[Federal Register: July 23, 2004 (Volume 69, Number 141)]
[Notices]
[Page 43993-43996]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23jy04-57]
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FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Proposed Collections;
Comment Request
AGENCY: Board of Governors of the Federal Reserve System
ACTION: Notice
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SUMMARY: Background. On June 15, 1984, the Office of Management and
Budget (OMB) delegated to the Board of Governors of the Federal Reserve
System (Board) its approval authority under the Paperwork Reduction
Act, as per 5 CFR 1320.16, to approve of and assign OMB control numbers
to collection of information requests and requirements conducted or
sponsored by the Board under conditions set forth in 5 CFR 1320
Appendix A.1. Board-approved collections of information are
incorporated into the official OMB inventory of currently approved
collections of information. Copies of the OMB 83-Is and supporting
statements and approved collection of information instruments are
placed into OMB's public docket files. The Federal Reserve may not
conduct or sponsor, and the respondent is not required to respond to,
an information collection that has been extended, revised, or
implemented on or after October 1, 1995, unless it displays a currently
valid OMB control number.
Request for comment on information collection proposals
The following information collections, which are being handled
under this delegated authority, have received initial Board approval
and are hereby published for comment. At the end of the comment period,
the proposed information collections, along with an analysis of
comments and recommendations received, will be submitted to the Board
for final approval under OMB delegated authority. Comments are invited
on the following:
a. whether the proposed collections of information are necessary
for the proper performance of the Federal Reserve's functions;
including whether the information has practical utility;
b. the accuracy of the Federal Reserve's estimate of the burden of
the proposed information collections, including the validity of the
methodology and assumptions used;
c. ways to enhance the quality, utility, and clarity of the
information to be collected; and
d. ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology.
DATES: Comments must be submitted on or before September 21, 2004.
ADDRESSES: You may submit comments, identified by FR 2436 or FR Y-12,
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.
[[Page 43994]]
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
FAX: 202/452-3819 or 202/452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th & Street and Constitution Avenue,
N.W., Washington, DC 20551.
All public comments are available from the Board's web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted,
except as necessary for technical reasons. Accordingly, your 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, N.W.)
between 9:00 a.m. and 5:00 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: A copy of the proposed forms and
instructions, the Paperwork Reduction Act Submission (OMB 83-I),
supporting statements, and other documents that will be placed into
OMB's public docket files once approved may be requested from the
agency clearance officer, whose name appears below.
Cynthia Ayouch, Federal Reserve Board Clearance Officer (202-452-
3829), Division of Research and Statistics, Board of Governors of the
Federal Reserve System, Washington, DC 20551. Telecommunications Device
for the Deaf (TDD) users may contact (202-263-4869), Board of Governors
of the Federal Reserve System, Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
Proposal to approve under OMB delegated authority the extension for
three years, with revision, of the following reports:
1. Report title: Semiannual Report of Derivatives Activity
Agency form number: FR 2436
OMB control number: 7100-0286
Frequency: Semiannual
Reporters: Large U.S. dealers of over-the-counter (OTC) derivatives
Annual reporting hours: 2,400 hours
Estimated average hours per response: 150 hours
Number of respondents: 8
General description of report: This information collection is
voluntary (12 U.S.C. Sec. Sec. 248(a)(2) and 353-359) and is given
confidential treatment (5 U.S.C. Sec. 552(b)(4)).
Abstract: This voluntary report collects derivatives market
statistics from eight large U.S. dealers of OTC derivatives. Data are
collected on notional amounts and gross market values of the volumes
outstanding of broad categories of foreign exchange, interest rate,
equity- and commodity-linked OTC derivatives contracts across a range
of underlying currencies, interest rates, and equity markets.
This collection of information complements the ongoing triennial
Survey of Foreign Exchange and Derivatives Market Activity (FR 3036;
OMB No. 7100-0285). The FR 2436 collects similar data on the
outstanding volume of derivatives, but not on derivatives turnover. The
Federal Reserve conducts both surveys in coordination with other
central banks and forwards the aggregated data furnished by U.S.
reporters to the Bank for International Settlements, which publishes
global market statistics that are aggregations of national data.
Current Actions: The Federal Reserve proposes to revise the FR 2436
by adding tables to collect data on credit default swaps, effective
with the December 31, 2004, report date. Given the very rapid growth of
credit derivatives in recent years, the G-10 central banks determined
that data on credit default swaps should be collected semiannually. The
credit default swaps data would be collected on new Tables 4A through
4D, while existing Table 4 and Table 5 would be re-numbered as Table 5
and Table 6, respectively.
The Federal Reserve proposes to collect data on outstanding
positions (notional, gross positive and gross negative market values)
of credit default swap contracts for protection bought and protection
sold by instrument type and counterparty type. Distinguishing between
protection bought and protection sold is of interest because it gives
some indication of how credit default swaps are used to shift credit
risk among market participants. Additionally, notional values of credit
default swap contracts would be reported by rating category of the
underlying reference entity, sector of the underlying reference entity,
and remaining contract maturity.
Instrument types would be disaggregated into single-name and
multiple-name instruments.
Counterparty types would be disaggregated into reporting dealers,
other financial institutions, and nonreporting financial institutions.
In addition, other financial institutions would be further
disaggregated into:
banks and securities firms
insurance, reinsurance, and financial guaranty firms
special purpose entities
hedge funds
other
This finer disaggregation of counterparty types, as compared to the
disaggregation for other types of OTC derivatives, would enable central
banks and other data users to get a clearer picture of how credit
default swaps transfer credit risk within the global financial system.
Notional values would be further disaggregated by the credit rating
of the underlying reference entity, by the sector of the underlying
reference entity, and by remaining maturity of outstanding credit
default swap contracts.
Proposed Table 4A-Credit Default Swaps by Rating Category. Data
would be disaggregated into upper investment grade (AA and higher),
lower investment grade (A and BBB), non investment grade (BB and
lower), and not rated. Information on the credit rating of the
reference entity would give central banks and other data users a
clearer picture of the nature and amount of credit risk that is being
transferred in the credit default swap market.
Proposed Table 4B-Credit Default Swaps by Sector of the Reference
Entity. Data would be disaggregated into financial firms, nonfinancial
firms, sovereigns, and multiple sectors (for multiple-name
instruments). Information on the sector of the reference entity would
give central banks and other data users a clearer picture of the nature
of the credit risk that is being transferred in the credit default swap
market.
Proposed Table 4C-Credit Default Swaps by Remaining Contract
Maturity. Data would be disaggregated into one year or less, over one
year through five years, and over five years.
Proposed Table 4D-Credit Default Swaps, Gross Positive and Gross
Negative Market Values. Data would show the magnitude of unsettled
changes in value of credit default swap contracts outstanding at the
time of reporting. Such a time series is a valuable source of
information for researchers and market participants in developing an
understanding of the role and function of the credit default swap
market in financial systems in various circumstances.
The Federal Reserve would like to solicit comments about Table 4A;
specifically about the costs and benefits of a further breakdown of
column ``A/BBB'' into two separate columns, ``A'' and ``BBB.'' At many
institutions, the ``A'' and ``BBB'' categories are of comparable size,
and the proportion in each category is not constant over time, but
appears to vary over the business cycle. Moreover, the default
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probabilities of A- and BBB-rated bonds, while both quite small, are
nonetheless quite different, with a BBB-rated bond four times more
likely to default over a five-year period than an A-rated bond.
2. Report title: Consolidated Bank Holding Company Report of Equity
Investments in Nonfinancial Companies
Agency form number: FR Y-12
OMB control number: 7100-0300
Frequency: Quarterly and semi-annually
Reporters: Bank holding companies
Annual reporting hours: 1,696 hours
Estimated average hours per response: 16 hours
Number of respondents: 28
General description of report: This information collection is
mandatory pursuant to Section 5(c) of the Bank Holding Company Act (12
U.S.C. 1844(c)) and data may be exempt from disclosure pursuant to
Sections (b)(4) and (b)(8) of the Freedom of Information Act (5 U.S.C.
552(b)(4) and (b)(8)).
Abstract: The FR Y-12 was implemented as of September 30, 2001, in
response to the Gramm-Leach-Bliley Act (GLB Act) of 1999, which
broadened the scope of permissible investments in nonfinancial
companies. The FR Y-12 collects information from certain domestic bank
holding companies (BHCs) on their investments in nonfinancial companies
on three schedules: Type of Investments, Type of Security, and Type of
Entity within the Banking Organization. Large BHCs report on a
quarterly basis, and small BHCs report semi-annually.
Current Actions: The Federal Reserve proposes to revise the FR Y-12
reporting form and instructions to enhance the Federal Reserve's
ability to monitor and supervise the private equity merchant banking
(PEMB) activity across all BHCs for purposes of safety and soundness.
The proposed revisions to the FR Y-12 include (1) modifying the
reporting threshold to reduce regulatory burden; (2) adding a
memorandum item to Schedule A to collect data on investments managed
for others; (3) adding a memorandum item to Schedule B to identify
whether the BHC holds any warrants received in connection with equity
investment activity; (4) simplifying Schedule C by eliminating three
columns used to collect data on direct investments in public entities,
direct investments in nonpublic entities, and all indirect investments;
and (5) adding Schedule D ``Nonfinancial Investment Transactions During
the Reporting Period'' to ollect information on all PEMB activity of
the BHC during the reporting period and to better reflect the
industry's focus on monitoring ``cash in and cash out.'' The Federal
Reserve proposes to defer implementation of the revised FR Y-12 until
March 31, 2005, to coincide with the implementation of proposed
revisions to the FR Y-9C and FR Y-9SP reports (OMB No. 7100-0128).
Proposed Revisions to the FR Y-12 Reporting Form and Instructions
Schedule A - Type of Investments
Retitle - Memorandum item 3 from ``Impact on net income
from items 1, 2, and 3 above'' to ``Pre-tax impact on net income from
items 1, 2, and 3 above.'' This modification would clarify the intent
of the original item, as discussed in the instructions.
Add - Memorandum item 4 ``Investments managed for
others.'' This item would collect information on the extent of the
BHC's role in managing private equity investments for others. This item
would be used to provide new information regarding the extent of the
institution's PEMB operation. Significant investment funds management
activity could increase the inherent legal and reputational risk of the
institution.
Schedule B - Type of Security
Add - Memorandum item 2 ``Does the BHC hold any Warrants
or similar instruments received in connection with equity investment
activity? (Enter ``1'' if yes, ``0'' if no).'' This item would be used
to identify whether the BHC holds any warrants or similar instruments
received in connection with equity investment activity or similar
``equity kickers'' that, while typically carried at only a nominal
value, may potentially increase the risk profile of the corporation.
Schedule C - Type of Entity within the Banking Organization
Schedule C would be modified to categorize the type of investments,
reported in Schedule A, by the booking entity within the banking
organization. The portfolio totals from Schedule C should equal
portfolio totals reported for Schedule A.
Add - New column ``(Column B) Net Unrealized Holding Gains
Not Recognized As Income.'' This information would identify net
unrealized holding gains (or losses) that have not been recognized as
income within the BHC structure through which the investments are made,
as reported in Schedules A and B.
Retitle - Old column ``(Column B) Carrying Value'' as
``(Column C) Carrying Value.'' Add - Item 2.b ``Edge and
agreement corporations,'' renumber ``SBICs'' as item 2.a, and renumber
``Broker/Dealers'' as item 2.c. This breakout from ``All other'' would
provide consistency with item 1, as Edge and agreement corporations may
be housed in either a depository institution or parent holding company
structure.
Add - Item 2.d ``Private Equity subsidiaries'' and
renumber ``All other'' as item 2.e. This additional breakout would
identify those BHCs that have established nonbank subsidiaries
primarily devoted to the PEMB activity. The larger BHCs active in PEMB
have typically established private equity subsidiaries.
Delete - Current Columns C, D, and E Carrying Value for:
``Direct Investments in Public Entities,'' ``Direct Investments in
Nonpublic Entities,'' and ``All Indirect Investments.'' These data were
not significantly different than data collected in Schedule A, and
Columns A and B of Schedule C.
Schedule D - Nonfinancial Investment Transactions During the Reporting
Period
Add - This proposed schedule would collect information on
all PEMB activity of the BHC, on an aggregate basis, for the reporting
period. Columns A and B would collect acquisition cost and carrying
value for all purchases, returns of capital, and net changes in
valuation made for all direct investments. Columns C and D would
collect information on the same items for all transactions involving
indirect (fund) investments. These data would provide valuable insight
into the scope of activity on a transaction basis and, when reviewed
over time, would provide critical trend data useful for industry
studies as well as BHC supervisory monitoring.
The proposed FR Y-12 instructions would be reorganized and
clarified to conform with the proposed changes to the reporting form.
Proposed Revisions to the FR Y-12 Respondent Reporting Threshold
Criteria
Modify the reporting threshold criteria for respondents
that file the FR Y-9C, by decreasing the aggregate nonfinancial equity
investments threshold from $200 million to $100 million (on an
acquisition cost basis) and increasing the consolidated Tier 1 capital
threshold from 5 percent to 10 percent.
Modify the reporting threshold criterion for respondents
that file the FR Y-9SP, by increasing the total capital threshold from
5 percent to 10 percent.
The proposed decrease in the reporting threshold from $200 million
to $100 million would require reporting from large complex banking
organizations that have a significant
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concentration of capital invested in this asset class, but fall below
the current reporting threshold.
The proposed increase in the reporting threshold from 5 percent to
10 percent of capital would reduce burden for respondents, while
continuing to screen for the smaller BHCs with a significant
concentration of capital invested in this asset class.
Delete - ``Has the bank holding company made an effective
election to become a financial holding company?'' This information is
readily available on the National Information Center database.
Modify - Clarify the legal authority to read: ``Directly
or indirectly through a subsidiary or affiliate, any nonfinancial
equity investments within a Small Business Investment Company
structure, or under section 4(c)(6) or 4(c)(7) of the Bank Holding
Company Act, or pursuant to the merchant banking authority of section
4(k)4(H) of the Bank Holding Company Act, or pursuant to the investment
authority granted by Regulation K.''
The Federal Reserve would like to solicit comments on the following
issues related to the FR Y-12:
1. Request comment on the reporting of information on an
acquisition cost and carrying value basis. Specifically, whether the
revised instructions on ``acquisition cost'' give BHCs the flexibility
to report carrying cost in a manner consistent with how they maintain
their internal books and records.
2. Request comment on the reporting of information on convertible
debt. Specifically, whether the reporting of convertible debt
information is burdensome.
3. Request comment on proposed Schedule D, ``Nonfinancial
Investment Transactions During the Reporting Period.'' Specifically,
whether the information requested is readily available.
Board of Governors of the Federal Reserve System, July 19, 2004.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 04-16819 Filed 7-22-04; 8:45 am]
BILLING CODE 6210-01-S