12 U.S.C. § 5464 — Standards for systemically important fi-

Page 1931 TITLE 12—BANKS AND BANKING § 5464 (B) Notice of waiver or modification The Council shall provide notice of the waiver or modification to the financial mar- ket utility concerned or, in the case of a payment, clearing, or settlement activity, to financial institutions, as soon as prac- ticable, which shall be no later than 24 hours after the waiver or modification in the case of a financial market utility and 3 business days in the case of financial institutions. The Council shall provide the notice to fi- nancial institutions by posting a notice on the website of the Council and by publishing a notice in the Federal Register. (d) Notification of final determination (1) After hearing Within 60 days of any hearing under sub- section (c)(2), the Council shall notify the fi- nancial market utility or financial institu- tions of the final determination of the Council in writing, which shall include findings of fact upon which the determination of the Council is based. (2) When no hearing requested If the Council does not receive a timely re- quest for a hearing under subsection (c)(2), the Council shall notify the financial market util- ity or financial institutions of the final deter- mination of the Council in writing not later than 30 days after the expiration of the date by which a financial market utility or a finan- cial institution could have requested a hear- ing. All notices to financial institutions under this subsection shall be published in the Fed- eral Register. (e) Extension of time periods The Council may extend the time periods es- tablished in subsections (c) and (d) as the Coun- cil determines to be necessary or appropriate. (Pub. L. 111–203, title VIII, § 804, July 21, 2010, 124 Stat. 1807.) § 5464. Standards for systemically important fi- nancial market utilities and payment, clear- ing, or settlement activities (a) Authority to prescribe standards (1) Board of Governors Except as provided in paragraph (2), the Board of Governors, by rule or order, and in consultation with the Council and the Super- visory Agencies, shall prescribe risk manage- ment standards, taking into consideration rel- evant international standards and existing prudential requirements, governing— (A) the operations related to the payment, clearing, and settlement activities of des- ignated financial market utilities; and (B) the conduct of designated activities by financial institutions. (2) Special procedures for designated clearing entities and designated activities of certain financial institutions (A) CFTC and Commission The Commodity Futures Trading Commis- sion and the Commission may each prescribe regulations, in consultation with the Coun- cil and the Board of Governors, containing risk management standards, taking into consideration relevant international stand- ards and existing prudential requirements, for those designated clearing entities and fi- nancial institutions engaged in designated activities for which each is the Supervisory Agency or the appropriate financial regu- lator, governing— (i) the operations related to payment, clearing, and settlement activities of such designated clearing entities; and (ii) the conduct of designated activities by such financial institutions. (B) Review and determination The Board of Governors may determine that existing prudential requirements of the Commodity Futures Trading Commission, the Commission, or both (including require- ments prescribed pursuant to subparagraph (A)) with respect to designated clearing enti- ties and financial institutions engaged in designated activities for which the Commis- sion or the Commodity Futures Trading Commission is the Supervisory Agency or the appropriate financial regulator are in- sufficient to prevent or mitigate significant liquidity, credit, operational, or other risks to the financial markets or to the financial stability of the United States. (C) Written determination Any determination by the Board of Gov- ernors under subparagraph (B) shall be pro- vided in writing to the Commodity Futures Trading Commission or the Commission, as applicable, and the Council, and shall ex- plain why existing prudential requirements, considered as a whole, are insufficient to en- sure that the operations and activities of the designated clearing entities or the activities of financial institutions described in sub- paragraph (B) will not pose significant li- quidity, credit, operational, or other risks to the financial markets or to the financial sta- bility of the United States. The Board of Governors’ determination shall contain a de- tailed analysis supporting its findings and identify the specific prudential requirements that are insufficient. (D) CFTC and Commission response The Commodity Futures Trading Commis- sion or the Commission, as applicable, shall within 60 days either object to the Board of Governors’ determination with a detailed analysis as to why existing prudential re- quirements are sufficient, or submit an ex- planation to the Council and the Board of Governors describing the actions to be taken in response to the Board of Governors’ deter- mination. (E) Authorization Upon an affirmative vote by not fewer than 2/3 of members then serving on the Council, the Council shall either find that the response submitted under subparagraph (D) is sufficient, or require the Commodity Futures Trading Commission, or the Com- mission, as applicable, to prescribe such risk Page 1932 TITLE 12—BANKS AND BANKING § 5465 1 So in original. The closing quotation marks probably should not appear. 1 So in original. Another closing parenthesis probably should appear. management standards as the Council deter- mines is necessary to address the specific prudential requirements that are determined to be insufficient.’’ 1 (b) Objectives and principles The objectives and principles for the risk man- agement standards prescribed under subsection (a) shall be to— (1) promote robust risk management; (2) promote safety and soundness; (3) reduce systemic risks; and (4) support the stability of the broader finan- cial system. (c) Scope The standards prescribed under subsection (a) may address areas such as— (1) risk management policies and procedures; (2) margin and collateral requirements; (3) participant or counterparty default poli- cies and procedures; (4) the ability to complete timely clearing and settlement of financial transactions; (5) capital and financial resource require- ments for designated financial market utili- ties; and (6) other areas that are necessary to achieve the objectives and principles in subsection (b). (d) Limitation on scope Except as provided in subsections (e) and (f) of section 5466 of this title, nothing in this sub- chapter shall be construed to permit the Council or the Board of Governors to take any action or exercise any authority granted to the Com- modity Futures Trading Commission under sec- tion 2(h) of title 7 or the Securities and Ex- change Commission under section 78c–3(a) of title 15, including— (1) the approval of, disapproval of, or stay of the clearing requirement for any group, cat- egory, type, or class of swaps that a des- ignated clearing entity may accept for clear- ing; (2) the determination that any group, cat- egory, type, or class of swaps shall be subject to the mandatory clearing requirement of sec- tion 2(h)(1) of title 7 or section 78c–3(a)(1) of title 15; (3) the determination that any person is ex- empt from the mandatory clearing require- ment of section 2(h)(1) of title 7 or section 78c–3(a)(1) of title 15; or (4) any authority granted to the Commodity Futures Trading Commission or the Securities and Exchange Commission with respect to transaction reporting or trade execution. (e) Threshold level The standards prescribed under subsection (a) governing the conduct of designated activities by financial institutions shall, where appro- priate, establish a threshold as to the level or significance of engagement in the activity at which a financial institution will become sub- ject to the standards with respect to that activ- ity. (f) Compliance required Designated financial market utilities and fi- nancial institutions subject to the standards prescribed under subsection (a) for a designated activity shall conduct their operations in com- pliance with the applicable risk management standards. (Pub. L. 111–203, title VIII, § 805, July 21, 2010, 124 Stat. 1809.) § 5465. Operations of designated financial market utilities (a) Federal Reserve account and services The Board of Governors may authorize a Fed- eral Reserve Bank to establish and maintain an account for a designated financial market util- ity and provide the services listed in section 11A(b) of the Federal Reserve Act (12 U.S.C. 248a(b)) and deposit accounts under the first un- designated paragraph of section 13 of the Fed- eral Reserve Act (12 U.S.C. 342) to the designated financial market utility that the Federal Re- serve Bank is authorized under the Federal Re- serve Act [12 U.S.C. 221 et seq.] to provide to a depository institution, subject to any applicable rules, orders, standards, or guidelines prescribed by the Board of Governors. (b) Advances The Board of Governors may authorize a Fed- eral Reserve bank under section 10B of the Fed- eral Reserve Act (12 U.S.C. 347b) to provide to a designated financial market utility discount and borrowing privileges only in unusual or exigent circumstances, upon the affirmative vote of a majority of the Board of Governors then serving (or such other number in accordance with the provisions of section 11(r)(2) of the Federal Re- serve Act (12 U.S.C. 248(r)(2)) 1 after consultation with the Secretary, and upon a showing by the designated financial market utility that it is unable to secure adequate credit accommoda- tions from other banking institutions. All such discounts and borrowing privileges shall be sub- ject to such other limitations, restrictions, and regulations as the Board of Governors may pre- scribe. Access to discount and borrowing privi- leges under section 10B of the Federal Reserve Act as authorized in this section does not re- quire a designated financial market utility to be or become a bank or bank holding company. (c) Earnings on Federal Reserve balances A Federal Reserve Bank may pay earnings on balances maintained by or on behalf of a des- ignated financial market utility in the same manner and to the same extent as the Federal Reserve Bank may pay earnings to a depository institution under the Federal Reserve Act [12 U.S.C. 221 et seq.], subject to any applicable rules, orders, standards, or guidelines prescribed by the Board of Governors. (d) Reserve requirements The Board of Governors may exempt a des- ignated financial market utility from, or modify any, reserve requirements under section 19 of the Federal Reserve Act (12 U.S.C. 461) applica- ble to a designated financial market utility.