83 FR 21167 - Regulation A: Extensions of Credit by Federal Reserve Banks

FEDERAL RESERVE SYSTEM

Federal Register Volume 83, Issue 90 (May 9, 2018)

The Board of Governors of the Federal Reserve System (Board) is adopting final amendments to its Regulation A to revise the provisions regarding the establishment of the primary credit rate in a financial emergency and to delete the provisions relating to the use of credit ratings for collateral for extensions of credit under the former Term Asset-Backed Securities Loan Facility (TALF). The final amendments are intended to allow the regulation to address circumstances in which the Federal Open Market Committee (FOMC) has established a target range for the federal funds rate rather than a single target rate, and to reflect the expiration of the TALF program.

[Federal Register Volume 83, Number 90 (Wednesday, May 9, 2018)]
[Rules and Regulations]
[Pages 21167-21168]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-09805]


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FEDERAL RESERVE SYSTEM

12 CFR Part 201

[Docket No. R-1585; RIN 7100-AE 90]


Regulation A: Extensions of Credit by Federal Reserve Banks

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
is adopting final amendments to its Regulation A to revise the 
provisions regarding the establishment of the primary credit rate in a 
financial emergency and to delete the provisions relating to the use of 
credit ratings for collateral for extensions of credit under the former 
Term Asset-Backed Securities Loan Facility (TALF). The final amendments 
are intended to allow the regulation to address circumstances in which 
the Federal Open Market Committee (FOMC) has established a target range 
for the federal funds rate rather than a single target rate, and to 
reflect the expiration of the TALF program.

DATES: The final rule is effective June 8, 2018.

FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Special Counsel, 
(202-452-3565), Legal Division, or Lyle Kumasaka, Senior Financial 
Analyst, (202-452-2382), Division of Monetary Affairs; for users of 
Telecommunications Device for the Deaf (TDD) only, contact 202-263-
4869; Board of Governors of the Federal Reserve System, 20th and C 
Streets NW, Washington, DC 20551.

SUPPLEMENTARY INFORMATION: The Federal Reserve Banks make primary, 
secondary, and seasonal credit available to depository institutions 
subject to rules and regulations prescribed by the Board. The primary, 
secondary, and seasonal credit rates are the interest rates that the 
twelve Federal Reserve Banks charge for extensions of credit under 
these programs. Under the primary credit program, Federal Reserve Banks 
may extend credit on a very short-term basis, typically overnight, to 
depository institutions that are in generally sound condition in the 
judgment of the Federal Reserve Bank. In accordance with the Federal 
Reserve Act, the primary credit rate is established by the boards of 
directors of the Federal Reserve Banks, subject to review and 
determination of the Board. The primary credit rate is set forth in 
Sec.  201.51(a) of Regulation A.
    Section 201.3(e) of Regulation A, adopted in December 2009, 
established criteria and procedures governing the acceptance by the 
Federal Reserve Bank of New York (FRBNY) of credit ratings issued by 
credit rating agencies in connection with extensions of credit under 
the former TALF. On June 30, 2010, the TALF was closed for new loan 
extensions, and the final outstanding TALF loan was repaid in full in 
October 2014.\1\
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    \1\ https://www.federalreserve.gov/monetarypolicy/talf.htm.
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I. Notice of Proposed Rulemaking

    On December 8, 2017, the Board published a notice of proposed 
rulemaking in the Federal Register proposing amendments to Regulation A 
that would (1) revise the regulatory procedures for establishing the 
primary credit rate in a financial emergency; and (2) delete the 
provisions relating to the use of credit ratings for collateral for 
extensions of credit under the former TALF.\2\ Specifically, the Board 
proposed to amend Sec.  201.51(d)(1) of Regulation A to provide that, 
in a financial emergency, the primary credit rate is the target federal 
funds rate or, if the FOMC has established a target range for the 
federal funds rate, a rate corresponding to the top of the target 
range. In addition, the Board proposed to delete Sec.  201.3(e) of 
Regulation A as unnecessary given the expiration of the TALF program. 
The comment period on the proposed rule closed on January 8, 2018.
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    \2\ 82 FR 57886 (Dec. 8, 2017).

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[[Page 21168]]

II. Comments Received on the Proposed Rule and Adoption of Final Rule

    The Board received five comments on the proposal. One comment 
supported the flexibility the amendment provides during times of 
crisis, and raised other issues regarding the size of the Federal 
Reserve balance sheet that were outside the scope of the proposal. 
Another commenter expressed support for the proposal as eliminating 
roadblocks while dealing with an emergency. The other three comments 
raised issues outside the scope of the proposal. Accordingly, the final 
rule adopts the proposal as proposed.

III. Administrative Law Matters

A. Regulatory Flexibility Act

    An initial regulatory flexibility analysis (IRFA) was included in 
the proposal in accordance with section 3(a) of the Regulatory 
Flexibility Act (RFA).\3\ In the IRFA, the Board requested comment on 
the effect of the proposed rule on small entities and on any 
significant alternatives that would reduce the regulatory burden on 
small entities. The Board did not receive any comments on the IRFA.
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    \3\ 5 U.S.C. 601 et seq.
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    The RFA requires an agency to prepare a final regulatory 
flexibility analysis unless the agency certifies that the rule will 
not, if promulgated, have a significant economic impact on a 
substantial number of small entities. In accordance with section 3(a) 
of the RFA, the Board has reviewed the final rule. Based on its 
analysis, and for the reasons stated below, the Board certifies that 
the final rule will not have a significant economic impact on a 
substantial number of small entities.
    Section 201.51(d) of Regulation A. Currently, there are 1,523 
depository institutions that are able to request primary credit that 
meet the definition of ``small'' business entity, out of a total of 
2,777 institutions that are able to request primary credit. The final 
rule makes a ministerial amendment to conform the provision to the 
current operating framework of the FOMC in establishing a target range 
for the federal funds rate. The final rule affects the actions of the 
Federal Reserve Banks and the Board, and requires no action or changes 
in procedures for any depository institution, large or small, and so 
there are no costs associated with the final rule. In addition, the 
final rule clarifies the operation of the provision for reducing the 
primary credit rate in a financial emergency from its current level to 
a lower level based on the target federal funds rate or the target 
range for the federal funds rate. Any economic impact of the final rule 
on small entities would be beneficial, because the final rule enables 
large and small entities to obtain primary credit at an interest rate 
that would be lower than the existing primary credit rate. Accordingly, 
the Board believes that a reasonable basis exists for assuming that the 
economic effect of the final rule would be de minimis or insignificant 
for small entities affected by it.
    Section 201.3(e) of Regulation A. The final rule deletes obsolete 
provisions applicable to credit extended under the TALF program. Since 
the TALF program no longer exists, the deletion of regulatory 
provisions governing the use of credit ratings in it will have no 
impact, economic or otherwise, on any credit rating agency. 
Accordingly, the Board believes that a reasonable basis exists for 
assuming costs would be de minimis or insignificant for small entities 
affected by it.

B. Paperwork Reduction Act Analysis

    Office of Management and Budget (OMB) regulations implementing the 
Paperwork Reduction Act (PRA) state that agencies must submit 
``collections of information'' contained in proposed rules published 
for public comment in the Federal Register in accordance with OMB 
regulations. OMB regulations define a ``collection of information'' as 
obtaining, causing to be obtained, soliciting, or requiring the 
disclosure to an agency, third parties or the public of information by 
or for an agency ``by means of identical questions posed to, or 
identical reporting, recordkeeping, or disclosure requirements imposed 
on, ten or more persons, whether such collection of information is 
mandatory, voluntary, or required to obtain or retain a benefit.''
    In accordance with the PRA, the Board reviewed the proposed rule 
under the authority delegated to the Board by OMB. The proposed rule 
contained no requirements subject to the PRA, and the Board received no 
comments on its PRA analysis in the proposed rule. The final rule 
adopts the proposed rule as proposed, and contains no requirements 
subject to the PRA.

C. Plain Language

    Each Federal banking agency, including the Board, is required to 
use plain language in all proposed and final rulemakings published 
after January 1, 2000.\4\ The Board has sought to present the final 
rule, to the extent possible, in a simple and straightforward manner. 
The Board received one comment that addressed the extent to which the 
proposed rule used plain language. This comment expressed appreciation 
for the Board's plain language interpretation of the regulation as set 
forth in the proposed rule.
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    \4\ 12 U.S.C. 4809.
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List of Subjects in 12 CFR Part 201

    Banks, Banking, Federal Reserve System, Reporting and recordkeeping 
requirements.

Authority and Issuance

    For the reasons set forth in the preamble, the Board is amending 12 
CFR chapter II as follows:

PART 201--EXTENSIONS OF CREDIT BY FEDERAL RESERVE BANKS (REGULATION 
A)

0
1. The authority citation for part 201 continues to read as follows:

    Authority:  12 U.S.C. 248(i)-(j) and (s), 343 et seq., 347a, 
347b, 347c, 348 et seq., 357, 374, 374a, and 461.


Sec.  201.3   [Amended]

0
2. Section 201.3 is amended by removing paragraph (e).

0
3. Section 201.51 is amended by revising paragraph (d)(1) introductory 
text to read as follows:


Sec.  201.51   Interest rates applicable to credit extended by a 
Federal Reserve Bank.3

* * * * *
    (d) * * *
    (1) The primary credit rate at a Federal Reserve Bank is the target 
federal funds rate of the Federal Open Market Committee or, if the 
Federal Open Market Committee has set a target range for the federal 
funds rate, the rate corresponding to the top of the target range, if:
* * * * *
    \3\ The primary, secondary, and seasonal credit rates described 
in this section apply to both advances and discounts made under the 
primary, secondary, and seasonal credit programs, respectively.

    By the Board of Governors of the Federal Reserve System, May 3, 
2018.
Michele Taylor Fennell,
Assistant Secretary of the Board.
[FR Doc. 2018-09805 Filed 5-8-18; 8:45 am]
 BILLING CODE 6210-01-P