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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules resolution. The Enterprises strategic analysis also should consider the capital support that will be needed by an LLRE
during its life and when its status as a limited-life regulated entity ends to maintain market confidence.
The strategic analysis should set forth the Enterprises strategy in the event of a failure or discontinuation of a core business line, including an associated operation, service, function, or support that is critical to a core business line and the actions that could be taken to prevent or mitigate any adverse effects of such failure or discontinuation on the national housing finance markets. This would include, if appropriate, the Enterprises strategy for continuing an associated operation, service, function or support provided by an affiliate or the third-party provider that has failed.
The ability of each affiliate or third party providing operations, services, functions or supports to function during the Enterprises resolution should be assessed.
The strategic analysis should describe how and the extent to which claims against the Enterprise by the Enterprises creditors and counterparties would be satisfied in accordance with FHFAs rule setting forth the priority of expenses and unsecured claims set forth at 12 CFR 1237.9, consistent with continuation of the Enterprises core business lines by an LLRE. Another element to be included in a strategic analysis is the Enterprises strategy for transferring or unwinding qualified financial contracts, consistent with applicable statutory requirements.42
It is likely that each Enterprise will identify potential material weaknesses or impediments to rapid and orderly resolution as conceived in its plan. The Enterprises strategic analysis must identify and describe those weaknesses or impediments, and any actions or steps the Enterprise has taken or proposes to take to address them. There may be overlap between these planned actions and other planned actions included in the strategic analysis. The Enterprise should identify actions or steps that other market participants could take to address the identified weaknesses or impediments. The Enterprise would be required to include a timeline for such remedial or other mitigating actions that are under its control.
Finally, FHFA proposes that each Enterprise describe in its strategic analysis the processes the Enterprise employs to determine the current 42 Qualified financial contracts are defined and the requirements for their transfer or unwinding are set forth at 12 U.S.C. 4617d8 through 11.

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market values and marketability of its core business lines and material asset holdings, as well as to assess the feasibility of the Enterprises plans including timeframes for executing any sales, divestitures, restructurings, recapitalizations, or other similar actions contemplated in the Enterprises resolution plan. The strategic analysis would include impact of such actions on the value, funding, and operations of the Enterprise and its core business lines.
Description of corporate governance related to resolution planning. The proposed rule would require each Enterprises resolution plan to include information on its corporate governance structure related to resolution planning.
Each Enterprise would be required to describe how resolution planning is integrated into its corporate governance structure and processes; the Enterprises methodology and process for identifying core business lines; Enterprise policies, procedures, and internal controls governing preparation and approval of its resolution plan; and, the nature, extent, and frequency of reporting to Enterprise senior executive officers and the board of directors regarding the development, maintenance, and implementation of the Enterprises resolution plan. Each Enterprise resolution plan would include the name and position of the senior management official primarily responsible for overseeing those functions and for compliance with a final resolution planning rule. The Enterprises strategic analysis should address the corporate governance framework that supports determination of the specific actions to be taken to facilitate a rapid and orderly resolution as the Enterprise is becoming in danger of default and the senior management officials responsible for making those determinations and undertaking those actions.
Each resolution plan would be required to describe any contingency planning or other similar exercise that the Enterprise has conducted since submitting its prior resolution plan to assess the viability of or improve its resolution plan. The proposed rule would require each Enterprise to identify and describe the relevant risk measures it uses to report credit risk exposures both internally to its senior management and board of directors as well as any relevant risk measures reported externally to investors or to FHFA.
Organizational structure, interconnections, and related information. Under the proposed rule, each Enterprises resolution plan would include information regarding the
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Enterprises organizational structure, including a list of all affiliates and trusts, the percentage of voting and nonvoting equity of each listed legal entity, and the location, jurisdiction of incorporation, licensing, and key management associate with each material legal entity identified. Where information required to be provided about a legal entity is identical across multiple legal entities, that information may be presented as applicable to a group of identified legal entities.
In its resolution plan, each Enterprise would be required to provide information about interconnections, mapping the operations, services, functions, and supports associated with each of its core business lines. Mapping should identify the entity, including any third-party providers, responsible for conducting each associated operation or service that supports the functioning of each core business line as well as the Enterprises material asset holdings.
Mapping should identify liabilities related to such operations, services, and core business lines. Such mapping should show the interconnections between core business lines to be transferred to the LLRE and any operations anticipated to be left in the receivership estate.
Enterprise resolution plans would be required to include an unconsolidated balance sheet for the Enterprise and a consolidating schedule for all material entities that are subject to consolidation by the Enterprise. Each Enterprise would be required to describe the material components of its liabilities, mapped to core business lines, identifying types and amounts of shortterm and long-term liabilities, secured and unsecured liabilities, and subordinated liabilities, as well as processes used by the Enterprise to determine to whom collateral has been pledged collateral, the identity of the entity or person that holds such collateral, and the jurisdiction where collateral is located and the jurisdiction in which the security interest in collateral is enforceable against the Enterprise, if different from the location.
Information on material off-balance sheet exposures, practices related to the booking of trading and derivatives activities, and hedges would be required and a description of the process undertaken by the Enterprise to establish exposure limits.
Each Enterprise would be required to include information about third-party providers with which the Enterprise has significant business connections, including descriptions of the business connection such as the operation, service, function, or support associated
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