83_FR_44621 83 FR 44451 - Liquidity Coverage Ratio Rule: Treatment of Certain Municipal Obligations as High-Quality Liquid Assets

83 FR 44451 - Liquidity Coverage Ratio Rule: Treatment of Certain Municipal Obligations as High-Quality Liquid Assets

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION

Federal Register Volume 83, Issue 170 (August 31, 2018)

Page Range44451-44455
FR Document2018-18610

The OCC, the Board, and the FDIC (collectively, the agencies) are jointly issuing and inviting comment on an interim final rule that amends the agencies' liquidity coverage ratio (LCR) rule to treat liquid and readily-marketable, investment grade municipal obligations as high-quality liquid assets (HQLA). Section 403 of the Economic Growth, Regulatory Relief, and Consumer Protection Act amends section 18 of the Federal Deposit Insurance Act and requires the agencies, for purposes of their LCR rule and any other regulation that incorporates a definition of the term ``high-quality liquid asset'' or another substantially similar term, to treat a municipal obligation as HQLA (that is a level 2B liquid asset) if that obligation is, as of the LCR calculation date, ``liquid and readily-marketable'' and ``investment grade.''

Federal Register, Volume 83 Issue 170 (Friday, August 31, 2018) 
[Federal Register Volume 83, Number 170 (Friday, August 31, 2018)]
[Rules and Regulations]
[Pages 44451-44455]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-18610]



[[Page 44451]]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 50

[Docket ID OCC-2018-0013]
RIN 1557-AE36

FEDERAL RESERVE SYSTEM

12 CFR Part 249

[Docket No. R-1616]
RIN 7100-AF10

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 329

RIN 3064-AE77


Liquidity Coverage Ratio Rule: Treatment of Certain Municipal 
Obligations as High-Quality Liquid Assets

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury; 
Board of Governors of the Federal Reserve System (Board); and Federal 
Deposit Insurance Corporation (FDIC).

ACTION: Interim final rule with request for comment.

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SUMMARY: The OCC, the Board, and the FDIC (collectively, the agencies) 
are jointly issuing and inviting comment on an interim final rule that 
amends the agencies' liquidity coverage ratio (LCR) rule to treat 
liquid and readily-marketable, investment grade municipal obligations 
as high-quality liquid assets (HQLA). Section 403 of the Economic 
Growth, Regulatory Relief, and Consumer Protection Act amends section 
18 of the Federal Deposit Insurance Act and requires the agencies, for 
purposes of their LCR rule and any other regulation that incorporates a 
definition of the term ``high-quality liquid asset'' or another 
substantially similar term, to treat a municipal obligation as HQLA 
(that is a level 2B liquid asset) if that obligation is, as of the LCR 
calculation date, ``liquid and readily-marketable'' and ``investment 
grade.''

DATES: The interim final rule is effective on August 31, 2018. Comments 
on the interim final rule must be received by October 1, 2018.

ADDRESSES: Comments should be directed to:
    OCC: Commenters are encouraged to submit comments through the 
Federal eRulemaking Portal or email, if possible. Please use the title 
``Liquidity Coverage Ratio Rule: Treatment of Certain Municipal 
Obligations as High-Quality Liquid Assets'' to facilitate the 
organization and distribution of the comments. You may submit comments 
by any of the following methods:
     Federal eRulemaking Portal--``Regulations.gov'': Go to 
www.regulations.gov. Enter ``Docket ID OCC-2018-0013'' in the Search 
box and click ``Search.'' Click on ``Comment Now'' to submit public 
comments. Click on the ``Help'' tab on the Regulations.gov home page to 
get information on using Regulations.gov, including instructions for 
submitting public comments.
     Email: [email protected].
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-
218, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW, suite 3E-218, 
Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2018-0013'' in your comment. In general, OCC will enter 
all comments received into the docket and publish the comments on the 
Regulations.gov website without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not include any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically: Go to 
www.regulations.gov. Enter ``Docket ID OCC-2018-0013'' in the Search 
box and click ``Search.'' Click on ``Open Docket Folder'' on the right 
side of the screen. Comments and supporting materials can be viewed and 
filtered by clicking on ``View all documents and comments in this 
docket'' and then using the filtering tools on the left side of the 
screen. Click on the ``Help'' tab on the Regulations.gov home page to 
get information on using Regulations.gov. The docket may be viewed 
after the close of the comment period in the same manner as during the 
comment period.
     Viewing Comments Personally: You may personally inspect 
comments at the OCC, 400 7th Street SW, Washington, DC 20219. For 
security reasons, the OCC requires that visitors make an appointment to 
inspect comments. You may do so by calling (202) 649-6700 or, for 
persons who are deaf or hearing-impaired, TTY, (202) 649-5597. Upon 
arrival, visitors will be required to present valid government-issued 
photo identification and submit to security screening in order to 
inspect comments.
    Board: When submitting comments, please consider submitting your 
comments by email or fax because paper mail in the Washington, DC area 
and at the Board may be subject to delay. You may submit comments, 
identified by Docket No. R-1616 and RIN 7100-AF10, by any of the 
following methods:
     Agency website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Email: [email protected]. Include docket 
and RIN numbers in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.
    Instructions: All public comments will be made available on the 
Board's website at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons or 
to remove personally identifiable information at the commenter's 
request. Accordingly, comments will not be edited to remove any 
identifying or contact information. Public comments may also be viewed 
electronically or in paper in Room 3515, 1801 K Street NW (between 18th 
and 19th Streets NW), Washington, DC 20006 between 9:00 a.m. and 5:00 
p.m. on weekdays. For security reasons, the Board requires that 
visitors make an appointment to inspect comments. You may do so by 
calling (202) 452-3684. Upon arrival, visitors will be required to 
present valid government-issued photo identification and to submit to 
security screening in order to inspect and photocopy comments.
    FDIC: You may submit comments, identified by FDIC RIN 3064-AE77, by 
any of the following methods:
     Agency website: http://www.FDIC.gov/regulations/laws/federal/.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance

[[Page 44452]]

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 NW building (located on F 
Street), on business days between 7:00 a.m. and 5:00 p.m.
     Email: [email protected].
    Instructions: Comments submitted must include ``FDIC'' and ``RIN 
3064-AE77.'' Comments received will be posted without change to http://www.FDIC.gov/regulations/laws/federal/, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT: 
    OCC: Christopher McBride, Director, James Weinberger, Technical 
Expert, or Ang Middleton, Bank Examiner (Risk Specialist), (202) 649-
6360, Treasury & Market Risk Policy; David Stankiewicz, Special 
Counsel, Securities and Corporate Practices Division, (202) 649-5510; 
Henry Barkhausen, Counsel, or Daniel Perez, Attorney, Legislative and 
Regulatory Activities Division, (202) 649-5490; for persons who are 
deaf or hearing-impaired, TTY, (202) 649-5597, Office of the 
Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219.
    Board: Constance Horsley, Deputy Associate Director, (202) 452-
5239, Peter Clifford, Manager, (202) 785-6057, J. Kevin Littler, Senior 
Supervisory Financial Analyst, (202) 475-6677, or Christopher Powell, 
Supervisory Financial Analyst, (202) 452-3442, Division of Banking 
Supervision and Regulation; Laurie Schaffer, Associate General Counsel, 
(202) 452-2272, Benjamin W. McDonough, Assistant General Counsel, (202) 
452-2036, Steve Bowne, Senior Attorney, (202) 452-3900, or Laura Bain, 
Senior Attorney, (202) 736-5546, Legal Division, Board of Governors of 
the Federal Reserve System, 20th and C Streets NW, Washington, DC 
20551. For the hearing impaired only, Telecommunication Device for the 
Deaf (TDD), (202) 263-4869, Board of Governors of the Federal Reserve 
System, 20th Street and Constitution Avenue NW, Washington, DC 20551.
    FDIC: Bobby R. Bean, Associate Director, (202) 898-6705, Michael E. 
Spencer, Chief, (202) 898-7041, Eric W. Schatten, Senior Policy 
Analyst, (202) 898-7063, Andrew D. Carayiannis, Senior Policy Analyst, 
(202) 898-6692, or Nana Ofori-Ansah, Capital Markets Policy Analyst, 
(202) 898-3572, Capital Markets Branch, Division of Risk Management 
Supervision; Suzanne J. Dawley, Counsel, (202) 898-6509 
([email protected]), Andrew B. Williams, II, Counsel, (202) 898-3591, 
or Alexander S. Bonander, Attorney (202) 898-3621, Supervision and 
Corporate Operations Branch, Legal Division, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC 20429. For the hearing 
impaired only, Telecommunication Device for the Deaf (TDD), (800) 925-
4618.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Office of the Comptroller of the Currency (OCC), the Board of 
Governors of the Federal Reserve System (Board), and the Federal 
Deposit Insurance Corporation (FDIC) (collectively, the agencies) 
adopted the liquidity coverage ratio (LCR) rule \1\ in 2014. The LCR 
rule established a quantitative liquidity requirement that is designed 
to promote the short-term resilience of the liquidity risk profile of 
large and internationally active banking organizations. The intent of 
the agencies in issuing the LCR rule was to improve the banking 
sector's ability to absorb shocks arising from financial and economic 
stress and the measurement and management of liquidity risk.\2\ The LCR 
rule generally applies to a bank holding company, savings and loan 
holding company, or depository institution if: (1) It has total 
consolidated assets equal to $250 billion or more; (2) it has total 
consolidated on-balance sheet foreign exposure equal to $10 billion or 
more; or (3) it is a depository institution with total consolidated 
assets equal to $10 billion or more and is a consolidated subsidiary of 
a firm that is subject to the LCR rule (each, a covered company).\3\ 
Covered companies generally must maintain an amount of high-quality 
liquid assets (HQLA) equal to or greater than their projected total net 
cash outflows over a prospective 30 calendar-day period.\4\ The LCR 
rule defines three categories of HQLA--level 1, level 2A, and level 2B 
liquid assets--and sets forth qualifying criteria for HQLA and 
limitations for an asset's inclusion in the HQLA amount.
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    \1\ 79 FR 61440 (October 10, 2014), codified at 12 CFR part 50 
(OCC), 12 CFR part 249 (Board), and 12 CFR part 329 (FDIC).
    \2\ Id.
    \3\ See section 1 of the LCR rule.
    \4\ The Board separately adopted a modified LCR requirement for 
bank holding companies and certain savings and loan holding 
companies that, in each case, (A) have $50 billion or more in total 
consolidated assets and (B) are not internationally active (each, a 
modified LCR holding company). Under the Board's LCR rule, modified 
LCR holding companies must maintain an amount of HQLA equal to or 
greater than 70 percent of their projected total net cash outflows 
on the last business day of the applicable calendar month. 12 CFR 
249 subpart G. This interim final rule's changes to the Board's LCR 
rule also apply to modified LCR holding companies.
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    In 2016, the Board amended its LCR rule to include certain U.S. 
municipal securities as HQLA, subject to certain limitations (2016 
Amendments).\5\ To qualify as level 2B liquid assets under the 2016 
Amendments, the U.S. municipal securities must be general obligation 
securities of public sector entities (i.e., a state, local authority, 
or other governmental subdivision below the U.S. sovereign entity 
level).\6\ Under the 2016 Amendments, a general obligation is defined 
as a bond or similar obligation that is backed by the full faith and 
credit of a public sector entity.\7\ To be treated as HQLA, the general 
obligation securities also must: (1) Be investment grade under 12 CFR 
part 1 as of the calculation date; (2) be issued or guaranteed by a 
public sector entity whose obligations have a proven record as a 
reliable source of liquidity in repurchase or sales markets during 
stressed market conditions; \8\ and (3) not be an obligation of a 
financial sector entity or a financial sector entity's consolidated 
subsidiary, unless it is only guaranteed by a financial sector entity 
or its consolidated subsidiary and otherwise eligible.\9\ The 2016 
Amendments limited the inclusion of general obligation securities in 
the HQLA amount to 5 percent of the covered company's total HQLA 
amount.\10\ The 2016 Amendments also limited the inclusion of general 
obligation securities of any single public sector entity to two times 
the average daily trading volume during the previous four quarters of 
all general obligation securities issued by that public sector 
entity.\11\
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    \5\ 81 FR 21223 (April 11, 2016), codified at 12 CFR part 249 
(Board).
    \6\ 12 CFR 249.20(c)(2).
    \7\ 12 CFR 249.3.
    \8\ This is demonstrated by (A) the market price of the security 
or equivalent securities of the issuer declining by no more than 20 
percent during a 30 calendar-day period of significant stress or (B) 
the market haircut demanded by counterparties to secured lending and 
secured funding transactions that are collateralized by the security 
or equivalent securities of the issuer increasing by no more than 20 
percentage points during a 30 calendar-day period of significant 
stress. 12 CFR 249.20(c)(2).
    \9\ Id.
    \10\ 12 CFR 249.21.
    \11\ 12 CFR 249.22(c).
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    The Economic Growth, Regulatory Relief, and Consumer Protection Act 
(EGRRCPA) was enacted on May 24, 2018.\12\ Section 403 of the EGRRCPA 
amends section 18 of the Federal Deposit Insurance Act \13\ and 
requires the agencies, for purposes of the LCR

[[Page 44453]]

rule and any other regulation that incorporates a definition of the 
term ``high-quality liquid asset'' or another substantially similar 
term, to treat a municipal obligation as HQLA that is a level 2B liquid 
asset if that obligation is, as of the calculation date, (A) liquid and 
readily-marketable and (B) investment grade. Section 403 defines 
``investment grade'' as having the meaning given the term in Sec.  1.2 
of title 12, Code of Federal Regulations, or any successor thereto. 
Section 403 defines ``liquid and readily-marketable'' as having the 
meaning given the term in Sec.  249.3 of title 12, Code of Federal 
Regulations, or any successor thereto. Section 403 defines ``municipal 
obligation'' as ``an obligation of--(i) a State or any political 
subdivision thereof; or (ii) any agency or instrumentality of a State 
or any political subdivision thereof.''
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    \12\ Public Law 115-174, 132 Stat. 1296-1368 (2018).
    \13\ 12 U.S.C. 1828(aa).
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II. Description of the Interim Final Rule

    This interim final rule amends the agencies' LCR rule to implement 
section 403 of the EGRRCPA. Section 403 requires the agencies to treat 
a municipal obligation as a level 2B liquid asset if the obligation, as 
of the calculation date, is liquid and readily-marketable and 
investment grade.\14\ To effect this change, the interim final rule 
makes certain amendments to each agency's LCR rule that incorporate the 
provisions of section 403 of the EGRRCPA.
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    \14\ 12 CFR part 50 (OCC), 12 CFR part 249 (Board), and 12 CFR 
part 329 (FDIC).
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    The interim final rule adds a definition to the agencies' rule for 
the term ``municipal obligations,'' which, consistent with the EGRRCPA, 
means an obligation of (1) a state or any political subdivision thereof 
or (2) any agency or instrumentality of a state or any political 
subdivision thereof.
    The interim final rule amends the HQLA criteria with respect to 
level 2B liquid assets by adding municipal obligations that, as of the 
calculation date, are both (1) liquid and readily-marketable and (2) 
investment grade (under 12 CFR part 1) to the list of assets that are 
eligible for treatment as level 2B liquid assets.\15\ The OCC's 
definition of ``investment grade'' under 12 CFR 1.2 provides that 
``[i]nvestment grade means the issuer of a security has an adequate 
capacity to meet financial commitments under the security for the 
projected life of the asset or exposure. An issuer has an adequate 
capacity to meet financial commitments if the risk of default by the 
obligor is low and the full and timely repayment of principal and 
interest is expected.'' \16\ A municipal obligation is required to meet 
this definition of ``investment grade'' as of the calculation date to 
be treated as a level 2B liquid asset under the interim final rule.
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    \15\ 12 CFR 50.20 (OCC), 12 CFR 249.20 (FRB), and 12 CFR 329.20 
(FDIC).
    \16\ 12 CFR 1.2.
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    Consistent with section 403, the interim final rule also amends the 
definition of ``liquid and readily-marketable'' in the FDIC's and OCC's 
rules so that the term has the same meaning given to it under the 
Board's rules. Under this provision of the Board's rules, a ``liquid 
and readily-marketable'' security is a security that is traded in an 
active secondary market with: (1) More than two committed market 
makers; (2) a large number of non-market maker participants on both the 
buying and selling sides of transactions; (3) timely and observable 
market prices; and (4) a high trading volume.\17\ As described above, a 
municipal obligation is required to be liquid and readily-marketable as 
of the date of calculation to be treated as a level 2B liquid asset 
under the interim final rule.
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    \17\ 12 CFR 249.3.
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    As part of the interim final rule, the Board is rescinding the 2016 
Amendments so that municipal obligations under the Board's LCR rule 
will be treated consistently with section 403 of the EGRRCPA. As a 
result of the above changes, covered companies will be able to count 
municipal obligations as HQLA that qualify as level 2B liquid assets, 
provided the municipal obligations meet the HQLA criteria under the LCR 
rule.\18\ Accordingly, covered companies will have greater flexibility 
in meeting the minimum requirements under the LCR rule as more types of 
assets will be eligible as HQLA. For FDIC- and OCC-regulated 
institutions, these changes will mark the first time that such 
institutions may treat any municipal obligations as HQLA. For Board-
regulated institutions, these changes are expected to broaden the 
number of municipal obligations that can be counted as HQLA. In 
particular, for purposes of the types of assets eligible for treatment 
as HQLA, municipal obligations will no longer be required to be general 
obligation securities.\19\ As a result, many issuances of revenue bonds 
will now qualify as municipal obligations.
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    \18\ Corresponding changes will be made to the Complex 
Institution Liquidity Monitoring Report (FR 2052a). These changes 
will be described in a separate Federal Register notice.
    \19\ Additionally, to count as HQLA, municipal obligations will 
not (1) be required to be issued or guaranteed by a public sector 
entity whose obligations have a proven record as a reliable source 
of liquidity in repurchase or sales markets during stressed market 
conditions, as demonstrated by the quantitative metrics included in 
the 2016 Amendments; or (2) be prohibited from being an obligation 
of a financial sector entity or a financial sector entity's 
consolidated subsidiary. In addition, the amount of municipal 
obligations that can be included in Board-regulated institutions' 
HQLA amount will no longer be limited to 5 percent of the total HQLA 
amount. The limit on the amount of municipal obligations of a single 
issuer that may be included as eligible HQLA will also no longer 
apply to Board-regulated institutions.
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    Only municipal obligations that meet the LCR rule's definition for 
liquid and readily-marketable and that are investment grade under 12 
CFR part 1 will qualify for treatment as HQLA under this interim final 
rule.\20\ The interim final rule does not otherwise affect covered 
companies' obligations under the LCR rule.
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    \20\ This interim final rule does not affect other requirements 
under the LCR rule that serve to restrict HQLA, such as the 50 
percent haircut for level 2B liquid assets under section 21(b) and 
the restriction that level 2B assets cannot exceed more than 15 
percent of the total HQLA amount. In addition, this interim final 
rule does not affect the section 22 requirements, which address the 
operational and generally applicable criteria for eligible HQLA. 
With regard to net cash outflows, the interim final rule does not 
affect the requirements under sections 32 and 33, which address the 
calculation of outflow and inflow amounts, respectively.
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III. Request for Comment

    The definition of ``municipal obligation'' and the criteria for 
treating municipal obligations as level 2B liquid assets were 
established by section 403 of the EGRRCPA. Consistent with section 403, 
in what ways, if any, could the agencies clarify aspects of these 
provisions (e.g., by clarifying the terms ``state'' or ``political 
subdivision'')? The agencies invite comment on this question and all 
other aspects of this interim final rule.

IV. Regulatory Analysis

A. Administrative Procedure Act and Effective Date

    The agencies are issuing the interim final rule without prior 
notice and the opportunity for public comment and the 30 day delayed 
effective date ordinarily prescribed by the Administrative Procedure 
Act (APA).\21\ Pursuant to section 553(b)(B) of the APA, general notice 
and the opportunity for public comment are not required prior to the 
issuance of a final rule if an agency, for good cause, finds (and 
incorporates the finding and a brief statement of reasons therefor in 
the rules issued) that ``notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.'' \22\
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    \21\ 5 U.S.C. 553.
    \22\ 5 U.S.C. 553(b)(B).

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[[Page 44454]]

    As discussed above, this interim final rule implements the 
provisions of section 403 of the EGRRCPA, which became effective on May 
24, 2018, and directs the agencies to make certain changes to the 
criteria for HQLA. The interim final rule adopts without change the 
statutory definition for ``municipal obligations'' and the requirement 
that municipal obligations be treated as level 2B liquid assets if the 
obligations are liquid and readily-marketable and investment grade. 
Because these changes to the LCR rule are mandated by the EGRRCPA, the 
agencies have determined that publishing a notice of proposed 
rulemaking is unnecessary. In addition, the agencies believe that the 
public interest is best served by implementing Congress's legislative 
directive as soon as possible because immediate implementation would 
provide clarity to the public regarding the liquidity rules and would 
be consistent with Congress's directive to the agencies under section 
403(b) of the EGRRCPA to amend the LCR rule within 90 days after 
enactment of the EGRRCPA.
    The effective date of this interim final rule is August 31, 2018. 
Pursuant to section 553(d)(3) of the APA, the required publication or 
service of a substantive rule shall be made not less than 30 days 
before its effective date, except as otherwise provided by the agency 
for good cause found and published with the rule.\23\ For the reasons 
described above in connection with APA section 553(b)(B), the agencies 
find good cause to publish the rule with an immediate effective date.
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    \23\ 5 U.S.C. 553(d).
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B. Riegle Community Development and Regulatory Improvement Act

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\24\ in determining the effective 
date and administrative compliance requirements for a new regulation 
that imposes additional reporting, disclosure, or other requirements on 
insured depository institutions, each federal banking agency must 
consider any administrative burdens that such regulation would place on 
depository institutions and the benefits of such regulation. In 
addition, section 302(b) of the RCDRIA \25\ requires such new 
regulation to take effect on the first day of a calendar quarter that 
begins on or after the date on which the regulations are published in 
final form, with certain exceptions, including for good cause. For the 
reasons described above in connection with the APA section 553(b)(B) 
requirement, the agencies find good cause exists under section 302 of 
RCDRIA to publish this interim final rule with an immediate effective 
date.
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    \24\ 12 U.S.C. 4802(a).
    \25\ 12 U.S.C. 4802(b).
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    While the agencies believe there is good cause to issue the rules 
without advance notice and comment and with an immediate effective 
date, the agencies are interested in the views of the public and 
request comment on all aspects of the interim final rule.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
when a general notice of proposed rulemaking is not required. 5 U.S.C. 
603 and 604. As noted previously, the agencies have determined that it 
is unnecessary to publish a general notice of proposed rulemaking for 
this interim final rule. Accordingly, the RFA's requirements relating 
to an initial and final regulatory flexibility analysis do not apply. 
Nonetheless, the agencies observe that in light of the way the interim 
final rule operates, they believe that, with respect to the entities 
subject to the interim final rule and within each agency's respective 
jurisdiction, the interim final rule would not have a significant 
economic impact on a substantial number of small entities.\26\
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    \26\ Under regulations issued by the Small Business 
Administration, a small entity includes a depository institution, 
bank holding company, or savings and loan holding company with total 
assets of $550 million or less and trust companies with total assets 
of $38.5 million or less.
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D. Paperwork Reduction Act of 1995

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) states 
that no agency may conduct or sponsor, nor is the respondent required 
to respond to, an information collection unless it displays a currently 
valid Office of Management and Budget control number. The agencies have 
determined that this interim final rule does not create any new, or 
revise any existing, collections of information pursuant to the 
Paperwork Reduction Act.

E. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act), 2 U.S.C. 1532, requires the OCC to prepare a budgetary 
impact statement before promulgating any final rule for which a general 
notice of proposed rulemaking was published. As discussed above, the 
OCC has determined that the publication of a general notice of proposed 
rulemaking is unnecessary. Accordingly, this interim final rule is not 
subject to section 202 of the Unfunded Mandates Act.

List of Subjects

12 CFR Part 50

    Administrative practice and procedure, Banks, Banking, Liquidity, 
Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 249

    Administrative practice and procedure, Banks, Banking, Federal 
Reserve System, Holding companies, Liquidity, Reporting and 
recordkeeping requirements.

12 CFR Part 329

    Administrative practice and procedure, Banks, Banking, Federal 
Deposit Insurance Corporation, FDIC, Liquidity, Reporting and 
recordkeeping requirements.

Authority and Issuance

    For the reasons stated in the preamble, the OCC amends 12 CFR part 
50, the Board amends 12 CFR part 249, and the FDIC amends 12 CFR part 
329 as follows:

Department of the Treasury

Office of the Comptroller of the Currency

PART 50--LIQUIDITY RISK MEASUREMENT STANDARDS

0
1. The authority citation for part 50 is revised to read as follows:

    Authority: 12 U.S.C. 1 et seq., 93a, 481, 1818, 1828, and 1462 
et seq.


0
2. Section 50.3 is amended by revising the definition for ``Liquid and 
readily-marketable'' and adding the definition for ``Municipal 
obligation'' in alphabetical order to read as follows:


Sec.  50.3  Definitions.

* * * * *
    Liquid and readily-marketable has the meaning given the term in 12 
CFR 249.3.
* * * * *
    Municipal obligation means an obligation of:
    (1) A state or any political subdivision thereof; or
    (2) Any agency or instrumentality of a state or any political 
subdivision thereof.
* * * * *

0
3. Section 50.20 is amended by:
0
a. Republishing paragraph (c) introductory text;
0
b. Removing the ``or'' at the end of paragraph (c)(1)(iii);

[[Page 44455]]

0
c. Removing the period at the end of paragraph (c)(2)(vi) and adding 
``; or'' in its place; and
0
d. Adding paragraph (c)(3).
    The republication and addition read as follows:


Sec.  50.20  High-quality liquid asset criteria.

* * * * *
    (c) Level 2B liquid assets. An asset is a level 2B liquid asset if 
the asset is liquid and readily-marketable and is one of the following 
types of assets:
* * * * *
    (3) A municipal obligation that is investment grade under 12 CFR 
part 1 as of the calculation date.

Federal Reserve System

PART 249--LIQUIDITY RISK MEASUREMENT STANDARDS (REGULATION WW)

0
4. The authority citation for part 249 continues to read as follows:

    Authority: 12 U.S.C. 248(a), 321-338a, 481-486, 1467a(g)(1), 
1818, 1828, 1831p-1, 1831o-1, 1844(b), 5365, 5366, 5368.


0
5. Amend Sec.  249.3 by removing the definition for ``General 
obligation'' and adding the definition for ``Municipal obligation'' in 
alphabetical order to read as follows:


Sec.  249.3  Definitions.

* * * * *
    Municipal obligation means an obligation of:
    (1) A state or any political subdivision thereof; or
    (2) Any agency or instrumentality of a state or any political 
subdivision thereof.
* * * * *


0
6. Amend Sec.  249.20 by republishing paragraph (c) introductory text, 
removing the ``or'' at the end of paragraph (c)(1)(iii), removing 
paragraph (c)(2), redesignating paragraph (c)(3) as (c)(2), removing 
the period at the end of newly redesignated paragraph (c)(2)(vi) and 
adding ``; or'' in its place, and adding a new paragraph (c)(3) to read 
as follows:


Sec.  249.20  High-quality liquid asset criteria.

* * * * *
    (c) Level 2B liquid assets. An asset is a level 2B liquid asset if 
the asset is liquid and readily-marketable and is one of the following 
types of assets:
* * * * *
    (3) A municipal obligation that is investment grade under 12 CFR 
part 1 as of the calculation date.


Sec.  249.21  [Amended]

0
7. Amend Sec.  249.21 by:
0
a. Removing paragraph (b)(4);
0
b. Removing ``; plus'' at the end of paragraph (c)(2) and adding in its 
place a period;
0
c. Removing paragraphs (c)(3), (f), and (g)(4);
0
d. Removing ``; plus'' at the end of paragraph (h)(2) and adding in its 
place a period;
0
e. Removing paragraphs (h)(3) and (k); and
0
f. Redesignating paragraphs (g) through (j) as paragraphs (f) through 
(i), respectively.


Sec.  249.22  [Amended]

0
8. Amend Sec.  249.22 by removing paragraph (c) and redesignating 
paragraph (d) as paragraph (c).

Federal Deposit Insurance Corporation

PART 329--LIQUIDITY RISK MEASUREMENT STANDARDS

0
9. The authority citation for part 329 continues to read as follows:

    Authority: 12 U.S.C. 1815, 1816, 1818, 1819, 1828, 1831p-1, 
5412.


0
10. Section 329.3 is amended by revising the definition for ``Liquid 
and readily-marketable'' and adding the definition for ``Municipal 
obligation'' in alphabetical order to read as follows:


Sec.  329.3  Definitions.

* * * * *
    Liquid and readily-marketable has the meaning given the term in 12 
CFR 249.3.
* * * * *
    Municipal obligation means an obligation of:
    (1) A state or any political subdivision thereof; or
    (2) Any agency or instrumentality of a state or any political 
subdivision thereof.
* * * * *


0
11. Section 329.20 is amended by:
0
a. Republishing paragraph (c) introductory text;
0
b. Removing the ``or'' at the end of paragraph (c)(1)(iii);
0
c. Removing the period at the end of paragraph (c)(2)(vi) and adding 
``; or'' in its place; and
0
d. Adding paragraph (c)(3).
    The republication and addition read as follows:


Sec.  329.20  High-quality liquid asset criteria.

* * * * *
    (c) Level 2B liquid assets. An asset is a level 2B liquid asset if 
the asset is liquid and readily-marketable and is one of the following 
types of assets:
* * * * *
    (3) A municipal obligation that is investment grade under 12 CFR 
part 1 as of the calculation date.

    Dated: August 20, 2018.
Joseph M. Otting,
Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System, August 21, 2018.
Ann E. Misback,
Secretary of the Board.

    Dated at Washington, DC, on August 22, 2018.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Valerie Jean Best,
Assistant Executive Secretary.
[FR Doc. 2018-18610 Filed 8-30-18; 8:45 am]
 BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P

Federal Register / Vol. 83, No. 170 / Friday, August 31, 2018 / Rules and Regulations 44451 DEPARTMENT OF THE TREASURY Please use the title ‘‘Liquidity Coverage OCC, 400 7th Street SW, Washington, Ratio Rule: Treatment of Certain DC 20219. For security reasons, the OCC Office of the Comptroller of the Municipal Obligations as High-Quality requires that visitors make an Currency Liquid Assets’’ to facilitate the appointment to inspect comments. You organization and distribution of the may do so by calling (202) 649–6700 or, 12 CFR Part 50 comments. You may submit comments for persons who are deaf or hearing- by any of the following methods: impaired, TTY, (202) 649–5597. Upon [Docket ID OCC–2018–0013] • Federal eRulemaking Portal— arrival, visitors will be required to RIN 1557–AE36 ‘‘Regulations.gov’’: Go to present valid government-issued photo www.regulations.gov. Enter ‘‘Docket ID identification and submit to security FEDERAL RESERVE SYSTEM OCC–2018–0013’’ in the Search box and screening in order to inspect comments. click ‘‘Search.’’ Click on ‘‘Comment Board: When submitting comments, 12 CFR Part 249 Now’’ to submit public comments. Click please consider submitting your on the ‘‘Help’’ tab on the comments by email or fax because paper [Docket No. R–1616] Regulations.gov home page to get mail in the Washington, DC area and at RIN 7100–AF10 information on using Regulations.gov, the Board may be subject to delay. You including instructions for submitting may submit comments, identified by FEDERAL DEPOSIT INSURANCE public comments. Docket No. R–1616 and RIN 7100–AF10, CORPORATION • Email: regs.comments@ by any of the following methods: occ.treas.gov. • Agency website: http:// 12 CFR Part 329 • Mail: Legislative and Regulatory www.federalreserve.gov. Follow the Activities Division, Office of the instructions for submitting comments at RIN 3064–AE77 Comptroller of the Currency, 400 7th http://www.federalreserve.gov/ Liquidity Coverage Ratio Rule: Street SW, Suite 3E–218, Washington, generalinfo/foia/ProposedRegs.cfm. Treatment of Certain Municipal DC 20219. • Email: regs.comments@ • Hand Delivery/Courier: 400 7th federalreserve.gov. Include docket and Obligations as High-Quality Liquid Street SW, suite 3E–218, Washington, RIN numbers in the subject line of the Assets DC 20219. message. AGENCY: Office of the Comptroller of the • Fax: (571) 465–4326. • FAX: (202) 452–3819 or (202) 452– Currency (OCC), Treasury; Board of Instructions: You must include 3102. Governors of the Federal Reserve ‘‘OCC’’ as the agency name and ‘‘Docket • Mail: Ann E. Misback, Secretary, System (Board); and Federal Deposit ID OCC–2018–0013’’ in your comment. Board of Governors of the Federal Insurance Corporation (FDIC). In general, OCC will enter all comments Reserve System, 20th Street and ACTION: Interim final rule with request received into the docket and publish the Constitution Avenue NW, Washington, for comment. comments on the Regulations.gov DC 20551. website without change, including any Instructions: All public comments SUMMARY: The OCC, the Board, and the business or personal information that will be made available on the Board’s FDIC (collectively, the agencies) are you provide such as name and address website at http:// jointly issuing and inviting comment on information, email addresses, or phone www.federalreserve.gov/generalinfo/ an interim final rule that amends the numbers. Comments received, including foia/ProposedRegs.cfm as submitted, agencies’ liquidity coverage ratio (LCR) attachments and other supporting unless modified for technical reasons or rule to treat liquid and readily- materials, are part of the public record to remove personally identifiable marketable, investment grade municipal and subject to public disclosure. Do not information at the commenter’s request. obligations as high-quality liquid assets include any information in your Accordingly, comments will not be (HQLA). Section 403 of the Economic comment or supporting materials that edited to remove any identifying or Growth, Regulatory Relief, and you consider confidential or contact information. Public comments Consumer Protection Act amends inappropriate for public disclosure. may also be viewed electronically or in section 18 of the Federal Deposit You may review comments and other paper in Room 3515, 1801 K Street NW Insurance Act and requires the agencies, related materials that pertain to this (between 18th and 19th Streets NW), for purposes of their LCR rule and any rulemaking action by any of the Washington, DC 20006 between 9:00 other regulation that incorporates a following methods: a.m. and 5:00 p.m. on weekdays. For definition of the term ‘‘high-quality • Viewing Comments Electronically: security reasons, the Board requires that liquid asset’’ or another substantially Go to www.regulations.gov. Enter visitors make an appointment to inspect similar term, to treat a municipal ‘‘Docket ID OCC–2018–0013’’ in the comments. You may do so by calling obligation as HQLA (that is a level 2B Search box and click ‘‘Search.’’ Click on (202) 452–3684. Upon arrival, visitors liquid asset) if that obligation is, as of ‘‘Open Docket Folder’’ on the right side will be required to present valid the LCR calculation date, ‘‘liquid and of the screen. Comments and supporting government-issued photo identification readily-marketable’’ and ‘‘investment materials can be viewed and filtered by and to submit to security screening in grade.’’ clicking on ‘‘View all documents and order to inspect and photocopy comments in this docket’’ and then comments. DATES: The interim final rule is effective using the filtering tools on the left side FDIC: You may submit comments, on August 31, 2018. Comments on the of the screen. Click on the ‘‘Help’’ tab identified by FDIC RIN 3064–AE77, by interim final rule must be received by daltland on DSKBBV9HB2PROD with RULES on the Regulations.gov home page to get any of the following methods: October 1, 2018. information on using Regulations.gov. • Agency website: http:// ADDRESSES: Comments should be The docket may be viewed after the www.FDIC.gov/regulations/laws/ directed to: close of the comment period in the same federal/. OCC: Commenters are encouraged to manner as during the comment period. • Mail: Robert E. Feldman, Executive submit comments through the Federal • Viewing Comments Personally: You Secretary, Attention: Comments/Legal eRulemaking Portal or email, if possible. may personally inspect comments at the ESS, Federal Deposit Insurance VerDate Sep<11>2014 16:04 Aug 30, 2018 Jkt 244001 PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

44452 Federal Register / Vol. 83, No. 170 / Friday, August 31, 2018 / Rules and Regulations Corporation, 550 17th Street NW, Williams, II, Counsel, (202) 898–3591, criteria for HQLA and limitations for an Washington, DC 20429. or Alexander S. Bonander, Attorney asset’s inclusion in the HQLA amount. • Hand Delivery: Comments may be (202) 898–3621, Supervision and In 2016, the Board amended its LCR hand-delivered to the guard station at Corporate Operations Branch, Legal rule to include certain U.S. municipal the rear of the 550 17th Street NW Division, Federal Deposit Insurance securities as HQLA, subject to certain building (located on F Street), on Corporation, 550 17th Street NW, limitations (2016 Amendments).5 To business days between 7:00 a.m. and Washington, DC 20429. For the hearing qualify as level 2B liquid assets under 5:00 p.m. impaired only, Telecommunication the 2016 Amendments, the U.S. • Email: comments@FDIC.gov. Device for the Deaf (TDD), (800) 925– municipal securities must be general Instructions: Comments submitted 4618. obligation securities of public sector must include ‘‘FDIC’’ and ‘‘RIN 3064– entities (i.e., a state, local authority, or SUPPLEMENTARY INFORMATION: other governmental subdivision below AE77.’’ Comments received will be posted without change to http:// I. Background the U.S. sovereign entity level).6 Under www.FDIC.gov/regulations/laws/ the 2016 Amendments, a general The Office of the Comptroller of the obligation is defined as a bond or federal/, including any personal Currency (OCC), the Board of Governors information provided. similar obligation that is backed by the of the Federal Reserve System (Board), full faith and credit of a public sector FOR FURTHER INFORMATION CONTACT: and the Federal Deposit Insurance OCC: Christopher McBride, Director, entity.7 To be treated as HQLA, the Corporation (FDIC) (collectively, the general obligation securities also must: James Weinberger, Technical Expert, or agencies) adopted the liquidity coverage (1) Be investment grade under 12 CFR Ang Middleton, Bank Examiner (Risk ratio (LCR) rule 1 in 2014. The LCR rule part 1 as of the calculation date; (2) be Specialist), (202) 649–6360, Treasury & established a quantitative liquidity issued or guaranteed by a public sector Market Risk Policy; David Stankiewicz, requirement that is designed to promote entity whose obligations have a proven Special Counsel, Securities and the short-term resilience of the liquidity record as a reliable source of liquidity Corporate Practices Division, (202) 649– risk profile of large and internationally in repurchase or sales markets during 5510; Henry Barkhausen, Counsel, or active banking organizations. The intent stressed market conditions; 8 and (3) not Daniel Perez, Attorney, Legislative and of the agencies in issuing the LCR rule be an obligation of a financial sector Regulatory Activities Division, (202) was to improve the banking sector’s entity or a financial sector entity’s 649–5490; for persons who are deaf or ability to absorb shocks arising from consolidated subsidiary, unless it is hearing-impaired, TTY, (202) 649–5597, financial and economic stress and the only guaranteed by a financial sector Office of the Comptroller of the measurement and management of entity or its consolidated subsidiary and Currency, 400 7th Street SW, liquidity risk.2 The LCR rule generally otherwise eligible.9 The 2016 Washington, DC 20219. applies to a bank holding company, Amendments limited the inclusion of Board: Constance Horsley, Deputy savings and loan holding company, or general obligation securities in the Associate Director, (202) 452–5239, depository institution if: (1) It has total HQLA amount to 5 percent of the Peter Clifford, Manager, (202) 785–6057, consolidated assets equal to $250 billion covered company’s total HQLA J. Kevin Littler, Senior Supervisory or more; (2) it has total consolidated on- amount.10 The 2016 Amendments also Financial Analyst, (202) 475–6677, or balance sheet foreign exposure equal to limited the inclusion of general Christopher Powell, Supervisory $10 billion or more; or (3) it is a obligation securities of any single public Financial Analyst, (202) 452–3442, depository institution with total sector entity to two times the average Division of Banking Supervision and consolidated assets equal to $10 billion daily trading volume during the Regulation; Laurie Schaffer, Associate or more and is a consolidated subsidiary previous four quarters of all general General Counsel, (202) 452–2272, of a firm that is subject to the LCR rule obligation securities issued by that Benjamin W. McDonough, Assistant (each, a covered company).3 Covered public sector entity.11 General Counsel, (202) 452–2036, Steve companies generally must maintain an The Economic Growth, Regulatory Bowne, Senior Attorney, (202) 452– amount of high-quality liquid assets Relief, and Consumer Protection Act 3900, or Laura Bain, Senior Attorney, (HQLA) equal to or greater than their (EGRRCPA) was enacted on May 24, (202) 736–5546, Legal Division, Board of projected total net cash outflows over a 2018.12 Section 403 of the EGRRCPA Governors of the Federal Reserve prospective 30 calendar-day period.4 amends section 18 of the Federal System, 20th and C Streets NW, The LCR rule defines three categories of Deposit Insurance Act 13 and requires Washington, DC 20551. For the hearing HQLA—level 1, level 2A, and level 2B the agencies, for purposes of the LCR impaired only, Telecommunication liquid assets—and sets forth qualifying Device for the Deaf (TDD), (202) 263– 5 81 FR 21223 (April 11, 2016), codified at 12 CFR 4869, Board of Governors of the Federal 1 79 FR 61440 (October 10, 2014), codified at 12 part 249 (Board). 6 12 CFR 249.20(c)(2). Reserve System, 20th Street and CFR part 50 (OCC), 12 CFR part 249 (Board), and 7 12 CFR 249.3. Constitution Avenue NW, Washington, 12 CFR part 329 (FDIC). 8 This is demonstrated by (A) the market price of 2 Id. DC 20551. the security or equivalent securities of the issuer 3 See section 1 of the LCR rule. FDIC: Bobby R. Bean, Associate 4 The Board separately adopted a modified LCR declining by no more than 20 percent during a 30 Director, (202) 898–6705, Michael E. requirement for bank holding companies and calendar-day period of significant stress or (B) the Spencer, Chief, (202) 898–7041, Eric W. market haircut demanded by counterparties to certain savings and loan holding companies that, in secured lending and secured funding transactions Schatten, Senior Policy Analyst, (202) each case, (A) have $50 billion or more in total that are collateralized by the security or equivalent 898–7063, Andrew D. Carayiannis, consolidated assets and (B) are not internationally securities of the issuer increasing by no more than active (each, a modified LCR holding company). Senior Policy Analyst, (202) 898–6692, daltland on DSKBBV9HB2PROD with RULES 20 percentage points during a 30 calendar-day Under the Board’s LCR rule, modified LCR holding period of significant stress. 12 CFR 249.20(c)(2). or Nana Ofori-Ansah, Capital Markets companies must maintain an amount of HQLA 9 Id. Policy Analyst, (202) 898–3572, Capital equal to or greater than 70 percent of their projected 10 12 CFR 249.21. Markets Branch, Division of Risk total net cash outflows on the last business day of 11 12 CFR 249.22(c). the applicable calendar month. 12 CFR 249 subpart Management Supervision; Suzanne J. G. This interim final rule’s changes to the Board’s 12 Public Law 115–174, 132 Stat. 1296–1368 Dawley, Counsel, (202) 898–6509 LCR rule also apply to modified LCR holding (2018). (sudawley@fdic.gov), Andrew B. companies. 13 12 U.S.C. 1828(aa). VerDate Sep<11>2014 16:04 Aug 30, 2018 Jkt 244001 PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

Federal Register / Vol. 83, No. 170 / Friday, August 31, 2018 / Rules and Regulations 44453 rule and any other regulation that interest is expected.’’ 16 A municipal of revenue bonds will now qualify as incorporates a definition of the term obligation is required to meet this municipal obligations. ‘‘high-quality liquid asset’’ or another definition of ‘‘investment grade’’ as of Only municipal obligations that meet substantially similar term, to treat a the calculation date to be treated as a the LCR rule’s definition for liquid and municipal obligation as HQLA that is a level 2B liquid asset under the interim readily-marketable and that are level 2B liquid asset if that obligation is, final rule. investment grade under 12 CFR part 1 as of the calculation date, (A) liquid and Consistent with section 403, the will qualify for treatment as HQLA readily-marketable and (B) investment interim final rule also amends the under this interim final rule.20 The grade. Section 403 defines ‘‘investment definition of ‘‘liquid and readily- interim final rule does not otherwise grade’’ as having the meaning given the marketable’’ in the FDIC’s and OCC’s affect covered companies’ obligations term in § 1.2 of title 12, Code of Federal rules so that the term has the same under the LCR rule. Regulations, or any successor thereto. meaning given to it under the Board’s Section 403 defines ‘‘liquid and readily- rules. Under this provision of the III. Request for Comment marketable’’ as having the meaning Board’s rules, a ‘‘liquid and readily- The definition of ‘‘municipal given the term in § 249.3 of title 12, marketable’’ security is a security that is obligation’’ and the criteria for treating Code of Federal Regulations, or any traded in an active secondary market municipal obligations as level 2B liquid successor thereto. Section 403 defines with: (1) More than two committed assets were established by section 403 of ‘‘municipal obligation’’ as ‘‘an market makers; (2) a large number of the EGRRCPA. Consistent with section obligation of—(i) a State or any political non-market maker participants on both 403, in what ways, if any, could the subdivision thereof; or (ii) any agency or the buying and selling sides of agencies clarify aspects of these instrumentality of a State or any transactions; (3) timely and observable provisions (e.g., by clarifying the terms political subdivision thereof.’’ market prices; and (4) a high trading ‘‘state’’ or ‘‘political subdivision’’)? The volume.17 As described above, a II. Description of the Interim Final Rule agencies invite comment on this municipal obligation is required to be question and all other aspects of this This interim final rule amends the liquid and readily-marketable as of the date of calculation to be treated as a interim final rule. agencies’ LCR rule to implement section 403 of the EGRRCPA. Section 403 level 2B liquid asset under the interim IV. Regulatory Analysis requires the agencies to treat a final rule. As part of the interim final rule, the A. Administrative Procedure Act and municipal obligation as a level 2B liquid Effective Date asset if the obligation, as of the Board is rescinding the 2016 calculation date, is liquid and readily- Amendments so that municipal The agencies are issuing the interim marketable and investment grade.14 To obligations under the Board’s LCR rule final rule without prior notice and the effect this change, the interim final rule will be treated consistently with section opportunity for public comment and the makes certain amendments to each 403 of the EGRRCPA. As a result of the 30 day delayed effective date ordinarily agency’s LCR rule that incorporate the above changes, covered companies will prescribed by the Administrative provisions of section 403 of the be able to count municipal obligations Procedure Act (APA).21 Pursuant to EGRRCPA. as HQLA that qualify as level 2B liquid section 553(b)(B) of the APA, general The interim final rule adds a assets, provided the municipal notice and the opportunity for public definition to the agencies’ rule for the obligations meet the HQLA criteria comment are not required prior to the term ‘‘municipal obligations,’’ which, under the LCR rule.18 Accordingly, issuance of a final rule if an agency, for consistent with the EGRRCPA, means an covered companies will have greater good cause, finds (and incorporates the obligation of (1) a state or any political flexibility in meeting the minimum finding and a brief statement of reasons subdivision thereof or (2) any agency or requirements under the LCR rule as therefor in the rules issued) that ‘‘notice instrumentality of a state or any more types of assets will be eligible as and public procedure thereon are political subdivision thereof. HQLA. For FDIC- and OCC-regulated impracticable, unnecessary, or contrary The interim final rule amends the institutions, these changes will mark the to the public interest.’’ 22 HQLA criteria with respect to level 2B first time that such institutions may liquid assets by adding municipal treat any municipal obligations as Amendments; or (2) be prohibited from being an obligations that, as of the calculation HQLA. For Board-regulated institutions, obligation of a financial sector entity or a financial date, are both (1) liquid and readily- these changes are expected to broaden sector entity’s consolidated subsidiary. In addition, marketable and (2) investment grade the number of municipal obligations the amount of municipal obligations that can be that can be counted as HQLA. In included in Board-regulated institutions’ HQLA (under 12 CFR part 1) to the list of assets amount will no longer be limited to 5 percent of the that are eligible for treatment as level 2B particular, for purposes of the types of total HQLA amount. The limit on the amount of liquid assets.15 The OCC’s definition of assets eligible for treatment as HQLA, municipal obligations of a single issuer that may be ‘‘investment grade’’ under 12 CFR 1.2 municipal obligations will no longer be included as eligible HQLA will also no longer apply required to be general obligation to Board-regulated institutions. provides that ‘‘[i]nvestment grade means 20 This interim final rule does not affect other the issuer of a security has an adequate securities.19 As a result, many issuances requirements under the LCR rule that serve to capacity to meet financial commitments restrict HQLA, such as the 50 percent haircut for 16 12 CFR 1.2. level 2B liquid assets under section 21(b) and the under the security for the projected life 17 12 CFR 249.3. restriction that level 2B assets cannot exceed more of the asset or exposure. An issuer has 18 Corresponding changes will be made to the than 15 percent of the total HQLA amount. In an adequate capacity to meet financial Complex Institution Liquidity Monitoring Report addition, this interim final rule does not affect the commitments if the risk of default by (FR 2052a). These changes will be described in a section 22 requirements, which address the daltland on DSKBBV9HB2PROD with RULES separate Federal Register notice. operational and generally applicable criteria for the obligor is low and the full and eligible HQLA. With regard to net cash outflows, 19 Additionally, to count as HQLA, municipal timely repayment of principal and obligations will not (1) be required to be issued or the interim final rule does not affect the guaranteed by a public sector entity whose requirements under sections 32 and 33, which 14 12 CFR part 50 (OCC), 12 CFR part 249 (Board), obligations have a proven record as a reliable source address the calculation of outflow and inflow and 12 CFR part 329 (FDIC). of liquidity in repurchase or sales markets during amounts, respectively. 15 12 CFR 50.20 (OCC), 12 CFR 249.20 (FRB), and 21 5 U.S.C. 553. stressed market conditions, as demonstrated by the 12 CFR 329.20 (FDIC). quantitative metrics included in the 2016 22 5 U.S.C. 553(b)(B). VerDate Sep<11>2014 16:04 Aug 30, 2018 Jkt 244001 PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

44454 Federal Register / Vol. 83, No. 170 / Friday, August 31, 2018 / Rules and Regulations As discussed above, this interim final For the reasons described above in Accordingly, this interim final rule is rule implements the provisions of connection with the APA section not subject to section 202 of the section 403 of the EGRRCPA, which 553(b)(B) requirement, the agencies find Unfunded Mandates Act. became effective on May 24, 2018, and good cause exists under section 302 of List of Subjects directs the agencies to make certain RCDRIA to publish this interim final changes to the criteria for HQLA. The rule with an immediate effective date. 12 CFR Part 50 interim final rule adopts without change While the agencies believe there is Administrative practice and the statutory definition for ‘‘municipal good cause to issue the rules without procedure, Banks, Banking, Liquidity, obligations’’ and the requirement that advance notice and comment and with Reporting and recordkeeping municipal obligations be treated as level an immediate effective date, the requirements, Savings associations. 2B liquid assets if the obligations are agencies are interested in the views of liquid and readily-marketable and the public and request comment on all 12 CFR Part 249 investment grade. Because these aspects of the interim final rule. Administrative practice and changes to the LCR rule are mandated procedure, Banks, Banking, Federal C. Regulatory Flexibility Act by the EGRRCPA, the agencies have Reserve System, Holding companies, determined that publishing a notice of The Regulatory Flexibility Act (RFA) Liquidity, Reporting and recordkeeping proposed rulemaking is unnecessary. In does not apply to a rulemaking when a requirements. addition, the agencies believe that the general notice of proposed rulemaking public interest is best served by is not required. 5 U.S.C. 603 and 604. 12 CFR Part 329 implementing Congress’s legislative As noted previously, the agencies have Administrative practice and directive as soon as possible because determined that it is unnecessary to procedure, Banks, Banking, Federal immediate implementation would publish a general notice of proposed Deposit Insurance Corporation, FDIC, provide clarity to the public regarding rulemaking for this interim final rule. Liquidity, Reporting and recordkeeping the liquidity rules and would be Accordingly, the RFA’s requirements requirements. consistent with Congress’s directive to relating to an initial and final regulatory the agencies under section 403(b) of the flexibility analysis do not apply. Authority and Issuance EGRRCPA to amend the LCR rule within Nonetheless, the agencies observe that For the reasons stated in the 90 days after enactment of the in light of the way the interim final rule preamble, the OCC amends 12 CFR part EGRRCPA. operates, they believe that, with respect 50, the Board amends 12 CFR part 249, The effective date of this interim final to the entities subject to the interim and the FDIC amends 12 CFR part 329 rule is August 31, 2018. Pursuant to final rule and within each agency’s as follows: section 553(d)(3) of the APA, the respective jurisdiction, the interim final required publication or service of a rule would not have a significant Department of the Treasury substantive rule shall be made not less economic impact on a substantial Office of the Comptroller of the than 30 days before its effective date, number of small entities.26 Currency except as otherwise provided by the D. Paperwork Reduction Act of 1995 agency for good cause found and PART 50—LIQUIDITY RISK published with the rule.23 For the The Paperwork Reduction Act of 1995 MEASUREMENT STANDARDS reasons described above in connection (44 U.S.C. 3501–3521) states that no with APA section 553(b)(B), the agency may conduct or sponsor, nor is ■ 1. The authority citation for part 50 is agencies find good cause to publish the the respondent required to respond to, revised to read as follows: rule with an immediate effective date. an information collection unless it Authority: 12 U.S.C. 1 et seq., 93a, 481, displays a currently valid Office of 1818, 1828, and 1462 et seq. B. Riegle Community Development and Management and Budget control Regulatory Improvement Act number. The agencies have determined ■ 2. Section 50.3 is amended by revising Pursuant to section 302(a) of the that this interim final rule does not the definition for ‘‘Liquid and readily- Riegle Community Development and create any new, or revise any existing, marketable’’ and adding the definition Regulatory Improvement Act collections of information pursuant to for ‘‘Municipal obligation’’ in (RCDRIA),24 in determining the effective the Paperwork Reduction Act. alphabetical order to read as follows: date and administrative compliance § 50.3 Definitions. E. Unfunded Mandates Reform Act of requirements for a new regulation that 1995 * * * * * imposes additional reporting, Liquid and readily-marketable has the disclosure, or other requirements on Section 202 of the Unfunded Mandates Reform Act of 1995 meaning given the term in 12 CFR insured depository institutions, each 249.3. federal banking agency must consider (Unfunded Mandates Act), 2 U.S.C. any administrative burdens that such 1532, requires the OCC to prepare a * * * * * regulation would place on depository budgetary impact statement before Municipal obligation means an institutions and the benefits of such promulgating any final rule for which a obligation of: general notice of proposed rulemaking (1) A state or any political subdivision regulation. In addition, section 302(b) of was published. As discussed above, the thereof; or the RCDRIA 25 requires such new OCC has determined that the (2) Any agency or instrumentality of regulation to take effect on the first day publication of a general notice of a state or any political subdivision of a calendar quarter that begins on or thereof. daltland on DSKBBV9HB2PROD with RULES after the date on which the regulations proposed rulemaking is unnecessary. are published in final form, with certain * * * * * exceptions, including for good cause. 26 Under regulations issued by the Small Business ■ 3. Section 50.20 is amended by: Administration, a small entity includes a depository ■ a. Republishing paragraph (c) institution, bank holding company, or savings and 23 5U.S.C. 553(d). loan holding company with total assets of $550 introductory text; 24 12 U.S.C. 4802(a). million or less and trust companies with total assets ■ b. Removing the ‘‘or’’ at the end of 25 12 U.S.C. 4802(b). of $38.5 million or less. paragraph (c)(1)(iii); VerDate Sep<11>2014 16:04 Aug 30, 2018 Jkt 244001 PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

Federal Register / Vol. 83, No. 170 / Friday, August 31, 2018 / Rules and Regulations 44455 ■ c. Removing the period at the end of ■ a. Removing paragraph (b)(4); (3) A municipal obligation that is paragraph (c)(2)(vi) and adding ‘‘; or’’ in ■ b. Removing ‘‘; plus’’ at the end of investment grade under 12 CFR part 1 its place; and paragraph (c)(2) and adding in its place as of the calculation date. ■ d. Adding paragraph (c)(3). a period; Dated: August 20, 2018. The republication and addition read ■ c. Removing paragraphs (c)(3), (f), and Joseph M. Otting, as follows: (g)(4); Comptroller of the Currency. ■ d. Removing ‘‘; plus’’ at the end of § 50.20 High-quality liquid asset criteria. paragraph (h)(2) and adding in its place By order of the Board of Governors of the * * * * * a period; Federal Reserve System, August 21, 2018. (c) Level 2B liquid assets. An asset is ■ e. Removing paragraphs (h)(3) and (k); Ann E. Misback, a level 2B liquid asset if the asset is and Secretary of the Board. liquid and readily-marketable and is one ■ f. Redesignating paragraphs (g) of the following types of assets: through (j) as paragraphs (f) through (i), Dated at Washington, DC, on August 22, * * * * * respectively. 2018. (3) A municipal obligation that is By order of the Board of Directors. investment grade under 12 CFR part 1 § 249.22 [Amended] Federal Deposit Insurance Corporation. as of the calculation date. ■ 8. Amend § 249.22 by removing Valerie Jean Best, Federal Reserve System paragraph (c) and redesignating Assistant Executive Secretary. paragraph (d) as paragraph (c). [FR Doc. 2018–18610 Filed 8–30–18; 8:45 am] PART 249—LIQUIDITY RISK Federal Deposit Insurance Corporation BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P MEASUREMENT STANDARDS (REGULATION WW) PART 329—LIQUIDITY RISK MEASUREMENT STANDARDS DEPARTMENT OF TRANSPORTATION ■ 4. The authority citation for part 249 continues to read as follows: ■ 9. The authority citation for part 329 Federal Aviation Administration Authority: 12 U.S.C. 248(a), 321–338a, continues to read as follows: 481–486, 1467a(g)(1), 1818, 1828, 1831p–1, Authority: 12 U.S.C. 1815, 1816, 1818, 14 CFR Part 31 1831o–1, 1844(b), 5365, 5366, 5368. 1819, 1828, 1831p–1, 5412. [Docket No. FAA–2018–0566; Notice No. 31– ■ 5. Amend § 249.3 by removing the ■ 10. Section 329.3 is amended by 002–SC] definition for ‘‘General obligation’’ and revising the definition for ‘‘Liquid and adding the definition for ‘‘Municipal readily-marketable’’ and adding the Special Conditions: Ultramagic S.A., obligation’’ in alphabetical order to read definition for ‘‘Municipal obligation’’ in Model M–56, M–56C, M–65, M–65C, M– as follows: alphabetical order to read as follows: 77, M–77C, M–90, M–105, M–120, M– § 249.3 Definitions. 130, M–145, M–160, N–180, N–210, N– § 329.3 Definitions. 250, N–300, N–355, N–425, S–70, S–90, * * * * * * * * * * S–105, S–130, S–160, T–150, T–180, T– Municipal obligation means an Liquid and readily-marketable has the 210, V–56, V–65, V–77, V–90, and V– obligation of: (1) A state or any political subdivision meaning given the term in 12 CFR 105 Balloons; Balloon Passenger thereof; or 249.3. Basket, Model CV–08, Seat Installation (2) Any agency or instrumentality of * * * * * AGENCY: Federal Aviation a state or any political subdivision Municipal obligation means an Administration (FAA), DOT. thereof. obligation of: (1) A state or any political subdivision ACTION: Final special conditions. * * * * * thereof; or SUMMARY: These special conditions are ■ 6. Amend § 249.20 by republishing (2) Any agency or instrumentality of issued for Ultramagic S.A. Models M– paragraph (c) introductory text, a state or any political subdivision 56, M–56C, M–65, M–65C, M–77, M– removing the ‘‘or’’ at the end of thereof. 77C, M–90, M–105, M–120, M–130, M– paragraph (c)(1)(iii), removing * * * * * 145, M–160, N–180, N–210, N–250, N– paragraph (c)(2), redesignating ■ 11. Section 329.20 is amended by: 300, N–355, N–425, S–70, S–90, S–105, paragraph (c)(3) as (c)(2), removing the ■ a. Republishing paragraph (c) S–130, S–160, T–150, T–180, T–210, V– period at the end of newly redesignated introductory text; 56, V–65, V–77, V–90, and V–105 paragraph (c)(2)(vi) and adding ‘‘; or’’ in ■ b. Removing the ‘‘or’’ at the end of balloons. These balloons will have its place, and adding a new paragraph paragraph (c)(1)(iii); novel or unusual design features (c)(3) to read as follows: ■ c. Removing the period at the end of associated with a standard construction § 249.20 High-quality liquid asset criteria. paragraph (c)(2)(vi) and adding ‘‘; or’’ in basket with a singular distribution that * * * * * its place; and includes four occupant seats and a (c) Level 2B liquid assets. An asset is ■ d. Adding paragraph (c)(3). lower sidewall. The applicable a level 2B liquid asset if the asset is The republication and addition read airworthiness regulations do not contain liquid and readily-marketable and is one as follows: adequate or appropriate safety standards of the following types of assets: for these design features. These special § 329.20 High-quality liquid asset criteria. conditions contain the additional safety daltland on DSKBBV9HB2PROD with RULES * * * * * (3) A municipal obligation that is * * * * * standards the Administrator considers investment grade under 12 CFR part 1 (c) Level 2B liquid assets. An asset is necessary to establish a level of safety as of the calculation date. a level 2B liquid asset if the asset is equivalent to that established by the liquid and readily-marketable and is one existing airworthiness standards. § 249.21 [Amended] of the following types of assets: DATES: These special conditions are ■ 7. Amend § 249.21 by: * * * * * effective August 31, 2018. VerDate Sep<11>2014 16:04 Aug 30, 2018 Jkt 244001 PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1


Document Created: 2018-08-31 00:53:58
Document Modified: 2018-08-31 00:53:58
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionInterim final rule with request for comment.
DatesThe interim final rule is effective on August 31, 2018. Comments on the interim final rule must be received by October 1, 2018.
ContactOCC: Christopher McBride, Director, James Weinberger, Technical Expert, or Ang Middleton, Bank Examiner (Risk Specialist), (202) 649- 6360, Treasury & Market Risk Policy; David Stankiewicz, Special Counsel, Securities and Corporate Practices Division, (202) 649-5510; Henry Barkhausen, Counsel, or Daniel Perez, Attorney, Legislative and Regulatory Activities Division, (202) 649-5490; for persons who are deaf or hearing-impaired, TTY, (202) 649-5597, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219.
FR Citation83 FR 44451 
RIN Number1557-AE36, 7100-AF10 and 3064-AE77
CFR Citation12 CFR 249
12 CFR 329
12 CFR 50
CFR AssociatedFederal Reserve System; Holding Companies; Federal Deposit Insurance Corporation; Fdic; Administrative Practice and Procedure; Banks; Banking; Liquidity; Reporting and Recordkeeping Requirements and Savings Associations
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