Unless defined in this section,
terms that are set forth in section 238.2 and used in this subpart
have the definitions assigned in section 238.2. For purposes of this
subpart:
(a) Adjusted market value means:
(1) With respect to the value of cash,
securities, or other eligible collateral transferred by the covered
company to a counterparty, the sum of:
(i) The market value
of the cash, securities, or other eligible collateral; and
(ii) The product of the
market value of the securities or other eligible collateral multiplied
by the applicable collateral haircut in Table 1 to section 217.132
of this chapter; and
(2) With respect to cash, securities, or
other eligible collateral received by the covered company from a counterparty:
(i) The market value of the cash, securities, or other eligible collateral; minus
(ii) The
market value of the securities or other eligible collateral multiplied
by the applicable collateral haircut in Table 1 to section 217.132
of this chapter.
(3) Prior to calculating the adjusted market
value pursuant to paragraphs (a)(1) and (2) of this section, with
regard to a transaction that meets the definition of “repo-style transaction”
in section 217.2 of this chapter, the covered company would first
multiply the applicable collateral haircuts in Table 1 to section
217.132 of this chapter by the square root of ½.
(b) Affiliate means, with respect to a company:
(1) Any subsidiary of the company and any
other company that is consolidated with the company under applicable
accounting standards; or
(2) For a company that is not subject to principles or standards
referenced in paragraph (b)(1) of this section, any subsidiary of
the company and any other company that would be consolidated with
the company, if consolidation would have occurred if such principles
or standards had applied.
(c) Aggregate
net credit exposure means the sum of all net credit exposures
of a covered company and all of its subsidiaries to a single counterparty
as calculated under this subpart.
(d) Bank-eligible
investments means investment securities that a national bank is
permitted to purchase, sell, deal in, underwrite, and hold under 12
U.S.C. 24 (Seventh) and 12 CFR part 1.
(e) Counterparty means, with respect to a credit transaction:
(1) With respect to a natural
person, the natural person, and, if the credit exposure of the covered
company to such natural person exceeds 5 percent of the covered company’s
tier 1 capital, the natural person and members of the person’s immediate
family collectively;
(2) With respect to any company that is not a subsidiary of the covered
company, the company and its affiliates collectively;
(3) With respect to a State, the State
and all of its agencies, instrumentalities, and political subdivisions
(including any municipalities) collectively;
(4) With respect to a foreign sovereign
entity that is not assigned a zero percent risk weight under the standardized
approach in 12 CFR part 217, subpart D, the foreign sovereign entity
and all of its agencies and instrumentalities (but not including any
political subdivision) collectively; and
(5) With respect to a political subdivision
of a foreign sovereign entity such as a state, province, or municipality,
any political subdivision of the foreign sovereign entity and all
of such political subdivision’s agencies and instrumentalities, collectively.
1(f) Covered company is
defined in section 238.150(a)
(g) Credit derivative has the same meaning as in section 217.2 of this chapter.
(h) Credit transaction means, with respect to a
counterparty:
(1) Any extension of credit
to the counterparty, including loans, deposits, and lines of credit,
but excluding uncommitted lines of credit;
(2) Any repurchase agreement or reverse
repurchase agreement with the counterparty;
(3) Any securities lending or securities
borrowing transaction with the counterparty;
(4) Any guarantee, acceptance, or letter
of credit (including any endorsement, confirmed letter of credit,
or standby letter of credit) issued on behalf of the counterparty;
(5) Any purchase of securities
issued by or other investment in the counterparty;
(6) Any credit exposure to the counterparty
in connection with a derivative transaction between the covered company
and the counterparty;
(7) Any credit exposure to the counterparty in connection with a
credit derivative or equity derivative between the covered company
and a third party, the reference asset of which is an obligation or
equity security of, or equity investment in, the counterparty; and
(8) Any transaction that
is the functional equivalent of the above, and any other similar transaction
that the Board, by regulation or order, determines to be a credit
transaction for purposes of this subpart.
(i) Depository institution has the same meaning as in section
3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
(j) Derivative transaction means any transaction
that is a contract, agreement, swap, warrant, note, or option that
is based, in whole or in part, on the value of, any interest in, or
any quantitative measure or the occurrence of any event relating to,
one or more commodities, securities, currencies, interest or other
rates, indices, or other assets.
(k) Eligible
collateral means collateral in which, notwithstanding the prior
security interest of any custodial agent, the covered company has
a perfected, first priority security interest (or the legal equivalent
thereof, if outside of the United States), with the exception of cash
on deposit, and is in the form of:
(1) Cash on deposit with the covered company
or a subsidiary of the covered company (including cash in foreign
currency or U.S. dollars held for the covered company by a custodian
or trustee, whether inside or outside of the United States);
(2) Debt securities (other
than mortgage- or asset-backed securities and resecuritization securities,
unless those securities are issued by a U.S. government-sponsored
enterprise) that are bank-eligible investments and that are investment
grade, except for any debt securities issued by the covered company
or any subsidiary of the covered company;
(3) Equity securities that are publicly
traded, except for any equity securities issued by the covered company
or any subsidiary of the covered company;
(4) Convertible bonds that are publicly
traded, except for any convertible bonds issued by the covered company
or any subsidiary of the covered company; or
(5) Gold bullion.
(l) Eligible credit derivative means a
single-name credit derivative or a standard, non-tranched index credit
derivative, provided that:
(1) The contract meets the requirements
of an eligible guarantee and has been confirmed by the protection
purchaser and the protection provider;
(2) Any assignment of the contract has
been confirmed by all relevant parties;
(3) If the credit derivative is a credit
default swap, the contract includes the following credit events:
(i) Failure to pay any amount due under the terms of the reference
exposure, subject to any applicable minimal payment threshold that
is consistent with standard market practice and with a grace period
that is closely in line with the grace period of the reference exposure;
and
(ii) Receivership,
insolvency, liquidation, conservatorship, or inability of the reference
exposure issuer to pay its debts, or its failure or admission in writing
of its inability generally to pay its debts as they become due, and
similar events;
(4) The terms and conditions dictating
the manner in which the contract is to be settled are incorporated into
the contract;
(5) If
the contract allows for cash settlement, the contract incorporates
a robust valuation process to estimate loss reliably and specifies
a reasonable period for obtaining post-credit event valuations of
the reference exposure;
(6) If the contract requires the protection purchaser to transfer
an exposure to the protection provider at settlement, the terms of
at least one of the exposures that is permitted to be transferred
under the contract provide that any required consent to transfer may
not be unreasonably withheld; and
(7) If the credit derivative is a credit
default swap, the contract clearly identifies the parties responsible
for determining whether a credit event has occurred, specifies that
this determination is not the sole responsibility of the protection
provider, and gives the protection purchaser the right to notify the
protection provider of the occurrence of a credit event.
(m) Eligible equity derivative means an equity
derivative, provided that:
(1) The derivative contract has been confirmed
by all relevant parties;
(2) Any assignment of the derivative contract has been confirmed
by all relevant parties; and
(3) The terms and conditions dictating
the manner in which the derivative contract is to be settled are incorporated
into the contract.
(n) Eligible guarantee has the same meaning as in section 217.2 of this chapter.
(o) Eligible guarantor has the same meaning as
in section 217.2 of this chapter.
(p) Equity
derivative has the same meaning as “equity derivative contract”
in section 217.2 of this chapter.
(q) Exempt
counterparty means an entity that is identified as exempt from
the requirements of this subpart under section 238.157, or that is
otherwise excluded from this subpart, including any sovereign entity
assigned a zero percent risk weight under the standardized approach
in 12 CFR part 217, subpart D.
(r) Financial
entity means:
(1) (i) A bank
holding company or an affiliate thereof; a savings and loan holding
company; a U.S. intermediate holding company established or designated
pursuant to 12 CFR 252.153; or a nonbank financial company supervised
by the Board;
(ii)
A depository institution as defined in section 3(c) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(c)); an organization that is
organized under the laws of a foreign country and that engages directly
in the business of banking outside the United States; a federal credit
union or state credit union as defined in section 2 of the Federal
Credit Union Act (12 U.S.C. 1752(1) and (6)); a national association,
state member bank, or state nonmember bank that is not a depository
institution; an institution that functions solely in a trust or fiduciary
capacity as described in section 2(c)(2)(D) of the Bank Holding Company
Act (12 U.S.C. 1841(c)(2)(D)); an industrial loan company, an industrial
bank, or other similar institution described in section 2(c)(2)(H)
of the Bank Holding Company Act (12 U.S.C. 1841(c)(2)(H));
(iii) An entity that is
state-licensed or registered as:
(A) A credit or lending entity,
including a finance company; money lender; installment lender; consumer
lender or lending company; mortgage lender, broker, or bank; motor
vehicle title pledge lender; payday or deferred deposit lender; premium
finance company; commercial finance or lending company; or commercial
mortgage company; except entities registered or licensed solely on
account of financing the entity’s direct sales of goods or services
to customers;
(B) A money
services business, including a check casher; money transmitter; currency
dealer or exchange; or money order or traveler’s check issuer;
(iv)
Any person registered with the Commodity Futures Trading Commission
as a swap dealer or major swap participant pursuant to the Commodity
Exchange Act of 1936 (7 U.S.C. 1 et seq.), or an entity that
is registered with the U.S. Securities and Exchange Commission as
a security-based swap dealer or a major security-based swap participant
pursuant to the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
(v)
A securities holding company as defined in section 618 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (12 U.S.C. 1850a);
a broker or dealer as defined in sections 3(a)(4) and 3(a)(5) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)-(5)); an investment
adviser as defined in section 202(a) of the Investment Advisers Act
of 1940 (15 U.S.C. 80b-2(a)); an investment company registered with
the U.S. Securities and Exchange Commission under the Investment Company
Act of 1940 (15 U.S.C. 80a-1 et seq.); or a company that has
elected to be regulated as a business development company pursuant
to section 54(a) of the Investment Company Act of 1940 (15 U.S.C.
80a-53(a));
(vi)
A private fund as defined in section 202(a) of the Investment Advisers
Act of 1940 (15 U.S.C. 80b-2(a)); an entity that would be an investment
company under section 3 of the Investment Company Act of 1940 (15
U.S.C. 80a-3) but for section 3(c)(5)(C); or an entity that is deemed
not to be an investment company under section 3 of the Investment
Company Act of 1940 pursuant to Investment Company Act Rule 3a-7 (17
CFR 270.3a-7) of the U.S. Securities and Exchange Commission;
(vii) A commodity pool,
a commodity pool operator, or a commodity trading advisor as defined,
respectively, in sections 1a(10), 1a(11), and 1a(12) of the Commodity
Exchange Act of 1936 (7 U.S.C. 1a(10), 1a(11), and 1a(12)); a floor
broker, a floor trader, or introducing broker as defined, respectively,
in sections 1a(22), 1a(23) and 1a(31) of the Commodity Exchange Act
of 1936 (7 U.S.C. 1a(22), 1a(23), and 1a(31)); or a futures commission
merchant as defined in section 1a(28) of the Commodity Exchange Act
of 1936 (7 U.S.C. 1a(28));
(viii) An employee benefit plan as defined
in paragraphs (3) and (32) of section 3 of the Employee Retirement
Income and Security Act of 1974 (29 U.S.C. 1002);
(ix) An entity that is organized as
an insurance company, primarily engaged in writing insurance or reinsuring
risks underwritten by insurance companies, or is subject to supervision
as such by a State insurance regulator or foreign insurance regulator;
(x) Any designated
financial market utility, as defined in section 803 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (12 U.S.C. 5462); and
(xi) An entity that
would be a financial entity described in paragraphs (r)(1)(i) through
(x) of this section, if it were organized under the laws of the United
States or any State thereof; and
(2) Provided that, for purposes of this
subpart, “financial entity” does not include any counterparty that
is a foreign sovereign entity or multilateral development bank.
(s) Foreign sovereign entity means
a sovereign entity other than the United States government and the
entity’s agencies, departments, ministries, and central bank collectively.
(t) Gross credit exposure means, with respect
to any credit transaction, the credit exposure of the covered company
before adjusting, pursuant to section 238.154, for the effect of any
eligible collateral, eligible guarantee, eligible credit derivative,
eligible equity derivative, other eligible hedge, and any unused portion
of certain extensions of credit.
(u) Immediate
family means the spouse of an individual, the individual’s minor
children, and any of the individual’s children (including adults)
residing in the individual’s home.
(v) Intraday
credit exposure means credit exposure of a covered company to
a counterparty that by its terms is to be repaid, sold, or terminated
by the end of its business day in the United States.
(w) Investment grade has the same meaning as in section 217.2
of this chapter.
(x) Multilateral development
bank has the same meaning as in section 217.2 of this chapter.
(y) Net credit exposure means, with respect
to any credit transaction, the gross credit exposure of a covered
company and all of its subsidiaries calculated under section 238.153,
as adjusted in accordance with section 238.154.
(z) Qualifying central counterparty has the same meaning as
in section 217.2 of this chapter.
(aa) Qualifying
master netting agreement has the same meaning as in section 217.2
of this chapter.
(bb) Securities financing transaction means any repurchase agreement, reverse repurchase agreement, securities
borrowing transaction, or securities lending transaction.
(cc) Short sale means any sale of a security which
the seller does not own or any sale which is consummated by the delivery
of a security borrowed by, or for the account of, the seller.
(dd) Sovereign entity means a central national
government (including the U.S. government) or an agency, department,
ministry, or central bank, but not including any political subdivision
such as a state, province, or municipality.
(ee) Subsidiary. A company is a subsidiary of
another company if:
(1) The company is consolidated by the
other company under applicable accounting standards; or
(2) For a company that is
not subject to principles or standards referenced in paragraph (ee)(1)
of this section, consolidation would have occurred if such principles
or standards had applied.
(ff) Tier
1 capital means common equity tier 1 capital and additional tier
1 capital, as defined in 12 CFR part 217 and as reported by the covered
savings and loan holding company on the most recent FR Y-9C report
on a consolidated basis.
(gg) Total consolidated assets. A company’s
total consolidated assets are determined based on:
(1) The average of the company’s total
consolidated assets in the four most recent consecutive quarters as
reported quarterly on the FR Y-9C; or
(2) If the company has not filed an FR
Y-9C for each of the four most recent consecutive quarters, the average
of the company’s total consolidated assets, as reported on the company’s
FR Y-9C, for the most recent quarter or consecutive quarters, as applicable.
