ABA Supports OCC Guidance for Short-Term Investment Funds

Chief Counsel’s Office
Office of the Comptroller of the Currency
400 7th Street SW, Suite 3E-218
Washington, DC 20219

Ladies and Gentlemen:

The American Bankers Association (ABA) appreciates this opportunity to comment on the Office of the Comptroller of the Currency’s (OCC) interim final rule (Release) amending the rules governing short-term investment funds (STIFs) maintained by national banks acting in a fiduciary capacity. STIFs are bank-maintained collective investment funds that, similar to money market mutual funds, are invested in short-term debt securities and maintain a stable net asset value (NAV) of $1.00 per participation interest.

The OCC issued the Release to address “[s]udden disruptions in the financial markets [that] have created conditions that may constrain the ability of a national bank's management team to execute certain elements of a STIF's written investment policy.” Under the interim final rule, the OCC may issue an administrative order during certain periods of market stress that modifies the length of the dollar-weighted average portfolio maturity (WAM) and the dollar-weighted average portfolio life maturity (WAL) requirements in the STIF Rules.

Simultaneous with the issuance of the Release, the OCC also issued an administrative order (Order) that temporarily increases the WAM period from 60 to 120 days and the WAL period from 120 to 180 days. Before taking advantage of the new periods in the Order, a bank must determine such action is in the best interests of the STIF following standard procedures for these fiduciary decisions, and must make necessary amendments to the written plan of the STIF to reflect those changes. The Order terminates on July 20, 2020, unless revised by the OCC before that date.

On behalf of ABA members and the industry that sponsors and maintains STIFs, we appreciate and support the OCC’s effort to provide banks with additional flexibility to manage these funds during the market disruptions caused by the spread of Coronavirus 2019 (COVID-19). Increased WAM and WAL periods allow banks to continue operating STIFs effectively, including facilitating redemptions from and investing contributions to these funds.

As a general matter, we encourage the OCC to consider extending the Order, which terminates on July 20, 2020, if the relevant indicators being monitored suggest market disruptions are occurring or are likely to occur later in the year, for example in the event that liquidity dissipates in the fourth quarter after other programs, such as the Federal Reserve Board’s Money Market Liquidity Facility, expire as currently scheduled. Whatever decision is made, we strongly urge the OCC to announce before the end of the second quarter, June 30, whether the agency will extend the Order beyond the July 20 termination date. Banks managing STIFs will need notice reasonably in advance of the termination date, so they can manage the effects of potential continued volatility and market disruptions to ensure that their portfolios are in compliance with the WAM and WAL requirements in 12 CFR 9.18(b)(4)(iii) before that date.

Conclusion

ABA appreciates this opportunity to comment in support of the Release and Order. The OCC has provided reasonable and helpful flexibility to banks seeking to manage STIFs in the best interests of their fiduciary clients. We urge the OCC to announce whether it will extend the Order’s July 20 termination date by the end of June to give STIF managers enough time to make the necessary investment decisions to move the funds’ portfolios back within the WAM and WAL periods required under 12 CFR 9.18(b)(4)(iii). If you have any questions about the points raised in this letter, please do not hesitate to contact the undersigned.

Sincerely,

Phoebe A. Papageorgiou
Vice President, Trust Policy