Interagency Guidance on Leveraged Lending
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17766 Federal Register / Vol. 78, No. 56 / Friday, March 22, 2013 / Notices § 1016.5(a)—Disclosure (institution)— third parties with respect to which the DEPARTMENT OF THE TREASURY Annual privacy notice to customers consumer wishes to opt out. requirement—A national bank or §§ 1016.7(h) and 1016(i)—Reporting Office of the Comptroller of the Federal savings association must (consumer)—Consumers may exercise Currency provide a clear and conspicuous notice continuing right to opt out—Consumer [Docket ID OCC–2011–0028] to customers that accurately reflects its may opt out at any time—A consumer privacy policies and practices not less may exercise the right to opt out at any FEDERAL RESERVE SYSTEM than annually during the continuation time. A consumer’s direction to opt out [OP–1438] of the customer relationship. is effective until the consumer revokes § 1016.8—Disclosure (institution)— it in writing or, if the consumer agrees, FEDERAL DEPOSIT INSURANCE Revised privacy notices—If a national electronically. When a customer CORPORATION bank or Federal savings association relationship terminates, the customer’s wishes to disclose information in a way opt out direction continues to apply. Interagency Guidance on Leveraged that is inconsistent with the notices Type of Review: Extension of a Lending previously given to a consumer, the currently approved collection. national bank or Federal savings AGENCY: The Office of the Comptroller Affected Public: Businesses or other of the Currency (OCC), Department of association must provide consumers for-profit; individuals. with a clear and conspicuous revised the Treasury; Board of Governors of the Estimated Annual Number of notice of the national bank’s or Federal Federal Reserve System (Board); and the Institution Respondents: Initial Notice, savings association’s policies and Federal Deposit Insurance Corporation 3; Annual Notice and Change in Terms, procedures and a new opt out notice. (FDIC). 1,793; Opt-out Notice, 897. § 1016.7(a)—Disclosure (institution)— ACTION: Final guidance. Form of opt out notice to consumers; opt Estimated Average Time per Response per Institution: Initial Notice, 80 hours; SUMMARY: The OCC, Board, and the out methods—Form of opt out notice— FDIC (collectively, the ‘‘agencies’’) are If a national bank or Federal savings Annual Notice and Change in Terms, 8 hours; Opt-out Notice, 8 hours. issuing final guidance on leveraged association is required to provide an lending. This guidance outlines for opt-out notice under § 1016.10(a), it Estimated Subtotal Annual Burden Hours for Institutions: 21,760 hours. agency-supervised institutions high- must provide a clear and conspicuous level principles related to safe-and- Estimated Annual Number of notice to each of its consumers that sound leveraged lending activities, Consumer Respondents: 2,526,802. accurately explains the right to opt out including underwriting considerations, under that section. The notice must Estimated Average Time per assessing and documenting enterprise state: Consumer Response: 0.25 hours. • value, risk management expectations for That the national bank or Federal Estimated Subtotal Annual Burden credits awaiting distribution, stress- savings association discloses or reserves Hours for Consumers: 631,701 hours. testing expectations, pipeline portfolio the right to disclose nonpublic personal Estimated Total Annual Burden management, and risk management information about its consumer to a Hours: 653,461 hours. expectations for exposures held by the nonaffiliated third party; • Comments: The OCC issued a 60-day institution. This guidance applies to all That the consumer has the right to Federal Register notice on January 14, financial institutions supervised by the opt out of that disclosure; and • 2013. 78 FR 2720. No comments were OCC, Board, and FDIC that engage in A reasonable means by which the received. Comments continue to be leveraged lending activities. The consumer may exercise the opt out invited on: number of community banks with right. substantial involvement in leveraged A national bank or Federal savings (a) Whether the collection of lending is small; therefore, the agencies association provides a reasonable means information is necessary for the proper generally expect community banks to be to exercise an opt out right if it: performance of the functions of the • Designates check-off boxes on the OCC, including whether the information largely unaffected by this guidance. relevant forms with the opt out notice; has practical utility; DATES: This guidance is effective on • Includes a reply form with the opt (b) The accuracy of the OCC’s March 22, 2013. The compliance date out notice; estimate of the information collection for this guidance is May 21, 2013. • Provides electronic means to opt burden; FOR FURTHER INFORMATION CONTACT: out; or (c) Ways to enhance the quality, OCC: Louise A. Francis, Commercial • Provides a toll-free number to opt utility, and clarity of the information to Credit Technical Expert, (202) 649– out. be collected; 6670, louise.francis@occ.treas.gov; or §§ 1016.10(a)(2) and 1016(c)— (d) Ways to minimize the burden of Kevin Korzeniewski, Attorney, Consumers must take affirmative the collection on respondents, including Legislative and Regulatory Activities actions to exercise their rights to prevent through the use of automated collection Division, (202) 649–5490, 400 7th Street financial institutions from sharing their techniques or other forms of information SW., MS 7W–2, Washington, DC 20219. information with nonaffiliated parties— technology; and Board: Carmen Holly, Supervisory Financial Analyst, Policy Section, (202) • (e) Estimates of capital or start-up Opt out—Consumers may direct costs and costs of operation, 973–6122, carmen.d.holly@frb.gov; that the national bank or Federal savings maintenance, and purchase of services Robert Cote, Senior Supervisory association not disclose nonpublic to provide information. Financial Analyst, Risk Section, (202) personal information about them to a 452–3354, robert.f.cote@frb.gov; or nonaffiliated third party, other than Dated: March 18, 2013. Benjamin W. McDonough, Senior permitted by §§ 1016.13–1016.15. Michele Meyer, Counsel, Legal Division, (202) 452– • Partial opt out—Consumer also may Assistant Director, Legislative and Regulatory 2036, benjamin.w.mcdonough@frb.gov; exercise partial opt out rights by Activities Division. Board of Governors of the Federal selecting certain nonpublic personal [FR Doc. 2013–06585 Filed 3–21–13; 8:45 am] Reserve System, 20th and C Streets information or certain nonaffiliated BILLING CODE 4810–33–P NW., Washington, DC 20551. VerDate Mar<15>2010 18:27 Mar 21, 2013 Jkt 229001 PO 00000 Frm 00140 Fmt 4703 Sfmt 4703 E:\FR\FM\22MRN1.SGM 22MRN1 srobinson on DSK4SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 56 / Friday, March 22, 2013 / Notices 17767 FDIC: Thomas F. Lyons, Senior pipelines. Financial institutions A. Terminology Examination Specialist, Division of Risk unprepared for such stressful events and One purpose of the final guidance is Management Supervision, (202) 898– circumstances can suffer acute threats to to update and replace guidance issued 6850, tlyons@fdic.gov; or Gregory S. their financial condition and viability. in April 2001, titled ‘‘Interagency Feder, Counsel, Legal Division, (202) This final guidance is intended to be Guidance on Leveraged Financing’’ 898–8724, gfeder@fdic.gov; 550 17th consistent with sound industry (2001 guidance). The 2001 guidance Street NW., Washington, DC 20429. practices and to expand on recent covered broad risk management issues 3 SUPPLEMENTARY INFORMATION: interagency issuances on stress-testing. associated with leveraged finance I. Background II. Discussion of Public Comments activities. This final guidance focuses on leveraged lending activities On March 30, 2012, the agencies Received conducted by financial institutions. requested public comment on the joint The agencies received 16 comment Therefore, to promote clarity and Proposed Guidance on Leveraged letters on the proposed guidance. consistency, the agencies have used the Lending (the proposed guidance) with Comments were submitted by bank term ‘‘leveraged lending’’ in the final the comment period closing on June 8, holding companies, commercial banks, guidance in place of all references to 2012.1 The agencies have reviewed the financial trade associations, financial ‘‘leveraged finance’’ that appeared in the public comments, and are now issuing advisory firms, and individuals. proposed guidance. This change is final guidance (final guidance) that Generally, most comments expressed intended to focus the applicability and includes certain modifications support for the proposed guidance; scope of the final guidance on specific discussed in more detail in section II of however, several comments types of leveraged lending transactions; this SUPPLEMENTARY INFORMATION. recommended changes to and those leveraged loans originated by As addressed in the final guidance, clarification of certain provisions in the financial institutions. the agencies expect financial proposed guidance. institutions to properly evaluate and The comments highlighted the B. Scope monitor underwritten credit risks in following as primary issues of concern leveraged loans, to understand the effect Several comment letters expressed or interest or areas that could benefit concern about the potential effect of the of changes in borrowers’ enterprise from further explanation: values on credit portfolio