12 U.S.C. § 5463 — Designation of systemic importance

Page 1930 TITLE 12—BANKS AND BANKING § 5463 seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1 of Title 7 and Ta- bles. The Securities Exchange Act of 1934, referred to in pars. (5)(B) and (6)(B)(i), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see sec- tion 78a of Title 15 and Tables. The Securities Act of 1933, referred to in par. (7)(A), is title I of act May 27, 1933, ch. 38, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of Title 15, Commerce and Trade. For com- plete classification of this Act to the Code, see section 77a of Title 15 and Tables. Sections 727 and 763(i) of the Wall Street Trans- parency and Accountability Act of 2010, referred to in par. (7)(D), are sections 727 and 763(i) of Pub. L. 111–203, which amended section 2 of Title 7, Agriculture, and section 78m of Title 15, Commerce and Trade, respec- tively, effective on the later of 360 days after July 21, 2010, or, to the extent it requires a rulemaking, not less than 60 days after publication of the final rule or regu- lation. § 5463. Designation of systemic importance (a) Designation (1) Financial stability oversight council The Council, on a nondelegable basis and by a vote of not fewer than 2⁄3 of members then serving, including an affirmative vote by the Chairperson of the Council, shall designate those financial market utilities or payment, clearing, or settlement activities that the Council determines are, or are likely to be- come, systemically important. (2) Considerations In determining whether a financial market utility or payment, clearing, or settlement ac- tivity is, or is likely to become, systemically important, the Council shall take into consid- eration the following: (A) The aggregate monetary value of transactions processed by the financial mar- ket utility or carried out through the pay- ment, clearing, or settlement activity. (B) The aggregate exposure of the financial market utility or a financial institution en- gaged in payment, clearing, or settlement activities to its counterparties. (C) The relationship, interdependencies, or other interactions of the financial market utility or payment, clearing, or settlement activity with other financial market utili- ties or payment, clearing, or settlement ac- tivities. (D) The effect that the failure of or a dis- ruption to the financial market utility or payment, clearing, or settlement activity would have on critical markets, financial in- stitutions, or the broader financial system. (E) Any other factors that the Council deems appropriate. (b) Rescission of designation (1) In general The Council, on a nondelegable basis and by a vote of not fewer than 2⁄3 of members then serving, including an affirmative vote by the Chairperson of the Council, shall rescind a des- ignation of systemic importance for a des- ignated financial market utility or designated activity if the Council determines that the utility or activity no longer meets the stand- ards for systemic importance. (2) Effect of rescission Upon rescission, the financial market utility or financial institutions conducting the activ- ity will no longer be subject to the provisions of this subchapter or any rules or orders pre- scribed under this subchapter. (c) Consultation and notice and opportunity for hearing (1) Consultation Before making any determination under sub- section (a) or (b), the Council shall consult with the relevant Supervisory Agency and the Board of Governors. (2) Advance notice and opportunity for hearing (A) In general Before making any determination under subsection (a) or (b), the Council shall pro- vide the financial market utility or, in the case of a payment, clearing, or settlement activity, financial institutions with advance notice of the proposed determination of the Council. (B) Notice in Federal Register The Council shall provide such advance no- tice to financial institutions by publishing a notice in the Federal Register. (C) Requests for hearing Within 30 days from the date of any notice of the proposed determination of the Coun- cil, the financial market utility or, in the case of a payment, clearing, or settlement activity, a financial institution engaged in the designated activity may request, in writ- ing, an opportunity for a written or oral hearing before the Council to demonstrate that the proposed designation or rescission of designation is not supported by substan- tial evidence. (D) Written submissions Upon receipt of a timely request, the Council shall fix a time, not more than 30 days after receipt of the request, unless ex- tended at the request of the financial mar- ket utility or financial institution, and place at which the financial market utility or financial institution may appear, person- ally or through counsel, to submit written materials, or, at the sole discretion of the Council, oral testimony or oral argument. (3) Emergency exception (A) Waiver or modification by vote of the Council The Council may waive or modify the re- quirements of paragraph (2) if the Council determines, by an affirmative vote of not fewer than 2⁄3 of members then serving, in- cluding an affirmative vote by the Chair- person of the Council, that the waiver or modification is necessary to prevent or miti- gate an immediate threat to the financial system posed by the financial market utility or the payment, clearing, or settlement ac- tivity. 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