01-22796. Resolution Funding Corporation Operations

AGENCY:

Department of the Treasury.

ACTION:

Affirmation of interim rule as final, with amendments.

SUMMARY:

The Secretary of the Treasury (Secretary) is adopting as a final rule, with amendments, an interim rule that amended the Treasury Department's regulation governing the operations of the Resolution Funding Corporation (Funding Corporation). The interim rule implemented statutory changes affecting the Funding Corporation's operations, eliminated obsolete regulatory provisions, and streamlined remaining regulatory provisions. The final rule makes two technical changes to the interim rule to reduce the compliance burden.

EFFECTIVE DATE:

The interim rule became effective on March 8, 2000. The amendments made by the final rule are effective on September 11, 2001.

FOR FURTHER INFORMATION CONTACT:

Brandon B. Straus, Attorney-Advisor, Office of the Assistant General Counsel (Banking & Finance), [phone], or Matthew P. Green, Financial Analyst, Office of Financial Institutions and Government Sponsored Enterprise Policy, Department of the Treasury, [phone].

SUPPLEMENTARY INFORMATION:

I. Background

In an interim rule published in the Federal Register on March 8, 2000 (see 65 FR 12064) and which became effective on that date, the Secretary amended the Treasury Department's regulation governing the operations of the Funding Corporation (operations regulation) in order to implement statutory changes affecting the Funding Corporation's operations, eliminate obsolete regulatory provisions, and streamline the regulation's remaining provisions. The Funding Corporation is a mixed-ownership government corporation created by Congress in 1989 as a mechanism for issuing debt to finance the resolution of a large number of insolvent savings associations. The SUPPLEMENTARY INFORMATION section of the interim rule provides additional background on the Funding Corporation and a detailed explanation of the regulatory amendments made by the interim rule (see 65 FR 12064-12068). The Secretary now is adopting the interim rule as final, with two changes that are discussed below.

II. Analysis of Public Comment and the Final Rule

The Secretary received one comment on the interim rule, which was submitted by the Funding Corporation. The Funding Corporation supported the Secretary's effort to streamline and simplify the operations regulation. The Funding Corporation also suggested a change to the procedure in § 1510.5(d)(1) of the interim rule governing how the Funding Corporation collects funds from the Federal Home Loan Banks (Banks) in order to make interest payments on its debt obligations (bonds). The Funding Corporation commented that in order to comply with the timing requirement in § 1510.5(d)(1) for reporting actual quarterly net earnings to the Funding Corporation, the Banks must close their books and determine actual net earnings figures no later than four business days after the end of a quarter. The Funding Corporation stated that in the future, however, it may not be possible for the Banks to close their books within this timeframe due to the operation of Financial Accounting Standards Board Statement 133. Statement 133, which went into effect for the Banks in 2000, establishes new accounting and reporting standards for derivative instruments. Consequently, the Funding Corporation believes it may not be able to obtain actual net earnings figures from the Banks by the sixth business day prior to the interest payment due date, as required by § 1510.5(d)(1) of the interim rule. To address this timing issue, the Funding Corporation recommended that the Secretary remove all the reporting deadlines from § 1510.5(d) of the interim rule and establish them in a separate procedure so that the deadlines could be changed without the need for a regulatory amendment.

In order to address the Funding Corporation's concern, the Secretary is revising the timing requirements in the interim final rule to allow the Banks an additional two business days to provide actual quarterly net earnings figures to the Funding Corporation after the end of each quarter. Specifically, the final rule permits the Banks to have up until the fourth business day prior to the interest payment due date to submit their actual quarterly net earnings figures to the Funding Corporation and for the Funding Corporation to then notify each Bank of the payment due from the Bank. As a result of this change, the final rule moves back by two business days the deadlines in § 1510.5(d)(2) and (3) related to the Federal Savings and Loan Insurance Corporations (FSLIC) Resolution Fund and the Secretary of the Treasury, so that any payment from the FSLIC Resolution Fund to the Funding Corporation is due no later than noon on the third business day prior to the interest payment due date. Similarly, the Funding Corporation must request payment from the Secretary no later than the third business day prior to the interest payment due date.

In the interest of reducing regulatory burden, the final rule also removes the requirement in § 1510.5(c) that the Funding Corporation obtain the Secretary's approval of the quarterly reports of funding projections it submits to the Secretary. Approval of these reports is not necessary because they are provided to the Secretary solely for informational purposes.

III. Administrative Procedure Act

This rule makes technical amendments to the regulation governing the operation of the Funding Corporation that do not affect the general public. For this reason, it has been determined that publishing this rule with notice and an opportunity for public comment is unnecessary pursuant to 5 U.S.C. 553(b). For the same reason, pursuant to 5 U.S.C. 553(d), it is determined that there is good cause for the final rule to become effective immediately upon publication.

IV. Regulatory Flexibility Act

Because no notice of proposed rulemaking is required for this final rule, the provisions of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., do not apply.

V. Executive Order 12866

This final rule is not a “significant regulatory action” for purposes of Executive Order 12866. Accordingly, a regulatory assessment is not required.

List of Subjects in 12 CFR Part 1510

• Federal home loan banks
• Federal Reserve System
• Resolution Funding Corporation
• Securities

Authority and Issuance

For the reasons set forth in the preamble, the Secretary is adopting as a final rule the interim rule that amended 12 CFR part 1510 and that was published at 65 FR 12064 on March 8, 2000, with the following amendments:

PART 1510—RESOLUTION FUNDING CORPORATION OPERATIONS

1. The authority citation for part 1510 continues to read as follows:

Authority: 12 U.S.C. 1441b; Sec 14(d), Pub. L. 105-216, 112 Stat. 910.

2. Amend § 1510.5 as follows:

a. Remove “for approval” from the introductory text of paragraph (c); and

b. Revise paragraph (d) to read as follows:

§ 1510.5

How does the Funding Corporation make interest payments on its obligations?

* * * * *

(d) The Funding Corporation must request funds from the Banks, the FSLIC Resolution Fund, and the Secretary—(1) Requests to the Banks. Not less than four business days prior to the interest payment due date, the Funding Corporation must obtain from each Bank a report of its actual net earnings for the prior quarter and notify each Bank in writing of the interest payment due date and the amount of the payment due from the Bank. To the extent funds identified in paragraph (a)(1) of this section are insufficient to pay the interest due, the amount of each Bank's payment must be 20 percent of the Bank's actual quarterly net earnings, taking into account any adjustment to the Bank's earnings for any previous quarters. The Funding Corporation must request the Bank to provide payment through wiring immediately available and finally collected funds to the Funding Corporation no later than the interest payment due date.

(2) Request to the FSLIC Resolution Fund. On the day the Funding Corporation notifies the Banks of the payments due from them under paragraph (d)(1) of this section, the Funding Corporation must:

(i) Notify the FSLIC Resolution Fund in writing of:

(A) The interest payment due date;

(B) The aggregate amount of the quarterly interest payment due on that date; and

(C) The amount of the quarterly interest payment that will be funded by earnings on assets of the Funding Corporation not invested in the Funding Corporation Principal Fund and payments due from the Banks; and

(ii) Request that the FSLIC Resolution Fund transfer to the Funding Corporation by noon on the third business day prior to the interest payment due date any funds available from the net proceeds from the sale of assets received from the RTC, to the extent funds identified in paragraphs (a)(1) and (2) of this section are insufficient to pay the interest due.

(3) Request to the Secretary. No less than three business days prior to the interest payment due date, the Funding Corporation must request payment from the Secretary by providing a certification, in a form satisfactory to the Secretary, stating the total amounts of the quarterly interest payment to be paid by the Funding Corporation from sources other than the Secretary and the amounts necessary to make up the deficiency. Any amount paid by the Secretary becomes a liability of the Funding Corporation to be repaid to the Secretary upon the dissolution of the Funding Corporation, to the extent of its remaining assets.

Dated: September 4, 2001.

Peter R. Fisher,

Under Secretary of the Treasury.