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The Proposals Regarding FMUs and PSR Policy

OCC submitted this letter in response to the publication by the Board of Governors of the Federal Reserve System ("the Board") of (a) proposed standards for Financial Market Utilities (the Reg. HH Proposal) and (b) proposed revisions to part 1 of the Federal Reserve Policy on Payment System Risk (the "PSR Policy Proposal"). Under the Reg. HH Proposal, the Board seeks to prescribe risk-management standards governing the operations related to payment, clearing and settlement activities of Financial Market Utilities (FMUs) that have been designated by the Financial Stability Oversight Council as systemically important and for which the Board is the "Supervisory Agency," pursuant to Title VIII of the Dodd-Frank Act. These risk management standards are based on the Principles for Financial Market Infrastructures ("PFMIs") developed jointly by CPSS and IOSCO. Under the PSR Policy Proposal, the Board is, among other things, proposing to revise its existing risk-management standards in the Policy on Payment System Risk (the "PSR Policy") to reflect the PFMIs, include all central counterparties within the scope of part 1 of the PSR Policy, clarify the Board's risk-management expectations for categories of financial market infrastructures, including designated financial market utilities ("DFMUs") for which the Board is not the Supervisory Agency under Title VIII of Dodd-Frank (a category that includes OCC), and replace the existing self-assessment framework with a broader disclosure expectation.

As a DFMU, OCC recognizes our critical role in promoting financial stability and integrity in every market we serve. That is why OCC continually strives to achieve the highest standards possible in everything that we do, including with respect to the risk-management solutions that we provide to market participants. Accordingly, OCC has always treated the PFMIs themselves as reflecting best practices by which we should be guided. When the PFMIs were proposed in March, 2011, OCC submitted a lengthy and detailed comment letter. CPSS and IOSCO addressed many of our comments in the final PFMI release that was published in April, 2012, but a number of our concerns about the PFMIs, as applied to OCC's circumstances, remain. We appreciate this opportunity to raise those concerns as our regulators propose the form in which compliance with the PFMIs will be made mandatory. We intend to submit comments on the SEC's proposal through which the PFMIs will become binding on OCC, but we also appreciate the opportunity to provide our comments to the Board and we encourage the Board and SEC to adopt a consistent view as to how the PFMIs should be interpreted and applied to OCC in light of OCC's unique characteristics and structure.

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