81 FR 57499 - Federal Home Loan Bank New Business Activities

FEDERAL HOUSING FINANCE AGENCY

Federal Register Volume 81, Issue 163 (August 23, 2016)

Page Range		57499-57505
FR Document		2016-19858
The proposed rule would modify a part of the Federal Housing Finance Agency (FHFA) regulations, which addresses requirements for the Federal Home Loan Banks' (Banks) new business activities (NBAs). The proposed rule would reduce the scope of NBAs for which the Banks must seek approval from FHFA and would establish new timelines for agency review and approval of NBA notices. The proposed rule also would reorganize a part of our regulations to clarify the protocol for FHFA review of NBAs.
Federal Register, Volume 81 Issue 163 (Tuesday, August 23, 2016)
[Federal Register Volume 81, Number 163 (Tuesday, August 23, 2016)]
[Proposed Rules]
[Pages 57499-57505]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19858]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1272

RIN 2590-AA84


Federal Home Loan Bank New Business Activities

AGENCY: Federal Housing Finance Agency.

ACTION: Notice of proposed rulemaking; request for comment.

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SUMMARY: The proposed rule would modify a part of the Federal Housing 
Finance Agency (FHFA) regulations, which addresses requirements for the 
Federal Home Loan Banks' (Banks) new business activities (NBAs). The 
proposed rule would reduce the scope of NBAs for which the Banks must 
seek approval from FHFA and would establish new timelines for agency 
review and approval of NBA notices. The proposed rule also would 
reorganize a part of our regulations to clarify the protocol for FHFA 
review of NBAs.

DATES: FHFA must receive written comments on or before October 24, 
2016.

ADDRESSES: You may submit your comments on the proposed rule, 
identified by regulatory information number (RIN) 2590-AA84 by any of 
the following methods:

[[Page 57500]]

     Agency Web site: www.fhfa.gov/open-for-comment-or-input.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comments to the Federal eRulemaking Portal, please also send it by 
email to FHFA at [email protected] to ensure timely receipt by the 
agency. Please include ``RIN 2590-AA84'' in the subject line of the 
message.
     Hand Delivery/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA84, 
Federal Housing Finance Agency, Constitution Center, (OGC) Eighth 
Floor, 400 Seventh Street SW., Washington, DC 20219. The package should 
be delivered to the Seventh Street entrance Guard Desk, First Floor, on 
business days between 9 a.m. and 5 p.m.
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA84, Federal 
Housing Finance Agency, Constitution Center, (OGC) Eighth Floor, 400 
Seventh Street SW., Washington, DC 20219.

FOR FURTHER INFORMATION CONTACT: Lara Worley, Principal Financial 
Analyst, [email protected], 202-649-3324, Division of Federal Home 
Loan Bank Regulation; or Winston Sale, Assistant General Counsel, 
[email protected], 202-649-3081 (these are not toll-free numbers), 
Office of General Counsel (OGC), Federal Housing Finance Agency, 
Constitution Center, 400 Seventh Street SW., Washington, DC 20219. The 
telephone number for the Telecommunications Device for the Hearing 
Impaired is 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Comments

    FHFA invites comment on all aspects of the proposed rulemaking, 
which FHFA is publishing with a 60-day comment period. After 
considering the comments, FHFA will develop a final regulation.
    Copies of all comments received will be posted without change on 
the FHFA Web site at http://www.fhfa.gov, and will include any personal 
information you provide, such as your name, address, email address, and 
telephone number. Copies of the comments also will be available for 
public inspection and copying on government-business days between the 
hours of 10 a.m. and 3 p.m. at the Federal Housing Finance Agency, 
Constitution Center, 400 7th Street SW., Washington, DC 20219. To make 
an appointment to inspect comments please call the Office of General 
Counsel at (202) 649-3804.

II. Background

    FHFA is an independent agency of the federal government established 
to regulate and oversee the Federal National Mortgage Association, the 
Federal Home Loan Mortgage Corporation (together, the Enterprises), the 
Banks (collectively with the Enterprises, the regulated entities), and 
the Bank System's Office of Finance.\1\ FHFA is the primary federal 
financial regulator of each regulated entity. FHFA's regulatory mission 
is to ensure, among other things, that each of the regulated entities 
``operates in a safe and sound manner'' and that its ``operations and 
activities . . . foster liquid, efficient, competitive and resilient 
national housing finance markets.'' \2\
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    \1\ 12 U.S.C. 4511.
    \2\ 12 U.S.C. 4513(a)(1)(B).
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    The eleven Banks are organized under the Federal Home Loan Bank Act 
(Bank Act) as cooperatives,\3\ meaning that only members may purchase 
the capital stock of a Bank, and only members or certain eligible 
housing associates (such as state housing finance agencies) may obtain 
access to secured loans, known as advances, or other products provided 
by a Bank.\4\ Each Bank is managed by its own board of directors and 
serves the public interest by enhancing the availability of residential 
mortgage and community lending credit through its member 
institutions.\5\
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    \3\ See 12 U.S.C. 1423 and 1432(a).
    \4\ See 12 U.S.C. 1426(a)(4), 1430(a), and 1430b.
    \5\ See 12 U.S.C. 1427.
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    In 2000, the Federal Housing Finance Board (Finance Board), a 
predecessor to FHFA, adopted a rule (Modernization Rule) implementing 
certain statutory amendments made by the Federal Home Loan Bank System 
Modernization Act of 1999.\6\ Because the statutory amendments had 
expanded the types of collateral that the Banks may accept, the Finance 
Board established a prior review process through which the Finance 
Board could assess the risks to the Banks of accepting the new types of 
collateral. That process was codified in the NBA regulation at 12 CFR 
part 980, which also required the Banks to obtain Finance Board 
approval prior to undertaking any other NBAs that presented risks the 
Banks had not previously managed.\7\ In 2010, FHFA re-designated part 
980 as part 1272 of its regulations.\8\ Aside from that re-designation, 
the NBA regulation has remained unchanged since 2000.
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    \6\ See 65 FR 44414 (July 18, 2000). The Federal Home Loan Bank 
System Modernization Act of 1999 is Title VI of the Gramm-Leach-
Bliley Act, Pub. L. 106-102, 113 Stat. 1338 (Nov. 12, 1999).
    \7\ See 65 FR 44420 (July 18, 2000).
    \8\ See 75 FR 76622 (Dec. 9, 2010).
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    In April 2013, FHFA published a Notice of Regulatory Review (Review 
Notice) pursuant to its regulatory review plan published in 2012.\9\ 
The Review Notice requested the public's comment on FHFA's existing 
regulations for purposes of improving their effectiveness and reducing 
their burden.\10\ In response to the Review Notice, FHFA received a 
letter co-signed by all of the Banks (Request Letter) with comments on 
certain regulations, including part 1272.\11\ The Request Letter's 
comments on part 1272 focused on two issues: (1) The scope of the NBA 
rule; and (2) The length of time afforded to FHFA under the rule to 
respond to an NBA notice.
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    \9\ See 78 FR 23507 (April 19, 2013). See also Regulatory Review 
Plan, 77 FR 10351 (Feb. 22, 2012).
    \10\ 78 FR 23508 (April 19, 2013).
    \11\ The Request Letter is available on FHFA's Web site, at the 
following link: https://www.fhfa.gov//SupervisionRegulation/Rules/Pages/Comment-Detail.aspx?CommentId=4012.
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    Specifically, the Request Letter expressed concern that the broad 
scope of the rule requires the Banks to expend significant time and 
effort to determine whether a proposed activity is subject to the 
rule's purview. Further, the Banks expressed concern that the rule 
requires them to analyze the risks associated with a contemplated NBA 
to their member institutions, as well to the Banks themselves. The 
Banks noted that, if applied literally, that provision requires them 
to:

evaluate whether risks from certain business activities are 
regularly managed by hundreds of member banks, credit unions and 
insurance companies of widely different sizes and locations, which 
have many different business and operational models and 
strategies.\12\
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    \12\ Id at 2-3.

The Request Letter also noted that ``the addition of a materiality 
concept would greatly enhance the FHLBanks' ability to assess the 
regulations' applicability.'' With respect to the time frame for FHFA's 
response to NBA notices, the Banks expressed concern that the current 
regulation allows the review period to be extended indefinitely and 
that FHFA should revise the regulation to require more prompt decisions 
on NBA submissions. FHFA is now proposing to amend part 1272 to address 
the Banks' concerns.

[[Page 57501]]

III. Consideration of Differences Between the Banks and the Enterprises

    When promulgating regulations relating to the Banks, section 
1313(f) of the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 requires the Director of FHFA (Director) to 
consider the differences between the Banks and the Enterprises with 
respect to the Banks' cooperative ownership structure; mission of 
providing liquidity to members; affordable housing and community 
development mission; capital structure; and joint and several 
liability.\13\ The changes proposed in this rulemaking apply 
exclusively to the Banks and generally affect the scope and timing of 
their NBA notifications. Apart from those changes, the substance of the 
proposed rule is substantially similar to that of the existing NBA 
regulation. In preparing this proposed rule the Director has considered 
the differences between the Banks and the Enterprises as they relate to 
the above factors, and requests comments about any particular 
differences that the Director should consider when developing a final 
rule.
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    \13\ See 12 U.S.C. 4513(f).
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IV. Analysis of the Proposed Rule

    The Proposed Rule. The purposes of the proposed rule are to revise 
the scope of activities requiring submission of an NBA notice, specify 
the response time to an NBA notice, and reorganize and clarify the 
rule. Additional changes are clarifying or conforming in nature. The 
following paragraphs describe the proposed revisions.
    Definitions. In Sec.  1272.1, FHFA proposes to revise the 
definition of ``new business activity'' and to add new definitions for 
two terms. In response to the Banks' request to narrow the scope of 
activities requiring prior FHFA approval under part 1272, FHFA is 
proposing to exclude from the definition of ``new business activity'' 
the acceptance of new types of advance collateral, i.e., types of 
collateral that are legally permissible but that a particular Bank has 
not previously accepted. Paragraphs (1) and (2) of the existing 
definition of new business activity, relating to the acceptance of 
``other real estate related collateral'' (ORERC) and ``community 
financial institution collateral'' (CFI collateral), respectively, were 
included in the definition because prior to 1999 the Banks could only 
accept limited amounts of ORERC and were not authorized to accept CFI 
collateral at all. The Finance Board found that the Banks lacked 
sufficient experience with those new collateral types, and specifically 
included that collateral within the definition of new business 
activities so it could ensure that the Banks had processes in place to 
manage the risks associated with the new collateral.\14\ In the 16 
years since the adoption of the Modernization Rule, most of the Banks 
have been approved to accept CFI collateral or some forms of ORERC and 
have developed significant experience in managing the risks associated 
with those collateral types. Those types of collateral are no longer 
new, and the remaining universe of new types of collateral that might 
potentially fall into the ORERC category is small. Thus, FHFA believes 
that there would be little risk associated with removing the references 
to these types of collateral from the definition of new business 
activity, which will allow the Banks to begin accepting any new types 
of collateral from their members and housing associates without prior 
regulatory review. Under the proposed rule, FHFA would assess the 
Banks' acceptance of new types of collateral through its examination 
process.
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    \14\ See 65 FR 44420 (July 18, 2000).
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    The current definition of new business activity also includes any 
activity that entails risks not previously and regularly managed by the 
Bank or by the Bank's members. For the reasons articulated in the 
Banks' Request Letter, FHFA is proposing to delete from the definition 
the reference to the Banks' members. Nonetheless, FHFA requests 
comments from the public about whether such deletion could negatively 
impact the Banks' safety and soundness or mission.
    In the Request Letter, the Banks also asked FHFA to add a 
materiality concept to the rule. The Banks contended that doing so 
would ``enhance [their] ability to assess the regulation's 
applicability'' to particular activities. FHFA has considered this 
request and proposes to incorporate a materiality provision into the 
definition of ``new business activity.'' Under the proposed definition, 
the Banks would be required to submit a notice only for those 
activities that ``entail material risks not previously and regularly 
managed by the Bank.'' The scope of this proposed definition would 
address the agency's principal safety and soundness concerns with 
respect to NBAs, while also allowing the Banks greater flexibility to 
initiate those activities, including modifications to existing 
activities, without prior agency approval. Assessing the materiality of 
the risks associated with a new activity necessarily will entail some 
subjective judgments by the Banks. For those instances in which it is 
unclear whether the risks associated with a proposed activity would be 
material, FHFA expects that a Bank would discuss the contemplated 
activity with FHFA staff early in the process to determine whether the 
risks warrant the submission of an NBA notice. For those instances in 
which a Bank undertakes a new activity based on its own determination 
that the associated risks are not material, FHFA expects to assess 
those decisions as part of the regular examination process, and will 
address any safety and soundness concerns associated with such 
activities in the same manner that it addresses such concerns arising 
from other aspects of a Bank's operations. FHFA specifically requests 
public comment on whether the proposed inclusion of materiality 
language within the definition of new business activity is the most 
appropriate means of incorporating a materiality assessment into the 
regulation, whether materiality should be defined, and whether limiting 
the NBA review process to those activities presenting new material 
risks could present any safety and soundness concerns.
    FHFA is also proposing to add two new definitions to the NBA 
regulation. The proposed rule includes a definition of ``business day'' 
because deadlines set forth in the proposed rule would be measured by 
business days rather than calendar days, as is the case under the 
current rule. FHFA proposes the use of business days because that 
approach assures that the review periods for NBA notices will be the 
same in all cases, even if they are filed during periods of the year 
that have multiple legal holidays. Lastly, FHFA is proposing to define 
``NBA Notice Date'' as the date on which FHFA receives an NBA notice. 
The purpose of this new term is to establish a unified start date 
against which the various deadlines in the proposed rule are to be 
measured.
    Filing Requirement. The proposed rule would not make any changes to 
Sec.  1272.2, which prohibits the Banks from commencing any NBAs except 
in accordance with the requirements of the NBA regulations of part 
1272.
    New Business Activity Notice Requirement. The proposed rule 
generally restructures part 1272 to clarify the protocol for notice and 
review of NBAs. Sections 1272.3 through 1272.7 have been reorganized 
into the Banks' notice requirements, FHFA's review process, requests 
for additional information, FHFA's examination authority, and 
delegation of approval authority, respectively. Functionally, most of 
the provisions are similar to the current regulation, but

[[Page 57502]]

reorganized to better reflect the order in which they are performed.
    In Sec.  1272.3, FHFA proposes retaining the NBA notice requirement 
with several changes that will limit its scope to describing the items 
that must be included as part of the notice. First, the proposed rule 
would relocate the timelines for commencement of an NBA to Sec.  
1272.4, as described in detail below. Second, FHFA proposes to replace 
the current itemized list of required notice contents with a revised 
list that includes more principles-based submission requirements. 
FHFA's intent is to provide the Banks greater flexibility in drafting 
notices that are appropriate to an NBA's scope. The proposed notice 
requirements are similar to the current requirements in that a notice 
must address FHFA's core legal and regulatory concerns. Thus, the 
proposed requirements would generally require that a Bank provide a 
thorough and complete description of the proposed activity. This 
approach is intended to afford the Banks additional discretion in 
tailoring notice contents to the nature of the proposed activity and 
its corresponding risks. FHFA would retain the authority to require the 
submission of additional information from the Banks as necessary to 
evaluate the risks associated with the new activity. See proposed 
Sec. Sec.  1272.4(b), 1272.5.
    The proposed rule would elaborate on the existing requirement that 
a Bank provide an opinion of counsel relating to the proposed new 
activity. For NBAs raising legal questions of first impression, FHFA 
proposes requiring the opinion to provide a thorough analysis of the 
legal authority for the activity that not only cites the general legal 
authority, but clearly explains how the cited authority permits the 
proposed activity. This proposed language is intended to ensure that 
the Banks perform a robust analysis of each of the legal issues 
relating to the contemplated new activity at an early stage of the 
process and provide FHFA with that analysis. A simple statement that 
counsel has reviewed the proposed activity and concluded that it is 
legally permissible will not satisfy this requirement.
    FHFA proposes removing the itemized list of informational items 
found in Sec.  1272.3(a)(3), and replacing it with a requirement that 
the submission provide a full and complete description of the proposed 
activity. FHFA expects that NBA notices, and especially those for 
activities not previously approved for any Bank, will need to discuss 
many of the items listed in the current regulation. However, FHFA 
recognizes that not all of the existing items in the regulation would 
be relevant to all notices, and that there will be some activities for 
which the current listing of items might be underinclusive. The more 
thorough and clear the submission, the more readily will FHFA be able 
to evaluate the request.
    The proposed notice requirements also specifically ask the Bank to 
inform FHFA whether the proposed activity represents a modification of 
an activity that FHFA has previously approved for that Bank, or whether 
it is an activity that FHFA has approved for any other Banks. Although 
FHFA generally will recognize when a proposed NBA has been previously 
approved for other Banks, the submitting Bank should provide this 
information to help expedite FHFA's decision on the notice. FHFA 
specifically requests public comment on whether the proposed notice 
description requirements appropriately balance the FHFA's informational 
needs with the associated compliance burden imposed on the Banks.
    The proposed rule would require a Bank to discuss how the proposed 
activity would support the Bank's housing finance and community 
investment mission. The current regulation requires a notice to 
describe the effect of a proposed activity on the housing or community 
development market, but does not affirmatively require the Banks to 
demonstrate how the proposed activity would support the Banks' 
statutory mission. FHFA's duties include ensuring that the Banks' 
activities foster such mission, see 12 U.S.C. 4513(a). The proposed 
rule elsewhere includes a related approval standard for NBA notices, 
which requires that FHFA approve notices only if the activity is 
conducted in a safe and sound manner and is consistent with the Banks' 
housing finance and community investment mission. This proposed 
requirement is also intended to dovetail with the general description 
requirement so that the submitting Bank produces a comprehensive 
picture of the proposed activity covering the range of its attributes, 
from technical production and risk concerns to the activity's potential 
effects on the Bank's mission.
    Paragraphs 1272.3(a)(4) and (5)--regarding the Bank's capacity to 
manage new risks and its assessment of the risks, respectively--have 
been combined into proposed Sec.  1272.3(a)(4). FHFA believes that the 
proposed language captures the fundamental concepts in the current 
regulation's requirements while streamlining the rule text and reducing 
the Banks' overall compliance burden.
    With respect to the anticipated dollar volume of an activity, the 
proposed rule clarifies that a Bank is to estimate the volume over the 
activity's initial three years of operation. This is intended to narrow 
the scope of the current regulation, which requires an estimate of the 
dollar volume of the activity over the long- and short-term, and 
clarifies that the estimate is to be based on anticipated production 
once the activity begins, especially in cases where the Bank may not 
immediately implement the new activity.
    Finally, FHFA proposes eliminating Sec.  1272.3(b), which addresses 
the submission requirements for NBAs relating to the acceptance of new 
types of advance collateral, because the acceptance of new types of 
collateral would no longer constitute an NBA, as described in the 
definitions discussion above.
    Agency Review. FHFA proposes revising Sec.  1272.4 through Sec.  
1272.6 to collapse their respective concepts into a more concise, 
narrative format and to establish new timelines for agency review of 
NBA notices. Proposed Sec.  1272.4 establishes FHFA's review process 
for NBA notices. Under the current regulation, a Bank may commence an 
NBA 60 days after FHFA's receipt of the associated notice unless FHFA 
disapproves the activity, instructs the Bank not to commence the 
activity pending further consideration by the agency, declares its 
intent to examine the Bank, or requests additional information. See 
Sec.  1272.5(a)(1)-(4). In the Request Letter, the Banks expressed 
concern that the existing regulation allows FHFA to easily extend its 
review of NBA notices by either requesting additional information or by 
instructing the Banks not to commence a new activity shortly after 
receipt of the notice. See Sec.  1272.4(a). The proposed rule would 
address the concerns by providing for the automatic approval of NBA 
notices if FHFA fails to act by certain deadlines, as described below. 
The proposed rule would establish two time periods for FHFA review: A 
30 business-day period, generally intended for activities already 
approved for other Banks, and an 80 business-day period, generally 
intended for activities of first impression or that otherwise require 
significant agency examination. Under both proposed timelines, subject 
to certain extensions and caveats, the Bank would be able to commence 
the new activity at the end of each time period if FHFA failed to 
approve, deny, or respond to the Bank regarding the activity.
    Proposed Sec.  1272.4(a) sets an initial 30 business-day period for 
FHFA to

[[Page 57503]]

approve or deny an activity, or inform the Bank that the request raises 
legal, policy, or supervisory issues that require further evaluation. 
Requests raising new legal or policy issues or which pose significant 
safety and soundness issues would generally be processed under the 80 
business-day timeline in proposed Sec.  1272.4(b). If FHFA fails to 
take one of those three actions by the end of 30 business days from the 
NBA Notice Date, the proposed rule provides that the notice would be 
deemed to have been approved and the Bank could commence the activity 
for which the notice was submitted. If FHFA notifies the Bank that the 
activity requires further evaluation, then the proposed rule provides 
that FHFA must approve or deny the notice no later than 80 business 
days from the NBA Notice Date. If FHFA fails to approve or deny the 
notice by that date, then it would be deemed to be approved, and the 
Bank could commence the activity. For all submissions, FHFA intends to 
approve or deny the notice prior to the applicable deadline, and 
expects that it will act on many notices substantially before the 
deadline. FHFA believes that these time periods will afford it 
sufficient time to review, consider, and fully evaluate the merits of 
both routine and novel submissions. The proposed rule includes one 
exception to the automatic approval provisions, which pertains to NBA 
submissions that raise significant policy issues that the Director 
determines require additional time. Proposed Sec.  1272.4(d) provides 
that the Director may extend the 80 business-day period by an 
additional 60 business days to facilitate such review. In such cases, 
FHFA will inform the Bank of the extension before the end of the 80 
business-day period and the Bank may not commence the proposed activity 
until FHFA has affirmatively approved the notice. This proposed 
exception to the automatic approval provisions is intended to preserve 
the Director's oversight authority on notices deemed by the Director to 
be of sufficient consequence to merit an extended review period and 
also to prevent automatic approval of such notices during periods of 
transition between FHFA Directors or if the Director is otherwise 
unable to attend to the matter.
    Proposed Sec.  1272.4(c) states that for purposes of calculating 
the number of days that make up the applicable review period, no days 
would be counted between the day FHFA communicates a request for 
additional information and the day the Bank responds to all questions 
asked. One purpose of the automatic approval provisions is to provide 
some certainty as to the date by which FHFA should act on a notice. In 
order for FHFA to act, however, it must have a complete notice, 
including responses to its requests for additional information. Because 
FHFA may be unable to continue processing a notice while it is awaiting 
receipt of additional information from a Bank, those days are not 
included within the applicable time periods. If a Bank's submitted 
notice is clear and thorough, FHFA expects that there will be less need 
to request additional information.
    FHFA proposes adding new Sec.  1272.4(e), which would establish an 
explicit standard under which the agency will make determinations with 
respect to NBAs. The proposed standard considers whether the activity 
will be conducted in a safe and sound manner and whether the activity 
is consistent with the housing finance and community investment mission 
of the Banks and the cooperative nature of the Bank System. The policy 
considerations underlying this proposed standard stem from FHFA's 
statutory oversight duties and reflect current agency practice. See 12 
U.S.C. 4513(a). The current regulation implies, but does not explicitly 
set forth, a standard for review, and FHFA now proposes a specific 
standard in keeping with its statutory mission and practice. Further, 
FHFA proposes to include in the same section a provision authorizing 
FHFA to impose conditions in connection with the approval of any NBA. 
This provision is similar to the current provision at Sec.  
1272.7(b)(2).
    FHFA proposes establishing a revised protocol for additional 
information requests in proposed Sec.  1272.5. As with the current 
regulation, FHFA reserves the right to request additional information 
regarding a proposed NBA. However, FHFA proposes adding several 
conditions to such requests. Specifically, after FHFA makes an initial 
request for additional information, any subsequent requests for 
additional information must be limited to information that is necessary 
to fully respond to the initial request, i.e., for cases in which a 
Bank's response was not fully responsive or otherwise requires 
clarification, or because the Bank's response raises new legal or 
policy issues not evident based on the notice or the Bank's previous 
response. FHFA intends for these proposed conditions to facilitate the 
review process by limiting the scope and circumstances in which FHFA 
can make subsequent requests for additional information and to incent 
the Banks to provide clear and thorough submissions and responses to 
information requests. These limitations notwithstanding, the proposed 
rule also authorizes the Director to request any additional information 
regarding any NBA for which the Director has extended the review 
period. Ultimately, the Director is responsible for supervising the 
Banks and otherwise ensuring that they act in a safe and sound manner, 
and this provision of the proposed rule is intended to allow the 
Director to have whatever information the Director deems necessary to 
carry out those responsibilities when reviewing an NBA notice. See 12 
U.S.C. 4513(a)(2)(B). FHFA specifically requests public comments on 
whether these proposed conditions on requests for additional 
information appropriately balance FHFA's regulatory duties with the 
Banks' compliance burden.
    Proposed Sec.  1272.6 reorganizes and combines Sec. Sec.  1272.7(a) 
and 1272.7(b)(2)(v) into one paragraph, reserving FHFA's right to 
examine the Banks with respect to their implementation of an NBA.
    Delegation of Authority. Proposed Sec.  1272.7 includes a 
delegation of authority to the Deputy Director for Federal Home Loan 
Bank Regulation (Deputy Director) to approve NBA submissions, but 
further provides that the Director reserves the right to modify, 
rescind, or supersede any such approvals granted under this delegation 
of authority. The provision is modeled on a similar delegation of 
authority in 12 CFR 1211.3, which authorizes the Deputy Director to 
grant ``approvals'' in accordance with the procedures regulations of 
that part. Although the term ``approval,'' as defined in Sec.  1211.1, 
arguably is broad enough to encompass NBA notices, when FHFA first 
included that delegation in the procedures regulations it explained in 
the Supplementary Information to the proposed rule that the provisions 
pertaining to ``approvals'' did not apply to NBA notices. See 79 FR 
15257, 15258 (March 19, 2014) (because NBA notices ``are subject to the 
procedural requirements of part 1272 . . . approvals for an NBA would 
not be subject to'' the ``approvals'' provisions of Sec.  1211.3). FHFA 
anticipates that most NBA notices will be approved by the Deputy 
Director pursuant to the proposed delegation of authority and that 
notices raising novel legal or policy questions will be referred to the 
Director for decision.

V. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. 3501 et seq.) requires that 
regulations involving the collection of

[[Page 57504]]

information receive clearance from the Office of Management and Budget 
(OMB). This rule contains no such collection of information requiring 
OMB approval under the Paperwork Reduction Act. Consequently, no 
information has been submitted to OMB for review.

VI. Regulatory Flexibility Act

    The proposed rule applies only to the Banks, which do not come 
within the meaning of small entities as defined in the Regulatory 
Flexibility Act (RFA). See 5 U.S.C. 601(6). Therefore, in accordance 
with section 605(b) of the RFA, FHFA certifies that this proposed rule, 
if adopted as a final rule, is not likely to have a significant 
economic impact on a substantial number of small entities.

List of Subjects in 12 CFR Part 1272

    Federal home loan banks, Reporting and recordkeeping requirements.

Authority and Issuance

    Accordingly, for reasons stated in the SUPPLEMENTARY INFORMATION 
and under the authority of 12 U.S.C. 1431(a), 1432(a), 4511(b), 4513, 
4526(a), FHFA proposes to amend subchapter D of chapter XII of title 12 
of the Code of Federal Regulations as follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

Subchapter D--Federal Home Loan Banks

0
1. Revise part 1272 to read as follows:

PART 1272--NEW BUSINESS ACTIVITIES

Sec.
1272.1 Definitions.
1272.2 Limitation on Bank authority to undertake new business 
activities.
1272.3 New business activity notice requirement.
1272.4 Review process.
1272.5 Additional information.
1272.6 Examinations.
1272.7 Approval of notices.

    Authority: 12 U.S.C. 1431(a), 1432(a), 4511(b), 4513, 4526(a).


Sec.  1272.1  Definitions.

    As used in this part:
    Business Day means any calendar day other than a Saturday, Sunday, 
or legal public holiday listed in 5 U.S.C. 6103.
    NBA Notice Date means the date on which FHFA receives a new 
business activity notice.
    New business activity (NBA) means any business activity undertaken, 
transacted, conducted, or engaged in by a Bank that entails material 
risks not previously managed by the Bank. A Bank's acceptance of a new 
type of advance collateral does not constitute a new business activity.


Sec.  1272.2  Limitation on Bank authority to undertake new business 
activities.

    No Bank shall undertake any NBA except in accordance with the 
procedures set forth in this part.


Sec.  1272.3  New business activity notice requirement.

    Prior to undertaking an NBA, a Bank shall submit a written notice 
of the proposed NBA that provides a thorough, meaningful, complete, and 
specific description of the activity such that FHFA will be able to 
make an informed decision regarding the proposed activity. At a 
minimum, the notice should include the following information:
    (a) A written opinion of counsel identifying the specific 
statutory, regulatory, or other legal authorities under which the NBA 
is authorized and, for submissions raising legal questions of first 
impression, a reasoned analysis explaining how the cited authorities 
can be construed to authorize the new activity;
    (b) A full description of the proposed activity, including, when 
applicable, infographics and definitions of key terms. In addition, the 
Bank shall indicate whether the proposed activity represents a 
modification to a previously approved activity in which the Bank is 
engaged or is an activity that FHFA has approved for any other Banks;
    (c) A discussion of why the Bank proposes to engage in the new 
activity and how the activity supports the housing finance and 
community investment mission of the Bank;
    (d) A discussion of the risks presented by the new activity and how 
the Bank will manage these risks; and
    (e) A good faith estimate of the anticipated dollar volume of the 
activity, and the income and expenses associated with implementing and 
operating the new activity, over the initial three years of operation.


Sec.  1272.4  Review process.

    (a) Within 30 business days of the NBA Notice Date, FHFA will take 
one of the following actions:
    (1) Approve the proposed NBA;
    (2) Deny the proposed activity; or
    (3) Inform the Bank that the activity raises policy, legal, or 
supervisory issues that require further evaluation. If FHFA fails to 
take any of those actions by the 30th business day following the NBA 
Notice Date, the NBA notice shall be deemed to have been approved and 
the Bank may commence the activity for which the notice was submitted.
    (b) In the case of any notice that FHFA has determined requires 
further evaluation, FHFA will approve or deny the notice by no later 
than the 80th business day following the NBA Notice Date. If FHFA fails 
to approve or deny a NBA notice by that date, and the Director has not 
extended the review period, the NBA notice shall be deemed to have been 
approved and the Bank may commence the activity for which the notice 
was submitted.
    (c) For purposes of calculating the review period, no days will be 
counted between the date that FHFA has requested additional information 
from the Bank pursuant to Sec.  1272.5 and the date that the Bank 
responds to all questions communicated.
    (d) Notwithstanding anything contained in this part, the Director 
may extend the 80 business day review period by an additional 60 
business days if the Director determines that additional time is 
required to consider the notice. In such a case, FHFA will inform the 
Bank of any such extension before the 80th business day following the 
NBA Notice Date, and the Bank may not commence the NBA until FHFA has 
affirmatively approved the notice.
    (e) In considering any NBA notice, FHFA will assess whether the 
proposed activity will be conducted in a safe and sound manner and is 
consistent with the housing finance and community investment mission of 
the Banks and the cooperative nature of the Bank System. FHFA may deny 
a NBA notice or may approve the notice, which approval may be made 
subject to the Bank's compliance with any conditions that FHFA 
determines are appropriate to ensure that the Bank conducts the new 
activity in a safe and sound manner and in compliance with applicable 
laws or regulations and the Bank's mission.


Sec.  1272.5  Additional information.

    FHFA may request additional information from a Bank necessary to 
issue a determination regarding an NBA. After an initial request for 
information, FHFA may make subsequent requests for information only to 
the extent that the information provided by the Bank does not fully 
respond to a previous request, the subsequent request seeks information 
needed to clarify the Bank's previous response, or the information 
provided by the Bank raises new legal, policy, or supervisory issues 
not evident based on the Bank's NBA notice or responses to previous 
requests for information. Nothing contained in this paragraph shall 
limit the Director's authority to request additional information from a 
Bank regarding an

[[Page 57505]]

NBA for which the Director has extended the review period.


Sec.  1272.6  Examinations.

    Nothing in this part shall limit in any manner the right of FHFA to 
conduct any examination of any Bank relating to its implementation of 
an NBA, including pre- or post-implementation safety and soundness 
examinations, or review of contracts or other agreements between the 
Bank and any other party.


Sec.  1272.7  Approval of notices.

    The Deputy Director for Federal Home Loan Bank Regulation may 
approve requests from a Bank seeking approval of any NBA notice 
submitted in accordance with this part. The Director reserves the right 
to modify, rescind, or supersede any such approval granted by the 
Deputy Director, with such action being effective only on a prospective 
basis.

    Dated: August 16, 2016.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2016-19858 Filed 8-22-16; 8:45 am]
 BILLING CODE 8070-01-P
57500 Federal Register / Vol. 81, No. 163 / Tuesday, August 23, 2016 / Proposed Rules

• Agency Web site: www.fhfa.gov/ make an appointment to inspect regulations.8 Aside from that re-
open-for-comment-or-input. comments please call the Office of designation, the NBA regulation has
• Federal eRulemaking Portal: http:// General Counsel at (202) 649–3804. remained unchanged since 2000.
www.regulations.gov. Follow the In April 2013, FHFA published a
II. Background
instructions for submitting comments. If
FHFA is an independent agency of the Notice of Regulatory Review (Review
you submit your comments to the
federal government established to Notice) pursuant to its regulatory review
Federal eRulemaking Portal, please also
regulate and oversee the Federal plan published in 2012.9 The Review
send it by email to FHFA at
RegComments@FHFA.gov to ensure National Mortgage Association, the Notice requested the public’s comment
timely receipt by the agency. Please Federal Home Loan Mortgage on FHFA’s existing regulations for
include ‘‘RIN 2590–AA84’’ in the Corporation (together, the Enterprises), purposes of improving their
subject line of the message. the Banks (collectively with the effectiveness and reducing their
• Hand Delivery/Courier: The hand Enterprises, the regulated entities), and burden.10 In response to the Review
delivery address is: Alfred M. Pollard, the Bank System’s Office of Finance.1 Notice, FHFA received a letter co-signed
General Counsel, Attention: Comments/ FHFA is the primary federal financial by all of the Banks (Request Letter) with
RIN 2590–AA84, Federal Housing regulator of each regulated entity. comments on certain regulations,
Finance Agency, Constitution Center, FHFA’s regulatory mission is to ensure, including part 1272.11 The Request
(OGC) Eighth Floor, 400 Seventh Street among other things, that each of the Letter’s comments on part 1272 focused
SW., Washington, DC 20219. The regulated entities ‘‘operates in a safe and on two issues: (1) The scope of the NBA
package should be delivered to the sound manner’’ and that its ‘‘operations rule; and (2) The length of time afforded
Seventh Street entrance Guard Desk, and activities . . . foster liquid, to FHFA under the rule to respond to an
First Floor, on business days between 9 efficient, competitive and resilient
NBA notice.
a.m. and 5 p.m. national housing finance markets.’’ 2
The eleven Banks are organized under Specifically, the Request Letter
• U.S. Mail, United Parcel Service,
the Federal Home Loan Bank Act (Bank expressed concern that the broad scope
Federal Express, or Other Mail Service:
Act) as cooperatives,3 meaning that only of the rule requires the Banks to expend
The mailing address for comments is:
Alfred M. Pollard, General Counsel, members may purchase the capital stock significant time and effort to determine
Attention: Comments/RIN 2590–AA84, of a Bank, and only members or certain whether a proposed activity is subject to
Federal Housing Finance Agency, eligible housing associates (such as state the rule’s purview. Further, the Banks
Constitution Center, (OGC) Eighth Floor, housing finance agencies) may obtain expressed concern that the rule requires
400 Seventh Street SW., Washington, access to secured loans, known as them to analyze the risks associated
DC 20219. advances, or other products provided by with a contemplated NBA to their
a Bank.4 Each Bank is managed by its member institutions, as well to the
FOR FURTHER INFORMATION CONTACT: Lara
own board of directors and serves the Banks themselves. The Banks noted
Worley, Principal Financial Analyst, public interest by enhancing the
Lara.Worley@FHFA.gov, 202–649–3324, that, if applied literally, that provision
availability of residential mortgage and requires them to:
Division of Federal Home Loan Bank community lending credit through its
Regulation; or Winston Sale, Assistant member institutions.5 evaluate whether risks from certain business
General Counsel, Winston.Sale@ In 2000, the Federal Housing Finance activities are regularly managed by hundreds
FHFA.gov, 202–649–3081 (these are not Board (Finance Board), a predecessor to of member banks, credit unions and
toll-free numbers), Office of General FHFA, adopted a rule (Modernization insurance companies of widely different
Counsel (OGC), Federal Housing Rule) implementing certain statutory sizes and locations, which have many
Finance Agency, Constitution Center, amendments made by the Federal Home different business and operational models
400 Seventh Street SW., Washington, Loan Bank System Modernization Act of and strategies.12
DC 20219. The telephone number for 1999.6 Because the statutory
the Telecommunications Device for the The Request Letter also noted that ‘‘the
amendments had expanded the types of
Hearing Impaired is 800–877–8339. addition of a materiality concept would
collateral that the Banks may accept, the
SUPPLEMENTARY INFORMATION:
greatly enhance the FHLBanks’ ability to
Finance Board established a prior
assess the regulations’ applicability.’’
I. Comments review process through which the
Finance Board could assess the risks to With respect to the time frame for
FHFA invites comment on all aspects the Banks of accepting the new types of FHFA’s response to NBA notices, the
of the proposed rulemaking, which collateral. That process was codified in Banks expressed concern that the
FHFA is publishing with a 60-day the NBA regulation at 12 CFR part 980, current regulation allows the review
comment period. After considering the which also required the Banks to obtain period to be extended indefinitely and
comments, FHFA will develop a final Finance Board approval prior to that FHFA should revise the regulation
regulation. undertaking any other NBAs that to require more prompt decisions on
Copies of all comments received will presented risks the Banks had not NBA submissions. FHFA is now
be posted without change on the FHFA previously managed.7 In 2010, FHFA re- proposing to amend part 1272 to
Web site at http://www.fhfa.gov, and designated part 980 as part 1272 of its address the Banks’ concerns.
will include any personal information
you provide, such as your name,
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1 12 U.S.C. 4511. 8 See 75 FR 76622 (Dec. 9, 2010).
address, email address, and telephone 2 12 U.S.C. 4513(a)(1)(B). 9 See 78 FR 23507 (April 19, 2013). See also
number. Copies of the comments also 3 See 12 U.S.C. 1423 and 1432(a). Regulatory Review Plan, 77 FR 10351 (Feb. 22,
will be available for public inspection 4 See 12 U.S.C. 1426(a)(4), 1430(a), and 1430b. 2012).
5 See 12 U.S.C. 1427. 10 78 FR 23508 (April 19, 2013).
and copying on government-business
6 See 65 FR 44414 (July 18, 2000). The Federal 11 The Request Letter is available on FHFA’s Web
days between the hours of 10 a.m. and
Home Loan Bank System Modernization Act of site, at the following link: https://www.fhfa.gov//
3 p.m. at the Federal Housing Finance 1999 is Title VI of the Gramm-Leach-Bliley Act, SupervisionRegulation/Rules/Pages/Comment-
Agency, Constitution Center, 400 7th Pub. L. 106–102, 113 Stat. 1338 (Nov. 12, 1999). Detail.aspx?CommentId=4012.
Street SW., Washington, DC 20219. To 7 See 65 FR 44420 (July 18, 2000). 12 Id at 2–3.

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Federal Register / Vol. 81, No. 163 / Tuesday, August 23, 2016 / Proposed Rules 57503

approve or deny an activity, or inform automatic approval provisions is to and responses to information requests.
the Bank that the request raises legal, provide some certainty as to the date by These limitations notwithstanding, the
policy, or supervisory issues that which FHFA should act on a notice. In proposed rule also authorizes the
require further evaluation. Requests order for FHFA to act, however, it must Director to request any additional
raising new legal or policy issues or have a complete notice, including information regarding any NBA for
which pose significant safety and responses to its requests for additional which the Director has extended the
soundness issues would generally be information. Because FHFA may be review period. Ultimately, the Director
processed under the 80 business-day unable to continue processing a notice is responsible for supervising the Banks
timeline in proposed § 1272.4(b). If while it is awaiting receipt of additional and otherwise ensuring that they act in
FHFA fails to take one of those three information from a Bank, those days are a safe and sound manner, and this
actions by the end of 30 business days not included within the applicable time provision of the proposed rule is
from the NBA Notice Date, the proposed periods. If a Bank’s submitted notice is intended to allow the Director to have
rule provides that the notice would be clear and thorough, FHFA expects that whatever information the Director
deemed to have been approved and the there will be less need to request deems necessary to carry out those
Bank could commence the activity for additional information. responsibilities when reviewing an NBA
which the notice was submitted. If FHFA proposes adding new notice. See 12 U.S.C. 4513(a)(2)(B).
FHFA notifies the Bank that the activity § 1272.4(e), which would establish an FHFA specifically requests public
requires further evaluation, then the explicit standard under which the comments on whether these proposed
proposed rule provides that FHFA must agency will make determinations with conditions on requests for additional
approve or deny the notice no later than respect to NBAs. The proposed standard information appropriately balance
80 business days from the NBA Notice considers whether the activity will be FHFA’s regulatory duties with the
Date. If FHFA fails to approve or deny conducted in a safe and sound manner Banks’ compliance burden.
the notice by that date, then it would be and whether the activity is consistent Proposed § 1272.6 reorganizes and
deemed to be approved, and the Bank with the housing finance and combines §§ 1272.7(a) and
could commence the activity. For all community investment mission of the 1272.7(b)(2)(v) into one paragraph,
submissions, FHFA intends to approve Banks and the cooperative nature of the reserving FHFA’s right to examine the
or deny the notice prior to the Bank System. The policy considerations Banks with respect to their
applicable deadline, and expects that it underlying this proposed standard stem implementation of an NBA.
will act on many notices substantially from FHFA’s statutory oversight duties Delegation of Authority. Proposed
before the deadline. FHFA believes that and reflect current agency practice. See § 1272.7 includes a delegation of
these time periods will afford it 12 U.S.C. 4513(a). The current authority to the Deputy Director for
regulation implies, but does not Federal Home Loan Bank Regulation
sufficient time to review, consider, and
explicitly set forth, a standard for (Deputy Director) to approve NBA
fully evaluate the merits of both routine
review, and FHFA now proposes a submissions, but further provides that
and novel submissions. The proposed
specific standard in keeping with its the Director reserves the right to modify,
rule includes one exception to the
statutory mission and practice. Further, rescind, or supersede any such
automatic approval provisions, which
FHFA proposes to include in the same approvals granted under this delegation
pertains to NBA submissions that raise
section a provision authorizing FHFA to of authority. The provision is modeled
significant policy issues that the
impose conditions in connection with on a similar delegation of authority in
Director determines require additional
the approval of any NBA. This provision 12 CFR 1211.3, which authorizes the
time. Proposed § 1272.4(d) provides that
is similar to the current provision at Deputy Director to grant ‘‘approvals’’ in
the Director may extend the 80 accordance with the procedures
§ 1272.7(b)(2).
business-day period by an additional 60 FHFA proposes establishing a revised regulations of that part. Although the
business days to facilitate such review. protocol for additional information term ‘‘approval,’’ as defined in § 1211.1,
In such cases, FHFA will inform the requests in proposed § 1272.5. As with arguably is broad enough to encompass
Bank of the extension before the end of the current regulation, FHFA reserves NBA notices, when FHFA first included
the 80 business-day period and the Bank the right to request additional that delegation in the procedures
may not commence the proposed information regarding a proposed NBA. regulations it explained in the
activity until FHFA has affirmatively However, FHFA proposes adding Supplementary Information to the
approved the notice. This proposed several conditions to such requests. proposed rule that the provisions
exception to the automatic approval Specifically, after FHFA makes an pertaining to ‘‘approvals’’ did not apply
provisions is intended to preserve the initial request for additional to NBA notices. See 79 FR 15257, 15258
Director’s oversight authority on notices information, any subsequent requests (March 19, 2014) (because NBA notices
deemed by the Director to be of for additional information must be ‘‘are subject to the procedural
sufficient consequence to merit an limited to information that is necessary requirements of part 1272 . . .
extended review period and also to to fully respond to the initial request, approvals for an NBA would not be
prevent automatic approval of such i.e., for cases in which a Bank’s response subject to’’ the ‘‘approvals’’ provisions
notices during periods of transition was not fully responsive or otherwise of § 1211.3). FHFA anticipates that most
between FHFA Directors or if the requires clarification, or because the NBA notices will be approved by the
Director is otherwise unable to attend to Bank’s response raises new legal or Deputy Director pursuant to the
the matter. policy issues not evident based on the proposed delegation of authority and
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Proposed § 1272.4(c) states that for notice or the Bank’s previous response. that notices raising novel legal or policy
purposes of calculating the number of FHFA intends for these proposed questions will be referred to the Director
days that make up the applicable review conditions to facilitate the review for decision.
period, no days would be counted process by limiting the scope and
between the day FHFA communicates a circumstances in which FHFA can make V. Paperwork Reduction Act
request for additional information and subsequent requests for additional The Paperwork Reduction Act (44
the day the Bank responds to all information and to incent the Banks to U.S.C. 3501 et seq.) requires that
questions asked. One purpose of the provide clear and thorough submissions regulations involving the collection of

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Federal Register / Vol. 81, No. 163 / Tuesday, August 23, 2016 / Proposed Rules 57505

NBA for which the Director has period does not align with the time are greater than the time limits for
extended the review period. constraints of Mexico’s IMMEX License Exception Temporary Imports,
program, which allows imports of items Exports, Reexports, and Transfers (in-
§ 1272.6 Examinations. for manufacturing operations on a time country) (TMP) allowed under
Nothing in this part shall limit in any limit that may exceed 18 months. This § 740.9(a)(14) of the EAR. With few
manner the right of FHFA to conduct rule proposes to amend TMP to exceptions, items exported under TMP,
any examination of any Bank relating to complement the timeline of the IMMEX if not consumed or destroyed during the
its implementation of an NBA, program. Under this proposed authorized use abroad, must be returned
including pre- or post-implementation amendment, items temporarily exported to the United States one year after the
safety and soundness examinations, or or reexported under license exception date of export. The discrepancy between
review of contracts or other agreements TMP and imported under the provisions the time periods of IMMEX and TMP
between the Bank and any other party. of the IMMEX program would be reduces the efficacy of both policies,
authorized to remain in Mexico for up thereby hindering the shipment of items
§ 1272.7 Approval of notices.
to four years from the date of export or subject to the EAR to and from Mexico.
The Deputy Director for Federal Home U.S. companies that produce items
reexport.
Loan Bank Regulation may approve subject to the EAR and ship those items
DATES: Comments must be received by
requests from a Bank seeking approval to Mexico under IMMEX have notified
of any NBA notice submitted in October 24, 2016.
the Bureau of Industry and Security of
accordance with this part. The Director ADDRESSES: You may submit comments
this discrepancy and have requested
reserves the right to modify, rescind, or by any of the following methods:
that BIS amend the EAR to increase
supersede any such approval granted by • Federal eRulemaking Portal: http://
compatibility with IMMEX. Considering
the Deputy Director, with such action www.regulations.gov. The identification
the strength of Mexico’s export control
being effective only on a prospective number for this rulemaking is BIS–
regimen, as exemplified by its accession
basis. 2016–0023.
as a member to the Wassenaar
• By email directly to
Dated: August 16, 2016. Arrangement, the Australia Group, and
publiccomments@bis.doc.gov. Include
Melvin L. Watt, the Nuclear Suppliers Group, BIS
RIN 0694–AG97 in the subject line.
Director, Federal Housing Finance Agency. • By mail or delivery to Regulatory proposes to amend § 740.9(a) to account
Policy Division, Bureau of Industry and for IMMEX’s time limit. For the purpose
[FR Doc. 2016–19858 Filed 8–22–16; 8:45 am]
of simplicity, BIS does not propose to
BILLING CODE 8070–01–P Security, U.S. Department of Commerce,
match the various time periods
Room 2099B, 14th Street and
instituted by IMMEX. Instead, this rule
Pennsylvania Avenue NW., Washington,
proposes to revise § 740.9(a)(8) to allow
DEPARTMENT OF COMMERCE DC 20230. Refer to RIN 0694–AG97.
temporary exports and reexports to
FOR FURTHER INFORMATION CONTACT: remain in Mexico for up to four years,
Bureau of Industry and Security Regulatory Policy Division, Office of which accommodates the maximum
Exporter Services, Bureau of Industry available time that temporarily imported
15 CFR Part 740 and Security, by telephone (202) 482– items may remain in Mexico under
[160519443–6443–01] 2440 or email: RPD2@bis.doc.gov. IMMEX and is in parallel with the
SUPPLEMENTARY INFORMATION: validity period of BIS’s licenses.
RIN 0694–AG97
Overview Additionally, this rule proposes to
Temporary Exports to Mexico Under revise introductory paragraph
Mexico’s Decree for the Promotion of § 740.9(a)(14) to include a reference to
License Exception TMP
Manufacturing, Maquiladora and Export § 740.9(a)(8) as an exception to the one-
AGENCY: Bureau of Industry and Services, known as IMMEX, is a year time limit of TMP.
Security, Commerce. platform used by U.S. and foreign
ACTION: Proposed rule. manufacturers to lower production costs Export Administration Act
by temporarily importing production Since August 21, 2001, the Export
SUMMARY: This proposed rule would materials into Mexico. Created in 2006, Administration Act of 1979, as
align the time limit of License Exception IMMEX is the product of the merger of amended, has been in lapse. However,
Temporary Imports, Exports, Reexports, two previous Mexican economic the President, through Executive Order
and Transfers (in-country) (TMP), which policies: The Maquiladora program, 13222 of August 17, 2001, 3 CFR, 2001
authorizes, among other things, certain which was designed to attract foreign Comp., p. 783 (2002), as amended by
temporary exports to Mexico, with the investment by exempting temporary Executive Order 13637 of March 8,
time limit of Mexico’s Decree for the imports from taxes, and the Temporary 2013, 78 FR 16129 (March 13, 2013),
Promotion of Manufacturing, Import Program to Promote Exports and as extended by the Notice of August
Maquiladora and Export Services (PITEX), which incentivized Mexican 7, 2015, 80 FR 48233 (August 11, 2015)
(IMMEX) program. Currently, TMP companies to grow and compete in has continued the EAR in effect under
allows for the temporary export and foreign markets by providing temporary the International Emergency Economic
reexport of various items subject to the import benefits. Under IMMEX, Powers Act (50 U.S.C. 1701 et seq.). BIS
Export Administration Regulations companies located in Mexico are not continues to carry out the provisions of
(EAR), as long as the items are returned subject to quotas and do not have to pay the Export Administration Act, as
srobinson on DSK5SPTVN1PROD with PROPOSALS

no later than one year after export, taxes on items temporarily imported appropriate and to the extent permitted
reexport, or transfer if not consumed or and manufactured, transformed, or by law, pursuant to Executive Order
destroyed during the period of repaired before reexport. 13222 as amended by Executive Order
authorized use. Other than a four-year Under IMMEX, the length of time that 13637.
period for certain personal protective imports may remain in Mexico is
equipment, the one-year limit extends to commodity dependent, with some items Rulemaking Requirements
all items shipped under license allowed to remain in-country for 18 1. Executive Orders 13563 and 12866
exception TMP. However, the one-year months or more. These time allotments direct agencies to assess all costs and

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Document Created: 2018-02-09 11:40:36
Document Modified: 2018-02-09 11:40:36
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Notice of proposed rulemaking; request for comment.
Dates		FHFA must receive written comments on or before October 24, 2016.
Contact		Lara Worley, Principal Financial Analyst, [email protected], 202-649-3324, Division of Federal Home Loan Bank Regulation; or Winston Sale, Assistant General Counsel, [email protected], 202-649-3081 (these are not toll-free numbers), Office of General Counsel (OGC), Federal Housing Finance Agency, Constitution Center, 400 Seventh Street SW., Washington, DC 20219. The telephone number for the Telecommunications Device for the Hearing Impaired is 800-877-8339.
FR Citation		81 FR 57499
RIN Number		2590-AA84
CFR Associated		Federal Home Loan Banks and Reporting and Recordkeeping Requirements