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clarify that the requirement that each Act of 1973. Please do not submit your III. Potential Areas for Improvement debit card transaction must be able to be comment multiple times via different IV. Request for Comments processed on at least two unaffiliated methods. You may submit comments by A. Existing FCA Liquidity Regulations payment card networks applies to card- any of the following methods: B. Applicability of the Liquidity Coverage • Ratio and Net Stable Funding Ratio not-present transactions, clarify the Email: Send us an email at reg- C. Other Comments Requested requirements that Regulation II imposes [email protected]. on debit card issuers to ensure that at • FCA website: http://www.fca.gov. I. Introduction least two unaffiliated payment card Click inside the ‘‘I want to . . .’’ field A. Objectives of the Advance Notice of networks have been enabled for debit near the top of the page; select Proposed Rulemaking card transactions, and standardize and ‘‘comment on a pending regulation’’ clarify the use of certain terminology.1 from the dropdown menu; and click FCA’s purpose in this Advance Notice The proposal provided for a comment ‘‘Go.’’ This takes you to an electronic of Proposed Rulemaking is to gather period ending on July 12, 2021. Since public comment form. public input to: • Ensure that each FCS bank operates the publication of the proposal, the • Mail: Kevin J. Kramp, Director, under a comprehensive liquidity Board has received comments Office of Regulatory Policy, Farm Credit framework, so it consistently maintains requesting a 30-day extension of the Administration, 1501 Farm Credit Drive, adequate liquidity to cover all of its comment period. An extension of the McLean, VA 22102–5090. potential obligations, including comment period will provide additional You may review copies of comments unfunded commitments and other opportunity for interested parties to we receive on our website at http:// material contingent liabilities, under www.fca.gov. Once you are on the analyze the proposal and prepare and stressful conditions; submit comments. Therefore, the Board website, click inside the ‘‘I want to • Assess if, and to what extent, the is extending the end of the comment . . .’’ field near the top of the page; Basel III International framework for period for the proposal from July 12, select ‘‘find comments on a pending liquidity risk measurement, standards 2021 to August 11, 2021. regulation’’ from the dropdown menu; and monitoring (hereafter ‘‘Basel III By order of the Board of Governors of the and click ‘‘Go.’’ This will take you to the Liquidity Framework’’), issued by the Federal Reserve System, acting through the Comment Letters page where you can Basel Committee on Banking Secretary of the Board under delegated select the regulation for which you Supervision (BCBS), and regulations of authority. would like to read the public comments. the Federal banking regulatory agencies Ann E. Misback, We will show your comments as (FRBAs) implementing this framework Secretary of the Board. submitted, including any supporting for banking organizations should [FR Doc. 2021–13533 Filed 6–29–21; 8:45 am] data provided, but for technical reasons influence revisions to FCA’s existing we may omit items such as logos and 1 BILLING CODE P liquidity framework; special characters. Identifying • Determine if the Basel III Liquidity information that you provide, such as Framework is appropriate for FCS phone numbers and addresses, will be FARM CREDIT ADMINISTRATION banks, and evaluate the impacts of publicly available. However, we will augmenting FCA’s existing liquidity 12 CFR Part 615 attempt to remove email addresses to framework to incorporate appropriate help reduce internet spam. You may aspects of the Basel III Liquidity RIN 3052–AD44 also review comments at our office in Framework and the FBRAs’ McLean, Virginia. Please call us at (703) 2 Bank Liquidity Reserve implementation of the framework; and 883–4056 or email us at reg-comm@ • Determine the respective costs and AGENCY: Farm Credit Administration. fca.gov to make an appointment. benefits of updating FCA’s liquidity ACTION: Advance notice of proposed FOR FURTHER INFORMATION CONTACT: framework for FCS banks. rulemaking. Technical information: Ryan Leist, B. Background on System Liquidity [email protected], Senior Accountant, or SUMMARY: The Farm Credit Jeremy R. Edelstein, [email protected], In 1916, Congress created the System Administration (FCA, we, our) is Associate Director, Finance and Capital to provide permanent, stable, affordable, contemplating revising its liquidity Markets Team, Office of Regulatory regulations so Farm Credit System (FCS 1 The Federal banking regulatory agencies include Policy, Farm Credit Administration, the Office of the Comptroller of the Currency, Board or System) banks can better withstand McLean, VA 22102–5090, (703) 883– of Governors of the Federal Reserve System crises that adversely impact liquidity 4414, TTY (703) 883–4056, or (hereafter Federal Reserve Board), and the Federal and pose a risk to their viability. FCA [email protected]; Deposit Insurance Corporation. See ‘‘Liquidity Coverage Ratio: Liquidity Risk Measurement is considering whether to amend our or Standards,’’ 79 FR 61440 (October 10, 2014) and existing liquidity regulatory framework. Legal information: Richard Katz, ‘‘Net Stable Funding Ratio: Liquidity Risk We are seeking comments from the Measurement Standards and Disclosure [email protected], Senior Counsel, Office public on how to amend or restructure Requirements,’’ 86 FR 9120 (February 11, 2021). of General Counsel, Farm Credit 2 our liquidity regulations. Basel III was published in December 2010 and Administration, McLean, VA 22102– revised in June 2011. The text is available at http:// DATES: Please send us your comments 5090, (703) 883–4020, TTY (703) 883– www.bis.org/publ/bcbs189.htm. The BCBS was on or before September 28, 2021. established in 1974 by central banks with bank 4056. supervisory authorities in major industrial ADDRESSES: For accuracy and efficiency SUPPLEMENTARY INFORMATION: countries. The BCBS develops banking guidelines reasons, please submit comments by and recommends them for adoption by member email or through FCA’s website. We do Table of Contents countries and others. BCBS documents are available at https://www.bis.org/. The FCA does not have not accept comments submitted by I. Introduction representation on the Basel Committee, as do the facsimiles (fax), as faxes are difficult for A. Objectives of the Advance Notice of FBRAs, and is not required by law to follow the us to process and achieve compliance Basel standards. The Basel III Liquidity Coverage Proposed Rulemaking Ratio and liquidity risk monitoring tools document with section 508 of the Rehabilitation B. Background on System Liquidity was published in January 2013 and the Net stable II. Recent Updates to System Liquidity funding ratio document was published in October 1 86 FR 26189 (May 13, 2021). Regulations 2014.

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and reliable sources of credit and borrowers. Although section 4.2(a) of objectives of our 2013 liquidity final related services to American agricultural the Act authorizes FCS banks to borrow rule 10 were to: and aquatic producers. The System from commercial banks and other • Improve the capacity of FCS banks currently consists of 3 Farm Credit lending institutions, lines of credit with to pay their obligations and fund their Banks, 1 agricultural credit bank, 66 such lenders are only used as a operations by maintaining adequate agricultural credit associations, 1 secondary source of liquidity. liquidity to withstand various market Federal land credit association, service As a government-sponsored enterprise disruptions and adverse economic or corporations, and the Federal Farm (GSE), the System depends on financial conditions; Credit Banks Funding Corporation continuing access to the capital markets • Strengthen liquidity management at (Funding Corporation).3 Farm Credit to obtain the funds necessary to extend all FCS banks; banks (which include both the Farm credit to agriculture, aquaculture, rural • Enhance the liquidity of assets that Credit Banks and the agricultural credit utilities, and rural housing in both good System banks hold in their liquidity bank) issue System-wide consolidated and bad economic times. If access to the reserves; debt obligations in the capital markets capital markets becomes impeded for • Require FCS banks to maintain a through the Funding Corporation,4 any reason, FCS banks must have three-tiered liquidity reserve. The first which enable the System to extend enough readily available funds and tier of the liquidity reserve must consist short-, intermediate-, and long-term assets that can be quickly converted into of a sufficient amount of cash and cash- credit and related services to farmers, cash to continue operations and pay like instruments to cover each bank’s ranchers, aquatic producers and maturing obligations. Unlike financial obligations for 15 days. The harvesters, their cooperatives, rural commercial banks, the System does not second and third tiers of the liquidity utilities, exporters of agricultural have a lender of last resort and does not reserve must contain cash and highly commodities products, and capital have a guaranteed line of credit from the liquid instruments that are sufficient to equipment, farm-related businesses, and U.S. Treasury or the Federal Reserve. cover the bank’s obligations for the next certain rural homeowners.5 The As part of our ongoing efforts to 15 and subsequent 60 days, System’s enabling statute is the Farm ensure the FCS banks have sufficient respectively; Credit Act of 1971, as amended (Act).6 liquidity to fund operations in the event • Establish a supplemental liquidity In many respects, the FCS is different of market disruptions, and in light of buffer that a bank can draw upon during from other lenders. In contrast to most updated guidance and regulations an emergency and is sufficient to cover commercial banks and other financial published by the BCBS and FBRAs, we the bank’s liquidity needs beyond 90 institutions, the System lends primarily are soliciting comments on the best days; and to agriculture and other eligible ways to enhance FCA’s existing • Strengthen each bank’s Contingency borrowers in rural areas. Unlike most liquidity framework. Funding Plan (CFP). As explained in the preamble to the other lenders, FCS banks and II. Recent Updates to System Liquidity 2013 final rule, the amendments to associations are cooperatives that are Regulations owned and controlled by their member- § 615.5134 incorporated many of the borrowers. Their common equity is not FCA regulations governing System principles that the BCBS and the FBRAs publicly traded. The System also funds banks’ liquidity were last substantially have articulated on liquidity its operations differently than most updated in 2013 in response to the 2008 management because many of these commercial lenders. FCS banks and financial crisis.7 FCA proposed fundamental concepts apply to all associations are not depository amendments to its liquidity financial institutions, including FCS institutions, and for this reason, System- requirements in 2011 to improve the banks. The comprehensive supervisory wide debt securities, not deposits, are quality of liquidity and bolster the approach developed by the BCBS and the System’s primary source for funding ability of the System banks to fund their the FBRAs effectively strengthens both loans to agricultural producers, their operations during times of economic, the liquidity reserves and the liquidity cooperatives, and other eligible financial, or market adversity.8 At the risk management practices at regulated time, FCA considered the Basel III financial institutions. 3 Number of institutions as of January 1, 2021. Liquidity Framework that was FCA’s update created three levels of The Federal Agricultural Mortgage Corporation published in September 2008 and liquid assets (levels 1, 2, and 3) which (Farmer Mac), which is also a System institution, December 2010,9 but decided not to has authority to operate secondary markets for are similar to, but not exactly the same agricultural real estate mortgage loans, rural adopt the Basel III liquidity ratios. The as, the three levels of high-quality liquid housing mortgage loans, and rural utility final rule incorporated the liquidity assets (HQLA) established in the Basel cooperative loans. The FCA has a separate set of coverage principles of Basel III as III Liquidity Framework (levels 1, 2a, liquidity regulations that apply to Farmer Mac. This appropriate to the System, improved the Advance Notice of Proposed Rulemaking does not and 2b) and used in the Liquidity affect Farmer Mac, and the use of the term ‘‘System System’s ability to withstand market Coverage Ratio (LCR).11 In addition, institution’’ in this preamble does not include disruptions by strengthening liquidity FCA’s framework adopted core concepts Farmer Mac. management practices at Farm Credit of the FBRA’s rules, including the 4 The Funding Corporation is established banks, and enhanced the liquidity of pursuant to section 4.9 of the Farm Credit Act of supplemental liquidity buffer, specific 1971, as amended, and is owned by all Farm Credit assets in their liquidity reserves. The policies and internal controls that banks. combat liquidity risk, and CFPs based in 5 The agricultural credit bank lends to, and 7 See 78 FR 23438 (April 18, 2013), as corrected part on the results of liquidity stress provides other financial services to farmer-owned by 78 FR 26701 (May 8, 2013). In addition, tests. cooperatives, rural utilities (electric and technical, non-substantive revisions to the terms telecommunications), and rural water and waste ‘‘Government-sponsored enterprise (GSE)’’ and The Basel III Liquidity Framework is water disposal systems. It also finances U.S. ‘‘U.S. Government agency’’ were made in 2018 (83 not the only basis for the existing agricultural exports and imports, and provides FR 27486 (June 12, 2018)). liquidity regulation. The regulation was international banking services to cooperatives and 8 See 76 FR 80817 (December 27, 2011). also based upon the System’s own other eligible borrowers. The agricultural credit 9 See ‘‘Principles for Sound Liquidity Risk initiatives to improve liquidity bank operates a Farm Credit Bank subsidiary. Management and Supervision.’’ September 2008; 6 12 U.S.C. 2001–2279cc. The Act is available at and ‘‘Basel III: International framework for liquidity www.fca.gov under ‘‘Laws and regulations,’’ and risk measurement, standards and monitoring.’’ 10 See supra footnote 7. ‘‘Statutes.’’ December 2010. 11 See 79 FR 61440 (October 10, 2014).

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management as well as the FCA’s FCA has closely monitored how the NSFR is designed to act as a experiences from examining liquidity FBRAs have adjusted Basel III and complement to the LCR to mitigate the risk management at Farm Credit banks applied it to the institutions they risks of banking organizations and the Funding Corporation. In this supervise since 2013. In response to supporting their assets with context, the regulation implemented the these developments and more recent insufficiently stable funding. The LCR best practices available for liquidity adverse market conditions, FCA applies to large banking organizations management at FCS banks at the time. believes it is appropriate to consider and does not apply to community The Farm Credit System Insurance updates to the existing FCA liquidity banking and savings associations. When Corporation (FCSIC) may use its framework.16 the final NSFR rule becomes effective Insurance Fund as a backup source of III. Potential Areas for Improvement on July 1, 2021, it too will apply to large liquidity for System banks through its banking organizations, but not assistance authorities.12 Additionally, Our current liquidity regulation community banks and small saving subsequent to FCA adopting the rule, § 615.5134, which we finalized in 2013, associations. FCSIC entered into an agreement with responded to the 2008 financial crisis. The Basel III Liquidity Framework the Federal Financing Bank (FFB) for a More specifically, this regulation encourages regulated entities to account $10 billion line of credit.13 Pursuant to improves the System’s liquidity for unfunded commitments and other this agreement, the FFB may advance management and bolsters the ability of contingent obligations in their liquidity funds to FCSIC when exigent market the System banks to fund their reserve calculations, and for this reason, circumstances 14 make it extremely operations during times of economic, its concepts are relevant to this doubtful that: The Funding Corporation financial, or market adversity. At the rulemaking and the maintenance of can issue new System-wide debt time, FCA considered the Basel III adequate liquidity at FCS banks. After obligations to repay maturing Liquidity Framework and how to tailor careful consideration of the comments obligations; and one or more insured it to the unique circumstances of System received on the 2011 liquidity proposed System banks will be able to pay banks. The FBRAs had not yet enacted rule, FCA decided not to incorporate maturing debt obligations without regulations that implemented Basel III, unfunded commitments into the selling available liquidity reserve assets and we decided it would be premature existing regulation, however, FCA stated at a material loss. If necessary, FCSIC for FCA to adopt the LCR and the Net it may address unfunded commitments would use the funds advanced by the Stable Funding Ratio (NSFR) for System at a later time. As a result, FCA’s FFB to increase amounts in its banks. FCA’s existing regulation has liquidity reserve requirement does not Insurance Fund to provide assistance to achieved FCA’s objectives by ensuring capture funds held or unfunded the System banks until market that System banks have a satisfactory commitments on retail loans or on the 15 conditions improve. liquidity framework. Yet, the time has direct note. While these unfunded The decision whether to provide come for FCA to revisit these issues and commitments are generally captured as assistance, including seeking funds from decide how best to strengthen and part of the liquidity stress tests update § 615.5134 so System banks are the FFB, is at the discretion of FCSIC, incorporated into a bank’s CFP, the CFP in a better position to respond to and each funding obligation of the FFB in the existing rule gives System banks emerging risks and constantly changing is subject to various terms and considerable discretion to determine the market conditions. conditions and, as a result, there can be cash flow assumptions and discount no assurance that funding would be Between 2013 and 2020, the BCBS and FBRAs issued new guidance and factors used to determine the amount of available if needed by the System. This liquidity reserves they should hold for FCSIC–FFB revolving credit facility is regulations to improve the liquidity framework for the banking sector. The these potential cash outflows. subject to annual renewal. Additionally, Modifying FCA’s liquidity reserve the agreement only applies during new regulations included the LCR that was finalized in 2014 17 and the NSFR, requirement to capture unfunded exigent market circumstances, and can commitments or adopting an LCR/NSFR only be used if the amount needed to which was proposed in 2016 18 and finalized in November 2020.19 The framework may promote stronger repay maturing System-wide insured liquidity profiles at System banks by debt obligations will exceed available LCR 20 focuses on short-term liquidity risk from severe market stresses and the improving how liquidity is measured Insurance Fund reserves. As such, FCA and reported. Furthermore, this does not consider potential FCSIC NSFR 21 promotes stable funding structures over a one-year horizon. The modification would help ensure that a assistance, including additional System bank has enough liquidity to amounts available through its agreement meet its unfunded commitments during with the FFB, when determining 16 The FCA has broad authority under various provisions of the Act to supervise and regulate a liquidity crisis. liquidity requirements or completing liquidity management at FCS banks. Section 5.17(a) The containment measures adopted in examinations of liquidity and related of the Act authorizes the FCA to: (1) Approve the early 2020 in response to COVID–19 management practices at FCS issuance of FCS debt securities under section 4.2(c) and (d) of the Act; (2) establish standards regarding slowed economic activity in the United institutions. loan security requirements at FCS institutions, and States.22 Financial conditions tightened regulate the borrowing, repayment, and transfer of markedly in March and April 2020 and 12 See 12 U.S.C. 2277a–10(a)(1); Section 5.61(a)(1) funds between System institutions; (3) prescribe sudden disruptions in financial markets of the Act. rules and regulations necessary or appropriate for 13 On September 24, 2013, FCSIC entered into an carrying out the Act; and (4) exercise its statutory put increasing liquidity pressure on agreement with the FFB, a U.S. government enforcement powers for the purpose of ensuring the certain credit markets. In response to corporation subject to the supervision and direction safety and soundness of System institutions. the pandemic, the Federal Reserve of the U.S. Treasury. 17 See 79 FR 61440 (October 10, 2014). 18 Board established a number of funding, 14 An ‘‘exigent market circumstance’’ is a broad See 81 FR 35124 (June 1, 2016). credit, liquidity, and loan facilities to disruption across U.S. credit markets that originates 19 See 86 FR 9120 (February 11, 2021). The final external to and independent of the Farm Credit rule will become effective on July 1, 2021. provide liquidity to the financial System. 20 See BCBS, ‘‘Basel III: The Liquidity Coverage 15 The agreement provides for a short-term Ratio and liquidity risk monitoring tools’’ (January 22 See Proclamation 9994, ‘‘Declaring a National revolving credit facility of up to $10 billion, is 2013). Emergency Concerning the Novel Coronavirus renewable annually and terminates on September 21 See BCBS, ‘‘Basel III: The net stable funding Disease COVID–19 Outbreak,’’ 85 FR 15337 (March 30, 2021, unless otherwise further extended. ratio’’ (October 2014). 18, 2020).

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system.23 One of these programs, the therefore, exposure to unfunded to function as an undrawn backup that Paycheck Protection Program (PPP) commitments and other contingent would be utilized to refinance debt Liquidity Facility, was directly available obligations varies within the FCS. As obligations of a borrower in situations to System institutions, while other part of each System bank’s general where the borrower is unable to rollover facilities indirectly increased the financing agreement (GFA) with its that debt in financial markets. liquidity of System institutions’ assets affiliated associations, System banks Alternatively, credit facilities provide a held in their liquidity reserves.24 FCA have an unfunded commitment to each line of credit for borrower’s general provided System institutions with affiliated association that is a possible corporate or working capital purposes. guidance to manage the challenges outflow of liquidity. The unfunded These lines of credit to retail borrowers associated with the COVID–19 commitment amount is the difference may or may not be unconditionally pandemic, including certain regulatory between the association’s maximum cancellable. A sudden surge in borrower capital relief for PPP loans and PPP credit limit with the System bank under demand for funds under these lines may loans pledged to the PPP Liquidity the GFA or promissory note 26 and the increase demands on the bank’s Facility.25 Throughout the market amount the association has borrowed liquidity at a time when market access turbulence in early 2020, System banks from the System bank. is becoming impeded. These unfunded maintained satisfactory liquidity The GFA permits a System bank to commitments potentially expose both reserves, however; the market terminate an association’s loan or to FCS banks and associations to conditions caused by COVID–19 refuse to make additional disbursements significant safety and soundness risks.30 provided FCA the opportunity to in the event of default. The Act To incorporate consideration of these observe the existing liquidity framework prohibits an association from borrowing unfunded commitments, the liquidity under adverse market conditions. from commercial banks or other rules of the FBRAs apply a multiplier or Based on these developments, FCA is financial institutions without its ‘‘factor’’ to the gross notional amount to considering whether changes to our funding bank’s approval.27 We believe reflect assumptions on how exposures liquidity regulations are appropriate or there may be merit in incorporating will result in ‘‘cash outflows.’’ These needed. these possible outflows for the bank’s factors are multiplied by the total IV. Request for Comments unfunded commitment to its affiliated amount of each outflow item to associations into the existing liquidity determine the regulatory outflow We request and encourage any reserve requirement because the amount. The factor applied is interested person(s) to submit comments associations are fully dependent on the dependent on the type of exposure, and on the following questions and ask that bank for funding its operations so it can is consistent with the Basel III Liquidity you support your comments with fulfill its mission. Framework and the FBRAs’ evaluation relevant data, analysis, or other System banks also have unfunded of relevant supervisory information. The information. We remind commenters commitments or other material factors applied consider the potential that comments, data, and other contingent liabilities to other financing impact of idiosyncratic and market-wide information submitted in support of a institutions (OFIs) that increase shocks.31 comment, will be available to the public 28 liquidity risk. System banks are While unfunded commitments at through our website. required to provide funding, or provide System banks should be analyzed in the We have organized our questions into similar financial assistance to any the following categories: (A) Existing CFP, banks have significant discretion creditworthy OFI that meets certain about the assumptions (i.e., factor) FCA Liquidity Regulations and (B) requirements.29 Although the GFAs Applicability of the LCR and NSFR. applied. For example, to reflect varying with OFIs may permit a System bank to drawdown assumptions System banks A. Existing FCA Liquidity Regulations refuse to make additional disbursements may apply a factor, similar to the factors in the event of default, a System bank Unfunded Commitments of FCS Banks applied in the FBRAs’ rules, to notional would likely be required to give prior amounts outstanding. A higher factor Each FCS bank has its own unique notice to cancel unfunded commitments reflects a higher drawdown potential of circumstances and risk profile and, to OFIs. As part of their GFA with OFIs, the undrawn portion of these System banks can be legally obligated to commitments and results in a higher 23 Section 1101 of the Dodd-Frank Wall Street fund these commitments. These types of liquidity requirement in the CFP. For Reform and Consumer Protection Act amended outflows may include retail funding, section 13(3) of the Federal Reserve Act, 12 U.S.C. example, a $10 billion exposure at a 10 343(3), to allow the Federal Reserve Board, in contractual settlements related to percent factor would add only $1 billion consultation with the Secretary of the Treasury, to derivative transactions, pledging to the discounted outflows, while a 40 establish by regulation, policies and procedures that collateral, or other off-balance sheet percent factor would add $4 billion to would govern emergency lending under a program commitments. or facility for the purpose of providing liquidity to the outflows. the financial system. Under section 13(3) of the FCS banks may also have outstanding Federal Reserve Act, as amended, the Federal lines of credit to retail borrowers who 30 The Tier 1/Tier 2 Capital framework regulation Reserve Board must establish procedures that may draw funds to meet their seasonal, requires that System banks hold capital against this prohibit insolvent and failing entities from business, or liquidity needs. A line of unfunded wholesale commitment due to the risk borrowing under the emergency program or facility. credit may be used as a liquidity facility presented. See § 628.33 and preamble discussion— See Public Law 11–203, title XI, sec. 1101(a), 124 81 FR 49737 (July 28, 2016). Stat. 2113 (Jul. 21, 2010). 31 See 79 FR 61440, 61444 (October 10, 2014). 26 24 To provide liquidity to small business lenders See § 614.4125(d). Examples include those shocks that would result in: and the broader credit markets and to help stabilize 27 Under section 2.2(12) of the Act, direct lender (1) A partial loss of unsecured wholesale funding the financial system, the Federal Reserve Board has associations may borrow money from their affiliated capacity; (2) a partial loss of secured, short-term created the PPP Liquidity Facility using its Farm Credit bank, and with the approval of their financing with certain collateral and counterparties; authority under section 13(3) of the Federal Reserve funding banks, may borrow from and issue notes or (3) losses from derivative positions and the Act. other obligations to any commercial bank or collateral supporting those positions; (4) 25 See FCA’s Supplement to the January 5, 2021, financial institution. unscheduled draws on committed credit and FCA Informational Memorandum: Guidance for 28 OFI means any entity referred to in section liquidity facilities that a covered company has System Institutions Affected by the COVID–19 1.7(b)(1)(B) of the Act. provided to its customers; and (5) other shocks that Pandemic: Regulatory Capital Requirements for PPP 29 See § 614.4540(b) which specifies the criteria affect outflows linked to structured financing Loans. for assured access for certain OFIs. transactions and mortgages.

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To evaluate this further, we are business expenses and accordingly, 5. How should FCA incorporate the seeking comment to determine if we draw from their operating lines. As liquidity risk of VACP accounts at should incorporate unfunded System banks are ultimately responsible associations into the funding banks’ commitments into the existing FCA to fund associations, we are seeking liquidity reserve requirement? liquidity framework and what type of comment to determine if a revised a. What would be an appropriate factor would be appropriate to capture liquidity requirement should ‘‘look- factor to apply to these VACP accounts? the drawdown risks. through’’ System banks to consider each b. If different factors should apply to 1. How should FCA incorporate the association’s unfunded commitment to different types of VACP accounts, please liquidity risk of unfunded commitments retail borrowers as a potential outflow specify. on affiliated associations’ direct notes item. Continuously Redeemable Perpetual into the System banks’ liquidity reserve 4. How should FCA incorporate the Preferred Stock requirement? risk of unfunded commitments from Some System associations have issued a. Should drawdown factors be association retail borrowers for the continuously redeemable perpetual applied to unfunded commitments? funding banks’ liquidity reserve preferred stock (typically called Harvest b. If so, what would be an appropriate requirement? factor to apply to the direct note Stock or H Stock) to their members who a. What would be an appropriate wish to invest and participate in their unfunded commitments? factor for System banks to apply to 2. How should FCA incorporate the cooperative beyond the minimum association unfunded commitments? member-borrower stock purchase. H liquidity risk of unfunded commitments b. Should unfunded commitments at to OFIs into the System banks’ liquidity Stock is an at-risk investment; it is associations that are not issued without a stated maturity and is reserve requirement? unconditionally cancellable be treated a. Should drawdown factors be retireable only at the discretion of the differently from those that are applied to unfunded commitments? institution’s board. A common feature of b. If so, what would be an appropriate unconditionally cancellable? Please H stock is that the issuing association factor to apply to OFI unfunded explain why. will redeem it upon the request of the commitments? c. If so, should we consider applying holder only if the association is in c. Does the liquidity risk of unfunded a different factor to differentiate the risk compliance with its regulatory capital commitments to OFIs pose a different between credit and liquidity facilities requirements. Because of this feature, risk than unfunded commitments to for association retail borrowers? FCA considers the stock to be affiliated associations’ direct notes? If d. Should FCA incorporate the continuously redeemable. Some so, how should FCA incorporate this liquidity risk of unfunded commitments associations reduce the operational risk into the liquidity reserve to association retail borrowers through a hurdles to redeeming H stock by requirement? ‘‘look through’’ approach or using the delegating the board’s authority to retire 3. How should FCA incorporate the direct note unfunded commitment such stock to management provided liquidity risk of unfunded commitments amount? certain board-approved minimum to bank retail borrowers into the System Voluntary Advance Conditional regulatory capital ratios are maintained. banks’ liquidity reserve requirement? Payment Accounts FCA has determined that holders a. What would be an appropriate reasonably expect the institution to factor to apply to retail borrower Section 614.4175 allows member- redeem the stock shortly after they make unfunded commitments? borrowers to make voluntary advance a request. A sudden surge in member- b. Should unfunded commitments to conditional payments (VACP) on their borrower redemptions of H Stock held retail borrowers that are not loans and allows institutions to set up at associations would increase the unconditionally cancellable be treated involuntary payment accounts for funds funding from System bank to its differently from those that are held to be used for insurance premiums, associations. This sudden increase in unconditionally cancellable? Please taxes, and other reasons.32 VACP (where funding may increase demands on the explain why. the advanced payment is not bank’s liquidity at a time when market c. Should we consider applying compulsory) accounts have the potential access is becoming impeded. To different factors to differentiate the risk to expose the System to additional evaluate this further, we are seeking between retail credit and liquidity liquidity risk in a crisis. More comment on how we should mitigate facilities for such retail borrowers? specifically, some VACP accounts may the risk H Stock poses to the liquidity be structured so that System member- Association Lines of Credit to Retail of System banks. borrowers may withdraw funds at their Borrowers 6. How should FCA incorporate the request (although prior notice for liquidity risk of H Stock redemptions at FCS associations often have withdrawals may be required). A associations into the funding banks’ outstanding lines of credit to retail sudden surge in member-borrower liquidity reserve requirement? What borrowers who may draw funds to meet draws from VACP accounts held at would be an appropriate factor to apply their seasonal or other business needs. associations would increase the funding to H Stock? Associations can be legally obligated to required from the bank to the fund these commitments and would association. This sudden increase in Cash Inflows generally rely on their System bank for funding may increase demands on the As discussed above, modifying FCA’s funding under the GFA. A sudden surge bank’s liquidity at a time when market liquidity reserve requirement to capture in borrower demand for funds under access is becoming impeded. To potential cash outflows, including these lines may increase demands on evaluate this further, we are seeking unfunded commitments, may promote a the bank’s liquidity at a time when comment on how we should mitigate stronger liquidity profile at System market access is becoming impeded. the risk VACP accounts pose to the banks. To improve how liquidity is More specifically, during periods of liquidity of System banks. measured and reported, we are also economic or market uncertainty, retail considering incorporating cash inflows borrowers may desire to increase their 32 Sections 1.5(6) and 2.2(13) of the Act authorize into the liquidity reserve requirement. cash holdings to cover operating and institutions to accept advance payments. FCA’s existing liquidity regulation,

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§ 615.5134, does not consider how balance sheet, and the adequacy of its there is the potential that the expected cash inflows would affect the liquidity risk measurement program. supplemental liquidity buffer may bank’s liquidity reserve requirement. System banks provide funding to their include investments that are not Outside of CFP stress analysis affiliated associations through the direct marketable or liquid under certain (discussed below), FCA’s existing note which is a significant portion of the circumstances. To evaluate this further, liquidity framework views the bank’s assets. The bank’s direct note we are seeking comment to determine if discounted market value of assets held assets are impacted by the funding and we should hold investments in the in the liquidity reserve and liquidity demands of their affiliated supplemental liquidity buffer to the supplemental buffer as the only source associations. However, System banks same or similar marketability standards of liquidity during a liquidity event.33 directly control the mix of funding for as assets in the liquidity reserve. However, in a liquidity event, certain these assets, as well as the risk 12. Should FCA apply the criteria for borrowers will still be making payments characteristics of other assets acquired. on their loans, allowing money to flow System banks issue System-wide debt ‘‘marketable’’ investments in into the institution that can be used to securities as the primary source for § 615.5134(d) to assets that FCS banks support ongoing operations. Cash funding loans and investments. As part hold in their supplemental liquidity inflows from sources other than the of the examination process, FCA buffer? If yes, why? If no, what criteria liquidity reserve typically include evaluates how each bank’s debt should FCA adopt to address its payments from wholesale and retail structure helps limit liquidity risks. For concerns about the liquidity and borrowers and coupon and scheduled example, if a bank funds its balance marketability of assets in the principal payments from securities not sheet wholly with short-term debt, the supplemental liquidity buffers of FCS included in the liquidity reserve.34 resulting large amounts of debt maturing banks when access to the markets are The CFP requirement at § 615.5134(f) each week would cause the bank to be becoming impeded, and why? allows System banks to consider inflows vulnerable to market disruptions and Money Market Instruments and when analyzing how much contingent liquidity risk. Therefore, debt maturities Diversified Investment Funds liquidity they must hold under a 30-day should be structured in a manner that acute stress scenario. However, for the they are extended and align with the The existing liquidity framework purposes of the CFP, System banks have tenor and composition of the bank’s allows certain money market considerable discretion to determine the assets. In addition, debt maturities instruments and diversified investment assumptions pertaining to the amount of should ensure longer-term stable funds to be included as Level 1 reserves inflows that will offset potential funding. at § 615.5134(b). The FBRAs decided outflows. To evaluate this further, we FCA’s existing liquidity framework not to include similar instruments in the are seeking comment to determine if we does not directly address the stability of LCR’s HQLA framework, such as mutual should incorporate inflows into the a bank’s balance sheet and does not funds and money market funds.36 The existing FCA liquidity framework. require compliance with specific debt FBRAs stated that certain underlying 7. How should FCA incorporate the structure ratios. To evaluate this further, investments of the investment uncertainty of cash inflows into System we are seeking comment to determine if companies may include high-quality banks’ liquidity reserve requirements? we should add requirements regarding assets, however, similar to securities 8. What would be an appropriate the structure of a bank’s balance sheet issued by many companies in the discount percentage to apply to the into the existing FCA liquidity financial sector, shares of investment different types of inflows (such as framework. companies have been prone to lose payments from wholesale and retail 10. How should FCA amend its borrowers, payments from securities not value and become less liquid during liquidity regulations to strengthen the periods of severe market stress or an included in the liquidity reserve)? stability of the balance sheet structure at 9. What type of operational changes idiosyncratic event involving the fund’s FCS banks? sponsor. Additionally, Securities and (such as data elements, general ledger 11. Under what circumstances might requirements, and systems) would be Exchange Commission (SEC) rules it be appropriate for FCA’s liquidity regarding money market funds may also required to accurately capture inflow framework to better address funding and outflow information to calculate impose some barriers on investors’ methods such as discount notes and ability to withdraw all their funds liquidity ratios on a daily or monthly short funding? basis? during a period of stress.37 Marketability of the Supplemental Stability of a Bank’s Balance Sheet Certain money market instruments Liquidity Buffer exhibited liquidity stress during the The amount of liquid assets that a Currently, investments held in a 2008 financial crisis and the economic bank must maintain is generally a bank’s liquidity reserve must be shock in March 2020 caused by the function of the stability of its funding marketable in accordance with the structure, the risk characteristics of the criteria in § 615.5134(d). However, 36 FCA defined money market instruments to investments held in the supplemental include short-term instruments such as (1) Federal 33 The discounts applied to the assets held for liquidity buffer are not subject to the funds, (2) negotiable certificates of deposit, (3) liquidity in FCA’s regulations approximate the cost bankers’ acceptances, (4) commercial paper, (5) 35 of liquidating investments over a short period of same marketability standard. Thus, non-callable term Federal funds (6) Eurodollar time time during adverse situations. The mechanism of deposits, (7) master notes, and (8) repurchase discounting assets is designed to accurately reflect 35 Assets held in the supplemental liquidity agreements collateralized by eligible investments as true market conditions. For example, FCA buffer are not subject to the marketability standard money market instruments. 83 FR 27486, 27489 regulations assign only a minimal discount to in § 615.5134(d). However, a System bank must be (June 12, 2018). Of the seven items, the FBRAs only investments that are less sensitive to interest rate able to liquidate any qualified eligible investment allow Federal funds to be included in Level 1 fluctuations because they are exposed to less price in its supplemental liquidity buffer within the HQLA. See supra footnote 1. Federal funds risk. Conversely, the discount for long-term fixed liquidity policy timeframe established by the bank’s represent a small amount of the System’s cash and rate instruments is higher because they expose FCS liquidity policy at no less than 80 percent of its liquidity included in Level 1 money market banks to greater market risk. book value. Assets having a market value of less instruments. 34 See FDIC’s Liquidity Risk Management than 80 percent of their book value at any time must 37 See SEC, ‘‘Money Market Fund Reform; Standards. Inflow amounts are defined at 12 CFR be removed from the supplemental buffer. See Amendments to Form PF,’’ 79 FR 47736 (August 14, 329.33. § 615.5134(e). 2014).

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COVID–19 pandemic.38 For example, in diversified investment funds included so, what assets should be limited and March 2020, Commercial paper (CP) and in specific levels in the liquidity reserve what percent should they be allowed to Certificate of deposit (CD) markets both to mitigate concentration risk? Please count towards the reserve requirement? became stressed.39 Under normal explain your reasoning. Liquidity and COVID–19 market conditions, secondary trading FCA’s Liquidity Reserve and High- volume in CP and CD markets is limited FCS banks withstood the recent as most investors purchase and hold Quality Liquid Assets in Liquidity economic and financial turmoil from these short-dated instruments to Coverage Ratio COVID–19 with their liquidity intact. maturity. However, in March 2020, as The FBRAs’ HQLA allowed in the However, both the FCA and FCS some market participants, including LCR differ from liquid assets allowed in continue to gain insights into the effects money market mutual funds and others, FCA’s liquidity regulation. FCA’s that sudden and severe stress have on may have sought secondary trading, regulation allows certain instruments to liquidity at individual FCS institutions they experienced a ‘‘frozen market.’’ For qualify as liquid assets even though they and in the entire financial system. For liquidity purposes, both secondary are excluded from the LCR, such as example, in March of 2020, financial trading and new issuances of CP and CD investment company shares (mutual markets experienced a ‘‘flight to cash’’ halted for a period of time during the funds and money market funds). where demand for cash and the highest pandemic.40 However, the LCR allows certain quality cash like instruments FCA’s existing definition of instruments to be included in HQLA dramatically increased, while demand ‘‘marketable’’ in § 615.5134(d) makes an that are excluded from FCA’s liquidity (and thus prices) for less liquid exception for money market regulation, such as municipal instruments declined.44 System banks instruments. Specifically, obligations and certain corporate are required to adopt a CFP to ensure § 615.5134(d)(4) exempts money market bonds.42 There are also certain sources of liquidity are sufficient to instruments from the requirement that instruments in HQLA that System banks fund normal operations under a variety investments in the liquidity reserve do not have the authority to purchase.43 of stress events.45 Such stress events must be easily bought and sold in active FCA’s regulation also differentiates include, but are not limited to market and sizeable markets without liquid assets by tenor while the LCR disruptions, rapid increase in loan significantly affecting prices. does not. Additionally, the LCR applies demand, unexpected draws on Additionally, money market more substantial discounts or ‘‘haircuts’’ unfunded commitments, difficulties in instruments are not subject to FCA’s to HQLA than FCA’s liquidity renewing or replacing funding with investment portfolio diversification regulation applies to the same assets. desired terms and structures, requirements and are not limited in the The FRBAs also limit certain assets to requirements to pledge collateral with liquidity reserve requirement.41 To a percentage of the total eligible HQLA counterparties, and reduced market evaluate the type of instruments and amount, whereas FCA does not. To access. definitions allowed under the FCA evaluate this further, we are seeking As addressed above, we are reviewing liquidity framework, we are seeking comment to determine if we should our regulatory and supervisory comment to determine if we should consider aligning FCA’s existing approaches towards liquidity so that align the instruments in FCA’s liquidity requirements for liquid assets with the System institutions are in a better reserve requirement with the FBRAs LCR’s HQLA. position to withstand whatever future HQLA framework. 16. Should FCA consider expanding crises may arise. As part of our ongoing 13. Given the risks of money market the instruments eligible under the efforts to limit the adverse effect of instruments and diversified investment liquidity reserve to more closely align rapidly changing economic, financial, funds and that the FBRAs do not with the HQLA framework of the and market conditions on the liquidity consider these instruments to be high FBRAs? If so, which instruments should of any FCS bank, we are seeking quality liquid assets, why should FCA be considered and how would including comment to determine if we should continue to permit these instruments to the instruments add strength to the make updates to our regulations to be included in an FCS bank’s liquidity existing liquidity framework? better prepare for future liquidity crises. reserve? If you believe that we should 17. Should FCA consider reviewing 20. How should FCA further continue to allow money market tenor requirements in its existing incorporate the demand for cash and instruments and diversified investment liquidity regulations? If so, which highly liquid U.S. Treasury securities funds in the liquidity reserve instruments should be considered and during times of crisis into the System requirement, how could FCA mitigate how would the requirements add banks liquidity reserve requirement? the risks they pose? strength to the existing liquidity 21. What type of updates should FCA 14. What factors should FCA consider framework? consider to the CFP requirements in in evaluating the risk of money market 18. Should FCA consider changing § 615.5134(f)? instruments and diversified investment discount values assigned to assets held B. Applicability of the Liquidity funds in the context of the total for liquidity to more closely align with Coverage Ratio and Net Stable Funding liquidity reserve requirement? those applied under the LCR’s HQLA 15. Should FCA consider limiting Ratio framework? money market instruments and 19. Should FCA consider limiting System Banks and the LCR and NSFR certain assets included in the liquidity 38 See 79 FR 61440, 61465 (October 10, 2014) and For the reasons discussed above, the Financial Stability Board’s ‘‘COVID–19 Pandemic: reserve to mitigate concentration risk? If FCA is exploring whether, and to what Financial Stability Impact and Policy Responses; extent, the LCR and NSFR should apply Report submitted to the G20.’’ November 17, 2020. 42 System banks can purchase certain municipal 39 Both CP and CD are included in FCA’s securities and corporate bonds under to System banks now that the FBRAs definition of money market instruments. § 615.5140(a)(1)(ii)(A)—non-convertible senior debt 40 See SEC’s Division of Economic and Risk securities. 44 See Bank for International Settlements Bulletin Analysis ‘‘U.S. Credit Markets Interconnectedness 43 Investments such as publicly traded common No 14 ‘‘US dollar funding markets during the and the Effects of the COVID–19 Economic Shock.’’ equity, certain corporate debt securities, and certain Covid–19 crisis—the money market fund turmoil.’’ October 2020. other securities are included in the LCR but are not May 12, 2020. 41 See § 615.5133(f)(3)(iii). eligible investments under § 615.5140. 45 See § 615.5134(f).

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issued final rules implementing the (financial sector entity or non-financial b. If not, what supports FCA treating Basel III Liquidity Framework in the sector entity). The direct notes from System institutions as non-financial United States. More specifically, we are System banks to System associations sector entities and applying a 10 percent evaluating whether it is feasible to under the GFAs are credit facilities, not factor on the unfunded commitments adjust the LCR and NSFR to the liquidity facilities. Unfunded System banks have to associations? System’s cooperative and non- commitments on a credit facility to a System Bank Member Investment Bonds depository structures and its mission as financial sector entity have a 40 percent a GSE, and we are seeking your input. factor, while the same commitment to a Two System banks offer investment In the alternative, we are considering non-financial sector entity only have a bonds to their member-borrowers and whether to incorporate specific 10 percent factor. Financial sector other specified individuals, such as elements of the LCR and NSFR into our entities typically have shorter-term bank employees (Member Investment liquidity regulation, and we are funding structures and higher Bonds). Both programs are similar in interested in your ideas about how to do correlations of drawing down that each bank offers overnight or short- so. commitments during times of stress term, uninsured bonds to the bank’s 22. What core principles would be which support a higher factor when members and other specified most important in FCA’s consideration compared to non-financial sector individuals. Member Investment Bonds of the Basel III Liquidity Framework? entities.47 A higher factor results in a are structured so that holders may How relevant is the Basel III Liquidity higher liquidity requirement under the redeem funds at their request (although Framework to the cooperative and non- LCR. prior notice for withdrawals may be required). Given their short maturity, a depository structure of the FCS? The FBRAs’ LCR regulation defines a holder’s investment may be 23. To what extent should FCA financial sector entity to include a continuously rolled over until they propose a similar rule to the FBRA’s regulated financial company, but provide notice to redeem the LCR and NSFR? specifically excludes GSEs. The FCS is investment, which may be at any time. a. Should FCA completely replace its a cooperative system of financial Member Investment Bonds present a existing liquidity regulations with an institutions that the FCA charters and liquidity demand similar to maturing LCR and NSFR framework or only regulates in accordance with the Act. System bonds. Accordingly, FCA treats augment existing regulations with System associations lend directly to and Member Investment Bonds and certain elements of the LCR and NSFR provide certain financially-related maturing System bonds the same under framework? If so, please explain. services to eligible borrowers. The the existing liquidity rules. Under the b. What specific modifications, if any, System’s lending activities to retail LCR, there are several different outflow should FCA consider making to the LCR borrowers, and its structure are different categories that Member Investment and NSFR ratios for application to than the activities and structure of other Bonds could fall into. To evaluate this System banks, and why? GSEs excluded from the FBRAs’ further, we are seeking comment to c. If FCA proposed to incorporate the definition of a financial sector entity.48 determine if we propose an LCR, what LCR and NSFR ratios as part of the CFP Unlike the other GSEs, most FCS the most appropriate factor for these requirement in § 615.5134(f), what types institutions lend directly to retail investment bonds would be. of modifications would be necessary to borrowers in a manner that is 27. If FCA proposes an LCR, what include elements of the ratios, without substantially similar to lenders that the would be an appropriate factor to apply being redundant or overly burdensome? FBRAs define as financial sector to the Member Investment Bonds and 24. If the FCA closely aligned the LCR entities. To evaluate this further, we are why? and NSFR to the FBRA’s regulations, seeking comment to determine if we and made only narrow modification to propose an LCR, should FCA treat Voluntary Advance Conditional accommodate the System’s unique System institutions as financial sector Payment Accounts structure, would the results enable FCS entities and apply the relevant factor As discussed above, FCA regulation banks to better withstand liquidity under the FBRAs’ definition. § 614.4175 allows member-borrowers to crises, or in the alternative, prove too 26. If FCA proposes an LCR, should make VACP on their loans and allows costly or burdensome? Please explain. FCA treat System institutions as institutions to set up involuntary 25. How would the implementation of financial sector entities and apply a 40 payment accounts for funds held to be an LCR and NSFR impact the System’s percent factor to the unfunded portion used for insurance premiums, taxes, and funding structure, lending activities, or of the associations’ direct note other reasons. A sudden surge in use of discount notes? commitments? member-borrower draws from VACP Outflows to Credit Facilities a. If so, what supports FCA treating accounts held at associations would System institutions as financial sector increase the funding required from the The LCR requires covered institutions entities and applying a 40 percent factor System bank to the affiliated association to hold liquidity against the undrawn on the unfunded commitments System at a time when market access is amount of a committed credit facility to banks have to associations? becoming impeded. To evaluate this a borrower. The outflow factor applied further, we are seeking comment to to this undrawn amount depends on the source of funding. If a facility has characteristics of determine if we propose an LCR, what type of credit facility (credit or liquidity both credit and liquidity facilities, the facility must the most appropriate factor for these facility) 46 and the type of borrower be classified as a liquidity facility. VACP accounts would be. 47 See 79 FR 61440, 61485 (October 10, 2014). 28. If FCA proposes an LCR, given the 46 Credit and liquidity facility are defined at 12 48 Other GSEs currently include the Federal Home CFR 329.3. A credit facility is a legally binding Loan Mortgage Corporation, the Federal National uniqueness of VACP accounts and the agreement to extend funds at a future date and Mortgage Association, and the Federal Home Loan ability of member-borrowers to generally includes working capital facilities (e.g., Bank System. As noted in footnote 3, supra, Farmer withdraw certain VACP account funds revolving line of credit used for general corporate Mac is a GSE that has a charter to operate a at their request, what would be an or working capital purposes). A liquidity facility is secondary market for certain types of loans a legally binding agreement to extend funds for originated by retail lenders. Farmer Mac is not a appropriate factor? purposes of refinancing the debt of a counterparty cooperative. Instead, it is a stockholder-owned, 29. If different factors should apply to when it is unable to obtain a primary or anticipated federally chartered corporation. different VACP accounts, please specify.

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High Quality Liquid Assets in LCR structure to meet an NSFR by DEPARTMENT OF TRANSPORTATION As discussed above, the FBRAs’ incorporating more long-term debt Federal Aviation Administration HQLA allowed in the LCR differ from issuances. To evaluate this further, we liquid assets allowed in FCA’s liquidity are seeking comment to determine if the 14 CFR Part 39 regulation. To evaluate this further, we NSFR is applicable to the System’s are seeking comment to determine if we funding structure, authorities, and mission. [Docket No. FAA–2021–0504; Project propose an LCR, should FCA consider Identifier AD–2020–01380–T] aligning FCA’s liquid assets with the 31. What core principles would be LCR’s HQLA. most important in FCA’s consideration RIN 2120–AA64 30. If FCA proposes an LCR, should of the NSFR? How does the cooperative we replace the current list of eligible and non-depository structure of the Airworthiness Directives; The Boeing instruments for the liquidity reserve System relate to the NSFR? Company Airplanes 32. How could NSFR metrics replace with a list that is more closely aligned AGENCY: any existing regulations, to ensure Federal Aviation to the FBRA’s HQLA instrument list Administration (FAA), DOT. (excluding common equities)? Please System banks have sufficiently stable ACTION: Notice of proposed rulemaking explain. liabilities (and regulatory capital) to (NPRM). a. Should FCA’s liquidity regulation support their assets and commitments over a one-year time horizon? continue to allow FCS banks to hold in SUMMARY: The FAA proposes to 33. Is it beneficial or detrimental to their liquidity reserve instruments that supersede Airworthiness Directive (AD) replace existing regulations with NSFR are currently excluded from the FBRA’s 2019–03–26, which applies to certain metrics and why? HLQA list? Which instruments and The Boeing Company Model 737–600, why? Other Considerations –700, –700C, –800, –900, and –900ER b. Should FCA allow FCS banks to series airplanes. AD 2019–03–26 The BCBS developed the Basel NSFR hold in their liquidity reserves requires modifying the passenger standard as a longer-term balance sheet instruments that are included in the service units (PSUs) and life vest panels funding metric to complement the Basel FBRAs HLQA list, but are currently by replacing the existing inboard LCR standard’s short-term liquidity excluded from FCA’s liquidity lanyard and installing two new lanyards stress metric. In developing the Basel regulation? Which instruments and on the outboard edge of the PSUs and NSFR standard, the FBRAs and their why? life vest panels; measuring the distance international counterparts in the BCBS between the hooks of the torsion spring Net Stable Funding Ratio Applicability considered a number of possible of the lanyard assembly; replacing funding metrics.49 The Basel guidance The BCBS introduced the NSFR to discrepant lanyard assemblies; and re- and FBRA’s NSFR regulation require banks to maintain a stable identifying serviceable lanyard incorporated consideration of these and funding profile to reduce the likelihood assemblies. Since the FAA issued AD other funding risks.50 that disruptions in a bank’s regular 2019–03–26, it has been determined that sources of funding will erode its 34. What other approaches or certain airplanes are listed in the wrong liquidity position that may increase its methodologies to measuring and configuration and certain PSUs have not risk of failure. Furthermore, during regulating liquidity not discussed above been correctly re-identified. This periods of financial stress, financial should FCA consider and why? proposed AD would retain the institutions without stable funding C. Other Comments Requested requirements of AD 2019–03–26, and, sources may be forced to monetize for certain airplanes, would require an We welcome comments on every assets in order to meet their obligations, inspection to determine if the re- aspect of this advance notice of which may drive down asset prices and identified PSU part number is correct, proposed rulemaking. We encourage compound liquidity issues. The NSFR and further re-identification if any interested person(s) to identify and implements a standardized quantitative necessary. The FAA is proposing this raise issues pertaining to other aspects metric designed to limit maturity AD to address the unsafe condition on of the liquidity framework for FCS mismatches and applies favorable these products. factors to a commercial bank’s primary banks and associations that we did not funding source—deposits. The NSFR address in this ANPRM. Please DATES: The FAA must receive comments requires a bank to maintain an amount designate such comments as ‘‘Other on this proposed AD by August 16, of available stable funding (ASF) that is Relevant Issues.’’ 2021. not less than the amount of its required * * * * * ADDRESSES: You may send comments, stable funding (RSF) on an ongoing Dated: June 10, 2021. using the procedures found in 14 CFR basis. ASF and RSF are calculated based 11.43 and 11.45, by any of the following Dale Aultman, on the liquidity characteristics of a methods: bank’s assets, derivative exposures, Secretary, Farm Credit Administration Board. • Federal eRulemaking Portal: Go to commitments, liabilities, and equity [FR Doc. 2021–13556 Filed 6–29–21; 8:45 am] https://www.regulations.gov. Follow the over a one-year time horizon. BILLING CODE 6705–01–P instructions for submitting comments. The NSFR and its corresponding • Fax: 202–493–2251. factors adopted by the FBRAs were 49 For example, the BCBS considered the • Mail: U.S. Department of established to measure and maintain the traditional ‘‘cash capital’’ measure, which compares Transportation, Docket Operations, the amount of a firm’s long-term and stable sources stability of the funding profiles of of funding to the amount of the firm’s illiquid M–30, West Building Ground Floor, banking organizations that rely assets. The BCBS found that this cash capital Room W12–140, 1200 New Jersey primarily on deposits. In contrast, FCS measure failed to account for material funding risks, Avenue SE, Washington, DC 20590. banks issue System-wide debt securities such as those related to off-balance sheet • Hand Delivery: Deliver to Mail commitments and certain on-balance sheet short- as the primary source for funding its term funding and lending mismatches. address above between 9 a.m. and 5 operations. The System would 50 See 86 FR 9120 (February 11, 2021). See supra p.m., Monday through Friday, except potentially need to modify its funding footnote 19. Federal holidays.

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