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2014-02019

  • Federal Register, Volume 79 Issue 21 (Friday, January 31, 2014)[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]

    [Rules and Regulations]

    [Pages 5223-5228]

    From the Federal Register Online via the Government Printing Office [www.gpo.gov]

    [FR Doc No: 2014-02019]

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    Rules and Regulations

    Federal Register

    ________________________________________________________________________

    This section of the FEDERAL REGISTER contains regulatory documents

    having general applicability and legal effect, most of which are keyed

    to and codified in the Code of Federal Regulations, which is published

    under 50 titles pursuant to 44 U.S.C. 1510.

    The Code of Federal Regulations is sold by the Superintendent of Documents.

    Prices of new books are listed in the first FEDERAL REGISTER issue of each

    week.

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    Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Rules

    and Regulations

    [[Page 5223]]

    DEPARTMENT OF THE TREASURY

    Office of the Comptroller of the Currency

    12 CFR Part 44

    [Docket No. OCC-2014-0003]

    RIN 1557-AD79

    BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

    12 CFR Part 248

    [Docket No. R-1480]

    RIN 7100 AE-11

    FEDERAL DEPOSIT INSURANCE CORPORATION

    12 CFR Part 351

    RIN 3064-AE11

    SECURITIES AND EXCHANGE COMMISSION

    17 CFR Part 255

    [Release No. BHCA-2]

    RIN 3235-AL52

    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 75

    RIN 3038-AE13

    Treatment of Certain Collateralized Debt Obligations Backed

    Primarily by Trust Preferred Securities With Regard to Prohibitions and

    Restrictions on Certain Interests in, and Relationships With, Hedge

    Funds and Private Equity Funds

    AGENCY: Office of the Comptroller of the Currency, Treasury (``OCC'');

    Board of Governors of the Federal Reserve System (``Board''); Federal

    Deposit Insurance Corporation (``FDIC''); Commodity Futures Trading

    Commission (``CFTC'') and Securities and Exchange Commission (``SEC'').

    ACTION: Interim final rule.

    -----------------------------------------------------------------------

    SUMMARY: The OCC, Board, FDIC, CFTC and SEC (individually, an

    ``Agency,'' and collectively, ``the Agencies'') are each adopting a

    common interim final rule that would permit banking entities to retain

    investments in certain pooled investment vehicles that invested their

    offering proceeds primarily in certain securities issued by community

    banking organizations of the type grandfathered under section 171 of

    the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-

    Frank Act''). The interim final rule is a companion rule to the final

    rules adopted by the Agencies to implement section 13 of the Bank

    Holding Company Act of 1956 (``BHC Act''), which was added by section

    619 of the Dodd-Frank Act.

    DATES: Effective date: The interim final rule is effective on April 1,

    2014. Comment date: Comments on the interim final rule should be

    received on or before March 3, 2014.

    ADDRESSES: Interested parties are encouraged to submit written comments

    jointly to all of the Agencies. Commenters are encouraged to use the

    title ``Treatment of Certain Collateralized Debt Obligations Backed

    Primarily by Trust Preferred Securities with Regard to Prohibitions and

    Restrictions on Certain Interests in, and Relationships with, Hedge

    Funds and Private Equity Funds'' to facilitate the organization and

    distribution of comments among the Agencies.

    Office of the Comptroller of the Currency: Because paper mail in

    the Washington, DC area and at the OCC is subject to delay, commenters

    are encouraged to submit comments by the Federal eRulemaking Portal or

    email, if possible. Please use the title ``Treatment of Certain

    Collateralized Debt Obligations Backed Primarily by Trust Preferred

    Securities with Regard to Prohibitions and Restrictions on Certain

    Interests in, and Relationships with, Hedge Funds and Private Equity

    Funds'' 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

    http://www.regulations.gov. Enter ``Docket ID OCC-2014-0003'' in the

    Search Box and click ``Search.'' Results can be filtered using the

    filtering tools on the left side of the screen. 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 or viewing public comments, viewing other supporting and

    related materials, and viewing the docket after the close of the

    comment period.

    Email: regs.comments@occ.treas.gov.

    Mail: Legislative and Regulatory Activities Division,

    Office of the Comptroller of the Currency, 400 7th Street SW., Suite

    3E-218, Mail Stop 9W-11, Washington, DC 20219.

    Fax: (571) 465-4326.

    Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218,

    Mail Stop 9W-11, Washington, DC 20219.

    Instructions: You must include ``OCC'' as the agency name and

    ``Docket ID ``OCC-2014-0003'' in your comment. In general, OCC will

    enter all comments received into the docket and publish them on the

    Regulations.gov Web site 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 enclose 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 proposed rulemaking by any of the following methods:

    Viewing Comments Electronically: Go to http://www.regulations.gov. Select ``Document Type'' of ``Public

    Submissions,'' and in the ``Enter Keyword or ID Box,'' enter Docket ID

    ``OCC-2014-0003,'' and click ``Search.'' Comments can be filtered by

    Agency 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, including instructions for

    viewing public comments, viewing other supporting and related

    materials, and

    [[Page 5224]]

    viewing the docket after the close of the comment period.

    Viewing Comments Personally: You may personally inspect

    and photocopy 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. Upon arrival, visitors will be required to present valid

    government-issued photo identification and submit to security screening

    in order to inspect and photocopy comments.

    Docket: You may also view or request available background documents

    and project summaries using the methods described above.

    Board of Governors of the Federal Reserve System:

    You may submit comments, identified by Docket No. R-1480 and RIN

    7100 AE-11, by any of the following methods:

    Agency Web site: http://www.federalreserve.gov. Follow the

    instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.

    Federal eRulemaking Portal: http://www.regulations.gov.

    Follow the instructions for submitting comments.

    Email: regs.comments@federalreserve.gov. Include the

    docket number in the subject line of the message.

    Fax: (202) 452-3819 or (202) 452-3102.

    Mail: Address to Robert deV. Frierson, Secretary, Board of

    Governors of the Federal Reserve System, 20th Street and Constitution

    Avenue NW., Washington, DC 20551.

    All public comments will be made available on the Board's Web site

    at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as

    submitted, unless modified for technical reasons. 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

    MP-500 of the Board's Martin Building (20th and C Streets NW.) between

    9:00 a.m. and 5:00 p.m. on weekdays.

    Federal Deposit Insurance Corporation: You may submit comments,

    identified by RIN number, by any of the following methods:

    Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on

    the Agency Web site.

    Email: Comments@fdic.gov. Include the RIN number 3064-AE11

    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-AE11 for this rulemaking. All comments received will

    be posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html, 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.

    Commodity Futures Trading Commission: You may submit comments,

    identified by RIN number 3038-AE13 by any of the following methods:

    Agency Web site: http://comments.cftc.gov.

    Mail: Secretary of the Commission, Commodity Futures

    Trading Commission, Three Lafayette Centre, 1155 21st Street NW.,

    Washington, DC 20581.

    Hand Delivery: Same as mail above.

    Federal eRulemaking Portal: http://www.regulations.gov.

    Follow instructions for submitting comments.

    All comments must be submitted in English, or if not, accompanied

    by an English translation. Comments will be posted as received to

    www.cftc.gov. You should submit only information that you wish to make

    available publicly. If you wish the CFTC to consider information that

    is exempt from disclosure under the Freedom of Information Act, a

    petition for confidential treatment of the exempt information may be

    submitted according to the procedure established in Sec. 145.9 of the

    CFTC's regulations (17 CFR 145.9).

    The CFTC reserves the right, but shall have no obligation, to

    review, pre-screen, filter, redact, refuse, or remove any or all of

    your submission from http://www.cftc.gov that it may deem to be

    inappropriate for publication, such as obscene language. All

    submissions that have been redacted or removed that contain comments on

    the merits of the rulemaking will be retained in the public comment

    file and will be considered as required under the Administrative

    Procedure Act and other applicable laws, and may be accessible under

    the Freedom of Information Act.

    Securities and Exchange Commission: You may submit comments by the

    following method:

    Electronic Comments

    Use the Commission's Internet comment form (http://www.sec.gov/rules/interim-final-temp.shtml); or

    Send an email to rule-comments@sec.gov. Please include

    File Number S7-01-14 on the subject line; or

    Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

    Paper Comments

    Send paper comments in triplicate to Elizabeth M. Murphy,

    Secretary, Securities and Exchange Commission, 100 F Street NE.,

    Washington, DC 20549-1090.

    All submissions should refer to File Number S7-01-14. This file number

    should be included on the subject line if email is used. To help us

    process and review your comments more efficiently, please use only one

    method. The SEC will post all comments on the SEC's Internet Web site

    (http://www.sec.gov/rules/interim-final-temp.shtml). Comments are also

    available for Web site viewing and printing in the SEC's Public

    Reference Room, 100 F Street NE., Washington, DC 20549, on official

    business days between the hours of 10:00 a.m. and 3:00 p.m. All

    comments received will be posted without change; we do not edit

    personal identifying information from submissions. You should submit

    only information that you wish to make available publicly.

    FOR FURTHER INFORMATION CONTACT:

    OCC: Tiffany Eng, Legislative and Regulatory Activities Division,

    (202) 649-5490, Office of the Comptroller of the Currency, 400 7th

    Street SW., Washington, DC 20219.

    Board: Christopher M. Paridon, Counsel, (202) 452-3274, or Anna M.

    Harrington, Senior Attorney, (202) 452-6406, Legal Division, Board of

    Governors of the Federal Reserve System, 20th and C Streets NW.,

    Washington, DC 20551.

    FDIC: Bobby R. Bean, Associate Director, bbean@fdic.gov. or Karl R.

    Reitz, Chief, Capital Markets Strategies Section, kreitz@fdic.gov,

    Capital Markets Branch, Division of Risk Management Supervision, (202)

    898-6888; Michael B. Phillips, Counsel, mphillips@fdic.gov, or Gregory

    S. Feder, Counsel, gfeder@fdic.gov, Legal Division, Federal Deposit

    Insurance Corporation, 550 17th Street NW., Washington, DC 20429.

    CFTC: Erik Remmler, Deputy Director, Division of Swap Dealer and

    [[Page 5225]]

    Intermediary Oversight (``DSIO''), (202) 418-7630, eremmler@cftc.gov;

    Paul Schlichting, Assistant General Counsel, Office of the General

    Counsel (``OGC''), (202) 418-5884, pschlichting@cftc.gov; Mark Fajfar,

    Assistant General Counsel, OGC, (202) 418-6636, mfajfar@cftc.gov;

    Michael Barrett, Attorney-Advisor, DSIO, (202) 418-5598,

    mbarrett@cftc.gov, Commodity Futures Trading Commission, 1155 21st

    Street NW., Washington, DC 20581.

    SEC: W. Danforth Townley, Attorney Fellow, Jane H. Kim or Brian

    McLaughlin Johnson, Senior Counsels, Division of Investment Management,

    (202) 551-6787, U.S. Securities and Exchange Commission, 100 F Street

    NE., Washington, DC 20549.

    SUPPLEMENTARY INFORMATION:

    I. Background

    Section 619 of the Dodd-Frank Act added a new section 13 to the BHC

    Act (codified at 12 U.S.C. 1851) that generally prohibits banking

    entities from engaging in proprietary trading and from investing in,

    sponsoring, or having certain relationships with a hedge fund or

    private equity fund. These prohibitions are subject to a number of

    statutory exemptions, restrictions and definitions.

    Section 13 of the BHC Act expressly authorizes the Board, OCC,

    FDIC, CFTC, and SEC to issue implementing regulations. Each Agency

    issued a common final rule implementing section 619 that becomes

    effective on April 1, 2014 (``Final Rule'').\1\

    ---------------------------------------------------------------------------

    \1\ The Final Rule will be codified at 12 CFR part 44 (OCC), 12

    CFR part 248 (FRB), 12 CFR part 351 (FDIC), 17 CFR part 75 (CFTC),

    and 17 CFR part 255 (SEC). The Final Rule defines a covered fund as

    an issuer that would be an investment company as defined in the

    Investment Company Act of 1940 (the ``Investment Company Act'') but

    for section 3(c)(1) or 3(c)(7) of that Act, and also includes and

    excludes certain entities. This definition implements the definition

    of ``hedge fund'' and ``private equity fund'' in section 13(h)(2) of

    the BHC Act. See 12 U.S.C. 1851(h)(2).

    ---------------------------------------------------------------------------

    A separate provision of the Dodd-Frank Act, section 171, generally

    provides that trust preferred and certain other securities issued by

    depository institution holding companies must be phased-out of such

    companies' calculation of regulatory capital for purposes of

    determining Tier 1 capital. However, section 171 further provides for

    the permanent grandfathering of debt and equity securities issued

    before May 19, 2010, by any depository institution holding company that

    had total consolidated assets of less than $15 billion as of December

    31, 2009, or was a mutual holding company on May 19, 2010 (``community

    banking organizations''). These grandfathered capital-raising

    instruments in the form of trust preferred securities or subordinated

    debt securities (collectively referred to herein as ``TruPS'') were

    issued by community banks frequently through securitization pools

    (``TruPS CDOs'') that were formed for the purpose of acquiring these

    TruPS.

    II. Discussion

    Section 619 generally prohibits a banking entity from acquiring or

    retaining any ownership in, or acting as sponsor to, a hedge fund or

    private equity fund, which are defined under the statute to mean an

    issuer that would be an investment company, as defined in the

    Investment Company Act, but for section 3(c)(1) or 3(c)(7) of that Act,

    or ``such similar funds'' as the Agencies determine by rule. The

    Agencies have by separate rule implementing section 619, in relevant

    part, defined a hedge fund or private equity fund through the term

    ``covered fund'' to be any issuer that would be an investment company

    under the Investment Company Act but for section 3(c)(1) or 3(c)(7) of

    that Act, with certain exceptions and additions.\2\ This definition

    generally includes pooled investment vehicles, such as many TruPS CDOs,

    that use 3(c)(1) or 3(c)(7) but do not qualify for another exclusion

    under the Investment Company Act or the Final Rule.

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    \2\ See Final Rule Sec. ----.10(b)(1)(i).

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    Section 171 of the Dodd-Frank Act requires, among other things,

    that the appropriate Federal banking agencies establish minimum

    leverage and risk-based capital requirements for insured depository

    institutions and depository institution holding companies that are not

    less than the generally applicable capital requirements that were in

    effect for insured depository institutions as of the date of enactment

    of the Dodd-Frank Act.\3\ The focus of this section on ensuring that

    depository institutions and their holding companies maintain strong

    minimum capital levels is one of the key prudential provisions included

    in the Dodd-Frank Act. Importantly in the current context and as noted

    above, section 171 specifically permits any community banking

    organization to continue to rely for regulatory capital purposes on any

    debt or equity instruments issued before May 19, 2010.\4\

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    \3\ See 12 U.S.C. 5371.

    \4\ See 12 U.S.C. 5371(b)(4)(C).

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    A number of community banking organizations have recently expressed

    concern that the Final Rule conflicts with the Congressional

    determination under section 171(b)(4)(C) of the Dodd-Frank Act to

    grandfather TruPS issued as of May 19, 2010, by community banking

    organizations.\5\ Many community banks and other market participants

    maintain that the issuance of TruPS using a pooled investment structure

    was the only practical way for community banking organizations to avail

    themselves of TruPS for regulatory capital purposes. Accordingly, the

    TruPS CDO structure was the tool that gave effect to the use of TruPS

    as a regulatory capital instrument prior to May 19, 2010 and was part

    of the status quo Congress preserved with the grandfathering provision

    of section 171. In order to avoid imposing restrictions that could

    adversely affect the TruPS CDO market in a manner that could undercut

    the grandfathering provisions that Congress provided in section 171,

    the Agencies believe that certain TruPS CDOs should be a permitted

    investment for all banking entities under section 619 of the Dodd-Frank

    Act.

    ---------------------------------------------------------------------------

    \5\ The banking agencies recently provided guidance on the

    application of the Final Rule to TruPS CDOs. See FAQ Regarding

    Collateralized Debt Obligations Backed by Trust Preferred Securities

    under the Final Volcker Rule, available at http://www.fdic.gov/news/news/press/2013/pr13123a.pdf. See also Statement regarding Treatment

    of Certain Collateralized Debt Obligations Backed by Trust Preferred

    Securities under the Rules implementing Section 619 of the Dodd-

    Frank Act, available at http://www.fdic.gov/news/news/financial/2013/fil13062.html (the ``Statement'').

    ---------------------------------------------------------------------------

    The Agencies have determined to act together to adopt an interim

    final rule. This new interim final rule permits a banking entity to

    retain an interest in, or to act as sponsor (including as trustee) of,

    an issuer that is backed by TruPS so long as (i) the issuer was

    established before May 19, 2010; (ii) the banking entity reasonably

    believes that the offering proceeds received by the issuer were

    invested primarily in Qualifying TruPS Collateral (as defined below);

    and (iii) the banking entity's interest in the vehicle was acquired on

    or before December 10, 2013 (unless acquired pursuant to a merger or

    acquisition). Under the interim final rule, a ``Qualifying TruPS

    Collateral'' is defined by reference to the standards in section

    171(b)(4)(C) to mean any trust preferred security or subordinated debt

    instrument issued prior to May 19, 2010 by a depository institution

    holding company that, for any reporting period during the 12 months

    immediately preceding the issuance of such instrument, had total

    consolidated assets of less than $15,000,000,000 or issued prior to May

    19, 2010 by a mutual holding company. The Agencies have required that

    an issuer must have invested primarily in Qualifying TruPS

    [[Page 5226]]

    Collateral to meet the requirements of the interim final rule; this is

    intended to cover those securitization vehicles that have invested a

    majority of their offering proceeds in Qualifying TruPS Collateral. The

    interim final rule also provides clarification that the relief relating

    to these TruPS CDOs also extends to activities of a banking entity

    acting as a sponsor for these securitization vehicles since acting as a

    sponsor might otherwise be subject to the prohibitions or requirements

    of section 619. For the avoidance of doubt, notwithstanding clause

    (iii) above, a banking entity may act as a market maker with respect to

    the interests of an issuer that qualifies for the exemption, in

    accordance with the applicable provisions of Sec. Sec. --.4 and --.11

    of the Final Rule. The Agencies note that nothing in the interim final

    rule limits or restricts the ability of the appropriate agency to place

    limits on any activity conducted or investment held pursuant to the

    exemption in a manner consistent with their safety and soundness or

    other authority to the extent the agency has such authority.

    The Agencies believe that the approach adopted in the interim final

    rule appropriately reconciles the policies of section 619 of the Dodd-

    Frank Act with its companion provision in section 171 of the Dodd-Frank

    Act and have attempted to encompass the class of instruments Congress

    intended to grandfather while limiting the scope of the interim final

    rule in keeping with the objectives of section 619. The Agencies have

    included a ``reasonable belief'' standard since the relevant CDOs were

    structured and made their investments many years ago and all of the

    relevant documentation may not be readily available to banking

    entities.\6\ Based on discussions with major market participants

    involved in structuring and offering TruPS CDOs, the Agencies expect

    that the interim final rule will cover all of the issuers that were

    formed primarily for the purpose of investing in Qualifying TruPS

    Collateral. The Agencies request comment regarding whether a different

    approach is necessary to accomplish this objective.

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    \6\ To minimize the burden of applying the interim final rule,

    the Board, the FDIC and the OCC will make public a non-exclusive

    list of issuers that meet the requirements of the interim final

    rule. A banking entity may rely on the list published by the Board,

    the FDIC and the OCC.

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    III. Request for Comment

    The Agencies invite comment from all members of the public

    regarding all aspects of the interim final rule. The request for

    comment is limited to this interim final rule. The Agencies request

    comment on whether the interim final rule is consistent with the

    purposes of sections 619 and 171 of the Dodd-Frank Act.

    The Agencies will carefully consider all comments that relate to

    this interim final rule.

    IV. Administrative Law Matters

    A. Interim Final Rule

    The Administrative Procedure Act generally requires an agency to

    publish notice of a proposed rulemaking in the Federal Register.\7\

    This requirement does not apply, however, when the agency ``for good

    cause finds . . . that notice and public procedure thereon are

    impracticable, unnecessary, or contrary to the public interest.'' \8\

    ---------------------------------------------------------------------------

    \7\ See 5 U.S.C. 553(b).

    \8\ Id.

    ---------------------------------------------------------------------------

    After the Agencies' adoption of the Final Rule implementing section

    619, a number of community banking organizations reached out to the

    Agencies to express concerns about the Final Rule and, in particular,

    the implications for financial statement purposes relating to the

    banking organizations' holdings resulting from their previous capital-

    raising efforts involving TruPS issued by banking organizations for

    regulatory capital purposes. The Agencies requested comment in the

    Notices of Proposed Rulemaking issued by the Agencies \9\ regarding the

    effects of the definition of covered fund and ownership interests on

    issuers of asset-backed securities, including the distinctions between

    debt and equity interests.\10\ The Agencies also included a request for

    comment on trust preferred securities specifically in the context of

    the proposed rule's permitted activity for underwriting activities.\11\

    Notwithstanding such requests, the Agencies believe that the recently

    expressed concerns regarding the impact of including TruPS CDOs in the

    definition of covered fund or on investments by community banks in

    TruPS CDOs were not included in comments to the Agencies during the

    comment process.

    ---------------------------------------------------------------------------

    \9\ See 76 FR 68,846 (Nov. 7, 2011) (``joint Notice of Proposed

    Rulemaking''); 77 FR 8332 (Feb. 14, 2012) (``CFTC Notice of Proposed

    Rulemaking'').

    \10\ See Questions 227-240 of the joint Notice of Proposed

    Rulemaking.

    \11\ See Question 78 of the joint Notice of Proposed Rulemaking.

    ---------------------------------------------------------------------------

    The Agencies have considered carefully these recently identified

    concerns, particularly in light of the provisions in section 171 of the

    Dodd-Frank Act and the concerns raised by community banking

    organizations regarding the consistency of treatment regarding TruPS

    issued by community banking organizations, and grandfathered under

    section 171, and the TruPS CDOs that were used as capital access

    vehicles for the TruPS issuances. In light of the significant concerns

    expressed, the Agencies believe there is an urgent need to act in light

    of the uncertainty expressed by some community banking organizations

    about whether the Final Rule will require them to dispose of their

    holdings of TruPS CDOs, which they contend could have an immediate

    effect on their financial statements and their bank regulatory capital.

    The OCC, Board, FDIC and SEC noted in the Statement that their

    accounting staffs believe that, ``consistent with generally accepted

    accounting principles, any actions in January 2014 that occur before

    the issuance of December 31, 2013 financial reports, including the FR

    Y-9C and the Call Report, should be considered when preparing those

    financial reports.'' The Agencies' decision in this interim final rule

    to permit a banking entity to retain certain TruPS CDOs should be

    factored into the accounting analysis. Accordingly, the Agencies

    believe it necessary to take action at this time before banking

    entities are required to file their next financial reports.\12\

    ---------------------------------------------------------------------------

    \12\ See Statement, supra note 5, stating that the Agencies'

    intend to address this matter no later than January 15, 2014.

    ---------------------------------------------------------------------------

    Accordingly, for the reasons discussed throughout, the Agencies

    find good cause to act immediately to adopt this rule on an interim

    final basis without prior solicitation of comment. With this interim

    final rule and request for comment, the Agencies are not reopening the

    final rules that have previously been adopted under section 619.

    B. Use of Plain Language

    Section 722 of the Gramm-Leach Bliley Act (Pub. L. 106-102, 113

    Stat. 1338, 1471, 12 U.S.C. 4809) requires the Federal banking agencies

    to use plain language in all proposed and final rules published after

    January 1, 2000. The Federal banking agencies believe that the interim

    final rule is written plainly and clearly, and request comment on

    whether there are ways the Federal banking agencies can make any final

    rule easier to understand.

    C. Paperwork Reduction Act

    The Agencies note that the new interim final rule does not create

    new regulatory obligations for banking entities, and therefore does not

    impose any new ``collections of information'' within the meaning of the

    Paperwork

    [[Page 5227]]

    Reduction Act of 1995 (``PRA''),\13\ nor does it create any new filing,

    reporting, recordkeeping, or disclosure reporting requirements.

    Accordingly, the Agencies did not submit the interim final rule to the

    Office of Management and Budget for review in accordance with the PRA.

    The Agencies request comment on their conclusion that there are no

    collections of information.

    ---------------------------------------------------------------------------

    \13\ 44 U.S.C. 3501 et seq.

    ---------------------------------------------------------------------------

    D. Regulatory Flexibility Act

    The interim final rule applies to banking entities that may have

    ownership interests in TruPS CDOs. The requirements of the Regulatory

    Flexibility Act are not applicable to this interim final rule.\14\

    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. The Agencies

    request comment on their conclusion that the new interim final rule

    should not have a significant economic impact on a substantial number

    of small entities.

    ---------------------------------------------------------------------------

    \14\ The requirements of the Regulatory Flexibility Act are not

    applicable to rules adopted under the Administrative Procedure Act's

    ``good cause'' exception, see 5 U.S.C. 601(2) (defining ``rule'' and

    notice requirements under the Administrative Procedure Act).

    ---------------------------------------------------------------------------

    E. OCC Unfunded Mandates Reform Act of 1995 Determination

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA), 2

    U.S.C. 1532, requires a Federal agency to prepare a budgetary impact

    statement before promulgating any rule likely to result in a Federal

    mandate that may result in the expenditure by State, local, and tribal

    governments, in the aggregate, or by the private sector, of $100

    million or more (adjusted annually for inflation) in any one year. The

    UMRA only applies when the Federal agency issues a general notice of

    proposed rulemaking. Since this rule is published as an interim final

    rule, it is not subject to section 202 of the UMRA.

    V. Authority: 12 U.S.C. 1851

    This interim final rule is issued under section 13 of the Bank

    Holding Company Act of 1956, as amended (12 U.S. 1851).

    Common Text of the Interim Final Rule

    Add new Sec. ----.16 to read as follows:

    Sec ----.16 Ownership of Interests in and Sponsorship of Issuers of

    Certain Collateralized Debt Obligations Backed by Trust-Preferred

    Securities.

    (a) The prohibition contained in Sec. ----.10(a)(1) does not apply

    to the ownership by a banking entity of an interest in, or sponsorship

    of, any issuer if:

    (1) The issuer was established, and the interest was issued, before

    May 19, 2010;

    (2) The banking entity reasonably believes that the offering

    proceeds received by the issuer were invested primarily in Qualifying

    TruPS Collateral; and

    (3) The banking entity acquired such interest on or before December

    10, 2013 (or acquired such interest in connection with a merger with or

    acquisition of a banking entity that acquired the interest on or before

    December 10, 2013).

    (b) For purposes of this Sec. ----.16, Qualifying TruPS Collateral

    shall mean any trust preferred security or subordinated debt instrument

    issued prior to May 19, 2010 by a depository institution holding

    company that, as of the end of any reporting period within 12 months

    immediately preceding the issuance of such trust preferred security or

    subordinated debt instrument, had total consolidated assets of less

    than $15,000,000,000 or issued prior to May 19, 2010 by a mutual

    holding company.

    (c) Notwithstanding paragraph (a)(3) of this section, a banking

    entity may act as a market maker with respect to the interests of an

    issuer described in paragraph (a) of this section in accordance with

    the applicable provisions of Sec. Sec. ----.4 and ----.11.

    (d) Without limiting the applicability of paragraph (a) of this

    section, the Board, the FDIC and the OCC will make public a non-

    exclusive list of issuers that meet the requirements of paragraph (a).

    A banking entity may rely on the list published by the Board, the FDIC

    and the OCC.

    End of Common Rule

    List of Subjects

    12 CFR Part 44

    Administrative Practice and procedure, Banks, Banking,

    Compensation, Credit, Derivatives, Government securities, Insurance,

    Investments, National banks, Federal savings associations, Federal

    branches and agencies, Penalties, Reporting and recordkeeping

    requirements, Risk, Risk retention, Securities, Trusts and trustees.

    12 CFR Part 248

    Administrative practice and procedure, Banks and banking, Capital,

    Compensation, Conflict of interests, Credit, Derivatives, Foreign

    banking, Government securities, Holding companies, Insurance, Insurance

    companies, Investments, Penalties, Reporting and recordkeeping

    requirements, Risk, Risk retention, Securities, Trusts and trustees.

    12 CFR Part 351

    Banks, Banking, Capital, Compensation, Conflicts of interest,

    Credit, Derivatives, Government securities, Insurance, Insurance

    companies, Investments, Penalties, Reporting and recordkeeping

    requirements, Risk, Risk retention, Securities, State nonmember banks,

    State savings associations, Trusts and trustees.

    17 CFR Part 75

    Banks, Banking, Compensation, Credit, Derivatives, Federal branches

    and agencies, Federal savings associations, Government securities,

    Hedge funds, Insurance, Investments, National banks, Penalties,

    Proprietary trading, Reporting and recordkeeping requirements, Risk,

    Risk retention, Securities, Swap dealers, Trusts and trustees, Volcker

    rule.

    17 CFR Part 255

    Banks, Brokers, Dealers, Investment advisers, Recordkeeping,

    Reporting, Securities.

    Department of the Treasury

    Office of the Comptroller of the Currency

    Authority and Issuance

    For the reasons stated in the Common Preamble, the Office of the

    Comptroller of the Currency hereby amends chapter I of Title 12, Code

    of Federal Regulations as follows:

    PART 44--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND

    RELATIONSHIPS WITH COVERED FUNDS

    0

    1. The authority for part 44 continues to read as follows:

    Authority: 7 U.S.C. 27 et seq., 12 U.S.C. 1, 24, 92a, 93a, 161,

    1461, 1462a, 1463, 1464, 1467a, 1813(q), 1818, 1851, 3101, 3102,

    3108, 5412.

    Sec. 44.16 [Amended]

    0

    2. Section 44.16 is added as set forth at the end of the Common

    Preamble.

    [[Page 5228]]

    Board of Governors of the Federal Reserve

    Authority and Issuance

    For the reasons set forth in the Common Preamble, the Board of

    Governors of the Federal Reserve System is adding the text of the

    common rule as set forth at the end of the Common Preamble as Sec.

    248.16 to part 248, 12 CFR chapter II.

    PART 248--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND

    RELATIONSHIPS WITH COVERED FUNDS (Regulation VV)

    0

    3. The authority for part 248 continues to read as follows:

    Authority: 12 U.S.C. 1851, 12 U.S.C. 221 et seq., 12 U.S.C.

    1818, 12 U.S.C. 1841 et seq., and 12 U.S.C. 3103 et seq.

    Sec. 248.16 [Amended]

    0

    4. Section 248.16 is added as set forth at the end of the Common

    Preamble.

    Federal Deposit Insurance Corporation

    Authority and Issuance

    For the reasons set forth in the Common Preamble, the Federal

    Deposit Insurance Corporation is adding the text of the common rule as

    set forth at the end of the Common Preamble as Sec. 351.16 to part

    351, chapter III of Title 12, Code of Federal Regulations.

    PART 351--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND

    RELATIONSHIPS WITH COVERED FUNDS

    0

    5. The authority for part 351 continues to read as follows:

    Authority: 12 U.S.C. 1851; 1811 et seq.; 3101 et seq.; and

    5412.

    Sec. 351.16 [Amended]

    0

    6. Section 351.16 is added as set forth at the end of the Common

    Preamble.

    Commodity Futures Trading Commission

    Authority and Issuance

    For the reasons set forth in the Common Preamble, the Commodity

    Futures Trading Commission is adding the text of the common rule as set

    forth at the end of the Common Preamble as Sec. 75.16 to part 75,

    chapter I of Title 17, Code of Federal Regulations.

    PART 75--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND

    RELATIONSHIPS WITH COVERED FUNDS

    0

    7. The authority for part 75 continues to read as follows:

    Authority: 12 U.S.C. 1851.

    Sec. 75.16 [Amended]

    0

    8. Section 75.16 is added as set forth at the end of the Common

    Preamble.

    Securities and Exchange Commission

    Authority and Issuance

    For the reasons set forth in the Common Preamble, the Securities

    and Exchange Commission is adding the text of the common rule as set

    forth at the end of the Common Preamble as Sec. 255.16 to part 255,

    chapter II of Title 17, Code of Federal Regulations.

    PART 255--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND

    RELATIONSHIPS WITH COVERED FUNDS

    0

    9. The authority for part 255 continues to read as follows:

    Authority: 12 U.S.C. 1851.

    Sec. 255.16 [Amended]

    0

    10. Section 255.16 is added as set forth at the end of the Common

    Preamble.

    Dated: January 14, 2014.

    Thomas J. Curry,

    Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve

    System, January 14, 2014.

    Robert deV. Frierson,

    Secretary of the Board.

    Dated at Washington, DC this 13th day of January 2014.

    By delegated authority from the Board of Directors of the

    Federal Deposit Insurance Corporation.

    Federal Deposit Insurance Corporation.

    Robert E. Feldman,

    Executive Secretary.

    Dated: January 17, 2014.

    By the Securities and Exchange Commission.

    Elizabeth M. Murphy,

    Secretary.

    Issued in Washington, DC, on January 15, 2014, by the Commodity

    Futures Trading Commission.

    Melissa D. Jurgens,

    Secretary of the Commodity Futures Trading Commission.

    Note: The following appendices will not appear in the Code of

    Federal Regulations.

    Commodity Futures Trading Commission (CFTC) Appendices to Treatment of

    Certain Collateralized Debt Obligations Backed Primarily by Trust

    Preferred Securities With Regard to Prohibitions and Restrictions on

    Certain Interests in, and Relationships With, Hedge Funds and Private

    Equity Funds--Commission Voting Summary and Statements of Commissioners

    Appendix 1--Commodity Futures Trading Commission Voting Summary

    On this matter, Acting Chairman Wetjen and Commissioner Chilton

    voted in the affirmative, and Commissioner O'Malia concurred.

    Appendix 2--Statement of CFTC Acting Chairman Mark P. Wetjen

    I support the interim final rule adopted by the CFTC and the other

    Volcker Rule agencies. The Commission believed it was important to join

    the other agencies in ensuring community banks are protected, as

    Congress directed, from restrictions in the Volcker Rule intended to

    lower the risk of large financial institutions.

    Appendix 3--Statement of Concurrence by CFTC Commissioner Scott D.

    O'Malia

    I support the interim final rule adopted by the Commission and the

    OCC, Federal Reserve Board, FDIC, and SEC (``Agencies''). When an

    unintended consequence of a regulation is discovered, it is imperative

    that it be expeditiously corrected to avoid unintentional harm to

    affected parties. Broken rules must be fixed, and I applaud the work of

    the Agencies to quickly respond to the public's concerns and comments

    regarding the holding of TruPS CDOs by community banks affected by the

    Volcker Rule.

    [FR Doc. 2014-02019 Filed 1-30-14; 8:45 am]

    BILLING CODE 6210-01-P; 6741-01-P; 6351-01-P; 8011-01-P; 4810-33-P

    Last Updated: January 31, 2014



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