As used in this part:
Additional tier 1 capital is defined in section
217.20(c).
Adjusted allowances for credit losses
(AACL) means, with respect to a Board-regulated institution that
has adopted CECL, valuation allowances that have been established
through a charge against earnings or retained earnings for expected
credit losses on financial assets measured at amortized cost and a
lessor’s net investment in leases that have been established
to reduce the amortized cost basis of the assets to amounts expected
to be collected as determined in accordance with GAAP. For purposes
of this part, adjusted allowances for credit losses include allowances
for expected credit losses on off-balance sheet credit exposures not
accounted for as insurance as determined in accordance with GAAP.
Adjusted allowances for credit losses exclude “allocated transfer
risk reserves” and allowances created that reflect credit losses
on purchased credit deteriorated assets and available-for-sale debt
securities.
Advanced approaches Board-regulated
institution means a Board-regulated institution that is described
in section 217.100(b)(1).
Advanced approaches
total risk-weighted assets means:
(1) The sum of:
(i) Credit-risk-weighted
assets;
(ii) Credit
valuation adjustment (CVA) risk-weighted assets;
(iii) Risk-weighted assets for operational
risk; and
(iv) For
a market risk Board-regulated institution only, advanced market risk-weighted
assets; minus
(2) Excess eligible credit reserves not included in the Board-regulated
institution’s tier 2 capital.
Advanced market risk-weighted assets means the advanced measure
for market risk calculated under section 217.204 multiplied by 12.5.
Affiliate with respect to a company, means
any company that controls, is controlled by, or is under common control
with, the company.
Allocated transfer risk
reserves means reserves that have been established in accordance
with section 905(a) of the International Lending Supervision Act,
against certain assets whose value U.S. supervisory authorities have
found to be significantly impaired by protracted transfer risk problems.
Allowances for loan and lease losses (ALLL) means
valuation allowances that have been established through a charge against
earnings to cover estimated credit losses on loans, lease financing
receivables or other extensions of credit as determined in accordance
with GAAP. ALLL excludes “allocated transfer risk reserves.”
For purposes of this part, ALLL includes allowances that have been
established through a charge against earnings to cover estimated credit
losses associated with off-balance sheet credit exposures as determined
in accordance with GAAP.
Asset-backed commercial
paper (ABCP) program means a program established primarily for
the purpose of issuing commercial paper that is investment grade and
backed by underlying exposures held in a bankruptcy-remote special
purpose entity (SPE).
Asset-backed commercial
paper (ABCP) program sponsor means a Board-regulated institution
that:
(1) Establishes an ABCP
program;
(2) Approves
the sellers permitted to participate in an ABCP program;
(3) Approves the exposures
to be purchased by an ABCP program; or
(4) Administers the ABCP program by monitoring
the underlying exposures, underwriting or otherwise arranging for
the placement of debt or other obligations issued by the program,
compiling monthly reports, or ensuring compliance with the program
documents and with the program’s credit and investment policy.
Bank holding company means a bank
holding company as defined in section 2 of the Bank Holding Company
Act.
Bank Holding Company Act means the
Bank Holding Company Act of 1956, as amended (12 U.S.C. 1841 et
seq.).
Bankruptcy remote means, with
respect to an entity or asset, that the entity or asset would be excluded
from an insolvent entity’s estate in receivership, insolvency,
liquidation, or similar proceeding.
Basis derivative
contract means a non-foreign-exchange derivative contract (i.e.,
the contract is denominated in a single currency) in which the cash
flows of the derivative contract depend on the difference between
two risk factors that are attributable solely to one of the following
derivative asset classes: Interest rate, credit, equity, or commodity.
Board means the Board of Governors of the
Federal Reserve System.
Board-regulated institution means a state member bank, bank holding company, or savings and
loan holding company.
Call Report means
Consolidated Reports of Condition and Income.
Carrying value means, with respect to an asset, the value of
the asset on the balance sheet of a Board-regulated institution as
determined in accordance with GAAP. For all assets other than available-for-sale
debt securities or purchased credit deteriorated assets, the carrying
value is not reduced by any associated credit loss allowance that
is determined in accordance with GAAP.
Category
II Board-regulated institution means:
(1) A depository institution holding company
that is identified as a Category II banking organization pursuant
to 12 CFR 252.5 or 12 CFR 238.10, as applicable;
(2) A U.S. intermediate holding company
that is identified as a Category II banking organization pursuant
to 12 CFR 252.5;
(3)
A state member bank that is a subsidiary of a company identified in
paragraph (1) of this definition; or
(4) A state member bank that:
(i) Is not
a subsidiary of a depository institution holding company; and
(ii) (A)
Has total consolidated assets, calculated based on the average of
the state member bank’s total consolidated assets for the four
most recent calendar quarters as reported on the Call Report, equal
to $700 billion or more. If the state member bank has not filed the
Call Report for each of the four most recent calendar quarters, total
consolidated assets is calculated based on its total consolidated
assets, as reported on the Call Report, for the most recent quarter or
average of the most recent quarters, as applicable; or
(B) Has:
(1) Total consolidated assets, calculated
based on the average of the state member bank’s total consolidated
assets for the four most recent calendar quarters as reported on the
Call Report, of $100 billion or more but less than $700 billion. If
the state member bank has not filed the Call Report for each of the
four most recent quarters, total consolidated assets is based on its
total consolidated assets, as reported on the Call Report, for the
most recent quarter or average of the most recent quarters, as applicable;
and
(2) Cross-jurisdictional
activity, calculated based on the average of its cross-jurisdictional
activity for the four most recent calendar quarters, of $75 billion
or more. Cross-jurisdictional activity is the sum of cross-jurisdictional
claims and cross-jurisdictional liabilities, calculated in accordance
with the instructions to the FR Y-15 or equivalent reporting form.
(iii) After meeting the criteria in
paragraph (4)(i) of this section, a state member bank continues to
be a Category II Board-regulated institution until the state member
bank:
(A) Has:
(1) Less than $700 billion in total consolidated assets, as
reported on the Call Report, for each of the four most recent calendar
quarters; and
(2) Less than $75 billion in cross-jurisdictional activity for each
of the four most recent calendar quarters. Cross-jurisdictional activity
is the sum of cross-jurisdictional claims and cross-jurisdictional
liabilities, calculated in accordance with the instructions to the
FR Y-15 or equivalent reporting form; or
(B) Has less than $100 billion
in total consolidated assets, as reported on the Call Report, for
each of the four most recent calendar quarters.
Category III Board-regulated
institution means:
(1) A depository institution holding company
that is identified as a Category III banking organization pursuant
to 12 CFR 252.5 or 12 CFR 238.10, as applicable;
(2) A U.S. intermediate holding company
that is identified as a Category III banking organization pursuant
to 12 CFR 252.5;
(3)
A state member bank that is a subsidiary of a company identified in
paragraph (1) of this definition;
(4) A depository institution that:
(i) Is not
a subsidiary of a depository institution holding company;
(ii) (A)
Has total consolidated assets, calculated based on the average of
the state member bank’s total consolidated assets for the four
most recent calendar quarters as reported on the Call Report, equal
to $250 billion or more. If the state member bank has not filed the
Call Report for each of the four most recent calendar quarters, total
consolidated assets is calculated based on its total consolidated
assets, as reported on the Call Report, for the most recent quarter
or average of the most recent quarters, as applicable; or
(B) Has:
(1) Total consolidated assets, calculated
based on the average of the state member bank’s total consolidated
assets for the four most recent calendar quarters as reported on the
Call Report, of $100 billion or more but less than $250 billion. If
the state member bank has not filed the Call Report for each of the
four most recent calendar quarters, total consolidated assets is calculated
based its total consolidated assets, as reported on the Call Report,
for the most recent quarter or average of the most recent quarters,
as applicable; and
(2) At least one of the following in paragraphs (4)(i)(B)(2)(i) through (iii) of this definition, each calculated
as the average of the four most recent calendar quarters:
(i) Total nonbank assets, calculated
in accordance with the instructions to the FR Y-9LP or equivalent
reporting form, equal to $75 billion or more;
(ii) Off-balance sheet exposure equal
to $75 billion or more. Off-balance sheet exposure is a state member
bank’s total exposure, calculated in accordance with the instructions
to the FR Y-15 or equivalent reporting form, minus the total consolidated
assets of the state member bank, as reported on the Call Report; or
(iii) Weighted short-term
wholesale funding, calculated in accordance with the instructions
to the FR Y-15 or equivalent reporting form, equal to $75 billion
or more; or
(iii) [Reserved]
(iv) After meeting the criteria
in paragraph (4)(ii) of this definition, a state member bank continues
to be a Category III Board-regulated institution until the state member
bank:
(A) Has:
(1) Less than $250 billion in total consolidated assets, as
reported on the Call Report, for each of the four most recent calendar
quarters;
(2) Less
than $75 billion in total nonbank assets, calculated in accordance
with the instructions to the FR Y-9LP or equivalent reporting form,
for each of the four most recent calendar quarters;
(3) Less than $75 billion in weighted
short-term wholesale funding, calculated in accordance with the instructions
to the FR Y-15 or equivalent reporting form, for each of the four
most recent calendar quarters; and
(4) Less than $75 billion in off-balance
sheet exposure for each of the four most recent calendar quarters.
Off-balance sheet exposure is a state member bank’s total exposure,
calculated in accordance with the instructions to the FR Y-15 or equivalent
reporting form, minus the total consolidated assets of the state member
bank, as reported on the Call Report; or
(B) Has less than $100 billion
in total consolidated assets, as reported on the Call Report, for
each of the four most recent calendar quarters; or
(C) Is a Category II Board-regulated institution.
Central
counterparty (CCP) means a counterparty (for example, a clearing
house) that facilitates trades between counterparties in one or more
financial markets by either guaranteeing trades or novating contracts.
CFTC means the U.S. Commodity Futures Trading
Commission.
Clean-up call means a contractual
provision that permits an originating Board-regulated institution
or servicer to call securitization exposures before their stated maturity
or call date.
Cleared transaction means
an exposure associated with an outstanding derivative contract or
repo-style transaction that a Board-regulated institution or clearing
member has entered into with a central counterparty (that is, a transaction
that a central counterparty has accepted).
(1) The following transactions are cleared
transactions:
(i) A transaction between a CCP and
a Board-regulated institution that is a clearing member of the CCP
where the Board-regulated institution enters into the transaction
with the CCP for the Board-regulated institution’s own account;
(ii) A transaction
between a CCP and a Board-regulated institution that is a clearing
member of the CCP where the Board-regulated institution is acting
as a financial intermediary on behalf of a clearing member client
and the transaction offsets another transaction that satisfies the
requirements set forth in section 217.3(a);
(iii) A transaction between a clearing
member client Board-regulated institution and a clearing member where the
clearing member acts as a financial intermediary on behalf of the
clearing member client and enters into an offsetting transaction with
a CCP, provided that the requirements set forth in section 217.3(a)
are met; or
(iv)
A transaction between a clearing member client Board-regulated institution
and a CCP where a clearing member guarantees the performance of the
clearing member client Board-regulated institution to the CCP and
the transaction meets the requirements of section 217.3(a)(2) and
(3).
(2)
The exposure of a Board-regulated institution that is a clearing member
to its clearing member client is not a cleared transaction where the
Board-regulated institution is either acting as a financial intermediary
and enters into an offsetting transaction with a CCP or where the
Board-regulated institution provides a guarantee to the CCP on the
performance of the client.
3Clearing
member means a member of, or direct participant in, a CCP that
is entitled to enter into transactions with the CCP.
Clearing member client means a party to a cleared transaction
associated with a CCP in which a clearing member acts either as a
financial intermediary with respect to the party or guarantees the
performance of the party to the CCP.
Client-facing
derivative transaction means a derivative contract that is not
a cleared transaction where the Board-regulated institution is either
acting as a financial intermediary and enters into an offsetting transaction
with a qualifying central counterparty (QCCP) or where the Board-regulated
institution provides a guarantee on the performance of a client on
a transaction between the client and a QCCP.
Collateral agreement means a legal contract that specifies the
time when, and circumstances under which, a counterparty is required
to pledge collateral to a Board-regulated institution for a single
financial contract or for all financial contracts in a netting set
and confers upon the Board-regulated institution a perfected, first-priority
security interest (notwithstanding the prior security interest of
any custodial agent), or the legal equivalent thereof, in the collateral
posted by the counterparty under the agreement. This security interest
must provide the Board-regulated institution with a right to close-out
the financial positions and liquidate the collateral upon an event
of default of, or failure to perform by, the counterparty under the
collateral agreement. A contract would not satisfy this requirement
if the Board-regulated institution’s exercise of rights under
the agreement may be stayed or avoided:
(1) Under applicable law in the relevant
jurisdictions, other than:
(i) In receivership, conservatorship,
or resolution under the Federal Deposit Insurance Act, Title II of
the Dodd-Frank Act, or under any similar insolvency law applicable
to GSEs, or laws of foreign jurisdictions that are substantially similar
4 to the U.S. laws referenced in this paragraph
(1)(i) in order to facilitate the orderly resolution of the defaulting
counterparty;
(ii)
Where the agreement is subject by its terms to, or incorporates, any
of the laws referenced in paragraph (1)(i) of this definition; or
(2) Other
than to the extent necessary for the counterparty to comply with the
requirements of subpart I of the Board’s Regulation YY (part
252 of this chapter), part 47 of this title, or part 382 of this title,
as applicable.
Commercial end-user means an entity that:
(1) (i)
Is using derivative contracts to hedge or mitigate commercial risk;
and
(ii) (A) Is not an entity described
in section 2(h)(7)(C)(i)(I) through (VIII) of the Commodity Exchange Act
(7 U.S.C. 2(h)(7)(C)(i)(I) through (VIII)); or
(B) Is not a “financial entity”
for purposes of section 2(h)(7) of the Commodity Exchange Act (7 U.S.C.
2(h)) by virtue of section 2(h)(7)(C)(iii) of the Act (7 U.S.C. 2(h)(7)(C)(iii));
or
(2) (i) Is
using derivative contracts to hedge or mitigate commercial risk; and
(ii) Is not an entity
described in section 3C(g)(3)(A)(i) through (viii) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c-3(g)(3)(A)(i) through (viii));
or
(3)
Qualifies for the exemption in section 2(h)(7)(A) of the Commodity
Exchange Act (7 U.S.C. 2(h)(7)(A)) by virtue of section 2(h)(7)(D)
of the Act (7 U.S.C. 2(h)(7)(D)); or
(4) Qualifies for an exemption in section
3C(g)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78c-3(g)(1))
by virtue of section 3C(g)(4) of the Act (15 U.S.C. 78c-3(g)(4)).
Commitment means any legally binding
arrangement that obligates a Board-regulated institution to extend
credit or to purchase assets.
Commodity derivative
contract means a commodity-linked swap, purchased commodity-linked
option, forward commodity-linked contract, or any other instrument
linked to commodities that gives rise to similar counterparty credit
risks.
Commodity Exchange Act means the
Commodity Exchange Act of 1936 (7 U.S.C. 1 et seq.)
Common equity tier 1 capital is defined in section
217.20(b).
Common equity tier 1 minority interest means the common equity tier 1 capital of a depository institution
or foreign bank that is:
(1) A consolidated subsidiary of a Board-regulated
institution; and
(2)
Not owned by the Board-regulated institution.
Company means a corporation, partnership, limited
liability company, depository institution, business trust, special
purpose entity, association, or similar organization.
Control. A person or company controls a
company if it:
(1) Owns, controls, or holds with power
to vote 25 percent or more of a class of voting securities of the
company; or
(2) Consolidates
the company for financial reporting purposes.
Corporate exposure means an exposure to a company
that is not:
(1) An exposure to a sovereign,
the Bank for International Settlements, the European Central Bank,
the European Commission, the International Monetary Fund, the European
Stability Mechanism, the European Financial Stability Facility, a
multi-lateral development bank (MDB), a depository institution, a
foreign bank, a credit union, or a public sector entity (PSE);
(2) An exposure to a GSE;
(3) A residential mortgage
exposure;
(4) A pre-sold
construction loan;
(5)
A statutory multifamily mortgage;
(6) A high volatility commercial real estate
(HVCRE) exposure;
(7)
A cleared transaction;
(8) A default fund contribution;
(9) A securitization exposure;
(10) An equity exposure; or
(11) An unsettled transaction.
(12) A policy loan;
(13) A separate account;
or
(14) A Paycheck
Protection Program covered loan as defined in section 7(a)(36) of
the Small Business Act (15 U.S.C. 636(a)(36)).
Country risk classification (CRC) with respect
to a sovereign, means the most recent consensus CRC published by the
Organization for Economic Cooperation and Development (OECD) as of
December 31st of the prior calendar year that provides a view of the
likelihood that the sovereign will service its external debt.
Covered debt instrument means an unsecured debt
instrument that is:
(1) Issued by a global systemically important
BHC and that is an eligible debt security, as defined in 12 CFR 252.61,
or that is pari passu or subordinated to any eligible debt
security issued by the global systemically important BHC; or
(2) Issued by a Covered IHC,
as defined in 12 CFR 252.161, and that is an eligible Covered IHC
debt security, as defined in 12 CFR 252.161, or that is pari passu or subordinated to any eligible Covered IHC debt security issued
by the Covered IHC; or
(3) Issued by a global systemically important banking organization,
as defined in 12 CFR 252.2 other than a global systemically important
BHC; or issued by a subsidiary of a global systemically important
banking organization that is not a global systemically important BHC,
other than a Covered IHC, as defined in 12 CFR 252.161; and where,
(i) The instrument is eligible for use to comply with an applicable
law or regulation requiring the issuance of a minimum amount of instruments
to absorb losses or recapitalize the issuer or any of its subsidiaries
in connection with a resolution, receivership, insolvency, or similar
proceeding of the issuer or any of its subsidiaries; or
(ii) The instrument is pari passu or subordinated to any instrument described in paragraph
(3)(i) of this definition; for purposes of this paragraph (3)(ii)
of this definition, if the issuer may be subject to a special resolution
regime, in its jurisdiction of incorporation or organization, that
addresses the failure or potential failure of a financial company
and any instrument described in paragraph (3)(i) of this definition
is eligible under that special resolution regime to be written down
or converted into equity or any other capital instrument, then an
instrument is pari passu or subordinated to any instrument
described in paragraph (3)(i) of this definition if that instrument
is eligible under that special resolution regime to be written down
or converted into equity or any other capital instrument ahead of
or proportionally with any instrument described in paragraph (3)(i)
of this definition; and
(4) Provided that, for purposes of this
definition, covered debt instrument does not include a debt instrument
that qualifies as tier 2 capital pursuant to 12 CFR 217.20(d) or that
is otherwise treated as regulatory capital by the primary supervisor
of the issuer.
Covered savings and
loan holding company means a top-tier savings and loan holding
company other than an institution that—
(1) Meets the requirements of section 10(c)(9)(C)
of the Home Owners’ Loan Act (12 U.S.C. 1467a(c)(9)(C)); and
(2) As of June 30 of the
previous calendar year, derived 50 percent or more of its total consolidated
assets or 50 percent of its total revenues on an enterprise-wide basis
(as calculated under GAAP) from activities that are not financial
in nature under section 4(k) of the Bank Holding Company Act (12 U.S.C.
1843(k)).
Credit derivative means
a financial contract executed under standard industry credit derivative
documentation that allows one party (the protection purchaser) to
transfer the credit risk of one or more exposures (reference exposure(s))
to another party (the protection provider) for a certain period of
time.
Credit-enhancing interest-only strip
(CEIO) means an on-balance sheet asset that, in form or in substance:
(1) Represents a contractual
right to receive some or all of the interest and no more than a minimal
amount of principal due on the underlying exposures of a securitization;
and
(2) Exposes the
holder of the CEIO to credit risk directly or indirectly associated
with the underlying exposures that exceeds a pro rata share of the
holder’s claim on the underlying exposures, whether through
subordination provisions or other credit-enhancement techniques.
Credit-enhancing representations and
warranties means representations and warranties that are made
or assumed in connection with a transfer of underlying exposures (including
loan servicing assets) and that obligate a Board-regulated institution
to protect another party from losses arising from the credit risk
of the underlying exposures. Credit-enhancing representations and
warranties include provisions to protect a party from losses resulting
from the default or nonperformance of the counterparties of the underlying
exposures or from an insufficiency in the value of the collateral
backing the underlying exposures. Credit-enhancing representations
and warranties do not include:
(1) Early default clauses and similar warranties
that permit the return of, or premium refund clauses covering, 1-4
family residential first mortgage loans that qualify for a 50 percent
risk weight for a period not to exceed 120 days from the date of transfer.
These warranties may cover only those loans that were originated within
1 year of the date of transfer;
(2) Premium refund clauses that cover assets
guaranteed, in whole or in part, by the U.S. Government, a U.S. Government
agency or a GSE, provided the premium refund clauses are for a period
not to exceed 120 days from the date of transfer; or
(3) Warranties that permit the return of
underlying exposures in instances of misrepresentation, fraud, or
incomplete documentation.
Credit
risk mitigant means collateral, a credit derivative, or a guarantee.
Credit-risk-weighted assets means 1.06 multiplied
by the sum of:
(1) Total wholesale and retail risk-weighted
assets as calculated under section 217.131;
(2) Risk-weighted assets for securitization
exposures as calculated under section 217.142; and
(3) Risk-weighted assets for equity exposures
as calculated under section 217.151.
Credit union means an insured credit union as defined under
the Federal Credit Union Act (12 U.S.C. 1752 et seq.).
Current expected credit losses (CECL) means the
current expected credit losses methodology under GAAP.
Current exposure means, with respect to a netting
set, the larger of zero or the fair value of a transaction or portfolio
of transactions within the netting set that would be lost upon default
of the counterparty, assuming no recovery on the value of the transactions.
Current exposure methodology means the method
of calculating the exposure amount for over-the-counter derivative
contracts in section 217.34(b).
Custodial banking
organization means:
(1) A Board-regulated institution that
is:
(i) A top-tier depository institution
holding company domiciled in the United States that has assets under
custody that are at least 30 times the amount of the depository institution
holding company’s total assets; or
(ii) A state member bank that is a subsidiary
of a depository institution holding company described in paragraph
(1)(i) of this definition.
(2) For purposes of this definition, total
assets are equal to the average of the banking organization’s
total consolidated assets for the four most recent calendar quarters.
Assets under custody are equal to the average of the Board-regulated
institution’s assets under custody for the four most recent
calendar quarters.
Custodian means
a financial institution that has legal custody of collateral provided
to a CCP.
Default fund contribution means
the funds contributed or commitments made by a clearing member to
a CCP’s mutualized loss sharing arrangement.
Depository institution means a depository institution
as defined in section 3 of the Federal Deposit Insurance Act.
Depository institution holding company means a
bank holding company or savings and loan holding company.
Derivative contract means a financial contract
whose value is derived from the values of one or more underlying assets,
reference rates, or indices of asset values or reference rates. Derivative
contracts include interest rate derivative contracts, exchange rate
derivative contracts, equity derivative contracts, commodity derivative
contracts, credit derivative contracts, and any other instrument that
poses similar counterparty credit risks. Derivative contracts also
include unsettled securities, commodities, and foreign exchange transactions
with a contractual settlement or delivery lag that is longer than
the lesser of the market standard for the particular instrument or
five business days.
Discretionary bonus payment means a payment made to an executive officer of a Board-regulated
institution, where:
(1) The Board-regulated institution retains
discretion as to whether to make, and the amount of, the payment until
the payment is awarded to the executive officer;
(2) The amount paid is determined by the
Board-regulated institution without prior promise to, or agreement
with, the executive officer; and
(3) The executive officer has no contractual
right, whether express or implied, to the bonus payment.
Distribution means:
(1) A reduction of tier 1 capital through
the repurchase of a tier 1 capital instrument or by other means, except
when a Board-regulated institution, within the same quarter when the
repurchase is announced, fully replaces a tier 1 capital instrument
it has repurchased by issuing another capital instrument that meets
the eligibility criteria for:
(i) A common equity tier
1 capital instrument if the instrument being repurchased was part
of the Board-regulated institution’s common equity tier 1 capital,
or
(ii) A common
equity tier 1 or additional tier 1 capital instrument if the instrument
being repurchased was part of the Board-regulated institution’s
tier 1 capital;
(2) A reduction of tier 2 capital through
the repurchase, or redemption prior to maturity, of a tier 2 capital
instrument or by other means, except when a Board-regulated institution,
within the same quarter when the repurchase or redemption is announced,
fully replaces a tier 2 capital instrument it has repurchased by issuing
another capital instrument that meets the eligibility criteria for
a tier 1 or tier 2 capital instrument;
(3) A dividend declaration or payment on
any tier 1 capital instrument;
(4) A dividend declaration or interest
payment on any tier 2 capital instrument if the Board-regulated institution
has full discretion to permanently or temporarily suspend such payments
without triggering an event of default; or
(5) Any similar transaction that the Board
determines to be in substance a distribution of capital.
Dodd-Frank Act means the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (Pub. L. 111-203,
124 Stat. 1376).
Early amortization provision means a provision in the documentation governing a securitization
that, when triggered, causes investors in the securitization exposures
to be repaid before the original stated maturity of the securitization
exposures, unless the provision:
(1) Is triggered solely by events not directly
related to the performance of the underlying exposures or the originating
Board-regulated institution (such as material changes in tax laws
or regulations); or
(2) Leaves investors fully exposed to future draws by borrowers on
the underlying exposures even after the provision is triggered.
Effective notional amount means
for an eligible guarantee or eligible credit derivative, the lesser
of the contractual notional amount of the credit risk mitigant and
the exposure amount (or EAD for purposes of subpart E of this part)
of the hedged exposure, multiplied by the percentage coverage of the
credit risk mitigant.
Eligible ABCP liquidity
facility means a liquidity facility supporting ABCP, in form or
in substance, that is subject to an asset quality test at the time
of draw that precludes funding against assets that are 90 days or
more past due or in default. Notwithstanding the preceding sentence,
a liquidity facility is an eligible ABCP liquidity facility if the
assets or exposures funded under the liquidity facility that do not
meet the eligibility requirements are guaranteed by a sovereign that
qualifies for a 20 percent risk weight or lower.
Eligible clean-up call means a clean-up call that:
(1) Is exercisable solely at the discretion
of the originating Board-regulated institution or servicer;
(2) Is not structured to avoid
allocating losses to securitization exposures held by investors or
otherwise structured to provide credit enhancement to the securitization;
and
(3) (i) For a traditional
securitization, is only exercisable when 10 percent or less of the
principal amount of the underlying exposures or securitization exposures
(determined as of the inception of the securitization) is outstanding;
or
(ii) For a synthetic
securitization, is only exercisable when 10 percent or less of the
principal amount of the reference portfolio of underlying exposures
(determined as of the inception of the securitization) is outstanding.
Eligible credit derivative means a credit derivative in the form of a credit default swap,
nth-to-default swap, total return swap, or any other form
of credit derivative approved by the Board, 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 or nth-to-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;
(7) If the credit derivative is a credit
default swap or nth-to-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; and
(8) If the credit derivative is a total return swap and the Board-regulated
institution records net payments received on the swap as net income,
the Board-regulated institution records offsetting deterioration in
the value of the hedged exposure (either through reductions in fair
value or by an addition to reserves).
Eligible credit reserves means:
(1) For a Board-regulated institution that
has not adopted CECL, all general allowances that have been established
through a charge against earnings to cover estimated credit losses
associated with on- or off-balance sheet wholesale and retail exposures,
including the ALLL associated with such exposures, but excluding allocated
transfer risk reserves established pursuant to 12 U.S.C. 3904 and
other specific reserves created against recognized losses; and
(2) For a Board-regulated
institution that has adopted CECL, all general allowances that have
been established through a charge against earnings or retained earnings
to cover expected credit losses associated with on- or off-balance
sheet wholesale and retail exposures, including AACL associated with
such exposures. Eligible credit reserves exclude allocated transfer
risk reserves established pursuant to 12 U.S.C. 3904, allowances that
reflect credit losses on purchased credit deteriorated assets and
available-for-sale debt securities, and other specific reserves created
against recognized losses.
Eligible
guarantee means a guarantee that:
(1) Is written;
(2) Is either:
(i) Unconditional,
or
(ii) A contingent
obligation of the U.S. government or its agencies, the enforceability
of which is dependent upon some affirmative action on the part of
the beneficiary of the guarantee or a third party (for example, meeting
servicing requirements);
(3) Covers all or a pro rata portion of
all contractual payments of the obligated party on the reference exposure;
(4) Gives the beneficiary
a direct claim against the protection provider;
(5) Is not unilaterally cancelable by the
protection provider for reasons other than the breach of the contract
by the beneficiary;
(6) Except for a guarantee by a sovereign, is legally enforceable
against the protection provider in a jurisdiction where the protection
provider has sufficient assets against which a judgment may be attached
and enforced;
(7) Requires
the protection provider to make payment to the beneficiary on the
occurrence of a default (as defined in the guarantee) of the obligated
party on the reference exposure in a timely manner without the beneficiary
first having to take legal actions to pursue the obligor for payment;
(8) Does not increase
the beneficiary’s cost of credit protection on the guarantee
in response to deterioration in the credit quality of the reference
exposure;
(9) Is not
provided by an affiliate of the Board-regulated institution, unless
the affiliate is an insured depository institution, foreign bank,
securities broker or dealer, or insurance company that:
(i) Does
not control the Board-regulated institution; and
(ii) Is subject to consolidated supervision
and regulation comparable to that imposed on depository institutions,
U.S. securities broker-dealers, or U.S. insurance companies (as the
case may be); and
(10) For purposes of sections 217.141 through
217.145 and subpart D of this part, is provided by an eligible guarantor.
Eligible guarantor means:
(1) A sovereign, the Bank for International
Settlements, the International Monetary Fund, the European Central
Bank, the European Commission, a Federal Home Loan Bank, Federal Agricultural
Mortgage Corporation (Farmer Mac), the European Stability Mechanism,
the European Financial Stability Facility, a multilateral development
bank (MDB), a depository institution, a bank holding company, a savings
and loan holding company, a credit union, a foreign bank, or a qualifying
central counterparty; or
(2) An entity (other than a special purpose entity):
(i) That
at the time the guarantee is issued or anytime thereafter, has issued
and outstanding an unsecured debt security without credit enhancement
that is investment grade;
(ii) Whose creditworthiness is not positively
correlated with the credit risk of the exposures for which it has
provided guarantees; and
(iii) That is not an insurance company
engaged predominately in the business of providing credit protection
(such as a monoline bond insurer or re-insurer).
Eligible margin loan means:
(1) An extension of credit where:
(i) The
extension of credit is collateralized exclusively by liquid and readily
marketable debt or equity securities, or gold;
(ii) The collateral is marked-to-fair
value daily, and the transaction is subject to daily margin maintenance
requirements; and
(iii) The extension of credit is conducted under an agreement that
provides the Board-regulated institution the right to accelerate and
terminate the extension of credit and to liquidate or set-off collateral
promptly upon an event of default, including upon an event of receivership,
insolvency, liquidation, conservatorship,or similar proceeding, of
the counterparty, provided that, in any such case:
(A) Any exercise
of rights under the agreement will not be stayed or avoided under
applicable law in the relevant jurisdictions, other than:
(
1) In receivership, conservatorship,
or resolution under the Federal Deposit Insurance Act, Title II of
the Dodd-Frank Act, or under any similar insolvency law applicable
to
GSEs,
5 or laws of foreign jurisdictions that
are substantially similar
6 to the U.S. laws referenced in this paragraph
(1)(iii)(A)(
1) in order to facilitate the orderly resolution
of the defaulting counterparty; or
(2) Where the agreement is subject
by its terms to, or incorporates, any of the laws referenced in paragraph
(1)(iii)(A)(1) of this definition; and
(B) The agreement may limit the
right to accelerate, terminate, and close-out on a net basis all transactions
under the agreement and to liquidate or set-off collateral promptly
upon an event of default of the counterparty to the extent necessary
for the counterparty to comply with the requirements of subpart I
of the Board’s Regulation YY (part 252 of this chapter), part
47 of this title, or part 382 of this title, as applicable.
Eligible servicer cash
advance facility means a servicer cash advance facility in which:
(1) The servicer is entitled
to full reimbursement of advances, except that a servicer may be obligated
to make non-reimbursable advances for a particular underlying exposure
if any such advance is contractually limited to an insignificant amount
of the outstanding principal balance of that exposure;
(2) The servicer’s right
to reimbursement is senior in right of payment to all other claims
on the cash flows from the underlying exposures of the securitization;
and
(3) The servicer
has no legal obligation to, and does not make advances to the securitization
if the servicer concludes the advances are unlikely to be repaid.
Employee stock ownership plan has
the same meaning as in 29 CFR 2550.407d-6.
Equity derivative contract means an equity-linked swap, purchased
equity-linked option, forward equity-linked contract, or any other
instrument linked to equities that gives rise to similar counterparty
credit risks.
Equity exposure means:
(1) A security or instrument
(whether voting or non-voting) that represents a direct or an indirect
ownership interest in, and is a residual claim on, the assets and
income of a company, unless:
(i) The issuing company is consolidated
with the Board-regulated institution under GAAP;
(ii) The Board-regulated institution
is required to deduct the ownership interest from tier 1 or tier 2
capital under this part;
(iii) The ownership interest incorporates
a payment or other similar obligation on the part of the issuing company
(such as an obligation to make periodic payments); or
(iv) The ownership interest
is a securitization exposure;
(2) A security or instrument that is mandatorily
convertible into a security or instrument described in paragraph (1)
of this definition;
(3) An option or warrant that is exercisable for a security or instrument
described in paragraph (1) of this definition; or
(4) Any other security or instrument (other
than a securitization exposure) to the extent the return on the security
or instrument is based on the performance of a security or instrument
described in paragraph (1) of this definition.
ERISA means the Employee Retirement Income and
Security Act of 1974 (29 U.S.C. 1001 et seq.).
Exchange rate derivative contract means a cross-currency
interest rate swap, forward foreign-exchange contract, currency option
purchased, or any other instrument linked to exchange rates that gives
rise to similar counterparty credit risks.
Excluded
covered debt instrument means an investment in a covered debt
instrument held by a global systemically important BHC or
a Board-regulated institution that is a subsidiary of a global systemically
important BHC that:
(1) Is held in connection with market making-related
activities permitted under 12 CFR 248.4, provided that a direct exposure
or an indirect exposure to a covered debt instrument is held for 30
business days or less; and
(2) Has been designated as an excluded covered debt instrument by
the global systemically important BHC or the subsidiary of a global
systemically important BHC pursuant to 12 CFR 217.22(c)(5)(iv)(A).
Executive officer means a person
who holds the title or, without regard to title, salary, or compensation,
performs the function of one or more of the following positions: president,
chief executive officer, executive chairman, chief operating officer,
chief financial officer, chief investment officer, chief legal officer,
chief lending officer, chief risk officer, or head of a major business
line, and other staff that the board of directors of the Board-regulated
institution deems to have equivalent responsibility.
Expected credit loss (ECL) means:
(1) For a wholesale exposure to a non-defaulted
obligor or segment of non-defaulted retail exposures that is carried
at fair value with gains and losses flowing through earnings or that
is classified as held-for-sale and is carried at the lower of cost
or fair value with losses flowing through earnings, zero.
(2) For all other wholesale
exposures to non-defaulted obligors or segments of non-defaulted retail
exposures, the product of the probability of default (PD) times the
loss given default (LGD) times the exposure at default (EAD) for the
exposure or segment.
(3) For a wholesale exposure to a defaulted obligor or segment of
defaulted retail exposures, the Board-regulated institution’s
impairment estimate for allowance purposes for the exposure or segment.
(4) Total ECL is the
sum of expected credit losses for all wholesale and retail exposures
other than exposures for which the Board-regulated institution has
applied the double default treatment in section 217.135.
Exposure amount means:
(1) For the on-balance sheet component
of an exposure (other than an available-for-sale or held-to-maturity
security, if the Board-regulated institution has made an AOCI opt-out
election (as defined in section 217.22(b)(2)); an OTC derivative contract;
a repo-style transaction or an eligible margin loan for which the
Board-regulated institution determines the exposure amount under section
217.37; a cleared transaction; a default fund contribution; or a securitization
exposure), the Board-regulated institution’s carrying value
of the exposure.
(2)
For a security (that is not a securitization exposure, equity exposure,
or preferred stock classified as an equity security under GAAP) classified
as available-for-sale or held-to-maturity if the Board-regulated institution
has made an AOCI opt-out election (as defined in section 217.22(b)(2)),
the Board-regulated institution’s carrying value (including
net accrued but unpaid interest and fees) for the exposure less any
net unrealized gains on the exposure and plus any net unrealized losses
on the exposure.
(3)
For available-for-sale preferred stock classified as an equity security
under GAAP if the Board-regulated institution has made an AOCI opt-out
election (as defined in section 217.22(b)(2)), the Board-regulated
institution’s carrying value of the exposure less any net unrealized
gains on the exposure that are reflected in such carrying value but
excluded from the Board-regulated institution’s regulatory capital
components.
(4) For
the off-balance sheet component of an exposure (other than an OTC
derivative contract; a repo-style transaction or an eligible margin
loan for which the Board-regulated institution calculates the exposure
amount under section 217.37; a cleared transaction; a default fund
contribution; or a securitization exposure), the notional amount of
the off-balance sheet component multiplied by the appropriate credit
conversion factor (CCF) in section 217.33.
(5) For an exposure that is an OTC derivative
contract, the exposure amount determined under section 217.34.
(6) For an exposure that is
a cleared transaction, the exposure amount determined under section
217.35.
(7) For an
exposure that is an eligible margin loan or repo-style transaction
for which the bank calculates the exposure amount as provided in section
217.37, the exposure amount determined under section 217.37.
(8) For an exposure that is
a securitization exposure, the exposure amount determined under section
217.42.
Federal Deposit Insurance
Act means the Federal Deposit Insurance Act (12 U.S.C. 1813).
Federal Deposit Insurance Corporation Improvement
Act means the Federal Deposit Insurance Corporation Improvement
Act of 1991 (12 U.S.C. 4401).
Fiduciary or
custodial and safekeeping account means, for purposes of section
217.10(c)(2)(x), an account administered by a custodial banking organization
for which the custodial banking organization provides fiduciary or
custodial and safekeeping services, as authorized by applicable Federal
or state law.
Financial collateral means
collateral:
(1) In the form of:
(i) Cash on deposit with the Board-regulated institution (including
cash held for the Board-regulated institution by a third-party custodian
or trustee);
(ii)
Gold bullion;
(iii)
Long-term debt securities that are not resecuritization exposures
and that are investment grade;
(iv) Short-term debt instruments that
are not resecuritization exposures and that are investment grade;
(v) Equity securities
that are publicly traded;
(vi) Convertible bonds that are publicly
traded; or
(vii)
Money market fund shares and other mutual fund shares if a price for
the shares is publicly quoted daily; and
(2) In which the Board-regulated
institution has a perfected, first-priority security interest or,
outside of the United States, the legal equivalent thereof, (with
the exception of cash on deposit; and notwithstanding the prior security
interest of any custodial agent or any priority security interest
granted to a CCP in connection with collateral posted to that CCP).
Financial institution means:
(1) A bank holding company; savings and
loan holding company; nonbank financial institution supervised by
the Board under Title I of the Dodd-Frank Act; depository institution;
foreign bank; credit union; industrial loan company, industrial bank,
or other similar institution described in section 2 of the Bank Holding
Company Act; national association, state member bank, or state non-member
bank that is not a depository institution; insurance company; securities
holding company as defined in section 618 of the Dodd-Frank Act; broker
or dealer registered with the SEC under section 15 of the Securities
Exchange Act; futures commission merchant as defined in section 1a
of the Commodity Exchange Act; swap dealer as defined in section 1a
of the Commodity Exchange Act; or security-based swap dealer as defined
in section 3 of the Securities Exchange Act;
(2) Any designated financial market utility,
as defined in section 803 of the Dodd-Frank Act;
(3) Any entity not domiciled in the United
States (or a political subdivision thereof) that is supervised and
regulated in a manner similar to entities described in paragraphs
(1) or (2) of this definition; or
(4) Any other company:
(i) Of
which the Board-regulated institution owns:
(A) An investment
in GAAP equity instruments of the company with an adjusted carrying
value or exposure amount equal to or greater than $10 million; or
(B) More than 10 percent
of the company’s issued and outstanding common shares (or similar
equity interest), and
(ii) Which is predominantly engaged
in the following activities:
(A) Lending money, securities
or other financial instruments, including servicing loans;
(B) Insuring, guaranteeing, indemnifying
against loss, harm, damage, illness, disability, or death, or issuing
annuities;
(C) Underwriting,
dealing in, making a market in, or investing as principal in securities
or other financial instruments; or
(D) Asset management activities (not including
investment or financial advisory activities).
(5) For the purposes of
this definition, a company is “predominantly engaged”
in an activity or activities if:
(i) 85 percent or more
of the total consolidated annual gross revenues (as determined in
accordance with applicable accounting standards) of the company is
either of the two most recent calendar years were derived, directly
or indirectly, by the company on a consolidated basis from the activities;
or
(ii) 85 percent
or more of the company’s consolidated total assets (as determined
in accordance with applicable accounting standards) as of the end
of either of the two most recent calendar years were related to the
activities.
(6) Any other company that the Board may determine is a financial
institution based on activities similar in scope, nature, or operation
to those of the entities included in paragraphs (1) through (4) of
this definition.
(7)
For purposes of this part, “financial institution” does
not include the following entities:
(i) GSEs;
(ii) Small business investment companies,
as defined in section 102 of the Small Business Investment Act of
1958 (15 U.S.C. 662);
(iii) Entities designated as Community Development Financial Institutions
(CDFIs) under 12 U.S.C. 4701 et seq. and 12 CFR part 1805;
(iv) Entities registered
with the SEC under the Investment Company Act of 1940 (15 U.S.C. 80a-1)
or foreign equivalents thereof;
(v) Entities to the extent that the
Board-regulated institution’s investment in such entities would
qualify as a community development investment under section 24 (Eleventh)
of the National Bank Act; and
(vi) An employee benefit plan as defined
in paragraphs (3) and (32) of section 3 of ERISA, a “governmental
plan” (as defined in 29 U.S.C. 1002(32)) that complies with
the tax deferral qualification requirements provided in the Internal
Revenue Code, or any similar employee benefit plan established under
the laws of a foreign jurisdiction.
First-lien residential mortgage exposure means
a residential mortgage exposure secured by a first lien.
Foreign bank means a foreign bank as defined in
section 211.2 of the Federal Reserve Board’s Regulation K (12
CFR 211.2) (other than a depository institution).
Forward agreement means a legally binding contractual obligation
to purchase assets with certain drawdown at a specified future date,
not including commitments to make residential mortgage loans or forward
foreign exchange contracts.
FR Y-9LP means
the Parent Company Only Financial Statements for Large Holding Companies.
FR Y-15 means the Systemic Risk Report.
GAAP means generally accepted accounting
principles as used in the United States.
Gain-on-sale means an increase in the equity capital of a Board-regulated institution
(as reported on [Schedule RC of the Call Report or Schedule HC of
the FR Y-9C]) resulting from a traditional securitization (other than
an increase in equity capital resulting from the Board-regulated institution’s
receipt of cash in connection with the securitization or reporting
of a mortgage servicing asset on [Schedule RC of the Call Report or
Schedule HC of the FRY-9C]).
General obligation means a bond or similar obligation that is backed by the full faith
and credit of a public sector entity (PSE).
Global systemically important BHC means a bank holding company
that is identified as a global systemically important BHC pursuant
to section 217.402.
Government-sponsored
enterprise (GSE) means an entity established or chartered by the
U.S. government to serve public purposes specified by the U.S. Congress
but whose debt obligations are not explicitly guaranteed by the full
faith and credit of the U.S. government.
GSIB
surcharge means the capital surcharge applicable to a global systemically
important BHC calculated pursuant to section 217.403.
Guarantee means a financial guarantee, letter
of credit, insurance, or other similar financial instrument (other
than a credit derivative) that allows one party (beneficiary) to transfer
the credit risk of one or more specific exposures (reference exposure)
to another party (protection provider).
High
volatility commercial real estate (HVCRE) exposure means:
(1) A credit facility secured by land or
improved real property that, prior to being reclassified by the Board-regulated
institution as a non-HVCRE exposure pursuant to paragraph (6) of this
definition—
(i) Primarily finances, has financed,
or refinances the acquisition, development, or construction of real
property;
(ii) Has
the purpose of providing financing to acquire, develop, or improve
such real property into income-producing real property; and
(iii) Is dependent upon
future income or sales proceeds from, or refinancing of, such real
property for the repayment of such credit facility.
(2) An HVCRE exposure
does not include a credit facility financing—
(i) The
acquisition, development, or construction of properties that are—
(A) One- to four-family residential properties. Credit facilities
that do not finance the construction of one- to four-family residential
structures, but instead solely finance improvements such as the laying
of sewers, water pipes, and similar improvements to land, do not qualify
for the one- to four-family residential properties exclusion;
(B) Real property that would qualify
as an investment in community development; or
(C) Agricultural land;
(ii) The acquisition
or refinance of existing income-producing real property secured by
a mortgage on such property, if the cash flow being generated by the
real property is sufficient to support the debt service and expenses
of the real property, in accordance with the Board-regulated institution’s
applicable loan underwriting criteria for permanent financings;
(iii) Improvements
to existing income-producing improved real property secured by a mortgage
on such property, if the cash flow being generated by the real property
is sufficient to support the debt service and expenses of the real
property, in accordance with the Board-regulated institution’s
applicable loan underwriting criteria for permanent financings; or
(iv) Commercial real
property projects in which—
(A) The loan-to-value ratio is
less than or equal to the applicable maximum supervisory loan-to-value
ratio as determined by the Board;
(B) The borrower has contributed capital of
at least 15 percent of the real property’s appraised, ‘as
completed’ value to the project in the form of—
(1) Cash;
(2) Unencumbered readily marketable
assets;
(3) Paid
development expenses out-of-pocket; or
(4) Contributed real property or improvements;
and
(C)
The borrower contributed the minimum amount of capital described under
paragraph (2)(iv)(B) of this definition before the Board-regulated
institution advances funds (other than the advance of a nominal sum
made in order to secure the Board-regulated institution’s lien
against the real property) under the credit facility, and such minimum
amount of capital contributed by the borrower is contractually required
to remain in the project until the HVCRE exposure has been reclassified
by the Board-regulated institution as a non-HVCRE exposure under paragraph
(6) of this definition;
(3) An HVCRE exposure does not include
any loan made prior to January 1, 2015;
(4) An HVCRE exposure does not include
a credit facility reclassified as a non-HVCRE exposure under paragraph
(6) of this definition.
(5) Value of contributed real property: For the purposes of this
definition of HVCRE exposure, the value of any real property contributed
by a borrower as a capital contribution is the appraised value of
the property as determined under standards prescribed pursuant to
section 1110 of the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (12 U.S.C. 3339), in connection with the extension of
the credit facility or loan to such borrower.
(6) Reclassification as a non-HVCRE exposure:
For purposes of this definition of HVCRE exposure and with respect
to a credit facility and a Board-regulated institution, a Board-regulated
institution may reclassify an HVCRE exposure as a non-HVCRE exposure
upon—
(i) The substantial completion of the
development or construction of the real property being financed by
the credit facility; and
(ii) Cash flow being generated by the real property being sufficient
to support the debt service and expenses of the real property, in
accordance with the Board-regulated institution’s applicable
loan underwriting criteria for permanent financings.
(7) For purposes of this
definition, a Board-regulated institution is not required to reclassify
a credit facility that was originated on or after January 1, 2015
and prior to April 1, 2020.
Home country means the country where an entity is incorporated, chartered, or
similarly established.
Independent collateral means financial collateral, other than variation margin, that is
subject to a collateral agreement, or in which a Board-regulated institution
has a perfected, first-priority security interest or, outside of the
United States, the legal equivalent thereof (with the exception of
cash on deposit; notwithstanding the prior security interest of any
custodial agent or any prior security interest granted to a CCP in
connection with collateral posted to that CCP), and the amount of
which does not change directly in response to the value of the derivative
contract or contracts that the financial collateral secures.
Indirect exposure means an exposure that arises
from the Board-regulated institution’s investment in an investment
fund which holds an investment in the Board-regulated institution’s
own capital instrument or an investment in the capital of an unconsolidated
financial institution. For an advanced approaches Board-regulated
institution, indirect exposure also includes an investment in an investment
fund that holds a covered debt instrument.
Insurance bank holding company means:
(1) (i) A bank
holding company that is an insurance underwriting company; or
(ii) A bank holding company
that, as of June 30 of the previous calendar year, held 25 percent
or more of its total consolidated assets in subsidiaries that are
insurance underwriting companies (other than assets associated with
insurance underwriting for credit risk).
(2) For purposes of this definition,
the company must calculate its total consolidated assets in accordance
with GAAP, or if the company does not calculate its total consolidated
assets under GAAP for any regulatory purpose (including compliance
with applicable securities laws), the company may estimate its total
consolidated assets, subject to review and adjustment by the Board.
Insurance company means an insurance
company as defined in section 201 of the Dodd-Frank Act (12 U.S.C.
5381).
Insurance mid-tier holding company means a bank holding company, or savings and loan holding company,
domiciled in the United States that:
(1) Is a subsidiary of:
(i) An insurance bank
holding company to which subpart J of this part applies; or
(ii) An insurance savings
and loan holding company to which subpart J of this part applies;
and
(2)
Is not an insurance underwriting company that is subject to state
law capital requirements.
Insurance
savings and loan holding company means:
(1) (i) A top-tier
savings and loan holding company that is an insurance underwriting
company; or
(ii)
A top-tier savings and loan holding company that, as of June 30 of
the previous calendar year, held 25 percent or more of its total consolidated
assets in subsidiaries that are insurance underwriting companies (other
than assets associated with insurance underwriting for credit risk).
(2) For
purposes of this definition, the company must calculate its total
consolidated assets in accordance with GAAP, or if the company does
not calculate its total consolidated assets under GAAP for any regulatory
purpose (including compliance with applicable securities laws), the
company may estimate its total consolidated assets, subject to review
and adjustment by the Board.
Insurance underwriting company means an insurance
company as defined in section 201 of the Dodd-Frank Act (12 U.S.C.
5381) that engages in insurance underwriting activities.
Insured depository institution means an insured
depository institution as defined in section 3 of the Federal Deposit
Insurance Act.
Interest rate derivative contract means a single-currency interest rate swap, basis swap, forward
rate agreement, purchased interest rate option, when-issued securities,
or any other instrument linked to interest rates that gives rise to
similar counterparty credit risks.
International
Lending Supervision Act means the International Lending Supervision
Act of 1983 (12 U.S.C. 3901 et seq.).
Investing bank means, with respect to a securitization, a Board-regulated
institution that assumes the credit risk of a securitization exposure
(other than an originating Board-regulated institution of the securitization).
In the typical synthetic securitization, the investing Board-regulated
institution sells credit protection on a pool of underlying exposures
to the originating Board-regulated institution.
Investment fund means a company:
(1) Where all or substantially all of the
assets of the company are financial assets; and
(2) That has no material liabilities.
Investment grade means that the
entity to which the Board-regulated institution is exposed through
a loan or security, or the reference entity with respect to a credit
derivative, has adequate capacity to meet financial commitments for
the projected life of the asset or exposure. Such an entity or reference
entity has adequate capacity to meet financial commitments if the
risk of its default is low and the full and timely repayment of principal
and interest is expected.
Investment in a covered
debt instrument means a Board-regulated institution’s net
long position calculated in accordance with section 217.22(h) in a
covered debt instrument, including direct, indirect, and synthetic
exposures to the debt instrument, excluding any underwriting positions
held by the Board-regulated institution for five or fewer business
days.
Investment in the capital of an unconsolidated
financial institution means a net long position calculated in
accordance with section 217.22(h) in an instrument that is recognized
as capital for regulatory purposes by the primary supervisor of an unconsolidated
regulated financial institution or is an instrument that is part of
the GAAP equity of an unconsolidated unregulated financial institution,
including direct, indirect, and synthetic exposures to capital instruments,
excluding underwriting positions held by the Board-regulated institution
for five or fewer business days.
Investment
in the Board-regulated institution’s own capital instrument means a net long position calculated in accordance with section
217.22(h) in the Board-regulated institution’s own common stock
instrument, own additional tier 1 capital instrument or own tier 2
capital instrument, including direct, indirect, or synthetic exposures
to such capital instruments. An investment in the Board-regulated
institution’s own capital instrument includes any contractual
obligation to purchase such capital instrument.
Junior-lien residential mortgage exposure means a residential
mortgage exposure that is not a first-lien residential mortgage exposure.
Main index means the Standard & Poor’s
500 Index, the FTSE All-World Index, and any other index for which
the Board-regulated institution can demonstrate to the satisfaction
of the Board that the equities represented in the index have comparable
liquidity, depth of market, and size of bid-ask spreads as equities
in the Standard & Poor’s 500 Index and FTSE All-World Index.
Market risk Board-regulated institution means
a Board-regulated institution that is described in section 217.201(b).
Minimum transfer amount means the smallest
amount of variation margin that may be transferred between counterparties
to a netting set pursuant to the variation margin agreement.
Money market fund means an investment fund that
is subject to 17 CFR 270.2a-7 or any foreign equivalent thereof.
Mortgage servicing assets (MSAs) means the
contractual rights owned by a Board-regulated institution to service
for a fee mortgage loans that are owned by others.
Multilateral development bank (MDB) means the International
Bank for Reconstruction and Development, the Multilateral Investment
Guarantee Agency, the International Finance Corporation, the Inter-American
Development Bank, the Asian Development Bank, the African Development
Bank, the European Bank for Reconstruction and Development, the European
Investment Bank, the European Investment Fund, the Nordic Investment
Bank, the Caribbean Development Bank, the Islamic Development Bank,
the Council of Europe Development Bank, and any other multilateral
lending institution or regional development bank in which the U.S.
government is a shareholder or contributing member or which the Board
determines poses comparable credit risk.
National
Bank Act means the National Bank Act (12 U.S.C. 24).
Net independent collateral amount means the fair
value amount of the independent collateral, as adjusted by the standard
supervisory haircuts under section 217.132(b)(2)(ii), as applicable,
that a counterparty to a netting set has posted to a Board-regulated
institution less the fair value amount of the independent collateral,
as adjusted by the standard supervisory haircuts under section 217.132(b)(2)(ii),
as applicable, posted by the Board-regulated institution to the counterparty,
excluding such amounts held in a bankruptcy remote manner or posted
to a QCCP and held in conformance with the operational requirements
in section 217.3.
Netting set means a group
of transactions with a single counterparty that are subject to a qualifying
master netting agreement. For derivative contracts, netting set also
includes a single derivative contract between a Board-regulated institution
and a single counterparty. For purposes of the internal model methodology
under section 217.132(d), netting set also includes a group of transactions
with a single counterparty that are subject to a qualifying cross-product
master netting agreement and does not include a transaction:
(1) That is not subject to such a master
netting agreement; or
(2) Where the Board-regulated institution has identified specific
wrong-way risk.
Non-guaranteed separate
account means a separate account where the insurance company:
(1) Does not contractually guarantee either
a minimum return or account value to the contract holder; and
(2) Is not required to hold
reserves (in the general account) pursuant to its contractual obligations
to a policyholder.
Non-significant
investment in the capital of an unconsolidated financial institution means an investment by an advanced approaches Board-regulated institution
in the capital of an unconsolidated financial institution where the
advanced approaches Board-regulated institution owns 10 percent or
less of the issued and outstanding common stock of the unconsolidated
financial institution.
Nth-o-default
credit derivative means a credit derivative that provides credit
protection only for the nth-defaulting reference exposure
in a group of reference exposures.
Operating
entity means a company established to conduct business with clients
with the intention of earning a profit in its own right.
Original maturity with respect to an off-balance
sheet commitment means the length of time between the date a commitment
is issued and:
(1) For a commitment that is not subject
to extension or renewal, the stated expiration date of the commitment;
or
(2) For a commitment
that is subject to extension or renewal, the earliest date on which
the Board-regulated institution can, at its option, unconditionally
cancel the commitment.
Originating
Board-regulated institution, with respect to a securitization,
means a Board-regulated institution that:
(1) Directly or indirectly originated or
securitized the underlying exposures included in the securitization;
or
(2) Serves as an
ABCP program sponsor to the securitization.
Over-the-counter (OTC) derivative contract means a derivative
contract that is not a cleared transaction. An OTC derivative includes
a transaction:
(1) Between a Board-regulated institution
that is a clearing member and a counterparty where the Board-regulated
institution is acting as a financial intermediary and enters into
a cleared transaction with a CCP that offsets the transaction with
the counterparty; or
(2) In which a Board-regulated institution that is a clearing member
provides a CCP a guarantee on the performance of the counterparty
to the transaction.
Performance standby
letter of credit (or performance bond) means an irrevocable obligation
of a Board-regulated institution to pay a third-party beneficiary
when a customer (account party) fails to perform on any contractual
nonfinancial or commercial obligation. To the extent permitted by
law or regulation, performance standby letters of credit include arrangements
backing, among other things, subcontractors’ and suppliers’
performance, labor and materials contracts, and construction bids.
Policy loan means a loan by an insurance
company to a policy holder pursuant to the provisions of an insurance
contract that is secured by the cash surrender value or collateral
assignment of the related policy or contract. A policy loan includes:
(1) A cash loan, including
a loan resulting from early payment benefits or accelerated payment
benefits, on an insurance contract when the terms of contract specify
that the payment is a policy loan secured by the policy; and
(2) An automatic premium loan,
which is a loan that is made in accordance with policy provisions
which provide that delinquent premium payments are automatically paid
from the cash value at the end of the established grace period for
premium payments.
Pre-sold construction
loan means any one-to-four family residential construction loan
to a builder that meets the requirements of section 618(a)(1) or (2)
of the Resolution Trust Corporation Refinancing, Restructuring, and
Improvement Act of 1991 (12 U.S.C. 1831n note) and the following criteria:
(1) The loan is made in accordance
with prudent underwriting standards, meaning that the Board-regulated
institution has obtained sufficient documentation that the buyer of
the home has a legally binding written sales contract and has a firm
written commitment for permanent financing of the home upon completion;
(2) The purchaser is an individual(s)
that intends to occupy the residence and is not a partnership, joint
venture, trust, corporation, or any other entity (including an entity
acting as a sole proprietorship) that is purchasing one or more of
the residences for speculative purposes;
(3) The purchaser has entered into a legally
binding written sales contract for the residence;
(4) The purchaser has not terminated the
contract; however, if the purchaser terminates the sales contract,
the Board must immediately apply a 100 percent risk weight to the
loan and report the revised risk weight in the next quarterly Call
Report, for a state member bank, or the FR Y-9C, for a bank holding
company or savings and loan holding company, as applicable;
(5) The purchaser has made
a substantial earnest money deposit of no less than 3 percent of the
sales price, which is subject to forfeiture if the purchaser terminates
the sales contract; provided that, the earnest money deposit shall
not be subject to forfeiture by reason of breach or termination of
the sales contract on the part of the builder;
(6) The earnest money deposit must be held
in escrow by the Board-regulated institution or an independent party
in a fiduciary capacity, and the escrow agreement must provide that
in an event of default arising from the cancellation of the sales
contract by the purchaser of the residence, the escrow funds shall
be used to defray any cost incurred by the Board-regulated institution;
(7) The builder must
incur at least the first 10 percent of the direct costs of construction
of the residence (that is, actual costs of the land, labor, and material)
before any drawdown is made under the loan;
(8) The loan may not exceed 80 percent
of the sales price of the presold residence; and
(9) The loan is not more than 90 days past
due, or on nonaccrual.
Protection
amount (P) means, with respect to an exposure hedged by an eligible
guarantee or eligible credit derivative, the effective notional amount
of the guarantee or credit derivative, reduced to reflect any currency
mismatch, maturity mismatch, or lack of restructuring coverage (as
provided in sections 217.36 or 217.134, as appropriate).
Publicly-traded means traded on:
(1) Any exchange registered with the SEC
as a national securities exchange under section 6 of the Securities
Exchange Act; or
(2)
Any non-U.S.-based securities exchange that:
(i) Is
registered with, or approved by, a national securities regulatory
authority; and
(ii)
Provides a liquid, two-way market for the instrument in question.
Public sector entity (PSE) means a state, local authority, or other governmental subdivision
below the sovereign level.
Qualifying central
bank means:
(1) A Federal Reserve Bank;
(2) The European Central Bank;
and
(3) The central
bank of any member country of the Organisation for Economic Co-operation
and Development, if:
(i) Sovereign exposures to the member
country would receive a zero percent risk-weight under section 217.32;
and
(ii) The sovereign
debt of the member country is not in default or has not been in default
during the previous 5 years.
Qualifying central counterparty (QCCP) means a central counterparty
that:
(1) (i) Is a designated
financial market utility (FMU) under Title VIII of the Dodd-Frank
Act;
(ii) If not
located in the United States, is regulated and supervised in a manner
equivalent to a designated FMU; or
(iii) Meets the following standards:
(A) The central counterparty requires all parties to contracts cleared
by the counterparty to be fully collateralized on a daily basis;
(B) The Board-regulated
institution demonstrates to the satisfaction of the Board that the
central counterparty:
(1) Is in sound financial condition;
(2) Is subject to supervision by the
Board, the CFTC, or the Securities Exchange Commission (SEC), or,
if the central counterparty is not located in the United States, is
subject to effective oversight by a national supervisory authority
in its home country; and
(3) Meets or exceeds the risk-management standards for central
counterparties set forth in regulations established by the Board,
the CFTC, or the SEC under Title VII or Title VIII of the Dodd-Frank
Act; or if the central counterparty is not located in the United States,
meets or exceeds similar risk-management standards established under
the law of its home country that are consistent with international
standards for central counterparty risk management as established
by the relevant standard setting body of the Bank of International
Settlements; and
(2) (i)
Provides the Board-regulated institution with the central counterparty’s
hypothetical capital requirement or the information necessary to calculate
such hypothetical capital requirement, and other information the Board-regulated
institution is required to obtain under sections 217.35(d)(3) and
217.133(d)(3);
(ii)
Makes available to the Board and the CCP’s regulator the information
described in paragraph (2)(i) of this definition; and
(iii) Has not otherwise
been determined by the Board to not be a QCCP due to its financial
condition, risk profile, failure to meet supervisory risk management
standards, or other weaknesses or supervisory concerns that are inconsistent
with the risk weight assigned to qualifying central counterparties
under sections 217.35 and 217.133.
(3) Exception. A QCCP that fails to meet the requirements of a QCCP in the future
may still be treated as a QCCP under the conditions specified in section
217.3(f).
Qualifying master netting
agreement means a written, legally enforceable agreement provided
that:
(1) The agreement creates
a single legal obligation for all individual transactions covered
by the agreement upon an event of default following any stay permitted
by paragraph (2) of this definition, including upon an event of receivership,
conservatorship, insolvency, liquidation, or similar proceeding, of
the counterparty;
(2)
The agreement provides the Board-regulated institution the right to
accelerate, terminate, and close-out on a net basis all transactions
under the agreement and to liquidate or set-off collateral promptly
upon an event of default, including upon an event of receivership,
conservatorship, insolvency, liquidation, or similar proceeding, of
the counterparty, provided that, in any such case:
(i) Any
exercise of rights under the agreement will not be stayed or avoided
under applicable law in the relevant jurisdictions, other than:
(A) In receivership, conservatorship, or resolution under the Federal
Deposit Insurance Act, Title II of the Dodd-Frank Act, or under any
similar insolvency law applicable to GSEs, or laws of foreign jurisdictions
that are substantially similar
7 to the U.S. laws referenced in this paragraph
(2)(i)(A) in order to facilitate the orderly resolution of the defaulting
counterparty; or
(B) Where
the agreement is subject by its terms to, or incorporates, any of
the laws referenced in paragraph (2)(i)(A) of this definition; and
(ii)
The agreement may limit the right to accelerate, terminate, and close-out
on a net basis all transactions under the agreement and to liquidate
or set-off collateral promptly upon an event of default of the counterparty
to the extent necessary for the counterparty to comply with the requirements
of subpart I of the Board’s Regulation YY (part 252 of this
chapter), part 47 of this title, or part 382 of this title, as applicable.
Regulated financial institution means a financial institution subject to consolidated supervision
and regulation comparable to that imposed on the following U.S. financial institutions:
depository institutions, depository institution holding companies,
nonbank financial companies supervised by the Board, designated financial
market utilities, securities broker-dealers, credit unions, or insurance
companies.
Regulated foreign subsidiary and
regulated foreign affiliate means a person described in section
171(a)(6) of the Dodd-Frank Act (12 U.S.C. 5371(a)(6)) and any subsidiary
of such a person other than a state-regulated insurer.
Repo-style transaction means a repurchase or reverse
repurchase transaction, or a securities borrowing or securities lending
transaction, including a transaction in which the Board-regulated
institution acts as agent for a customer and indemnifies the customer
against loss, provided that:
(1) The transaction is based solely on
liquid and readily marketable securities, cash, or gold;
(2) The transaction is marked-to-fair
value daily and subject to daily margin maintenance requirements;
(3) (i) The transaction
is a “securities contract” or “repurchase agreement”
under section 555 or 559, respectively, of the Bankruptcy Code (11
U.S.C. 555 or 559), a qualified financial contract under section 11(e)(8)
of the Federal Deposit Insurance Act, or a netting contract between
or among financial institutions under sections 401-407 of the Federal
Deposit Insurance Corporation Improvement Act or the Federal Reserve
Board’s Regulation EE (12 CFR part 231); or
(ii) If the transaction does not meet
the criteria set forth in paragraph (3)(i) of this definition, then
either:
(A) The transaction is executed under an agreement
that provides the Board-regulated institution the right to accelerate,
terminate, and close-out the transaction on a net basis and to liquidate
or set-off collateral promptly upon an event of default, including
upon an event of receivership, insolvency, liquidation, or similar
proceeding, of the counterparty, provided that, in any such case:
(1) Any exercise of rights under the
agreement will not be stayed or avoided under applicable law in the
relevant jurisdictions, other than:
(
i) In receivership, conservatorship, or resolution under
the Federal Deposit Insurance Act, Title II of the Dodd-Frank Act,
or under any similar insolvency law applicable to GSEs, or laws of
foreign jurisdictions that are substantially similar
8 to the U.S. laws referenced in this paragraph
(3)(ii)(A)(
1)(
i) in order to facilitate the orderly
resolution of the defaulting counterparty;
(ii) Where the agreement is subject
by its terms to, or incorporates, any of the laws referenced in paragraph
(3)(ii)(A)(1)(i) of this definition; and
(2) The agreement
may limit the right to accelerate, terminate, and close-out on a net
basis all transactions under the agreement and to liquidate or set-off
collateral promptly upon an event of default of the counterparty to
the extent necessary for the counterparty to comply with the requirements
of subpart I of the Board’s Regulation YY (part 252 of this
chapter), part 47 of this title, or part 382 of this title, as applicable;
or
(B)
The transaction is:
(1) Either overnight or unconditionally cancelable at any
time by the Board-regulated institution; and
(2) Executed under an agreement that
provides the Board-regulated institution the right to accelerate,
terminate, and close-out the transaction on a net basis and to liquidate
or set-off collateral promptly upon an event of counterparty default;
and
(4) In order to recognize an exposure as
a repo-style transaction for purposes of this subpart, a Board-regulated
institution must comply with the requirements of section 217.3(e)
of this part with respect to that exposure.
Resecuritization means a securitization which has more than
one underlying exposure and in which one or more of the underlying
exposures is a securitization exposure.
Resecuritization
exposure means:
(1) An on- or off-balance sheet exposure
to a resecuritization;
(2) An exposure that directly or indirectly references a resecuritization
exposure.
(3) An exposure
to an asset-backed commercial paper program is not a resecuritization
exposure if either:
(i) The program-wide credit enhancement
does not meet the definition of a resecuritization exposure; or
(ii) The entity sponsoring
the program fully supports the commercial paper through the provision
of liquidity so that the commercial paper holders effectively are
exposed to the default risk of the sponsor instead of the underlying
exposures.
Residential
mortgage exposure means an exposure (other than a securitization
exposure, equity exposure, statutory multifamily mortgage, or presold
construction loan):
(1) (i)
That is primarily secured by a first or subsequent lien on one-to-four
family residential property; or
(ii) With an original and outstanding
amount of $1 million or less that is primarily secured by a first
or subsequent lien on residential property that is not one-to-four
family; and
(2) For purposes of calculating capital requirements under subpart
E of this part, managed as part of a segment of exposures with homogeneous
risk characteristics and not on an individual-exposure basis.
Revenue obligation means a bond or similar
obligation that is an obligation of a PSE, but which the PSE is committed
to repay with revenues from the specific project financed rather than
general tax funds.
Savings and loan holding company means a savings and loan holding company as defined in section 10
of the Home Owners’ Loan Act (12 U.S.C. 1467a).
Securities and Exchange Commission (SEC) means
the U.S. Securities and Exchange Commission.
Securities Exchange Act means the Securities Exchange Act of
1934 (15 U.S.C. 78).
Securitization exposure means:
(1) An on-balance sheet
or off-balance sheet credit exposure (including credit-enhancing representations
and warranties) that arises from a traditional securitization or synthetic
securitization (including a resecuritization), or
(2) An exposure that directly or indirectly
references a securitization exposure described in paragraph (1) of
this definition.
Securitization special
purpose entity (securitization SPE) means a corporation, trust,
or other entity organized for the specific purpose of holding underlying
exposures of a securitization, the activities of which are limited
to those appropriate to accomplish this purpose, and the structure
of which is intended to isolate the underlying exposures held by the
entity from the credit risk of the seller of the underlying exposures
to the entity.
Separate account means a
legally segregated pool of assets owned and held by an insurance company
and maintained separately from the insurance company’s general
account assets for the benefit of an individual contract holder. To
be a separate account:
(1) The account must be legally recognized
as a separate account under applicable law;
(2) The assets in the account must be insulated
from general liabilities of the insurance company under applicable
law in the event of the insurance company’s insolvency;
(3) The insurance company
must invest the funds within the account as directed by the contract
holder in designated investment alternatives or in accordance with
specific investment objectives or policies; and
(4) All investment gains and losses, net
of contract fees and assessments, must be passed through to the contract
holder, provided that the contract may specify conditions under which
there may be a minimum guarantee but must not include contract terms
that limit the maximum investment return available to the policyholder.
Servicer cash advance facility means
a facility under which the servicer of the underlying exposures of
a securitization may advance cash to ensure an uninterrupted flow
of payments to investors in the securitization, including advances
made to cover foreclosure costs or other expenses to facilitate the
timely collection of the underlying exposures.
Significant investment in the capital of an unconsolidated financial
institution means an investment by an advanced approaches Board-regulated
institution in the capital of an unconsolidated financial institution
where the advanced approaches Board-regulated institution owns more
than 10 percent of the issued and outstanding common stock of the
unconsolidated financial institution.
Small
Business Act means the Small Business Act (15 U.S.C. 632).
Small Business Investment Act means the Small
Business Investment Act of 1958 (15 U.S.C. 682).
Sovereign means a central government (including the U.S. government)
or an agency, department, ministry, or central bank of a central government.
Sovereign default means noncompliance by a
sovereign with its external debt service obligations or the inability
or unwillingness of a sovereign government to service an existing
loan according to its original terms, as evidenced by failure to pay
principal and interest timely and fully, arrearages, or restructuring.
Sovereign exposure means:
(1) A direct exposure to a sovereign; or
(2) An exposure directly
and unconditionally backed by the full faith and credit of a sovereign.
Specific wrong-way risk means wrong-way
risk that arises when either:
(1) The counterparty and issuer of the
collateral supporting the transaction; or
(2) The counterparty and the reference
asset of the transaction are affiliates or are the same entity.
Speculative grade means the reference
entity has adequate capacity to meet financial commitments in the
near term, but is vulnerable to adverse economic conditions, such
that should economic conditions deteriorate, the reference entity
would present an elevated default risk.
Standardized
market risk-weighted assets means the standardized measure for
market risk calculated under section 217.204 multiplied by 12.5.
Standardized total risk-weighted assets means:
(1) The sum of:
(i) Total risk-weighted
assets for general credit risk as calculated under section 217.31;
(ii) Total risk-weighted
assets for cleared transactions and default fund contributions as
calculated under section 217.35;
(iii) Total risk-weighted assets for
unsettled transactions as calculated under section 217.38;
(iv) Total risk-weighted
assets for securitization exposures as calculated under section 217.42;
(v) Total risk-weighted
assets for equity exposures as calculated under sections 217.52 and
217.53; and
(vi)
For a market risk Board-regulated institution only, standardized market
risk-weighted assets; minus
(2) Any amount of the Board-regulated institution’s
allowance for loan and lease losses or adjusted allowance for credit
losses, as applicable, that is not included in tier 2 capital and
any amount of “allocated transfer risk reserves.”
State bank means any bank incorporated by special
law of any State, or organized under the general laws of any State,
or of the United States, including a Morris Plan bank, or other incorporated
banking institution engaged in a similar business.
State member bank or member bank means a state bank that is
a member of the Federal Reserve System.
State-regulated
insurer means a person regulated by a state insurance regulator
as defined in section 1002(22) of the Dodd-Frank Act (12 U.S.C. 5481(22)),
and any subsidiary of such a person, other than a regulated foreign
subsidiary and regulated foreign affiliate.
Statutory multifamily mortgage means a loan secured by a multifamily
residential property that meets the requirements under section 618(b)(1)
of the Resolution Trust Corporation Refinancing, Restructuring, and
Improvement Act of 1991, and that meets the following criteria:
9 (1) The loan is made in accordance with
prudent underwriting standards;
(2) The principal amount of the loan at
origination does not exceed 80 percent of the value of the property
(or 75 percent of the value of the property if the loan is based on
an interest rate that changes over the term of the loan) where the
value of the property is the lower of the acquisition cost of the
property or the appraised (or, if appropriate, evaluated) value of
the property;
(3) All
principal and interest payments on the loan must have been made on
a timely basis in accordance with the terms of the loan for at least
one year prior to applying a 50 percent risk weight to the loan, or
in the case where an existing owner is refinancing a loan on the property,
all principal and interest payments on the loan being refinanced must
have been made on a timely basis in accordance with the terms of the
loan for at least one year prior to applying a 50 percent risk weight
to the loan;
(4) Amortization
of principal and interest on the loan must occur over a period of
not more than 30 years and the minimum original maturity for repayment
of principal must not be less than 7 years;
(5) Annual net operating income (before
making any payment on the loan) generated by the property securing
the loan during its most recent fiscal year must not be less than
120 percent of the loan’s current annual debt service (or 115
percent of current annual debt service if the loan is based on an
interest rate that changes over the term of the loan) or, in the case
of a cooperative or other not-for-profit housing project, the property
must generate sufficient cash flow to provide comparable protection
to the Board-regulated institution; and
(6) The loan is not more than 90 days past
due, or on nonaccrual.
Subsidiary means, with respect to a company, a company controlled by that company.
Sub-speculative grade means the reference
entity depends on favorable economic conditions to meet its financial
commitments, such that should such economic conditions deteriorate
the reference entity likely would default on its financial commitments.
Synthetic exposure means an exposure whose
value is linked to the value of an investment in the Board-regulated
institution’s own capital instrument or to the value of an investment
in the capital of an unconsolidated financial institution. For an
advanced approaches Board-regulated institution, synthetic exposure
includes an exposure whose value is linked to the value of an investment
in a covered debt instrument.
Synthetic securitization means a transaction in which:
(1) All or a portion of the credit risk
of one or more underlying exposures is retained or transferred to
one or more third parties through the use of one or more credit derivatives
or guarantees (other than a guarantee that transfers only the credit
risk of an individual retail exposure);
(2) The credit risk associated with the
underlying exposures has been separated into at least two tranches
reflecting different levels of seniority;
(3) Performance of the securitization exposures
depends upon the performance of the underlying exposures; and
(4) All or substantially all
of the underlying exposures are financial exposures (such as loans,
commitments, credit derivatives, guarantees, receivables, asset-backed
securities, mortgage-backed securities, other debt securities, or
equity securities).
Tier 1 capital means the sum of common equity tier 1 capital and additional tier
1 capital.
Tier 1 minority interest means
the tier 1 capital of a consolidated subsidiary of a Board-regulated
institution that is not owned by the Board-regulated institution.
Tier 2 capital is defined in section 217.20(d).
Total capital means the sum of tier 1 capital
and tier 2 capital.
Total capital minority interest means the total capital of a consolidated subsidiary of a Board-regulated
institution that is not owned by the Board-regulated institution.
Total leverage exposure is defined in section
217.10(c)(2).
Traditional securitization means a transaction in which:
(1) All or a portion of the credit risk
of one or more underlying exposures is transferred to one or more
third parties other than through the use of credit derivatives or
guarantees;
(2) The
credit risk associated with the underlying exposures has been separated
into at least two tranches reflecting different levels of seniority;
(3) Performance of the
securitization exposures depends upon the performance of the underlying
exposures;
(4) All
or substantially all of the underlying exposures are financial exposures
(such as loans, commitments, credit derivatives, guarantees, receivables,
asset-backed securities, mortgage-backed securities, other debt securities,
or equity securities);
(5) The underlying exposures are not owned by an operating company;
(6) The underlying exposures
are not owned by a small business investment company defined in section
302 of the Small Business Investment Act;
(7) The underlying exposures are not owned
by a firm an investment in which qualifies as a community development
investment under section 24 (Eleventh) of the National Bank Act;
(8) The Board may determine
that a transaction in which the underlying exposures are owned by
an investment firm that exercises substantially unfettered control
over the size and composition of its assets, liabilities, and off-balance
sheet exposures is not a traditional securitization based on the transaction’s
leverage, risk profile, or economic substance;
(9) The Board may deem a transaction that
meets the definition of a traditional securitization, notwithstanding
paragraph (5), (6), or (7) of this definition, to be a traditional securitization
based on the transaction’s leverage, risk profile,
(10) The transaction is not:
(i) An investment fund;
(ii) A collective investment fund (as
defined in 12 CFR 208.34);
(iii) An employee benefit plan (as defined
in paragraphs (3) and (32) of section 3 of ERISA), a “governmental
plan” (as defined in 29 U.S.C. 1002(32)) that complies with
the tax deferral qualification requirements provided in the Internal
Revenue Code, or any similar employee benefit plan established under
the laws of a foreign jurisdiction;
(iv) A synthetic exposure to the capital
of a financial institution to the extent deducted from capital under
section 217.22; or
(v) Registered with the SEC under the Investment Company Act of 1940
(15 U.S.C. 80a-1) or foreign equivalents thereof.
Tranche means all securitization
exposures associated with a securitization that have the same seniority
level.
Two-way market means a market where
there are independent bona fide offers to buy and sell so that a price
reasonably related to the last sales price or current bona fide competitive
bid and offer quotations can be determined within one day and settled
at that price within a relatively short time frame conforming to trade
custom.
Unconditionally cancelable means
with respect to a commitment, that a Board-regulated institution may,
at any time, with or without cause, refuse to extend credit under
the commitment (to the extent permitted under applicable law).
Underlying exposures means one or more exposures
that have been securitized in a securitization transaction.
Unregulated financial institution means, for purposes
of section 217.131, a financial institution that is not a regulated
financial institution, including any financial institution that would
meet the definition of “financial institution” under this
section but for the ownership interest thresholds set forth in paragraph
(4)(i) of that definition.
U.S. Government
agency means an instrumentality of the U.S. Government whose obligations
are fully and explicitly guaranteed as to the timely payment of principal
and interest by the full faith and credit of the U.S. Government.
U.S. intermediate holding company means the
company that is required to be established or designated pursuant
to 12 CFR 252.153.
Value-at-Risk (VaR) means
the estimate of the maximum amount that the value of one or more exposures
could decline due to market price or rate movements during a fixed
holding period within a stated confidence interval.
Variation margin means financial collateral that is subject
to a collateral agreement provided by one party to its counterparty
to meet the performance of the first party’s obligations under
one or more transactions between the parties as a result of a change
in value of such obligations since the last time such financial collateral
was provided.
Variation margin agreement means an agreement to collect or post variation margin.
Variation margin amount means the fair value amount
of the variation margin, as adjusted by the standard supervisory haircuts
under section 217.132(b)(2)(ii), as applicable, that a counterparty
to a netting set has posted to a Board-regulated institution less
the fair value amount of the variation margin, as adjusted by the
standard supervisory haircuts under section 217.132(b)(2)(ii), as
applicable, posted by the Board-regulated institution to the counterparty.
Variation margin threshold means the amount
of credit exposure of a Board-regulated institution to its counterparty
that, if exceeded, would require the counterparty to post variation
margin to the Board-regulated institution pursuant to the variation
margin agreement.
Volatility derivative contract means a derivative contract in which the payoff of the derivative
contract explicitly depends on a measure of the volatility of an
underlying risk factor to the derivative contract.
Wrong-way risk means the risk that arises when an exposure
to a particular counterparty is positively correlated with the probability
of default of such counterparty itself.
