agencies' risk-

based capital standards.


 

Administrative Procedure Act


 

The Agencies find that there is good cause to dispense with prior

notice and public comment on this interim final rule and with the 30-

day delay of effective date generally prescribed by the Administrative

Procedure Act (APA). 5 U.S.C 553.

Under section 553(b) of the APA, the agencies are not required to

provide notice and an opportunity for public


 

[[Page 22384]]


 

comment on a rule if they find, for good cause, that notice and comment

are ``impracticable, unnecessary or contrary to the public interest.''

The agencies find that notice and public comment are unnecessary

because the agencies have given the public a prior opportunity to

comment on the substance of the October 2003 interim final rule, which

is to preserve the pre-existing non-consolidated risk-based capital

treatment for sponsoring banking organizations pending the agencies'

determination of the capital charge appropriate to certain ABCP conduit

exposures. Most commenters favored this result. This extension of the

effective date merely provides additional time for the agencies to

complete that process. Further, the agencies find that further notice

and public comment are not in the public interest because a failure to

extend the April 1st sunset date could create confusion regarding the

calculation of regulatory capital ratios pending the issuance of a

final rule. The agencies also find that it is impracticable to provide

an additional opportunity for comment before the April 1, 2004

expiration date established by the October 2003 interim rule.

Under section 553(d) of the APA, the agencies must generally

provide a 30-day delayed effective date for final rules. The agencies

may waive the 30-day delayed effective date requirement ``for good

cause found and published with the rule.'' Similarly, section 302 of

the Riegle Community Development and Regulatory Improvement Act of 1994

(CDRI), requires a banking agency to make a rule effective on the first

day of the calendar quarter that begins on or after the date on which

the regulations are published in final form, unless the agency finds

good cause for an earlier effective date. 12 U.S.C. 4802(b)(1). The

agencies find that there is good cause to waive the two effective date

requirements because a failure to extend the April 1st sunset date

could create confusion and uncertainty regarding the calculation of

regulatory capital ratios pending the issuance of a final rule.

Further, the purpose of the APA and CDRI delayed effective date

provisions is to afford affected persons a reasonable time to comply

with rule changes. Because institutions have complied with the

requirements since October 2003, it is not necessary to delay the

effective date to achieve this purpose.


 

Paperwork Reduction Act


 

The agencies have determined that this interim final rule does not

involve a collection of information pursuant to the provisions of the

Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).


 

Unfunded Mandates Reform Act of 1995


 

OCC and OTS: Section 202 of the Unfunded Mandates Reform Act of

1995, Pub. L. 104-4 (Unfunded Mandates Act) requires that an agency

prepare a budgetary impact statement before promulgating a rule that

includes a Federal mandate that may result in expenditure by State,

local, and tribal governments, in the aggregate, or by the private

sector, of $100 million or more in any one year. If a budgetary impact

statement is required, section 205 of the Unfunded Mandates Act also

requires an agency to identify and consider a reasonable number of

regulatory alternatives before promulgating a rule. This interim final

rule is designed to temporarily offset the effect on risk-based capital

ratios of FIN 46 with respect to ABCP programs. The OCC and OTS have

determined that this interim final rule will not result in expenditures

by State, local, or tribal governments, or by the private sector, of

$100 million or more in any one year. Accordingly, section 202 of the

Unfunded Mandates Act does not require the OCC or OTS to prepare a

budgetary impact statement for this interim final rule.


 

Executive Order 12866


 

The Director of the OTS and the Comptroller of the OCC have

determined that this interim final rule does not constitute a

``significant regulatory action'' for the purposes of Executive Order

12866.


 

List of Subjects


 

12 CFR Part 3


 

Administrative practice and procedure, Capital, National banks,

Reporting and recordkeeping requirements, Risk.


 

12 CFR Part 208


 

Accounting, Agriculture, Banks, banking, 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.


 

12 CFR Part 325


 

Administrative practice and procedure, Bank deposit insurance,

Banks, banking, Capital adequacy, Reporting and recordkeeping

requirements, Savings associations, State non-member banks.


 

12 CFR Part 567


 

Capital, Reporting and recordkeeping requirements, Savings

associations.


 

Department of the Treasury


 

Office of the Comptroller of the Currency


 

12 CFR Chapter I


 

Authority and Issuance


 

0

For the reasons set out in the joint preamble, part 3 of chapter I of

title 12 of the Code of Federal Regulations is amended as follows:


 

PART 3--MINIMUM CAPITAL RATIOS; ISSUANCE OF DIRECTIVES


 

0

1. The authority citation for part 3 continues to read as follows:


 

Authority: 12 U.S.C. 93a, 161, 1818, 1828(n), 1828 note, 1831n

note, 1835, 3907, and 3909.


 

Appendix A to Part 3--[Amended]


 

0

2. In Appendix A to part 3:

0

a. In section 2, paragraph (a)(3)(ii), remove ``April 1'' and add

``July 1'' in its place; and

0

b. In section 4, paragraphs (j)(4) and (k)(2), remove ``April 1'' and

add ``July 1'' in its place.


 

Dated: April 9, 2004.

John D. Hawke, Jr.,

Comptroller of the Currency.


 

Federal Reserve System


 

12 CFR Chapter II


 

Authority and Issuance


 

0

For the reasons set forth in the joint 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, 1831w, 1831x, 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; 31 U.S.C.

5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.


 

[[Page 22385]]


 

Appendix A to Part 208--[Amended]


 

0

2. In Appendix A to part 208, the following amendments are made:

0

a. In section II.A.1.c., remove ``April 1'' and add ``July 1'' in its

place; and

0

b. In section III.B.6.c., remove ``April 1'' and add ``July 1'' in its

place.


 

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.


 

Appendix A to Part 225--[Amended]


 

0

2. In Appendix A to part 225, the following amendments are made:

0

a. In section II.A.1.c., remove ``April 1'' and add ``July 1'' in its

place; and

0

b. In section III.B.6.c., remove ``April 1'' and add ``July 1'' in its

place.


 

By order of the Board of Governors of the Federal Reserve

System, April 16, 2004.

Jennifer J. Johnson,

Secretary of the Board.


 

Federal Deposit Insurance Corporation


 

12 CFR Chapter III


 

Authority and Issuance


 

0

For the reasons set forth in the joint preamble, the Board of Directors

of the Federal Deposit Insurance Corporation amends part 325 of chapter

III of title 12 of the Code of Federal Regulations as follows:


 

PART 325--CAPITAL MAINTENANCE


 

0

1. The authority citation for part 325 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; 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).


 

Appendix A to Part 325--[Amended]


 

0

2. In Appendix A to part 325, the following amendments are made:

0

a. In section I.A.1.iii.e., remove ``April 1'' and add ``July 1'' in

its place; and

0

b. In section II.B.6.c., remove ``April 1'' and add ``July 1'' in its

place.


 

By order of the Board of Directors.


 

Dated at Washington, DC, this 6th day of April, 2004.


 

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.


 

Department of the Treasury


 

Office of Thrift Supervision


 

12 CFR Chapter V


 

Authority and Issuance


 

0

For the reasons set out in the preamble, part 567 of chapter V of title

12 of the Code of Federal Regulations is amended as follows:


 

PART 567--CAPITAL


 

0

1. The authority citation for part 567 continues to read as follows:


 

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828

(note).


 

567.5 [Amended]


 

0

2. In Sec. 567.5(a)(1)(iii), remove ``April 1'' and add ``July 1'' in

its place.



 

567.6 [Amended]


 

0

3. In Sec. 567.6, paragraphs (a)(3)(iv) and (a)(4)(ii), remove ``April

1'' and add ``July 1'' in its place.


 

Dated: March 30, 2004.


 

By the Office of Thrift Supervision.

Richard M. Riccobono,

Acting Director.

[FR Doc. 04-9361 Filed 4-23-04; 8:45 am]


 

BILLING CODE 4810-33-P

Last Updated: March 24, 2024