Voglio sapere a riguardo di…

khammond on DSKJM1Z7X2PROD with NOTICES3

41636

Federal Register / Vol. 86, No. 145 / Monday, August 2, 2021 / Notices
Balance Sheet Table.285 Based on this review, the commenter stated that the vast majority of each firms total assets consists of cash and cash equivalents, collateralized agreements, trade and other receivables, and other trading and financial assets. The commenter characterized these assets as being liquid. The commenter stated further that the amount of illiquid assets held by these firms as a proportion of their balance sheets is comparable to the proportion of illiquid assets held by U.S. broker-dealers. The commenter also stated that the long-term debt, subordinated debt, and equity of the Covered Entities, as a proportion of their total liabilities and equity, also was comparable to U.S. broker-dealers.
Moreover, based on the Balance Sheet Table and the staffs analysis of the public financial reports of the major investment firms regulated by the Prudential Regulatory Authority PRA in the United Kingdom i.e., a PRA-designated investment firm and a large investment firm in France, these firms report total liquid assets that exceed total liabilities and, in most cases, substantially in excess of $100
million.286
This information suggests that Covered Entities may be able to meet the second additional capital condition without having to significantly adjust their assets, liabilities, and equity.
Moreover, the modifications to the second additional capital condition that incorporate how Covered Entities categorize liquid and illiquid assets and calculate risk-weighted assets, will allow them to use existing processes to derive the measures needed to adhere to the condition. Therefore, while the condition imposes a simplified net liquid assets test and associated recordkeeping requirement, it may not cause Covered Entities to withdraw from the U.S. security-based swap market. Nonetheless, it is possible that the simplified net liquid assets test and associated recordkeeping burden could cause a Covered Entity to withdraw from the U.S. security-based swap market. However, as discussed above, this additional capital condition is designed to produce a comparable regulatory outcome with respect to SBS
Entities subject to Exchange Act rule 18a1 and Covered Entities applying substituted compliance with respect to that rule.
285 See
SIFMA Letter at 1011, Appendix C.
286 The Bank of England publishes a list of PRAdesignated investment firms. This list is available at: https www.bankofengland.co.uk/prudentialregulation/authorisations/which-firms-does-thepra-regulate.

VerDate Sep<11>2014

18:23 Jul 30, 2021

Jkt 253001

In response to a specific request for comment in the Reopening Release, a commenter stated that the capital conditions would not be necessary if the balance sheets of the Covered Entities seeking to apply substituted compliance with respect to Exchange Act rule 18a 1 were similar to the balance sheets of U.S. broker-dealers.287 However, the Commission also sought comment on whether the capital conditions would serve to ensure that these firms do not engage in non-securities business activities that could impair their liquidity.288 Two commenters expressed support for the capital conditions.289
The fact that today certain Covered Entities have liquid balance sheets does not mean this will hold true in the future or with respect to other potential registrants. For these reasons, it is appropriate to include additional conditions with respect to applying substituted compliance to Exchange Act rule 18a1.
It would not be appropriate to take a more incremental approach to the additional capital conditions as suggested by a commenter.290
Substituted compliance is premised on comparable regulatory outcomes. As discussed above, the additional capital condition is designed to supplement French and EU capital laws in order to achieve a comparable regulatory outcome in terms of the net liquid assets test of Exchange Act rule 18a1.
Delaying the implementation of the additional capital condition would mean that Covered Entities are operating as registered security-based swap dealers under a capital standard that does impose the net liquid assets test.
This would be inconsistent with the objective of substituted compliance and could increase risk to the U.S. securitybased swap markets and participants in those markets. Moreover, the modifications to the capital conditions discussed above may ease the implementation burdens.
In addition, the Commission does not believe a commenters suggestion for an alternative capital condition requiring a Covered Entity to maintain $100 million of HQLA as defined in the LCR
requirements would be adequate in terms of achieving comparable regulatory outcomes with Exchange Act rule 18a1.291 The Balance Sheet Table and public financial reports of investment firms in the UK and France 287 See SIFMA Letter II at 8; Reopening Release, 86 FR at 18345.
288 Reopening Release, 86 FR at 18345.
289 See Better Markets Letter at 78; AFREF Letter at 12.
290 See SIFMA Letter II at 1617.
291 See SIFMA Letter II at 16.

PO 00000

Frm 00026

Fmt 4701

Sfmt 4703

indicates that Covered Entities have total liabilities of many billions of dollars.292 A condition requiring $100
million in highly liquid assets would not cover these liabilities and would not impose a net liquid assets test.
Finally, the Commission has modified the citations to French and EU laws in the capital section of the Order in response to comment and further analysis.293 In response to comments, the capital section of the Order does not cite recitals because they are not part of a legally binding regulation.294
The Commission agrees with the comments that the specific provisions to the CRR citied in the proposed Order are not comprehensive .295 In response, the Commission has modified the final ordering language to use more comprehensive citations to the CRR
including the specific CRR provisions cited in the proposed Order, as the capital analysis includes only discussion of entities that are fully subject to CRR and CRD IV.296 In addition, this commenter recommended that the Commission modify the final ordering language to qualify the citations to the CRR with a reference to waivers and permissions.297 In response, the specific provisions in the CRR referenced in the capital comparability analysis were analysed without reference to waivers or permissions, and the condition states that the Covered Entity must be subject to and comply with these specific capital requirements. Therefore, the more comprehensive references to the CRR in the final order are cited without reference to waivers or permissions.
Further, the Commission agrees with the commenter that some of the citations do not relate to requirements imposed on Covered Entities, but generally relate to the powers of relevant authorities. In these cases, citations in the ordering language have been deleted or modified to reference requirements that a Covered Entity is subject to and must comply with.298
292 See
SIFMA UK Letter, Appendix C.
Letter II at Appendix A.
294 SIFMA Letter II, Appendix A.
295 SIFMA Letter II, Appendix A.
296 French Authorities Application Side Letter for Capital Requirements at p.4. More specifically, in the final Order, the Commission is including references to the CRR to read: CRR, Part One General Provisions Article 61, Part Two Own Funds, Part Three Capital Requirements, Part Four Large Exposures, Part Five Exposures to Transferred Credit Risk, Part Six Liquidity, and Part Seven Leverage.
297 SIFMA Letter II, Appendix A.
298 More specifically, in the final order, the Commission is: 1 Deleting BRRD Articles 271, 312, 311a and 5, and 325; 2 deleting CRD
Articles 97, 981e, 986, 99, 1001, 1021, 104, 1041, 105. 1424 and narrowing the scope of 293 SIFMA

E:FRFM02AUN3.SGM

02AUN3