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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules
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Timing of feedback. FHFA intends to provide substantive feedback to an Enterprise on an informationally complete resolution plan within 12
months of receipt. The proposed rule would permit FHFA to extend that timeframe if extenuating circumstances so require. FHFA wishes to provide timely feedback but must take the time necessary to review each plan appropriately. Given that FHFA has proposed to require each Enterprise to submit resolution plans every two years, receipt of feedback one year after submission of a plan would provide the Enterprise another year to incorporate that feedback into its next resolution plan.
If FHFA provides an Enterprise a notice of deficiency, the Enterprise must submit appropriate revisions to its prior plan within a timeframe established by the Agency. Procedures for submitting revised resolution plans and taking other corrective actions are addressed below.
E. Corrective Processes; Significance as a Prudential Standard The proposed rule would require an Enterprise that receives notification from FHFA of any deficiency in its resolution plan to submit a revised resolution plan to FHFA that addresses the deficiency. The proposed rule would also identify the resolution planning rule, in its entirety, as a prudential standard within the meaning of 12 U.S.C. 4513b section 4513b and for purposes of 12 CFR part 1236. The interplay of these two elements of the proposed rule is described below.
Section 4513bb authorizes FHFA to establish prudential management and operations standards for its regulated entities and provides that if a regulated entity fails to meet a standard, FHFA
may require submission of a corrective plan specifying actions that the regulated entity will take to correct the deficiency.49 To implement section 4513b, FHFA has adopted a prudential management and operations standards PMOS regulation, at 12 CFR part 1236.
That regulation addresses FHFA
determinations that a regulated entity has failed to meet a standard and provides that FHFA may base that determination on an examination, inspection, or any other information.50
The PMOS regulation codifies FHFAs authority to permit a regulated entity to rule, including the Enterprises methodology and process for identification of core business lines, resolution planning strategic analysis, and corporate governance related to resolution planning.
49 12 U.S.C. 4513bb2B.
50 12 CFR 1236.4a.

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submit a PMOS corrective plan in conjunction with other required submissions, such as a capital restoration plan or a response to an examination report.51 If a regulated entity fails to submit a corrective plan or fails to implement an approved corrective plan, the PMOS regulation provides for an FHFA order to correct the deficiency or to undertake additional corrective or remedial measures as FHFA may require.
FHFA has determined that it is legally appropriate and would be sound policy to identify its resolution planning rule as a prudential standard. Identifying the rule as a prudential standard provides FHFA access to section 4513b corrective measures, if necessary, to address deficiencies in a resolution plan, an Enterprises failure to take actions set forth in its resolution plan that FHFA
agrees could facilitate the Enterprises rapid and orderly resolution, or concerns with an Enterprises resolution planning process.52 Section 4513b corrective measures are in line with FHFAs approach to resolution planning, which will be iterative and involve dialogue between an Enterprise and FHFA. A corrective approach to encourage or direct Enterprise managements attention to concerns of high priority to FHFA could in some cases be more constructive and more conducive to improvements in a resolution plan or the Enterprise planning process than an enforcement approach.
51 Id.,
1236.4c2ii.
determination reflects, among other things: 1 Safety and Soundness Act provisions that require FHFA to act as receiver for an Enterprise, should receivership be necessary; 2
Requirements for FHFA, as receiver, to establish an LLRE to continue the business of an Enterprise in resolution; 3 Requirements for the receiver to pay all valid obligations of the Enterprise, pursuant to the receivers determination of claims; and, 4
clarifies the absence of any U.S. government support for the Enterprises or FHFA when acting as receiver. Prudential management and operation of an Enterprise and its successor LLRE during the resolution process will require advance planning.
Also of note, FHFA is directed by statute to establish prudential management and operations standards on topics that would have a direct and critical bearing on an Enterprises rapid and orderly resolution, such as: 1 The adequacy of management information systems; 2 Adequacy and maintenance of liquidity and reserves; 3
Overall risk management processes, including processes to identify, measure, monitor, and control material risks and for business resumption or continuation for all major systems to protect against disruptive events; 4 Management of counterparty risk; and, 5 Maintenance of adequate records to enable FHFA to determine the financial condition of an Enterprise. See 12 U.S.C.
4513ba1, 4, 8, 9, and 10. It would be possible to address resolution planning in the context of these and other required standards, but it would be more coherent to address it in a single, more focused, standard.
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Because the resolution planning standard would be established as a regulation, FHFA could also bring an enforcement action if appropriate grounds existed and FHFA determined such action to be necessary.53 Under its general enforcement authority, FHFA
may order an Enterprise to cease and desist from a violation of law, which would include the final resolution planning rule, and may require an Enterprise to take other appropriate corrective action, including by implementing a plan to correct a violation of the final resolution planning rule. FHFA also may impose a civil money penalty for a violation of a final resolution planning rule.
Procedurally, the proposed rule permits FHFA to deem a determination of a deficiency in a resolution plan or an Enterprises failure to undertake actions or changes that FHFA identified in any notice to an Enterprise following review of a resolution plan to be the failure of a prudential standard and to deem the Enterprises submission of a revised resolution plan in accordance with any final resolution planning rule to be a corrective plan for purposes of the PMOS regulation. The proposed rule states that FHFA may find an Enterprise to have failed the resolution planning standard if the Enterprise does not undertake any planned action or change set forth by the Enterprise, and which FHFA identified as necessary in its notice to the Enterprise following review of the resolution plan.
In such cases, FHFA could provide the Enterprise a notice of failure in accordance with the PMOS regulation, and would inform the Enterprise of the need to submit a PMOS corrective plan or, a revised resolution plan that is deemed to be a PMOS corrective plan.
Within 90 days, absent FHFA
establishing a longer or shorter period, the Enterprise would be required to submit a revised resolution plan that addresses: 1 The deficiencies identified and discusses revisions to the plan to address the deficiencies; 2 Any changes to the Enterprises business operations and corporate structure the Enterprise proposes to undertake to address the deficiencies, and a timeline for completing them; and, 3 Why the Enterprise believes the revised resolution plan is feasible and would facilitate its rapid and orderly resolution by FHFA, as receiver.
If a regulated entity fails to submit a corrective plan which may be a revised 53 See 12 U.S.C. 4513ba authorizing FHFA to establish standards as regulations and 12 U.S.C.
4631a1 authorizing FHFA to issue a cease-anddesist order for, among other things, violating a regulation.

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