SUPPLEMENTARY INFORMATION:

On June 15, 1984, the Office of Management and Budget (OMB) delegated to the Board authority under the Paperwork Reduction Act (PRA) to approve of and assign OMB control numbers to collection of information requests and requirements conducted or sponsored by the Board. In exercising this delegated authority, the Board is directed to take every reasonable step to solicit comment. In determining whether to approve a collection of information, the Board will consider all comments received from the public and other agencies.

Request for Comment on Information Collection Proposal

The Board invites public comment on the following information collection, which is being reviewed under authority delegated by the OMB under the PRA. Comments are invited on the following:

a. Whether the proposed collection of information is necessary for the proper performance of the Board's functions, including whether the information has practical utility;

b. The accuracy of the Board's estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used;

c. Ways to enhance the quality, utility, and clarity of the information to be collected;

d. Ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and

e. Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.

At the end of the comment period, the comments and recommendations received will be analyzed to determine the extent to which the Board should modify the proposal.

Proposal To Approve Under OMB Delegated Authority the Implementation of a New Information Collection

Report title: Single-Counterparty Credit Limits.

Agency form number: FR 2590. ( printed page 38304)

OMB control number: 7100-NEW.

Frequency: Quarterly; event-generated for requests for temporary relief.

Respondents: U.S. bank holding companies (BHCs) with total consolidated assets that equal or exceed $250 billion, foreign banking organizations (FBOs) with U.S. banking operations and total consolidated assets that equal or exceed $250 billion, and the U.S. intermediate holding companies (IHCs) of such FBOs with total consolidated assets of at least $50 billion. Based on data as of December 31, 2017, this respondent panel would include 10 U.S. BHCs, 12 U.S. IHCs, and 82 FBOs.

Estimated number of respondents: 104; 3 for requests for temporary relief.

Estimated average hours per response: 254 for ongoing and 1,273 for one-time implementation and 10 for requests for temporary relief.

Estimated annual burden hours: 237,982 (which includes 132,392 for one-time implementation and 30 for requests for temporary relief).

General description of report: The proposed reporting form would provide the Federal Reserve with information to monitor a covered company's or a covered foreign entity's compliance with the SCCL set forth in the final SCCL rule published elsewhere in this issue of the Federal Register . The report would comprehensively capture the credit exposures of a respondent organization to its counterparties in accordance with the SCCL rule. A covered company is any U.S. BHC identified as a global systemically important BHC (GSIB) under the Board's Regulation Q and any other U.S. BHC with total consolidated assets that equal or exceed $250 billion. A covered foreign entity is any entity that is part of the combined U.S. operations of an FBO with total global consolidated assets that equal or exceed $250 billion, and any U.S. IHC of such an FBO with total consolidated assets that equal or exceed $50 billion.

The reporting form first asks for general information about the respondent organization ( e.g., the respondent organization's full legal name; the amount of its capital stock and surplus; whether the respondent would be considered a major covered company, major foreign banking organization, or major U.S. intermediate holding company under the final SCCL rule).^[1] The reporting form also permits any respondent that is an FBO to certify that it is subject to and complies with large exposure standards on a consolidated basis established by its home-country supervisor that are consistent with the large exposures framework published by the Basel Committee on Banking Supervision. The reporting form then requests data required to calculate the respondent organization's credit exposures and requires identification of counterparties by name and by entity type ( e.g., sovereign entities, securitization funds). The form would require each respondent organization to report its top 50 counterparties.^[2]

The FR 2590 includes nine schedules. Five of these schedules (Schedules G-1 through G-5) collect information related to the gross exposures of the respondent organization to various counterparties, as calculated pursuant to the methods in § 252.73 and 252.173, respectively, of the SCCL rule. A respondent organization must add the exposure amounts in the five G schedules to calculate its aggregate gross credit exposure.

A respondent organization would then calculate its net credit exposure by adjusting its gross credit exposures using Schedules M-1 and M-2, which collect information related to eligible collateral and other eligible risk mitigants ( e.g., eligible guarantees), respectively, pursuant to § 252.74 and 252.174 of the SCCL rule.

The respondent organization must take into account special provisions in the SCCL rule that require aggregation of certain connected counterparties due to economic interdependence—meaning the underlying risk of one counterparty's financial distress or failure would cause the financial distress or failure of another counterparty, as indicated by the presence of certain enumerated factors in the SCCL rule—or due to the presence of certain control relationships described in the SCCL rule.^[3] Data relevant to understanding the presence of any relationships that require such aggregation are reported in Schedules A-1 and A-2.

In filling out the schedules described above, the respondent organization must report exposures by counterparty, with a single counterparty in each row. The reporting form requires each respondent organization to report its top 50 counterparties.

Detailed Discussion of Proposed Information Collection Activity

Schedule G-1: General Exposures

This schedule contains seven general gross credit exposure categories that are described in § 252.73, 252.75, 252.173, and 252.175 of the SCCL rule: (i) Deposits; (ii) loans and leases; (iii) debt securities or investments; (iv) equity securities or investments; (v) committed credit lines; (vi) guarantees and letters of credit; and (vii) securitization arising from the look-through approach.^[4] These gross exposures are summed together, by counterparty, in the final column of Schedule G-1.

Schedule G-2: Repurchase Agreement Exposures

This schedule collects gross credit exposures arising from repurchase agreements and reverse repurchase agreements as provided in § 252.73 and 252.173 of the SCCL rule. It requires the respondent organization to identify the assets transferred and received in the transaction. Examples include sovereign entity debt, non-sovereign entity debt, main index equities,^[5] and cash. The penultimate column asks for the total gross credit exposure under bilateral netting agreements. The final column tallies the total gross credit exposure resulting from these transactions by counterparty.

Schedule G-3: Securities Lending Exposures

This schedule collects similar information to that collected in Schedule G-2 with respect to securities lending and securities borrowing transactions. Again, the final column tallies the total gross credit exposure resulting from these transactions by counterparty.

Schedule G-4: Derivatives Exposures

Schedule G-4 requires the respondent organization to report the gross notional amount of its derivatives transactions—interest rate, foreign exchange rate, credit, equity, commodity, or other—by counterparty, consistent with § 252.73 and 252.173 of the SCCL rule. If the respondent organization has been authorized by the Board to use internal models to value such transactions, then ( printed page 38305) it can report its exposures using the “Internal Model Method” columns.^[6] Another column in Schedule G-4 is available for a respondent organization to report gross credit exposures resulting from qualifying master netting agreements.^[7] All respondent organizations are required to complete the total gross credit exposure column.

Schedule G-5: Risk-Shifting Exposures

Schedule G-5 collects information related to gross credit exposures that have been impacted by the risk shifting requirements of § 252.74 and 252.174 of the SCCL rule. Risk-shifting is required when a respondent organization employs five types of credit risk mitigants: (i) Eligible collateral; (ii) eligible guarantees; (iii) eligible credit derivatives; (iv) other eligible hedges; or (v) unused portion of certain extensions of credit. Risk-shifting may also be required in connection with credit transactions involving exempt counterparties.^[8] The final column aggregates the total gross exposure, by counterparty, due to risk-shifting.

Schedule M-1: Eligible Collateral

Sections 252.74 and 252.174 of the SCCL rule permit a respondent organization to subtract the value of any “eligible collateral” provided by a counterparty in connection with a particular transaction from its gross credit exposure for that transaction.^[9] The value of all such eligible collateral is reported in Schedule M-1. Eligible collateral include, but are not limited to, sovereign debt, non-sovereign debt, main index equities, other publicly traded equities, and cash. The final column sums the total credit risk mitigation impact due to eligible collateral, by counterparty.

Schedule M-2: General Risk Mitigants

Schedule M-2 collects information related to credit risk mitigation techniques other than the receipt of eligible collateral used by the firm to reduce its gross credit exposure in a given transaction. Permitted credit risk mitigation methods, described in § 252.74 and 252.174 of the SCCL rule, are (i) eligible guarantees; (ii) eligible credit derivatives; (iii) other eligible hedges; (iv) unused portion of certain extensions of credit; and (v) credit transactions involving exempt entities. The final column sums the total credit risk mitigation effected by use of these techniques, by counterparty.

Summary Sheet

The reporting form contains a summary sheet that sums the respondent organization's aggregate gross credit exposure (as reported in the final columns of each of the five G schedules); calculates the respondent organization's aggregate net credit exposures by reducing its aggregate gross credit exposure by its aggregate credit risk mitigants (calculated by taking the sum of the final columns of the two M schedules); and divides the respondent organization's aggregate net credit exposure by its eligible capital base.^[10] The resulting ratio shows whether the respondent organization's aggregate net credit exposures comply with the limits of the SCCL rule.

Schedule A-1: Economic Interdependence

Sections 252.76(b) and 252.176(b) of the SCCL rule require a covered company, a covered foreign entity, or U.S. IHC with total consolidated assets that equal or exceed $250 billion to aggregate its net credit exposures to counterparties that are economically interdependent—meaning that the underlying risk of one counterparty's financial distress or failure would cause the financial distress or failure of another counterparty.^[11] Those sections enumerate specific factors that those covered companies or covered foreign entities must consider in order to assess whether counterparties are economically interdependent. Such factors include whether 50 percent or more of one counterparty's gross revenue is derived from the other counterparty, or whether two or more counterparties rely on the same source for the majority of their funding.^[12] The SCCL rule requires that counterparties that must be aggregated be treated as a single counterparty (reported in Schedule A-1 as an “interconnected counterparty group”) for purposes of the aggregate net credit exposure limits of the SCCL rule. Schedule A-1 requires the respondent organization to provide its aggregate net credit exposure to each member of the interconnected counterparty group (one per column). The final column of Schedule A-1 sums the total net credit exposure of the respondent organization to each connected counterparty group.

Schedule A-2: Control Relationships

Sections 252.76(c) and 252.176(c) of the SCCL rule require a covered company, a covered foreign entity, or U.S. IHC with total consolidated assets that equal or exceed $250 billion to aggregate exposures to counterparties due to the presence of certain control relationships.^[13] These sections require that counterparties that are connected by certain specified control relationships must be treated as a single counterparty (reported in Schedule A-2 as a “control counterparty group”) for purposes of the aggregate net credit exposure limits of the SCCL rule. Schedule A-2 requires the respondent organization to provide its aggregate net credit exposure to each member of the control counterparty group (one per column). The final column of Schedule A-2 sums the total net credit exposure of the respondent organization to each control counterparty group.

In addition, certain provisions in the SCCL rule permit a covered company or covered foreign entity to request temporary relief from specific requirements of the rule. Specifically, the SCCL rule permits a covered company or covered foreign entity to request temporary relief from ( printed page 38306) requirements to aggregate one or more counterparties even if one or more factors indicating economic interdependence or control relationships are met, subject to certain conditions, including that such relief be in the public interest and consistent with the purpose of the rule.^[14] The SCCL rule also permits a covered company or covered foreign entity that is not in compliance with the requirements of the rule to request a special temporary credit exposure limit exemption from the Board to permit continued credit transactions with that counterparty, based upon a finding that those transactions are necessary or appropriate to preserve the safety and soundness of the covered company or U.S. financial stability.^[15]

Legal authorization and confidentiality: Section 165(e) of the Dodd-Frank Act (12 U.S.C. 5365(e)) and section 5(c)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c)(1)) authorize the Board to require these BHCs, FBOs, and U.S. IHCs to file a reporting form such as the proposed FR 2590 with the Board. The proposed FR 2590 would be mandatory for U.S. BHCs with total consolidated assets that equal or exceed $250 billion, FBOs with U.S. banking operations and total consolidated assets that equal or exceed $250 billion, and U.S. IHCs of such FBOs with at least $50 billion in total consolidated assets.

The data collected on this proposed form includes financial information that is not normally disclosed by the respondent organizations, the release of which would likely cause substantial harm to the competitive position of the respondent organization if made publicly available. Therefore, the data collected on this form would be kept confidential under exemption 4 of the Freedom of Information Act, which protects from disclosure trade secrets and commercial or financial information (5 U.S.C. 552(b)(4)).

Regarding notices associated with requests for temporary relief from specific requirements of the SCCL rule, a firm that wishes information in these notices to be kept confidential in accordance with exemption 4 of the Freedom of Information Act (5 U.S.C. 552(b)(4)) may request confidential treatment under the Board's rules regarding confidential treatment of information at 12 CFR 261.15. The Board's Legal Division will be asked to review the confidentiality status of such notices.