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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules
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required and prohibited assumptions governing development of the resolution plan.
FHFA notes that the DFA section 165
rule requires bank holding companies to identify material entities in the public sections of their resolution plans.43
FHFA has not proposed a similar requirement, considering the corporate structures of the Enterprises.
Specifically, as defined in the DFA
section 165 rule, a material entity is a subsidiary or foreign office of the bank holding company that is significant to the activities of an identified critical operation or core business line, or is financially or operationally significant to the resolution of the bank holding company. 44 Were FHFA to adopt a similar requirement and definition, each Enterprise would identify one material entityCSS.
Based on the DFA section 165 rule definition of material entity, FHFA
does not view that rules requirement to identify such entities in the public section of a bank holding companys resolution plan as intending to require the company to identify its major counterparties or third-party providers.
Only entities that are significant to the activities of an identified critical operation or core business line or financially or operationally significant to the bank holding companys resolution and that are within the companys organizational structure would be required to be identified in the public section of the bank holding companys resolution plan.
Because FHFA sees little, if any value, in requiring each Enterprise to identify CSS as its single material entity, FHFA has not proposed a similar requirement for the public section of an Enterprise resolution plan.45 FHFA
requests comment, however, on whether an Enterprise should be required to identify significant third-party providers and major counterparties in the public section of its resolution plan.
FHFA expects to publish the public section of each Enterprises resolution plan on its website. If published as proposed, the public section would 43 12 CFR 243.11c2i. Material entity is differently defined but appears to be similarly applied in the FDIC IDI rule, id., 12 CFR
360.10b8.
44 Id., 12 CFR 243.2.
45 FHFA also notes that resolution of CSS is not addressed by the proposed resolution planning rule, and the proposed rule would not require CSS to develop a resolution plan. On the other hand, as an affiliate of an Enterprise, CSS could be within FHFA resolution authority. FHFA expects to address these aspects of its supervision of CSS at a different time.

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make clear the assumptions pursuant to which the Enterprise drafted its resolution plan, including the assumption that no government support will be available to prevent the failure of an Enterprise or to fund its resolution. It would indicate the extent to which potential claims by creditors and counterparties against the Enterprise might be satisfied in a resolution, and priority of those claims.
By providing the public with greater transparency about the satisfaction of potential claims and the manner in which those claims might be satisfied, FHFA believes publishing the public section of each Enterprises resolution plan would foster market discipline by making clear to investors in Enterpriseguaranteed MBS and Enterprise debt that they should no longer rely on an implicit government guarantee and that they should price the risk of these investments accordingly. FHFA may also publish other information about Enterprise resolution planning, which may include its high-level assessments of the Enterprises resolution plans.
With regard to the first resolution plans the Enterprises submit, however, it is plausible FHFA would not publish the public section, but may publish information based on it or drawn from it on FHFAs website or in its Annual Report to Congress. This approach recognizes that the Enterprises and FHFA will learn from the process of developing and reviewing resolution plans, and balances the desire for transparency and market awareness of Enterprise resolution plans with the desire to permit improvement in resolution plans before the public sections are published.
All material that is not in the public section would be presumed to be confidential, and the proposed rule provides that information contained in the confidential section of a resolution plan would be treated as confidential in line with applicable law. The proposed rule would provide a process for an Enterprise to request confidential treatment of information in a resolution plan or any related materials under 5
U.S.C. 552b4, 12 CFR part 1202
Freedom of Information Act, and 12
CFR part 1214 availability of nonpublic information, and states that FHFA will determine confidentiality in accordance with applicable exemptions under the Freedom of Information Act, FHFAs rule implementing that Act, and FHFAs rule on the availability of nonpublic information and its statutory requirements and authorities.
Preparation of the initial resolution plan. FHFA recognizes the burden associated with developing an initial
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resolution plan, including establishing necessary processes, procedures, and systems. Although FHFA proposes to require an Enterprises initial resolution plan to include all informational elements set forth in the proposal, FHFA expects the process of submission and review of the initial resolution plan to involve dialogue with each Enterprise. In developing its initial resolution plan, each Enterprise should focus on the key elements of the resolution plan, including identifying core business lines and associated operations, services, functions, and supports, developing a robust strategic analysis, and identifying and describing the interconnections and interdependencies among the Enterprise, its affiliates, and its thirdparty providers.
Incorporation by reference of material from prior resolution plans. FHFA
proposes to permit an Enterprise to incorporate by reference information from a prior resolution plan submitted to FHFA, provided that the information remains accurate in all material respects. The incorporating resolution plan would be required to clearly identify the information that is being incorporated as well as the resolution plan in which it was originally contained and its specific location in that plan.
D. FHFA Review and Feedback, Plan Deficiencies, and the Credible Standard FHFA review and feedback. After a resolution plan is submitted, FHFA
would review it and provide feedback to the Enterprise. Feedback could range from informal discussion with an Enterprise to an FHFA determination of, and notice to the Enterprise identifying, deficiencies in the resolution plan as submitted. FHFA feedback could address any planned actions or changes set forth by the Enterprise that FHFA
agrees could facilitate a rapid and orderly resolution, or priority or timing of actions or changes to be undertaken by the Enterprise. After FHFA and Enterprise experience over the first few resolution plan submission and review cycles, it may also be appropriate for FHFA to share more general lessonslearned feedback on meeting rule requirements and developing a resolution plan, or for FHFA to develop and publish responses to frequentlyasked-questions.
FHFA expects that it would first assess submitted resolution plans for substantive completeness. If additional information is necessary in order for FHFA to review a plan, the Enterprise would receive notice and be provided
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