The federal bank regulators have received numerous questions recently about whether
daily confirmation disclosures for overnight hold-in-custody repurchase agreement
transactions (commonly referred to as "sweep repos") are necessary. Several
banks have commented that daily confirmations are unnecessary, burdensome and costly. They
have requested permission to issue confirmations less frequently; some have suggested
monthly rather than daily.
This is to inform you that the staffs of the Federal Deposit Insurance Corporation
along with the Comptroller of the Currency and the Federal Reserve Board have reviewed the
situation and continue to believe, based on the Government Securities Act of 1986 (GSA),
that banks must make available for delivery on a daily basis confirmations for each sweep
The Treasury Department's Bureau of the Public Debt (Bureau), responsible for
regulations implementing the GSA, requires government securities broker-dealers to issue a
confirmation for repurchase transactions by the end of the day in which a transaction is
initiated and on any day in which substitution of securities occurs. These confirmation
requirements apply to all repurchase transactions in which the selling institution keeps
control of the underlying securities. In addition, the operational requirements for a
daily sweep repo program currently require institutional control of the underlying
securities. The Bureau only permits exclusions from the confirmation requirements for
situations involving foreign corporations, partnerships, trusts or non-U.S. citizens
residing outside of the United States.
In December 1992, the Federal Financial Institutions Examination Council's Regulatory
Burden Study Group, in consultation with the Bureau, reviewed the issue of whether daily
confirmations are burdensome. The Bureau declined to amend the requirements because daily
confirmations provide fundamental customer protection. The confirmations allow the
customer to act or react knowledgeably and promptly in current and future transactions.
The Bureau has stated that daily confirmations of sweep repos are necessary because
they "are recurring transactions, generally giving rise to a new repurchase
transaction daily." The requirement that the confirmation take place by "the end
of the business day" means prior to opening for the next day of business; thus,
confirmation must be available for delivery before or at the start of the bank's next
If your bank desires a legal interpretation regarding confirmation requirements or
other government securities regulations, call or write The Bureau of the Public Debt,
Government Securities Staff, Washington, DC 20239, (202-219-3632). For further
information, contact Hugh W. Conway, Special Programs Coordinator, in the Division of
Supervision's Special Activities Section (202-898-6812).
Nicholas J. Ketcha Jr.
Distribution: FDIC Supervised Banks (Commercial and Savings)