Federal Register: October 23, 2009 (Volume 74, Number 204)
DOCID: fr23oc09-1 FR Doc E9-25555
FEDERAL DEPOSIT INSURANCE CORPORATION
Federal Deposit Insurance Corporation
CFR Citation: 12 CFR Part 370
RIN ID: RIN 3064-AD37
NOTICE: RULES
DOCID: fr23oc09-1
DOCUMENT ACTION: Final rule.
SUBJECT CATEGORY:
Amendment of the Debt Guarantee Program To Provide for the
DATES: The final rule becomes effective on October 23, 2009.
DOCUMENT SUMMARY:
To ensure an orderly phase-out of the Debt Guarantee Program (DGP), a component of the Temporary Liquidity Guarantee Program (TLGP), the FDIC is establishing a limited emergency guarantee facility. For most insured depository institutions and other entities participating in the DGP, the Debt Guarantee Program will conclude on October 31, 2009, with the FDIC's guarantee expiring no later than December 31, 2012. To the extent that certain of those entities become unable to issue nonguaranteed debt to replace maturing senior unsecured debt because of market disruptions or other circumstances beyond their control, the emergency guarantee facility will be available on an application basis. In order to utilize the emergency guarantee facility, an entity must apply to, and receive prior approval from, the FDIC. If the application is approved, the FDIC will guarantee the applicant's senior unsecured debt issued on or before April 30, 2010. Debt guaranteed under the emergency guarantee facility will be subject to an annualized assessment rate equal to a minimum of 300 basis points.
SUMMARY:
Debt Guarantee Program; Establishment of a Limited Six-Month Emergency Guarantee Facility
DOCUMENT BODY 2:
Establishment of a Limited SixMonth Emergency Guarantee Facility
SUPPLEMENTAL INFORMATION
I. Background
The FDIC adopted the TLGP in October 2008 following a determination
of systemic risk by the Secretary of the Treasury (after consultation
with the President) that was supported by recommendations from the FDIC
and the Board of Governors of the Federal Reserve System (Federal
Reserve).\1\ The TLGP is part of a coordinated effort by the FDIC, the
U.S. Department of the Treasury (Treasury), and the Federal Reserve to
address unprecedented disruptions in the credit markets and the
resultant difficulty of many financial institutions to obtain funds and
to make loans to creditworthy borrowers. On October 23, 2008, the
FDIC's Board of Directors (Board) authorized the publication in the
Federal Register of an interim rule that outlined the structure of the
TLGP.\2\ Designed to assist in the stabilization of the nation's
financial system, the FDIC's TLGP is composed of two distinct
components: The DGP and the Transaction Account Guarantee Program (TAG
program). Under the DGP, the FDIC guarantees certain senior unsecured
debt issued by participating entities. Under the TAG program, the FDIC
guarantees all funds held in qualifying noninterestbearing transaction
accounts at participating insured depository institutions (IDIs).\3\
\1\ See Section 13(c)(4)(G) of the Federal Deposit Insurance Act
(FDI Act), 12 U.S.C. 1823(c)(4)(G). The determination of systemic
risk triggered the FDIC's authority``in its sole discretion and
upon such terms and conditions as the [FDIC's] Board of Directors
may prescribeto take actions to avoid or mitigate serious adverse
effects on economic conditions or financial stability.'' See also
Section 9(a) Tenth of the FDI Act, 12 U.S.C. 1819(a)Tenth. The FDIC implemented the TLGP in response.
\2\ 73 FR 64179 (October 29, 2008). This interim rule was
finalized and a final rule was published in the Federal Register on November 26, 2008. 73 FR 72244 (November 26, 2008).
\3\ On June 23, 2009, the Board proposed two alternatives for
phasing out the TAG. The first alternative provided that the TAG
would expire on December 31, 2009, as required by the terms of the
existing rule. The second alternative provided for a limited six
month extension to that program. Following consideration of the
comments submitted in response to the two alternatives, on August
26, 2009, the Board adopted and approved for publication in the
Federal Register a final rule providing for a sixmonth extension of
the TAG program, through June 30, 2010. See 74 FR 45093 (September 1, 2009).
The DGP initially permitted participating entities to issue FDIC guaranteed senior unsecured debt until June 30, 2009, with the FDIC's guarantee for such debt to expire on the earlier of the maturity of the debt (or the conversion date, for mandatory convertible debt) or June 30, 2012.
To reduce the potential for market disruptions at the conclusion of the DGP and to begin the orderly phaseout of the program, on May 29, 2009 the Board issued a final rule that extended for four months the period during which certain participating entities could issue FDIC guaranteed debt.\4\ All IDIs and those other participating entities that had issued FDICguaranteed debt on or before April 1, 2009 were permitted to participate in the extended DGP without application to the FDIC. Other participating entities that received approval from the FDIC also were permitted to participate in the extended DGP. The expiration of the guarantee period was also extended from June 30, 2012 to December 31, 2012. As a result, all such participating entities were permitted to issue FDICguaranteed debt through and including October 31, 2009, with the FDIC's guarantee expiring on the earliest of the debt's mandatory conversion date (for mandatory convertible debt), the stated maturity date, or December 31, 2012.
\4\ 74 FR 26521 (June 3, 2009).
With over $600 billion in guaranteed debt having been issued by 118
entities, the TLGP has been an important factor in restoring liquidity
and confidence in the banking system. The program enabled banking
organizations to meet financing needs at affordable terms during a
period of systemwide turmoil. Recently, credit and liquidity conditions have become less stressed. Narrowing
[[Page 54744]]
spreads on both TLGP debt and nonguaranteed debt indicate that access
to funding has improved. Only a few entities have issued TLGP debt
during the extended DGP period, and recently several banking
organizations have successfully issued nonguaranteed debt. The total
amount of FDICguaranteed debt outstanding as of October 1, 2009 under the TLGP is $300 billion.
Noting the evidence that the domestic credit and liquidity markets
are beginning to normalize, on September 9, 2009, the Board authorized
publication of a Notice of Proposed Rulemaking that proposed two alternatives for concluding the DGP.\5\
\5\ 74 FR 47489 (September 16, 2009).
II. The Notice of Proposed Rulemaking
The Notice of Proposed Rulemaking (Proposed Rule) presented two alternatives for concluding the FDIC's guarantee of senior unsecured debt under the DGP, Alternative A and Alternative B.
A. Alternative A
Alternative A would have preserved the expiration dates for the issuance periods and for the duration of the guarantees under the DGP. Thus, all IDIs participating in the DGP and other participating entities that had either (i) issued guaranteed debt before April 1, 2009, or (ii) had not issued guaranteed debt before April 1, 2009, but had received the FDIC's permission to issue guaranteed debt through October 31, 2009 would be permitted to issue FDICguaranteed senior unsecured debt through October 31, 2009. The FDIC's guarantee for such debt issuances would expire no later than December 31, 2012. B. Alternative B
Like Alternative A, Alternative B provided that the basic DGP would expire as structured under the existing regulation. However, Alternative B also proposed the establishment of a limited, sixmonth emergency guarantee facility upon expiration of the DGP on October 31, 2009.
The emergency guarantee facility under Alternative B was intended to address a participating entity's inability to replace maturing senior unsecured debt with nonguaranteed debt as a result of market disruptions or other circumstances beyond the control of the participating entity. Under this emergency guarantee facility, certain participating entities could apply to the FDIC for permission to issue FDICguaranteed debt after October 31, 2009. If the FDIC approved an entity's request, the FDIC would guarantee the entity's senior unsecured debt issued after October 31, 2009, through and including April 30, 2010. Any such approval would be subject to such restrictions and conditions as the FDIC deemed appropriate including, but not limited to, a pledge of collateral, and limitations on executive compensation, bonuses, or the payment of dividends. Under Alternative B, the FDIC would assess a fee using an annualized assessment rate equal to at least 300 basis points on any FDICguaranteed debt issued by entities under the emergency guarantee facility. The FDIC would reserve the right to increase the assessment rate on a casebycase basis, depending upon the risks presented by the issuing entity. The FDIC's guarantee of principal and interest payments for senior unsecured debt issuances approved under the emergency guarantee facility would extend through the earliest of the mandatory conversion date (for mandatory convertible debt), the stated maturity date, or December 31, 2012. Under Alternative B, all of the terms and provisions of the FDIC's guarantee under the DGP would apply to such debt except as amended by the final rule. Further, under Alternative B, there would be no effect on any conditions that the FDIC may have placed on the issuance of debt by an IDI or other entity participating in the DGP. Any IDI participating in the DGP and any other entity participating in the DGP that has issued FDICguaranteed debt by September 9, 2009, would be permitted to apply to use this emergency guarantee facility. III. Summary of Comments Received
The FDIC requested comments on all aspects of the Proposed Rule. The FDIC specifically requested that commenters indicate a preference for either Alternative A or Alternative B. The FDIC also sought comments on whether, under Alternative B, eligibility for the emergency guarantee facility should be limited to participating IDIs and to those other entities that had issued FDICguaranteed debt on or before September 9, 2009. In response to the request, the FDIC received four (4) comments from the following: One comment (1) from an individual; one comment (1) from an industry association; and two comments (2) from two separate groups of LL.M. candidates at a law school. A summary of the comments the FDIC received follows.
The individual commenter expressed the belief that the DGP provides a valuable service and, therefore, should not be concluded as currently structured. The commenter noted that the DGP has value as a support mechanism regardless of whether it is underutilized.
A banking industry association commented in support of Alternative B as the most appropriate phaseout of the DGP. Specifically, the association expressed support for allowing access to the emergency guarantee facility on a limited casebycase basis for emergency circumstances. The association also noted that domestic credit and liquidity markets have begun to normalize and the number of entities issuing debt under the DGP has decreased. The association expressed the opinion that access to the emergency guarantee facility should be limited to IDIs or other entities that have issued FDICguaranteed senior unsecured debt on or before September 9, 2009. The association also supported a robust participation fee and noted that such a fee could both encourage a winding down of the DGP and generate increased TLGP revenue.
The FDIC also received comment letters from two groups of law students. Both groups supported the adoption of Alternative B as the most appropriate phaseout of the DGP, and both also requested that any final rule provide the FDIC with the discretion to decrease the proposed 300 basis points assessment rate.
The FDIC is establishing the emergency guarantee facility to serve as a mechanism to phaseout the DGP, it is not intended to encourage indefinite participation. The FDIC believes that establishing a 300 basis point minimum assessment rate will provide a more effective incentive for participating entities to wean themselves off of the FDIC's guarantee program. Consequently, the FDIC has decided to retain the 300 basis point minimum assessment rate.
Regarding access to the emergency guarantee facility, one student group supported restricting access to the emergency guarantee facility as proposed in Alternative B, noting that such a restriction would both provide an adequate safeguard against dependency and ensure that the facility is available only in severe circumstances. The second student group recommended that the FDIC expand the emergency guarantee facility eligibility to all financial institutions originally eligible under the DGP. This group asserted that expanding eligibility would protect the DIF, perpetuate the objectives of the TLGP, help deserving nonparticipating institutions avoid receivership, grant the FDIC greater discretion, and result in minimal additional costs to the FDIC. [[Page 54745]]
As noted above, the FDIC is establishing the emergency guarantee facility to phaseout the DGP in an orderly manner. Expanding access to all entities originally eligible would be inconsistent with that goal. As a result, the FDIC believes that limiting the eligibility as provided in Alternative B is the more appropriate way to achieve the goal of the emergency guarantee facility.
The two student groups also expressed a number of additional concerns regarding the proposed Alternative B. One group recommended that a final rule adopting Alternative B should include mandatory end use restrictions, such as limitations on executive compensation. This group also recommended that the application requirements for access to the emergency guarantee facility include a statement identifying any changes from all prior plans for the retirement of FDICguaranteed debt that an applicant had submitted to the FDIC under the DGP. Moreover, this group recommended requiring that applications for the emergency guarantee facility include a business plan that states clear objectives for avoiding use of the emergency guarantee facility in the future. The second group expressed concern that Alternative B includes overlybroad language when describing the types of situations that would warrant granting access to the emergency guarantee facility. The group recommended that the FDIC provide clearer guidelines and principles outlining the kind of financial challenges that can be construed as stemming from market disruption. The group also recommended that the FDIC provide greater guidance on how participation in the emergency guarantee facility would impact the participant's disclosures, raising the question of whether an applicant that has been denied access to the emergency guarantee facility must disclose the fact that it has been denied such access.
The FDIC believes that the emergency guarantee facility as designed
can adequately address the concerns underlying these suggestions. In
order to be effective, the emergency guarantee facility must be
available to handle a variety of adverse circumstances, including some
that have not yet been encountered or even forseen. Providing too
narrow a description of the circumstances when the facility would be
available could limit its effectiveness. The FDIC also believes that imposing too many mandatory requirements could also be
counterproductive. The FDIC needs flexibility in responding to these
situations. Since the FDIC can impose any condition it deems
appropriate and can, of course, decide not to approve an entity's use
of the emergency guarantee facility, the FDIC believes that it has the
ability to address these concerns and the flexibility to effectively respond to unforeseen circumstances.
IV. The Final Rule
The FDIC is adopting the proposal described in Alternative B as a final rule. As discussed below, the final rule will allow the basic DGP to expire on October 31, 2009 as currently structured. However, the final rule will also establish a limited sixmonth emergency guarantee facility upon the expiration of the basic DGP. The FDIC believes this approach provides the most appropriate phaseout of the basic DGP. A. Expiration of Debt Guarantee Program
Under the final rule, the DGP will expire as currently structured under existing regulation. Thus, all IDI's participating in the DGP and other participating entities that had either (i) issued guaranteed debt before April 1, 2009, or (ii) had not issued guaranteed debt before April 1, 2009, but had received FDIC's permission to issue guaranteed debt through October 31, 2009, are permitted to issue FDICguaranteed senior unsecured debt through October 31, 2009. The FDIC's guarantee for such debt issuances will expire no later than December 31, 2012. B. Emergency Guarantee Facility
Additionally, the final rule establishes a limited sixmonth emergency guarantee facility upon the expiration of the basic DGP. The emergency guarantee facility addresses an entity's inability to replace maturing senior unsecured debt with nonguaranteed debt as a result of market disruptions or other circumstances beyond the control of the participating entity. Under the final rule, the FDIC will guarantee senior unsecured debt issued after October 31, 2009, subject to the FDIC's prior approval on a casebycase basis, through April 30, 2010 by certain entities participating in the DGP; such guarantee will be subject to such restrictions and conditions that the FDIC deems appropriate. The duration of the FDIC's guarantee of senior unsecured debt issuances approved under the emergency guarantee facility will extend through the earliest of the mandatory conversion date (for mandatory convertible debt), the stated maturity date, or December 31, 2012. All of the terms and provisions of the DGP that are not amended by this final rule will apply to such debt issuances. The final rule does not affect any conditions that the FDIC has placed on the issuance of debt by an IDI or other entity participating in the DGP.
Any IDI participating in the DGP and any other entity participating in the DGP that has issued FDICguaranteed debt by September 9, 2009, is permitted to apply to use the emergency guarantee facility. i. Application Requirements for Participation in the Emergency Guarantee Facility
The final rule requires prior approval by the FDIC before an entity may participate in the emergency guarantee facility. Applications to participate in the emergency guarantee facility must be submitted to the Director of the Division of Supervision and Consumer Protection on or before April 30, 2010. FDIC prior approval to participate in the emergency guarantee facility will be granted on a casebycase basis subject to such terms and conditions as the FDIC deems appropriate.
Under the final rule, participation in the emergency guarantee facility is limited. Only those eligible entities that demonstrate an inability to issue nonguaranteed debt to replace maturing senior unsecured debt as a result of market disruptions or other circumstances beyond the entity's control may apply. The final rule requires that applications to participate in the emergency guarantee facility include the following: A projection of the sources and uses of funds through December 31, 2012; a summary of the entity's contingency plans; a description of any collateral that the entity can make available to secure the entity's obligation to reimburse the FDIC for any payments made pursuant to the guarantee; a description of the plans for retirement of the FDICguaranteed debt; a description of the market disruptions or other circumstances beyond the entity's control that prevent the entity from replacing maturing debt with nonguaranteed debt; a description of management's efforts to mitigate the effects of such disruptions or circumstances; conclusive evidence that demonstrates the entity's inability to issue nonguaranteed debt; and any other relevant information that the FDIC deems appropriate. ii. Participation Fee
Under the final rule, the FDIC will assess a fee equal to the
amount of the debt to be guaranteed times the number of years (or portions thereof) from
[[Page 54746]]
issuance date through the earliest of the mandatory conversion date
(for mandatory convertible debt), the stated maturity date, or December
31, 2012 times an assessment rate of at least 300 basis points on any
guaranteed debt issued under the emergency guarantee facility. The FDIC
reserves the right to increase the fee on a casebycase basis,
depending upon the risks presented by the issuing entity. The FDIC
believes that the fee established under the final rule will provide an
appropriate deterrent to applications based on other, less severe
circumstances or concerns. Under the final rule, a participating entity
may be required to pledge sufficient collateral to ensure the repayment
of any principal and interest payments made by the FDIC under the
emergency guarantee facility, subject to any other conditions and
restrictions that the FDIC deems appropriate. Such conditions and restrictions may include, for example, limiting executive
compensations, bonuses, or the payment of dividends.
V. Regulatory Analysis and Procedure
A. Administrative Procedure Act
The process of amending Part 370 by means of this final rule is governed by the Administrative Procedure Act (APA). Section 553(d)(3) of the APA provides that the publication of a 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.'' \6\
\6\ 5 U.S.C. 553(d)(3).
When it issued the interim rule and the final rule initially
implementing the TLGP, the FDIC invoked this good cause exception based
on the severe financial conditions that threatened the stability of the
nation's economy generally and the banking system in particular.\7\
Recently, credit and liquidity conditions have become less stressed.
Narrowing spreads on both TLGP debt and nonguaranteed debt indicate
that access to funding has improved. Only a few entities have issued
TLGP debt during the extended DGP period, and recently several banking
organizations have successfully issued nonguaranteed debt. In order to
continue the orderly phase out of the basic DGP and to ensure that the
creation of the emergency guarantee facility occurs at the conclusion
of the basic DGP on October 31, 2009, the FDIC finds that good cause exists for an immediate effective date for the final rule.
\7\ See 74 FR 26521 (June 3, 2009) and 73 FR 72244 (Nov. 26, 2008).
B. Riegle Community Development and Regulatory Improvement Act
The Riegle Community Development and Regulatory Improvement Act
(RCDRIA) provides that any new regulations or amendments to regulations
prescribed by a Federal banking agency that impose additional
reporting, disclosures, or other new requirements on IDIs shall take
effect on the first day of a calendar quarter which begins on or after
the date on which the regulations are published in final form, unless
the agency determines, for good cause published with the rule, that the
rule should become effective before such time.\8\ For the same reasons
as discussed above, the FDIC finds that good cause exists for an immediate effective date for the final rule.
\8\ 12 U.S.C. 4802.
C. Small Business Regulator Enforcement Fairness Act
The Office of Management and Budget (OMB) has determined that this
final rule is not a ``major rule'' within the meaning of the relevant
sections of the Small Business Regulatory Enforcement Act of 1996
(SBREFA), 5 U.S.C. 801 et seq. As required by SBREFA, the FDIC will file appropriate reports with Congress and the Government
Accountability Office.
D. Regulatory Flexibility Act
Under the Regulatory Flexibility Act (RFA), the FDIC must prepare a
final regulatory flexibility analysis in connection with the
promulgation of a final rule,\9\ or certify that the final rule will
not have a significant economic impact on a substantial number of small
entities.\10\ For purposes of the RFA analysis or certification,
financial institutions with total assets of $175 million or less are
considered to be ``small entities.'' For reasons discussed below, the
FDIC certifies that the final rule will not have a significant economic impact on a substantial number of small entities.
\9\ 5 U.S.C. 604.
\10\ 5 U.S.C. 605(b).
Currently, 4,394 IDIs participate in the DGP, of which approximately 2,120 (or approximately 48 percent) are small entities. Under the final rule, all 2,120 IDIs that would be considered small entities for purposes of this analysis are eligible to apply to access the emergency guarantee facility. As a result, the FDIC asserts that the final rule may affect a substantial number of IDIs that are small entities that participate in the DGP.
Nevertheless, the FDIC has determined that the final rule's economic impact on small entities will not be significant for the following reasons. The emergency guarantee facility is designed to be accessed on an emergency casebycase basis by IDIs (and other entities that issued debt under the DGP) only if such entities are unable to replace maturing debt as a result of market disruptions or other circumstances beyond the entities' control. Eightyone IDIs have issued FDICguaranteed debt through the DGP since the program's inception. It is unlikely that a significant number of IDIs (or other qualifying entities) would satisfy the requirements to issue FDICguaranteed debt during such emergency circumstances. Accordingly, the final rule will not have a significant economic impact on a substantial number of small entities.
E. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. This Final Rule implements Alternative B of the Notice of Proposed Rulemaking, which establishes an emergency guarantee facility to ensure an orderly phase out of the debt guarantee component of the Temporary Liquidity Guarantee Program. Alternative B includes, in section 370.3(h)(viii), an application requirement for IDIs and nonIDIs wishing to access the emergency guarantee facility. In conjunction with publication of the Notice of Proposed Rulemaking, the FDIC submitted to OMB a request for clearance of the paperwork burden associated with the application requirement in Alternative B. That request is still pending.
The proposed rule document requested comment on the estimated paperwork burden. However, none of the comments received addressed the estimated paperwork burden. Therefore, the FDIC has not altered its initial burden estimates. The estimated burden for the application requirement, as set forth in the Notice of Proposed Rulemaking and Final Rule, is as follows:
Title: ``Temporary Liquidity Guarantee ProgramEmergency Guarantee Facility.''
OMB Number: 3064NEW.
Estimated Number of Respondents: Application to access emergency guarantee facility submitted by IDIs8.
Application to access emergency guarantee facility submitted by nonIDIs that issued FDICguaranteed debt under the DGP4.
[[Page 54747]]
Frequency of Response: Application to access emergency guarantee facility submitted by IDIsonce.
Application to access emergency guarantee facility submitted by nonIDIs that issued FDICguaranteed debt under the DGPonce.
Affected Public: IDIs; thrift holding companies, bank and financial holding companies, and affiliates of IDIs that issued debt under the DGP.
Average Time per Response: Application to access emergency guarantee facility submitted by IDIs4 hours.
Application to access emergency guarantee facility submitted by nonIDIs that issued FDICguaranteed debt under the DGP4 hours.
Estimated Annual Burden: Application to access emergency guarantee facility submitted by IDIs32 hours.
Application to access emergency guarantee facility submitted by nonIDIs that issued FDICguaranteed debt under the DGP16 hours.
Total Annual Burden48 hours.
Comment Request: The FDIC has an ongoing interest in public
comments on its collections of information, including comments on: (1)
Whether this collection of information is necessary for the proper
performance of the FDIC's functions, including whether the information
has practical utility; (2) the accuracy of the estimates of the burden
of the information collection, including the validity of the
methodologies and assumptions used; (3) ways to enhance the quality,
utility, and clarity of the information to be collected; and (4) ways
to minimize the burden of the information collection on respondents,
including through the use of automated collection techniques or other
forms of information technology. Comments may be submitted to the FDIC by any of the following methods:
A copy of the comment may also be submitted to the OMB Desk Officer for the FDIC, Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 3208, Washington, DC 20503. All comments should refer to the ``Temporary Liquidity Guarantee ProgramEmergency Guarantee Facility (OMB No. 3064New)''.
F. Solicitation of Comments on Use of Plain Language
Section 722 of the GrammLeachBliley Act, Public Law 106102, 113
Stat. 1338, 1471 (Nov. 12, 1999), requires the federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. In issuing the Notice of Proposed Rulemaking the FDIC
requested comment on how to make the regulation easier to understand.
The FDIC received one comment in response to the request. The comment supported the FDIC's use of plain language in the NPR.
G. The Treasury and General Government Appropriations Act, 1999 Assessment of Federal Regulations and Policies on Families
The FDIC has determined that the Final Rule will not affect family wellbeing within the measure of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105277, 112 Stat. 2681).
List of Subjects in 12 CFR Part 370
Banks, Banking, Bank deposit insurance, Holding companies, National
banks, Reporting and recordkeeping requirements, Savings associations.
For the reasons discussed in the preamble, the Federal Deposit Insurance Corporation amends 12 CFR part 370 as follows:
PART 370TEMPORARY LIQUIDITY GUARANTEE PROGRAM
1. The authority citation for part 370 continues to read as follows:
Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818,
1819(a)(Tenth), 1820(f), 1821(a), 1821(c), 1821(d), 1823(c)(4).
2. Amend Sec. 370.2 by revising paragraph (n) to read as follows: Sec. 370.2 Definitions.
* * * * *
(n) Issuance period.
(1) Except as provided in paragraph (n)(2) of this section, the term ``issuance period'' means
(i) With respect to the issuance, by a participating entity that is
either an insured depository institution, an entity that has issued
FDICguaranteed debt before April 1, 2009, or an entity that has been
approved pursuant to Sec. 370.3(h) to issue FDICguaranteed debt after June 30, 2009, and on or before October 31, 2009, of:
(A) Mandatory convertible debt, the period from February 27, 2009, to and including October 31, 2009, and
(B) All other senior unsecured debt, the period from October 14, 2008, to and including October 31, 2009; and
(ii) With respect to the issuance, by any other participating entity, of
(A) Mandatory convertible debt, the period from February 27, 2009, to and including June 30, 2009, and
(B) All other senior unsecured debt, the period from October 14, 2008, to and including June 30, 2009.
(2) The ``issuance period'' for a participating entity that has
been approved to issue FDICguaranteed debt pursuant to Sec. 370.3(k)
of this part is the period after October 31, 2009, and on or before April 30, 2010.
* * * * *
3. Amend Sec. 370.3 as follows:
a. Revise paragraph (d)(2);
b. Revise paragraphs (h)(1) through (h)(3), (h)(5), and (h)(6); and c. Add paragraph (k), to read as follows:
Sec. 370.3 Debt Guarantee Program
* * * * *
(d) * * *
(2) With respect to debt that is issued on or after April 1, 2009,
by a participating entity that is either an insured depository
institution, a participating entity that has issued guaranteed debt
before April 1, 2009, a participating entity that has been approved
pursuant to Sec. 370.3(h) to issue guaranteed debt after June 30,
2009, and on or before October 31, 2009, or a participating entity that
has been approved pursuant to Sec. 370.3(k) to issue guaranteed debt
after October 31, 2009, the guarantee expires on the earliest of the
mandatory conversion date (for mandatory convertible debt), the maturity date of the debt, or December 31, 2012.
* * * * *
(h) Applications for exceptions, eligibility, and issuance of certain debt.
(1) The following requests require written application to the FDIC
and the appropriate Federal banking agency of the entity or the entity's lead affiliated insured depository institution:
(i) A request by a participating entity to establish, increase, or decrease its debt guarantee limit,
(ii) A request by an entity that becomes an eligible entity after
October 13, 2008, for an increase in its presumptive debt guarantee limit of zero,
[[Page 54748]]
(iii) A request by a nonparticipating surviving entity in a merger
transaction to opt in to either the debt guarantee program or the transaction account guarantee program,
(iv) A request by an affiliate of an insured depository institution to participate in the debt guarantee program,
(v) A request by a participating entity to issue FDICguaranteed mandatory convertible debt,
(vi) A request by a participating entity that is neither an insured
depository institution nor an entity that has issued FDICguaranteed
debt before April 1, 2009, to issue FDICguaranteed debt after June 30, 2009, and on or before October 31, 2009,
(vii) A request by a participating entity to issue senior unsecured nonguaranteed debt after June 30, 2009, and
(viii) A request by a participating entity to issue FDICguaranteed
debt after October 31, 2009 under the Emergency Guarantee Facility pursuant to paragraph (k) of this section.
(2) Each letter application must describe the details of the
request, provide a summary of the applicant's strategic operating plan, describe the proposed use of the debt proceeds, and
(i) With respect to an application for approval of the issuance of mandatory convertible debt, must also include:
(A) The proposed date of issuance,
(B) The total amount of the mandatory convertible debt to be issued,
(C) The mandatory conversion date,
(D) The conversion rate (i.e., the total number of shares of common
stock that will result from the conversion divided by the total dollar amount of the mandatory convertible debt to be issued),
(E) Confirmation that all applications and all notices required
under the Bank Holding Company Act of 1956, as amended, the Home
Owners' Loan Act, as amended, or the Change in Bank Control Act, as
amended, have been submitted to the applicant's appropriate Federal
banking agency in connection with the proposed issuance, and
(F) Any other relevant information that the FDIC deems appropriate;
(ii) With respect to an application pursuant to paragraph
(h)(1)(vi) of this section to extend the period for issuance of FDIC
guaranteed debt to and including October 31, 2009, the entity's plans
for the retirement of the guaranteed debt, a description of the
entity's financial history, current condition, and future prospects,
and any other relevant information that the FDIC deems appropriate;
(iii) With respect to an application pursuant to paragraph
(h)(1)(vii) of this section to issue senior unsecured nonguaranteed
debt, a summary of the applicant's strategic operating plan and the
entity's plans for the retirement of any guaranteed debt; and
(iv) With respect to an application pursuant to paragraph
(h)(1)(viii) of this section to issue FDICguaranteed debt under the
Emergency Guarantee Facility, a projection of the sources and uses of
funds through December 31, 2012, a summary of the entity's contingency
plans, a description of the collateral that an entity can make
available to secure the entity's obligation to reimburse the FDIC for
any payments made pursuant to the guarantee, a description of the plans
for retirement of the FDICguaranteed debt, a description of the market
disruptions or other circumstances beyond the entity's control that
prevent the entity from replacing maturing debt with nonguaranteed
debt, a description of management's efforts to mitigate the effects of
such disruptions or circumstances, conclusive evidence that
demonstrates an entity's inability to issue nonguaranteed debt, and any other relevant information.
(3) In addition to any other relevant factors that the FDIC deems
appropriate, the FDIC will consider the following factors in evaluating
applications filed pursuant to paragraph (h) of this section:
(i) For applications pursuant to paragraphs (h)(1)(i), (h)(1)(ii),
(h)(1)(iii), and (h)(1)(v) of this section: The proposed use of the
proceeds; the financial condition and supervisory history of the eligible/surviving entity;
(ii) For applications pursuant to paragraph (h)(1)(iv) of this
section: The proposed use of the proceeds; the extent of the financial
activity of the entities within the holding company structure; the
strength, from a ratings perspective of the issuer of the obligations
that will be guaranteed; the size and extent of the activities of the organization;
(iii) For applications pursuant to paragraph (h)(1)(vi) of this
section: The proposed use of the proceeds; the entity's plans for the
retirement of the guaranteed debt, the entity's financial history,
current condition, future prospects, capital, management, and the risk presented to the FDIC;
(iv) For applications pursuant to paragraph (h)(1)(vii) of this
section: The entity's plans for the retirement of the guaranteed debt; and
(v) For applications pursuant to paragraph (h)(1)(viii) of this
section, the applicant's strategic operating plan, the proposed use of
the debt proceeds, the entity's plans for the retirement of the FDIC
guaranteed debt, the entity's contingency plans, the nature and extent
of the market disruptions or other circumstances beyond the entity's
control that prevent the entity from replacing maturing debt with non
guaranteed debt, the collateral that an entity can make available to
secure the entity's obligation to reimburse the FDIC for any payments
made pursuant to the guarantee, management's efforts to mitigate the
effects of such conditions or circumstances, the evidence that
demonstrates an entity's inability to issue nonguaranteed debt, and the risk presented to the FDIC.
* * * * *
(5) The filing deadlines for certain applications are:
(i) At the same time the merger application is filed with the
appropriate Federal banking agency, for an application pursuant to
paragraph (h)(1)(iii) of this section (which must include a copy of the merger application);
(ii) October 31, 2009, for an application pursuant to paragraph
(h)(1)(v) of this section that is filed by a participating entity that
is either an insured depository institution, an entity that has issued
FDICguaranteed debt before April 1, 2009, or an entity that has been
approved pursuant to paragraph (h) of this section to issue FDIC
guaranteed debt after June 30, 2009, and on or before October 31, 2009;
(iii) June 30, 2009, for an application pursuant to paragraph
(h)(1)(v) of this section that is filed by a participating entity other
than an entity described in paragraph (h)(5)(ii) of this section;
(iv) June 30, 2009, for an application pursuant to paragraph (h)(1)(vi); and
(v) April 30, 2010, for applications pursuant to paragraph (h)(1)(viii).
(6) In granting its approval of an application filed pursuant to
paragraph (h) of this section the FDIC may impose any conditions it
deems appropriate, including without limitation, requirements that the issuer
(i) Hedge any foreign currency risk, or
(ii) Pledge collateral to secure the issuer's obligation to
reimburse the FDIC for any payments made pursuant to the guarantee. (iii) Limit executive compensation and bonuses, and/or
(iv) Limit or refrain from the payment of dividends.
* * * * *
(k) Emergency Guarantee Facility. In the event that a participating
entity that is either an insured depository institution or an entity
that has issued FDICguaranteed debt on or before September 9, 2009 is unable, after October 31, 2009, to issue non
[[Page 54749]]
guaranteed debt to replace maturing senior unsecured debt as a result
of market disruptions or other circumstances beyond the entity's
control, the participating entity may, with the FDIC's prior approval
under paragraph (h) of this section, issue FDICguaranteed debt after
October 31, 2009, and on or before April 30, 2010. Any such issuance is
subject to all of the terms and conditions imposed by the FDIC in its
approval decision as well as all of the provisions of this part,
including without limitation, the payment of the applicable assessment and compliance with the disclosure requirements.
* * * * *
4. Amend Sec. 370.5 as follows:
a. Revise paragraph (f); and
b. Revise paragraph (h)(2), to read as follows:
Sec. 370.5 Participation.
* * * * *
(f) Except as provided in paragraphs (g), (j), and (k) of Sec.
370.3, participating entities are not permitted to select which newly
issued senior unsecured debt is guaranteed debt; all senior unsecured
debt issued by a participating entity up to its debt guarantee limit
must be issued and identified as FDICguaranteed debt as and when issued.
* * * * *
(h) * * *
(2) Each participating entity that is either an insured depository
institution, an entity that has issued FDICguaranteed debt before
April 1, 2009, an entity that has been approved pursuant to Sec.
370.3(h) to issue FDICguaranteed debt after June 30, 2009, and on or
before October 31, 2009, or a participating entity that has been
approved pursuant to Sec. 370.3(k) to issue FDICguaranteed debt after
October 31, 2009, must include the following disclosure statement in
all written materials provided to lenders or creditors regarding any
senior unsecured debt that is issued by it during the applicable
issuance period and that is guaranteed under the debt guarantee program:
This debt is guaranteed under the Federal Deposit Insurance
Corporation's Temporary Liquidity Guarantee Program and is backed by
the full faith and credit of the United States. The details of the FDIC
guarantee are provided in the FDIC's regulations, 12 CFR Part 370, and
at the FDIC's Web site, http://www.fdic.gov/tlgp. [If the debt being
issued is mandatory convertible debt, add: The expiration date of the
FDIC's guarantee is the earlier of the mandatory conversion date or
December 31, 2012]. [If the debt being issued is any other senior
unsecured debt, add: The expiration date of the FDIC's guarantee is the
earlier of the maturity date of the debt or December 31, 2012.] * * * * *
5. Amend Sec. 370.6 as follows:
a. Revise paragraph (d)(1); and
b. Add paragraph (i), to read as follows:
Sec. 370.6 Assessments under the Debt Guarantee Program.
* * * * *
(d) Amount of assessments for debt within the debt guarantee limit
(1) Calculation of assessment. Subject to paragraphs (d)(3) and (h)
of this section, and except as provided in paragraph (i) of this
section, the amount of assessment will be determined by multiplying the
amount of FDICguaranteed debt times the term of the debt or, in the
case of mandatory convertible debt, the time period from issuance to
the mandatory conversion date, times an annualized assessment rate determined in accordance with the following table.
The annualized
assessment
For debt with a maturity or time period to conversion rate (in basis
date of points) is
180 days or less (excluding overnight debt)............. 50
181364 days............................................ 75
365 days or greater..................................... 100 * * * * *
(i) Assessment for debt issued under the Emergency Guarantee
Facility. The amount of the assessment for FDICguaranteed debt issued
pursuant to Sec. 370.3(k) of this part is equal to the amount of the
debt times the term of the debt (or in the case of mandatory
convertible debt, the time period to conversion) times an annualized
assessment rate of 300 basis points, or such greater rate as the FDIC may determine in its decision approving such issuance.
By order of the Board of Directors.
Dated at Washington, DC, this 20th day of October 2009. Robert E. Feldman,
Executive Secretary, Federal Deposit Insurance Corporation. [FR Doc. E925555 Filed 102209; 8:45 am]
BILLING CODE 671401P
FOR FURTHER INFORMATION CONTACT
(For questions or comments related to
applications) Lisa D. Arquette, Associate Director, Division of Supervision and Consumer Protection, (202) 8988633 or
larquette@fdic.gov; Serena L. Owens, Associate Director, Supervision
and Applications Branch, Division of Supervision and Consumer
Protection, (202) 8988996 or sowens@fdic.gov; Gail Patelunas, Deputy
Director, Division of Resolutions and Receiverships, (202) 8986779 or
gpatelunas@fdic.gov; Donna Saulnier, Manager, Assessment Policy
Section, Division of Finance, (703) 5626167 or dsaulnier@fdic.gov; A. Ann Johnson, Counsel, Legal Division, (202) 8983573 or
aajohnson@fdic.gov; Ryan K. Clougherty, Senior Attorney, Legal
Division, (202) 8983843 or rclougherty@fdic.gov; or Robert C. Fick,
Counsel, Legal Division, (202) 8988962 or rfick@fdic.gov.