(a) Scope of compliance.
(1) Except as provided
in paragraph (a)(2) of this section, using all available data, including
any data required to be maintained or reported to the Federal Reserve
under this subpart, a covered foreign entity must comply with the
requirements of this subpart on a daily basis at the end of each business
day.
(2) Until December 31, 2020,
using all available data, including any data required to be maintained
or reported to the Federal Reserve under this subpart, a U.S. intermediate
holding company that is a covered foreign entity with less than $250
billion in total consolidated assets as of December 31, 2019 must
comply with the requirements of this subpart on a quarterly basis,
unless the Board determines and notifies the entity in writing that
more frequent compliance is required.
(3) A covered foreign entity must report its compliance to the Federal
Reserve as of the end of the quarter, unless the Board determines
and notifies that entity in writing that more frequent reporting is
required.
(4) In reporting its compliance,
a covered foreign entity must calculate and include in its gross credit
exposure to an issuer of eligible collateral or eligible guarantor
the amounts of eligible collateral, eligible guarantees, eligible
equity derivatives, and eligible credit derivatives that were provided
to the covered foreign entity in connection with credit transactions
with exempt counterparties, valued in accordance with and as required
by section 252.174(b) through (d) and (g).
(b) Qualifying master netting agreement. With
respect to any qualifying master netting agreement, a covered foreign
entity must establish and maintain procedures that meet or exceed
the requirements of section 217.3(d) of the Board’s Regulation Q (12
CFR 217.3(d)) to monitor possible changes in relevant law and to ensure
that the agreement continues to satisfy these requirements.
(c) Noncompliance.
(1) Except as otherwise provided in this
section, if a covered foreign entity is not in compliance with this
subpart with respect to a counterparty solely due to the circumstances
listed in paragraphs (c)(2)(i) through (v) of this section, the covered
foreign entity will not be subject to enforcement actions for a period
of 90 days (or, with prior notice to the foreign entity, such shorter
or longer period determined by the Board, in its sole discretion,
to be appropriate to preserve the safety and soundness of the covered
foreign entity or U.S. financial stability), if the covered foreign
entity uses reasonable efforts to return to compliance with this subpart
during this period. The covered foreign entity may not engage in any
additional credit transactions with such a counterparty in contravention
of this rule during the period of noncompliance, except as provided
in paragraph (c)(2) of this section.
(2) A covered foreign entity may request a special temporary credit
exposure limit exemption from the Board. The Board may grant approval
for such exemption in cases where the Board determines that such credit
transactions are necessary or appropriate to preserve the safety and
soundness of the covered foreign entity or U.S. financial stability.
In acting on a request for an exemption, the Board will consider the
following:
(i) A decrease in the covered foreign
entity’s capital stock and surplus or tier 1 capital, as applicable;
(ii) The merger of the covered
foreign entity with another covered foreign entity;
(iii) A merger of two counterparties;
or
(iv) An unforeseen and abrupt
change in the status of a counterparty as a result of which the covered
foreign entity’s credit exposure to the counterparty becomes limited
by the requirements of this section; or
(v) Any other factor(s) the Board determines,
in its discretion, is appropriate.
(d) Other measures. The Board may impose supervisory
oversight and additional reporting measures that it determines are
appropriate to monitor compliance with this subpart. Covered
foreign entities must furnish, in the manner and form prescribed by
the Board, such information to monitor compliance with this subpart
and the limits therein as the Board may require.
