83 FR 13880 - Annual Stress Test-Applicability Transition for Covered Banks With $50 Billion or More in Assets; Technical and Conforming Changes

FEDERAL DEPOSIT INSURANCE CORPORATION

Federal Register Volume 83, Issue 63 (April 2, 2018)

The Federal Deposit Insurance Corporation (FDIC) proposes to make several revisions to its stress testing regulation. Consistent with changes already made by the Board of Governors of the Federal Reserve System (Board) and the Office of the Comptroller of the Currency (OCC) to their respective stress testing regulations, the proposed rule would change the transition process for covered banks that become over $50 billion covered banks. Under the proposed rule, a covered bank that becomes an over $50 billion covered bank on or before September 30 would become subject to the requirements applicable to an over $50 billion covered bank beginning on January 1 of the second calendar year after the covered bank becomes an over $50 billion covered bank. A covered bank that becomes an over $50 billion covered bank after September 30 would become subject to the requirements applicable to an over $50 billion covered bank beginning on January 1 of the third calendar year after the covered bank becomes an over $50 billion covered bank. The proposed rule would also change the range of possible ``as-of'' dates used in the trading and counterparty position data stress testing component. Lastly, the proposed rule would make certain technical changes to clarify the requirements of the FDIC's stress testing regulation, and to eliminate obsolete provisions.

[Federal Register Volume 83, Number 63 (Monday, April 2, 2018)]
[Proposed Rules]
[Pages 13880-13883]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-06162]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 83, No. 63 / Monday, April 2, 2018 / Proposed 
Rules

[[Page 13880]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 325

RIN 3064-AE73


Annual Stress Test--Applicability Transition for Covered Banks 
With $50 Billion or More in Assets; Technical and Conforming Changes

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Proposed rule.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) proposes to 
make several revisions to its stress testing regulation. Consistent 
with changes already made by the Board of Governors of the Federal 
Reserve System (Board) and the Office of the Comptroller of the 
Currency (OCC) to their respective stress testing regulations, the 
proposed rule would change the transition process for covered banks 
that become over $50 billion covered banks. Under the proposed rule, a 
covered bank that becomes an over $50 billion covered bank on or before 
September 30 would become subject to the requirements applicable to an 
over $50 billion covered bank beginning on January 1 of the second 
calendar year after the covered bank becomes an over $50 billion 
covered bank. A covered bank that becomes an over $50 billion covered 
bank after September 30 would become subject to the requirements 
applicable to an over $50 billion covered bank beginning on January 1 
of the third calendar year after the covered bank becomes an over $50 
billion covered bank. The proposed rule would also change the range of 
possible ``as-of'' dates used in the trading and counterparty position 
data stress testing component. Lastly, the proposed rule would make 
certain technical changes to clarify the requirements of the FDIC's 
stress testing regulation, and to eliminate obsolete provisions.

DATES: Comments must be received on or before June 1, 2018.

ADDRESSES: Interested parties are encouraged to submit written 
comments. Commenters are encouraged to use the title ``Annual Stress 
Test-- Applicability Transition for Covered Banks with $50 Billion or 
More in Assets; Technical and Conforming Changes'' to facilitate the 
organization and distribution of comments among the Agencies. You may 
submit comments, identified by RIN number, by any of the following 
methods:
     Agency website: https://www.fdic.gov/regulations/laws/publiccomments/. Follow instructions for submitting comments on the 
Agency website.
     Email: [email protected]. Include the RIN number 3064-AE73 
on the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, 
Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7:00 a.m. and 5:00 p.m.
     Public Inspection: All comments received must include the 
agency name and RIN 3064-AE73 for this rulemaking. All comments 
received will be posted without change to https://www.fdic.gov/regulations/laws/publiccomments/, including any personal information 
provided. Paper copies of public comments may be ordered from the FDIC 
Public Information Center, 3501 North Fairfax Drive, Room E-I002, 
Arlington, VA 22226 by telephone at 1 (877) 275-3342 or 1 (703) 562-
2200.

FOR FURTHER INFORMATION CONTACT: Ryan Sheller, Section Chief, (202) 
412-4861, Large Bank Supervision, Division of Risk Management 
Supervision; Annmarie Boyd, Counsel, (202) 898-3714, or Benjamin Klein, 
Counsel, (202) 898-7027, Legal Division, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC, 20429.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 165(i) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act \1\ (``Dodd-Frank Act'') requires two types of stress 
tests. Section 165(i)(1) requires the Board to conduct annual stress 
tests of holding companies with $50 billion or more in assets 
(``supervisory stress tests''). Section 165(i)(2) requires the federal 
banking agencies to issue regulations requiring financial companies 
with more than $10 billion in assets to conduct annual stress tests 
themselves (``company-run stress tests''). In October 2012, the FDIC, 
Board, and OCC issued final rules implementing the company-run stress 
tests.\2\ Accordingly, the FDIC regulation at 12 CFR part 325, subpart 
C, implements the stress test requirements of section 165(i)(2) of the 
Dodd-Frank Act with respect to covered banks.
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    \1\ 12 U.S.C. 5365(i).
    \2\ 77 FR 62417 (Oct. 15, 2012) (FDIC); 77 FR 62380 (Oct. 12, 
2012 (Board)); 77 FR 61238 (Oct. 9, 2012) (OCC).
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    The Dodd-Frank Act also requires that the FDIC and other federal 
financial regulatory agencies issue consistent and comparable 
regulations to implement the statutory stress testing requirement.\3\ 
In order to fulfill this requirement and minimize regulatory burden, 
the FDIC is proposing certain changes to 12 CFR part 325, subpart C, as 
described below, in order to ensure that its stress testing regulation 
remains consistent and comparable to the regulations enacted by other 
regulatory agencies, including the Board and the OCC.
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    \3\ 12 U.S.C. 5365(i)(2)(C).
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II. Description of the Proposed Rule

A. New Terminology and Applicability Transition for Covered Banks With 
$50 Billion or More in Assets

    Although 12 CFR part 325, subpart C applies to all covered banks 
that exceed $10 billion in average total consolidated assets, the 
regulation differentiates between ``$10 billion to $50 billion covered 
banks'' and ``over $50 billion covered banks.'' The proposed rule would 
change the defined term ``over $50 billion covered bank'' to ``$50 
billion or over covered bank.'' This change would not alter the scope 
of this defined term and would not change the substantive requirements 
of the regulation. The new defined term would be a more precise 
description of the entities included within this category, which 
includes all state nonmember banks and state savings associations 
``with average total consolidated assets . . . that are not less than 
$50 billion.'' \4\ While the proposed rule would change

[[Page 13881]]

the defined term ``over $50 billion covered bank'' to ``$50 billion or 
over covered bank,'' this supplementary information section will 
continue to use the term ``over $50 billion covered bank'' since that 
is the term used in the current regulatory text.
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    \4\ 12 CFR 325.202(d)(2).
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    The proposed rule would also change the transition process for a 
covered bank that becomes an ``over $50 billion covered bank.'' On 
February 3, 2017, the Board published a final rule that provided 
additional time for bank holding companies that cross the $50 billion 
asset threshold to comply with the stress testing requirements 
applicable to bank holding companies of such size.\5\ On February 23, 
2018, the OCC published a final rule making the same change to its 
stress testing regulation.\6\ The proposed rule would make a parallel 
amendment to the FDIC's stress testing regulation.
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    \5\ 82 FR 9308 (Feb. 3, 2017). These expanded transitional 
arrangements are codified in the Board's regulations at 12 CFR 
252.53(b).
    \6\ 83 FR 7951 (Feb. 23, 2018).
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    Under the existing regulation, a $10 billion to $50 billion covered 
bank that migrates to an over $50 billion covered bank becomes subject 
to the requirements applicable to over $50 billion covered banks 
immediately after satisfying the threshold.\7\ Under the proposed rule, 
a state nonmember bank or state savings association that becomes an 
over $50 billion covered bank in the first three quarters of a calendar 
year would not be subject to the stress testing requirements applicable 
to over $50 billion covered banks until the second calendar year after 
it crosses the threshold. A state nonmember bank or state savings 
association that becomes an over $50 billion covered bank in the fourth 
quarter of a calendar year would not be subject to the stress testing 
requirements applicable to over $50 billion covered banks until the 
third year after it crosses the asset threshold. For example, if a 
state nonmember bank or state savings association becomes an over $50 
billion covered bank on September 15, 2018, it would need to comply 
with the requirements applicable to over $50 billion covered banks 
beginning in 2020 and file the FDIC DFAST-14A in April 2020. However, 
if a state nonmember bank or a state savings association becomes an 
over $50 billion covered bank on October 15, 2018, it would be required 
to comply with the stress testing requirements applicable to over $50 
billion covered banks beginning in 2021 and file the FDIC DFAST-14A in 
April 2021. The additional time provided to a state nonmember bank or 
state savings association that becomes an over $50 billion covered bank 
prior to the enactment of the stress testing requirements is unlikely 
to change the potential compliance burden for those institutions.
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    \7\ 12 CFR 325.203(c)(2). A covered bank becomes an over $50 
billion covered bank when its average total consolidated assets, as 
reported on the covered bank's Call Reports, for the four most 
recent consecutive quarters, equals $50 billion or more.
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    The stress testing timeline and transition process for state 
nonmember banks and state savings associations that become $10 to $50 
billion covered banks would remain unchanged.

B. New Range of Possible As-Of Dates for Trading Scenario Component

    Under 12 CFR part 325, subpart C, the FDIC may require a covered 
bank with significant trading activities to include trading and 
counterparty components in its adverse and severely adverse scenarios. 
The trading data to be used in this component is as of a date between 
January 1 and March 1 of a calendar year.\8\ On February 3, 2017 the 
Board published a final rule that extended this range to run from 
October 1 of the calendar year preceding the year of the stress test to 
March 1 of the calendar year of the stress test.\9\ On February 23, 
2018, the OCC published a final rule making the same change to its 
stress testing regulation.\10\ The proposed rule would make the same 
change to the FDIC's stress testing regulation. Extending this range 
would increase the FDIC's flexibility to choose an appropriate as-of 
date. The FDIC continues to coordinate its stress testing program with 
the Board and OCC in order to minimize regulatory burden. Presently, no 
FDIC-supervised institutions are required to comply with this stress 
testing requirement so the proposed rule is unlikely to have an 
immediate effect on FDIC-supervised institutions.
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    \8\ 12 CFR 325.204(c).
    \9\ 82 FR 9308 (Feb 3, 2017).
    \10\ 83 FR 7951 (Feb. 23, 2018).
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C. Removal of Obsolete Transition Language

    In 2014 the FDIC, in coordination with the Board and OCC, shifted 
the dates of the annual stress testing cycle by approximately three 
months, from October 1 to January 1.\11\ The FDIC's stress testing 
regulation continues to include transition language to facilitate this 
prior schedule shift. Because the transition to the new schedule is now 
complete, the proposed rule would remove this obsolete transition 
language.
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    \11\ 79 FR 69365 (Nov. 21, 2014).
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III. Request for Comment

    The FDIC requests comment on all aspects of the proposal.

IV. Regulatory Analysis and Procedure

Paperwork Reduction Act

    Under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3520), the 
FDIC may not conduct or sponsor, and a person is not required to 
respond to, an information collection unless the information collection 
displays a valid Office of Management and Budget (OMB) control number. 
This notice of proposed rulemaking amends 12 CFR part 325, which has an 
approved information collection under the PRA (OMB Control No. 3064-
0189). The FDIC has determined that the proposed rule does not create 
any new or revise any existing collection of information under section 
3504(h) of title 44. Accordingly, no Paperwork Reduction Act submission 
will be made to OMB.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
generally requires an agency, in connection with a proposed rule, to 
prepare and make available for public comment an initial regulatory 
flexibility analysis that describes the impact of a proposed rule on 
small entities.\12\ However, a regulatory flexibility analysis is not 
required if the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The Small Business Administration has defined ``small entities'' to 
include banking organizations with total assets of less than or equal 
to $550 million.\13\ For the reasons described below and pursuant to 
section 605(b) of the RFA, the FDIC certifies that the proposed rule 
would not have a significant economic impact on a substantial number of 
small entities.
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    \12\ 5 U.S.C. 601 et seq.
    \13\ 13 CFR 121.201 (as amended, effective December 2, 2014).
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    The FDIC supervises 3,637 depository institutions,\14\ of which, 
2,924 are defined as small banking entities by the terms of the 
RFA.\15\ As discussed in the SUPPLEMENTARY INFORMATION above, the 
proposed changes will only affect institutions with more than $10 
billion in total assets. Therefore, the rule will not affect any small 
entities. As such, no small state nonmember banks and state

[[Page 13882]]

savings associations would be affected by the proposal.
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    \14\ FDIC-supervised institutions are set forth in 12 U.S.C. 
1813(q)(2).
    \15\ FDIC Call Report, December 31, 2017.
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    The FDIC invites any comments that will further inform the FDIC's 
consideration of RFA.

Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires the Agencies to 
use plain language in all proposed and final rules published after 
January 1, 2000. The Agencies invite comment on how to make this 
proposed rule easier to understand.
    For example:
     Has the FDIC organized the material to suit your needs? If 
not, how could it present the rule more clearly?
     Have we clearly stated the requirements of the rule? If 
not, how could the rule be more clearly stated?
     Does the rule contain technical jargon that is not clear? 
If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes would make the regulation easier to 
understand?
     What else could we do to make the regulation easier to 
understand?

List of Subjects in 12 CFR Part 325

    Administrative practice and procedure, Banks, Banking, Reporting 
and recordkeeping requirements, State savings associations, Stress 
tests.

Authority and Issuance

    For the reasons set forth in the preamble, the FDIC proposes to 
amend 12 CFR part 325 as follows:

PART 325--CAPITAL MAINTENANCE

0
 1. The authority citation for part 325 continues to read as follows:

    Authority:  12 U.S.C. 5365(i)(2); 12 U.S.C. 5412(b)(2)(C); 12 
U.S.C. 1818, 12 U.S.C. 1819(a) (Tenth), 12 U.S.C. 1831o, and 12 
U.S.C. 1831p-1.

Subpart C--Annual Stress Test

0
2. In subpart C, remove the phrase ``over $50 billion covered bank'' 
from wherever it appears in the subpart, and add in its place the 
phrase ``$50 billion or over covered bank''.
0
3. Amend Sec.  325.201(a) by revising paragraph (a) to read as follows:


Sec.  325.201  Authority, purpose, and reservation of authority.

    (a) Authority. This subpart is issued by the Federal Deposit 
Insurance Corporation (the ``Corporation'' or ``FDIC'') under 12 U.S.C. 
5365(i)(2); 12 U.S.C. 5412(b)(2)(C); 12 U.S.C. 1818, 12 U.S.C. 
1819(a)(Tenth), 12 U.S.C. 1831o, and 12 U.S.C. 1831p-1.
* * * * *
0
4. Amend Sec.  325.202 by revising paragraphs (d)(2) and (m) to read as 
follows:


Sec.  325.202  Definitions.

* * * * *
    (d) * * *
    (2) $50 billion or over covered bank. Any state nonmember bank or 
state savings association with average total consolidated assets 
calculated as required under this subpart that are not less than $50 
billion.
* * * * *
    (m) Stress test cycle means the period beginning January 1 of a 
calendar year and ending on December 31 of that year.
0
5. Revise Sec.  325.203 to read as follows:


Sec.  325.203  Applicability.

    (a) Covered banks that become subject to stress testing 
requirements. A state nonmember bank or state savings association that 
becomes a $10 billion to $50 billion covered bank on or before March 31 
of a given year shall conduct its first annual stress test under this 
subpart in the next calendar year after the date the state nonmember 
bank or state savings association becomes a $10 billion to $50 billion 
covered bank, unless that time is extended by the Corporation in 
writing. A state nonmember bank or state savings association that 
becomes a $10 billion to $50 billion covered bank after March 31 of a 
given year shall conduct its first annual stress test under this part 
in the second calendar year after the calendar year in which the state 
nonmember bank or state savings association becomes a $10 billion to 
$50 billion covered bank, unless that time is extended by the 
Corporation in writing.
    (b) Ceasing to be a covered bank or changing categories. (1) A 
covered bank shall remain subject to the stress test requirements based 
on its applicable category, as defined in Sec.  325.202, unless and 
until total consolidated assets of the covered bank fall below the 
relevant size threshold for each of four consecutive quarters as 
reported by the covered bank's most recent Call Reports. The 
calculation shall be effective on the ``as of'' date of the fourth 
consecutive Call Report.
    (2) Notwithstanding paragraph (b)(1) of this section, a state 
nonmember bank or state savings association that becomes a $50 billion 
or over covered bank, whether by migrating from being a $10 billion to 
$50 billion covered bank or by directly becoming a $50 billion or over 
covered bank, after September 30 of a calendar year must comply with 
the requirements applicable to a $50 billion or over covered bank 
beginning on January 1 of the third calendar year after the state 
nonmember bank or state savings association becomes a $50 billion or 
over covered bank, unless that time is extended by the Corporation in 
writing. A state nonmember bank or state savings association that 
becomes a $50 billion or over covered bank on or before September 30 of 
a calendar year must comply with the requirements applicable to a $50 
billion or over covered bank beginning on January 1 of the second 
calendar year after the state nonmember bank or state savings 
association becomes a $50 billion or over covered bank, unless that 
time is extended by the Corporation in writing.
    (c) Covered bank subsidiaries of a bank holding company or savings 
and loan holding company subject to annual stress test requirements. 
(1) Notwithstanding the requirements applicable to covered banks under 
this section, a covered bank that is a consolidated subsidiary of a 
bank holding company or savings and loan holding company that is 
required to conduct an annual company-run stress test under applicable 
regulations of the Board of Governors of the Federal Reserve System may 
elect to conduct its stress test and report to the FDIC on the same 
timeline as its parent bank holding company or savings and loan holding 
company.
    (2) A covered bank that elects to conduct its stress test under 
paragraph (c)(1) of this section will remain subject to the same 
timeline requirements of its parent company until otherwise approved by 
the FDIC.
0
6. Revise Sec.  325.204 to read as follows:


Sec.  325.204  Annual stress tests required.

    Each covered bank must conduct the annual stress test under this 
part subject to the following requirements:
    (a) Financial data. A covered bank must use financial data as of 
December 31 of the previous calendar year.
    (b) Scenarios provided by the Corporation. In conducting the stress 
test under this part, each covered bank must use the scenarios provided 
by the Corporation. The scenarios provided by the Corporation will 
reflect a minimum of three sets of economic and financial conditions, 
including baseline, adverse, and severely adverse scenarios. The 
Corporation will provide a description of the scenarios required to be 
used by each covered bank no later than February 15 of that calendar 
year.
    (c) Significant trading activities. The Corporation may require a 
covered bank with significant trading activities, as determined by the 
Corporation, to

[[Page 13883]]

include trading and counterparty components in its adverse and severely 
adverse scenarios. The trading and counterparty position data to be 
used in this component will be as of a date between October 1 of the 
previous calendar year and March 1 of that calendar year in which the 
stress test is performed, and the Corporation will communicate a 
description of the component to the covered bank no later than March 1 
of that calendar year.
0
7. Amend Sec.  325.206 by revising paragraph (a) to read as follows:


Sec.  325.206  Required reports of stress test results to the FDIC and 
the Board of Governors of the Federal Reserve System.

    (a) Report required for annual stress test results--(1) $10 billion 
to $50 billion covered bank. A $10 billion to $50 billion covered bank 
must report to the FDIC and to the Board of Governors of the Federal 
Reserve System, on or before July 31, the results of the stress test in 
the manner and form specified by the FDIC.
    (2) $50 billion or over covered bank. A $50 billion or over covered 
bank must report to the FDIC and to the Board of Governors of the 
Federal Reserve System, on or before April 5, the results of the stress 
test in the manner and form specified by the FDIC.
* * * * *
0
8. Amend Sec.  325.207 by revising paragraph (a) to read as follows:


Sec.  325.207  Publication of disclosures.

    (a) Publication date--(1) $10 billion to $50 billion covered bank. 
A $10 billion to $50 billion covered bank must publish a summary of the 
results of its annual stress test in the period starting October 15 and 
ending October 31.
    (2) $50 billion or over covered bank. A $50 billion or over covered 
bank must publish a summary of the results of its annual stress tests 
in the period starting June 15 and ending July 15, provided:
    (i) Unless the Corporation determines otherwise, if the $50 billion 
or over covered bank is a consolidated subsidiary of a bank holding 
company or savings and loan holding company subject to supervisory 
stress tests conducted by the Board of Governors of the Federal Reserve 
System under 12 CFR part 252, then within the June 15 to July 15 
period, such covered bank may not publish the required summary of its 
annual stress test earlier than the date that the Board of Governors of 
the Federal Reserve System publishes the supervisory stress test 
results of the covered bank's parent holding company.
    (ii) If the Board of Governors of the Federal Reserve System 
publishes the supervisory stress test results of the covered bank's 
parent holding company prior to June 15, then such covered bank may 
publish its stress test results prior to June 15, but no later than 
July 15, through actual publication by the covered bank or through 
publication by the parent holding company pursuant to paragraph (b) of 
this section.
* * * * *

    Dated at Washington, DC, on March 20, 2018.

    Federal Deposit Insurance Corporation.

    By order of the Board of Directors.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 2018-06162 Filed 3-30-18; 8:45 am]
 BILLING CODE 6714-01-P