SPST 0163 Qualified Financial Contracts 2024 Renewal

Supporting Statement

Qualified Financial Contracts

OMB Control No. 3064-0163

Introduction

The FDIC is requesting OMB approval of an extension, with revision, of an existing information collection. The collection of information is comprised of reporting and recordkeeping requirements contained in FDIC regulations 12 CFR Part 371 (“Part 371”). The current clearance for this collection of information expires on June 30, 2024.

A. Justification.

1. Circumstances that make the collection necessary:

Under the Federal Deposit Insurance Act (FDIA), Qualified Financial Contract (“QFCs”) have been designated for special treatment by the FDIC in the event of the failure of an insured depository institution. As codified in FDIA as part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), certain timing restrictions are effectively placed on the FDIC for making decisions whether to transfer QFCs to another financial institution, repudiate the QFCs, or retain the QFCs in the receivership in the event of an insured institution’s failure. To make an informed decision about QFCs in such situations, the FDIC needs timely information pertaining to the types and amounts of QFC contracts held, the counterparties to these contracts and their affiliates, the purpose of these contracts, their maturity dates, the current value of these contracts, and whether these contracts are collateralized.

Because of the large volume of QFC information that a receiver must process in a limited timeframe, in Part 371, the FDIC established QFC recordkeeping requirements for institutions in a “troubled condition” as that term is defined in the rule. The FDIC does not believe these recordkeeping requirements are overly burdensome. Rather, the FDIC believes these requirements are consistent with safe and sound risk management practices for institutions that hold QFCs.

2. Use of the information:

When the FDIC is appointed receiver of a failed institution, the FDIC has one business day to determine whether to transfer QFCs to which a failed IDI is a party. The FDIC adopted Part 371 because it became evident that making a timely and informed decision as to whether to transfer the QFCs of a failed institution in the course of one business day required having access to and processing detailed information. If that data was not easily available in an accessible format, making such a decision was difficult. Consequently, Part 371 enabled the FDIC to more efficiently act as the receiver for failed institutions with QFCs, particularly if the failed institution had a substantial QFC portfolio

Part 371 is a recordkeeping regulation. The records that are required to be maintained are not required to be reported to the FDIC unless specific request for the records is made by the FDIC. If the records are requested from an insured depository institution (“IDI”), they would be used to help the FDIC, when it is appointed receiver, determine whether to transfer the QFCs during the one-business-day stay period applicable to QFCs of an IDI for which a receiver is appointed.

3. Consideration of the use of improved information technology:

Part 371 prescribes a specific format for the maintenance of these records that is compatible with currently available information technology.

4. Efforts to identify duplication:

The information required is unique. It is not duplicated by other information collected by the FDIC.

5. Methods used to minimize burden if the collection has an impact on a substantial number of small entities:

The collection applies only to IDIs in a troubled condition. The recordkeeping required for small entities (other than the limited number of small entities that are members of corporate groups subject to the special requirements) are quite limited and, because most small entities are not parties to QFCs, will not apply to most small entities.

6. Consequences to the Federal program if the collection were conducted less frequently:

The collection is event-generated, that is, it comes into play when an IDI becomes in a troubled condition and, therefore, subject to Part 371. Conducting the collection less frequently would be at odds with the goals of the regulation of requiring maintenance of current records as to QFCs and would pose a significant risk to the Deposit Insurance Fund.

7. Special circumstances necessitating collection inconsistent with 5 CFR Part 1320:

None. This information collection is conducted in a manner consistent with the guidelines in 5 CFR 1320.

8. Efforts to consult with persons outside the agency:

FDIC published a notice in the Federal Register seeking public comment for a 60-day period on March 25, 2024 (89 FR 20653). No comments were received.

9. Payment to respondents:

None.

10. Any assurance of confidentiality:

The information will be kept private to the extent permitted by law.

11. Justification for questions of a sensitive nature:

This collection contains no sensitive information.

12. Estimates of Hour Burden and Annualized Cost:

Summary of Estimated Annual Burden

Table 1. Summary of Estimated Annual Burden (OMB No. 3064-0163)
Information Collection (IC) (Obligation to Respond)	Type of Burden (Frequency of Response)	Number of Respondents	Number of Responses per Respondent	Time per Response (HH:MM)	Annual Burden (Hours)
1. Full Scope Entities, Implementation (Mandatory)	Recordkeeping (Annual)	1	1	6000:00	6,000
2. Full Scope Entities, Ongoing (Mandatory)	Recordkeeping (Annual)	11	1	250:00	2,750
3. Limited Scope Entities, Implementation (Mandatory)	Recordkeeping (Annual)	3	1	23:30	71
4. Limited Scope Entities, Ongoing (Mandatory)	Recordkeeping (Annual)	10	1	11:30	115
5. Reporting Requirements for part 371 (Mandatory)	Reporting (Annual)	4	1	6:00	24
Total Annual Burden (Hours):					8,960
Source: FDIC.
Note: The estimated annual IC time burden is the product, rounded to the nearest hour, of the estimated annual number of responses and the estimated time per response for a given IC. The estimated annual number of responses is the product, rounded to the nearest whole number, of the estimated annual number of respondents and the estimated annual number of responses per respondent. This methodology ensures the estimated annual burdens in the table are consistent with the values recorded in OMB’s consolidated information system.

Estimated Hourly Labor Compensation Rates -To estimate the weighted average hourly compensation cost of the burdens described above, FDIC uses the 75th percentile hourly wages reported by the Bureau of Labor Statistics (BLS) National Industry-Specific Occupational Employment and Wage Estimates for the relevant occupations in the Depository Credit Intermediation sector, as of December 2020.  

The hourly wage rates reported do not include non-monetary compensation. According to the December 2020 Employer Cost of Employee Compensation data, compensation rates for health and other benefits are 34 percent of total compensation. To account for non-monetary compensation, FDIC adjusts the hourly wage rates reported by BLS by that percentage. FDIC also adjusts the hourly wage by 1.71 percent based on changes in the Consumer Price Index for Urban Consumers (CPI-U) from May 2019 to December 2020 to account for inflation and ensure that the wage information is contemporaneous with the non-monetary compensation statistic.

After calculating these adjustments, FDIC then weights the total hourly compensation for the six occupations (Executives and Managers, Lawyers, Compliance Officers, IT Specialists, Financial Analysts, and Clerical), using the agency’s estimated allocation of labor to find the estimated hourly cost of complying with this IC.¹ The estimated hourly compensation rates are as follows:

Summary of Hourly Burden Cost Estimate (OMB No. 3064-0163)
Estimated Category of Personnel Responsible for Complying with the PRA Burden	Total Estimated Hourly Compensation	Allocated Weights	Weighted Hourly Compensation
Executives and Managers2	$123.30	16.7%	$20.55
Lawyers3	151.44	16.7%	$25.24
Compliance Officers4	67.35	16.7%	$11.23
IT Specialists5	92.30	16.7%	$15.38
Financial Analysts6	79.40	16.7%	$13.23
Clerical7	33.44	16.7%	$5.57
Weighted Average:			$91.21
Source: Bureau of Labor Statistics: "National Industry-Specific Occupational Employment and Wage Estimates: Industry: Credit Intermediation and Related Activities (5221 And 5223 only)" (May 2019), Employer Cost of Employee Compensation (December 2020), Consumer Price Index (December 2020). Note: The 75th percentile wage information reported by the BLS in the Specific Occupational Employment and Wage Estimates does not include health benefits and other non-monetary benefits. According to the December 2020 Employer Cost of Employee Compensation data compensation rates for health and other benefits are 34 percent of total compensation. Additionally, the wage has been adjusted for inflation according BLS data on the Consumer Price Index for Urban Consumers (CPI-U) so that it is contemporaneous with the non-wage compensation statistic. The inflation rate was 1.71 percent between May 2019 and December 2020.

Total Estimated Compliance Cost

Estimated Labor Cost – FDIC estimates the total annual cost burden for this information collection by multiplying the total estimated annual burden hours shown in the Summary of Estimated Annual Burden table above, by the weighted average hourly compensation estimate shown in the Summary of Hourly Burden Cost Estimate table . The total annual cost burden is estimated to be approximately $934,902.⁸

13. Estimate of annualized external costs to respondents:

None.

14. Estimate of annualized costs to the government:

None.

15. Changes in burden:

See discussion in Section 12 above.

16. Information regarding collections whose results are planned to be published for statistical use:

No publication for statistical use is contemplated.

17. Display of expiration date:

Not applicable.

18. Exceptions to certification statement:

Not applicable.

B. Collections of Information Employing Statistical Methods.

Not applicable.

1 The FDIC did not have information sufficient to allocate labor hours and, accordingly, it has assumed that an even allocation among the listed occupations would be appropriate.

2 Occupation (SOC Code): Management Occupations (110000).

3 Occupation (SOC Code): Legal Occupations (230000).

4 Occupation (SOC Code): Compliance Officers (131040).

5 Occupation (SOC Code): Computer and Mathematical Occupations (150000).

6 Occupation (SOC Code): Financial and Investment Analysts, Financial Risk Specialists, and Financial Specialists, All Other (132098).

7 Occupation (SOC Code): Office and Administrative Support Occupations (430000).

8 10,250 hours / year multiplied by $91.21 / hour = $934,902.05 per year.

7