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Federal Register / Vol. 86, No. 84 / Tuesday, May 4, 2021 / Rules and Regulations other choices reflected in its plan, and even optional strategies that reflect relative weighting of the rules objectives. In such instances, the Enterprises explanation would be helpful to FHFA in its understanding and review of submitted plans. More broadly, the rule permits optionality in the resolution planning process, which could result in plans that are more resilient and actionable under a range of possible circumstances.
Rapid and Orderly Standard. FHFA
proposed to require each Enterprise to develop resolution plans to facilitate its rapid and orderly resolution, and proposed to define rapid and orderly resolution as a process for establishing a LLRE as successor to the Enterprise under section 1367 of the Safety and Soundness Act 12 U.S.C
4617, including transferring Enterprise assets and liabilities to the LLRE, such that succession by the LLRE can be accomplished promptly and in a manner that substantially mitigates the risk that the failure of the Enterprise would have serious adverse effects on national housing finance markets. 26
One commenter remarked that, as drafted, the definition of rapid and orderly resolution would apply to all aspects of resolution, where only certain . . . stages need to be conducted rapidly for an orderly resolution to occur, namely, the initial recapitalization and stabilization phases. In contrast, the claims process through a receivership will necessarily take . . . a longer period and imposing rapidity on these stages of the resolution would come at the expense of their orderliness, and could undermine the stability of the U.S.
financial system. Another commenter opined that a rapid and orderly resolution is . . . unrealistic and FHFA should . . . work with other stakeholders, including Congress, to implement critical reforms to minimize the potential for market disruption in the event of an Enterprises insolvency.
FHFA agrees that conducting some stages of a resolution rapidly, or promptly, will facilitate an orderly resolution, while other stagessuch as the claims processcould take longer to carry out. However, FHFA disagrees that the rule text as proposed must be changed to accommodate this distinction. As drafted, the rule definition of rapid and orderly resolution focuses on accomplishing succession by the LLRE promptly. More generally, FHFA intends the rapid and orderly standard to work in concert with the rules purpose and objectives.

In that light, while FHFA recognizes that not all steps in a resolution process may, or should, be taken with similar speed, FHFA also believes that no step in a rapid and orderly resolution would involve undue delay.
C. Identification of Core Business Lines;
Associated Operations and Services Definition of Core Business Line.
FHFA proposed to require each Enterprise to make a preliminary identification of each core business line and provide notice of such identification to FHFA.27 For this purpose, FHFA proposed to define core business line as a business line of the Enterprise that plausibly would continue to operate in a LLRE, considering the purposes, mission, and authorized activities of the Enterprise as set forth in its authorizing statute and the Safety and Soundness Act including associated operations, services, functions, and supports necessary for any identified core business line to be continued. As examples of associated operations, services, functions, and supports, the proposed CBL definition listed servicing, credit enhancement, securitization support, information technology support and operations, and human resources and personnel. 28
FHFA noted in the preamble to the proposed rule that the DFA section 165
and FDIC IDI resolution planning rules included the terms critical operations and critical services, respectively, which bank holding companies or insured depository institutions were required to identify in addition to their core business lines. 29 Considering the DFA section 165 rule definition of critical operations and the Enterprises statutory purposes and mission, FHFA expressed the view that there would be alignment between the Enterprises core business lines and their critical operations, such that there was no need to separately identify critical operations. Likewise, considering the FDIC IDI rule definition of critical services, FHFA reasoned that there would be alignment between such services and the associated operations, services, functions, and supports necessary for any identified core business line to be continued, which each Enterprise is required to identify for each of its CBLs. On that basis, FHFA determined that it was not necessary to require the Enterprises to separately identify their critical services. FHFA requested comment on 27 See
12 CFR 1242.3a, 86 FR at 1343.
12 CFR 1242.2, 86 FR at 1343.
29 86 FR at 1331.

its determination not to require identification of, or define, critical operations and critical services. 30
Commenters generally agreed with FHFAs proposed approach to identification of Enterprise CBLs, noting that it is important to understand what business lines would be continued in the LLRE. One commenter called identification of CBLs the primary benefit . . . of Enterprise resolution planning, because it would provide notice of business lines that should be assumed by the LLRE to preserve a wellfunctioning market; and another commenter remarked that identification of CBLs would make clear to market participants and the public what the operational capabilities of the LLRE will be and what any changes or limitations will be, compared to pre-resolution operations.
Some commenters agreed that separate identification of critical operations and critical services was not necessary and would not improve the rule. One commenter offered the opposite view that bifurcating the CBL
definition between core business lines and critical services . . . would allow the Enterprises to more clearly map core business lines and critical services . . .
and show what core business lines rely on each of the critical services.
Another commenter addressed the scope of the CBL definition, to the effect that associated supports could cover third parties and, if CBLs were intended to be continued by the LLRE, then the proposed rule could imply that the Enterprise was responsible for the continuation of the third party itself.
That commenter suggested FHFA clarify that resolution planning with respect to Third Parties would not impose obligations beyond a need to maintain resolution-friendly contracts and an ability to pay Third Parties to maintain access to critical outsourced services during resolution. To that end, the commenter also suggested clarifying that supports in the CBL definition did not include third parties and that FHFA include a definition of Third Parties to capture those external service providers necessary to support CBLs.
After considering these comments, FHFA does not believe that the rule should create separate categories for critical operations or critical services, because these concepts are already covered within the CBL
definition. Likewise, FHFA does not believe that support should be removed from the CBL definition. The description of business activities associated with execution of a CBL, in
28 See 26 See
12 CFR 1242.5a, 86 FR at 1344.

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