Seal of the Board of Governors of the Federal Reserve System
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.  20551
DIVISION OF BANKING
SUPERVISION AND REGULATION
SR 06 - 14
August 29, 2006

Revised June 30, 2009

The original Attachment 3 (Hiring Non-citizens) was replaced June 30, 2009 by a more up-to-date version.
TO THE OFFICER IN CHARGE OF SUPERVISION
AT EACH FEDERAL RESERVE BANK
SUBJECT:  Revised Policy Governing Access to Confidential Supervisory Information

On August 7, 2006, by an immediately effective interim rule, the Board amended its rule regarding the employment of non-citizens to permit the hiring of certain non-citizens into positions requiring access to confidential supervisory information, subject to certain conditions. Although the rule focuses on the hiring of Board staff, it affects Reserve Bank staff needing access to Board information in performing activities on behalf of the Board. The interim rule clarifies that Reserve Bank staff who seek access to confidential supervisory information must meet the same conditions that apply to Board staff. The interim rule retains the Board's preference for employing U.S. citizens and U.S. nationals over equally qualified persons who are not U.S. citizens or U.S. nationals. The interim rule parallels a recently implemented restriction that the Federal Open Market Committee (FOMC) applies to access by Reserve Bank employees to FOMC information. The full text of the Federal Register notice is attached (Attachment 1).

Rule Governing Access to Confidential Supervisory Information

Confidential supervisory information generally consists of information regarding the Board's examination and supervision of entities subject to its jurisdiction. Under the August 7, 2006, interim rule (as was the case under the prior interim rule covering FOMC information),1 access to confidential supervisory information is limited to "Protected Individuals," which covers three categories of persons: U.S. citizens, U.S. nationals, and non-citizens (i.e., lawful permanent resident aliens or "green card holders") who are eligible for U.S. citizenship and seeking such citizenship.2 In addition, under the new interim rule, a non-citizen in a position requiring a Ph.D. in economics or finance who meets certain conditions is also eligible for access to confidential supervisory information, as further described below.

These requirements extend to all supervisory staff requiring access to confidential supervisory information, including but not limited to Federal Reserve examiners, as well as other Reserve Bank employees who are authorized to access confidential supervisory information. The requirements apply to confidential supervisory information at any level (i.e., Restricted-Controlled FR, Restricted FR, and Internal FR), in any form (e.g., paper or electronic) and irrespective of where the information resides in the Federal Reserve System, including both national and local databases. Thus, unless an employee is a Protected Individual or qualifies for the limited exception for certain non-citizens described below, the employee may not have access to confidential supervisory information.

Exception for Non-citizen3 Access to Confidential Supervisory Information

The immediately effective interim rule provides a narrow exception for certain non-citizens with valid work visas hired into certain positions (which the interim rule refers to as an "Eligible Position"). The change was prompted by a specific business need to hire qualified individuals with a Ph.D. in economics or finance to perform risk quantification analysis required by evolving risk management practices and expected revisions to capital guidelines and frameworks (i.e., Basel II). The exception is a narrow one, as the only Eligible Positions are those that require a Ph.D. in economics or in finance and require access to confidential supervisory information. The exception does not extend, for example, to Federal Reserve examiners or supervision staff in other job functions that require access to confidential supervisory information. A non-citizen employed in an Eligible Position will be permitted, however, to receive a temporary credential authorizing his or her participation in an examination or inspection as a subject matter expert.

For a non-citizen with a valid work visa employed in an Eligible Position, access to confidential supervisory information and the level of access that the non-citizen is eligible to receive are contingent on the non-citizen meeting certain Country List, employment, and residency requirements. In addition, the Director of the Board's Division of Banking Supervision and Regulation must concur with a Reserve Bank's recommendation to provide a non-citizen in an Eligible Position access to confidential supervisory information as a condition for allowing access and a background investigation satisfactory to the Board may be required.4 The rule distinguishes between non-citizens from a country on the Country List, which is contained in the annual federal appropriations' laws, and those non-citizens who are from a country that is not on the Country List. While the Board, whose funds are not appropriated, is not subject to the limitations specifying the countries whose citizens are eligible to be hired as federal employees using appropriated funds, the interim rule uses the Country List as a common point of reference to help align the Board's practices with those approved by Congress in appropriating funds to federal government agencies. This will help ensure consistent treatment for all System employees engaged in supervisory activities, which are conducted by the Reserve Banks under delegated authority by the Board.

Attachment 2 contains a table that summarizes the information access policy by category of staff and security level, including the new exception for non-citizens with valid work visas employed in Eligible Positions. Under the new interim rule, a non-citizen with a valid work visa who is from a country on the Country List, and who is employed in an Eligible Position, may receive access to confidential supervisory information classified as Internal FR or Restricted FR. A non-citizen in this category would be eligible for access to the most sensitive information, Restricted-Controlled FR information, only after meeting the following conditions: (1) the Reserve Bank officer-in-charge of supervision has recommended the employee for access to Restricted-Controlled information and the Board's Director of Banking Supervision and Regulation has concurred with the recommendation; (2) the employee has resided in the United States for at least six years and has been employed for at least two years in the Federal Reserve System; and (3) the employee has passed a background investigation acceptable to the Board. A non-citizen with a valid work visa who is from a country not on the Country List, and who is employed in an Eligible Position, may be granted access to Internal FR information without having to meet the length of employment or U.S. residency requirements. Further, a non-citizen in this category would be eligible to receive access to Restricted FR information if he or she meets the same three conditions noted above. Such a non-citizen, however, would not be eligible for access to Restricted-Controlled information under the interim rule.

Attachment 3 contains the current Country List used by federal government agencies, which is the common point of reference for applying the interim rule. If the employee's country is deleted from the Country List after the employee begins his or her employment with the Federal Reserve System, the employee's existing access to confidential supervisory information designated as Restricted FR or Restricted-Controlled FR will not be affected by the change in the Country List. Similarly, the employee would continue to be eligible for access to confidential supervisory information classified Restricted-Controlled FR information and may be granted such access if he or she meets the additional conditions outlined below for employees from a country on the Country List.

Grandfathering Provisions

For some Reserve Banks, these requirements may represent a change from past Reserve Bank practice. Accordingly, a small number of Reserve Bank staff who had access to confidential supervisory information as of August 7, 2006, the effective date of the interim rule, who now would not qualify for such access or need to take additional steps to be granted access, may continue their existing level of access subject to the successful completion of a background check. This means, for example, that a non-citizen Reserve Bank employee who is not from a country on the Country List and who currently has access to Restricted FR information, will continue to have access to this information, but will be subject to successful completion of a background check. As a non-citizen from a country not on the Country List, this employee would remain ineligible for access to Restricted-Controlled FR information. As previously noted, background checks will be performed by the Board on behalf of Reserve Banks following current procedures.

The interim rule does permit a lawful permanent resident alien who was a System employee as of January 1, 2006, who does not currently have access to confidential supervisory information and who does not qualify as a Protected Individual because he or she failed to file for citizenship within six months of eligibility, to become a Protected Individual if he or she meets the requirements of the interim rule and undergoes a background check acceptable to the Board. The interim rule permits this employee to become a Protected Individual if, before requesting access to confidential supervisory information, he or she files for citizenship. To retain access to confidential supervisory information under this grandfathering provision, the employee must attain U.S. citizenship within two years of applying for it, not counting the processing time by the Department of Homeland Security, Citizenship and Immigration Services. In contrast, a lawful permanent resident alien hired after the effective date of this interim rule who fails to file for citizenship within six months of eligibility would not be considered a Protected Individual. He or she would only qualify as a Protected Individual upon becoming a U.S. citizen.

Implementation and Compliance

A number of related policies and forms (e.g., confidentiality agreements, Intending Citizenship forms) will be updated as a result of these changes. While citizenship requirements pertaining to confidential supervisory information apply to all employees requiring such access, as clarified earlier in this letter, the procedures for Federal Reserve examiners outlined in SR letter 94-40, "Citizenship Policy and Requirements for Federal Reserve Examiners," continue to be in effect, including completion of the required Intending Citizenship form. At this time, Reserve Banks should review their internal practices and procedures, and immediately implement enhancements as necessary to comply with the citizenship access requirements. Strong consideration should also be given to ensuring that all employment notices for positions requiring access to confidential supervisory information contain appropriate disclosure about the Federal Reserve's citizenship requirements.

Since the revised policy is newly implemented and has numerous technical provisions requiring compliance, we encourage Reserve Banks with specific situations and questions about applicability to consult frequently and as needed with the appropriate Board staff. Within the Board's Division of Banking Supervision and Regulation, questions concerning the policy should be directed to Cynthia Carter, Senior Supervisory Financial Analyst at (202) 452-3633. In the Board's Legal Division, questions concerning the Board's rule on non-citizens, including the County List, should be directed to Alye Foster, Senior Counsel at (202) 452-5289.

Roger T. Cole
Acting Director


Enclosures:
Attachment 1 – Federal Register Notice (793 KB PDF)
August 7, 2006

Attachment 2 – Access Policy for Confidential Supervisory Information (240 KB PDF)
Revised Rule effective August 2006

Attachment 3 – Hiring Non-citizens (72 KB PDF)
June 2009

Notes:
  1. The prior interim rule was published as an immediately effective interim rule on November 7, 2005. It permitted the Board to hire certain non-citizens into positions requiring access to FOMC information, with certain restrictions and subject to a preference for citizens over equally qualified non-citizens.  Return to text
  2. Protected Individual means: (i) A citizen or national of the United States, (ii) an alien who: (A) meets the conditions set forth in 8 USC 1324b(a)(3)(B), as amended, and (B) has filed with the Board or the appropriate Federal Reserve Bank a declaration of intention to become a citizen of the United States, or (iii) an alien who: (A) is lawfully admitted for permanent residence, is admitted for temporary residence under 8 USC 1160(a) or 1255a(a)(1), is admitted as a refugee under 8 USC 1157, or is granted asylum under 8 USC 1158; (B) was an employee of the Board or a Federal Reserve Bank on January 1, 2006; (C) before requesting access to sensitive information filed an application for U.S. citizenship; and (D) has had his or her application for citizenship pending for two years or less, unless in the case of an application pending for a longer period, the alien can establish that the alien is actively pursuing naturalization. Time consumed by the Department of Homeland Security, Citizenship and Immigration Services (or its predecessor or successor agency) in processing the application shall not be counted toward the 2-year period. See 12 CFR 268.205(a)(9).  Return to text
  3. A non-citizen means "any individual who is not a Protected Individual" thus, the term may include a lawful permanent resident alien who chooses not to file for U.S. citizenship. 12 CFR 268.205(a)(8).  Return to text
  4. When a background investigation is required, the investigation is performed by the Board on behalf of a Reserve Bank, following procedures currently in place.  Return to text


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