RegY1_20110401_omb

Supporting Statement for the
Reporting Requirements Associated with Regulation Y
(Extension of Time to Conform to the Volcker Rule) (Reg Y-1; OMB No. to be obtained)
Conformance Period for Entities Engaged in Prohibited Proprietary Trading or
Private Equity Fund or Hedge Fund Activities
(Docket No. R-1397) (RIN 7100-AD58)
Summary
The Board of Governors of the Federal Reserve System, under delegated authority from
the Office of Management and Budget (OMB), will implement the Reporting Requirements
Associated with Regulation Y (Extension of Time to Conform to the Volcker Rule) (Reg Y-1;
OMB No. to be obtained). The Paperwork Reduction Act (PRA) classifies reporting,
recordkeeping, or disclosure requirements of a regulation as an “information collection.”1
On November 26, 2010, the Federal Reserve published a notice of proposed rulemaking
in the Federal Register for public comment (75 FR 72741). The Federal Reserve proposed to
revise the Bank Holding Companies and Change in Bank Control Regulation Y following the
passage of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act), commonly referred to as the Volcker Rule. In general, the Volcker Rule
amends Regulation Y by prohibiting banking entities from engaging in proprietary trading or
from investing in, sponsoring, or having certain relationships with a hedge fund or private equity
fund. The Volcker Rule also amends Regulation Y by requiring nonbank financial companies,
supervised by the Board, that engage in such activities or have such investments to be subject to
additional capital requirements, quantitative limits, or other restrictions.
The information collections associated with the Volcker Rule are located in sections
225.181(c) and 225.182(c) of Regulation Y. Sections 225.181(c) and 225.182(c) permit a
banking entity and nonbank financial company respectively, to request an extension of time to
conform its activities to the Volcker Rule. The comment period expired on January 10, 2011.
The Federal Reserve received 12 comments; two of these comments specifically addressed the
proposed paperwork burden estimates. On February 14, 2011, the Federal Reserve published a
notice of final rulemaking in the Federal Register which clarified certain aspects of the proposed
rule in response to public comments (76 FR 8265). The final rule is effective on April 1, 2011.
The total annual burden for this information collection is estimated to be 21,600 hours for
the 720 institutions that are deemed respondents for purposes of the PRA. There are no required
reporting forms associated with these information collections.
Background and Justification
The Dodd-Frank Act was enacted on July 21, 2010.2 Section 619 of the Dodd-Frank Act
adds a new section 13 to the Bank Holding Company Act of 1956 (BHC Act) (to be codified at
1
2

See 44 U.S.C. § 3501 et seq.
Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010).

12 U.S.C. § 1851) that generally prohibits banking entities3 from engaging in proprietary trading
or from investing in, sponsoring, or having certain relationships with a hedge fund or private
equity fund.4 The new section 13 of the BHC Act also provides that nonbank financial
companies supervised by the Federal Reserve that engage in such activities or have such
investments shall be subject to additional capital requirements, quantitative limits, or other
restrictions.5 These prohibitions and other provisions of section 619 are commonly known as the
Volcker Rule.
The Federal Reserve and several other agencies have responsibilities with respect to the
Volcker Rule. As required by the Dodd-Frank Act, the FSOC recently issued a study of the
Volcker Rule, which included several recommendations regarding the implementation of its
prohibitions and restrictions.6 As a general matter, authority for developing and adopting
regulations to implement the prohibitions and restrictions of the Volcker Rule is divided between
the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Federal Deposit
Insurance Corporation (FDIC), the SEC and the CFTC in the manner provided in section
13(b)(2) of the BHC Act.7 The Federal Reserve and these other agencies are directed to adopt
implementing rules not later than 9 months after completion of the FSOC’s study.8 The
restrictions and prohibitions of the Volcker Rule become effective 12 months after issuance of
final rules by the agencies, or July 21, 2012, whichever is earlier.
The Federal Reserve, however, is solely charged with adopting rules to implement the
provisions of the Volcker Rule that provide a banking entity or a nonbank financial company
supervised by the Federal Reserve a period of time after the effective date of the Volcker Rule to
bring the activities, investments, and relationships of the banking entity or company that were
commenced, acquired, or entered into before the Volcker Rule’s effective date into compliance
with the Volcker Rule and the agencies’ implementing regulations.9 This period is intended to
give markets and firms an opportunity to adjust to the Volcker Rule.10
3

The term “banking entity” is defined in section 13(h)(1) of the BHC Act, as amended by section 619 of the DoddFrank Act. See 12 U.S.C. § 1851(h)(1). The term means any insured depository institution (other than certain
limited-purpose trust institutions), any company that controls an insured depository institution, any company that is
treated as a bank holding company for purposes of section 8 of the International Banking Act of 1978 (12 U.S.C. §
3106), and any affiliate or subsidiary of any of the foregoing.
4
The Volcker Rule defines the terms “hedge fund” and “private equity fund” as an issuer that would be an
investment company, as defined under the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.), but for
section 3(c)(1) or 3(c)(7) of that Act, or any such similar funds as the appropriate Federal banking agencies, the
Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) may, by
rule, determine should be treated as a hedge fund or private equity fund. See 12 U.S.C. § 1851(h)(2).
5
See 12 U.S.C. § 1851(a)(2) and (f)(4). A “nonbank financial company supervised by the Federal Reserve” is a
nonbank financial company or other company that has been designated by the Financial Stability Oversight Council
(FSOC) under section 113 of the Dodd-Frank Act as requiring supervision and regulation by the Federal Reserve on
a consolidated basis because of the danger such company may pose to the financial stability of the United States.
6
See FSOC, Study & Recommendations on Prohibitions on Proprietary Trading & Certain Relationships with
Hedge
Funds
&
Private
Equity
Funds
(January
18,
2011),
available
at
www.treasury.gov/initiatives/Documents/Volcker sec 619 study final 1 18 11 rg.pdf.
7
See 12 U.S.C. § 1851(b)(2). The Secretary of the Treasury, as Chairperson of the FSOC, is responsible for
coordinating the agencies’ rulemakings under the Volcker Rule. See id. at Sec. 1851(b)(2)(B)(ii).
8
See id. at Sec. 1851(b)(2)(A).
9
See id. at Sec. 1851(c)(6).
10
See 156 Cong. Rec. S5898 (daily ed. July 15, 2010) (Statement of Senator Merkley).

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Description of Information Collection
These information collections in Sections 225.181(c) and 225.182(c) would only be
required for banking entities and nonbank financial companies supervised by the Federal Reserve
that voluntarily decide to seek an extension of time to conform their activities to the Volcker
Rule or divest their interest in an illiquid hedge fund or private equity fund. The Dodd-Frank
Act generally requires banking entities and nonbank financial companies supervised by the
Federal Reserve to conform their activities and investments to the restrictions in the Volcker
Rule within 2 years of the effective date of the Volcker Rule’s restrictions. The final rule
implements this conformance period and, as permitted by the Dodd-Frank Act, permits a banking
entity or nonbank financial company supervised by the Federal Reserve to request an extension
of time to conform its activities to the Volcker Rule. A request by a banking entity or nonbank
financial company supervised by the Federal Reserve also must address the relevant factors set
out in section 225.181(d).
Conformance Period for Banking Entities Engaged in Prohibited Proprietary Trading or
Private Fund Activities - Approval Required to Hold Interests in Excess of Time Limit
(Section 225.181(c))
Section 225.181(c) requires an application for an extension by a banking entity to be (1)
submitted in writing to the Federal Reserve at least 180 days prior to the expiration of the
applicable time period, (2) provide the reasons why the banking entity believes the extension
should be granted, and (3) provide a detailed explanation of the banking entity’s plan for
divesting or conforming the activity or investment(s).
Conformance Period for Nonbank Financial Companies Supervised by the Federal Reserve
Engaged in Proprietary Trading or Private Fund Activities - Approval Required to Hold
Interests in Excess of Time Limit. (Section 225.182(c))
Section 225.182(c) requires an application for an extension by a nonbank financial
company supervised by the Federal Reserve to be (1) submitted in writing to the Federal Reserve
at least 180 days prior to the expiration of the applicable time period, (2) provide the reasons
why the nonbank financial company supervised by the Federal Reserve believes the extension
should be granted, and (3) provide a detailed explanation of the company’s plan for coming into
compliance with the requirements of the Volcker Rule.
Time Schedule for Information Collection
This information collection contains reporting requirements provided on an eventgenerated basis, which must be provided to the Federal Reserve within the time period
established by the regulation as discussed above.
Legal Status
The Board’s Legal Division has determined that section 13 of the Bank Holding
Company Act (to be codified at 12 U.S.C. § 1851(c)(6)) authorizes the Federal Reserve to

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require the report to obtain the benefit for extension of time to conform to the Volker Rule. A
banking entity or nonbank financial company supervised by the Federal Reserve may request
confidential treatment of information submitted as part of an extension request in accordance
with the Freedom of Information Act (5 U.S.C. § 552(b)(4)).
Consultation Outside the Agency and Discussion of Public Comment
On November 26, 2010, the Federal Reserve published the proposed rule in the Federal
Register (75 FR 72741) requesting public comment on the proposed information collection. The
comment period for this notice expired on January 10, 2011. The Federal Reserve received two
comments from banking entities that specifically addressed the paperwork burden estimates.
Both commenters asserted that the Federal Reserve underestimated the burden and that it would
take substantially longer than one hour to prepare a request for an extension and relevant
supporting information. One commenter specifically noted that a banking entity could
potentially be required to submit up to four extension requests with respect to a single illiquid
fund (three requests for extension of the general conformance period and one request for the
extended transition period provided for illiquid funds). In light of the comments received, the
Federal Reserve increased the estimated average hours per response to 3 hours and estimated
annual frequency to 10 requests for an extension per year. On February 14, 2011, the Federal
Reserve published the final rule in the Federal Register (76 FR 8265) and is effective on April 1,
2011.
Estimate of Respondent Burden
The total annual burden for Reg Y-1 is estimated to be 21,600 hours. The Federal
Reserve estimates that there were approximately 7,200 banking entities as of December 31,
2009. Of that number, the Federal Reserve estimates that approximately 720 banking entities
would request an extension of the conformance period. The number of nonbank financial
companies supervised by the Federal Reserve will be determined by the FSOC in accordance
with the procedures established under the Dodd-Frank Act.11 The Reg Y-1 reporting
requirements represent less than 1 percent of the total Federal Reserve System paperwork
burden.

Reg Y-1

Number
of
respondents12

Estimated
annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

720

10

3

21,600

The total cost to the public for this information collection is estimated to be $921,240.13
11

See 76 FR 4555 (January 26, 2011).
Of these respondents, 182 are small entities as defined by the Small Business Administration (i.e., entities with
less than $175 million in total assets) www.sba.gov/contractingopportunities/officials/size/table/index.html.
13
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rate (30% Office & Administrative Support @ $16, 45% Financial Managers @
$49, 15% Legal Counsel @ $54, and 10% Chief Executives @ $77). Hourly rate for each occupational group are
the median hourly wages (rounded up) from the Bureau of Labor and Statistics (BLS), Occupational Employment
12

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Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The cost to the Federal Reserve System is negligible.

and Wages 2009, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using the BLS Occupational
Classification System, www.bls.gov/soc/.

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