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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules
an opportunity to submit the missing information, generally within 30 days.
An Enterprise that does not receive a notice that additional information is needed may assume that FHFA has accepted the plan as substantially complete; however this does not prevent FHFA from making reasonable requests for additional information it believes would be helpful to understand the Enterprises resolution plan in the course of its review.
FHFA believes a completeness review would improve the efficiency and effectiveness of the review process, in particular because it establishes a process for obtaining missing information outside of the deficiency identification process discussed below. FHFA also observes, however, that a resolution plan that is missing substantial information, or as to which an Enterprise does not timely provide missing information, may warrant a deficiency notice.
FHFA notice following review;
determination of deficiencies. The proposed rule would establish a process for FHFA to identify deficiencies in an Enterprises resolution plan and provide notice to the Enterprise identifying deficiencies or affirming that there were no deficiencies. For this purpose, the proposed rule would define deficiency as an aspect of the Enterprises resolution plan that FHFA
determines presents a weakness that, individually or in conjunction with other aspects, could undermine the feasibility of the Enterprises resolution plan. For example, a deficiency may be that the nature, extent, or frequency an Enterprises reporting on resolution planning to the board of directors is insufficient or that an Enterprises contracts with third-party providers do not clearly address continuity of services or operations after an LLRE is established as successor to the Enterprise. An Enterprise receiving a notice of deficiency would be required to submit a revised resolution plan that corrects the deficiency, which may include planned actions or next steps.
Because a notice of deficiency would trigger the need for an Enterprise to submit a revised resolution plan that addresses the deficiency, the proposed rule would establish the principle that a deficiency would be something an Enterprise could plausibly address by taking or adding a planned action, considering of additional factors, or undertaking additional strategic analysis. Although there could be an overlap between deficiencies and material weaknesses or impediments identified by the Enterprise in its resolution plan as conceived and
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described in its strategic analysis, FHFA
does not anticipate identifying as deficiencies those material weaknesses or impediments to a well-conceived plan that an Enterprise is reasonably unable to address, or which would be impracticable to change.
FHFA notes that the DFA section 165
rule includes reference to shortcomings, defined as a weakness or gap that raises questions about the feasibility of a bank holding companys resolution plan, but does not rise to the level of a deficiency. 46
Determination of a shortcoming in a resolution plan would not trigger the requirement to submit a revised plan, but unaddressed shortcomings could become deficiencies in subsequent plans. FHFA does not propose a similar concept because, as the proposed rule indicates, FHFA could inform an Enterprise through routine communications of any concerns with its resolution plan that do not yet rise to the level of a deficiency, but which could rise to such a level if unaddressed in future plans. FHFA requests comment on whether a final resolution planning rule should include a process for FHFA identification of a shortcoming, in addition to a deficiency and, if so, whether FHFA
should adopt a definition of shortcoming similar to that contained in the DFA section 165 rule.
Credible standard. Concepts of deficiency in a resolution plan, and a plans identification of material weaknesses in or impediments to resolution, must be considered in the context of a credible resolution plan.
While credible is commonly used as a standard for resolution plans, it is not always defined when used.47 As did the FDIC, FHFA has determined to propose a rule standard for a resolution plan to be credible.
Specifically, FHFA is proposing to consider a resolution plan to be credible if, demonstrating consideration of the proposed rules required and prohibited assumptions, the plans strategic analysis and detailed information required are well-founded and based on information and data that are observable or otherwise verifiable and employ reasonable projections from current and historical conditions within the broader financial markets. A
resolution plan that meets this standard will reflect depth and thoroughness of thought and analysis, clarity and 46 12

CFR 243.8e.
FDIC IDI rule, 12 CFR 360.10c4i used and defined; DFA section 165 rule, 12 CFR
243.8b used but not defined and Treasury Department Housing Reform Plan supra, p. 13 used but not defined.
47 Compare
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appropriateness of assumptions and projections, and accuracy and detail in supporting data and other information.
Under this standard, a resolution plan may be credible even if it identifies material weaknesses or impediments to rapid and orderly resolution or if it sets forth steps that an Enterprise indicates it will take to improve the likelihood of its rapid and orderly resolution. FHFA
is not proposing to correlate identification of deficiencies with application of the credible standard, although it is inevitable that sufficiently significant deficiencies would result in a resolution plan that is not credible.
Through its proposed standard for a credible resolution plan, FHFA seeks to clarify that such a plan would not require an Enterprise to produce a roadmap that FHFA would follow to discharge its responsibilities as receiver.
This clarification is important for two reasons: 1 To reassure the Enterprises, and inform other stakeholders that Enterprise resolution plans may stop short of an FHFA-executable playbook and still be credible; and, 2 To emphasize that resolution of an Enterprise remains FHFAs responsibility, to be carried out pursuant to its statutorily conferred authorities and discretion.
On the other hand, the credible standard would make the Enterprises accountable to FHFA on critical aspects of resolution planning as the standard includes concepts of well-founded and verifiable. FHFA expects to use its examination authority to assess such aspects of an Enterprises resolution plan as the capabilities of the Enterprises management information systems to collect and maintain information and data underlying the resolution plan and report it in a timely manner to management of the Enterprise and to FHFA. Such capabilities and the importance of assessing them were both emphasized in consultations with FDIC
and FRB staff on their experience implementing the FDIC IDI and DFA
section 165 rules.48
48 See also, 77 FR 3075, 3083 Jan. 23, 2012
FDIC IDI final rule The IDIs ability to produce the information and data underlying its resolution rapidly and on demand is a vital element in a credible resolution plan. and 76 FR 58379, 58380 Sept. 21, 2011 FDIC IDI interim final rule The Financial Stability Board Crisis Management Working Group has recommended that supervisors ensure that firms are capable of supplying in a timely fashion the information that may be required by the authorities in managing a financial crisis..
Verifying capabilities set forth in an Enterprises resolution plan is not the only area of resolution planning that would be subject to FHFAs examination authority. FHFA may use its examination authority at any time to review Enterprise compliance with a resolution planning
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