RegY1_20160523_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. 7100-0333)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority from the Office of Management and Budget (OMB), proposes to extend for three years,
without revision, the Reporting Requirements Associated with Regulation Y (Extension of Time
to Conform to the Volcker Rule) (Reg Y-1; OMB No. 7100-0333). The Paperwork Reduction
Act (PRA) classifies reporting, recordkeeping, or disclosure requirements of a regulation as an
“information collection.”1
The total annual burden for this information collection is estimated to be 774 hours for
the 258 institutions. There are no required reporting forms associated with these information
collections.
Background and Justification
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
was enacted on July 21, 2010.2 Section 619 of the Dodd-Frank Act, also known as the Volcker
Rule, adds a new section 13 to the Bank Holding Company Act of 1956 (BHC Act)3 that
generally prohibits any banking entity4 from engaging in proprietary trading or from investing in,
sponsoring, or having certain relationships with a hedge fund or private equity fund (together, a
covered fund). Section 13 of the BHC Act also provides that nonbank financial companies
designated by the Financial Stability Oversight Council (Council) that engage in proprietary
trading activities or make investments in covered funds may be made subject by rule to
additional capital requirements or quantitative limits.5 In December 2013, the Board, Office of
the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC),
Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission
(CFTC) (the agencies) approved final regulations implementing the provisions of section 13 of

1

See 44 U.S.C. § 3501 et seq.

2

See Public Law 111-203, 124 Stat. 1376 (2010).

3

See 12 U.S.C. § 1851.

The term “banking entity” is defined in section 13(h)(1) of the BHC 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

5

See 12 U.S.C. § 1851(a)(2) and (f)(4).

the BHC Act (the “final rule”).6
The restrictions and prohibitions of section 13 of the BHC Act became effective on
July 21, 2012,7 however, the statute provided banking entities a grace period until July 21, 2014,
to conform their activities and investments to the requirements of the statute and any rule issued
by the agencies. The statute also granted exclusively to the Board authority to provide banking
entities additional time to conform or divest their investments and activities covered by
section 13. The statute provides that the Board may, by rule or order, extend the conformance
period “for not more than one year at a time,” up to three times, if in the judgment of the Board,
an extension is consistent with the purposes of section 13 and would not be detrimental to the
public interest.8 This would allow extensions of the conformance period until July 21, 2017.9
Section 13 also permits the Board, upon application by a banking entity, to provide up to an
additional five-year transition period to conform certain illiquid funds.10
Section 13 also gives nonbank financial companies supervised by the Board the same
general two-year conformance period with the potential of up to three, one-year extensions to
bring their activities into compliance with any requirements or limits established. Consistent
with the conformance period available to banking entities, the Board has the ability to extend this
two-year period by up to three additional one-year periods, if the Board determines that such an
extension is consistent with the purpose of the Volcker Rule and would not be detrimental to the
public interest.11
In February 2011, the Board adopted a final rule to implement the conformance period
provisions of section 13 (Conformance Rule) during which banking entities and nonbank
financial companies supervised by the Board must bring their activities and investments into
compliance with the Volcker Rule and implementing regulations. The information collections
associated with the Conformance 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
6

See Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge
Fund and Private Equity Funds, 79 FR 5536 (Jan. 31, 2014); 79 FR 5808 (Jan. 31, 2014). At the time of the final
rule, the agencies explained they would explore whether a nonbank financial company designated by the Council
that was not also a banking entity engages in any activity subject to section 13 of the BHC Act and what, if any,
requirements to apply under section 13.
7

See 12 U.S.C. § 1851(c)(1).

8

See 12 U.S.C. § 1851(c)(2).

9

At the time of issuance of the final rule in December 2013, the Board exercised authority under the statute to
extend this period for one year, until July 21, 2015. See Board Order Approving Extension of Conformance Period
(December 10, 2013), available at www.federalreserve.gov/newsevents/press/bcreg/20131210b.htm. In addition, in
December 2014, the Federal Reserve Board extended the conformance period until July 21, 2016 for banking
entities to conform investments in and relationships with covered funds and foreign funds that were in place prior to
December 31, 2013, (legacy covered funds) and stated its intention to act next year to give banking entities until
July 21, 2017, to conform legacy covered funds. See Board Order Approving Extension of Conformance Period
under Section 13 of the Bank Holding Company Act (December 18, 2014), available at
www.federalreserve.gov/newsevents/press/bcreg/20141218a.htm.
10

See 12 U.S.C. § 1851(c)(3)-(4).

11

See 12 U.S.C. § 1851(c)(2).

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financial company, respectively, to request an extension of time to conform their activities to the
Volcker Rule. The Conformance Rule became effective April 1, 2011.
Description of Information Collection
The information collection in sections 225.181(c) would only be required for banking
entities supervised by the Board that decide to seek an extension of time to conform their
activities to the Volcker Rule or divest their interest in an illiquid fund. The information
collection in section 225.182(c) would only be required for nonbank financial companies that
request additional time to comply with any capital requirements and quantitative limits adopted
under section 13. The final rule implements this conformance period and, as provided by section
13 of the BHC Act, permits a banking entity or nonbank financial company supervised by the
Board 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 Board also must address the
relevant factors set out in sections 225.181(d) and 225.182(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 Board 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 Board to be (1) submitted in writing to the Board 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 Board 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 Board 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 BHC Act specifically

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authorizes the Board to issue rules to permit entities covered by the Volcker Rule to seek
extensions of time of the conformance period (12 U.S.C. § 1851(c)(6)). The information
collections in sections 225.181(c) and 225.182(c) of Regulation Y are required for covered
entities that 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 obligation to respond,
therefore, is required to obtain a benefit. As noted above, the information collected under the
provisions of section 13 of the BHC Act and Subpart K of Regulation Y is required to be
submitted in order to obtain an extension of time to conform a covered entity’s investments and
activities to the Volcker Rule. As provided in sections 221.181(d) and 221.182(d) of Subpart K,
such information includes:
 The terms of private contractual obligations,
 The liquid or illiquid nature of assets proposed to be divested by the regulated entity,
 The total exposure of the covered entity to the activity or investment, and its materiality
to the institution,
 The risks and costs of disposing of, or maintaining, the activity or investment,
 The impact of divestiture or conformance of the activity or investment on any duty owed
by the institution to a client, customer, or counterparty.
This information is the type of confidential commercial and financial information that
may be withheld under Exemption 4 of the Freedom of Information Act (5 U.S.C. 552(b)(4)).
As required information, it may be withheld under Exemption 4 only if public disclosure could
result in substantial competitive harm to the submitting institution, under National Parks and
Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974).
Consultation Outside the Agency
On February 19, 2016, the Federal Reserve published a notice in the Federal Register
(81 FR 8494) requesting public comment for 60 days on the extension, without revision, of this
information collection. The comment period for this notice expired on April 19, 2016. The
Federal Reserve did not receive any comments. On May 5, 2016, the Federal Reserve published
a final notice in the Federal Register (81 FR 27132).
Estimate of Respondent Burden
The total annual burden for Reg Y-1 is estimated to be 774 hours. The Board estimates
that 258 respondents would take an average of three hours to prepare and submit an application
for extension. The Reg Y-1 reporting requirements represent less than 1 percent of the total
Federal Reserve System paperwork burden.

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Reg Y-1

Number of
respondents12

Annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

258

1

3

774

The total cost to the public for this information collection is estimated to be $41,138.13
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.

12

Of these respondents, 121 are small entities as defined by the Small Business Administration (i.e., entities with
less than $550 million in total assets), www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sbasize-standards/table-small-business-size-standards.
13
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $17, 45% Financial Managers at
$65, 15% Lawyers at $66, and 10% Chief Executives at $89). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2015, published March 30, 2016 www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using the
BLS Occupational Classification System, www.bls.gov/soc/.

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