LegiStorm

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GAO reviewed the Department of the Treasury, Office of the Comptroller of the Currency; Federal Reserve System; and Federal Deposit Insurance Corporation's (the agencies) new rule on the Liquidity Coverage Ratio Rule: Treatment of Certain Emergency Facilities. GAO found that the final rule requires banking organizations to neutralize the effect under the Liquidity Coverage Ratio rule of participating in the Money Market Mutual Fund Liquidity Facility and the Paycheck Protection Program Liquidity Facility.







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B-332299
June 30, 2020
The Honorable Mike Crapo
Chairman
The Honorable Sherrod Brown
Ranking Member
Committee on Banking, Housing, and Urban Affairs
United States Senate
The Honorable Maxine Waters
Chairwoman
The Honorable Patrick McHenry
Ranking Member
Committee on Financial Services
House of Representatives
Subject: Department of the Treasury,
Office of the Comptroller of the Currency; Federal Reserve System, Federal Deposit
Insurance Corporation: Liquidity Coverage Ratio Rule: Treatment of Certain
Emergency Facilities
Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a
major rule promulgated by the Department of the Treasury, Office of the Comptroller of the
Currency; Federal Reserve System; Federal Deposit Insurance Corporation (the agencies)
entitled ?Liquidity Coverage Ratio Rule: Treatment of Certain Emergency
Facilities? (RINs: 1557-AE92; 7100-AF90; 3064-AF51).  We received the rule on
June 12, 2020.  It was published in the Federal Register as an interim final
rule and became effective on May 6, 2020.  85 Fed. Reg. 26835.  The agencies
requested public comments by June 5, 2020.  Id.
According to the agencies, to facilitate use of the Money Market Mutual Fund Liquidity
Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF), and to
ensure that the effects of their use are consistent and predictable under the Liquidity
Coverage Ratio (LCR) rule, the agencies are adopting this interim final rule to require
banking organizations to neutralize the effect under the LCR rule of participating in the
MMLF and the PPPLF.  The agencies stated that the Board of Governors of the Federal
Reserve System (Board) authorized the establishment of the MMLF and the PPPLF, pursuant to
section 13(3) of the Federal Reserve Act, Pub. L. No. 63-43, 38 Stat. 251 (Dec. 23, 1913),
to provide liquidity to the money market sector, small business lenders, and the broader
credit markets in order to stabilize the financial system.
The Congressional Review Act (CRA) requires a 60-day delay in the effective date of a
major rule from the date of publication in the Federal Register or receipt of the
rule by Congress, whichever is later.  5 U.S.C. § 801(a)(3)(A).  The 60-day delay
in effective date can be waived, however, if the agency finds for good cause that delay is
impracticable, unnecessary, or contrary to the public interest, and the agency incorporates
a statement of the findings and its reasons in the rule issued.  5 U.S.C. §§
553(b)(3)(B), 808(2).  The agencies stated that they believe the public interest is
best served by implementing the interim final rule immediately upon publication in the
Federal Register.  The agencies stated that in the absence of this interim
final rule, banking organizations may be restricted in their ability to use the MMLF and
PPPLF due to potential effects on their LCRs.  The urgent funding pressures facing
small businesses and money market mutual funds justify the adoption of this interim final
rule as quickly as possible, according to the agencies.   
Enclosed is our assessment of the agencies? compliance with the procedural steps
required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. 
If you have any questions about this report or wish to contact GAO officials responsible
for the evaluation work relating to the subject matter of the rule, please contact Shari
Brewster, Assistant General Counsel, at (202) 512-6398.

Shirley A. Jones
Managing Associate General Counsel
Enclosure
cc: Shaquita Merritt
Program Specialist
Chief Counsel?s Office
Department of the TreasuryENCLOSURE
REPORT UNDER 5 U.S.C. § 801(a)(2)(A) ON A
MAJOR RULE
ISSUED BY THE
DEPARTMENT OF THE TREASURY,
OFFICE OF THE COMPTROLLER OF THE CURRENCY;
FEDERAL RESERVE SYSTEM;
FEDERAL DEPOSIT INSURANCE CORPORATION
ENTITLED
?LIQUIDITY COVERAGE RATIO
RULE: TREATMENT OF
CERTAIN EMERGENCY FACILITIES?
(RIN: 1557-AE92; 7100-AF90; 3064-AF51)
(i) Cost-benefit analysis
In their submission to us, the Department of the Treasury, Office of the Comptroller of
the Currency (OCC); Federal Reserve System (Board); Federal Deposit Insurance Corporation
(FDIC) (collectively, the agencies) indicated that they did not prepare an analysis of the
costs and benefits of this final rule.
(ii) Agency actions relevant to the Regulatory Flexibility Act (RFA), 5 U.S.C. §§
603-605, 607, and 609
The agencies stated that they are not required to conduct a regulatory flexibility
analysis.  The agencies noted that rules that are exempt from notice and comment are
also exempt from RFA requirements, including conducting a regulatory flexibility
analysis.
(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act
of 1995, 2 U.S.C. §§ 1532-1535
The agencies stated that the Act does not apply to final rules for which a general
notice of proposed rulemaking was not published.  Therefore, according to the
agencies, because they found good cause to dispense with notice and comment for the interim
final rule, they did not prepare an economic analysis of the rule under the Act.
(iv) Other relevant information or requirements under acts and executive
orders
Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.
The agencies determined they had good cause to waive notice and public procedure. 
According to the agencies, the containment measures adopted in response to the public
health concerns have slowed economic activity in the United States.  In particular,
the agencies noted that these containment measures have acutely affected small businesses,
money market mutual funds (MMFs), and financial markets generally.  The agencies
stated that significantly tighter financial conditions and the increased cost of credit for
most borrowers have severely affected small businesses.  According to the agencies, as
millions of Americans have been ordered to stay home, severely reducing their ability to
engage in normal commerce, revenue streams for many small businesses have collapsed.
 The agencies noted that this has resulted in severe liquidity constraints at small
businesses and has forced many small businesses to close temporarily or furlough employees.
 The agencies stated that continued access to financing will be crucial for small
businesses to weather economic disruptions caused by the containment measures adopted in
response to the public health concerns and, ultimately, to help restore economic
activity.  Additionally, the agencies noted that sudden disruptions in financial
markets have put increasing liquidity pressure on MMFs.  Given these pressures, stated
the agencies, MMFs have been faced with increased redemption requests from clients with
immediate cash needs.  According to the agencies, the MMFs may need to sell a
significant number of assets to meet these redemption requests, which could further
increase market pressures.  The agencies stated that to provide liquidity to banking
organizations that lend to small business and the broader credit markets, and to prevent
the disruption in the money markets from destabilizing the financial system, the Board,
with approval of the Secretary of the Treasury, authorized each of the Federal Reserve
Banks to extend credit under the Paycheck Protection Program Liquidity Facility (PPPLF) and
the Federal Reserve Bank of Boston to establish the Money Market Mutual Fund Liquidity
Facility (MMLF).  According to the agencies, this interim final rule will provide
certainty to covered companies regarding the liquidity treatment of inflows and outflows
related to these Federal Reserve lending programs.  The agencies stated that in the
absence of this interim final rule, banking organizations may be restricted in their
ability to use the MMLF and PPPLF due to potential effects on their Liquidity Coverage
Ratios.  The urgent funding pressures facing small businesses and MMFs justify the
adoption of this interim final rule as quickly as possible, according to the agencies.
 For these reasons, the agencies find that there is good cause consistent with the
public interest to issue the interim final rule without advance notice and comment. 
However, according to the agencies, while they believe that there is good cause to issue
the interim final rule without advance notice and comment and with an immediate effective
date, the agencies are interested in the views of the public and requested comment on all
aspects of the interim final rule.  Comments must have been received by June 5,
2020.
Paperwork Reduction Act (PRA), 44 U.S.C. §§ 3501-3520
According to the agencies, this interim final rule does not introduce any new
information collection requirements (ICRs) or revise any existing ICRs pursuant to PRA for
OCC and FDIC.  Therefore, the agencies stated that no submissions will be made by the
agencies to the Office of Management and Budget (OMB) for review.  According to the
agencies, the interim final rule does, however, affect the Board?s current ICR for the
Complex Institution Liquidity Monitoring Report (OMB Control Number 7100?0361).  The
Board estimated 917,440 annual burden hours associated with this information
collection.
Statutory authorization for the rule
The agencies promulgated this final rule pursuant to sections 1 et seq., 93a,
248(a), 321?338a, 481?486, 1462 et seq., 1467a(g)(1), 1815, 1816, 1818, 1819, 1828,
1831p?1, 1831o?1, 1844(b), 3101 et seq., 5365, 5366, 5368, and 5412 of title 12,
United States Code.
Executive Order No. 12,866 (Regulatory Planning and Review)
As independent regulatory agencies, the agencies are not subject to the Order.
Executive Order No. 13,132 (Federalism)
As independent regulatory agencies, the agencies are not subject to the Order.




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