12 U.S.C. § 5465: Operations of designated…

Summary

Allows the Federal Reserve Board to let a Federal Reserve Bank give a designated financial market utility (a big system that helps clear, settle, or net payments) the same kinds of accounts and services that banks get, and to pay interest on money it keeps there, all under any rules the Board sets. The Fed can also allow a Reserve Bank to lend to the utility in unusual or emergency situations, but only if a majority of the Federal Reserve Board agrees, after consulting the Secretary, and if the utility shows it cannot get credit from other banks. The Board can also change or remove reserve requirements that would apply to the utility. The utility must tell its Supervisory Agency (its federal regulator) 60 days before making any change that could meaningfully raise risks. The notice must describe the change, its risk effects, and how the utility will manage those risks. The regulator can ask for more information and must object within 60 days after getting the notice (or after getting any extra info). If the regulator objects, the utility cannot go ahead. The regulator can extend review by another 60 days for complex or new issues. In an emergency, the utility may act first but must tell the regulator within 24 hours, explain the emergency and why the change was needed, and the regulator can require the change be changed or reversed. The regulator must send the Federal Reserve Board copies of all notices and consult the Board before deciding.

Title 12, §5465

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(a)Federal Reserve account and services

The Board of Governors may authorize a Federal Reserve Bank to establish and maintain an account for a designated financial market utility and provide the services listed in section 11A(b) of the Federal Reserve Act (12 U.S.C. 248a(b)) and deposit accounts under the first undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 342) to the designated financial market utility that the Federal Reserve Bank is authorized under the Federal Reserve Act [12 U.S.C. 221 et seq.] to provide to a depository institution, subject to any applicable rules, orders, standards, or guidelines prescribed by the Board of Governors.

(b)Advances

The Board of Governors may authorize a Federal Reserve bank under section 10B of the Federal Reserve Act (12 U.S.C. 347b) to provide to a designated financial market utility discount and borrowing privileges only in unusual or exigent circumstances, upon the affirmative vote of a majority of the Board of Governors then serving (or such other number in accordance with the provisions of section 11(r)(2) of the Federal Reserve Act (12 U.S.C. 248(r)(2)) after consultation with the Secretary, and upon a showing by the designated financial market utility that it is unable to secure adequate credit accommodations from other banking institutions. All such discounts and borrowing privileges shall be subject to such other limitations, restrictions, and regulations as the Board of Governors may prescribe. Access to discount and borrowing privileges under section 10B of the Federal Reserve Act as authorized in this section does not require a designated financial market utility to be or become a bank or bank holding company.

(c)Earnings on Federal Reserve balances

A Federal Reserve Bank may pay earnings on balances maintained by or on behalf of a designated financial market utility in the same manner and to the same extent as the Federal Reserve Bank may pay earnings to a depository institution under the Federal Reserve Act [12 U.S.C. 221 et seq.], subject to any applicable rules, orders, standards, or guidelines prescribed by the Board of Governors.

(d)Reserve requirements

The Board of Governors may exempt a designated financial market utility from, or modify any, reserve requirements under section 19 of the Federal Reserve Act (12 U.S.C. 461) applicable to a designated financial market utility.

(e)Changes to rules, procedures, or operations

(1)Advance notice

(A)Advance notice of proposed changes required

A designated financial market utility shall provide notice 60 days in advance notice to its Supervisory Agency of any proposed change to its rules, procedures, or operations that could, as defined in rules of each Supervisory Agency, materially affect, the nature or level of risks presented by the designated financial market utility.

(B)Terms and standards prescribed by the Supervisory Agencies

Each Supervisory Agency, in consultation with the Board of Governors, shall prescribe regulations that define and describe the standards for determining when notice is required to be provided under subparagraph (A).

(C)Contents of notice

The notice of a proposed change shall describe—

(i)the nature of the change and expected effects on risks to the designated financial market utility, its participants, or the market; and

(ii)how the designated financial market utility plans to manage any identified risks.

(D)Additional information

The Supervisory Agency may require a designated financial market utility to provide any information necessary to assess the effect the proposed change would have on the nature or level of risks associated with the designated financial market utility’s payment, clearing, or settlement activities and the sufficiency of any proposed risk management techniques.

(E)Notice of objection

The Supervisory Agency shall notify the designated financial market utility of any objection regarding the proposed change within 60 days from the later of— (i)

(ii)the date any further information requested for consideration of the notice is received.

(F)Change not allowed if objection

A designated financial market utility shall not implement a change to which the Supervisory Agency has an objection.

(G)Change allowed if no objection within 60 days

A designated financial market utility may implement a change if it has not received an objection to the proposed change within 60 days of the later of— (i)

(ii)the date the Supervisory Agency receives any further information it requests for consideration of the notice.

(H)Review extension for novel or complex issues

The Supervisory Agency may, during the 60-day review period, extend the review period for an additional 60 days for proposed changes that raise novel or complex issues, subject to the Supervisory Agency providing the designated financial market utility with prompt written notice of the extension. Any extension under this subparagraph will extend the time periods under subparagraphs (E) and (G).

(I)Change allowed earlier if notified of no objection

A designated financial market utility may implement a change in less than 60 days from the date of receipt of the notice of proposed change by the Supervisory Agency, or the date the Supervisory Agency receives any further information it requested, if the Supervisory Agency notifies the designated financial market utility in writing that it does not object to the proposed change and authorizes the designated financial market utility to implement the change on an earlier date, subject to any conditions imposed by the Supervisory Agency.

(2)Emergency changes

(A)In general

A designated financial market utility may implement a change that would otherwise require advance notice under this subsection if it determines that—

(i)an emergency exists; and

(ii)immediate implementation of the change is necessary for the designated financial market utility to continue to provide its services in a safe and sound manner.

(B)Notice required within 24 hours

The designated financial market utility shall provide notice of any such emergency change to its Supervisory Agency, as soon as practicable, which shall be no later than 24 hours after implementation of the change.

(C)Contents of emergency notice

In addition to the information required for changes requiring advance notice, the notice of an emergency change shall describe—

(i)the nature of the emergency; and

(ii)the reason the change was necessary for the designated financial market utility to continue to provide its services in a safe and sound manner.

(D)Modification or rescission of change may be required

The Supervisory Agency may require modification or rescission of the change if it finds that the change is not consistent with the purposes of this Act or any applicable rules, orders, or standards prescribed under section 5464(a) of this title.

(3)Copying the Board of Governors

The Supervisory Agency shall provide the Board of Governors concurrently with a complete copy of any notice, request, or other information it issues, submits, or receives under this subsection.

(4)Consultation with Board of Governors

Before taking any action on, or completing its review of, a change proposed by a designated financial market utility, the Supervisory Agency shall consult with the Board of Governors.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Federal Reserve Act, referred to in subsecs. (a) and (c), is act Dec. 23, 1913, ch. 6, 38 Stat. 251, which is classified principally to chapter 3 (§ 221 et seq.) of this title. For complete classification of this Act to the Code, see

References in Text

note set out under section 226 of this title and Tables. This Act, referred to in subsec. (e)(2)(D), is Pub. L. 111–203, July 21, 2010, 124 Stat. 1376, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, which enacted this chapter and chapters 108 (§ 8201 et seq.) and 109 (§ 8301 et seq.) of Title 15, Commerce and Trade, and enacted, amended, and repealed numerous other sections and notes in the Code. For complete classification of this Act to the Code, see

Short Title

note set out under section 5301 of this title and Tables.

§5465 Operations of Designated Financial Market Utilities

Summary

Title 12, §5465

Notes & Related Subsidiaries

Editorial Notes

References in Text

References in Text

Short Title

Citations & Metadata