Moratorium on Certain Industrial Bank Applications and Notices, 5290-5294 [E7-1853]
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5290
Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Notices
Monday, March 5, 2007, from 1 to 5
p.m. (Eastern Time). Additional
information regarding availability of
meeting materials, procedures for
providing public input, and
accessibility are provided in the
December 27, 2006 Federal Register, or
from the DFO at the contact information
provided above.
Dated: January 29, 2007.
Anthony F. Maciorowski,
Deputy Director, EPA Science Advisory Board
Staff Office.
[FR Doc. E7–1791 Filed 2–2–07; 8:45 am]
BILLING CODE 6560–50–P
FEDERAL COMMUNICATIONS
COMMISSION
[FCC 06–177]
Notice of Debarment
Federal Communications
Commission.
ACTION: Notice.
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AGENCY:
SUMMARY: The Enforcement Bureau
(Bureau) debars Premio, Inc. (Premio)
from all activities associated with the
schools and libraries universal service
support mechanism, also known as the
E-Rate program. Premio pled guilty to
and was convicted of serious fraudrelated felonies against the E-Rate
program. We find Premio’s conduct
merits a debarment of at least three
years, as contemplated by our
debarment rule, but in light of several
important factors, we will impose a
debarment period of one year.
DATES: Debarment commences on the
Premio, Inc. receives the debarment
letter or whichever date comes first, for
a period of one year.
FOR FURTHER INFORMATION CONTACT:
Diana Lee, Federal Communications
Commission, Enforcement Bureau,
Investigations and Hearings Division,
Room 4–A265, 445 12th Street, SW.,
Washington, DC 20554. Diana Lee may
be contacted by phone at 202–418–1420
or e-mail at diana.lee@fcc.gov.
SUPPLEMENTARY INFORMATION: This a
summary of the Commission’s Notice of
Debarment, released January 22, 2007.
As an additional precaution to protect
the E-Rate program, we put in place two
monitoring measures to ensure Premio’s
compliance upon its re-entry into the ERate program, in the event that Premio
re-enters the E-Rate program during its
three year probation period. First, we
order USAC to review with heightened
scrutiny Premio’s applications
submitted during the first two funding
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years after re-entry.1 Second, we order
the Administrator to conduct automatic
annual audits regarding Premio’s
compliance with the Act and the
Commission’s rules governing the ERate program, for each of the first two
funding periods upon Premio’s re-entry.
We find these additional precautionary
measures are necessary to ensure that ERate funds are used only for their
intended purpose and that the program
is not subject to additional waste, fraud,
or abuse. The full text of this Notice is
available for inspection and copying
during normal business hours in the
FCC Reference Center, Room CY–A–
257, 445 12th Street, SW., Washington,
DC 20554. The complete text may also
be purchased from the Commission’s
duplicating contractor, Best Copy and
Printing, Inc. (BCP), Portals II, 445 12th
Street, SW., Room CY–B402,
Washington, DC 20554. The complete
item is also available on the
Commission’s Web site at https://
www.fcc.gov/eb.
Federal Communications Commission.
Hillary S. DeNigro,
Chief, Investigations and Hearings Division,
Enforcement Bureau.
[FR Doc. E7–1795 Filed 2–2–07; 8:45 am]
BILLING CODE 6712–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
Moratorium on Certain Industrial Bank
Applications and Notices
Federal Deposit Insurance
Corporation (FDIC)
ACTION: Notice; Limited Extension of
Moratorium.
AGENCY:
This notice announces a oneyear extension of the termination date of
the FDIC’s existing moratorium on
industrial loan companies and
industrial banks 1 (collectively,
‘‘industrial banks’’) for deposit
insurance applications and change in
control notices with respect to certain
industrial banks. The extended
moratorium only applies to applications
SUMMARY:
1 See Fifth Report and Order, 19 FCC Rcd at
15822–23, para. 44. We note that the Commission
currently is considering what particular
requirements, if any, that it should apply in
conducting heightened review of E-Rate program
participants. See Universal Service Fund Oversight
NPRM, 20 FCC Rcd at 11345, para. 91.
1 For purposes of the extended moratorium, the
terms ‘‘industrial loan company’’ and ‘‘industrial
bank’’ mean any insured State bank that is an
industrial bank, industrial loan company, or other
similar institution that is excluded from the
definition of ‘‘bank’’ in the Bank Holding Company
Act of 1956 (BHCA) pursuant to section 2(c)(2)(H)
of the BHCA, 12 U.S.C. 1841(c)(2)(H).
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for deposit insurance and change in
control notices with respect to
industrial banks that will become
subsidiaries of companies engaged in
non-financial activities 2 (‘‘commercial
activities’’).
Although the FDIC’s existing
industrial bank moratorium was
originally set to expire on January 31,
2007 for all industrial banks, as a result
of the extension, the moratorium will
now expire on January 31, 2008 for
certain industrial banks. The extended
moratorium does not apply to any
application for deposit insurance or
change in control notice with respect to
any industrial bank that will not become
a subsidiary of a company, or any
industrial bank that will become a
subsidiary of a company engaged only
in financial activities. The FDIC is also
publishing elsewhere in the Federal
Register today a notice of proposed
rulemaking that proposes certain
requirements on any industrial bank
that will become a subsidiary of a
company that is engaged only in
financial activities and is not subject to
consolidated bank supervision by the
Federal Reserve Board (FRB) or the
Office of Thrift Supervision (OTS)
(hereinafter referred to as ‘‘Federal
Consolidated Bank Supervision’’).
DATES: The extended moratorium is
effective through January 31, 2008.
FOR FURTHER INFORMATION CONTACT:
Robert C. Fick, Counsel, (202) 898–8962
or Thomas P. Bolt, Counsel, (202) 898–
6750, Federal Deposit Insurance
Corporation, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Industrial banks were first chartered
in the early 1900’s as small loan
companies for industrial workers. Over
time some of the chartering states
expanded the powers of their industrial
banks to the extent that some industrial
banks now have generally the same
powers as state commercial banks.
2 For purposes of the extended moratorium, the
term ‘‘financial activity’’ includes: (i) Banking,
managing or controlling banks or savings
associations; and (ii) any activity permissible for
financial holding companies under 12 U.S.C.
1843(k), any specific activity that is listed as
permissible for bank holding companies under 12
U.S.C. 1843(c), as well as activities that the Federal
Reserve Board (FRB) has permitted for bank holding
companies under 12 CFR 225.28 and 225.86, and
any activity permissible for all savings and loan
holding companies under 12 U.S.C. 1467a(c). The
term ‘‘non-financial activity’’ is any other activity.
The FDIC intends to follow the written guidance of
the FRB and the Office of Thrift Supervision (OTS)
regarding permissible holding company activities in
its interpretations of the term ‘‘financial activity’’
and to consult with the FRB and/or OTS before
making any decisions.
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Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Notices
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Since the passage of the Competitive
Equality Banking Act of 1987 (CEBA),3
the industrial bank industry has
changed significantly. Between 1987
and 2006 total assets held by industrial
banks grew from $4.2 billion to $177
billion.
Since January 1, 2000, 24 industrial
banks became insured.4 As of January
30, 2007, there were fifty-eight insured
industrial banks with aggregate total
assets of approximately $177 billion.5
Six industrial banks reported total assets
of $10 billion or more; eleven other
industrial banks reported total assets of
$1 billion or more. The remaining fortyone institutions, on average, reported
total assets of approximately $231.8
million. Forty-five of those fifty-eight
operated in Utah and California.6 Of the
fifty-eight existing industrial banks,
forty-three were either controlled by one
or more individuals or controlled by a
parent company whose business is
financial in nature. As of January 30,
2007, thirty-one of the fifty-eight
existing industrial banks were owned by
companies that were engaged solely in
financial activities and that were not
subject to Federal Consolidated Bank
Supervision; such companies are
hereinafter referred to as ‘‘Non-FCBS
Financial Companies.’’ Eight of the fiftyeight industrial banks (representing
approximately sixty-nine percent of
industrial bank industry assets) were
owned by companies that are engaged
solely in financial activities and are
subject to consolidated supervision by
the FRB or the OTS. Four of the fiftyeight industrial banks were owned by
individuals. Fifteen industrial banks
were subsidiaries of holding companies
that are non-financial in nature, i.e.,
commercial.
In 2005, the Government
Accountability Office (GAO) expressed
its concern that industrial banks owned
by commercial companies or other
entities without a Federal consolidated
supervisor created an uneven playing
field when compared to banks and
thrifts owned by holding companies
subject to Federal consolidated
supervision.7 The concerns regarding
3 Public Law 100–86, 101 Stat. 552 (codified as
amended in various sections of title 12 of the U.S.
Code)
4 During 2000, 4 new industrial banks were
insured; 2 during each of 2001 and 2002; 5 during
2003; 6 during 2004; 4 during 2005; and 1 in 2006.
5 Based on reported assets as of September 30,
2006, the most recent reported data.
6 Industrial banks also operate in Colorado,
Hawaii, Indiana, Minnesota and Nevada.
7 U.S. Gov’t Accountability Office, GAO–05–621,
Industrial Loan Corporations: Recent Asset Growth
and Commercial Interest Highlight Differences in
Regulatory Authority 79–80 (2005) (hereinafter
‘‘GAO Report’’).
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the lack of consolidated supervision and
the possible limitations of the FDIC’s
authority echoed those previously
expressed by the FDIC’s Office of
Inspector General (OIG) in a 2004
report.8
Some industrial banks continue to be
small, community-focused institutions.
However, the FDIC has noted a recent
increase in the number of applications
for deposit insurance and notices of
change in control with respect to
industrial banks that would be affiliated
with commercial companies or other
entities that would not be subject to
Federal Consolidated Bank Supervision.
Such institutions are often large
organizations that tend to have complex
business plans. Their subsidiary
industrial banks tend to provide
specialty lending programs or financial
services or other support to the holding
company. Whatever their purpose or
structure, the industrial bank charter
has generated a significant amount of
public interest in recent years as various
entities have explored the feasibility
and business opportunities associated
with including an industrial bank as
part of their operations.
In 2006, the FDIC received more than
13,800 comment letters regarding the
proposed Wal-Mart Bank’s 2005 deposit
insurance application.9 Most of these
comments expressed opposition to
granting deposit insurance with respect
to this particular applicant; however,
some commenters raised more universal
concerns about industrial banks. Over
640 of the more general comments were
specifically focused on the risk posed to
the deposit insurance fund by industrial
banks owned by commercial companies
or by holding companies without a
Federal consolidated bank supervisor.
Similar sentiments were expressed by
witnesses during three days of public
hearings held by the FDIC regarding the
Wal-Mart application. In addition, the
Home Depot also filed a change in
control notice in connection with its
proposed acquisition of EnerBank, a
Utah industrial bank. In response to the
request for public comment on the
change in control notice, the FDIC
received approximately 830 comment
letters; almost all of them expressed
opposition to the proposed acquisition.
Congress also has had a continuing
interest in the industrial bank charter.
Most recently, on July 12, 2006, the
8 See Federal Deposit Insurance Corporation
Office of Inspector General, Report No. 2004–048,
The Division of Supervision and Consumer
Protection’s Approach for Supervising LimitedCharter Depository Institutions (2004) (hereinafter
‘‘OIG Report’’).
9 See the FDIC’s Web site at https://www.fdic.gov/
regulations/laws/walmart/.
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House Committee on Financial Services
(Committee) held a hearing regarding
industrial banks. At the hearing, the
General Counsels of the FDIC and FRB
testified before the Committee regarding
the history, characteristics, current
industry profile, and supervision of
industrial banks.10 The FDIC’s
testimony noted that today’s industrial
banks are owned by a diverse group of
financial and commercial entities.
Among industrial banks owned by such
entities are those that serve a particular
lending, funding, or processing function
within a larger organizational structure,
and those that directly support one or
more affiliate’s commercial activities.
The business plans for these industrial
banks differ substantially from the
consumer lending focus of the original
industrial banks.
Currently, eight industrial bank
deposit insurance applications are
pending before the FDIC. Also, in 2006
the FDIC received three additional
deposit insurance applications that were
either returned or withdrawn. In
addition, the FDIC received seven
change in control notices for the
acquisition of industrial banks; five of
which have been returned or
withdrawn. None of the potential parent
companies would be subject to Federal
Consolidated Bank Supervision, and at
least nine of the eighteen potential
parent companies are engaged in
activities that are considered
commercial in nature.
To evaluate the concerns and issues
raised with respect to industrial banks,
on July 28, 2006, the FDIC imposed a
six-month moratorium on FDIC action
with respect to certain industrial bank
applications and notices.11 The FDIC
declared the moratorium to enable it to
further evaluate (i) Industry
developments, (ii) the various issues,
facts, and arguments raised with respect
to the industrial bank industry, (iii)
10 Industrial Loan Companies: A Review of
Charter, Ownership, and Supervision Issues:
Hearing Before the H. Comm. on Financial Services,
109th Cong. (2006). The Committee also heard
testimony from G. Edward Leary, Commissioner for
the Utah Department of Financial Institutions; Rick
Hilman, Director of Financial Markets and
Community Investment, U.S. Government
Accountability Office; George Sutton, Former
Commissioner for the Utah Department of Financial
Institutions; Terry Jorde, Chairman, President, and
CEO of CountryBank USA, Chairman of ICBA; John
L. Douglas, Partner, Alston & Bird; Arthur C.
Johnson, Chairman and CEO of United Bank of
Michigan; Prof. Lawrence J. White, Professor of
Economics, Stern School of Business of New York
University; Michael J. Wilson, Director, Legislative
and Political Action Department, United Food and
Commercial International Union. Also, several
organizations submitted record statements.
11 See Moratorium on Certain Industrial Loan
Company Applications and Notices, 71 FR 43482
(August 1, 2006).
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Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Notices
whether there are emerging safety and
soundness issues or policy issues
involving industrial banks or other risks
to the insurance fund, and (iv) whether
statutory, regulatory, or policy changes
should be made in the FDIC’s oversight
of industrial banks in order to protect
the deposit insurance fund or important
Congressional objectives.12
Thereafter, on August 23, 2006, the
FDIC published in the Federal Register
a request for public comment on twelve
questions.13 Among other things, the
FDIC sought public comment on what
modifications, if any, should be made to
its regulations in light of the changing
industrial bank industry; how and
whether the attributes of consolidated
supervision affect the safety and
soundness of either industrial banks or
the Deposit Insurance Fund; and how,
and whether, the FDIC should
differentiate and assess possible risks
associated with financial or commercial
ownership of industrial banks.
The FDIC received over 12,600
comment letters in response to the
Request for Public Comment during the
comment period.14 Approximately
12,485 comments were generated by
what appears to be organized campaigns
either supporting or opposing the
proposed industrial bank to be owned
by Wal-Mart or the proposed acquisition
of Enerbank, also an industrial bank, by
The Home Depot. Of this total,
approximately 82 percent generally
were opposed to the ownership of
industrial banks by Wal-Mart or other
commercial companies. The remaining
comment letters were sent by
individuals, law firms, community
banks, financial services trade
associations, existing and proposed
industrial banks or their parent
companies, the Conference of State
Bank Supervisors, and two members of
Congress. Of the total comments
received, seventy-one commenters
addressed specific substantive issues
concerning the industrial bank industry
and its regulation.
The commenters who favored the
current state of the industrial bank
industry generally believed that the
risks commonly associated with
commercial company affiliations are
overstated and that industrial banks
affiliated with commercial companies
generally maintain safe and prudent
business relationships and financial and
managerial support systems. They felt
that the current restrictions on
12 Id.
13 See Industrial Loan Companies and Industrial
Banks, 71 FR 49456 (August 23, 2006).
14 See https://www.fdic.gov/regulations/laws/
federal/2006/06comilc.html.
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transactions with affiliates and tying
provide ample protection for the
industrial bank. The commenters who
expressed a negative or neutral view of
the industrial bank industry generally
believed that affiliations with
commercial companies and other
entities not subject to consolidated
supervision presented safety and
soundness problems and unacceptable
risks to the Deposit Insurance Fund by
increasing the potential for conflicts of
interest, excessive dependence on such
affiliates, and tying. These commenters
supported extending the moratorium
until Congress acts on legislation to
prohibit industrial banks from affiliating
with non-financial entities. Some urged
the FDIC to issue regulations restricting
industrial banks from affiliating with
non-financial entities. Still others
suggested that the conditions imposed
by the FDIC in the past were
insufficient, standing alone, to offer
adequate protections to the Deposit
Insurance Fund. Several commenters
cited the competitive advantages—in
access to capital, customers, and
marketing opportunities—that exist
when industrial banks are owned by
commercial entities or otherwise lack a
Federal Consolidated Bank Supervisor.
The FDIC’s experience and the
comments suggest no risk or other
possible harm that is unique to the
industrial bank charter. Rather, the
concerns that have been raised focus on
the ownership of the industrial bank
and on the proposed industrial bank’s
business model or plan. Consequently,
the FDIC’s analysis of how to proceed
focuses primarily on the proposed
owners of industrial banks.
II. The Extended Moratorium
Scope
The original six-month moratorium
imposed on July 28, 2006, deferred FDIC
action on deposit insurance applications
and change in control notices with
respect to all proposed and existing
industrial banks. However, recently the
FDIC has noted a marked increase in
deposit insurance applications for, and
change-in-control notices with respect
to, industrial banks that would be
affiliated with commercial concerns and
other companies that would not have a
Federal Consolidated Bank Supervisor.
This trend has led to heightened
concerns by some members of Congress
and commenters regarding the lack of
Federal Consolidated Bank Supervision,
the mixing of banking and commerce,
and the potential for an ‘‘uneven
playing field.’’ Both the FDIC’s
observations and the bulk of the
comments received indicate that these
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concerns about industrial banks focus
on commercial-company ownership
and/or the lack of Federal Consolidated
Bank Supervision.
Financial companies that are subject
to Federal Consolidated Bank
Supervision (‘‘FCBS Financial
Companies’’), such as bank holding
companies, financial holding
companies, and savings and loan
holding companies generally do not
present these same issues. Many of the
statutory and regulatory tools available
to Federal Consolidated Bank
Supervisors can substantially restrict
the extent to which such companies
may engage in commercial activities or
affiliate with commercial companies.
Moreover, the examination, reporting,
and monitoring systems of Federal
Consolidated Bank Supervisors can be
effective tools in preventing an
affiliate’s activities from causing a safety
and soundness risk to the bank. Finally,
holding companies that are expected to
serve as a source of strength to their
subsidiary insured depository
institutions provide an important
resource for an insured bank in need of
additional capital. As a result, the FDIC
believes that this class of industrial
bank ownership does not need further
study and that the supervisory tools
currently available to the FDIC are
adequate.
Generally, industrial banks owned by
individuals also do not present the same
issues that industrial banks owned by
commercial companies present. In the
case of an industrial bank owned by
individuals, there is neither a parent
company nor any subsidiary of a parent
company that could present an
opportunity for a safety and soundness
risk or a conflict of interest with the
industrial bank.15 Consequently, at this
time, the FDIC believes that ownership
of industrial banks by individuals
presents no extraordinary issues that
deserve further study or consideration.
Importantly, industrial banks to be
owned by Non-FCBS Financial
Companies present some of the same
issues that industrial banks owned by
commercial companies do. However,
the FDIC believes that those issues can
be controlled or minimized in such
cases. In addition, some such companies
are subject to well-established
regulatory authorities, e.g., by state
insurance commissions or the U.S.
Securities and Exchange Commission.
Such Non-FCBS Financial Companies
engage only in financial activities and,
so, do not engage in commercial
activities either directly or indirectly.
15 Since there is no parent company of the
industrial bank, the BHCA does not apply.
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Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Notices
However, since these companies will
not be subject to Federal Consolidated
Bank Supervision, the FDIC believes
that safeguards should be implemented
that provide adequate protections for
the safety and soundness of insured
industrial banks and for the protection
of the Deposit Insurance Fund. Through
the publication of a notice of proposed
rulemaking for part 354, the FDIC is
proposing conditions and requirements
to provide safeguards such as
examination of, and reporting by, such
companies and their subsidiaries, and
binding commitments to serve as a
resource for additional capital for the
industrial bank subsidiaries. We
anticipate that the proposed regulations
will provide the safeguards that the
FDIC believes could be helpful in
identifying and avoiding or controlling,
on a consolidated basis, the safety and
soundness risks and the risks to the
Deposit Insurance Fund that may result
from that kind of company-ownership
model.
Industrial banks that are to be owned
or controlled, directly or indirectly, by
commercial companies, however,
continue to present concerns. Under
current law, commercial companies
would not be allowed to acquire a thrift
or a bank, other than an industrial bank,
and would not have a Federal
Consolidated Bank Supervisor. In many
instances, commercial activities are the
predominant, if not sole, business of
such companies. In such circumstances,
not only would consolidated
supervision not be present, but the
current supervisory process and
infrastructure may not produce the
safeguards that the FDIC believes could
be helpful in identifying and avoiding
or controlling, on a consolidated basis,
the safety and soundness risks and the
risks to the Deposit Insurance Fund that
may result from that kind of companyownership model. The recent trend of
increased interest in industrial banks by
entities engaged in commercial
activities makes an evaluation of the
application of current supervisory
structures to such owners timely and
appropriate. As a result, the FDIC
believes that this class of companies
needs further study and consideration
on two key issues: (1) What, if any,
increased risks are created by ownership
by commercial companies and (2) how
well do current supervisory models
apply to such owners.
Many members of Congress have
urged the FDIC to extend the
moratorium with respect to industrial
banks that would be controlled by
commercial firms. On December 7, 2006
one hundred and seven members of the
House of Representatives sent a letter to
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the FDIC urging the FDIC to extend the
moratorium for at least an additional six
months. The Representatives requested
the extension ‘‘to allow the 110th
Congress an opportunity to act on this
important public policy issue.’’ While
the FDIC is not expressing any
conclusion about the propriety of
ownership of industrial banks by
commercial companies, it is appropriate
to provide Congress with a reasonable
period for consideration of these
developments and, if necessary,
revisions to existing statutory authority.
Furthermore, even though the FDIC
has authority to act on any particular
application, notice, or request involving
an industrial bank, the FDIC has
continuing concerns regarding the
commercial ownership of industrial
banks and the lack of a Federal
Consolidated Bank Supervisor. The
FDIC recognizes that commercial
companies that currently own industrial
banks will not be affected by the
extended moratorium and that there
may be concerns that this results in
disparate treatment for those
commercial companies now seeking to
control ILCs. However, the FDIC has
considered the potential impact of the
extended moratorium on individual
applicants and proponents, including
commercial companies, and because the
issues raised by such ownership have
the potential for broad and substantial
impact on the entire banking system
and, potentially, the nation’s economy,
the FDIC believes that Congressional
resolution of these issues may be
appropriate.
The FDIC also recognizes that the
moratorium may appear inconsistent
with specific timetables for agency
action, including processing of
approvals. However, adherence to a
strict statutory timeline without an
opportunity to re-evaluate its standards
for determining the public interest risks
frustrating the substantive policies the
agency is charged with promoting.
Consequently, the FDIC has concluded
that a limited moratorium should be
extended through January 31, 2008. The
extension will both allow the FDIC
needed time to evaluate the various
issues, facts, and arguments associated
with the ownership of an industrial
bank by a commercial company, and
allow Congress time to consider
legislation concerning industrial banks.
Summary
For the reasons discussed above, the
scope of the extended moratorium is
narrower than the scope of the FDIC’s
original six-month moratorium. Under
the extended moratorium, the FDIC will
take no action to accept, approve, or
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5293
deny any application for deposit
insurance, or to accept, disapprove, or
issue a letter of intent not to disapprove
any change in control notice, with
respect to any industrial bank that
would become a direct or indirect
subsidiary of a company engaged in
commercial activities. While to date,
commercially owned industrial banks
have not resulted in serious problems,
in light of the concerns that have been
expressed and the recent trend of
increased ownership of industrial banks
by commercial entities, the FDIC will
continue to monitor closely existing
industrial banks that currently are
controlled by commercial companies.
Thus, the extended moratorium will
not apply to, and the FDIC may proceed
with action on, any application for
deposit insurance or any change in
control notice with respect to: (i) Any
industrial bank that would become a
subsidiary of a company engaged only
in financial activities that is subject to
Federal Consolidated Bank Supervision
by the FRB, or the OTS (i.e., a FCBS
Financial Company); (ii) any industrial
bank that would not become a
subsidiary of any company; or (iii) any
industrial bank that would become a
subsidiary of a company engaged only
in financial activities that is not subject
to Federal Consolidated Bank
Supervision by the FRB or the OTS (i.e.,
a Non-FCBS Financial Company). While
the notice of proposed rulemaking for
part 354 is pending, the FDIC will
consider deposit insurance applications
and change in control notices with
respect to industrial banks within group
(iii) above on a case-by-case basis. After
any final rules are adopted, the FDIC
will consider requests to modify any
conditions and requirements agreed to
during the period between issuance of
the proposed rule and the effective date
of the final rules to conform such
conditions and requirements to those in
the final rules.
During the extended moratorium any
application, notice or request with
respect to any industrial bank that is not
subject to the moratorium will be acted
upon only by the FDIC’s Board of
Directors.
The extended moratorium is effective
through January 31, 2008 for
applications for deposit insurance and
change in control notices with respect to
industrial banks that will become
subsidiaries of companies engaged in
commercial activities.
Dated at Washington DC, this 31st day of
January 2007.
By Order of the Board of Directors.
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Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Notices
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. E7–1853 Filed 2–2–07; 8:45 am]
Under the
Federal Election Campaign Act of 1971,
2 U.S.C. 431 et seq., as amended by the
Bipartisan Campaign Reform Act of
2002, 1 coordinated party expenditure
limits (2 U.S.C. 441a(d)(3)(A) and (B)),
and certain contribution limits (2 U.S.C.
441a(a)(1)(A) and (B), (a)(3), (d) and (h)),
are adjusted either annually or
biennially by the increase in the
consumer price index. See 2 U.S.C.
441a(c)(1) and 11 CFR 110.17. The
Commission is publishing this notice to
announce these limits for 2007 or the
2007–2008 election cycle.
SUPPLEMENTARY INFORMATION:
BILLING CODE 6714–01–P
FEDERAL ELECTION COMMISSION
[Notice 2007–2]
Price Index Increases for Expenditure
and Contribution Limitations
Federal Election Commission.
Notice of expenditure and
contribution limitation increases.
AGENCY:
ACTION:
Coordinated Party Expenditure Limits
for 2007
SUMMARY: As mandated by provisions of
the Bipartisan Campaign Reform Act of
2002 (‘‘BCRA’’), the Federal Election
Commission (‘‘FEC’’ or ‘‘the
Commission’’) is adjusting certain
expenditure and contribution
limitations set forth in the Federal
Election Campaign Act of 1971, as
amended (‘‘FECA’’ or ‘‘the Act’’), to
account for increases in the consumer
price index. Additional details appear
in the supplemental information that
follows.
Under 2 U.S.C. 441a(c), the
Commission must adjust the
expenditure limitations established by 2
U.S.C. 441a(d) (the limits on
expenditures by national party
committees, state party committees, or
their subordinate committees in
connection with the general election
campaign of candidates for Federal
office) annually to account for inflation.
This expenditure limitation is increased
by the percent difference between the
price index, as certified to the
Commission by the Secretary of Labor,
for the 12 months preceding the
beginning of the calendar year and the
price index for the base period (calendar
year 1974).
The effective date for
the limit at 2 U.S.C. 441a(a)(1)(A) is
November 8, 2006. The effective date for
the limits at 2 U.S.C. 441a(a)(1)(B),
441a(a)(3), 441a(d) and 441a(h) is
January 1, 2007.
FOR FURTHER INFORMATION CONTACT: Mr.
Gregory J. Scott, Information Division,
999 E Street, NW., Washington, DC
20463; (202) 694–1100 or (800) 424–
9530.
EFFECTIVE DATE:
1. Expenditure Limitation for House of
Representatives
Both the national and state party
committees have an expenditure
limitation for each general election held
to fill a seat in the House of
Representatives. The formula used to
calculate the expenditure limitation in a
state with more than one congressional
district multiplies the base figure of
$10,000 by the price index (4.089),
rounding to the nearest $100. Based
upon this formula, the expenditure
limitation for 2007 House elections in
those states is $40,900. The formula
used to calculate the expenditure
limitation in a state with only one
congressional district is the greater of:
the base figure ($20,000) multiplied by
the price index (4.089) (which totals
$81,800); or $0.02 multiplied by the
voting age population (‘‘VAP’’) of the
state, multiplied by the price index.
Amounts are rounded to the nearest
$100. Based upon this formula, the
expenditure limitation for 2007 House
elections in these states is $81,800. See
2 U.S.C. 441a(d)(3) and 11 CFR
109.32(b).
2. Expenditure Limitation for Senate
Both the national and state party
committees have an expenditure
limitation for a general election held to
fill a seat in the Senate. The formula
used to calculate the Senate expenditure
limitation considers not only the price
index but also the VAP of the state. The
expenditure limitation is the greater of:
the base figure ($20,000) multiplied by
the price index (which totals $81,800);
or $0.02 multiplied by the VAP of the
state, multiplied by the price index.
Amounts are rounded to the nearest
$100. See 2 U.S.C. 441a(d)(3) and 11
CFR 109.32(b). The chart below
provides the state-by-state breakdown of
the 2007 expenditure limitations for
Senate elections.
SENATE EXPENDITURE LIMITATIONS—2007 ELECTIONS
VAP
(in thousands)
mstockstill on PROD1PC66 with NOTICES
State
Alabama ...........................................................................................................................
Alaska ..............................................................................................................................
Arizona .............................................................................................................................
Arkansas ..........................................................................................................................
California ..........................................................................................................................
Colorado ..........................................................................................................................
Connecticut ......................................................................................................................
Delaware ..........................................................................................................................
Florida ..............................................................................................................................
Georgia ............................................................................................................................
Hawaii ..............................................................................................................................
Idaho ................................................................................................................................
Illinois ...............................................................................................................................
Indiana .............................................................................................................................
Iowa .................................................................................................................................
Kansas .............................................................................................................................
VAP × .02
multiplied by the
price index
(4.089)
Expenditure limit
(the greater of
the amount in
column 3 or
$81,800)
$285,000
40,000
371,100
173,400
2,201,900
293,100
219,700
53,200
1,150,500
565,000
80,700
87,700
786,500
387,300
185,800
169,100
$285,000
81,800
371,100
173,400
2,201,900
293,100
219,700
81,800
1,150,500
565,000
81,800
87,700
786,500
387,300
185,800
169,100
3,485
489
4,538
2,120
26,925
3,584
2,687
650
14,068
6,909
987
1,072
9,617
4,736
2,272
2,068
1 Public Law 107–155, 116 Stat. 81 (Mar. 27,
2002).
VerDate Aug<31>2005
15:07 Feb 02, 2007
Jkt 211001
PO 00000
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Fmt 4703
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05FEN1
]]>Agencies
[Federal Register Volume 72, Number 23 (Monday, February 5, 2007)]
[Notices]
[Pages 5290-5294]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-1853]
=======================================================================
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FEDERAL DEPOSIT INSURANCE CORPORATION
Moratorium on Certain Industrial Bank Applications and Notices
AGENCY: Federal Deposit Insurance Corporation (FDIC)
ACTION: Notice; Limited Extension of Moratorium.
-----------------------------------------------------------------------
SUMMARY: This notice announces a one-year extension of the termination
date of the FDIC's existing moratorium on industrial loan companies and
industrial banks \1\ (collectively, ``industrial banks'') for deposit
insurance applications and change in control notices with respect to
certain industrial banks. The extended moratorium only applies to
applications for deposit insurance and change in control notices with
respect to industrial banks that will become subsidiaries of companies
engaged in non-financial activities \2\ (``commercial activities'').
---------------------------------------------------------------------------
\1\ For purposes of the extended moratorium, the terms
``industrial loan company'' and ``industrial bank'' mean any insured
State bank that is an industrial bank, industrial loan company, or
other similar institution that is excluded from the definition of
``bank'' in the Bank Holding Company Act of 1956 (BHCA) pursuant to
section 2(c)(2)(H) of the BHCA, 12 U.S.C. 1841(c)(2)(H).
\2\ For purposes of the extended moratorium, the term
``financial activity'' includes: (i) Banking, managing or
controlling banks or savings associations; and (ii) any activity
permissible for financial holding companies under 12 U.S.C. 1843(k),
any specific activity that is listed as permissible for bank holding
companies under 12 U.S.C. 1843(c), as well as activities that the
Federal Reserve Board (FRB) has permitted for bank holding companies
under 12 CFR 225.28 and 225.86, and any activity permissible for all
savings and loan holding companies under 12 U.S.C. 1467a(c). The
term ``non-financial activity'' is any other activity. The FDIC
intends to follow the written guidance of the FRB and the Office of
Thrift Supervision (OTS) regarding permissible holding company
activities in its interpretations of the term ``financial activity''
and to consult with the FRB and/or OTS before making any decisions.
---------------------------------------------------------------------------
Although the FDIC's existing industrial bank moratorium was
originally set to expire on January 31, 2007 for all industrial banks,
as a result of the extension, the moratorium will now expire on January
31, 2008 for certain industrial banks. The extended moratorium does not
apply to any application for deposit insurance or change in control
notice with respect to any industrial bank that will not become a
subsidiary of a company, or any industrial bank that will become a
subsidiary of a company engaged only in financial activities. The FDIC
is also publishing elsewhere in the Federal Register today a notice of
proposed rulemaking that proposes certain requirements on any
industrial bank that will become a subsidiary of a company that is
engaged only in financial activities and is not subject to consolidated
bank supervision by the Federal Reserve Board (FRB) or the Office of
Thrift Supervision (OTS) (hereinafter referred to as ``Federal
Consolidated Bank Supervision'').
DATES: The extended moratorium is effective through January 31, 2008.
FOR FURTHER INFORMATION CONTACT: Robert C. Fick, Counsel, (202) 898-
8962 or Thomas P. Bolt, Counsel, (202) 898-6750, Federal Deposit
Insurance Corporation, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Industrial banks were first chartered in the early 1900's as small
loan companies for industrial workers. Over time some of the chartering
states expanded the powers of their industrial banks to the extent that
some industrial banks now have generally the same powers as state
commercial banks.
[[Page 5291]]
Since the passage of the Competitive Equality Banking Act of 1987
(CEBA),\3\ the industrial bank industry has changed significantly.
Between 1987 and 2006 total assets held by industrial banks grew from
$4.2 billion to $177 billion.
---------------------------------------------------------------------------
\3\ Public Law 100-86, 101 Stat. 552 (codified as amended in
various sections of title 12 of the U.S. Code)
---------------------------------------------------------------------------
Since January 1, 2000, 24 industrial banks became insured.\4\ As of
January 30, 2007, there were fifty-eight insured industrial banks with
aggregate total assets of approximately $177 billion.\5\ Six industrial
banks reported total assets of $10 billion or more; eleven other
industrial banks reported total assets of $1 billion or more. The
remaining forty-one institutions, on average, reported total assets of
approximately $231.8 million. Forty-five of those fifty-eight operated
in Utah and California.\6\ Of the fifty-eight existing industrial
banks, forty-three were either controlled by one or more individuals or
controlled by a parent company whose business is financial in nature.
As of January 30, 2007, thirty-one of the fifty-eight existing
industrial banks were owned by companies that were engaged solely in
financial activities and that were not subject to Federal Consolidated
Bank Supervision; such companies are hereinafter referred to as ``Non-
FCBS Financial Companies.'' Eight of the fifty-eight industrial banks
(representing approximately sixty-nine percent of industrial bank
industry assets) were owned by companies that are engaged solely in
financial activities and are subject to consolidated supervision by the
FRB or the OTS. Four of the fifty-eight industrial banks were owned by
individuals. Fifteen industrial banks were subsidiaries of holding
companies that are non-financial in nature, i.e., commercial.
---------------------------------------------------------------------------
\4\ During 2000, 4 new industrial banks were insured; 2 during
each of 2001 and 2002; 5 during 2003; 6 during 2004; 4 during 2005;
and 1 in 2006.
\5\ Based on reported assets as of September 30, 2006, the most
recent reported data.
\6\ Industrial banks also operate in Colorado, Hawaii, Indiana,
Minnesota and Nevada.
---------------------------------------------------------------------------
In 2005, the Government Accountability Office (GAO) expressed its
concern that industrial banks owned by commercial companies or other
entities without a Federal consolidated supervisor created an uneven
playing field when compared to banks and thrifts owned by holding
companies subject to Federal consolidated supervision.\7\ The concerns
regarding the lack of consolidated supervision and the possible
limitations of the FDIC's authority echoed those previously expressed
by the FDIC's Office of Inspector General (OIG) in a 2004 report.\8\
---------------------------------------------------------------------------
\7\ U.S. Gov't Accountability Office, GAO-05-621, Industrial
Loan Corporations: Recent Asset Growth and Commercial Interest
Highlight Differences in Regulatory Authority 79-80 (2005)
(hereinafter ``GAO Report'').
\8\ See Federal Deposit Insurance Corporation Office of
Inspector General, Report No. 2004-048, The Division of Supervision
and Consumer Protection's Approach for Supervising Limited-Charter
Depository Institutions (2004) (hereinafter ``OIG Report'').
---------------------------------------------------------------------------
Some industrial banks continue to be small, community-focused
institutions. However, the FDIC has noted a recent increase in the
number of applications for deposit insurance and notices of change in
control with respect to industrial banks that would be affiliated with
commercial companies or other entities that would not be subject to
Federal Consolidated Bank Supervision. Such institutions are often
large organizations that tend to have complex business plans. Their
subsidiary industrial banks tend to provide specialty lending programs
or financial services or other support to the holding company. Whatever
their purpose or structure, the industrial bank charter has generated a
significant amount of public interest in recent years as various
entities have explored the feasibility and business opportunities
associated with including an industrial bank as part of their
operations.
In 2006, the FDIC received more than 13,800 comment letters
regarding the proposed Wal-Mart Bank's 2005 deposit insurance
application.\9\ Most of these comments expressed opposition to granting
deposit insurance with respect to this particular applicant; however,
some commenters raised more universal concerns about industrial banks.
Over 640 of the more general comments were specifically focused on the
risk posed to the deposit insurance fund by industrial banks owned by
commercial companies or by holding companies without a Federal
consolidated bank supervisor. Similar sentiments were expressed by
witnesses during three days of public hearings held by the FDIC
regarding the Wal-Mart application. In addition, the Home Depot also
filed a change in control notice in connection with its proposed
acquisition of EnerBank, a Utah industrial bank. In response to the
request for public comment on the change in control notice, the FDIC
received approximately 830 comment letters; almost all of them
expressed opposition to the proposed acquisition.
---------------------------------------------------------------------------
\9\ See the FDIC's Web site at https://www.fdic.gov/regulations/
laws/walmart/.
---------------------------------------------------------------------------
Congress also has had a continuing interest in the industrial bank
charter. Most recently, on July 12, 2006, the House Committee on
Financial Services (Committee) held a hearing regarding industrial
banks. At the hearing, the General Counsels of the FDIC and FRB
testified before the Committee regarding the history, characteristics,
current industry profile, and supervision of industrial banks.\10\ The
FDIC's testimony noted that today's industrial banks are owned by a
diverse group of financial and commercial entities. Among industrial
banks owned by such entities are those that serve a particular lending,
funding, or processing function within a larger organizational
structure, and those that directly support one or more affiliate's
commercial activities. The business plans for these industrial banks
differ substantially from the consumer lending focus of the original
industrial banks.
---------------------------------------------------------------------------
\10\ Industrial Loan Companies: A Review of Charter, Ownership,
and Supervision Issues: Hearing Before the H. Comm. on Financial
Services, 109th Cong. (2006). The Committee also heard testimony
from G. Edward Leary, Commissioner for the Utah Department of
Financial Institutions; Rick Hilman, Director of Financial Markets
and Community Investment, U.S. Government Accountability Office;
George Sutton, Former Commissioner for the Utah Department of
Financial Institutions; Terry Jorde, Chairman, President, and CEO of
CountryBank USA, Chairman of ICBA; John L. Douglas, Partner, Alston
& Bird; Arthur C. Johnson, Chairman and CEO of United Bank of
Michigan; Prof. Lawrence J. White, Professor of Economics, Stern
School of Business of New York University; Michael J. Wilson,
Director, Legislative and Political Action Department, United Food
and Commercial International Union. Also, several organizations
submitted record statements.
---------------------------------------------------------------------------
Currently, eight industrial bank deposit insurance applications are
pending before the FDIC. Also, in 2006 the FDIC received three
additional deposit insurance applications that were either returned or
withdrawn. In addition, the FDIC received seven change in control
notices for the acquisition of industrial banks; five of which have
been returned or withdrawn. None of the potential parent companies
would be subject to Federal Consolidated Bank Supervision, and at least
nine of the eighteen potential parent companies are engaged in
activities that are considered commercial in nature.
To evaluate the concerns and issues raised with respect to
industrial banks, on July 28, 2006, the FDIC imposed a six-month
moratorium on FDIC action with respect to certain industrial bank
applications and notices.\11\ The FDIC declared the moratorium to
enable it to further evaluate (i) Industry developments, (ii) the
various issues, facts, and arguments raised with respect to the
industrial bank industry, (iii)
[[Page 5292]]
whether there are emerging safety and soundness issues or policy issues
involving industrial banks or other risks to the insurance fund, and
(iv) whether statutory, regulatory, or policy changes should be made in
the FDIC's oversight of industrial banks in order to protect the
deposit insurance fund or important Congressional objectives.\12\
---------------------------------------------------------------------------
\11\ See Moratorium on Certain Industrial Loan Company
Applications and Notices, 71 FR 43482 (August 1, 2006).
\12\ Id.
---------------------------------------------------------------------------
Thereafter, on August 23, 2006, the FDIC published in the Federal
Register a request for public comment on twelve questions.\13\ Among
other things, the FDIC sought public comment on what modifications, if
any, should be made to its regulations in light of the changing
industrial bank industry; how and whether the attributes of
consolidated supervision affect the safety and soundness of either
industrial banks or the Deposit Insurance Fund; and how, and whether,
the FDIC should differentiate and assess possible risks associated with
financial or commercial ownership of industrial banks.
---------------------------------------------------------------------------
\13\ See Industrial Loan Companies and Industrial Banks, 71 FR
49456 (August 23, 2006).
---------------------------------------------------------------------------
The FDIC received over 12,600 comment letters in response to the
Request for Public Comment during the comment period.\14\ Approximately
12,485 comments were generated by what appears to be organized
campaigns either supporting or opposing the proposed industrial bank to
be owned by Wal-Mart or the proposed acquisition of Enerbank, also an
industrial bank, by The Home Depot. Of this total, approximately 82
percent generally were opposed to the ownership of industrial banks by
Wal-Mart or other commercial companies. The remaining comment letters
were sent by individuals, law firms, community banks, financial
services trade associations, existing and proposed industrial banks or
their parent companies, the Conference of State Bank Supervisors, and
two members of Congress. Of the total comments received, seventy-one
commenters addressed specific substantive issues concerning the
industrial bank industry and its regulation.
---------------------------------------------------------------------------
\14\ See https://www.fdic.gov/regulations/laws/federal/2006/
06comilc.html.
---------------------------------------------------------------------------
The commenters who favored the current state of the industrial bank
industry generally believed that the risks commonly associated with
commercial company affiliations are overstated and that industrial
banks affiliated with commercial companies generally maintain safe and
prudent business relationships and financial and managerial support
systems. They felt that the current restrictions on transactions with
affiliates and tying provide ample protection for the industrial bank.
The commenters who expressed a negative or neutral view of the
industrial bank industry generally believed that affiliations with
commercial companies and other entities not subject to consolidated
supervision presented safety and soundness problems and unacceptable
risks to the Deposit Insurance Fund by increasing the potential for
conflicts of interest, excessive dependence on such affiliates, and
tying. These commenters supported extending the moratorium until
Congress acts on legislation to prohibit industrial banks from
affiliating with non-financial entities. Some urged the FDIC to issue
regulations restricting industrial banks from affiliating with non-
financial entities. Still others suggested that the conditions imposed
by the FDIC in the past were insufficient, standing alone, to offer
adequate protections to the Deposit Insurance Fund. Several commenters
cited the competitive advantages--in access to capital, customers, and
marketing opportunities--that exist when industrial banks are owned by
commercial entities or otherwise lack a Federal Consolidated Bank
Supervisor.
The FDIC's experience and the comments suggest no risk or other
possible harm that is unique to the industrial bank charter. Rather,
the concerns that have been raised focus on the ownership of the
industrial bank and on the proposed industrial bank's business model or
plan. Consequently, the FDIC's analysis of how to proceed focuses
primarily on the proposed owners of industrial banks.
II. The Extended Moratorium
Scope
The original six-month moratorium imposed on July 28, 2006,
deferred FDIC action on deposit insurance applications and change in
control notices with respect to all proposed and existing industrial
banks. However, recently the FDIC has noted a marked increase in
deposit insurance applications for, and change-in-control notices with
respect to, industrial banks that would be affiliated with commercial
concerns and other companies that would not have a Federal Consolidated
Bank Supervisor. This trend has led to heightened concerns by some
members of Congress and commenters regarding the lack of Federal
Consolidated Bank Supervision, the mixing of banking and commerce, and
the potential for an ``uneven playing field.'' Both the FDIC's
observations and the bulk of the comments received indicate that these
concerns about industrial banks focus on commercial-company ownership
and/or the lack of Federal Consolidated Bank Supervision.
Financial companies that are subject to Federal Consolidated Bank
Supervision (``FCBS Financial Companies''), such as bank holding
companies, financial holding companies, and savings and loan holding
companies generally do not present these same issues. Many of the
statutory and regulatory tools available to Federal Consolidated Bank
Supervisors can substantially restrict the extent to which such
companies may engage in commercial activities or affiliate with
commercial companies. Moreover, the examination, reporting, and
monitoring systems of Federal Consolidated Bank Supervisors can be
effective tools in preventing an affiliate's activities from causing a
safety and soundness risk to the bank. Finally, holding companies that
are expected to serve as a source of strength to their subsidiary
insured depository institutions provide an important resource for an
insured bank in need of additional capital. As a result, the FDIC
believes that this class of industrial bank ownership does not need
further study and that the supervisory tools currently available to the
FDIC are adequate.
Generally, industrial banks owned by individuals also do not
present the same issues that industrial banks owned by commercial
companies present. In the case of an industrial bank owned by
individuals, there is neither a parent company nor any subsidiary of a
parent company that could present an opportunity for a safety and
soundness risk or a conflict of interest with the industrial bank.\15\
Consequently, at this time, the FDIC believes that ownership of
industrial banks by individuals presents no extraordinary issues that
deserve further study or consideration.
---------------------------------------------------------------------------
\15\ Since there is no parent company of the industrial bank,
the BHCA does not apply.
---------------------------------------------------------------------------
Importantly, industrial banks to be owned by Non-FCBS Financial
Companies present some of the same issues that industrial banks owned
by commercial companies do. However, the FDIC believes that those
issues can be controlled or minimized in such cases. In addition, some
such companies are subject to well-established regulatory authorities,
e.g., by state insurance commissions or the U.S. Securities and
Exchange Commission. Such Non-FCBS Financial Companies engage only in
financial activities and, so, do not engage in commercial activities
either directly or indirectly.
[[Page 5293]]
However, since these companies will not be subject to Federal
Consolidated Bank Supervision, the FDIC believes that safeguards should
be implemented that provide adequate protections for the safety and
soundness of insured industrial banks and for the protection of the
Deposit Insurance Fund. Through the publication of a notice of proposed
rulemaking for part 354, the FDIC is proposing conditions and
requirements to provide safeguards such as examination of, and
reporting by, such companies and their subsidiaries, and binding
commitments to serve as a resource for additional capital for the
industrial bank subsidiaries. We anticipate that the proposed
regulations will provide the safeguards that the FDIC believes could be
helpful in identifying and avoiding or controlling, on a consolidated
basis, the safety and soundness risks and the risks to the Deposit
Insurance Fund that may result from that kind of company-ownership
model.
Industrial banks that are to be owned or controlled, directly or
indirectly, by commercial companies, however, continue to present
concerns. Under current law, commercial companies would not be allowed
to acquire a thrift or a bank, other than an industrial bank, and would
not have a Federal Consolidated Bank Supervisor. In many instances,
commercial activities are the predominant, if not sole, business of
such companies. In such circumstances, not only would consolidated
supervision not be present, but the current supervisory process and
infrastructure may not produce the safeguards that the FDIC believes
could be helpful in identifying and avoiding or controlling, on a
consolidated basis, the safety and soundness risks and the risks to the
Deposit Insurance Fund that may result from that kind of company-
ownership model. The recent trend of increased interest in industrial
banks by entities engaged in commercial activities makes an evaluation
of the application of current supervisory structures to such owners
timely and appropriate. As a result, the FDIC believes that this class
of companies needs further study and consideration on two key issues:
(1) What, if any, increased risks are created by ownership by
commercial companies and (2) how well do current supervisory models
apply to such owners.
Many members of Congress have urged the FDIC to extend the
moratorium with respect to industrial banks that would be controlled by
commercial firms. On December 7, 2006 one hundred and seven members of
the House of Representatives sent a letter to the FDIC urging the FDIC
to extend the moratorium for at least an additional six months. The
Representatives requested the extension ``to allow the 110th Congress
an opportunity to act on this important public policy issue.'' While
the FDIC is not expressing any conclusion about the propriety of
ownership of industrial banks by commercial companies, it is
appropriate to provide Congress with a reasonable period for
consideration of these developments and, if necessary, revisions to
existing statutory authority.
Furthermore, even though the FDIC has authority to act on any
particular application, notice, or request involving an industrial
bank, the FDIC has continuing concerns regarding the commercial
ownership of industrial banks and the lack of a Federal Consolidated
Bank Supervisor. The FDIC recognizes that commercial companies that
currently own industrial banks will not be affected by the extended
moratorium and that there may be concerns that this results in
disparate treatment for those commercial companies now seeking to
control ILCs. However, the FDIC has considered the potential impact of
the extended moratorium on individual applicants and proponents,
including commercial companies, and because the issues raised by such
ownership have the potential for broad and substantial impact on the
entire banking system and, potentially, the nation's economy, the FDIC
believes that Congressional resolution of these issues may be
appropriate.
The FDIC also recognizes that the moratorium may appear
inconsistent with specific timetables for agency action, including
processing of approvals. However, adherence to a strict statutory
timeline without an opportunity to re-evaluate its standards for
determining the public interest risks frustrating the substantive
policies the agency is charged with promoting. Consequently, the FDIC
has concluded that a limited moratorium should be extended through
January 31, 2008. The extension will both allow the FDIC needed time to
evaluate the various issues, facts, and arguments associated with the
ownership of an industrial bank by a commercial company, and allow
Congress time to consider legislation concerning industrial banks.
Summary
For the reasons discussed above, the scope of the extended
moratorium is narrower than the scope of the FDIC's original six-month
moratorium. Under the extended moratorium, the FDIC will take no action
to accept, approve, or deny any application for deposit insurance, or
to accept, disapprove, or issue a letter of intent not to disapprove
any change in control notice, with respect to any industrial bank that
would become a direct or indirect subsidiary of a company engaged in
commercial activities. While to date, commercially owned industrial
banks have not resulted in serious problems, in light of the concerns
that have been expressed and the recent trend of increased ownership of
industrial banks by commercial entities, the FDIC will continue to
monitor closely existing industrial banks that currently are controlled
by commercial companies.
Thus, the extended moratorium will not apply to, and the FDIC may
proceed with action on, any application for deposit insurance or any
change in control notice with respect to: (i) Any industrial bank that
would become a subsidiary of a company engaged only in financial
activities that is subject to Federal Consolidated Bank Supervision by
the FRB, or the OTS (i.e., a FCBS Financial Company); (ii) any
industrial bank that would not become a subsidiary of any company; or
(iii) any industrial bank that would become a subsidiary of a company
engaged only in financial activities that is not subject to Federal
Consolidated Bank Supervision by the FRB or the OTS (i.e., a Non-FCBS
Financial Company). While the notice of proposed rulemaking for part
354 is pending, the FDIC will consider deposit insurance applications
and change in control notices with respect to industrial banks within
group (iii) above on a case-by-case basis. After any final rules are
adopted, the FDIC will consider requests to modify any conditions and
requirements agreed to during the period between issuance of the
proposed rule and the effective date of the final rules to conform such
conditions and requirements to those in the final rules.
During the extended moratorium any application, notice or request
with respect to any industrial bank that is not subject to the
moratorium will be acted upon only by the FDIC's Board of Directors.
The extended moratorium is effective through January 31, 2008 for
applications for deposit insurance and change in control notices with
respect to industrial banks that will become subsidiaries of companies
engaged in commercial activities.
Dated at Washington DC, this 31st day of January 2007.
By Order of the Board of Directors.
[[Page 5294]]
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. E7-1853 Filed 2-2-07; 8:45 am]
BILLING CODE 6714-01-P
