The Honorable Randal Quarles
Vice Chairman for Supervision
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551

Re: Challenges regarding the implementation of the FBO Tailoring Rule

Dear Vice Chairman Quarles,

SIFMA1 appreciates the Board of Governors of the Federal Reserve’s efforts on finalizing the revisions to the tailoring rules and the collective efforts of the Federal Banking Agencies regarding the tailored application of interagency liquidity and capital requirements. We have reviewed the final rules issued by the Board of Governors of the Federal Reserve System (“Board Rule”) to revise Regulation YY as it applies to the enhanced prudential standards2 and the Agencies’ final rule to change applicability thresholds for regulatory capital and liquidity requirements3 (“Inter-agency Proposal”). While SIFMA was a signatory on the Joint Trades Letter providing “Supplemental Comments on the Final Tailoring Rule” sent November 1, 2019, we believe additional alternatives detailed in this letter may provide expeditious resolution to industry concerns. The Tailoring rule was a very broad rulemaking and further revisions maybe warranted to accommodate transition in a way envisioned in the rule’s preamble.

Nonetheless, we offer for your consideration concerns regarding certain Risk Based Indicators use in the initial designation which unless refined will present challenges in implementation and avoidable costs, burdens, uncertainty that impact effected banks’ balance sheets and business planning. These issues are particularly impactful for Intermediate Holding Companies (IHCs) of Foreign Banking Organizations (FBOs) engaged in institutional U.S. capital markets activities.