Title 12, Banks and BankingRelease 119-110

§5464 Standards for Systemically Important Financial Market Utilities and Payment, Clearing, or Settlement Activities

Title 12 › CHAPTER 53 — WALL STREET REFORM AND CONSUMER PROTECTION › SUBCHAPTER IV — PAYMENT, CLEARING, AND SETTLEMENT SUPERVISION › § 5464

Last updated Sep 23, 2026|Official source

Summary

The Board of Governors must write rules that manage risks for big payment, clearing, and settlement systems and for certain related activities by financial firms. The Board must work with the Council and the agencies that supervise those firms, and it must consider international rules and existing standards. The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) can also set rules for the firms they supervise. If the Board finds those CFTC or SEC rules are not enough, the Board must send a written explanation saying which rules fall short and why. The CFTC or SEC then has 60 days to object with a detailed reply or to say what it will do. If at least two‑thirds of the Council members agree, the Council can require the CFTC or SEC to make stronger risk rules. The risk rules must aim to strengthen risk management, protect safety and soundness, cut systemic risk, and support the whole financial system. They can cover things like written risk policies, margin and collateral, default procedures, timely clearing and settlement, capital and other financial resources, and any other areas needed to meet those goals. The rules may set a threshold for when a firm must follow them. Designated financial market utilities and firms doing designated activities must follow the applicable rules. The Board and Council cannot take over certain CFTC or SEC powers, such as deciding which swaps must be cleared, exemptions from mandatory clearing, or rules about trade reporting and execution.

Full Legal Text

Title 12, §5464

Banks and Banking, Source: USLM XML via OLRC

(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 Supervisory Agencies, shall prescribe risk management standards, taking into consideration relevant international standards and existing prudential requirements, governing—

(A)the operations related to the payment, clearing, and settlement activities of designated 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 Commission and the Commission may each prescribe regulations, in consultation with the Council and the Board of Governors, containing risk management standards, taking into consideration relevant international standards and existing prudential requirements, for those designated clearing entities and financial institutions engaged in designated activities for which each is the Supervisory Agency or the appropriate financial regulator, 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 requirements prescribed pursuant to subparagraph (A)) with respect to designated clearing entities and financial institutions engaged in designated activities for which the Commission or the Commodity Futures Trading Commission is the Supervisory Agency or the appropriate financial regulator are insufficient 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 Governors under subparagraph (B) shall be provided in writing to the Commodity Futures Trading Commission or the Commission, as applicable, and the Council, and shall explain why existing prudential requirements, considered as a whole, are insufficient to ensure that the operations and activities of the designated clearing entities or the activities of financial institutions described in subparagraph (B) will not pose significant liquidity, credit, operational, or other risks to the financial markets or to the financial stability of the United States. The Board of Governors’ determination shall contain a detailed analysis supporting its findings and identify the specific prudential requirements that are insufficient.

(D)CFTC and Commission response

The Commodity Futures Trading Commission 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 requirements are sufficient, or submit an explanation to the Council and the Board of Governors describing the actions to be taken in response to the Board of Governors’ determination.

(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 Commission, as applicable, to prescribe such risk management standards as the Council determines is necessary to address the specific prudential requirements that are determined to be insufficient.”

(b)Objectives and principles

The objectives and principles for the risk management 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 financial 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 policies and procedures;

(4)the ability to complete timely clearing and settlement of financial transactions;

(5)capital and financial resource requirements for designated financial market utilities; 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 subchapter shall be construed to permit the Council or the Board of Governors to take any action or exercise any authority granted to the Commodity Futures Trading Commission under section 2(h) of title 7 or the Securities and Exchange 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, category, type, or class of swaps that a designated clearing entity may accept for clearing;

(2)the determination that any group, category, type, or class of swaps shall be subject to the mandatory clearing requirement of section 2(h)(1) of title 7 or section 78c–3(a)(1) of title 15;

(3)the determination that any person is exempt from the mandatory clearing requirement 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 appropriate, establish a threshold as to the level or significance of engagement in the activity at which a financial institution will become subject to the standards with respect to that activity.

(f)Compliance required

Designated financial market utilities and financial institutions subject to the standards prescribed under subsection (a) for a designated activity shall conduct their operations in compliance with the applicable risk management standards.

Reference

Citations & Metadata

Citation

12 U.S.C. § 5464

Title 12, Banks and Banking

Last Updated

Sep 23, 2026

Release point: 119-110