Notice2023-13696
Agency Information Collection Activities: Revision of an Approved Information Collection; Submission for OMB Review; Margin and Capital Requirements for Covered Swap Entities
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 28, 2023
Issuing agencies
Treasury DepartmentComptroller of the Currency
Abstract
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995 (PRA). In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OCC is soliciting comment concerning a revision to its information collection titled, "Margin and Capital Requirements for Covered Swap Entities." The OCC also is giving notice that it has sent the collection to OMB for review.
Full Text
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<title>Federal Register, Volume 88 Issue 123 (Wednesday, June 28, 2023)</title>
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[Federal Register Volume 88, Number 123 (Wednesday, June 28, 2023)]
[Notices]
[Pages 42000-42002]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-13696]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
Agency Information Collection Activities: Revision of an Approved
Information Collection; Submission for OMB Review; Margin and Capital
Requirements for Covered Swap Entities
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.
ACTION: Notice and request for comment.
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SUMMARY: The OCC, as part of its continuing effort to reduce paperwork
and respondent burden, invites the general public and other Federal
agencies to take this opportunity to comment on a continuing
information collection, as required by the Paperwork Reduction Act of
1995 (PRA). In accordance with the requirements of the PRA, the OCC may
not conduct or sponsor, and the respondent is not required to respond
to, an information collection unless it displays a currently valid
Office of Management and Budget (OMB) control number. The OCC is
soliciting comment concerning a revision to its information collection
titled, ``Margin and Capital Requirements for Covered Swap Entities.''
The OCC also is giving notice that it has sent the collection to OMB
for review.
DATES: Comments must be received by July 28, 2023.
ADDRESSES: Commenters are encouraged to submit comments by email, if
possible. You may submit comments by any of the following methods:
<bullet> Email: <a href="/cdn-cgi/l/email-protection#126260737b7c747d527d71713c66607773613c757d64"><span class="__cf_email__" data-cfemail="156567747c7b737a557a76763b61677074663b727a63">[email protected]</span></a>.
<bullet> Mail: Chief Counsel's Office, Attention: Comment
Processing, Office of the Comptroller of the Currency, Attention: 1557-
0251, 400 7th Street SW, Suite 3E-218, Washington, DC 20219.
<bullet> Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218,
Washington, DC 20219.
<bullet> Fax: (571) 293-4835.
Instructions: You must include ``OCC'' as the agency name and
``1557-0251'' in your comment. In general, the OCC will publish
comments on <a href="http://www.reginfo.gov">www.reginfo.gov</a> without change, including any business or
personal information provided, 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.
Written comments and recommendations for the proposed information
collection should also be sent within 30 days of publication of this
notice to <a href="http://www.reginfo.gov/public/do/PRAMain">www.reginfo.gov/public/do/PRAMain</a>. You can find this
information collection by selecting ``Currently under 30-day Review--
Open for Public Comments'' or by using the search function.
You may review comments and other related materials that pertain to
this information collection following the close of the 30-day comment
period for this notice by the method set forth below:
<bullet> Viewing Comments Electronically: Go to <a href="http://www.reginfo.gov">www.reginfo.gov</a>.
Hover over the ``Information Collection Review'' drop-down menu. Click
on ``Information Collection Review.'' From the ``Currently under
Review'' drop-down menu, select ``Department of Treasury'' and then
click ``submit.'' This information collection can be located by
searching OMB control number ``1557-0251'' or ``Margin and Capital
Requirements for Covered Swap Entities.'' Upon finding the appropriate
information collection, click on the related ``ICR Reference Number.''
On the next screen, select ``View Supporting Statement and Other
Documents'' and then click on the link to any comment listed at the
bottom of the screen.
<bullet> For assistance in navigating <a href="http://www.reginfo.gov">www.reginfo.gov</a>, please
contact the Regulatory Information Service Center at (202) 482-7340.
FOR FURTHER INFORMATION CONTACT: Shaquita Merritt, Clearance Officer,
(202) 649-5490, Chief Counsel's Office, Office of the Comptroller of
the Currency, 400 7th Street, SW, Washington, DC 20219. If you are
deaf, hard of hearing, or have a speech disability, please dial 7-1-1
to access telecommunications relay services.
SUPPLEMENTARY INFORMATION: Under the PRA (44 U.S.C. 3501 et seq.),
Federal agencies must obtain approval from the OMB for each collection
of information that they conduct or sponsor. ``Collection of
information'' is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to
include agency requests or requirements that members of the public
submit reports, keep records, and/or provide information to a third
party.
The OCC asks that OMB approve this revised collection.
Title: Margin and Capital Requirements for Covered Swap Entities.
OMB Control No.: 1557-0251.
Affected Public: Business or other for-profit.
Type of Review: Regular review.
Abstract: Title VII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act) established a comprehensive
regulatory framework for derivatives, which are generally characterized
as swaps and security-based swaps.
Sections 731 and 764 of the Dodd-Frank Act require the registration
and regulation of swap dealers and major swap participants and
security-based swap dealers and major security-based swap participants,
respectively (collectively, ``swap entities''). For certain types of
swap entities that are prudentially regulated by one of the
Agencies,\1\ sections 731 and 764 of the Dodd-Frank Act require the
Agencies to jointly adopt rules, for the entities under their
respective jurisdictions, imposing capital requirements and initial and
variation margin requirements on all
[[Page 42001]]
non-cleared swaps. Swap entities that are prudentially regulated by the
Agencies are referred to herein as ``covered swap entities.'' OCC's
rules for swap entities can be found in 12 CFR part 45.
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\1\ The Agencies are the Office of the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the Federal Housing Finance
Agency, and the Farm Credit Administration.
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The OCC has determined that Sec. 45.1(h), previously cleared as
part of this information collection, no longer includes a disclosure
collection of information because the conditions triggering the
disclosure have expired. In addition, the OCC has omitted from this
information collection the following provisions that were formerly
referenced in the clearance because it determined that the provisions
do not constitute collections of information under the Paperwork
Reduction Act: Sec. Sec. 45.1(d); 45.5(c)(2)(i); 45.8(c)(2);
45.8(d)(5), (12), and (13); 45.8(e); and 45.8(f)(2), (3), and (4).
Section 45.2 defines terms referenced in part 45. Under the
definition of ``eligible master netting agreement,'' a covered swap
entity that relies on such agreement for purpose of calculating
required margin must (1) conduct sufficient legal review of the
agreement to conclude with a well-founded basis that the agreement
meets specified criteria and maintain sufficient written documentation
of that legal review and (2) establish and maintain written procedures
for monitoring relevant changes in law and to ensure that the agreement
continues to satisfy the requirements of the definition. To demonstrate
compliance with this section, records must be retained for as long as
the covered swap entity relies on such agreement. The term ``eligible
master netting agreement'' is used elsewhere in the rule to specify
instances in which a covered swap entity may (1) calculate variation
margin on an aggregate basis across multiple non-cleared swaps and
security-based swaps and (2) calculate initial margin requirements
under an initial margin model for one or more swaps and security-based
swaps.
Section 45.7 generally requires a covered swap entity to ensure
that any initial margin collateral that it collects or posts is held at
a third-party custodian. Section 45.7(c) requires the custodian to act
pursuant to a custody agreement that: (1) prohibits the custodian from
rehypothecating, repledging, reusing, or otherwise transferring
(through securities lending, securities borrowing, repurchase
agreement, reverse repurchase agreement or other means) the collateral
held by the custodian except that cash collateral may be held in a
general deposit account with the custodian if the funds in the account
are used to purchase certain assets, such assets are held in compliance
with Sec. 45.7, and such purchase takes place within a time period
reasonably necessary to consummate such purchase after the cash
collateral is posted as initial margin; and (2) is a legal, valid,
binding, and enforceable agreement under the laws of all relevant
jurisdictions, including in the event of bankruptcy, insolvency, or a
similar proceeding. A custody agreement may permit the posting party to
substitute or direct any reinvestment of posted collateral held by the
custodian, provided that, with respect to collateral collected by a
covered swap entity pursuant to Sec. 45.3(a) or posted by a covered
swap entity pursuant to Sec. 45.3(b), the agreement requires the
posting party to substitute only funds or other property that would
qualify as eligible collateral under Sec. 45.6, and for which the
amount net of applicable discounts described in appendix B would be
sufficient to meet the requirements of Sec. 45.3 and direct
reinvestment of funds only in assets that would qualify as eligible
collateral under Sec. 45.6, and for which the amount net of applicable
discounts described in appendix B would be sufficient to meet the
requirements of Sec. 45.3.
Section 45.8 sets forth standards for the use of initial margin
models. These standards include: (1) a requirement that the covered
swap entity receive prior approval from the OCC based on demonstration
that the initial margin model meets specific requirements (Sec.
45.8(c)(1)); (2) a requirement that a covered swap entity notify the
OCC in writing 60 days before extending use of the model to additional
product types, making certain changes to the initial margin model, or
making material changes to modeling assumptions (Sec. 45.8(c)(3)); and
(3) a requirement that the covered swap entity demonstrate to the
satisfaction of the OCC that the omission of any risk factor from the
calculation of its initial margin is appropriate, prior to omitting
such risk factor (Sec. 45.8(d)(10)), and demonstrate to the
satisfaction of the OCC that the incorporation of any proxy or
approximation used to capture the risks of the covered swap entity's
non-cleared swaps or non-cleared security-based swaps is appropriate,
prior to incorporating such proxy or approximation (Sec. 45.8(d)(11)).
Also, if the validation process reveals any material problems with the
initial margin model, the covered swap entity must promptly notify the
OCC of the problems, describe to the OCC any remedial actions being
taken, and adjust the initial margin model to ensure an appropriately
conservative amount of required initial margin is being calculated
(Sec. 45.8(f)(3)).
Section 45.8 also sets forth requirements for the ongoing review
and documentation of initial margin models. These standards include a
requirement that the covered swap entity adequately document all
material aspects of its initial margin model (Sec. 45.8(g)) and that
the covered swap entity must adequately document internal authorization
procedures, including escalation procedures, that require review and
approval of any change to the initial margin calculation under the
initial margin model, demonstrable analysis that any basis for any such
change is consistent with the requirements of Sec. 45.8, and
independent review of such demonstrable analysis and approval (Sec.
45.8(h)).
Section 45.9 addresses the treatment of cross-border transactions
and, in certain limited situations, will permit a covered swap entity
to comply with a foreign regulatory framework for non-cleared swaps (as
a substitute for compliance with the prudential regulators' rule) if
the prudential regulators jointly determine that the foreign regulatory
framework is comparable to the requirements in the prudential
regulators' rule. Section 45.9(e) allows a covered swap entity to
request that the prudential regulators make a substituted compliance
determination and provides that the covered swap entity must provide
the reasons for the request and other required supporting
documentation. A request for a substituted compliance determination
must include a description of the scope and objectives of the foreign
regulatory framework for non-cleared swaps and non-cleared security-
based swaps; the specific provisions of the foreign regulatory
framework for non-cleared swaps and security-based swaps (scope of
transactions covered; determination of the amount of initial and
variation margin required; timing of margin requirements; documentation
requirements; forms of eligible collateral; segregation and re-
hypothecation requirements; and approval process and standards for
models); the supervisory compliance program and enforcement authority
exercised by a foreign financial regulatory authority or authorities in
such system to support its oversight of the application of the non-
cleared swap and security-based swap regulatory framework; and any
other descriptions and documentation that the prudential regulators
determine are appropriate. A covered swap entity may make a request
[[Page 42002]]
under Sec. 45.9 only if it is directly supervised by the authorities
administering the foreign regulatory framework for non-cleared swaps
and non-cleared security-based swaps.
Section 45.10 requires a covered swap entity to execute trading
documentation with each counterparty that is either a swap entity or
financial end user regarding credit support arrangements that: (1)
provides the contractual right to collect and post initial margin and
variation margin in such amounts, in such form, and under such
circumstances as are required; and (2) specifies the methods,
procedures, rules, and inputs for determining the value of each non-
cleared swap or non-cleared security-based swap for purposes of
calculating variation margin requirements, and the procedures for
resolving any disputes concerning valuation.
Estimated Number of Respondents: 11.
Estimated Total Annual Burden: 4,895 hours.
On April 7, 2023, the OCC published a 60-day notice for this
information collection, (88 FR 20941). No comments were received.
Comments continue to be invited on:
(a) Whether the collection of information is necessary for the
proper performance of the functions of the OCC, including whether the
information has practical utility;
(b) The accuracy of the OCC's estimate of the burden of the
collection of information;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the collection on respondents,
including through the use of automated collection techniques or other
forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
Theodore J. Dowd,
Deputy Chief Counsel, Office of the Comptroller of the Currency.
[FR Doc. 2023-13696 Filed 6-27-23; 8:45 am]
BILLING CODE 4810-33-P
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