FR4006_20130625_omb

Supporting Statement for

the Request for Extension of Time to Dispose of Assets Acquired in

Satisfaction of Debts Previously Contracted

(FR 4006; OMB No. 7100‑0129)

Summary

The Board of Governors of the Federal Reserve System, under delegated authority from the Office of Management and Budget (OMB), proposes to extend for three years, without revision, the Request for Extension of Time to Dispose of Assets Acquired in Satisfaction of Debts Previously Contracted (FR 4006; OMB No. 7100‑0129). A bank holding company (BHC) that acquired voting securities or assets through foreclosure in the ordinary course of collecting a debt previously contracted (DPC) may not retain ownership of those shares or assets for more than two years without prior Federal Reserve approval. There is no formal reporting form and each request for extension must be filed at the appropriate Reserve Bank of the BHC. The FR 4006 is required to obtain the benefit of authorization to hold DPC shares or assets beyond the two year permissible holding period. The Federal Reserve uses the information provided in the request to fulfill its statutory obligation to supervise BHCs. The annual burden for the FR 4006 is estimated to be 885 hours.

Background and Justification

Under section 4(c)(2) of the Bank Holding Company Act (BHC Act) and section 225.22(d)(1) of Regulation Y, a BHC is not required to seek prior Federal Reserve approval before acquiring voting securities or assets, acquired by foreclosure or otherwise, in the ordinary course of collecting a DPC property, if the DPC property is divested within two years of acquisition. However, the two-year period may be extended by the Federal Reserve for up to three additional years and for up to five additional years (for a total of 10 years) in the case of certain types of DPC property. The BHC Act and Regulation Y specify the standards that should be considered in granting extensions for different types of DPC property. A request for extension must be filed by letter with the appropriate Reserve Bank. The Federal Reserve System uses the information in a request to determine if the proposed extension is consistent with prudential supervisory and financial standards, as well as the public interest.

Description of the Information Collection

The request for extension only applies to a BHC that is unable to divest a specific DPC property within two years of initial acquisition. The BHC’s letter to the Reserve Bank must describe the efforts made, to date, to effect divestiture (including reasons for any delay in the pace of divestiture) and include financial and descriptive data with respect to assets as well as the sales price of any related divested assets. Generally, extensions are requested for a period of one year, although in appropriate circumstances the Federal Reserve may grant an extension request of longer than one year. In determining whether to approve a request, the Federal Reserve takes into consideration whether the BHC has made a good faith effort to dispose of the property, the value of the property relative to the organization’s capital, the effect that selling or retaining the property would have on the financial condition of the BHC (and any affected subsidiary), and the BHC’s supervisory record. The information collected serves to identify potentially unsound situations and to encourage timely compliance with the divestiture requirement contained in the statute and regulation. The Federal Reserve monitors the BHC’s efforts to effect an orderly divestiture and may require divestiture before the end of the approved period if supervisory concerns warrant such action.

Time Schedule for Information Collection

This information collection is event generated. The first request for extension must be filed by a BHC before the second anniversary of the date that the specific DPC property was originally acquired. Subsequent requests for extension must be filed before expiration of the previously authorized holding period. Most requests are filed annually. The Federal Reserve responds to extension requests in writing in a timely manner.

Legal Status

The Board’s Legal Division has determined that sections 4(a) and 4(c)(2) of the BHC Act (12 U.S.C. § 1843(a) and (c)(2)) authorizes the Board to require a request for extension. The Board has established a procedure for requesting an extension in its Regulation Y (12 C.F.R. § 225.22(d)(1) and 225.140). The FR 4006 is required to obtain a benefit because in order for a BHC to retain ownership of voting securities or assets acquired through foreclosure in the ordinary course of collection a debt previously contracted for more than two years, the BHC must file a request with the appropriate Reserve Bank. BHCs may request confidential treatment for information contained in the request. The Board, in turn, may grant confidential treatment upon a showing by the individual company that such information should be held confidential.

Consultation Outside the Agency

On April 15, 2013, the Federal Reserve published a notice in the Federal Register (78 FR 22261) seeking public comment for 60 days on the extension, without revision, of the Request for Extension of Time to Dispose of Assets Acquired in Satisfaction of Debts Previously Contracted. The comment period for this notice expired on June 14, 2013. The Federal Reserve did not receive any comments. On June 25, 2013, the Federal Reserve published a final notice in the Federal Register (78 FR 38032).

Estimate of Respondent Burden

Based upon prior experience and review, the respondent burden for this extension request is estimated to average five hours per submission. The respondent burden varies depending upon the complexity of the individual situation. The Federal Reserve received 177 requests for extension in 2012. The total respondent burden for the FR 4006 is estimated to be 885 hours annually, as presented in the following table. These reporting requirements represent less than 1 percent of total Federal Reserve System paperwork burden.

	Number of respondents	Estimated annual frequency	Estimated average hours per response	Estimated annual burden hours
FR 4006	177	1	5	885

The total cost to the public is estimated to be $44,162.¹

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

Costs associated with the processing of this extension request are minimal. Storage of the reported information is not automated. Because there is no standard reporting form, there are no printing or distribution costs.

1 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 at $18, 45% Financial Managers at $59, 15% Lawyers at $63, and 10% Chief Executives at $85). Hourly rate for each occupational group are the (rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages 2012, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using the BLS Occupational Classification System, www.bls.gov/soc/