SUPPLEMENTARY INFORMATION:

I. Background

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act or the Act) to “promote the financial stability of the United States by improving accountability and transparency in the financial system,” (Pub. L. 111-203). In the Act, Congress found that “ratings on structured financial products have proven to be inaccurate” and that “[t]his inaccuracy contributed significantly to the mismanagement of risks by financial institutions and investors, which in turn adversely impacted the health of the economy.” In section 939A of the Act, Congress directed each Federal agency to “review any regulation issued by such agency that requires the use of an assessment of the credit-worthiness of a security or money market instrument and any references to or requirements in such regulations regarding credit ratings.” Section 939A of the Act further directed each such agency to “modify any such regulations identified by the review . . . to remove any reference to or requirement of reliance on credit ratings and to substitute in such regulations such standard of credit-worthiness as each respective agency shall determine as appropriate for such regulations.” A discussion of the NRC's decision to discontinue this rulemaking activity is provided in section II of this document.

II. Discussion

As directed by section 939A of the Dodd-Frank Act, the NRC reviewed its regulations for any references for requirements of reliance on credit ratings. In accordance with this review, the NRC issued a proposed rulemaking and associated guidance for public comment January 3, 2023 (88 FR 25). The NRC received two public comment submissions on the proposed rulemaking; the public comments were considered during the final rule revision efforts, but the NRC will not be responding due to the discontinuation of the rulemaking.

As part of the final rule revisions, the NRC reviewed Dodd-Frank Act policies and rulemakings published by other Federal agencies to examine the manner in which they implemented the removal of references to credit ratings when they are used to assess the credit-worthiness of the underlying security. In 2023, the U.S. Securities and Exchange Commission issued implementing regulations to “remove certain existing rule exceptions that reference credit ratings for nonconvertible debt securities, nonconvertible preferred securities, and asset-backed securities and substitute in their place new exceptions that are based on alternative standards of creditworthiness,” (88 FR 39962; June 20, 2023). The NRC staff also learned from the Office of Information and Regulatory Affairs (OIRA) that the NRC was the only non-financial regulator that submitted a rulemaking in response to section 939A of Dodd Frank for Executive Order 12866, “Regulatory Planning and Review.” In reviewing regulatory actions of other Federal agencies related to Dodd Frank, the NRC determined that it is in the best interest of the agency to discontinue this rulemaking as it would assess the credit-worthiness of an entity (not a security), whereas it is Federal best-practice to utilize the bottom-line credit-worthiness determination of the underlying regulation operated on a security or money market instrument.

III. Conclusion

The NRC is no longer pursuing the rulemaking for Alternatives to the Use of Credit Ratings. In the next edition of the Unified Agenda, the NRC will update the entry for this rulemaking activity and reference this document to indicate that the rulemaking activity is no longer being pursued. This rulemaking will appear in the completed actions section of that edition of the Unified Agenda but will not appear in future editions. The NRC ( printed page 68894) will inform the public of future associated rulemakings through new rulemaking entries in the Unified Agenda.

91 FR 68893