FR2225_20170809_omb

Supporting Statement for the
Annual Daylight Overdraft Capital Report for
U.S. Branches and Agencies of Foreign Banks
(FR 2225; OMB No. 7100-0216)
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 Annual Daylight Overdraft Capital Report for U.S. Branches and Agencies
of Foreign Banks (FR 2225; OMB No. 7100-0216). This report was implemented in March 1986
as part of the procedures used to administer the Federal Reserve’s Payment System Risk (PSR)
policy. A key component of the PSR policy is a limit, or a net debit cap, on an institution’s
negative intraday balance in its Reserve Bank account. The Federal Reserve calculates an
institution’s net debit cap by applying the multiple associated with the net debit cap category to
the institution’s capital. For foreign banking organizations (FBOs), a percentage of the FBO’s
capital measure, known as the U.S. capital equivalency, is used to calculate the FBO’s net debit
cap. FBOs that wish to establish a positive net debit cap and have a strength of support
assessment (SOSA) 1 or SOSA 2 ranking or hold a financial holding company (FHC)
designation are required to submit the FR 2225 to their Administrative Reserve Bank (ARB).1, 2
The annual total burden for the FR 2225 is estimated to be 50 hours.
Background and Justification
In April 1985, the Board adopted a policy to reduce risk on large-dollar payment
systems.3 Under the policy, all institutions that maintain a Federal Reserve account are assigned
or may establish a net debit cap that represents a maximum limit on uncollateralized daylight
overdrafts incurred in that account.4 A daylight overdraft occurs when the intraday balance in a
depository institution’s Federal Reserve account becomes negative. An institution’s net debit cap
category and its reported capital determine the size of the net debit cap.
Net debit caps for U.S. branches and agencies of foreign banks are calculated in the same
manner as for domestic banks; by applying cap multiples to a capital measure.5 A depository
institution’s cap class and associated cap multiple are determined through a self-assessment and
1

The Administrative Reserve Bank is responsible for the administration of Federal Reserve credit, reserves, and
risk-management policies for a given institution or other legal entity.
2
Most FBOs that are ranked SOSA 3 do not qualify for a positive net debit cap. In the event a Reserve Bank grants
a net debit cap or extends intraday credit to a financially healthy SOSA 3-ranked FBO, the financially healthy SOSA
3-ranked FBOs will have their U.S. capital equivalency based on their “Net due to related depository institutions” as
reported on the Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002; OMB
No. 7100-0032), Schedule RAL, Item 5.a, Column A, for the most recent quarter.
3
See 50 FR 21120 (May 22, 1985).
4
In December 2008, the Board published its revised Federal Reserve Policy on Payment System Risk. See 73 FR
79109 (December 24, 2008).
5
U.S. branches and agencies of foreign banks are entities contained within and controlled by a foreign banking
organization. For the definition of “branch” and “agency”, refer to 12 U.S.C. 3101 and 12 CFR Part 211.21.

a board of directors resolution for self-assessed institutions, through a board of directors
resolution for de minimis institutions, or by assignment by the ARB. The PSR policy
incorporates SOSA rankings and FHC status in determining U.S. capital equivalency for an
FBO. The SOSA ranking is composed of four factors, including the FBO’s financial condition
and prospects, the system of supervision in the FBO’s home country, the record of the home
country’s government in support of the banking system or other sources of support for the FBO,
and transfer risk concerns.6 A combination of an FBO’s SOSA ranking and its FHC status
determines the fraction of the institution’s capital measure used in calculating the institution’s
cap.7
Description of Information Collection
The FR 2225 reporting form collects information needed to identify the respondent and
its fiscal year-end and to determine its capital and assets for purposes of daylight overdraft
monitoring. Four items, converted into U.S. dollars, are collected for the capital and assets
determination: capital for the FBO (item 1), an adjustment to avoid double counting of capital
used by any direct or indirect subsidiary of the FBO that also has access to Fedwire and has its
own net debit cap (item 2), the FBO’s total capital base (item 3) used to calculate the net debit
cap, and the FBO’s assets (item 4).
Respondents are not asked to submit any data that are not ordinarily disclosed to the
public; however, if they do, the data must be identified and documented as such. The Reserve
Banks use items 1 and 2 as supplemental information to clarify the data reported in item 3.
Federal Reserve staff use the assets data reported in item 4 for analytic purposes.
The current reporting panel comprises 50 FBOs with U.S. branches or agencies that have
non-zero net debit caps and are ranked SOSA 1 or SOSA 2 or hold a FHC designation. An FBO
choosing to file the FR 2225 must submit it annually, following the end of the FBO’s fiscal year.
The PSR policy requires an FBO to file the FR 2225 if it requests a non-zero net debit cap. An
FBO may voluntarily submit the report more frequently to have its overdraft limit based on
current data. The net debit cap for an FBO’s U.S. branches and agencies is calculated on a
consolidated basis for the FBO as a whole. Therefore, an FBO with multiple offices in the U.S.
submits only one form for the U.S. “family” of offices.
Time Schedule for Information Collection
The FR 2225 is due 90 days after the respondent’s fiscal year-end. The U.S. office of the
reporting FBO submits the data directly to the Federal Reserve Bank stated in the reporting
instructions. If the reporting FBO has more than one U.S. office, one office is designated as the
reporting office and serves as the FBO’s representative on all matters involving compliance with
the PSR policy.

6

Transfer risk relates to the FBO’s ability to access and transmit U.S. dollars, which is an essential factor in
determining whether an FBO can support its U.S. operations.
7
The U.S. capital equivalency fractions are detailed in the Guide to the Federal Reserve’s Payment System Risk
Policy on Intraday Credit available at www.federalreserve.gov/paymentsystems/psr_guide.htm.

2

Legal Status
The Board’s Legal Division has determined that the FR 2225 is authorized by sections
11(i), 16, and 19(f) of the Federal Reserve Act (12 U.S.C. 248(i), 248-1, and 464). An FBO is
required to respond in order to obtain or retain a benefit, i.e., in order for the U.S. branch or
agency of an FBO to establish and maintain a non-zero net debit cap. Respondents are not asked
to submit any data that are not ordinarily disclosed to the public; accordingly, such items would
not routinely be protected from disclosure under the Freedom of Information Act (FOIA). To the
extent an institution submits data it believes are confidential and can establish the potential for
substantial competitive harm, those responses would be protected from disclosure pursuant to
exemption 4 of the FOIA (5 U.S.C. 552(b)(4)), under the standards set forth in National Parks
and Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974). Such a determination
would be made on a case-by-case basis in response to a specific request for disclosure of the
information.
Consultation Outside the Agency
On April 7, 2017, the Board published an initial notice in the Federal Register (82 FR
17005) requesting public comment for 60 days on the extension, without revision, of the
FR 2225. The comment period for this notice expired on June 6, 2017. The Board did not receive
any comments. On July 7, 2017, the Board published a final notice in the Federal Register (82
FR 31603) and the information collection will be extended as proposed.
Estimate of Respondent Burden
Assuming a response time of one hour, the annual reporting burden for the FR 2225 is
estimated to be 50 hours based on the current number of FBOs with U.S. branches or agencies
that have non-zero net debit caps and are ranked SOSA 1 or SOSA 2 or hold a financial holding
company designation. An FBO with multiple offices in the U.S. submits only one form for the
U.S. “family” of offices. These reporting requirements represent less than 1 percent of the total
Federal Reserve System paperwork burden.
Number of
respondents8
FR 2225

50

Estimated
Annual
average hours
frequency
per response
1

8

1

Estimated
annual burden
hours
50

Of these respondents, 8 are considered to be 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-sureyou-meet-sba-size-standards/table-small-business-size-standards.

3

The total annual cost to the public for this information collection is estimated to be $2,745.9
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 estimated annual cost to the Federal Reserve Banks for collecting and processing this
report is $1,500. Responses are not transmitted to the Federal Reserve Board.

9

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 $18, 45% Financial Managers at
$67, 15% Lawyers at $67, and 10% Chief Executives at $93). 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 2016, published March 31, 2017, www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

4