Expanded Examination Cycle for Certain Small Insured Depository Institutions and U.S. Branches and Agencies of Foreign Banks, 17798-17804 [07-1716]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION
• FEDERAL RESERVE SYSTEM
• Office of the Comptroller of the Currency
• DEPARTMENT OF THE TREASURY
• Office of Thrift Supervision
• Comptroller of the Currency

[Federal Register Volume 72, Number 68 (Tuesday, April 10, 2007)]
[Rules and Regulations]
[Pages 17798-17804]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-1716]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 4

[Docket ID OCC-2007-0007]

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 211

[Docket No. R-1279]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 337 and 347

RIN 3064-AD17

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563

[Docket ID OTS-2007-0006]


Expanded Examination Cycle for Certain Small Insured Depository 
Institutions and U.S. Branches and Agencies of Foreign Banks

AGENCIES: Office of the Comptroller of the Currency (OCC); Board of 
Governors of the Federal Reserve System (Board); Federal Deposit 
Insurance Corporation (FDIC); and Office of Thrift Supervision (OTS), 
Treasury.

ACTION: Interim rules with request for comment.

-----------------------------------------------------------------------

SUMMARY: The OCC, Board, FDIC, and OTS (collectively, the Agencies) are 
jointly issuing and requesting public comment on these interim rules to 
implement the Financial Services Regulatory Relief Act of 2006 (FSRRA) 
and related legislation (collectively the Examination Amendments). The 
Examination Amendments permit insured depository institutions 
(institutions) that have up to $500 million in total assets, and that 
meet certain other criteria, to qualify for an 18-month (rather than 
12-month) on-site examination cycle. Prior to enactment of FSRRA, only 
institutions with less than $250 million in total assets were eligible 
for an 18-month on-site examination

[[Page 17799]]

cycle. The OCC, Board, and FDIC are making parallel changes to their 
regulations governing the on-site examination cycle for U.S. branches 
and agencies of foreign banks (foreign bank offices), consistent with 
the International Banking Act of 1978 (IBA). In addition to 
implementing the changes in the Examination Amendments, the Agencies 
are clarifying when a small insured depository institution is 
considered ``well managed'' for purposes of qualifying for an 18-month 
examination cycle.

DATES: These interim rules are effective on April 10, 2007. Comments on 
the rules must be received by May 10, 2007.

ADDRESSES: Comments should be directed to:
    OCC: You may submit comments by any of the following methods:
     Federal eRulemaking Portal--``Regulations.gov'': Go to 
https://www.regulations.gov, select ``Comptroller of the Currency'' from 
the agency drop-down menu, then click ``Submit.'' In the ``Docket ID'' 
column, select ``OCC-2007-0007'' to submit or view public comments and 
to view supporting and related materials for this interim rule. The 
``User Tips'' link at the top of the Regulations.gov home page provides 
information on using Regulations.gov, including instructions for 
submitting or viewing public comments, viewing other supporting and 
related materials, and viewing the docket after the close of the 
comment period.
     Mail: Office of the Comptroller of the Currency, 250 E 
Street, SW., Mail Stop 1-5, Washington, DC 20219.
     Hand Delivery/Courier: 250 E Street, SW., Attn: Public 
Information Room, Mail Stop 1-5, Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2007-0007'' in your comment. In general, OCC will enter 
all comments received into the docket and publish them on 
Regulations.gov without change, including any business or personal 
information that you provide such as name and address information, e-
mail addresses, or phone numbers. Comments, including attachments and 
other supporting materials, received are part of the public record and 
subject to public disclosure. Do not enclose any information in your 
comment or supporting materials that you consider confidential or 
inappropriate for public disclosure.
    You may review comments and other related materials by any of the 
following methods:
     Viewing Comments Electronically: Go to https://
www.regulations.gov, select Comptroller of the Currency from the agency 
drop-down menu, then click ``Submit.'' In the ``Docket ID'' column, 
select ``OCC-2007-0007'' to view public comments for this interim final 
rule.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC's Public Information Room, 250 E 
Street, SW., Washington, DC. You can make an appointment to inspect 
comments by calling (202) 874-5043.
     Docket: You may also view or request available background 
documents and project summaries using the methods described above.
    Board: You may submit comments, identified by Docket No. R-1279, by 
any of the following methods:
     Agency Web Site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include the 
docket number in the subject line of the message.
     FAX: 202-452-3819 or 202-452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper in Room MP-500 of the Board's Martin Building (20th and C 
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
    FDIC: You may submit comments by any of the following methods:
     Agency Web Site: https://www.fdic.gov/regulations/laws/
federal. Follow instructions for submitting comments on the Agency Web 
Site.
     E-mail: Comments@FDIC.gov. Include ``Expanded Examination 
Cycle'' in the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the 
550 17th Street Building (located on F Street) on business days between 
7 a.m. and 5 p.m. (EST).
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Public Inspection: All comments received will be posted 
without change to https://www.fdic.gov/regulations/laws/federal 
including any personal information provided. Comments may be inspected 
and photocopied in the FDIC Public Information Center, 3501 North 
Fairfax Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 
p.m. (EST) on business days. Paper copies of public comments may be 
ordered from the Public Information Center by telephone at (877) 275-
3342 or (703) 562-2200.
    OTS: You may submit comments, identified by OTS-2007-0006, by any 
of the following methods:
     Federal eRulemaking Portal: Go to https://
www.regulations.gov, select ``Office of Thrift Supervision'' from the 
agency drop-down menu, then click submit. Select Docket ID ``OTS-2007-
0006'' to submit or view public comments and to view supporting and 
related materials for this interim rule. The ``User Tips'' link at the 
top of the page provides information on using Regulations.gov, 
including instructions for submitting or viewing public comments, 
viewing other supporting and related materials, and viewing the docket 
after the close of the comment period.
     Mail: Regulation Comments, Chief Counsel's Office, Office 
Of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, 
Attention: OTS-2007-0006.
     Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention: 
Regulation Comments, Chief Counsel's Office, OTS-2007-0006.
    Instructions: All submissions received must include the agency name 
and docket number for this rulemaking. All comments received will be 
entered into the docket and posted on Regulations.gov without change, 
including any personal information provided. Comments, including 
attachments and other supporting materials received are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    Viewing Comments Electronically: Go to https://www.regulations.gov, 
select ``Office of Thrift Supervision'' from the agency drop-down menu, 
then click ``Submit.'' Select Docket ID ``OTS-2007-0006'' to view 
public comments for this notice of proposed rulemaking.

[[Page 17800]]

    View Comments On-Site: You may inspect comments in the Public 
Reading Room, 1700 G Street, NW., by appointment. To make an 
appointment, call (202) 906-5922, send an e-mail to 
public.info@ots.treas.gov, or send a facsimile transmission to (202) 
906-6518. (Prior notice identifying the materials you will be 
requesting will assist us in serving you.) We schedule appointments on 
business days between 10 a.m. and 4 p.m. In most cases, appointments 
will be available the next business day following the date we receive a 
request.

FOR FURTHER INFORMATION CONTACT: 
    OCC: Mitchell Plave, Counsel, Legislative and Regulatory Activities 
Division, (202) 874-5090; Stuart E. Feldstein, Assistant Director, 
Legislative and Regulatory Activities, (202) 874-5090; Fred Finke, Mid-
size/Community Bank Supervision, (202) 874-4468; Patricia Roberts, 
Operational Risk Policy Analyst, (202) 874-5637.
    Board: Barbara Bouchard, Deputy Associate Director, (202) 452-3072, 
Mary Frances Monroe, Manager, (202) 452-5231, or Stanley Rediger, 
Supervisory Financial Analyst, (202) 452-2629, Division of Banking 
Supervision and Regulation; or Pamela G. Nardolilli, Senior Counsel, 
(202) 452-3289, for the revisions to Regulation H, or Jon Stoloff, 
Senior Counsel, (202) 452-3269, for the revisions to Regulation K, 
Legal Division. For users of Telecommunication Device for the Deaf 
(TDD) only, contact (202) 263-4869.
    FDIC: Melinda West, Senior Examination Specialist, (202) 898-7221; 
Patricia A. Colohan, Senior Examination Specialist, (202) 898-7283; 
Division of Supervision and Consumer Protection; Rodney D. Ray, 
Counsel, (202) 898-3556, for the revisions to 12 CFR Part 347; Kimberly 
A. Stock, Attorney, (202) 898-3815, for the revisions to 12 CFR Part 
337; Legal Division.
    OTS: Robyn H. Dennis, Director, Operation Risk, (202) 906-5751, 
Examinations and Supervision Policy; or Barbara Shycoff, Special 
Counsel, Regulations and Legislation, (202) 906-6947, Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

Background

    Section 10(d) of the Federal Deposit Insurance Act (the FDI Act) 
\1\ generally requires that the appropriate federal banking agency for 
an insured depository institution conduct a full-scope, on-site 
examination of the institution at least once during each 12-month 
period. Prior to enactment of FSRRA, section 10(d) also authorized the 
appropriate federal banking agency to lengthen the on-site examination 
cycle for an institution to 18 months if the institution (1) had total 
assets of less than $250 million; (2) was well capitalized (as defined 
in the prompt corrective action statute at 12 U.S.C. 1831o); (3) was 
found, at its most recent examination, to be well managed and to have a 
composite condition of outstanding or good; \2\ (4) had not undergone a 
change in control during the previous 12-month period in which a full-
scope, on-site examination otherwise would have been required; and (5) 
was not subject to a formal enforcement proceeding or order by its 
appropriate federal banking agency or the FDIC. The Board, the FDIC and 
the OTS, as the appropriate federal banking agencies for state-
chartered insured banks and savings associations, are permitted to 
conduct on-site examinations of such institutions on alternating 12-
month or 18-month schedules with the institution's State supervisor, if 
the Board, FDIC, or OTS, as appropriate, determines that the 
alternating examination conducted by the State carries out the purposes 
of section 10(d) of the FDI Act and the Home Owners' Loan Act.
---------------------------------------------------------------------------

    \1\ Section 10(d) of the FDI Act was added by section 111 of the 
Federal Deposit Insurance Corporation Improvement Act of 1991 
(FDICIA) and is codified at 12 U.S.C. 1820(d).
    \2\ Under section 10(d) of the FDI Act, before enactment of the 
Examination Amendments, the Agencies had the authority to extend the 
18-month examination cycle to institutions with composite CAMELS 
ratings of 2 and assets of up to $250 million. Section 10(d) 
required that the Agencies determine that extending the 18-month 
cycle in this manner would be consistent with safety and soundness. 
See 12 U.S.C. 1820(d)(10). The Agencies exercised this discretion in 
1997 and extended the 18-month examination cycle to 2-rated 
institutions with assets of $250 million or less. See 62 FR 6449, 
February 12, 1997 (interim rule); see also 63 FR 16377, April 2, 
1998 (final rule).
---------------------------------------------------------------------------

    In addition, section 7(c)(1)(C) of the IBA provides that a U.S. 
branch or agency of a foreign bank shall be subject to on-site 
examination by its appropriate federal banking agency as frequently as 
a national or state bank would be subject to such an examination by the 
agency. The agencies previously adopted regulations to implement the 
examination cycle requirements of section 10(d) of the FDI Act and 
section 7(c)(1)(C) of the IBA, including the extended 18-month 
examination cycle available to qualifying small institutions and 
foreign bank offices.\3\
---------------------------------------------------------------------------

    \3\ See 12 CFR 4.6 and 4.7 (OCC), 12 CFR 208.64 and 211.26 
(Board), 12 CFR 337.12 and 347.211 (FDIC), and 12 CFR 563.171 (OTS).
---------------------------------------------------------------------------

    Section 605 of FSRRA, which became effective on October 13, 2006, 
amended section 10(d) of the FDI Act to raise, from $250 million to 
$500 million, the total asset threshold below which an insured 
depository institution may qualify for an 18-month (rather than a 12-
month) on-site examination cycle.\4\ Public Law No. 109-473, which 
became effective on January 11, 2007, also amended section 10(d)(10) of 
the FDI Act to authorize the appropriate agency, if it determines the 
action would be consistent with principles of safety and soundness, to 
allow an insured depository institution that falls within this expanded 
total asset threshold to qualify for an 18-month examination cycle if 
the institution received a composite rating of outstanding or good at 
its most recent examination.\5\
---------------------------------------------------------------------------

    \4\ Pub. L. No. 109-351, 120 Stat. 1966 (2006).
    \5\ 120 Stat. 3561 (2007).
---------------------------------------------------------------------------

    The Examination Amendments will allow the Agencies to better focus 
their supervisory resources on those institutions that may present 
capital, managerial, or other issues of supervisory concern, while 
concomitantly reducing the regulatory burden on small, well capitalized 
and well managed institutions. The Agencies will continue to use off-
site monitoring tools to identify potential problems in smaller, well 
capitalized and well managed institutions that present low levels of 
risk. Moreover, neither the statute nor the Agencies' regulations 
limit, and the Agencies therefore retain, the authority to examine an 
insured depository institution or foreign bank office more frequently 
than would be required by the FDI Act or IBA.

Description of the Interim Rules

    The Agencies are adopting interim rules to implement the 
Examination Amendments. In particular, the Agencies are amending their 
respective rules to raise, from $250 million to $500 million, the total 
asset threshold below which an insured depository institution that 
meets the qualifying criteria in section 10(d) and the Agencies' rules 
may qualify for an 18-month on-site examination cycle. In addition, as 
authorized by the Examination Amendments, the Agencies have determined 
that it is consistent with safety and soundness to permit institutions 
with between $250 million and $500 million in total assets that 
received a composite rating of 1 or 2 under the Uniform Financial 
Institutions Rating System (commonly referred to as CAMELS),\6\ and 
that meet

[[Page 17801]]

the other qualifying criteria set forth in section 10(d) and the 
Agencies' rules, to qualify for an 18-month examination cycle. In this 
regard, data indicate that between 1985 and 2000, insured depository 
institutions with a composite CAMELS rating of 1 or 2 were more than 
three times less likely to fail over the next five-year period than 
institutions with a lower composite CAMELS rating. Furthermore, the 
Agencies note that, in order to qualify for an 18-month examination 
cycle, any insured depository institution with total assets of less 
than $500 million--including one with a composite rating of 2--must 
meet the other capital, managerial and supervisory criteria set forth 
in section 10(d). These provisions, combined with the Agencies' off-
site monitoring activities and ability to examine an institution more 
frequently as necessary or appropriate, have permitted the Agencies to 
effectively supervise and protect the safety and soundness of 
institutions with total assets of $250 million or less since 1997.
---------------------------------------------------------------------------

    \6\ CAMELS is an acronym that is drawn from the first letters of 
the individual components of the rating system: Capital adequacy, 
Asset quality, Management, Earnings, Liquidity, and Sensitivity to 
market risk.
---------------------------------------------------------------------------

    Consistent with section 7(c)(1)(C) of the IBA, the OCC, Board and 
FDIC also are making conforming changes to their regulations governing 
the on-site examination cycle for the U.S. branches and agencies of 
foreign banks. The Agencies' amended rules permit a foreign bank office 
with total assets of less than $500 million to qualify for an 18-month 
examination cycle if the office received a composite ROCA rating of 1 
or 2 at its most recent examination.\7\
---------------------------------------------------------------------------

    \7\ The four components of the ROCA supervisory rating system 
for foreign bank offices are: Risk management, Operational controls, 
Compliance, and Asset quality.
---------------------------------------------------------------------------

    The Agencies estimate that these interim rules will increase the 
number of insured depository institutions that may qualify for an 
extended 18-month examination cycle by approximately 1,089 
institutions, for a total of 6,670 insured depository institutions. 
Approximately 126 foreign branches and agencies would be eligible for 
the extended examination cycle based on the interim rules, for an 
increase of 31 offices.\8\
---------------------------------------------------------------------------

    \8\ Data are as of June 30, 2006, and reflect the number of 
institutions and foreign bank offices with total assets of less than 
$500 million.
---------------------------------------------------------------------------

    In connection with these changes, the Agencies also have modified 
their rules to specify, consistent with current practice, that a small 
institution meets the statutory ``well managed'' criteria for an 18-
month cycle if the institution, besides having a CAMELS composite 
rating of 1 or 2, also received a rating of 1 or 2 for the management 
component of the CAMELS rating at its most recent examination. The 
Agencies believe this amendment will provide additional transparency to 
their rules and clarify for institutions how the ``well managed'' 
requirement in section 10(d) is interpreted and applied by the 
Agencies.\9\ This interpretation is consistent with definitions of 
``well managed'' that the Agencies currently apply in other 
circumstances.\10\
---------------------------------------------------------------------------

    \9\ The Agencies' rules relating to the examination cycle for 
foreign bank offices already permit the appropriate Agency to 
consider, among other things, whether the office received a ``3'' or 
lower rating for any of the individual ROCA components (including 
risk management) in determining whether the office should qualify 
for an 18-month exam cycle. See 12 CFR 4.7(b)(2)(i) (OCC), 
211.26(c)(2)(ii) (Board), and 347.211(b)(2)(i) (FDIC).
    \10\ See, e.g., 12 CFR 362.17(c)(1) (FDIC); 12 CFR 5.34(d)(3) 
(OCC); 12 CFR 225.2(5) and 12 CFR 208.11(h) (Board); OTS Examination 
Handbook, Sec. 060 (2004) (OTS).
---------------------------------------------------------------------------

    The FDI Act and the IBA set the outside limits within which an on-
site safety and soundness examination of an institution or foreign bank 
office must commence, and permit the appropriate Agency for an 
institution or foreign bank to conduct an on-site examination more 
frequently than required. The Agencies' rules continue to expressly 
recognize that the appropriate Agency may examine an institution or 
foreign bank office as frequently as the Agency deems necessary.

Effective Date/Request for Comment

    The Agencies are issuing these interim rules without advance notice 
and comment and the 30-day delayed effective date ordinarily prescribed 
by the Administrative Procedure Act, 5 U.S.C. 551 et seq. (``APA''). 
The interim rules implement the provisions of section 605 of the FSRRA, 
which became effective on October 13, 2006, and Public Law No. 109-473, 
which became effective on January 11, 2007. The interim rules adopt 
without change the statutory increase in the asset ceiling for 18-month 
examination of CAMELS-1 rated institutions and the statutory 
availability of the 18-month examination cycle for CAMELS-2 
institutions. The interim rules also explain how the Agencies apply the 
``well managed'' requirement in the underlying statute and thus, 
provide greater clarity to institutions consistent with the agencies' 
current practices. For these reasons, the Agencies find there is good 
cause to issue the rules without advance notice and comment. 5 U.S.C. 
553(b)(3)(A), (B). The rules explain how the Agencies generally 
exercise the discretion given them by the statute to examine qualifying 
institutions less frequently than once every 12 months. The Agencies 
retain the discretion to examine individual institutions more 
frequently; the interim rules do not bind the Agencies to examine 
qualifying institutions on an 18-month basis, nor do they create a 
right for institutions to be examined on an 18-month cycle. With 
respect to the delayed effective date, the Agencies conclude that, 
because the rules recognize an exemption, the interim rules are exempt 
from the APA's delayed effective date requirement. 5 U.S.C. 553(d)(1). 
The Agencies are nevertheless interested in the views of the public and 
request comment on all aspects of these interim rules.

Regulatory Flexibility Act

    The interim rules do not impose any new obligations, restrictions 
or burdens on banking organizations, including small banking 
organizations, and, indeed, reduce regulatory burden associated with 
on-site examinations for qualifying small institutions and foreign bank 
offices. For these reasons, the Agencies certify that the interim rules 
will not have a significant impact on a substantial number of small 
entities, as defined in the Regulatory Flexibility Act. 5 U.S.C. 601 et 
seq. The objective and legal basis for the interim rules are discussed 
in the SUPPLEMENTARY INFORMATION.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\11\ the 
Agencies have determined that no collections of information pursuant to 
the Paperwork Reduction Act are contained in these interim rules.
---------------------------------------------------------------------------

    \11\ 44 U.S.C. 3506; 5 CFR part 1320, Appendix A.1.
---------------------------------------------------------------------------

OCC and OTS Executive Order 12866 Statement

    The OCC and OTS have each independently determined that the interim 
rules with request for comment are not significant regulatory actions 
under Executive Order 12866.

OCC and OTS Unfunded Mandates Act of 1995 Statement

    Section 202 of the Unfunded Mandates Reform Act of 1995\12\ 
requires that an agency prepare a budgetary impact statement before 
promulgating a rule that includes a federal mandate that may result in 
the expenditure by state, local, and tribal governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year. If a budgetary impact statement is required, section 205 of the 
Unfunded

[[Page 17802]]

Mandates Act also requires an agency to identify and consider a 
reasonable number of regulatory alternatives before promulgating a 
rule. Because the OCC and the OTS have each independently determined 
that the interim rules will not result in expenditures by state, local, 
and tribal governments, in the aggregate, or by the private sector, of 
more than $100 million in any one year, the OCC and the OTS have not 
prepared a budgetary impact statement or specifically addressed the 
regulatory alternatives considered. Nevertheless, as discussed in the 
preamble, the interim rules will have the effect of reducing regulatory 
burden on certain institutions and foreign bank offices.
---------------------------------------------------------------------------

    \12\ Pub. L. 104-4, 109 Stat. 48 (March 22, 1995) (Unfunded 
Mandates Act).
---------------------------------------------------------------------------

Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (12 U.S.C. 4809) requires 
the Agencies to use ``plain language'' in all proposed and final rules 
published after January 1, 2000. The Agencies believe the interim rules 
are presented in a clear and straightforward manner and solicit 
comments on ways to make the rules easier to understand.

List of Subjects

12 CFR Part 4

    Administrative practice and procedure, Availability and release of 
information, Confidential business information, Contracting outreach 
program, Freedom of information, National banks, Organization and 
functions (government agencies), Reporting and recordkeeping 
requirements, Women and minority businesses.

12 CFR Part 208

    Accounting, Agriculture, Banks, Banking, Confidential business 
information, Crime, Currency, Federal Reserve System, Flood insurance, 
Mortgages, Reporting and recordkeeping requirements, Safety and 
soundness, Securities.

12 CFR Part 211

    Exports, Federal Reserve System, Foreign banking, Holding 
companies, Investments, Reporting and recordkeeping requirements.

12 CFR Part 337

    Banks, banking, Reporting and recordkeeping requirements, 
Securities.

12 CFR Part 347

    Authority delegations (Government agencies), Bank deposit 
insurance, Banks, banking, Credit, Foreign banking, Investments, 
Reporting and recordkeeping requirements, United States investments 
abroad.

12 CFR Part 563

    Accounting, Advertising, Crime, Currency, Investments, Reporting 
and recordkeeping requirements, Savings associations, Securities, 
Surety bonds.

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

0
For the reasons set forth in the joint preamble, part 4 of chapter I of 
title 12 of the Code of Federal Regulations is amended as follows:

PART 4--ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF 
INFORMATION, CONTRACTING OUTREACH PROGRAM, POST-EMPLOYMENT 
RESTRICTIONS FOR SENIOR EXAMINERS

0
1. The authority citation for part 4 continues to read as follows:

    Authority: 12 U.S.C. 93a. Subpart A also issued under 5 U.S.C. 
552. Subpart B also issued under 5 U.S.C. 552; E.O. 12600 (3 CFR, 
1987 Comp., p. 235). Subpart C also issued under 5 U.S.C. 301, 552; 
12 U.S.C. 161, 481, 482, 484(a), 1442, 1817(a)(3), 1818(u) and(v), 
1820(d)(6), 1820(k), 1821(c), 1821(o), 1821(t), 1831m, 1831p-1, 
1831o, 1867, 1951 et seq., 2901 et seq., 3101 et seq., 3401 et seq.; 
15 U.S.C. 77uu(b), 78q(c)(3); 18 U.S.C. 641, 1905, 1906; 29 U.S.C. 
1204; 31 U.S.C. 9701; 42 U.S.C. 3601; 44 U.S.C. 3506, 3510. Subpart 
D also issued under 12 U.S.C. 1833e.

0
2. In Subpart A, Sec.  4.6(b) is revised to read as follows:


Sec.  4.6  Frequency of examination of national banks.

* * * * *
    (b) 18-month rule for certain small institutions. The OCC may 
conduct a full-scope, on-site examination of a national bank at least 
once during each 18-month period, rather than each 12-month period as 
provided in paragraph (a) of this section, if the following conditions 
are satisfied:
    (1) The bank has total assets of less than $500 million;
    (2) The bank is well capitalized as defined in part 6 of this 
chapter;
    (3) At the most recent examination, the OCC:
    (i) Assigned the bank a rating of 1 or 2 for management as part of 
the bank's rating under the Uniform Financial Institutions Rating 
System; and
    (ii) Assigned the bank a composite rating of 1 or 2 under the 
Uniform Financial Institutions Rating System;
    (4) The bank currently is not subject to a formal enforcement 
proceeding or order by the FDIC, OCC or the Federal Reserve System; and
    (5) No person acquired control of the bank during the preceding 12-
month period in which a full-scope, on-site examination would have been 
required but for this section.
* * * * *

0
3. In Sec.  4.7, paragraph (b)(1) introductory text is republished and 
paragraph (b)(1)(i) is revised to read as follows:


Sec.  4.7  Frequency of examination of Federal agencies and branches.

* * * * *
    (b) 18-month rule for certain small institutions. (1) Mandatory 
standards. The OCC may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month 
period as provided in paragraph (a) of this section, if the Federal 
branch or agency:
    (i) Has total assets of less than $500 million;
* * * * *

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

0
For the reasons set forth in the joint preamble, the Board amends 12 
CFR parts 208 and 211 of chapter II of title 12 of the Code of Federal 
Regulations as follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL 
RESERVE SYSTEM (REGULATION H)

0
1. The authority citation for part 208 continues to read as follows:

    Authority: 12 U.S.C. 24, 36, 92(a), 93(a), 248(a), 248(c), 321-
338a, 371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 
1823(j), 1828(o), 1831, 1831(o), 1831p-1, 1831r-1, 1831(w), 1831(x), 
1835a, 1882, 2901-2907, 3105, 3310, 3331-3351, and 3906-3909; 15 
U.S.C. 78b, 781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q-1 and 78w; 
1681S, 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106 and 4128.

0
2. Section 208.64(b) is revised to read as follows:


Sec.  208.64  Frequency of examination.

* * * * *
    (b) 18-month rule for certain small institutions. The Federal 
Reserve may conduct a full-scope, on-site examination of an insured 
member bank at least once during each 18-month period, rather than each 
12-month period as provided in paragraph (a) of this section, if the 
following conditions are satisfied:
    (1) The bank has total assets of less than $500 million;

[[Page 17803]]

    (2) The bank is well capitalized as defined in subpart D of this 
part (Sec.  208.43);
    (3) At the most recent examination conducted by either the Federal 
Reserve or applicable State banking agency, the Federal Reserve--
    (i) Assigned the bank a rating of 1 or 2 for management as part of 
the bank's rating under the Uniform Financial Institutions Rating 
System (commonly referred to as CAMELS); and
    (ii) Assigned the bank a composite CAMELS rating of 1 or 2 under 
the Uniform Financial Institutions Rating System;
    (4) The bank currently is not subject to a formal enforcement 
proceeding or order by the Federal Reserve or the FDIC; and
    (5) No person acquired control of the bank during the preceding 12-
month period in which a full-scope examination would have been required 
but for this paragraph (b).
* * * * *

PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)

0
1. The authority citation for part 211 continues to read as follows:

    Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq., 
3101 et seq., and 3901 et seq.

0
2. In Sec.  211.26 paragraph (c)(2)(i) introductory text is republished 
and paragraph (c)(2)(i)(A) is revised to read as follows:


Sec.  211.26  Examinations of offices and affiliates of foreign banks.

* * * * *
    (c) Frequency of on-site examination * * *
    (2) 18-month cycle for certain small institutions--(i) Mandatory 
standards. The Board may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month 
period as required in paragraph (c)(1) of this section, if the branch 
or agency:
    (A) Has total assets of less than $500 million;
* * * * *

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

0
For the reasons set forth in the joint preamble, the Board of Directors 
of the FDIC amends parts 337 and 347 of chapter III of title 12 of the 
Code of Federal Regulations as follows:

PART 337--UNSAFE AND UNSOUND BANK PRACTICES

0
1. The authority citation for part 337 is revised to read as follows:

    Authority: 12 U.S.C. 375a(4), 375b, 1816, 1818(a), 1818(b), 
1819, 1820(d)(10), 1821(f), 1828(j)(2), 1831.

0
2. Section 337.12(b) is revised to read as follows:


Sec.  337.12  Frequency of examination.

* * * * *
    (b) 18-month rule for certain small institutions. The FDIC may 
conduct a full-scope, on-site examination of an insured state nonmember 
bank at least once during each 18-month period, rather than each 12-
month period as provided in paragraph (a) of this section, if the 
following conditions are satisfied:
    (1) The bank has total assets of less than $500 million;
    (2) The bank is well capitalized as defined in Sec.  325.103(b)(1) 
of this chapter;
    (3) At the most recent FDIC or applicable State banking agency 
examination, the FDIC--
    (i) Assigned the bank a rating of 1 or 2 for management as part of 
the bank's composite rating under the Uniform Financial Institutions 
Rating System (commonly referred to as CAMELS); and
    (ii) Assigned the bank a composite rating of 1 or 2 under the 
Uniform Financial Institutions Rating System (copies of which are 
available at the addresses specified in Sec.  309.4 of this chapter);
    (4) The bank currently is not subject to a formal enforcement 
proceeding or order by the FDIC, OCC or the Federal Reserve and
    (5) No person acquired control of the bank during the preceding 12-
month period in which a full-scope, on-site examination would have been 
required but for this section.
* * * * *

PART 347--INTERNATIONAL BANKING

0
1. The authority citation for part 347 continues to read as follows:

    Authority: 12 U.S.C. 1813, 1815, 1817, 1819, 1820, 1828, 3103, 
3104, 3105, 3108, 3109; Title IX, Pub. L. 98-181, 97 Stat. 1153.

0
2. In Sec.  347.211, paragraph (b)(1) introductory text is republished 
and paragraph (b)(1)(i) is revised to read as follows:


Sec.  347.211  Examination of branches of foreign banks.

* * * * *
    (b) 18-month cycle for certain small institutions. (1) Mandatory 
standards. The FDIC may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month 
period as provided in paragraph (a) of this section, if the insured 
branch:
    (i) Has total assets of less than $500 million;
* * * * *

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

0
For the reasons set forth in the joint preamble, the OTS amends part 
563 of Chapter V of title 12 of the Code of Federal Regulations as 
follows:

PART 563--SAVINGS ASSOCIATIONS--OPERATIONS

0
1. The authority citation for part 563 continues to read as follows:

    Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468, 
1817, 1820, 1828, 1831o, 3806; 31 U.S.C. 5318; 42 U.S.C. 4106.


0
2. Section 563.171(b) is revised to read as follows:


Sec.  563.171  Frequency of safety and soundness examination.

* * * * *
    (b) 18-month rule for certain small institutions. The OTS may 
conduct a full-scope, on-site examination of a savings association at 
least once during each 18-month period, rather than each 12-month 
period as provided in paragraph (a) of this section, if the following 
conditions are satisfied:
    (1) The savings association has total assets of less than $500 
million;
    (2) The savings association is well capitalized as defined in Sec.  
565.4 of this chapter;
    (3) At its most recent examination, the OTS--
    (i) Assigned the savings association a rating of 1 or 2 for 
management as part of the savings association's composite rating under 
the Uniform Financial Institutions Rating System (commonly referred to 
as CAMELS), and
    (ii) Determined that the savings association was in outstanding or 
good condition, that is, it received a composite rating, as defined in 
Sec.  516.5(c) of this chapter, of 1 or 2;
    (4) The savings association currently is not subject to a formal 
enforcement proceeding or order by the OTS or the FDIC; and
    (5) No person acquired control of the savings association during 
the preceding 12-month period in which a full-scope, on-site 
examination would have been required but for this section.
* * * * *


[[Page 17804]]


    Dated: March 29, 2007.
John C. Dugan,
Comptroller of the Currency, Office of the Comptroller of the Currency.
    Board of Governors of the Federal Reserve System, April 3, 2007.
Jennifer J. Johnson,
Secretary of the Board.
    Dated at Washington, DC, this 20th day of March, 2007.

    Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
    Dated: April 2, 2007.

    By the Office of Thrift Supervision.
John M. Reich,
Director.
[FR Doc. 07-1716 Filed 4-9-07; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P