FRF_20210720_omb

Supporting Statement for the
Recordkeeping Requirements Associated with Regulation F
(FR F; OMB No. 7100-0331)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), has extended for three years,
without revision, the Recordkeeping Requirements Associated with Regulation F (FR F; OMB
No. 7100-0331). The Board’s Regulation F - Limitations on Interbank Liabilities (12 CFR Part
206) establishes limits on depository institutions’ credit exposure to individual correspondents in
order to mitigate the risk that the failure of a correspondent would pose to an insured depository
institution.1 Section 206.3 of Regulation F requires insured depository institutions to establish
and maintain policies and procedures designed to prevent excessive exposure to correspondents .
This regulation applies to all depository institutions insured by the Federal Deposit Insurance
Corporation (FDIC) and the Board takes burden under the Paperwork Reduction Act with respect
to all such entities.
The estimated total annual burden for the FR F is 5,108 hours.
Background and Justification
Regulation F implements section 308 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA). 2 Pursuant to FDICIA, the Board is required to prescribe
standards to limit the risks posed by exposure of insured depository institu tions to
correspondents. Regulation F generally requires depository institutions to develop and
implement internal prudential policies and procedures to evaluate and control exposure to
correspondents. 3 Regulation F requires these policies and procedures to establish limits on
overnight credit exposure to individual correspondents that ordinarily should not be exceeded.
As noted, the policies and procedures on exposure established by a depository institution
under Regulation F also must include limits on overnight credit exposure to individual
1

Correspondent means a U.S. depository institution or a foreign bank to which a bank has exposure, but does not
include a commonly controlled correspondent. 12 CFR 206.2(c).
2
See 12 U.S.C. § 371b-2.
3
As defined in Regulation F, exposure “means the potential that an obligation will not be paid in a timely manner or
in full. ‘Exposure’ includes credit and liquidity risks, including operational risks, related to intraday and interday
transactions.” 12 CFR 206.2(d). Credit risk is the potential that an obligation will not be paid in a timely manner or
in full. Credit risk arises whenever an institution advances or commits funds to another financial institution, as the
advancing institution’s assets are at risk of loss if the recipient institution fails. Some institutions conceivably could
have a credit concentration arising from the need to maintain large “due from” balances with a correspondent to
facilitate account clearing activities. Liquidity risk arises when an institution depends heavily on the liquidity
provided by a limited number of institutions to meet its funding needs. Liquidity risk can create an immediate threat
to an institution’s viability if the advancing entity suddenly reduces the institution’s access to liquid funds.
Institutions might abruptly limit the availability of liquid funding sources as part of a prudential program for limiting
credit exposure or as required by regulation when the financial condition of either counterparty declin es rapidly.
Operational risk means the risk of loss resulting from inadequate or failed internal processes, people, and systems
or from external events (including legal risk but excluding strategic and reputational risk).

correspondents that ordinarily should not be exceeded. Pursuant to Regulation F, a depository
institution’s interday credit exposure to an individual correspondent is limited to not more than
25 percent of the institution’s total capital, unless the bank can demonstrate that its
correspondent is at least adequately capitalized.
Description of Information Collection
Section 206.3 of Regulation F provides that a depository institution shall establish and
maintain written policies and procedures to prevent excessive exposure to any individual
correspondent in relation to the condition of the correspondent. In these policies and procedures,
a depository institution must take into account the risks in selecting correspondents and
terminating those relationships. Where exposure to a correspondent is significant, the policies
and procedures must require periodic reviews of the financial condition of the correspondent and
shall take into account any deterioration in the correspondent’s financial condition. Where the
financial condition of the correspondent and the form or maturity of the exposure create a
significant risk that payments will not be made in full or in a timely manner, the policies and
procedures must limit the depository institution’s exposure to the correspondent, either by the
establishment of internal limits or by other means. The policies and procedures must be reviewed
and approved by the depository institution’s board of directors at least annually.
Respondent Panel
The FR F panel comprises all insured depository institutions, as defined in section 3 of
the Federal Deposit Insurance Act (i.e., all institutions the deposits of which are insured by the
FDIC).
Time Schedule for Information Collection
This information collection contains recordkeeping requirements. The creation of written
policies and procedures concerning interbank liabilities is a mandatory one-time requirement.
Subsequent changes to these policies and procedures would be on occasion, and they must be
reviewed and approved by the depository institution’s board of directors at least annually .
Public Availability of Data
No data collected by the Board pursuant to this information collection is released to the
public.
Legal Status
The Regulation F recordkeeping requirements are authorized by section 23 of the Federal
Reserve Act (12 U.S.C. § 371b-2), as added by section 308 of the Federal Deposit Insurance
Corporation Improvement Act of 1991, which requires the Board to prescribe standards to limit
risks posed by exposure of insured depository institutions to other depository institutions. The
Regulation F recordkeeping requirements are mandatory.

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The Board does not collect any information under Regulation F, so no issue of
confidentiality normally arises. However, in the event the records are obtained by the Board as
part of an examination or supervision of a financial institution, this information may be
considered confidential pursuant to exemption 8 of the Freedom of Information Act (FOIA),
which protects information contained in “examination, operating, or condition reports” obtained
in the bank supervisory process (5 U.S.C. § 552(b)(8)). Additionally, to the extent that such
information obtained by the Board constitutes nonpublic commercial or financial information,
which is both customarily and actually treated as private by the financial institution, the financial
institution may request confidential treatment pursuant to exemption 4 of the FOIA (5 U.S.C. §
552(b)(4)).
Consultation Outside the Agency
There has been no consultation outside the Federal Reserve System with regard to this
proposal.
Public Comments
On February 3, 2021, the Board published an initial notice in the Federal Register
(86 FR 8010) requesting public comment for 60 days on the extension, without revision, of the
FR F. The comment period for this notice expired on April 5, 2021. The Board did not receive
any comments. The Board adopted the extension, without revision, of the FR F as originally
proposed. On May 26, 2021, the Board published a final notice in the Federal Register
(86 FR 28343).
Estimate of Respondent Burden
As shown in the table below, the estimated total annual for the FR F burden is 5,108
hours. The Board estimates it will take seven hours for new institutions to establish a compliance
program and one hour for all institutions to maintain procedures to ensure and monitor
compliance with Regulation F. Because established institutions have already created and
implemented their policies and procedures, the burden on those institutions has been reduced to
account for only program maintenance. These recordkeeping requirements represent less than 1
percent of the Board’s total paperwork burden.

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Estimated
number of
respondents4

FR F
Creation
Maintenance

Annual
frequency

Estimated
average hours
per response

7

1

7

49

5,059

1

1

5,059

Total

Estimated
annual burden
hours

5,108

The estimated total annual cost to the public for the FR F is $302,138.5
Sensitive Questions
These collections of information contain no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The estimated cost to the Federal Reserve System is negligible because the Federal
Reserve does not collect any information.

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Of these respondents, 502 state member banks, 2,427 non-member banks, 535 national banks, 152 state savings
banks, 115 federal savings banks, 140 savings and loan associations, 1 foreign banking organization, 1 nondepository trust company members, and 12 cooperative banks are considered small entities as defined by the Small
Business Administration (i.e., entities with less than $600 million in total assets),
https://www.sba.gov/document/support--table-size-standards. There are no special accommodations given to
mitigate the burden on small institutions.
5
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by a nnual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $20, 45% Financial Managers at
$73, 15% Lawyers at $72, and 10% Chief Executives at $95). 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 2020, published March 31, 2021, https://www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined
using the BLS Standard Occupational Classification System, https://www.bls.gov/soc/.

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