PART 234—DESIGNATED FINANCIAL MARKET UTILITIES (REGULATION HH) Authority: 12 U.S.C. 5461 et seq. Source: 77 FR 45919, Aug. 2, 2012, unless otherwise noted. § 234.1 Authority, purpose, and scope. (a) Authority. (b) Purpose and scope. [77 FR 45919, Aug. 2, 2012, as amended at 78 FR 76979, Dec. 20, 2013] § 234.2 Definitions. (a) Backtest ex post (b) Central counterparty (c) Central securities depository (d) Critical operations critical services (e) Designated financial market utility (f) Financial market utility (g) Link (h) Operational risk (i) Orderly wind-down (j) Recovery ex ante (k) Securities settlement system (l) Stress test (m) Supervisory Agency (n) Third party (o) Trade repository [Reg. HH, 89 FR 18765, Mar. 15, 2024] § 234.3 Standards for designated financial market utilities. (a) A designated financial market utility must implement rules, procedures, or operations designed to ensure that it meets or exceeds the following risk-management standards with respect to its payment, clearing, and settlement activities. (1) Legal basis. (2) Governance. (i) Are clear, transparent, and documented; (ii) Promote the safety and efficiency of the designated financial market utility; (iii) Support the stability of the broader financial system, other relevant public interest considerations such as fostering fair and efficient markets, and the legitimate interests of relevant stakeholders, including the designated financial market utility's owners, participants, and participants' customers; and (iv) Are designed to ensure— (A) Lines of responsibility and accountability are clear and direct; (B) The roles and responsibilities of the board of directors and senior management are clearly specified; (C) The board of directors consists of suitable individuals having appropriate skills to fulfill its multiple roles; (D) The board of directors includes a majority of individuals who are not executives, officers, or employees of the designated financial market utility or an affiliate of the designated financial market utility; (E) The board of directors establishes policies and procedures to identify, address, and manage potential conflicts of interest of board members and to review its performance and the performance of individual board members on a regular basis; (F) The board of directors establishes a clear, documented risk-management framework that includes the designated financial market utility's risk-tolerance policy, assigns responsibilities and accountability for risk decisions, and addresses decisionmaking in crises and emergencies; (G) Senior management has the appropriate experience, skills, and integrity necessary to discharge operational and risk-management responsibilities; (H) The risk-management function has sufficient authority, resources, and independence from other operations of the designated financial market utility, and has a direct reporting line to and is overseen by a committee of the board of directors; (I) The internal audit function has sufficient authority, resources, and independence from management, and has a direct reporting line to and is overseen by a committee of the board of directors; and (J) Major decisions of the board of directors are clearly disclosed to relevant stakeholders, including the designated financial market utility's owners, participants, and participants' customers, and, where there is a broad market impact, the public. (3) Framework for the comprehensive management of risks. (i) Risk-management policies, procedures, and systems that enable the designated financial market utility to identify, measure, monitor, and manage the risks that arise in or are borne by the designated financial market utility, including those posed by other entities as a result of interdependencies; (ii) Risk-management policies, procedures, and systems that enable the designated financial market utility to identify, measure, monitor, and manage the material risks that it poses to other entities, such as other financial market utilities, trade repositories, settlement banks, liquidity providers, or service providers, as a result of interdependencies; and (iii) Integrated plans for the designated financial market utility's recovery and orderly wind-down that— (A) Identify the designated financial market utility's critical operations and services related to payment, clearing, and settlement; (B) Identify scenarios that may potentially prevent it from being able to provide its critical operations and services as a going concern, including uncovered credit losses (as described in paragraph (a)(4)(vi)(A) of this section), uncovered liquidity shortfalls (as described in paragraph (a)(7)(viii)(A) of this section), and general business losses (as described in paragraph (a)(15) of this section); (C) Identify criteria that could trigger the implementation of the recovery or orderly wind-down plan; (D) Include rules, procedures, policies, and any other tools the designated financial market utility would use in a recovery or orderly wind-down to address the scenarios identified under paragraph (a)(3)(iii)(B) of this section; (E) Include procedures to ensure timely implementation of the recovery and orderly wind-down plans in the scenarios identified under paragraph (a)(3)(iii)(B) of this section; (F) Include procedures for informing the Board, as soon as practicable, if the designated financial market utility is considering initiating recovery or orderly wind-down; and (G) Are reviewed the earlier of every two years or after changes to the system or the environment in which the designated financial market utility operates that would significantly affect the viability or execution of the plans. (4) Credit risk. (i) If it operates as a central counterparty, maintains additional prefunded financial resources that are sufficient to cover its credit exposure under a wide range of significantly different stress scenarios that includes the default of the participant and its affiliates that would potentially cause the largest aggregate credit exposure to the designated financial market utility in extreme but plausible market conditions; (ii) If it operates as a central counterparty, may be directed by the Board to maintain additional prefunded financial resources that are sufficient to cover its credit exposure under a wide range of significantly different stress scenarios that includes the default of the two participants and their affiliates that would potentially cause the largest aggregate credit exposure to the designated financial market utility in extreme but plausible market conditions. The Board may consider such a direction if the central counterparty— (A) Is involved in activities with a more-complex risk profile, such as clearing financial instruments characterized by discrete jump-to-default price changes or that are highly correlated with potential participant defaults, or (B) Has been determined by another jurisdiction to be systemically important in that jurisdiction; (iii) If it operates as a central counterparty, determines the amount and regularly tests the sufficiency of the total financial resources available to meet the requirements of this paragraph by— (A) On a daily basis, conducting a stress test of its total financial resources using standard and predetermined stress scenarios, parameters, and assumptions; (B) On at least a monthly basis, and more frequently when the products cleared or markets served experience high volatility or become less liquid, or when the size or concentration of positions held by the central counterparty's participants increases significantly, conducting a comprehensive and thorough analysis of the existing stress scenarios, models, and underlying parameters and assumptions such that the designated financial market utility meets its required level of default protection in light of current and evolving market conditions; and (C) Having clear procedures to report the results of its stress tests to decisionmakers at the central counterparty and using these results to evaluate the adequacy of and adjust its total financial resources; (iv) If it operates as a central counterparty, excludes assessments for additional default or guaranty fund contributions (that is, default or guaranty fund contributions that are not prefunded) in its calculation of financial resources available to meet the total financial resource requirement under this paragraph; (v) At least annually, provides for a validation of the designated financial market utility's risk-management models used to determine the sufficiency of its total financial resources that— (A) Includes the designated financial market utility's models used to comply with the collateral provisions under paragraph (a)(5) of this section and models used to determine initial margin under paragraph (a)(6) of this section; and (B) Is performed by a qualified person who does not perform functions associated with the model (except as part of the annual model validation), does not report to such a person, and does not have a financial interest in whether the model is determined to be valid; and (vi) Establishes rules and procedures that explicitly— (A) Address allocation of credit losses the designated financial market utility may face if its collateral and other financial resources are insufficient to cover fully its credit exposures, including the repayment of any funds a designated financial market utility may borrow from liquidity providers; and (B) Describe the designated financial market utility's process to replenish any financial resources that the designated financial market utility may employ during a stress event, including a participant default. (5) Collateral. (i) Establishes prudent valuation practices and develops haircuts that are tested regularly and take into account stressed market conditions; (ii) Establishes haircuts that are calibrated to include relevant periods of stressed market conditions to reduce the need for procyclical adjustments; (iii) Provides for annual validation of its haircut procedures, as part of its risk-management model validation under paragraph (a)(4)(v) of this section; (iv) Avoids concentrated holdings of any particular type of asset where the concentration could significantly impair the ability to liquidate such assets quickly without significant adverse price effects; (v) Uses a collateral management system that is well-designed and operationally flexible such that it, among other things,— (A) Accommodates changes in the ongoing monitoring and management of collateral; and (B) Allows for the timely valuation of collateral and execution of any collateral or margin calls. (6) Margin. (i) Is conceptually and methodologically sound for the risks and particular attributes of each product, portfolio, and markets it serves, as demonstrated by documented and empirical evidence supporting design choices, methods used, variables selected, theoretical bases, key assumptions, and limitations; (ii) Establishes margin levels commensurate with the risks and particular attributes of each product, portfolio, and market it serves; (iii) Has a reliable source of timely price data; (iv) Has procedures and sound valuation models for addressing circumstances in which pricing data are not readily available or reliable; (v) Marks participant positions to market and collects variation margin at least daily and has the operational capacity to make intraday margin calls and payments, both scheduled and unscheduled, to participants; (vi) Generates initial margin requirements sufficient to cover potential changes in the value of each participant's position during the interval between the last margin collection and the closeout of positions following a participant default by— (A) Ensuring that initial margin meets an established single-tailed confidence level of at least 99 percent with respect to the estimated distribution of future exposure; and (B) Using a conservative estimate of the time horizons for the effective hedging or closeout of the particular types of products cleared, including in stressed market conditions; and (vii) Is monitored on an ongoing basis and regularly reviewed, tested, and verified through— (A) Daily backtests; (B) Monthly sensitivity analyses, performed more frequently during stressed market conditions or significant fluctuations in participant positions, with this analysis taking into account a wide range of parameters and assumptions that reflect possible market conditions that captures a variety of historical and hypothetical conditions, including the most volatile periods that have been experienced by the markets the designated financial market utility serves; and (C) Annual model validations of the designated financial market utility's margin models and related parameters and assumptions, as part of its risk-management model validation under paragraph (a)(4)(v) of this section. (7) Liquidity risk. (i) Has effective operational and analytical tools to identify, measure, and monitor its settlement and funding flows on an ongoing and timely basis, including its use of intraday liquidity; (ii) Maintains sufficient liquid resources in all relevant currencies to effect same-day and, where applicable, intraday and multiday settlement of payment obligations with a high degree of confidence under a wide range of significantly different potential stress scenarios that includes the default of the participant and its affiliates that would generate the largest aggregate liquidity obligation for the designated financial market utility in extreme but plausible market conditions; (iii) Holds, for purposes of meeting the minimum liquid resource requirement under paragraph (a)(7)(ii) of this section,— (A) cash in each relevant currency at the central bank of issue or creditworthy commercial banks; (B) assets that are readily available and convertible into cash, through committed arrangements without material adverse change conditions, such as collateralized lines of credit, foreign exchange swaps, and repurchase agreements; or (C) subject to the determination of the Board, highly marketable collateral and investments that are readily available and convertible into cash with prearranged and highly reliable funding arrangements, even in extreme but plausible market conditions; (iv) Evaluates and confirms, at least annually, whether each provider of the arrangements as described in paragraphs (a)(7)(iii)(B) and (C) of this section has sufficient information to understand and manage that provider's associated liquidity risks, and whether the provider has the capacity to perform; (v) Maintains and tests its procedures and operational capacity for accessing each type of liquid resource required under this paragraph at least annually; (vi) Determines the amount and regularly tests the sufficiency of the liquid resources necessary to meet the minimum liquid resource requirement under this paragraph by— (A) On a daily basis, conducting a stress test of its liquid resources using standard and predetermined stress scenarios, parameters, and assumptions; (B) On at least a monthly basis, and more frequently when products cleared or markets served experience high volatility or become less liquid, or when the size or concentration of positions held by the designated financial market utility's participants increases significantly, conducting a comprehensive and thorough analysis of the existing stress scenarios, models, and underlying parameters and assumptions such that the designated financial market utility meets its identified liquidity needs and resources in light of current and evolving market conditions; and (C) Having clear procedures to report the results of its stress tests to decisionmakers at the designated financial market utility and using these results to evaluate the adequacy of and make adjustments to its liquidity risk-management framework; (vii) At least annually, provides for a validation of its liquidity risk-management model by a qualified person who does not perform functions associated with the model (except as part of the annual model validation), does not report to such a person, and does not have a financial interest in whether the model is determined to be valid; and (viii) Establishes rules and procedures that explicitly— (A) Address potential liquidity shortfalls that would not be covered by the designated financial market utility's liquid resources and avoid unwinding, revoking, or delaying the same-day settlement of payment obligations; and (B) Describe the designated financial market utility's process to replenish any liquid resources that it may employ during a stress event, including a participant default. (8) Settlement finality. (9) Money settlements. (i) Establishes and monitors adherence to criteria based on high standards for its settlement banks that take account of, among other things, their applicable regulatory and supervisory frameworks, creditworthiness, capitalization, access to liquidity, and operational reliability; (ii) Monitors and manages the concentration of credit and liquidity exposures to its commercial settlement banks; and (iii) Ensures that its legal agreements with its settlement banks state clearly— (A) When transfers on the books of individual settlement banks are expected to occur; (B) That transfers are final when funds are credited to the recipient's account; and (C) That the funds credited to the recipient are available immediately for retransfer or withdrawal. (10) Physical deliveries. (11) Central securities depositories. (12) Exchange-of-value settlement systems. (13) Participant-default rules and procedures. (14) Segregation and portability. (15) General business risk. (i) Maintains liquid net assets funded by equity that are at all times sufficient to ensure a recovery or orderly wind-down of critical operations and services such that it— (A) Holds unencumbered liquid financial assets, such as cash or highly liquid securities, that are sufficient to cover the greater of— ( 1 ( 2 (B) Holds equity, such as common stock, disclosed reserves, and other retained earnings, that is at all times greater than or equal to the amount of unencumbered liquid financial assets that are required to be held under paragraph (a)(15)(i)(A) of this section; and (ii) Maintains a viable plan, approved by the board of directors, for raising additional equity should the designated financial market utility's equity fall below the amount required under paragraph (a)(15)(i) of this section, and updates the plan the earlier of every two years or following changes to the designated financial market utility or the environment in which it operates that would significantly affect the viability or execution of the plan. (16) Custody and investment risks. (i) Safeguards its own and its participants' assets and minimizes the risk of loss on and delay in access to these assets by— (A) Holding its own and its participants' assets at supervised and regulated entities that have accounting practices, safekeeping procedures, and internal controls that fully protect these assets; and (B) Evaluating its exposures to its custodian banks, taking into account the full scope of its relationships with each; and (ii) Invests its own and its participants' assets— (A) In instruments with minimal credit, market, and liquidity risks, such as investments that are secured by, or are claims on, high-quality obligors and investments that allow for timely liquidation with little, if any, adverse price effect; and (B) Using an investment strategy that is consistent with its overall risk-management strategy and fully disclosed to its participants. (17) Operational risk. (i) Identifies the plausible sources of operational risk, both internal and external, and mitigates their impact through the use of appropriate systems, policies, procedures, and controls—including those specific systems, policies, procedures, or controls required pursuant to this paragraph (a)(17)—that are reviewed, audited, and tested periodically and after major changes such that— (A) The designated financial market utility conducts tests— ( 1 ( 2 (B) The designated financial market utility reviews the design, implementation, and testing of affected and similar systems, policies, procedures, and controls, after material operational incidents, including the material operational incidents described in paragraph (a)(17)(vi)(A) of this section, or after changes to the environment in which the designated financial market utility operates that could significantly affect the plausible sources or mitigants of operational risk; and (C) The designated financial market utility remediates as soon as possible, following established governance processes, deficiencies in systems, policies, procedures, or controls identified in the process of review or testing; (ii) Identifies, monitors, and manages the risks its operations might pose to other entities such as those referenced in paragraph (a)(3)(ii) of this section; (iii) Has systems, policies, procedures, and controls that are designed to achieve clearly defined objectives to ensure a high degree of security and operational reliability; (iv) Has systems that have adequate, scalable capacity to handle increasing stress volumes and achieve the designated financial market utility's service-level objectives; (v) Has comprehensive physical, information, and cyber security policies, procedures, and controls that enable the designated financial market utility to identify, monitor, and manage potential and evolving vulnerabilities and threats; (vi) Has a documented framework for incident management that provides for the prompt detection, analysis, and escalation of an incident, appropriate procedures for addressing an incident, and incorporation of lessons learned following an incident. This framework includes a plan for notification and communication of material operational incidents to identified relevant entities that ensures the designated financial market utility— (A) Immediately notifies the Board, in accordance with the process established by the Board, when the designated financial market utility activates its business continuity plan or has a reasonable basis to conclude that— ( 1 ( 2 (B) Establishes criteria and processes providing for timely communication and responsible disclosure of material operational incidents to the designated financial market utility's participants and other relevant entities, such that— ( 1 ( 2 (vii) Has business continuity management that provides for rapid recovery and timely resumption of critical operations and services and fulfillment of its obligations, including in the event of a wide-scale disruption or a major disruption; (viii) Has a business continuity plan that— (A) Incorporates the use of two sites providing for sufficient redundancy supporting critical operations that are located at a sufficient geographical distance from each other to have a distinct risk profile; (B) Is designed to enable critical systems, including information technology systems, to recover and resume critical operations and services no later than two hours following disruptive events; (C) Is designed to enable it to complete settlement by the end of the day of the disruption, even in case of extreme circumstances; (D) Sets out criteria and processes by which the designated financial market utility will reestablish availability for affected participants and other entities following a disruption to the designated financial market utility's critical operations or services; (E) Provides for testing, pursuant to the requirements under paragraphs (a)(17)(i)(A) and (C) of this section, at least annually, of the designated financial market utility's business continuity arrangements, including the people, processes, and technologies of the sites required under paragraph (a)(17)(viii)(A) of this section, such that— ( 1 ( 2 ( 3 (F) Is reviewed, pursuant to the requirements under paragraphs (a)(17)(i)(B) and (C) of this section, at least annually, in order to— ( 1 ( 2 (ix) Has systems, policies, procedures, and controls that effectively identify, monitor, and manage risks associated with third-party relationships, and that ensure that, for any service that is performed for the designated financial market utility by a third party, risks are identified, monitored, and managed to the same extent as if the designated financial market utility were performing the service itself. In this regard, the designated financial market utility— (A) Regularly conducts risk assessments of third parties; (B) Establishes information-sharing arrangements, as appropriate, with third parties that provide services material to any of the designated financial market utility's critical operations or services; and (C) Addresses in its business continuity management and testing, as appropriate, third parties that provide services material to any of the designated financial market utility's critical operations or services. (18) Access and participation requirements. (i) Monitors compliance with its participation requirements on an ongoing basis and has the authority to impose more-stringent restrictions or other risk controls on a participant in situations where the designated financial market utility determines the participant poses heightened risk to the designated financial market utility; and (ii) Has clearly defined and publicly disclosed procedures for facilitating the suspension and orderly exit of a participant that fails to meet the participation requirements. (19) Tiered participation arrangements. (i) Conducts an analysis to determine whether material risks arise from tiered participation arrangements; (ii) Where material risks are identified, mitigates or manages such risks; and (iii) Reviews and updates the analysis conducted under paragraph (a)(19)(i) of this section the earlier of every two years or following material changes to the system design or operations or the environment in which the designated financial market utility operates if those changes could affect the analysis conducted under paragraph (a)(19)(i) of this section. (20) Links. (21) Efficiency and effectiveness. (i) Is efficient and effective in meeting the requirements of its participants and the markets it serves, in particular, with regard to its— (A) Clearing and settlement arrangement; (B) Risk-management policies, procedures, and systems; (C) Scope of products cleared and settled; and (D) Use of technology and communication procedures; (ii) Has clearly defined goals and objectives that are measurable and achievable, such as minimum service levels, risk-management expectations, and business priorities; and (iii) Has policies and procedures for the regular review of its efficiency and effectiveness. (22) Communication procedures and standards. (23) Disclosure of rules, key procedures, and market data. (i) Has clear and comprehensive rules and procedures; (ii) Publicly discloses all rules and key procedures, including key aspects of its default rules and procedures; (iii) Provides sufficient information to enable participants to have an accurate understanding of the risks, fees, and other material costs they incur by participating in the designated financial market utility; (iv) Provides a comprehensive public disclosure of its legal, governance, risk management, and operating framework, that includes— (A) Executive summary. (B) Summary of major changes since the last update of the disclosure. (C) General background on the designated financial market utility. ( 1 ( 2 ( 3 (D) Standard-by-standard summary narrative. (E) List of publicly available resources. (v) Updates the public disclosure under paragraph (a)(23)(iv) of this section the earlier of every two years or to reflect changes to its system or the environment in which it operates that would significantly change the accuracy of the statements provided under paragraph (a)(23)(iv) of this section. (b) The Board, by order, may apply heightened risk-management standards to a particular designated financial market utility in accordance with the risks presented by that designated financial market utility. The Board, by order, may waive the application of a standard or standards to a particular designated financial market utility where the risks presented by or the design of that designated financial market utility would make the application of the standard or standards inappropriate. [77 FR 45919, Aug. 2, 2012, as amended at 79 FR 65558, Nov. 5, 2014; Reg. HH, 89 FR 18766, Mar. 15, 2024] § 234.4 Changes to rules, procedures, or operations. (a) Advance notice. (2) The notice of the proposed change shall describe— (i) The nature of the change and expected effects on risks to the designated financial market utility, its participants, or the market; and (ii) How the designated financial market utility plans to manage any identified risks. (3) The Board may require the designated financial market utility to provide additional information necessary to assess the effect the proposed change would have on the nature or level of risks associated with the utility's payment, clearing, or settlement activities and the sufficiency of any proposed risk-management techniques. (4) A designated financial market utility shall not implement a change to which the Board has an objection. (5) The Board will notify the designated financial market utility of any objection before the end of 60 days after the later of— (i) The date the Board receives the notice of proposed change; or (ii) The date the Board receives any further information it requests for consideration of the notice. (6) A designated financial market utility may implement a change if it has not received an objection to the proposed change before the end of 60 days after the later of— (i) The date the Board receives the notice of proposed change; or (ii) The date the Board receives any further information it requests for consideration of the notice. (7) With respect to proposed changes that raise novel or complex issues, the Board may, by written notice during the 60-day review period, extend the review period for an additional 60 days. Any extension under this paragraph will extend the time periods under paragraphs (a)(5) and (a)(6) of this section to 120 days. (8) A designated financial market utility may implement a proposed change before the expiration of the applicable review period if the Board notifies the designated financial market utility in writing that the Board does not object to the proposed change and authorizes the designated financial market utility to implement the change on an earlier date, subject to any conditions imposed by the Board. (b) Emergency changes. (i) An emergency exists; and (ii) Immediate implementation of the change is necessary for the designated financial market utility to continue to provide its services in a safe and sound manner. (2) The designated financial market utility shall provide notice of any such emergency change to the Board as soon as practicable and no later than 24 hours after implementation of the change. (3) In addition to the information required for changes requiring advance notice in paragraph (a)(2) of this section, the notice of an emergency change shall describe— (i) The nature of the emergency; and (ii) The reason the change was necessary for the designated financial market utility to continue to provide its services in a safe and sound manner. (4) The Board may require modification or rescission of the change if it finds that the change is not consistent with the purposes of the Dodd-Frank Act or any applicable rules, order, or standards prescribed under section 805(a) of the Dodd-Frank Act. (c) Materiality. (2) A change to rules, procedures, or operations that would materially affect the nature or level of risks presented includes, but is not limited to, changes that materially affect any one or more of the following: (i) Participant eligibility or access criteria; (ii) Product eligibility; (iii) Risk management; (iv) Settlement failure or default procedures; (v) Financial resources; (vi) Business continuity and disaster recovery plans; (vii) Daily or intraday settlement procedures; (viii) The scope of services, including the addition of a new service or discontinuation of an existing service; (ix) Technical design or operating platform, which results in non-routine changes to the underlying technological framework for payment, clearing, or settlement functions; or (x) Governance. (3) A change to rules, procedures, or operations that does not meet the conditions of paragraph (c)(2) of this section and would not materially affect the nature or level of risks presented includes, but is not limited to the following: (i) A routine technology systems upgrade; (ii) A change in a fee, price, or other charge for services provided by the designated financial market utility; (iii) A change related solely to the administration of the designated financial market utility or related to the routine, daily administration, direction, and control of employees; or (iv) A clerical change and other non-substantive revisions to rules, procedures, or other documentation. [77 FR 45919, Aug. 2, 2012. Redesignated at 79 FR 65562, Nov. 5, 2014] § 234.5 Access to Federal Reserve Bank accounts and services. (a) This section applies to any designated financial market utility for which the Board may authorize a Federal Reserve Bank to open an account or provide services in accordance with section 806(a) of the Dodd-Frank Act. Upon receipt of Board authorization and subject to any limitations, restrictions, or other requirements established by the Board, a Federal Reserve Bank may enter into agreements governing the details of its accounts and services with a designated financial market utility, consistent with this section and any other applicable Board direction. The agreements may include, among other things, provisions regarding documentation to establish the account and receive services, conditions imposed on the account and services, service charges, reporting, accounting for activity in the account, liability and duty of care, and termination. (b) A Federal Reserve Bank should ensure that its establishment and maintenance of an account for or provision of services to a designated financial market utility does not create undue credit, settlement, or other risk to the Reserve Bank. In order to establish and maintain an account with a Federal Reserve Bank or receive financial services from a Federal Reserve Bank, the designated financial market utility must be in compliance with the Supervisory Agency's regulatory and supervisory requirements regarding financial resources, liquidity, participant default management, and other aspects of risk management, as determined by the Supervisory Agency. In addition, at a minimum, the designated financial market utility must, in the Federal Reserve Bank's judgment— (1) Be in generally sound financial condition, including maintenance of sufficient working capital and cash flow to permit the designated financial market utility to continue as a going concern and to meet its current and projected operating expenses under a range of scenarios; (2) Be in compliance with Board orders and policies, Federal Reserve Bank account agreements and, as applicable, operating circulars, and other applicable Federal Reserve requirements regarding the establishment and maintenance of an account at a Federal Reserve Bank and the receipt of financial services from a Federal Reserve Bank; and (3) Have an ongoing ability, including during periods of market stress or a participant default, to meet all of its obligations under its agreement for a Federal Reserve Bank account and services, including by maintaining— (i) Sufficient liquid resources to meet its obligations under the account agreement; (ii) The operational capacity to ensure that such liquid resources are available to satisfy the account obligations on a timely basis in accordance with the account agreement; and (iii) Sound money settlement processes designed to adequately monitor its Federal Reserve Bank account on an intraday basis, process money transfers through its account in an orderly manner, and complete final money settlement no later than the value date. (c) The Board will consult with the Supervisory Agency of a designated financial market utility prior to authorizing a Federal Reserve Bank to open an account, and periodically thereafter, to ascertain the views of the Supervisory Agency regarding the designated financial market utility's compliance with the requirements in paragraph (b) of this section. (d) In addition to any right that a Reserve Bank has to limit or terminate an account or the use of a service pursuant to its account agreement, the Board may direct the Federal Reserve Bank to impose limits, restrictions, or other conditions on the availability or use of a Federal Reserve Bank account or service by a designated financial market utility, including directing the Reserve Bank to terminate the use of a particular service or to close the account. If the Reserve Bank determines that a designated financial market utility no longer complies with one or more of the minimum conditions in subsection (b), the Reserve Bank will consult with the Board regarding continued maintenance of the account and provision of services. [78 FR 76979, Dec. 20, 2013. Redesignated and amended at 79 FR 65562, Nov. 5, 2014] § 234.6 Interest on balances. (a) A Federal Reserve Bank may pay interest on balances maintained by a designated financial market utility at the Federal Reserve Bank in accordance with this section and under such other terms and conditions as the Board may prescribe. (b) Interest on balances paid under this section shall be at the rate paid on balances maintained by depository institutions or another rate determined by the Board from time to time, not to exceed the general level of short-term interest rates. (c) For purposes of this section, “short-term interest rates” shall have the same meaning as the meaning provided for that term in § 204.10(b)(3) of this chapter. [78 FR 76979, Dec. 20, 2013. Redesignated at 79 FR 65562, Nov. 5, 2014]