Office of Thrift Supervision Integration Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 48950-49199 [2011-17581]
Download as PDF
48950
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Parts 100, 108, 109, 112, 116,
128, 133, 136, 141, 143, 144, 145, 146,
150, 151, 152, 155, 157, 159, 160, 161,
162, 163, 164, 165, 167, 168, 169, 170,
171, 172, 174, 190, 191, 192, 193, 194,
195, 196, 197
[Docket ID OCC–2011–0016]
RIN 1557–AD47
Office of Thrift Supervision Integration
Pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act
Office of the Comptroller of the
Currency (OCC).
ACTION: Interim final rule with request
for comment.
AGENCY:
Pursuant to Title III of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act, all functions
of the Office of Thrift Supervision (OTS)
relating to Federal savings associations
and the rulemaking authority of the OTS
relating to all savings associations are
transferred to the Office of the
Comptroller of the Currency (OCC) on
July 21, 2011 (transfer date). In order to
facilitate the OCC’s enforcement and
administration of former OTS rules and
to make appropriate changes to these
rules to reflect OCC supervision of
Federal savings associations as of the
transfer date, the OCC is republishing,
with nomenclature and other technical
changes, the OTS regulations currently
found in Chapter V of Title 12 of the
Code of Federal Regulations. The
republished regulations will be
recodified with the OCC’s regulations in
Chapter I at parts 100 through 197
(Republished Regulations), effective on
July 21, 2011. The Republished
Regulations will supersede the OTS
regulations in Chapter V for purposes of
OCC supervision and regulation of
Federal savings associations, and certain
of the Republished Rules will supersede
the OTS regulations in Chapter V for
purposes of the FDIC’s supervision of
state savings associations. Chapter V of
Title 12 of the Code of Federal
Regulations will be vacated at a later
date.
SUMMARY:
This interim final rule is
effective July 21, 2011. Comments must
be received on or before October 11,
2011.
sroberts on DSK5SPTVN1PROD with RULES
DATES:
Because paper mail in the
Washington, DC area and at the OCC is
subject to delay, commenters are
encouraged to submit comments by the
ADDRESSES:
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Federal eRulemaking Portal or e-mail, if
possible. Please use the title
‘‘Republication of Regulations in
Connection with Office of Thrift
Supervision Integration Pursuant to the
Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010’’ to
facilitate the organization and
distribution of the comments. You may
submit comments by any of the
following methods:
• Federal eRulemaking Portal—
‘‘regulations.gov’’: Go to https://
www.regulations.gov. Select ‘‘Document
Type’’ of ‘‘Rule,’’ and in ‘‘Enter
Keyword or ID Box,’’ enter Docket ID
‘‘OCC–2011–0016’’ and click ‘‘Search.’’
On ‘‘View By Relevance’’ tab at bottom
of screen, in the ‘‘Agency’’ column,
locate the Rule for OCC, in the ‘‘Action’’
column, click on ‘‘Submit a Comment’’
or ‘‘Open Docket Folder’’ to submit or
view public comments and to view
supporting and related materials for this
rulemaking action.
• Click on the ‘‘Help’’ tab on the
Regulations.gov home page to get
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.
• E-mail:
regs.comments@occ.treas.gov.
• Mail: Office of the Comptroller of
the Currency, 250 E Street, SW., Mail
Stop 2–3, Washington, DC 20219.
• Fax: (202) 874–5274.
• Hand Delivery/Courier: 250 E
Street, SW., Mail Stop 2–3, Washington,
DC 20219.
Instructions: You must include
‘‘OCC’’ as the agency name and ‘‘Docket
ID OCC–2011–0016’’ in your comment.
In general, OCC will enter all comments
received into the docket and publish
them on the Regulations.gov Web site
without change, including any business
or personal information that you
provide such as name and address
information, e-mail addresses, or phone
numbers. Comments received, including
attachments and other supporting
materials, 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 that pertain to this
interim final rule by any of the
following methods:
• Viewing Comments Electronically:
Go to https://www.regulations.gov. Select
‘‘Document Type’’ of ‘‘Public
Submissions,’’ in ‘‘Enter Keyword or ID
Box,’’ enter Docket ID ‘‘OCC–2011–
PO 00000
Frm 00002
Fmt 4701
Sfmt 4700
0016,’’ and click ‘‘Search.’’ Comments
will be listed under ‘‘View By
Relevance’’ tab at bottom of screen.
• Viewing Comments Personally: You
may personally inspect and photocopy
comments at the OCC, 250 E Street,
SW., Washington, DC. For security
reasons, the OCC requires that visitors
make an appointment to inspect
comments. You may do so by calling
(202) 874–4700. Upon arrival, visitors
will be required to present valid
government-issued photo identification
and to submit to security screening in
order to inspect and photocopy
comments.
• Docket: You may also view or
request available background
documents and project summaries using
the methods described above.
FOR FURTHER INFORMATION CONTACT:
Andra Shuster, Senior Counsel, or Heidi
Thomas, Special Counsel, Legislative
and Regulatory Activities Division,
(202) 874–5090, Office of the
Comptroller of the Currency, 250 E
Street, SW., Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
I. Background
On July 21, 2010, President Barack
Obama signed into law the Dodd-Frank
Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act or
Act).1 Title III of the Dodd-Frank Act
transfers the powers, authorities, rights,
and duties of the OTS to other Federal
banking agencies, including the OCC, on
July 21, 2011, the transfer date. The OTS
is abolished 90 days thereafter.
Under Title III of the Dodd-Frank Act,
the OCC will assume all functions of the
OTS and the Director of the OTS
relating to Federal savings associations.2
As a result, the OCC will have
responsibility for the ongoing
supervision, examination and regulation
of Federal savings associations as of the
transfer date. The Act also transfers to
the OCC the rulemaking authority of the
OTS relating to all savings associations,
both state and Federal.3 The legislation
1 Public
Law 111–203, 124 Stat. 1376 (2010).
Act section 312(b)(2)(B)(i) (to be
codified 12 U.S.C. 5412(b)(2)(B)(i)). Title III
transfers all supervisory functions of the OTS
relating to state savings associations to the Federal
Deposit Insurance Corporation (FDIC) and all
functions relating to the supervision of any savings
and loan holding company and non-depository
institution subsidiaries of such holding companies,
as well as rulemaking authority for savings and loan
holding companies, to the Board of Governors of the
Federal Reserve System (Board).
3 Id. As discussed below, although this is the
language in the Act, the FDIC has identified a
number of independent bases for rulemaking
authority for state savings associations. Where no
such authority has been found, the FDIC will
enforce applicable OCC regulations for state savings
associations.
2 Dodd-Frank
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
sroberts on DSK5SPTVN1PROD with RULES
continues in effect all OTS orders,
resolutions, determinations, agreements,
regulations, interpretive rules, other
interpretations, guidelines, procedures
and other advisory materials in effect
the day before the transfer date, and
allows the OCC to enforce these
materials with respect to Federal
savings associations, until modified,
terminated, set aside or superseded by
the OCC, a court, or by operation of
law.4
In an effort to ensure an orderly
transfer of OTS regulations to the OCC
as of the transfer date, the OCC has
determined that it is appropriate to
republish in 12 CFR Chapter I all OTS
regulations from 12 CFR Chapter V that
we have the authority to promulgate and
enforce, with appropriate nomenclature
and other technical changes. The
Republished Regulations will supersede
the OTS regulations found in Chapter V
for purposes of the OCC’s supervision
and regulation of Federal savings
associations, and, where applicable, for
purposes of the FDIC’s supervision and
regulation of state savings associations.
OCC Regulatory Actions To Integrate
OTS Functions
Since the adoption of the Dodd-Frank
Act, the OCC, in collaboration with the
OTS, has been reviewing its regulations,
as well as those of the OTS, to
determine what changes are needed to
facilitate a smooth regulatory transition
to OCC supervision of Federal savings
associations. This review is being
accomplished in several phases. On July
21, 2011, the OCC issued a final rule
revising certain OCC rules that are
central to internal agency functions and
operations immediately upon the
transfer of supervisory jurisdiction for
Federal savings associations.5 This final
rule amends the OCC’s rules at 12 CFR
part 4 pertaining to its organization and
functions, the availability of information
from the OCC under the Freedom of
Information Act, the release of nonpublic OCC information, and
restrictions on the post-employment
activities of senior examiners; and at 12
CFR part 8, pertaining to assessments.
The final rule also amends 12 CFR parts
5 and 28 to implement sections 603 and
335 of the Dodd-Frank Act, respectively;
and 12 CFR parts 5, 7, and 34, to
implement sections 1044 through 1047
of the Act pertaining to preemption and
visitorial powers.
This interim final rule is the next step
of our review of OCC and OTS
4 Dodd-Frank Act, section 316(b) (to be codified
at 12 U.S.C. 5414(b)).
5 See the Rules and Regulations section of the July
21, 2011 issue of the Federal Register.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
regulations. As described in more detail
below, this interim final rule
republishes those OTS regulations that
the OCC has the authority to promulgate
and will enforce as of the transfer date.6
Subsequent to the transfer date, the
OCC will consider more comprehensive
substantive amendments, as necessary,
to the Republished Regulations. For
example, we may propose to repeal or
combine provisions in cases where OCC
and former OTS rules are substantively
identical or substantially overlap. In
addition, we may propose to repeal or
modify OCC or former OTS rules where
differences in regulatory approach are
not required by statute or warranted by
features unique to either the national
bank or Federal savings association
charter. This substantive review also
will provide an opportunity for the OCC
to ask for comments suggesting
revisions to the rules for both national
banks and Federal savings associations
that would remove provisions that are
‘‘outmoded, ineffective, insufficient, or
excessively burdensome,’’ consistent
with the goals outlined in an executive
order recently issued by the President.7
II. Description of the Interim Final Rule
As noted above, the interim final rule
republishes those OTS regulations the
OCC has the authority to promulgate
and, along with the FDIC in the case of
state savings associations, will enforce
as of the transfer date. The OTS
regulations are currently set out in
Chapter V of Title 12 as parts 500
through 591. In order to reduce
confusion and to assist the thrift
industry, we have preserved where
possible the OTS’s numbering system by
republishing these regulations with OCC
part numbers that correspond to the
former OTS rules, specifically, by
changing the ‘‘5’’ to a ‘‘1’’. For example,
12 CFR part 545 is republished as 12
CFR part 145. We note, however, that
there were a number of instances where
the OTS numbering system has been
modified because it deviated from
standard CFR numbering conventions.
Therefore, for example, former parts
563b through 563g are being
republished as parts 192 through 197
(with corresponding cross-reference
changes). This preamble contains a
redesignation table indicating how the
newly issued parts in Chapter I
6 Pursuant to section 316(c)(2) of the Dodd-Frank
Act, the OCC (along with the FDIC) published a
notice in the Federal Register identifying those
OTS regulations that are continued under the Act
that each agency will enforce beginning on the
transfer date. 76 FR 39246 (July 6, 2011).
7 Executive Order 13563, ‘‘Improving Regulation
and Regulatory Review’’ 76 FR 3821 (Jan. 21, 2011).
PO 00000
Frm 00003
Fmt 4701
Sfmt 4700
48951
correspond to the former parts in
Chapter V.
We also have made nomenclature and
other technical amendments to reflect
OCC supervision of Federal savings
associations and FDIC supervision of
state savings associations, along with
certain required Dodd-Frank Act
changes. OTS regulations in Chapter V
of Title 12 that will be unnecessary
following the transfer date, or that are
superseded by this rulemaking (or other
rulemakings by the FDIC and the Board)
or other provisions of the Dodd-Frank
Act, will be repealed at a later date. We
have added a new part 100 to clarify
that the Republished Regulations
supersede any rules applying to savings
associations contained in Chapter V of
Title 12.
In addition, part 100 provides that the
Comptroller may, for good cause and to
the extent permitted by statute, waive
the applicability of any provision of
parts 100 through 197. This provision
transfers to the Comptroller authority
provided to the OTS Director by 12 CFR
500.30(a).
The OCC has worked closely with the
OTS, FDIC and the Board to coordinate
the republication of OTS rules.
Although section 312 of the Dodd-Frank
Act transfers all OTS rulemaking
authority for all savings associations to
the OCC, where the FDIC has identified
an independent basis for its rulemaking
authority over state savings associations
(either due to other amendments made
by the Dodd-Frank Act or based on
other statutory authority) the FDIC will
promulgate regulations for state savings
associations. Therefore, not all of the
Republished Regulations apply to state
savings associations.8 The FDIC will
publish a separate rulemaking amending
its rules or republishing certain OTS
rules under this authority.
We also have not republished those
OTS rules relating exclusively to
savings and loan holding companies
(SLHCs), because the Dodd-Frank Act
transferred the OTS’s supervision and
rulewriting authority for SLHCs to the
Board.9 Where OTS rules addressed
both savings associations and SLHCs,
we have republished only those parts of
the rule pertaining to savings
associations.
8 The following regulations apply to state savings
associations: certain provisions in part 160
(Lending and Investment), part 161 (Definitions),
certain provisions in part 163 (Savings Association
Operations), part 169 (Proxies), part 190
(Preemption of State Usury Laws), part 191
(Preemption of State Due-on-Sale Laws), part 192
(Conversions from Mutual to Stock Form), and part
195 (Community Reinvestment).
9 See section 312 of the Dodd-Frank Act, (to be
codified at 12 U.S.C. 5412).
E:\FR\FM\09AUR2.SGM
09AUR2
48952
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
sroberts on DSK5SPTVN1PROD with RULES
Similarly, under the Dodd-Frank Act,
rulewriting authority for certain
consumer rules is transferred to the
Bureau of Consumer Financial
Protection (Bureau). Therefore, although
the OCC has the authority to enforce
these rules for Federal savings
associations and national banks with
total assets of $10 billion or less, we
have not republished these rules and
they remain in Chapter V of the Code of
Federal Regulations, until superseded
by the Bureau.10
We also note that, in addition to parts
100 through 197, certain rules contained
in parts 1 through 41 will also take into
consideration the OCC’s supervision of
Federal savings associations, such as
part 4 (regarding disclosure of
information) and part 8 (regarding
assessments).
A. General Nomenclature Changes
The OCC has made certain
nomenclature and other non-substantive
changes consistently throughout the
Republished Regulations to replace
references to the OTS and its
administrative structure with
appropriate references to the OCC and,
in the case of rules also applicable to
state savings associations, the FDIC.
Specifically, these changes are as
follows:
• References to ‘‘the OTS,’’ ‘‘Office,’’
and ‘‘Secretary’’ have been changed to
‘‘the OCC’’ or ‘‘FDIC’’ or to ‘‘the
appropriate Federal banking agency’’
(AFBA), as defined in 12 U.S.C. 1813(q)
and as amended by the Dodd-Frank Act.
Because some of the Republished
Regulations apply to both Federal and
state savings associations, the term
‘‘AFBA’’ is used where a provision
applies to both types of institutions. We
have added the definition of AFBA to
part 161.
• References to ‘‘the Director of the
OTS’’ or ‘‘Director’’ have been changed
to ‘‘Comptroller’’ or ‘‘Board of Directors
of the FDIC’’ or ‘‘FDIC,’’ as appropriate.
We have added the definition of
‘‘Comptroller’’ and ‘‘OCC’’ to part 161.
• In some cases, references to specific
offices within the OTS have been
removed and replaced with the names
of the corresponding office within the
OCC (for example, references to the OTS
Office of Enforcement have been
changed to reference the OCC’s
Enforcement and Compliance Division).
However, some OTS rules include
references to offices that do not
correspond easily to the OCC’s
10 See section 1022 of the Dodd-Frank Act, (to be
codified at 12 U.S.C. 5512). These rules include 12
CFR parts 563, subpart D (S.A.F.E. Act), 571
subparts A through E and § 571.82 in subpart I (Fair
Credit Reporting) and 573 (Privacy).
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
administrative structure. In those cases,
the specific reference has been replaced
with ‘‘the OCC.’’ Similar references have
been made to the FDIC where
appropriate. OCC and FDIC handbooks
and other agency publications (which
will be amended as appropriate after the
transfer date), as well as OCC and FDIC
Web sites will provide the specific filing
locations.11
• In some cases, we have reduced the
number of copies of filings to be
submitted to the OCC.
• Some OTS regulations include
agency addresses and contact
information as well as addresses of third
parties. Because office addresses
frequently are subject to change as a
result of moves and reassignments, the
OCC generally has chosen not to include
specific addresses in its regulations
governing national banks, and has made
similar changes in the Republished
Regulations. Updated contact
information for these entities will
continue to be available on the OCC’s
Web site or in other agency
publications, or by contacting the
specified third parties.
• Cross-references in the Republished
Rules have been changed to reference
the new OCC CFR numbers in Chapter
I. For example, a reference to 12 CFR
550.80 has been changed to reference
the new section 12 CFR 150.80 in the
Republished Regulations. Crossreferences also have been updated to
reference OCC rules, or relevant rules
issued by the FDIC or the Board.
B. Specific Section Changes
In addition to the changes described
above, the OCC has made other notable
changes to sections of the Republished
Regulations to implement provisions of
the Dodd-Frank Act or to delete obsolete
references.12
• Deposit activities of savings
associations—part 157. Section 627 of
the Dodd-Frank Act removed the
11 The OCC’s Web site is found at www.occ.gov.
The FDIC’s Web site is found at www.fdic.gov.
12 We note that section 939A of the Dodd-Frank
Act requires the Federal banking agencies to amend
their rules to provide alternatives for references to
external credit ratings in there regulations. OTS
rules include such references related to lending and
investment in part 560, and regulatory capital
requirements in part 567. The OTS issued an ANPR
addressing lending and investment on October 14,
2010. (75 FR 63107), and it joined the other Federal
banking agencies in issuing an ANPR addressing
the regulatory capital requirements on August 25,
2010 (75 FR 52283). We have not amended these
references in the Republished Regulations as the
OCC is currently drafting separate proposals to
address section 939A. We anticipate that the final
OCC rules addressing section 939A will make any
necessary amendments to parts 160 and 167 of the
Republished Regulations, incorporating comments
received including those in response to the OTS
ANPRs.
PO 00000
Frm 00004
Fmt 4701
Sfmt 4700
prohibition of paying interest on
demand accounts from the HOLA.
Section 157.14 provided that savings
associations could pay interest only on
savings accounts. Therefore, in order to
implement the Dodd-Frank Act change,
we have removed the word ‘‘savings’’
from this section.
• Preemption—parts 145, 150, 157,
and 160. The OTS regulations at 12 CFR
parts 545, 550, 557 and 560 include
certain ‘‘occupation of the field’’
statements on Federal preemption.
Section 1046 of the Dodd-Frank Act
provides that the Home Owners’ Loan
Act (HOLA) does not occupy the field
in any area of state law. Therefore, these
occupation of the field statements in the
OTS regulations have been removed
from the Republished Regulations in
§§ 145.2, 150.136, 157.11 and 160.2 by
this interim final rule. In addition, the
current OTS regulations do not
accurately characterize the preemption
standards applicable to Federal savings
associations after the Dodd-Frank Act.
The Act changes the preemption
standards applicable to Federal savings
associations to conform to those
applicable to national banks.13 The Act
specifically provides that, as of the
transfer date, determinations by a court
or by the OCC under the HOLA with
respect to Federal savings associations
must be made in accordance with the
laws and legal standards applicable to
national banks regarding the application
of state law.14 The OCC recently
published a final rule hat implements
this standard for Federal savings
associations. To conform with the DoddFrank Act, this interim final rule adds
references to the new preemption
standards applicable to Federal savings
associations in §§ 157.11 and 160.2 of
the Republished Regulations and
removes a now obsolete cross-reference
in § 160.110.
• Historical references. We have
removed a number of historical
references contained in the OTS rules in
Chapter V that are no longer relevant.
• Alternative Mortgage Transactions
Parity Act (AMTPA). Section 1002 of the
Dodd-Frank Act transfers rulemaking
authority for the AMTPA to the Bureau.
Therefore, we have not republished
§ 560.220, which implements AMTPA,
as OCC rules.
13 Dodd-Frank Act section 1046, 124 Stat. 2017 (to
be codified at 12 U.S.C. 1465). In addition, the Act
states that the provisions in section 1047(a)
regarding visitorial powers shall apply to Federal
savings associations and their subsidiaries to the
same extent and in the same manner as if they were
national banks or national bank subsidiaries. DoddFrank Act section 1047(b), 124 Stat. 2018 (to be
codified at 12 U.S.C. 1465).
14 Id.
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
• Regulations relating to transactions
with affiliates, extensions of credit to
insiders and tying arrangements.
Section 312(b)(2)(A) transfers all OTS
rulemaking authority relating to
transactions with affiliates, extensions
of credit to insiders and tying
arrangements to the Board. Therefore,
we have not republished §§ 563.36,
563.41 and 563.43, but rather refer
Federal savings associations to the
Board’s regulations.
• Savings associations—Operations:
In § 163.22(e)(1)(iv), we have removed
the reference to the Board and FDIC, as
12 U.S.C. 1828(c) no longer requires the
Federal banking agencies to seek
competitive impact reports from the
other Federal banking agencies before
acting on a merger, consolidation, or
assumption of liabilities. Instead,
competitive impact reports are required
only from the Attorney General. In
addition, pursuant to the Dodd-Frank
Act, savings associations that are part of
a SLHC structure must now file a notice
of a declaration of a dividend with the
Board. We have amended § 163.143 to
require that, in the case of cash
dividends, Federal savings associations
that are subsidiaries of a stock SLHC file
an informational copy of that notice
with the OCC at the same time it is filed
with the Board. We note that under the
regulation Federal savings associations
that are subsidiaries of stock SLHCs
must file notices of a declaration of a
noncash dividend and other capital
distributions with the OCC. In addition,
pursuant to an amendment made to the
HOLA by the Dodd-Frank Act,15 Federal
savings associations that are
subsidiaries of mutual SLHCs are
required to provide a notice of a
declaration of dividends to both the
Board and the OCC. Our amendment to
§ 163.143 accounts for this notice.
• Change in bank control. Part 574 of
the OTS rules addressing change in
control of savings associations
referenced control as being ‘‘more than
25%,’’ however because the underlying
statute (the Change in Bank Control Act,
12 U.S.C. 1817(j)) uses the phrase ‘‘25%
or more,’’ we have replaced the former
OTS phrase with the statutory language
throughout part 174 in the Republished
Regulations. We also have conformed
§ 574.7(d)(3) to better track the statutory
language. Additionally, throughout this
rule, we have removed those sections
that apply only to SLHCs, and have
added provisions from former part 574
in place of cross-references where the
cross-referenced provision is now
contained in a Board regulation.
15 Dodd-Frank Act, section 625 (to be codified at
12 U.S.C. 1467a(o)(11)).
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
• References to Thrift Financial
Report (TFR). Where there were
references to the TFR in Chapter V of
the OTS rules, we have added
‘‘Consolidated Reports of Condition or
Income’’ (Call Report) or ‘‘Thrift
Financial Report,’’ as appropriate’’ to
account for the phase out of the TFR.16
• Remaining Fair Credit Reporting
regulations. As noted above, under the
Dodd-Frank Act, the Bureau assumes
rulemaking authority for the majority of
rules under the Fair Credit Reporting
Act (FCRA). However, the OCC retains
rulemaking authority for § 571.83 of
subpart I and all of subpart J. All of the
FCRA rules were originally published
together in part 571 of the OTS rules
and contained generally applicable
provisions in subpart A. One such
provision stated that examples given in
the rules were not exclusive and that
compliance with an example would
constitute compliance with the rule. In
part 171 of the Republished Regulations,
we have included this provision to
apply it to subpart J, which includes
examples.
III. Notice and Comment
This interim final rule is effective on
July 21, 2011. Pursuant to the
Administrative Procedure Act (APA), at
5 U.S.C. 553(b)(B), notice and comment
are not required prior to the issuance of
a final rule if an agency, for good cause,
finds that ‘‘notice and public procedure
thereon are impracticable, unnecessary,
or contrary to the public interest.’’
Section 316(b) of the Dodd-Frank Act
provides that all OTS regulations in
effect the day before the transfer date
shall continue in effect until modified,
terminated, set aside, or superseded by
the OCC. The interim final rule makes
non-substantive, technical changes to
the OTS regulations, such as
renumbering, changing internal crossreferences, replacing appropriate
nomenclature, and changing the address
for filing applications and notices. The
rule also makes a few changes to
conform the rules for Federal savings
associations to changes in the law
affected by the Dodd-Frank Act. Because
these regulations are nearly identical to
the OTS’s rules which savings
associations are currently subject to, the
new rules do not change or impose
additional requirements that necessitate
adjustments by these institutions. In
addition, codifying former OTS
regulations as OCC regulations with
nomenclature changes and updated
16 See the joint Paperwork Reduction Act Notice
published by the OTS, OCC, FDIC and the Board
proposing to phase out of the TFR. 76 FR 39981
(July 7, 2011).
PO 00000
Frm 00005
Fmt 4701
Sfmt 4700
48953
filing addresses will help reduce
confusion in the industry. Moreover, the
transferring rules in general were
originally issued by the OTS following
notice and comment rulemaking, as
appropriate.
Therefore, the OCC has concluded
that advance notice and comment under
the APA is unnecessary and not in the
public interest.
IV. Effective Date
This interim final rule is effective on
July 21, 2011. A final rule may be
published with an immediate effective
date if an agency finds good cause and
publishes such with the final rule.17 The
purpose of a delayed effective date is to
permit regulated entities to adjust their
behavior before the final rule takes
effect. As described above, the interim
final rule makes non-substantive,
technical changes, which will not
require savings associations to adjust
their behavior in a substantive manner.
In addition, the interim final rule
provides guidance regarding certain
required Dodd-Frank Act changes. It is
important to have these regulations in
place on July 21, 2011, the transfer date,
to facilitate a seamless transition when
the OCC and the FDIC assume
responsibility for supervising savings
associations on that day and to inform
the industry what rules will apply as of
the transfer date. For these reasons, the
OCC finds good cause to dispense with
a delayed effective date.
Section 302 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (12 U.S.C.
4802) requires, subject to certain
exceptions, that regulations imposing
additional reporting, disclosure, or other
requirements on insured depository
institutions take effect on the first day
of the calendar quarter after publication
of the final rule. As a general matter this
interim final rule does not impose
additional reporting, disclosure, or other
requirements. However, to the extent
that there are any additional reporting,
disclosure, or other requirements,
because they impose minimal burden on
savings associations and because of the
need to have final rules in place on he
transfer date, the OCC finds good cause
not to delay the effectiveness of these
rules.
V. Request for Comments
Although notice and comment are not
required prior to the effective date of
this interim final rule, the OCC invites
comments on all aspects of the rule and
will revise it if necessary or appropriate
in light of the comments received.
17 5
U.S.C. 553(d)(3).
E:\FR\FM\09AUR2.SGM
09AUR2
48954
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
VI. Regulatory Analysis
Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (Pub.
L. 96–354, Sept. 19, 1980) (RFA) applies
only to rules for which an agency
publishes a general notice of proposed
rulemaking pursuant to 5 U.S.C. 553(b).
Pursuant to the APA at 5 U.S.C.
553(b)(B), general notice and an
opportunity for public comment are not
required prior to the issuance of a final
rule when an agency, for good cause,
finds that ‘‘notice and public procedure
thereon are impracticable, unnecessary,
or contrary to the public interest.’’ As
discussed above, the OCC has
determined for good cause that the APA
does not require general notice and
public comment on this interim final
rule and, therefore, we are not
publishing a general notice of proposed
rulemaking. Thus, the RFA, pursuant 5
U.S.C. 601(2), does not apply to this
interim final rule.
sroberts on DSK5SPTVN1PROD with RULES
Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995, Public
Law 104–4 (2 U.S.C. 1532) (Unfunded
Mandates Act), requires that an agency
prepare a budgetary impact statement
before promulgating any rule likely to
result in 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. The OCC has
determined that there is no Federal
mandate imposed by this rulemaking
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.
Paperwork Reduction Act
The OCC may not conduct or sponsor,
and a respondent is not required to
respond to, an information collection
unless it displays a currently valid
Office of Management and Budget
(OMB) control number.
This rule contains information
collection requirements under the
Paperwork Reduction Act (PRA), which
have been previously approved by OMB
under the following OMB control
numbers, and the PRA burden for which
is unchanged by this rule: OMB Control
Nos. 1550–0003; 1550–0005 through
1550–0007; 1550–0011 through 1550–
0020; 1550–0021, 1550–0025; 1550–
0030; 1550–0032; 1550–0035; 1550–
0037; 1550–0041; 1550–0047; 1550–
0051; 1550–0053; 1550–0056; 1550–
0060; 1550–0062; 1550–0066; 1550–
0072; 1550–0077 through 1550–0078;
1550–0081; 1550–0088; 1550–0092;
1550–0094 through 1550–0095; 1550–
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
0103 through 1550–0106; 1550–0109
through 1550–0110; 1550–0112 through
1550–0113; 1550–0115; 1550–0117;
1557–0119; 1550–0122; and 1550–0127.
The information collection approved
under OMB Control No. 1550–0059 will
be amended through a non-substantive
change. There are no new information
collection requirements in this interim
final rule.
VII. Redesignation Table
The following redesignation table is
provided for reader reference and shows
the relationship of former section
numbers within Chapter V to the new
section numbers in Chapter I.
12 CFR Chapter V:
Former part or section
numbers
Part 508 ....................
Part 509 ....................
Part 512 ....................
Part 516 ....................
Part 528 ....................
Section 528.1 ............
Section 528.1a ..........
Section 528.2 ............
Section 528.2a ..........
Section 528.3 ............
Section 528.4 ............
Section 528.5 ............
Section 528.6 ............
Section 528.7 ............
Section 528.8 ............
Section 528.9 ............
Part 533 ....................
Part 536 ....................
Part 541 ....................
Part 543 ....................
Section 543.1 ............
Section 543.2 ............
Section 543.3 ............
Section 543.5 ............
Section 543.6 ............
Section 543.7 ............
Section 543.7–1 ........
Section 543.8 ............
Section 543.9 ............
Section 543.10 ..........
Section 543.11 ..........
Section 543.11–1 ......
Section 543.14 ..........
Part 544 ....................
Part 545 ....................
Part 546 ....................
Part 550 ....................
Part 551 ....................
Part 552 ....................
Section 552.2–1 ........
Section 552.2–2 ........
Section 552.2–3 ........
Section 552.2–6 ........
Section 552.2–7 ........
Section 552.3 ............
Section 552.4 ............
Section 552.5 ............
Section 552.6 ............
Section 552.6–1 ........
Section 552.6–2 ........
Section 552.6–3 ........
Section 552.6–4 ........
Section 552.9 ............
PO 00000
Frm 00006
Fmt 4701
12 CFR Chapter I:
New part or section
numbers
Part 108
Part 109
Part 112
Part 116
Part 128
Section 128.1
Section 128.10
Section 128.2
Section 128.11
Section 128.3
Section 128.4
Section 128.5
Section 128.6
Section 128.7
Section 128.8
Section 128.9
Part 133
Part 136
Part 141
Part 143
Section 143.1
Section 143.2
Section 143.3
Section 143.4
Section 143.5
Section 143.6
Section 143.7
Section 143.8
Section 143.9
Section 143.10
Section 143.11
Section 143.12
Section 143.14
Part 144
Part 145
Part 146
Part 150
Part 151
Part 152
Section 152.1
Section 152.2
Section 152.17
Section 152.18
Section 152.19
Section 152.3
Section 152.4
Section 152.5
Section 152.6
Section 152.7
Section 152.8
Section 152.9
None
None
Sfmt 4700
12 CFR Chapter V:
Former part or section
numbers
12 CFR Chapter I:
New part or section
numbers
Section 552.10 ..........
Section 552.11 ..........
Section 552.12 ..........
Section 552.13 ..........
Section 552.14 ..........
Section 552.15 ..........
Section 552.16 ..........
Part 555 ....................
Part 557 ....................
Part 559 ....................
Part 560 ....................
Part 561 ....................
Part 562 ....................
Part 563 ....................
Part 563b ..................
Part 563c ...................
Part 563c, Subpart A
Part 563c, Subpart B
Section 563c.101 ......
Section 563c.102 ......
Section 152.10
Section 152.11
Section 152.12
Section 152.13
Section 152.14
Section 152.15
Section 152.16
Part 155
Part 157
Part 159
Part 160
Part 161
Part 162
Part 163
Part 192
Part 193
Part 193, Subpart A
Part 193, Subpart B
Section 193.101
Section 193.102 and
new Appendix A
Part 194
Section 194.1
Section 194.2
Section 194.3
Section 194.210
Section 194.801
Section 194.802
Part 195
Part 196
Part 197
Section 197.1
Section 197.2
Section 197.3
Section 197.4
Section 197.5
Section 197.6
Section 197.7
Section 197.8
Section 197.9
Section 197.10
Section 197.11
Section 197.12
Section 197.13
Section 197.14
Section 197.15
Section 197.16
Section 197.17
Section 197.18
Section 197.19
Part 197, Appendix A
Section 197.21
Part 164
Part 165
Part 167
Part 168
Part 169
Part 170
Part 171
Part 172
Part 174
Section 174.1
Section 174.2
Section 174.3
Section 174.4
Section 174.5
Section 174.6
Section 174.7
Section 174.8
Part 174, Appendix A
Part 190
Part 191
Part 563d ..................
Section 563d.1 ..........
Section 563d.2 ..........
Section 563d.3b–6 ....
Section 563d.210 ......
Section 563d.801 ......
Section 563d.802 ......
Part 563e ..................
Part 563f ...................
Part 563g ..................
Section 563g.1 ..........
Section 563g.2 ..........
Section 563g.3 ..........
Section 563g.4 ..........
Section 563g.5 ..........
Section 563g.6 ..........
Section 563g.7 ..........
Section 563g.8 ..........
Section 563g.9 ..........
Section 563g.10 ........
Section 563g.11 ........
Section 563g.12 ........
Section 563g.13 ........
Section 563g.14 ........
Section 563g.15 ........
Section 563g.16 ........
Section 563g.17 ........
Section 563g.18 ........
Section 563g.19 ........
Section 563g.20 ........
Section 563g.21 ........
Part 564 ....................
Part 565 ....................
Part 567 ....................
Part 568 ....................
Part 569 ....................
Part 570 ....................
Part 571 ....................
Part 572 ....................
Part 574 ....................
Section 574.1 ............
Section 574.2 ............
Section 574.3 ............
Section 574.4 ............
Section 574.5 ............
Section 574.6 ............
Section 574.7 ............
Section 574.8 ............
Section 574.100 ........
Part 590 ....................
Part 591 ....................
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
List of Subjects
12 CFR Part 151
12 CFR Part 169
12 CFR Part 100
Reporting and recordkeeping
requirements, Savings associations,
Securities, Trusts and trustees.
48955
12 CFR Part 170
Savings associations.
Savings associations, Securities.
Reporting and recordkeeping
requirements, Savings associations,
Securities.
Accounting, Administrative practice
and procedure, Bank deposit insurance,
Reporting and recordkeeping
requirements, Safety and soundness,
Savings associations.
12 CFR Part 155
12 CFR Part 171
Administrative practice and
procedure, Investigations.
Accounting, Consumer protection,
Electronic funds transfers, Reporting
and recordkeeping requirements,
Savings associations.
Consumer protection, Credit, Fair
Credit Reporting Act, Privacy, Reporting
and recordkeeping requirements,
Savings associations.
12 CFR Part 116
12 CFR Part 157
12 CFR Part 172
Administrative practice and
procedure, Reporting and recordkeeping
requirements, Savings associations.
Reporting and recordkeeping
requirements, Savings associations.
Flood insurance, Reporting and
recordkeeping requirements, Savings
associations.
12 CFR Part 108
Administrative practice and
procedure, Crime, Savings associations.
12 CFR Part 109
Administrative practice and
procedure, Penalties.
12 CFR Part 112
12 CFR Part 128
Advertising, Aged, Civil rights, Credit,
Equal employment opportunity, Fair
housing, Individuals with disabilities,
Marital status discrimination,
Mortgages, Religious discrimination,
Reporting and recordkeeping
requirements, Savings associations, Sex
discrimination, Signs and symbols.
12 CFR Part 133
Confidential business information,
Freedom of information, Reporting and
recordkeeping requirements, Savings
associations.
12 CFR Part 152
12 CFR Part 159
12 CFR Part 174
Reporting and recordkeeping
requirements, Savings associations,
Subsidiaries.
12 CFR Part 160
Consumer protection, Investments,
Manufactured homes, Mortgages,
Reporting and recordkeeping
requirements, Savings associations,
Securities.
12 CFR Part 161
Savings associations.
12 CFR Part 143
Reporting and recordkeeping
requirements; Savings associations.
12 CFR Part 144
Administrative practice and
procedure, Savings associations.
Banks, banking, Loan programshousing and community development,
Mortgages.
12 CFR Part 162
12 CFR Part 192
Reporting and recordkeeping
requirements, Savings associations,
Securities.
12 CFR Part 193
Accounting, Savings associations,
Securities.
12 CFR Part 164
Reporting and recordkeeping
requirements, Savings associations.
Appraisals, Mortgages, Reporting and
recordkeeping requirements, Savings
associations.
12 CFR Part 145
Consumer protection, Credit,
Electronic funds transfers, Investments,
Manufactured homes, Mortgages,
Reporting and recordkeeping
requirements, Savings associations.
12 CFR Part 165
12 CFR Part 146
sroberts on DSK5SPTVN1PROD with RULES
12 CFR Part 191
Accounting, Administrative practice
and procedure, Advertising, Conflict of
interests, Crime, Currency, Investments,
Mortgages, Reporting and recordkeeping
requirements, Savings associations,
Securities, Surety bonds.
12 CFR Part 141
Reporting and recordkeeping
requirements, Savings associations.
Capital, Reporting and recordkeeping
requirements, Risk, Savings
associations.
12 CFR Part 150
12 CFR Part 168
Administrative practice and
procedure, Reporting and recordkeeping
requirements, Savings associations,
Trusts and trustees.
Consumer protection, Privacy,
Reporting and recordkeeping
requirements, Savings associations,
Security measures.
Jkt 223001
Banks, banking, Loan programshousing and community development,
Manufactured homes, Mortgages.
12 CFR Part 163
Consumer protection, Insurance,
Reporting and recordkeeping
requirements, Savings associations.
21:10 Aug 08, 2011
12 CFR Part 190
Accounting, Reporting and
recordkeeping requirements, Savings
associations.
12 CFR Part 136
VerDate Mar<15>2010
Administrative practice and
procedure, Reporting and recordkeeping
requirements, Savings associations,
Securities.
Administrative practice and
procedure, Savings associations.
12 CFR Part 167
PO 00000
Frm 00007
Fmt 4701
Sfmt 4700
12 CFR Part 194
Authority delegations (Government
agencies), Reporting and recordkeeping
requirements, Savings associations,
Securities.
12 CFR Part 195
Community development, Credit,
Investments, Reporting and
recordkeeping requirements, Savings
associations.
12 CFR Part 196
Antitrust, Reporting and
recordkeeping requirements, Savings
associations.
12 CFR Part 197
Reporting and recordkeeping
requirements, Savings associations,
Securities.
For the reasons set forth in the
preamble, Chapter I of Title 12 of the
■
E:\FR\FM\09AUR2.SGM
09AUR2
48956
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Code of Federal Regulations is amended
by adding parts 100, 108, 109, 112, 116,
128, 133, 136, 141, 143, 144, 145, 146,
150, 151, 152, 155, 157, 159, 160, 161,
162, 163, 164, 165, 167, 168, 169, 170,
171, 172, 174, 190, 191, 192, 193, 194,
195, 196, 197, respectively, to read as
follows:
PART 100—RULES APPLICABLE TO
SAVINGS ASSOCIATIONS
Authority: 12 U.S.C. 1462a, 1463,
5412(b)(2)(B), 5414(b)(2).
§ 100.1
Certain regulations superseded.
Effective on July 21, 2011, section
312(b)(2)(B) of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (Pub. L. 111–203, 124 Stat. 1376
(2010)) (12 U.S.C. 5412(b)(2)(B))
transferred rulemaking authority of the
Office of Thrift Supervision (OTS)
relating to all savings associations, both
state and Federal to the OCC. The
regulations set forth in parts 100
through 197 of this Chapter I applying
to Federal savings associations and state
savings associations, as those terms are
defined in section 3(b) of the Federal
Deposit Insurance Act (12 U.S.C.
1813(b)), supersede corresponding
regulations set forth in parts 500
through 591 of Chapter V of the Code of
Federal Regulations that were
applicable to such entities prior to July
21, 2011.
§ 100.2
Waiver authority.
The Comptroller of the Currency may,
for good cause and to the extent
permitted by statute, waive the
applicability of any provision of parts
100 through 197.
sroberts on DSK5SPTVN1PROD with RULES
PART 108—REMOVALS,
SUSPENSIONS, AND PROHIBITIONS
WHERE A CRIME IS CHARGED OR
PROVEN
Sec.
108.1 Scope.
108.2 Definitions.
108.3 Issuance of Notice or Order.
108.4 Contents and service of the Notice or
Order.
108.5 Petition for hearing.
108.6 Initiation of hearing.
108.7 Conduct of hearings.
108.8 Default.
108.9 Rules of evidence.
108.10 Burden of persuasion.
108.11 Relevant considerations.
108.12 Proposed findings and conclusions
and recommended decision.
108.13 Decision of the OCC.
108.14 Miscellaneous.
Authority: 12 U.S.C. 1464, 1818,
5412(b)(2)(B).
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
§ 108.1
Scope.
The rules in this part apply to
hearings, which are exempt from the
adjudicative provisions of the
Administrative Procedure Act, afforded
to any officer, director, or other person
participating in the conduct of the
affairs of a Federal savings association,
Federal savings association subsidiary,
or affiliate service corporation, where
such person has been suspended or
removed from office or prohibited from
further participation in the conduct of
the affairs of one of the aforementioned
entities by a Notice or Order served by
the OCC upon the grounds set forth in
section 8(g) of the Federal Deposit
Insurance Act, (12 U.S.C. 1818(g)).
§ 108.2
Definitions.
As used in this part—
(a) The term OCC means the Office of
the Comptroller of the Currency.
(b) [Reserved]
(c) The term Notice means a Notice of
Suspension or Notice of Prohibition
issued by the OCC pursuant to section
8(g) of the Federal Deposit Insurance
Act.
(d) The term Order means an Order of
Removal or Order of Prohibition issued
by the OCC pursuant to section 8(g) of
the Federal Deposit Insurance Act.
(e) The term association means a
Federal savings association within the
meaning of section 2(5) of the Home
Owners’ Loan Act of 1933, as amended,
12 U.S.C. 1462(5) (‘‘HOLA’’), Federal
savings association subsidiary and an
affiliate service corporation within the
meaning of section 8(b)(8) of the Federal
Deposit Insurance Act, as amended, 12
U.S.C. 1818(b)(8) (‘‘FDIA’’).
(f) The term subject individual means
a person served with a Notice or Order.
(g) The term petitioner means a
subject individual who has filed a
petition for informal hearing under this
part.
§ 108.3
Issuance of Notice or Order.
(a) The OCC may issue and serve a
Notice upon an officer, director, or other
person participating in the conduct of
the affairs of an association, where the
individual is charged in any
information, indictment, or complaint
with the commission of or participation
in a crime involving dishonesty or
breach of trust that is punishable by
imprisonment for a term exceeding one
year under state or Federal law, if the
OCC, upon due deliberation, determines
that continued service or participation
by the individual may pose a threat to
the interests of the association’s
depositors or may threaten to impair
public confidence in the association.
The Notice shall remain in effect until
PO 00000
Frm 00008
Fmt 4701
Sfmt 4700
the information, indictment, or
complaint is finally disposed of or until
terminated by the OCC.
(b) The OCC may issue and serve an
Order upon a subject individual against
whom a judgment of conviction, or an
agreement to enter a pretrial diversion
or other similar program has been
rendered, where such judgment is not
subject to further appellate review, and
the OCC, upon the deliberation, has
determined that continued service or
participation by the subject individual
may pose a threat to the interests of the
association’s depositors or may threaten
to impair public confidence in the
association.
§ 108.4 Contents and service of the Notice
or Order.
(a) The Notice or Order shall set forth
the basis and facts in support of the
OCC’s issuance of such Notice or Order,
and shall inform the subject individual
of his right to a hearing, in accordance
with this part, for the purpose of
determining whether the Notice or
Order should be continued, terminated,
or otherwise modified.
(b) The OCC shall serve a copy of the
Notice or Order upon the subject
individual and the related association in
the manner set forth in § 109.11 of this
chapter.
(c) Upon receipt of the Notice or
Order, the subject individual shall
immediately comply with the
requirements thereof.
§ 108.5
Petition for hearing.
(a) To obtain a hearing, the subject
individual must file two copies of a
petition with the OCC within 30 days of
being served with the Notice or Order.
(b) The petition filed under this
section shall admit or deny specifically
each allegation in the Notice or Order,
unless the petitioner is without
knowledge or information, in which
case the petition shall so state and the
statement shall have the effect of a
denial. Any allegation not denied shall
be deemed to be admitted. When a
petitioner intends in good faith to deny
only a part of or to qualify an allegation,
he shall specify so much of it as is true
and shall deny only the remainder.
(c) The petition shall state whether
the petitioner is requesting termination
or modification of the Notice or Order,
and shall state with particularity how
the petitioner intends to show that his
continued service to or participation in
the conduct of the affairs of the
association would not, or is not likely
to, pose a threat to the interests of the
association’s depositors or to impair
public confidence in the association.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 108.6
Initiation of hearing.
(a) Within 10 days of the filing of a
petition for hearing, the OCC shall
notify the petitioner of the time and
place fixed for hearing, and it shall
designate one or more OCC employees
to serve as presiding officer.
(b) The hearing shall be scheduled to
be held no later than 30 days from the
date the petition was filed, unless the
time is extended at the request of the
petitioner.
(c) A petitioner may appear
personally or through counsel, but if
represented by counsel, said counsel is
required to comply with § 109.6 of this
chapter.
(d) A representative(s) of the OCC’s
Enforcement and Compliance Division
also may attend the hearing and
participate therein as a party.
sroberts on DSK5SPTVN1PROD with RULES
§ 108.7
Conduct of hearings.
(a) Hearings provided by this section
are not subject to the adjudicative
provisions of the Administrative
Procedure Act (5 U.S.C. 554–557). The
presiding officer is, however, authorized
to exercise all of the powers enumerated
in § 109.5 of this chapter.
(b) Witnesses may be presented,
within time limits specified by the
presiding officer, provided that at least
10 days prior to the hearing date, the
party presenting the witnesses furnishes
the presiding officer and the opposing
party with a list of such witnesses and
a summary of the proposed testimony.
However, the requirement for furnishing
such a witness list and summary of
testimony shall not apply to the
presentation of rebuttal witnesses. The
presiding officer may ask questions of
any witness, and each party shall have
an opportunity to cross-examine any
witness presented by an opposing party.
(c) Upon the request of either the
petitioner or a representative of the
Enforcement and Compliance Division,
the record shall remain open for a
period of 5 business days following the
hearing, during which time the parties
may make any additional submissions
for the record. Thereafter, the record
shall be closed.
(d) Following the introduction of all
evidence, the petitioner and the
representative of the Enforcement and
Compliance Division shall have an
opportunity for oral argument; however,
the parties may jointly waive the right
to oral argument, and, in lieu thereof,
elect to submit written argument.
(e) All oral testimony and oral
argument shall be recorded, and
transcripts made available to the
petitioner upon payment of the cost
thereof. A copy of the transcript shall be
sent directly to the presiding officer,
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
who shall have authority to correct the
record sua sponte or upon the motion of
any party.
(f) The parties may, in writing, jointly
waive an oral hearing and instead elect
a hearing upon a written record in
which all evidence and argument would
be submitted to the presiding officer in
documentary form and statements of
individuals would be made by affidavit.
§ 108.8
Default.
If the subject individual fails to file a
petition for a hearing, or fails to appear
at a hearing, either in person or by
attorney, or fails to submit a written
argument where oral argument has been
waived pursuant to § 108.7(d) or (f) of
this part, the Notice shall remain in
effect until the information, indictment,
or complaint is finally disposed of and
the Order shall remain in effect until
terminated by the OCC.
§ 108.9
Rules of evidence.
(a) Formal rules of evidence shall not
apply to a hearing, but the presiding
officer may limit the introduction of
irrelevant, immaterial, or unduly
repetitious evidence.
(b) All matters officially noticed by
the presiding officer shall appear on the
record.
§ 108.10
Burden of persuasion.
The petitioner has the burden of
showing, by a preponderance of the
evidence, that his or her continued
service to or participation in the
conduct of the affairs of the association
does not, or is not likely to, pose a threat
to the interests of the association’s
depositors or threaten to impair public
confidence in the association.
§ 108.11
Relevant considerations.
(a) In determining whether the
petitioner has shown that his or her
continued service to or participation in
the conduct of the affairs of the
association would not, or is not likely
to, pose a threat to the interests of the
association’s depositors or threaten to
impair public confidence in the
association, in order to decide whether
the Notice or Order should be
continued, terminated, or otherwise
modified, the OCC will consider:
(1) The nature and extent of the
petitioner’s participation in the affairs of
the association;
(2) The nature of the offense with
which the petitioner has been charged;
(3) The extent of the publicity
accorded the indictment and trial; and
(4) Such other relevant factors as may
be entered on the record.
(b) When considering a request for the
termination or modification of a Notice,
PO 00000
Frm 00009
Fmt 4701
Sfmt 4700
48957
the OCC will not consider the ultimate
guilt or innocence of the petitioner with
respect to the criminal charge that is
outstanding.
(c) When considering a request for the
termination or modification of an Order
which has been issued following a final
judgment of conviction against a subject
individual, the OCC will not collaterally
review such final judgment of
conviction.
§ 108.12 Proposed findings and
conclusions and recommended decision.
(a) Within 30 days after completion of
oral argument or the submission of
written argument where oral argument
has been waived, the presiding officer
shall file with and certify to the OCC for
decision the entire record of the hearing,
which shall include a recommended
decision, the Notice or Order, and all
other documents filed in connection
with the hearing.
(b) The recommended decision shall
contain:
(1) A statement of the issue(s)
presented,
(2) A statement of findings and
conclusions, and the reasons or basis
therefor, on all material issues of fact,
law, or discretion presented on the
record, and
(3) An appropriate recommendation
as to whether the suspension, removal,
or prohibition should be continued,
modified, or terminated.
§ 108.13
Decision of the OCC.
(a) Within 30 days after the
recommended decision has been
certified to the OCC, the OCC shall issue
a final decision.
(b) The OCC’s final decision shall
contain a statement of the basis therefor.
The OCC may satisfy this requirement
where it adopts the recommended
decision of the presiding officer upon
finding that the recommended decision
satisfies the requirements of § 109.38 of
this chapter.
(c) The OCC shall serve upon the
petitioner and the representative of the
Enforcement and Compliance Division a
copy of the OCC’s final decision and the
related recommended decision.
§ 108.14
Miscellaneous.
The provisions of §§ 109.10, 109.11,
and 109.12 of this chapter shall apply to
proceedings under this part.
PART 109—RULES OF PRACTICE AND
PROCEDURE IN ADJUDICATORY
PROCEEDINGS
Subpart A—Uniform Rules of Practice
and Procedure
Sec.
E:\FR\FM\09AUR2.SGM
09AUR2
48958
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
109.1 Scope.
109.2 Rules of construction.
109.3 Definitions.
109.4 Authority of the Comptroller.
109.5 Authority of the administrative law
judge.
109.6 Appearance and practice in
adjudicatory proceedings.
109.7 Good faith certification.
109.8 Conflicts of interest.
109.9 Ex parte communications.
109.10 Filing of papers.
109.11 Service of papers.
109.12 Construction of time limits.
109.13 Change of time limits.
109.14 Witness fees and expenses.
109.15 Opportunity for informal settlement.
109.16 OCC’s right to conduct examination.
109.17 Collateral attacks on adjudicatory
proceeding.
109.18 Commencement of proceeding and
contents of notice.
109.19 Answer.
109.20 Amended pleadings.
109.21 Failure to appear.
109.22 Consolidation and severance of
actions.
109.23 Motions.
109.24 Scope of document discovery.
109.25 Request for document discovery
from parties.
109.26 Document subpoenas to nonparties.
109.27 Deposition of witness unavailable
for hearing.
109.28 Interlocutory review.
109.29 Summary disposition.
109.30 Partial summary disposition.
109.31 Scheduling and prehearing
conferences.
109.32 Prehearing submissions.
109.33 Public hearings.
109.34 Hearing subpoenas.
109.35 Conduct of hearings.
109.36 Evidence.
109.37 Post-hearing filings.
109.38 Recommended decision and filing of
record.
109.39 Exceptions to recommended
decision.
109.40 Review by the Comptroller.
109.41 Stays pending judicial review.
Subpart B—Local Rules
109.100 Scope.
109.101 Appointment of Office of Financial
Institution Adjudication.
109.102 Discovery.
109.103 Civil money penalties.
109.104 Additional procedures.
Subpart C [Reserved]
Subpart D [Reserved]
sroberts on DSK5SPTVN1PROD with RULES
Authority: 5 U.S.C. 504, 554–557; 12
U.S.C. 1464, 1467, 1467a, 1468, 1817(j), 1818,
1820(k), 1829(e), 3349, 4717, 5412(b)(2)(B);
15 U.S.C. 78l, 78o–5, 78u–2; 28 U.S.C. 2461
note; 31 U.S.C. 5321; 42 U.S.C. 4012a.
Subpart A—Uniform Rules of Practice
and Procedure
§ 109.1
Scope.
This subpart prescribes Uniform
Rules of practice and procedure with
regard to Federal savings associations
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
applicable to adjudicatory proceedings
as to which hearings on the record are
provided for by the following statutory
provisions:
(a) Cease-and-desist proceedings
under section 8(b) of the Federal
Deposit Insurance Act (FDIA) (12 U.S.C.
1818(b));
(b) Removal and prohibition
proceedings under section 8(e) of the
FDIA (12 U.S.C. 1818(e));
(c) Change-in-control proceedings
under section 7(j)(4) of the FDIA (12
U.S.C. 1817(j)(4)) to determine whether
the OCC should issue an order to
approve or disapprove a person’s
proposed acquisition of an institution;
(d) Proceedings under section
15C(c)(2) of the Securities Exchange Act
of 1934 (Exchange Act) (15 U.S.C. 78o–
5), to impose sanctions upon any
government securities broker or dealer
or upon any person associated or
seeking to become associated with a
government securities broker or dealer
for which the OCC is the appropriate
agency.
(e) Assessment of civil money
penalties by the OCC against
institutions, institution-affiliated
parties, and certain other persons for
which it is the appropriate agency for
any violation of:
(1) Section 5 of the Home Owners’
Loan Act (HOLA) or any regulation or
order issued thereunder, pursuant to 12
U.S.C. 1464 (d), (s) and (v);
(2) Section 9 of the HOLA or any
regulation or order issued thereunder,
pursuant to 12 U.S.C. 1467(d);
(3) Section 10 of the HOLA, pursuant
to 12 U.S.C. 1467a (i) and (r);
(4) Any provisions of the Change in
Bank Control Act, any regulation or
order issued thereunder or certain
unsafe or unsound practices or breaches
of fiduciary duty, pursuant to 12 U.S.C.
1817(j)(16);
(5) Sections 22(h) and 23 of the
Federal Reserve Act, or any regulation
issued thereunder or certain unsafe or
unsound practices or breaches of
fiduciary duty, pursuant to 12 U.S.C.
1468;
(6) Certain provisions of the Exchange
Act, pursuant to section 21B of the
Exchange Act (15 U.S.C. 78u–2);
(7) Section 1120 of Financial
Institutions Reform, Recovery and
Enforcement Act of 1989 (12 U.S.C.
3349), or any order or regulation issued
thereunder;
(8) The terms of any final or
temporary order issued or enforceable
pursuant to section 8 of the FDIA or of
any written agreement executed by the
OCC, the terms of any conditions
imposed in writing by the OCC in
connection with the grant of an
PO 00000
Frm 00010
Fmt 4701
Sfmt 4700
application or request, certain unsafe or
unsound practices or breaches of
fiduciary duty, or any law or regulation
not otherwise provided herein pursuant
to 12 U.S.C. 1818(i)(2);
(9) Any provision of law referenced in
section 102 of the Flood Disaster
Protection Act of 1973 (42 U.S.C.
4012a(f)) or any order or regulation
issued thereunder; and
(10) Any provision of law referenced
in 31 U.S.C. 5321 or any order or
regulation issued thereunder;
(f) Remedial action under section 102
of the Flood Disaster Protection Act of
1973 (42 U.S.C. 4012a(g));
(g) Proceedings under section 10(k) of
the FDIA (12 U.S.C. 1820(k)) to impose
penalties on senior examiners for
violation of post-employment
prohibitions; and
(h) This subpart also applies to all
other adjudications required by statute
to be determined on the record after
opportunity for an agency hearing,
unless otherwise specifically provided
for in the Local Rules.
(i) [Reserved]
§ 109.2
Rules of construction.
For purposes of this subpart:
(a) Any term in the singular includes
the plural, and the plural includes the
singular, if such use would be
appropriate;
(b) Any use of a masculine, feminine,
or neuter gender encompasses all three,
if such use would be appropriate;
(c) The term counsel includes a nonattorney representative; and
(d) Unless the context requires
otherwise, a party’s counsel of record, if
any, may, on behalf of that party, take
any action required to be taken by the
party.
§ 109.3
Definitions.
For purposes of this subpart, unless
explicitly stated to the contrary:
(a) Administrative law judge means
one who presides at an administrative
hearing under authority set forth at 5
U.S.C. 556.
(b) Adjudicatory proceeding means a
proceeding conducted pursuant to these
rules and leading to the formulation of
a final order other than a regulation.
(c) Decisional employee means any
member of the OCC’s or administrative
law judge’s staff who has not engaged in
an investigative or prosecutorial role in
a proceeding and who may assist the
OCC or the administrative law judge,
respectively, in preparing orders,
recommended decisions, decisions, and
other documents under the Uniform
Rules.
(d) Comptroller means the
Comptroller of the Currency or his or
her designee.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(e) Enforcement Counsel means any
individual who files a notice of
appearance as counsel on behalf of the
OCC in an adjudicatory proceeding.
(f) Final order means an order issued
by the OCC with or without the consent
of the affected institution or the
institution-affiliated party that has
become final, without regard to the
pendency of any petition for
reconsideration or review.
(g) Institution includes any Federal
savings association as that term is
defined in section 3(b) of the FDIA (12
U.S.C. 1813(b)).
(h) Institution-affiliated party means
any institution-affiliated party as that
term is defined in section 3(u) of the
FDIA (12 U.S.C. 1813(u)).
(i) Local Rules means those rules
found in subpart B of this part.
(j) OCC means the Office of the
Comptroller of the Currency.
(k) Office of Financial Institution
Adjudication (OFIA) means the
executive body charged with overseeing
the administration of administrative
enforcement proceedings for the OCC,
the Board of Governors of the Federal
Reserve Board, the Federal Deposit
Insurance Corporation, and the National
Credit Union Administration.
(l) Party means the OCC and any
person named as a party in any notice.
(m) Person means an individual, sole
proprietor, partnership, corporation,
unincorporated association, trust, joint
venture, pool, syndicate, agency or other
entity or organization, including an
institution as defined in paragraph (g) of
this section.
(n) Respondent means any party other
than the OCC.
(o) Uniform Rules means those rules
in subpart A of this part.
(p) Violation includes any action
(alone or with another or others) for or
toward causing, bringing about,
participating in, counseling, or aiding or
abetting a violation.
§ 109.4
Authority of the Comptroller.
The Comptroller may, at any time
during the pendency of a proceeding
perform, direct the performance of, or
waive performance of, any act which
could be done or ordered by the
administrative law judge.
sroberts on DSK5SPTVN1PROD with RULES
§ 109.5
judge.
Authority of the administrative law
(a) General rule. All proceedings
governed by this part shall be conducted
in accordance with the provisions of
chapter 5 of title 5 of the United States
Code. The administrative law judge
shall have all powers necessary to
conduct a proceeding in a fair and
impartial manner and to avoid
unnecessary delay.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(b) Powers. The administrative law
judge shall have all powers necessary to
conduct the proceeding in accordance
with paragraph (a) of this section,
including the following powers:
(1) To administer oaths and
affirmations;
(2) To issue subpoenas, subpoenas
duces tecum, and protective orders, as
authorized by this part, and to quash or
modify any such subpoenas and orders;
(3) To receive relevant evidence and
to rule upon the admission of evidence
and offers of proof;
(4) To take or cause depositions to be
taken as authorized by this subpart;
(5) To regulate the course of the
hearing and the conduct of the parties
and their counsel;
(6) To hold scheduling and/or prehearing conferences as set forth in
§ 109.31 of this subpart;
(7) To consider and rule upon all
procedural and other motions
appropriate in an adjudicatory
proceeding, provided that only the
Comptroller shall have the power to
grant any motion to dismiss the
proceeding or to decide any other
motion that results in a final
determination of the merits of the
proceeding;
(8) To prepare and present to the
Comptroller a recommended decision as
provided herein;
(9) To recuse himself or herself by
motion made by a party or on his or her
own motion;
(10) To establish time, place and
manner limitations on the attendance of
the public and the media for any public
hearing; and
(11) To do all other things necessary
and appropriate to discharge the duties
of a presiding officer.
§ 109.6 Appearance and practice in
adjudicatory proceedings.
(a) Appearance before the OCC or an
administrative law judge—(1) By
attorneys. Any member in good standing
of the bar of the highest court of any
state, commonwealth, possession,
territory of the United States, or the
District of Columbia may represent
others before the OCC if such attorney
is not currently suspended or debarred
from practice before the OCC.
(2) By non-attorneys. An individual
may appear on his or her own behalf; a
member of a partnership may represent
the partnership; a duly authorized
officer, director, or employee of any
government unit, agency, institution,
corporation or authority may represent
that unit, agency, institution,
corporation or authority if such officer,
director, or employee is not currently
suspended or debarred from practice
before the OCC.
PO 00000
Frm 00011
Fmt 4701
Sfmt 4700
48959
(3) Notice of appearance. Any
individual acting as counsel on behalf of
a party, including the Comptroller, shall
file a notice of appearance with OFIA at
or before the time that individual
submits papers or otherwise appears on
behalf of a party in the adjudicatory
proceeding. The notice of appearance
must include a written declaration that
the individual is currently qualified as
provided in paragraph (a)(1) or (a)(2) of
this section and is authorized to
represent the particular party. By filing
a notice of appearance on behalf of a
party in an adjudicatory proceeding, the
counsel agrees and represents that he or
she is authorized to accept service on
behalf of the represented party and that,
in the event of withdrawal from
representation, he or she will, if
required by the administrative law
judge, continue to accept service until
new counsel has filed a notice of
appearance or until the represented
party indicates that he or she will
proceed on a pro se basis.
(b) Sanctions. Dilatory, obstructionist,
egregious, contemptuous or
contumacious conduct at any phase of
any adjudicatory proceeding may be
grounds for exclusion or suspension of
counsel from the proceeding.
§ 109.7
Good faith certification.
(a) General requirement. Every filing
or submission of record following the
issuance of a notice shall be signed by
at least one counsel of record in his or
her individual name and shall state that
counsel’s address and telephone
number. A party who acts as his or her
own counsel shall sign his or her
individual name and state his or her
address and telephone number on every
filing or submission of record.
(b) Effect of signature. (1) The
signature of counsel or a party shall
constitute a certification that: the
counsel or party has read the filing or
submission of record; to the best of his
or her knowledge, information, and
belief formed after reasonable inquiry,
the filing or submission of record is
well-grounded in fact and is warranted
by existing law or a good faith argument
for the extension, modification, or
reversal of existing law; and the filing or
submission of record is not made for
any improper purpose, such as to harass
or to cause unnecessary delay or
needless increase in the cost of
litigation.
(2) If a filing or submission of record
is not signed, the administrative law
judge shall strike the filing or
submission of record, unless it is signed
promptly after the omission is called to
the attention of the pleader or movant.
E:\FR\FM\09AUR2.SGM
09AUR2
48960
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(c) Effect of making oral motion or
argument. The act of making any oral
motion or oral argument by any counsel
or party constitutes a certification that
to the best of his or her knowledge,
information, and belief formed after
reasonable inquiry, his or her statements
are well-grounded in fact and are
warranted by existing law or a good
faith argument for the extension,
modification, or reversal of existing law,
and are not made for any improper
purpose, such as to harass or to cause
unnecessary delay or needless increase
in the cost of litigation.
§ 109.8
Conflicts of interest.
(a) Conflict of interest in
representation. No person shall appear
as counsel for another person in an
adjudicatory proceeding if it reasonably
appears that such representation may be
materially limited by that counsel’s
responsibilities to a third person or by
the counsel’s own interests. The
administrative law judge may take
corrective measures at any stage of a
proceeding to cure a conflict of interest
in representation, including the
issuance of an order limiting the scope
of representation or disqualifying an
individual from appearing in a
representative capacity for the duration
of the proceeding.
(b) Certification and waiver. If any
person appearing as counsel represents
two or more parties to an adjudicatory
proceeding or also represents a nonparty on a matter relevant to an issue in
the proceeding, counsel must certify in
writing at the time of filing the notice
of appearance required by § 109.6(a):
(1) That the counsel has personally
and fully discussed the possibility of
conflicts of interest with each such
party and non-party; and
(2) That each such party and nonparty waives any right it might
otherwise have had to assert any known
conflicts of interest or to assert any nonmaterial conflicts of interest during the
course of the proceeding.
sroberts on DSK5SPTVN1PROD with RULES
§ 109.9
Ex parte communications.
(a) Definition—(1) Ex parte
communication means any material oral
or written communication relevant to
the merits of an adjudicatory proceeding
that was neither on the record nor on
reasonable prior notice to all parties that
takes place between:
(i) An interested person outside the
OCC (including such person’s counsel);
and
(ii) The administrative law judge
handling that proceeding, the
Comptroller, or a decisional employee.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(2) Exception. A request for status of
the proceeding does not constitute an ex
parte communication.
(b) Prohibition of ex parte
communications. From the time the
notice is issued by the Comptroller until
the date that the Comptroller issues the
final decision pursuant to § 109.40(c) of
this subpart:
(1) No interested person outside the
OCC shall make or knowingly cause to
be made an ex parte communication to
the Comptroller, the administrative law
judge, or a decisional employee; and
(2) The Comptroller, administrative
law judge, or decisional employee shall
not make or knowingly cause to be
made to any interested person outside
the OCC any ex parte communication.
(c) Procedure upon occurrence of ex
parte communication. If an ex parte
communication is received by the
administrative law judge, the
Comptroller or other person identified
in paragraph (a) of this section, that
person shall cause all such written
communications (or, if the
communication is oral, a memorandum
stating the substance of the
communication) to be placed on the
record of the proceeding and served on
all parties. All other parties to the
proceeding shall have an opportunity,
within ten days of receipt of service of
the ex parte communication to file
responses thereto and to recommend
any sanctions, in accordance with
paragraph (d) of this section, that they
believe to be appropriate under the
circumstances.
(d) Sanctions. Any party or his or her
counsel who makes a prohibited ex
parte communication, or who
encourages or solicits another to make
any such communication, may be
subject to any appropriate sanction or
sanctions imposed by the Comptroller
or the administrative law judge
including, but not limited to, exclusion
from the proceedings and an adverse
ruling on the issue which is the subject
of the prohibited communication.
(e) Separation-of-functions. Except to
the extent required for the disposition of
ex parte matters as authorized by law,
the administrative law judge may not
consult a person or party on any matter
relevant to the merits of the
adjudication, unless on notice and
opportunity for all parties to participate.
An employee or agent engaged in the
performance of investigative or
prosecuting functions for the OCC in a
case may not, in that or a factually
related case, participate or advise in the
decision, recommended decision, or
agency review of the recommended
decision under § 109.40 of this subpart,
PO 00000
Frm 00012
Fmt 4701
Sfmt 4700
except as witness or counsel in public
proceedings.
§ 109.10
Filing of papers.
(a) Filing. Any papers required to be
filed, excluding documents produced in
response to a discovery request
pursuant to §§ 109.25 and 109.26 of this
subpart, shall be filed with the OFIA,
except as otherwise provided.
(b) Manner of filing. Unless otherwise
specified by the Comptroller or the
administrative law judge, filing may be
accomplished by:
(1) Personal service;
(2) Delivering the papers to a reliable
commercial courier service, overnight
delivery service, or to the U.S. Post
Office for Express Mail delivery;
(3) Mailing the papers by first class,
registered, or certified mail; or
(4) Transmission by electronic media,
only if expressly authorized, and upon
any conditions specified, by the
Comptroller or the administrative law
judge. All papers filed by electronic
media shall also concurrently be filed in
accordance with paragraph (c) of this
section as to form.
(c) Formal requirements as to papers
filed—(1) Form. All papers filed must
set forth the name, address, and
telephone number of the counsel or
party making the filing and must be
accompanied by a certification setting
forth when and how service has been
made on all other parties. All papers
filed must be double-spaced and printed
or typewritten on 81⁄2 x 11 inch paper,
and must be clear and legible.
(2) Signature. All papers must be
dated and signed as provided in § 109.7
of this subpart.
(3) Caption. All papers filed must
include at the head thereof, or on a title
page, the name of the OCC and of the
filing party, the title and docket number
of the proceeding, and the subject of the
particular paper.
(4) Number of copies. Unless
otherwise specified by the Comptroller,
or the administrative law judge, an
original and one copy of all documents
and papers shall be filed, except that
only one copy of transcripts of
testimony and exhibits shall be filed.
§ 109.11
Service of papers.
(a) By the parties. Except as otherwise
provided, a party filing papers shall
serve a copy upon the counsel of record
for all other parties to the proceeding so
represented, and upon any party not so
represented.
(b) Method of service. Except as
provided in paragraphs (c)(2) and (d) of
this section, a serving party shall use
one or more of the following methods of
service:
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(1) Personal service;
(2) Delivering the papers to a reliable
commercial courier service, overnight
delivery service, or to the U.S. Post
Office for Express Mail delivery;
(3) Mailing the papers by first class,
registered, or certified mail; or
(4) Transmission by electronic media,
only if the parties mutually agree. Any
papers served by electronic media shall
also concurrently be served in
accordance with the requirements of
§ 109.10(c) of this subpart as to form.
(c) By the Comptroller or the
administrative law judge. (1) All papers
required to be served by the Comptroller
or the administrative law judge upon a
party who has appeared in the
proceeding through a counsel of record,
shall be served by any means specified
in paragraph (b) of this section.
(2) If a party has not appeared in the
proceeding in accordance with § 109.6
of this subpart, the Comptroller or the
administrative law judge shall make
service by any of the following methods:
(i) By personal service;
(ii) If the person to be served is an
individual, by delivery to a person of
suitable age and discretion at the
physical location where the individual
resides or works;
(iii) If the person to be served is a
corporation or other association, by
delivery to an officer, managing or
general agent, or to any other agent
authorized by appointment or by law to
receive service and, if the agent is one
authorized by statute to receive service
and the statute so requires, by also
mailing a copy to the party;
(iv) By registered or certified mail
addressed to the person’s last known
address; or
(v) By any other method reasonably
calculated to give actual notice.
(d) Subpoenas. Service of a subpoena
may be made:
(1) By personal service;
(2) If the person to be served is an
individual, by delivery to a person of
suitable age and discretion at the
physical location where the individual
resides or works;
(3) By delivery to an agent, which in
the case of a corporation or other
association, is delivery to an officer,
managing or general agent, or to any
other agent authorized by appointment
or by law to receive service and, if the
agent is one authorized by statute to
receive service and the statute so
requires, by also mailing a copy to the
party;
(4) By registered or certified mail
addressed to the person’s last known
address; or
(5) By any other method reasonably
calculated to give actual notice.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(e) Area of service. Service in any
state, territory, possession of the United
States, or the District of Columbia, on
any person or company doing business
in any state, territory, possession of the
United States, or the District of
Columbia, or on any person as
otherwise provided by law, is effective
without regard to the place where the
hearing is held, provided that if service
is made on a foreign bank in connection
with an action or proceeding involving
one or more of its branches or agencies
located in any state, territory,
possession of the United States, or the
District of Columbia, service shall be
made on at least one branch or agency
so involved.
§ 109.12
Construction of time limits.
(a) General rule. In computing any
period of time prescribed by this
subpart, the date of the act or event that
commences the designated period of
time is not included. The last day so
computed is included unless it is a
Saturday, Sunday, or Federal holiday.
When the last day is a Saturday,
Sunday, or Federal holiday, the period
runs until the end of the next day that
is not a Saturday, Sunday, or Federal
holiday. Intermediate Saturdays,
Sundays, and Federal holidays are
included in the computation of time.
However, when the time period within
which an act is to be performed is ten
days or less, not including any
additional time allowed for in paragraph
(c) of this section, intermediate
Saturdays, Sundays, and Federal
holidays are not included.
(b) When papers are deemed to be
filed or served. (1) Filing and service are
deemed to be effective:
(i) In the case of personal service or
same day commercial courier delivery,
upon actual service;
(ii) In the case of overnight
commercial delivery service, U.S.
Express mail delivery, or first class,
registered, or certified mail, upon
deposit in or delivery to an appropriate
point of collection; or
(iii) In the case of transmission by
electronic media, as specified by the
authority receiving the filing, in the case
of filing, and as agreed among the
parties, in the case of service.
(2) The effective filing and service
dates specified in paragraph (b)(1) of
this section may be modified by the
Comptroller or administrative law judge
in the case of filing or by agreement of
the parties in the case of service.
(c) Calculation of time for service and
filing of responsive papers. Whenever a
time limit is measured by a prescribed
period from the service of any notice or
PO 00000
Frm 00013
Fmt 4701
Sfmt 4700
48961
paper, the applicable time limits are
calculated as follows:
(1) If service is made by first class,
registered, or certified mail, add three
calendar days to the prescribed period;
(2) If service is made by express mail
or overnight delivery service, add one
calendar day to the prescribed period; or
(3) If service is made by electronic
media transmission, add one calendar
day to the prescribed period, unless
otherwise determined by the
Comptroller or the administrative law
judge in the case of filing, or by
agreement among the parties in the case
of service.
§ 109.13
Change of time limits.
Except as otherwise provided by law,
the administrative law judge may, for
good cause shown, extend the time
limits prescribed by the Uniform Rules
or any notice or order issued in the
proceedings. After the referral of the
case to the Comptroller pursuant to
§ 109.38 of this subpart, the Comptroller
may grant extensions of the time limits
for good cause shown. Extensions may
be granted at the motion of a party or
on the Comptroller’s or the
administrative law judge’s own motion
after notice and opportunity to respond
is afforded all non-moving parties.
§ 109.14
Witness fees and expenses.
Witnesses subpoenaed for testimony
or deposition shall be paid the same fees
for attendance and mileage as are paid
in the United States district courts in
proceedings in which the United States
is a party, provided that, in the case of
a discovery subpoena addressed to a
party, no witness fees or mileage need
be paid. Fees for witnesses shall be
tendered in advance by the party
requesting the subpoena, except that
fees and mileage need not be tendered
in advance where the OCC is the party
requesting the subpoena. The OCC shall
not be required to pay any fees to, or
expenses of, any witness not
subpoenaed by the OCC.
§ 109.15 Opportunity for informal
settlement.
Any respondent may, at any time in
the proceeding, unilaterally submit to
Enforcement Counsel written offers or
proposals for settlement of a proceeding,
without prejudice to the rights of any of
the parties. No such offer or proposal
shall be made to any OCC representative
other than Enforcement Counsel.
Submission of a written settlement offer
does not provide a basis for adjourning
or otherwise delaying all or any portion
of a proceeding under this part. No
settlement offer or proposal, or any
subsequent negotiation or resolution, is
E:\FR\FM\09AUR2.SGM
09AUR2
48962
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 109.19
admissible as evidence in any
proceeding.
§ 109.16 OCC’s right to conduct
examination.
Nothing contained in this subpart
limits in any manner the right of the
OCC to conduct any examination,
inspection, or visitation of any
institution or institution-affiliated party,
or the right of the OCC to conduct or
continue any form of investigation
authorized by law.
§ 109.17 Collateral attacks on adjudicatory
proceeding.
If an interlocutory appeal or collateral
attack is brought in any court
concerning all or any part of an
adjudicatory proceeding, the challenged
adjudicatory proceeding shall continue
without regard to the pendency of that
court proceeding. No default or other
failure to act as directed in the
adjudicatory proceeding within the
times prescribed in this subpart shall be
excused based on the pendency before
any court of any interlocutory appeal or
collateral attack.
sroberts on DSK5SPTVN1PROD with RULES
§ 109.18 Commencement of proceeding
and contents of notice.
(a) Commencement of proceeding.
(1)(i) Except for change-in-control
proceedings under section 7(j)(4) of the
FDIA (12 U.S.C. 1817(j)(4)), a
proceeding governed by this subpart is
commenced by issuance of a notice by
the Comptroller.
(ii) The notice must be served by the
Comptroller upon the respondent and
given to any other appropriate financial
institution supervisory authority where
required by law.
(iii) The notice must be filed with the
OFIA.
(2) Change-in control proceedings
under section 7(j)(4) of the FDIA (12
U.S.C. 1817(j)(4)) commence with the
issuance of an order by the Comptroller.
(b) Contents of notice. The notice
must set forth:
(1) The legal authority for the
proceeding and for the OCC’s
jurisdiction over the proceeding;
(2) A statement of the matters of fact
or law showing that the OCC is entitled
to relief;
(3) A proposed order or prayer for an
order granting the requested relief;
(4) The time, place, and nature of the
hearing as required by law or regulation;
(5) The time within which to file an
answer as required by law or regulation;
(6) The time within which to request
a hearing as required by law or
regulation; and
(7) The answer and/or request for a
hearing shall be filed with OFIA.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Answer.
(a) When. Within 20 days of service of
the notice, respondent shall file an
answer as designated in the notice. In a
civil money penalty proceeding,
respondent shall also file a request for
a hearing within 20 days of service of
the notice.
(b) Content of answer. An answer
must specifically respond to each
paragraph or allegation of fact contained
in the notice and must admit, deny, or
state that the party lacks sufficient
information to admit or deny each
allegation of fact. A statement of lack of
information has the effect of a denial.
Denials must fairly meet the substance
of each allegation of fact denied; general
denials are not permitted. When a
respondent denies part of an allegation,
that part must be denied and the
remainder specifically admitted. Any
allegation of fact in the notice which is
not denied in the answer must be
deemed admitted for purposes of the
proceeding. A respondent is not
required to respond to the portion of a
notice that constitutes the prayer for
relief or proposed order. The answer
must set forth affirmative defenses, if
any, asserted by the respondent.
(c) Default—(1) Effect of failure to
answer. Failure of a respondent to file
an answer required by this section
within the time provided constitutes a
waiver of his or her right to appear and
contest the allegations in the notice. If
no timely answer is filed, Enforcement
Counsel may file a motion for entry of
an order of default. Upon a finding that
no good cause has been shown for the
failure to file a timely answer, the
administrative law judge shall file with
the Comptroller a recommended
decision containing the findings and the
relief sought in the notice. Any final
order issued by the Comptroller based
upon a respondent’s failure to answer is
deemed to be an order issued upon
consent.
(2) Effect of failure to request a
hearing in civil money penalty
proceedings. If respondent fails to
request a hearing as required by law
within the time provided, the notice of
assessment constitutes a final and
unappealable order.
§ 109.20
Amended pleadings.
(a) Amendments. The notice or
answer may be amended or
supplemented at any stage of the
proceeding. The respondent must
answer an amended notice within the
time remaining for the respondent’s
answer to the original notice, or within
ten days after service of the amended
notice, whichever period is longer,
unless the Comptroller or administrative
PO 00000
Frm 00014
Fmt 4701
Sfmt 4700
law judge orders otherwise for good
cause.
(b) Amendments to conform to the
evidence. When issues not raised in the
notice or answer are tried at the hearing
by express or implied consent of the
parties, they will be treated in all
respects as if they had been raised in the
notice or answer, and no formal
amendments are required. If evidence is
objected to at the hearing on the ground
that it is not within the issues raised by
the notice or answer, the administrative
law judge may admit the evidence when
admission is likely to assist in
adjudicating the merits of the action and
the objecting party fails to satisfy the
administrative law judge that the
admission of such evidence would
unfairly prejudice that party’s action or
defense upon the merits. The
administrative law judge may grant a
continuance to enable the objecting
party to meet such evidence.
§ 109.21
Failure to appear.
Failure of a respondent to appear in
person at the hearing or by a duly
authorized counsel constitutes a waiver
of respondent’s right to a hearing and is
deemed an admission of the facts as
alleged and consent to the relief sought
in the notice. Without further
proceedings or notice to the respondent,
the administrative law judge shall file
with the Comptroller a recommended
decision containing the findings and the
relief sought in the notice.
§ 109.22
actions.
Consolidation and severance of
(a) Consolidation. (1) On the motion
of any party, or on the administrative
law judge’s own motion, the
administrative law judge may
consolidate, for some or all purposes,
any two or more proceedings, if each
such proceeding involves or arises out
of the same transaction, occurrence or
series of transactions or occurrences, or
involves at least one common
respondent or a material common
question of law or fact, unless such
consolidation would cause
unreasonable delay or injustice.
(2) In the event of consolidation under
paragraph (a)(1) of this section,
appropriate adjustment to the
prehearing schedule must be made to
avoid unnecessary expense,
inconvenience, or delay.
(b) Severance. The administrative law
judge may, upon the motion of any
party, sever the proceeding for separate
resolution of the matter as to any
respondent only if the administrative
law judge finds that:
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(1) Undue prejudice or injustice to the
moving party would result from not
severing the proceeding; and
(2) Such undue prejudice or injustice
would outweigh the interests of judicial
economy and expedition in the
complete and final resolution of the
proceeding.
§ 109.23
Motions.
(a) In writing. (1) Except as otherwise
provided herein, an application or
request for an order or ruling must be
made by written motion.
(2) All written motions must state
with particularity the relief sought and
must be accompanied by a proposed
order.
(3) No oral argument may be held on
written motions except as otherwise
directed by the administrative law
judge. Written memoranda, briefs,
affidavits or other relevant material or
documents may be filed in support of or
in opposition to a motion.
(b) Oral motions. A motion may be
made orally on the record unless the
administrative law judge directs that
such motion be reduced to writing.
(c) Filing of motions. Motions must be
filed with the administrative law judge,
but upon the filing of the recommended
decision, motions must be filed with the
Comptroller.
(d) Responses. (1) Except as otherwise
provided herein, within ten days after
service of any written motion, or within
such other period of time as may be
established by the administrative law
judge or the Comptroller, any party may
file a written response to a motion. The
administrative law judge shall not rule
on any oral or written motion before
each party has had an opportunity to
file a response.
(2) The failure of a party to oppose a
written motion or an oral motion made
on the record is deemed a consent by
that party to the entry of an order
substantially in the form of the order
accompanying the motion.
(e) Dilatory motions. Frivolous,
dilatory or repetitive motions are
prohibited. The filing of such motions
may form the basis for sanctions.
(f) Dispositive motions. Dispositive
motions are governed by §§ 109.29 and
109.30 of this subpart.
sroberts on DSK5SPTVN1PROD with RULES
§ 109.24
Scope of document discovery.
(a) Limits on discovery. (1) Subject to
the limitations set out in paragraphs (b),
(c), and (d) of this section, a party to a
proceeding under this subpart may
obtain document discovery by serving a
written request to produce documents.
For purposes of a request to produce
documents, the term ‘‘documents’’ may
be defined to include drawings, graphs,
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
charts, photographs, recordings, data
stored in electronic form, and other data
compilations from which information
can be obtained, or translated, if
necessary, by the parties through
detection devices into reasonably usable
form, as well as written material of all
kinds.
(2) Discovery by use of deposition is
governed by § 109.102 of this part.
(3) Discovery by use of interrogatories
is not permitted.
(b) Relevance. A party may obtain
document discovery regarding any
matter, not privileged, that has material
relevance to the merits of the pending
action. Any request to produce
documents that calls for irrelevant
material, that is unreasonable,
oppressive, excessive in scope, unduly
burdensome, or repetitive of previous
requests, or that seeks to obtain
privileged documents will be denied or
modified. A request is unreasonable,
oppressive, excessive in scope or
unduly burdensome if, among other
things, it fails to include justifiable
limitations on the time period covered
and the geographic locations to be
searched, the time provided to respond
in the request is inadequate, or the
request calls for copies of documents to
be delivered to the requesting party and
fails to include the requestor’s written
agreement to pay in advance for the
copying, in accordance with § 109.25 of
this subpart.
(c) Privileged matter. Privileged
documents are not discoverable.
Privileges include the attorney-client
privilege, work-product privilege, any
government’s or government agency’s
deliberative-process privilege, and any
other privileges the Constitution, any
applicable act of Congress, or the
principles of common law provide.
(d) Time limits. All discovery,
including all responses to discovery
requests, shall be completed at least 20
days prior to the date scheduled for the
commencement of the hearing, except as
provided in the Local Rules. No
exceptions to this time limit shall be
permitted, unless the administrative law
judge finds on the record that good
cause exists for waiving the
requirements of this paragraph.
§ 109.25 Request for document discovery
from parties.
(a) General rule. Any party may serve
on any other party a request to produce
for inspection any discoverable
documents that are in the possession,
custody, or control of the party upon
whom the request is served. The request
must identify the documents to be
produced either by individual item or
by category, and must describe each
PO 00000
Frm 00015
Fmt 4701
Sfmt 4700
48963
item and category with reasonable
particularity. Documents must be
produced as they are kept in the usual
course of business or must be organized
to correspond with the categories in the
request.
(b) Production or copying. The request
must specify a reasonable time, place,
and manner for production and
performing any related acts. In lieu of
inspecting the documents, the
requesting party may specify that all or
some of the responsive documents be
copied and the copies delivered to the
requesting party. If copying of fewer
than 250 pages is requested, the party to
whom the request is addressed shall
bear the cost of copying and shipping
charges. If a party requests 250 pages or
more of copying, the requesting party
shall pay for the copying and shipping
charges. Copying charges are the current
per-page copying rate imposed under 12
CFR 4.17 for requests under the
Freedom of Information Act (5 U.S.C.
552). The party to whom the request is
addressed may require payment in
advance before producing the
documents.
(c) Obligation to update responses. A
party who has responded to a discovery
request with a response that was
complete when made is not required to
supplement the response to include
documents thereafter acquired, unless
the responding party learns that:
(1) The response was materially
incorrect when made; or
(2) The response, though correct when
made, is no longer true and a failure to
amend the response is, in substance, a
knowing concealment.
(d) Motions to limit discovery. (1) Any
party that objects to a discovery request
may, within ten days of being served
with such request, file a motion in
accordance with the provisions of
§ 109.23 of this subpart to revoke or
otherwise limit the request. If an
objection is made to only a portion of
an item or category in a request, the
portion objected to shall be specified.
Any objections not made in accordance
with this paragraph and § 109.23 of this
subpart are waived.
(2) The party who served the request
that is the subject of a motion to revoke
or limit may file a written response
within five days of service of the
motion. No other party may file a
response.
(e) Privilege. At the time other
documents are produced, the producing
party must reasonably identify all
documents withheld on the grounds of
privilege and must produce a statement
of the basis for the assertion of privilege.
When similar documents that are
protected by deliberative process,
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
48964
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
attorney-work-product, or attorneyclient privilege are voluminous, these
documents may be identified by
category instead of by individual
document. The administrative law judge
retains discretion to determine when the
identification by category is insufficient.
(f) Motions to compel production. (1)
If a party withholds any documents as
privileged or fails to comply fully with
a discovery request, the requesting party
may, within ten days of the assertion of
privilege or of the time the failure to
comply becomes known to the
requesting party, file a motion in
accordance with the provisions of
§ 109.23 of this subpart for the issuance
of a subpoena compelling production.
(2) The party who asserted the
privilege or failed to comply with the
request may file a written response to a
motion to compel within five days of
service of the motion. No other party
may file a response.
(g) Ruling on motions. After the time
for filing responses pursuant to this
section has expired, the administrative
law judge shall rule promptly on all
motions filed pursuant to this section. If
the administrative law judge determines
that a discovery request, or any of its
terms, calls for irrelevant material, is
unreasonable, oppressive, excessive in
scope, unduly burdensome, or repetitive
of previous requests, or seeks to obtain
privileged documents, he or she may
deny or modify the request, and may
issue appropriate protective orders,
upon such conditions as justice may
require. The pendency of a motion to
strike or limit discovery or to compel
production is not a basis for staying or
continuing the proceeding, unless
otherwise ordered by the administrative
law judge. Notwithstanding any other
provision in this part, the administrative
law judge may not release, or order a
party to produce, documents withheld
on grounds of privilege if the party has
stated to the administrative law judge its
intention to file a timely motion for
interlocutory review of the
administrative law judge’s order to
produce the documents, and until the
motion for interlocutory review has
been decided.
(h) Enforcing discovery subpoenas. If
the administrative law judge issues a
subpoena compelling production of
documents by a party, the subpoenaing
party may, in the event of
noncompliance and to the extent
authorized by applicable law, apply to
any appropriate United States district
court for an order requiring compliance
with the subpoena. A party’s right to
seek court enforcement of a subpoena
shall not in any manner limit the
sanctions that may be imposed by the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
administrative law judge against a party
who fails to produce subpoenaed
documents.
§ 109.26 Document subpoenas to
nonparties.
(a) General rules. (1) Any party may
apply to the administrative law judge
for the issuance of a document
discovery subpoena addressed to any
person who is not a party to the
proceeding. The application must
contain a proposed document subpoena
and a brief statement showing the
general relevance and reasonableness of
the scope of documents sought. The
subpoenaing party shall specify a
reasonable time, place, and manner for
making production in response to the
document subpoena.
(2) A party shall only apply for a
document subpoena under this section
within the time period during which
such party could serve a discovery
request under § 109.24(d) of this
subpart. The party obtaining the
document subpoena is responsible for
serving it on the subpoenaed person and
for serving copies on all parties.
Document subpoenas may be served in
any state, territory, or possession of the
United States, the District of Columbia,
or as otherwise provided by law.
(3) The administrative law judge shall
promptly issue any document subpoena
requested pursuant to this section. If the
administrative law judge determines
that the application does not set forth a
valid basis for the issuance of the
subpoena, or that any of its terms are
unreasonable, oppressive, excessive in
scope, or unduly burdensome, he or she
may refuse to issue the subpoena or may
issue it in a modified form upon such
conditions as may be consistent with
the Uniform Rules.
(b) Motion to quash or modify. (1)
Any person to whom a document
subpoena is directed may file a motion
to quash or modify such subpoena,
accompanied by a statement of the basis
for quashing or modifying the subpoena.
The movant shall serve the motion on
all parties, and any party may respond
to such motion within ten days of
service of the motion.
(2) Any motion to quash or modify a
document subpoena must be filed on
the same basis, including the assertion
of privilege, upon which a party could
object to a discovery request under
§ 109.25(d) of this subpart, and during
the same time limits during which such
an objection could be filed.
(c) Enforcing document subpoenas. If
a subpoenaed person fails to comply
with any subpoena issued pursuant to
this section or any order of the
administrative law judge which directs
PO 00000
Frm 00016
Fmt 4701
Sfmt 4700
compliance with all or any portion of a
document subpoena, the subpoenaing
party or any other aggrieved party may,
to the extent authorized by applicable
law, apply to an appropriate United
States district court for an order
requiring compliance with so much of
the document subpoena as the
administrative law judge has not
quashed or modified. A party’s right to
seek court enforcement of a document
subpoena shall in no way limit the
sanctions that may be imposed by the
administrative law judge on a party who
induces a failure to comply with
subpoenas issued under this section.
§ 109.27 Deposition of witness unavailable
for hearing.
(a) General rules. (1) If a witness will
not be available for the hearing, a party
may apply in accordance with the
procedures set forth in paragraph (a)(2)
of this section, to the administrative law
judge for the issuance of a subpoena,
including a subpoena duces tecum,
requiring the attendance of the witness
at a deposition. The administrative law
judge may issue a deposition subpoena
under this section upon showing that:
(i) The witness will be unable to
attend or may be prevented from
attending the hearing because of age,
sickness or infirmity, or will otherwise
be unavailable;
(ii) The witness’ unavailability was
not procured or caused by the
subpoenaing party;
(iii) The testimony is reasonably
expected to be material; and
(iv) Taking the deposition will not
result in any undue burden to any other
party and will not cause undue delay of
the proceeding.
(2) The application must contain a
proposed deposition subpoena and a
brief statement of the reasons for the
issuance of the subpoena. The subpoena
must name the witness whose
deposition is to be taken and specify the
time and place for taking the deposition.
A deposition subpoena may require the
witness to be deposed at any place
within the country in which that
witness resides or has a regular place of
employment or such other convenient
place as the administrative law judge
shall fix.
(3) Any requested subpoena that sets
forth a valid basis for its issuance must
be promptly issued, unless the
administrative law judge on his or her
own motion, requires a written response
or requires attendance at a conference
concerning whether the requested
subpoena should be issued.
(4) The party obtaining a deposition
subpoena is responsible for serving it on
the witness and for serving copies on all
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
parties. Unless the administrative law
judge orders otherwise, no deposition
under this section shall be taken on
fewer than ten days’ notice to the
witness and all parties. Deposition
subpoenas may be served in any state,
territory, possession of the United
States, or the District of Columbia, on
any person or company doing business
in any state, territory, possession of the
United States, or the District of
Columbia, or as otherwise permitted by
law.
(b) Objections to deposition
subpoenas. (1) The witness and any
party who has not had an opportunity
to oppose a deposition subpoena issued
under this section may file a motion
with the administrative law judge to
quash or modify the subpoena prior to
the time for compliance specified in the
subpoena, but not more than ten days
after service of the subpoena.
(2) A statement of the basis for the
motion to quash or modify a subpoena
issued under this section must
accompany the motion. The motion
must be served on all parties.
(c) Procedure upon deposition. (1)
Each witness testifying pursuant to a
deposition subpoena must be duly
sworn, and each party shall have the
right to examine the witness. Objections
to questions or documents must be in
short form, stating the grounds for the
objection. Failure to object to questions
or documents is not deemed a waiver
except where the ground for the
objection might have been avoided if the
objection had been timely presented. All
questions, answers, and objections must
be recorded.
(2) Any party may move before the
administrative law judge for an order
compelling the witness to answer any
questions the witness has refused to
answer or submit any evidence the
witness has refused to submit during the
deposition.
(3) The deposition must be subscribed
by the witness, unless the parties and
the witness, by stipulation, have waived
the signing, or the witness is ill, cannot
be found, or has refused to sign. If the
deposition is not subscribed by the
witness, the court reporter taking the
deposition shall certify that the
transcript is a true and complete
transcript of the deposition.
(d) Enforcing subpoenas. If a
subpoenaed person fails to comply with
any order of the administrative law
judge which directs compliance with all
or any portion of a deposition subpoena
under paragraph (b) or (c)(2) of this
section, the subpoenaing party or other
aggrieved party may, to the extent
authorized by applicable law, apply to
an appropriate United States district
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
court for an order requiring compliance
with the portions of the subpoena that
the administrative law judge has
ordered enforced. A party’s right to seek
court enforcement of a deposition
subpoena in no way limits the sanctions
that may be imposed by the
administrative law judge on a party who
fails to comply with or procures a
failure to comply with, a subpoena
issued under this section.
§ 109.28
Interlocutory review.
(a) General rule. The Comptroller may
review a ruling of the administrative
law judge prior to the certification of the
record to the Comptroller only in
accordance with the procedures set
forth in this section and § 109.23 of this
subpart.
(b) Scope of review. The Comptroller
may exercise interlocutory review of a
ruling of the administrative law judge if
the Comptroller finds that:
(1) The ruling involves a controlling
question of law or policy as to which
substantial grounds exist for a difference
of opinion;
(2) Immediate review of the ruling
may materially advance the ultimate
termination of the proceeding;
(3) Subsequent modification of the
ruling at the conclusion of the
proceeding would be an inadequate
remedy; or
(4) Subsequent modification of the
ruling would cause unusual delay or
expense.
(c) Procedure. Any request for
interlocutory review shall be filed by a
party with the administrative law judge
within ten days of his or her ruling and
shall otherwise comply with § 109.23 of
this subpart. Any party may file a
response to a request for interlocutory
review in accordance with § 109.23(d) of
this subpart. Upon the expiration of the
time for filing all responses, the
administrative law judge shall refer the
matter to the Comptroller for final
disposition.
(d) Suspension of proceeding. Neither
a request for interlocutory review nor
any disposition of such a request by the
Comptroller under this section suspends
or stays the proceeding unless otherwise
ordered by the administrative law judge
or the Comptroller.
§ 109.29
Summary disposition.
(a) In general. The administrative law
judge shall recommend that the
Comptroller issue a final order granting
a motion for summary disposition if the
undisputed pleaded facts, admissions,
affidavits, stipulations, documentary
evidence, matters as to which official
notice may be taken, and any other
evidentiary materials properly
PO 00000
Frm 00017
Fmt 4701
Sfmt 4700
48965
submitted in connection with a motion
for summary disposition show that:
(1) There is no genuine issue as to any
material fact; and
(2) The moving party is entitled to a
decision in its favor as a matter of law.
(b) Filing of motions and responses.
(1) Any party who believes that there is
no genuine issue of material fact to be
determined and that he or she is entitled
to a decision as a matter of law may
move at any time for summary
disposition in its favor of all or any part
of the proceeding. Any party, within 20
days after service of such a motion, or
within such time period as allowed by
the administrative law judge, may file a
response to such motion.
(2) A motion for summary disposition
must be accompanied by a statement of
the material facts as to which the
moving party contends there is no
genuine issue. Such motion must be
supported by documentary evidence,
which may take the form of admissions
in pleadings, stipulations, depositions,
investigatory depositions, transcripts,
affidavits and any other evidentiary
materials that the moving party
contends support his or her position.
The motion must also be accompanied
by a brief containing the points and
authorities in support of the contention
of the moving party. Any party opposing
a motion for summary disposition must
file a statement setting forth those
material facts as to which he or she
contends a genuine dispute exists. Such
opposition must be supported by
evidence of the same type as that
submitted with the motion for summary
disposition and a brief containing the
points and authorities in support of the
contention that summary disposition
would be inappropriate.
(c) Hearing on motion. At the request
of any party or on his or her own
motion, the administrative law judge
may hear oral argument on the motion
for summary disposition.
(d) Decision on motion. Following
receipt of a motion for summary
disposition and all responses thereto,
the administrative law judge shall
determine whether the moving party is
entitled to summary disposition. If the
administrative law judge determines
that summary disposition is warranted,
the administrative law judge shall
submit a recommended decision to that
effect to the Comptroller. If the
administrative law judge finds that no
party is entitled to summary
disposition, he or she shall make a
ruling denying the motion.
§ 109.30
Partial summary disposition.
If the administrative law judge
determines that a party is entitled to
E:\FR\FM\09AUR2.SGM
09AUR2
48966
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
proceeding. A party may obtain a copy
of the transcript at its expense.
(d) Scheduling or prehearing orders.
At or within a reasonable time following
the conclusion of the scheduling
conference or any prehearing
conference, the administrative law judge
shall serve on each party an order
setting forth any agreements reached
and any procedural determinations
made.
§ 109.31 Scheduling and prehearing
conferences.
sroberts on DSK5SPTVN1PROD with RULES
summary disposition as to certain
claims only, he or she shall defer
submitting a recommended decision as
to those claims. A hearing on the
remaining issues must be ordered.
Those claims for which the
administrative law judge has
determined that summary disposition is
warranted will be addressed in the
recommended decision filed at the
conclusion of the hearing.
§ 109.32
(a) Scheduling conference. Within 30
days of service of the notice or order
commencing a proceeding or such other
time as parties may agree, the
administrative law judge shall direct
counsel for all parties to meet with him
or her in person at a specified time and
place prior to the hearing or to confer
by telephone for the purpose of
scheduling the course and conduct of
the proceeding. This meeting or
telephone conference is called a
‘‘scheduling conference.’’ The
identification of potential witnesses, the
time for and manner of discovery, and
the exchange of any prehearing
materials including witness lists,
statements of issues, stipulations,
exhibits and any other materials may
also be determined at the scheduling
conference.
(b) Prehearing conferences. The
administrative law judge may, in
addition to the scheduling conference,
on his or her own motion or at the
request of any party, direct counsel for
the parties to meet with him or her (in
person or by telephone) at a prehearing
conference to address any or all of the
following:
(1) Simplification and clarification of
the issues;
(2) Stipulations, admissions of fact,
and the contents, authenticity and
admissibility into evidence of
documents;
(3) Matters of which official notice
may be taken;
(4) Limitation of the number of
witnesses;
(5) Summary disposition of any or all
issues;
(6) Resolution of discovery issues or
disputes;
(7) Amendments to pleadings; and
(8) Such other matters as may aid in
the orderly disposition of the
proceeding.
(c) Transcript. The administrative law
judge, in his or her discretion, may
require that a scheduling or prehearing
conference be recorded by a court
reporter. A transcript of the conference
and any materials filed, including
orders, becomes part of the record of the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Prehearing submissions.
(a) Within the time set by the
administrative law judge, but in no case
later than 14 days before the start of the
hearing, each party shall serve on every
other party, his or her:
(1) Prehearing statement;
(2) Final list of witnesses to be called
to testify at the hearing, including name
and address of each witness and a short
summary of the expected testimony of
each witness;
(3) List of the exhibits to be
introduced at the hearing along with a
copy of each exhibit; and
(4) Stipulations of fact, if any.
(b) Effect of failure to comply. No
witness may testify and no exhibits may
be introduced at the hearing if such
witness or exhibit is not listed in the
prehearing submissions pursuant to
paragraph (a) of this section, except for
good cause shown.
§ 109.33
Public hearings.
(a) General rule. All hearings shall be
open to the public, unless the
Comptroller, in the Comptroller’s
discretion, determines that holding an
open hearing would be contrary to the
public interest. Within 20 days of
service of the notice or, in the case of
change-in-control proceedings under
section 7(j)(4) of the FDIA (12 U.S.C.
1817(j)(4)), within 20 days from service
of the hearing order, any respondent
may file with the Comptroller a request
for a private hearing, and any party may
file a reply to such a request. A party
must serve on the administrative law
judge a copy of any request or reply the
party files with the Comptroller. The
form of, and procedure for, these
requests and replies are governed by
§ 109.23 of this subpart. A party’s failure
to file a request or a reply constitutes a
waiver of any objections regarding
whether the hearing will be public or
private.
(b) Filing document under seal.
Enforcement Counsel, in his or her
discretion, may file any document or
part of a document under seal if
disclosure of the document would be
contrary to the public interest. The
administrative law judge shall take all
appropriate steps to preserve the
PO 00000
Frm 00018
Fmt 4701
Sfmt 4700
confidentiality of such documents or
parts thereof, including closing portions
of the hearing to the public.
§ 109.34
Hearing subpoenas.
(a) Issuance. (1) Upon application of
a party showing general relevance and
reasonableness of scope of the testimony
or other evidence sought, the
administrative law judge may issue a
subpoena or a subpoena duces tecum
requiring the attendance of a witness at
the hearing or the production of
documentary or physical evidence at the
hearing. The application for a hearing
subpoena must also contain a proposed
subpoena specifying the attendance of a
witness or the production of evidence
from any state, territory, or possession
of the United States, the District of
Columbia, or as otherwise provided by
law at any designated place where the
hearing is being conducted. The party
making the application shall serve a
copy of the application and the
proposed subpoena on every other
party.
(2) A party may apply for a hearing
subpoena at any time before the
commencement of a hearing. During a
hearing, a party may make an
application for a subpoena orally on the
record before the administrative law
judge.
(3) The administrative law judge shall
promptly issue any hearing subpoena
requested pursuant to this section. If the
administrative law judge determines
that the application does not set forth a
valid basis for the issuance of the
subpoena, or that any of its terms are
unreasonable, oppressive, excessive in
scope, or unduly burdensome, he or she
may refuse to issue the subpoena or may
issue it in a modified form upon any
conditions consistent with this subpart.
Upon issuance by the administrative
law judge, the party making the
application shall serve the subpoena on
the person named in the subpoena and
on each party.
(b) Motion to quash or modify. (1)
Any person to whom a hearing
subpoena is directed or any party may
file a motion to quash or modify the
subpoena, accompanied by a statement
of the basis for quashing or modifying
the subpoena. The movant must serve
the motion on each party and on the
person named in the subpoena. Any
party may respond to the motion within
ten days of service of the motion.
(2) Any motion to quash or modify a
hearing subpoena must be filed prior to
the time specified in the subpoena for
compliance, but not more than ten days
after the date of service of the subpoena
upon the movant.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(c) Enforcing subpoenas. If a
subpoenaed person fails to comply with
any subpoena issued pursuant to this
section or any order of the
administrative law judge which directs
compliance with all or any portion of a
document subpoena, the subpoenaing
party or any other aggrieved party may
seek enforcement of the subpoena
pursuant to § 109.26(c) of this subpart.
sroberts on DSK5SPTVN1PROD with RULES
§ 109.35
Conduct of hearings.
(a) General rules. (1) Hearings shall be
conducted so as to provide a fair and
expeditious presentation of the relevant
disputed issues. Each party has the right
to present its case or defense by oral and
documentary evidence and to conduct
such cross examination as may be
required for full disclosure of the facts.
(2) Order of hearing. Enforcement
Counsel shall present its case-in-chief
first, unless otherwise ordered by the
administrative law judge, or unless
otherwise expressly specified by law or
regulation. Enforcement Counsel shall
be the first party to present an opening
statement and a closing statement, and
may make a rebuttal statement after the
respondent’s closing statement. If there
are multiple respondents, respondents
may agree among themselves as to their
order of presentation of their cases, but
if they do not agree the administrative
law judge shall fix the order.
(3) Examination of witnesses. Only
one counsel for each party may conduct
an examination of a witness, except that
in the case of extensive direct
examination, the administrative law
judge may permit more than one
counsel for the party presenting the
witness to conduct the examination. A
party may have one counsel conduct the
direct examination and another counsel
conduct re-direct examination of a
witness, or may have one counsel
conduct the cross examination of a
witness and another counsel conduct
the re-cross examination of a witness.
(4) Stipulations. Unless the
administrative law judge directs
otherwise, all stipulations of fact and
law previously agreed upon by the
parties, and all documents, the
admissibility of which have been
previously stipulated, will be admitted
into evidence upon commencement of
the hearing.
(b) Transcript. The hearing must be
recorded and transcribed. The reporter
will make the transcript available to any
party upon payment by that party to the
reporter of the cost of the transcript. The
administrative law judge may order the
record corrected, either upon motion to
correct, upon stipulation of the parties,
or following notice to the parties upon
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
the administrative law judge’s own
motion.
§ 109.36
Evidence.
(a) Admissibility. (1) Except as is
otherwise set forth in this section,
relevant, material, and reliable evidence
that is not unduly repetitive is
admissible to the fullest extent
authorized by the APA and other
applicable law.
(2) Evidence that would be admissible
under the Federal Rules of Evidence is
admissible in a proceeding conducted
pursuant to this subpart.
(3) Evidence that would be
inadmissible under the Federal Rules of
Evidence may not be deemed or ruled
to be inadmissible in a proceeding
conducted pursuant to this subpart if
such evidence is relevant, material,
reliable and not unduly repetitive.
(b) Official notice. (1) Official notice
may be taken of any material fact which
may be judicially noticed by a United
States district court and any material
information in the official public
records of any Federal or state
government agency.
(2) All matters officially noticed by
the administrative law judge or
Comptroller shall appear on the record.
(3) If official notice is requested or
taken of any material fact, the parties,
upon timely request, shall be afforded
an opportunity to object.
(c) Documents. (1) A duplicate copy
of a document is admissible to the same
extent as the original, unless a genuine
issue is raised as to whether the copy is
in some material respect not a true and
legible copy of the original.
(2) Subject to the requirements of
paragraph (a) of this section, any
document, including a report of
examination, supervisory activity,
inspection or visitation, prepared by the
appropriate Federal banking agency, as
defined in section 3(q) of the FDIA (12
U.S.C. 1813(q)), or state regulatory
agency, is admissible either with or
without a sponsoring witness.
(3) Witnesses may use existing or
newly created charts, exhibits,
calendars, calculations, outlines or other
graphic material to summarize,
illustrate, or simplify the presentation of
testimony. Such materials may, subject
to the administrative law judge’s
discretion, be used with or without
being admitted into evidence.
(d) Objections. (1) Objections to the
admissibility of evidence must be timely
made and rulings on all objections must
appear on the record.
(2) When an objection to a question or
line of questioning propounded to a
witness is sustained, the examining
counsel may make a specific proffer on
PO 00000
Frm 00019
Fmt 4701
Sfmt 4700
48967
the record of what he or she expected
to prove by the expected testimony of
the witness, either by representation of
counsel or by direct interrogation of the
witness.
(3) The administrative law judge shall
retain rejected exhibits, adequately
marked for identification, for the record,
and transmit such exhibits to the
Comptroller.
(4) Failure to object to admission of
evidence or to any ruling constitutes a
waiver of the objection.
(e) Stipulations. The parties may
stipulate as to any relevant matters of
fact or the authentication of any relevant
documents. Such stipulations must be
received in evidence at a hearing, and
are binding on the parties with respect
to the matters therein stipulated.
(f) Depositions of unavailable
witnesses. (1) If a witness is unavailable
to testify at a hearing, and that witness
has testified in a deposition to which all
parties in a proceeding had notice and
an opportunity to participate, a party
may offer as evidence all or any part of
the transcript of the deposition,
including deposition exhibits, if any.
(2) Such deposition transcript is
admissible to the same extent that
testimony would have been admissible
had that person testified at the hearing,
provided that if a witness refused to
answer proper questions during the
depositions, the administrative law
judge may, on that basis, limit the
admissibility of the deposition in any
manner that justice requires.
(3) Only those portions of a
deposition received in evidence at the
hearing constitute a part of the record.
§ 109.37
Post-hearing filings.
(a) Proposed findings and conclusions
and supporting briefs. (1) Using the
same method of service for each party,
the administrative law judge shall serve
notice upon each party, that the
certified transcript, together with all
hearing exhibits and exhibits introduced
but not admitted into evidence at the
hearing, has been filed. Any party may
file with the administrative law judge
proposed findings of fact, proposed
conclusions of law, and a proposed
order within 30 days following service
of this notice by the administrative law
judge or within such longer period as
may be ordered by the administrative
law judge.
(2) Proposed findings and conclusions
must be supported by citation to any
relevant authorities and by page
references to any relevant portions of
the record. A post-hearing brief may be
filed in support of proposed findings
and conclusions, either as part of the
same document or in a separate
E:\FR\FM\09AUR2.SGM
09AUR2
48968
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
document. Any party who fails to file
timely with the administrative law
judge any proposed finding or
conclusion is deemed to have waived
the right to raise in any subsequent
filing or submission any issue not
addressed in such party’s proposed
finding or conclusion.
(b) Reply briefs. Reply briefs may be
filed within 15 days after the date on
which the parties’ proposed findings,
conclusions, and order are due. Reply
briefs must be strictly limited to
responding to new matters, issues, or
arguments raised in another party’s
papers. A party who has not filed
proposed findings of fact and
conclusions of law or a post-hearing
brief may not file a reply brief.
(c) Simultaneous filing required. The
administrative law judge shall not order
the filing by any party of any brief or
reply brief in advance of the other
party’s filing of its brief.
sroberts on DSK5SPTVN1PROD with RULES
§ 109.38 Recommended decision and filing
of record.
(a) Filing of recommended decision
and record. Within 45 days after
expiration of the time allowed for filing
reply briefs under § 109.37(b) of this
subpart, the administrative law judge
shall file with and certify to the
Comptroller, for decision, the record of
the proceeding. The record must
include the administrative law judge’s
recommended decision, recommended
findings of fact, recommended
conclusions of law, and proposed order;
all prehearing and hearing transcripts,
exhibits, and rulings; and the motions,
briefs, memoranda, and other
supporting papers filed in connection
with the hearing. The administrative
law judge shall serve upon each party
the recommended decision, findings,
conclusions, and proposed order.
(b) Filing of index. At the same time
the administrative law judge files with
and certifies to the Comptroller for final
determination the record of the
proceeding, the administrative law
judge shall furnish to the Comptroller a
certified index of the entire record of the
proceeding. The certified index shall
include, at a minimum, an entry for
each paper, document or motion filed
with the administrative law judge in the
proceeding, the date of the filing, and
the identity of the filer. The certified
index shall also include an exhibit
index containing, at a minimum, an
entry consisting of exhibit number and
title or description for: Each exhibit
introduced and admitted into evidence
at the hearing; each exhibit introduced
but not admitted into evidence at the
hearing; each exhibit introduced and
admitted into evidence after the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
completion of the hearing; and each
exhibit introduced but not admitted into
evidence after the completion of the
hearing.
§ 109.39 Exceptions to recommended
decision.
(a) Filing exceptions. Within 30 days
after service of the recommended
decision, findings, conclusions, and
proposed order under § 109.38 of this
subpart, a party may file with the
Comptroller written exceptions to the
administrative law judge’s
recommended decision, findings,
conclusions or proposed order, to the
admission or exclusion of evidence, or
to the failure of the administrative law
judge to make a ruling proposed by a
party. A supporting brief may be filed at
the time the exceptions are filed, either
as part of the same document or in a
separate document.
(b) Effect of failure to file or raise
exceptions. (1) Failure of a party to file
exceptions to those matters specified in
paragraph (a) of this section within the
time prescribed is deemed a waiver of
objection thereto.
(2) No exception need be considered
by the Comptroller if the party taking
exception had an opportunity to raise
the same objection, issue, or argument
before the administrative law judge and
failed to do so.
(c) Contents. (1) All exceptions and
briefs in support of such exceptions
must be confined to the particular
matters in, or omissions from, the
administrative law judge’s
recommendations to which that party
takes exception.
(2) All exceptions and briefs in
support of exceptions must set forth
page or paragraph references to the
specific parts of the administrative law
judge’s recommendations to which
exception is taken, the page or
paragraph references to those portions
of the record relied upon to support
each exception, and the legal authority
relied upon to support each exception.
§ 109.40
Review by the Comptroller.
(a) Notice of submission to the
Comptroller. When the Comptroller
determines that the record in the
proceeding is complete, the Comptroller
shall serve notice upon the parties that
the proceeding has been submitted to
the Comptroller for final decision.
(b) Oral argument before the
Comptroller. Upon the initiative of the
Comptroller or on the written request of
any party filed with the Comptroller
within the time for filing exceptions, the
Comptroller may order and hear oral
argument on the recommended findings,
conclusions, decision, and order of the
PO 00000
Frm 00020
Fmt 4701
Sfmt 4700
administrative law judge. A written
request by a party must show good
cause for oral argument and state
reasons why arguments cannot be
presented adequately in writing. A
denial of a request for oral argument
may be set forth in the Comptroller’s
final decision. Oral argument before the
Comptroller must be on the record.
(c) Comptroller’s final decision. (1)
Decisional employees may advise and
assist the Comptroller in the
consideration and disposition of the
case. The final decision of the
Comptroller will be based upon review
of the entire record of the proceeding,
except that the Comptroller may limit
the issues to be reviewed to those
findings and conclusions to which
opposing arguments or exceptions have
been filed by the parties.
(2) The Comptroller shall render a
final decision within 90 days after
notification of the parties that the case
has been submitted for final decision, or
90 days after oral argument, whichever
is later, unless the Comptroller orders
that the action or any aspect thereof be
remanded to the administrative law
judge for further proceedings. Copies of
the final decision and order of the
Comptroller shall be served upon each
party to the proceeding, upon other
persons required by statute, and, if
directed by the Comptroller or required
by statute, upon any appropriate state or
Federal supervisory authority.
§ 109.41
Stays pending judicial review.
The commencement of proceedings
for judicial review of a final decision
and order of the OCC may not, unless
specifically ordered by the Comptroller
or a reviewing court, operate as a stay
of any order issued by the Comptroller.
The Comptroller may, in its discretion,
and on such terms as it finds just, stay
the effectiveness of all or any part of its
order pending a final decision on a
petition for review of the order.
Subpart B—Local Rules
§ 109.100
Scope.
The rules and procedures in this
subpart B shall apply to those
proceedings covered by subpart A of
this part. In addition, subpart A of this
part and this subpart shall apply to
adjudicatory proceedings for which
hearings on the record are provided for
by the following statutory provisions:
(a) Proceedings under section
10(a)(2)(D) of the HOLA (12 U.S.C.
1467a(a)(2)(D)) to determine whether
any person directly or indirectly
exercises a controlling influence over
the management or policies of a savings
association or any other company; and
E:\FR\FM\09AUR2.SGM
09AUR2
48969
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(b) [Reserved]
(c) Proceedings under section 15(c)(4)
of the Securities and Exchange Act of
1934 (15 U.S.C. 78o(c)(4)) (Exchange
Act) to determine whether any Federal
savings association or person subject to
the jurisdiction of the OCC pursuant to
section 12(i) of the Exchange Act (15
U.S.C. 78 l (i)) has failed to comply with
the provisions of sections 12, 13, 14(a),
14(c), 14(d) or 14(f) of the Exchange Act.
§ 109.101 Appointment of Office of
Financial Institution Adjudication.
Unless otherwise directed by the
OCC, all hearings under subpart A of
this part and this subpart shall be
conducted by administrative law judges
under the direction of the Office of
Financial Institution Adjudication.
sroberts on DSK5SPTVN1PROD with RULES
§ 109.102
Discovery.
(a) In general. A party may take the
deposition of an expert, or of a person,
including another party, who has direct
knowledge of matters that are nonprivileged, relevant and material to the
proceeding and where there is a need
for the deposition. The deposition of
experts shall be limited to those experts
who are expected to testify at the
hearing.
(b) Notice. A party desiring to take a
deposition shall give reasonable notice
in writing to the deponent and to every
other party to the proceeding. The
notice must state the time and place for
taking the deposition and the name and
address of the person to be deposed.
(c) Time limits. A party may take
depositions at any time after the
commencement of the proceeding, but
no later than ten days before the
scheduled hearing date, except with
permission of the administrative law
judge for good cause shown.
(d) Conduct of the deposition. The
witness must be duly sworn, and each
party shall have the right to examine the
witness with respect to all nonprivileged, relevant and material matters
of which the witness has factual, direct
and personal knowledge. Objections to
questions or exhibits shall be in short
form, stating the grounds for objection.
Failure to object to questions or exhibits
is not a waiver except where the
grounds for the objection might have
been avoided if the objection had been
timely presented. The court reporter
shall transcribe or otherwise record the
witness’s testimony, as agreed among
the parties.
(e) Protective orders. At any time after
notice of a deposition has been given, a
party may file a motion for the issuance
of a protective order. Such protective
order may prohibit, terminate, or limit
the scope or manner of the taking of a
deposition. The administrative law
judge shall grant such protective order
upon a showing of sufficient grounds,
including that the deposition:
(1) Is unreasonable, oppressive,
excessive in scope, or unduly
burdensome;
(2) Involves privileged, investigative,
trial preparation, irrelevant or
immaterial matters; or
(3) Is being conducted in bad faith or
in such manner as to unreasonably
annoy, embarrass, or oppress the
deponent.
(f) Fees. Deposition witnesses,
including expert witnesses, shall be
paid the same expenses in the same
manner as are paid witnesses in the
district courts of the United States in
proceedings in which the United States
Government is a party. Expenses in
accordance with this paragraph shall be
paid by the party seeking to take the
deposition.
(g) Deposition subpoenas—(1)
Issuance. At the request of a party, the
administrative law judge shall issue a
subpoena requiring the attendance of a
witness at a deposition. The attendance
of a witness may be required from any
place in any state or territory that is
subject to the jurisdiction of the United
States or as otherwise permitted by law.
(2) Service. The party requesting the
subpoena must serve it on the person
named therein or upon that person’s
counsel, by any of the methods
identified in § 109.11(d) of this part. The
party serving the subpoena must file
proof of service with the administrative
law judge.
(3) Motion to quash. A person named
in the subpoena or a party may file a
motion to quash or modify the
subpoena. A statement of the reasons for
the motion must accompany it and a
copy of the motion must be served on
the party that requested the subpoena.
The motion must be made prior to the
time for compliance specified in the
subpoena and not more than ten days
after the date of service of the subpoena,
or if the subpoena is served within 15
days of the hearing, within five days
after the date of service.
(4) Enforcement of deposition
subpoena. Enforcement of a deposition
subpoena shall be in accordance with
the procedures of § 109.27(d) of this
part.
§ 109.103
Civil money penalties.
(a) Assessment. In the event of
consent, or if upon the record developed
at the hearing the OCC finds that any of
the grounds specified in the notice
issued pursuant to § 109.18 of this part
have been established, the OCC may
serve an order of assessment of civil
money penalty upon the party
concerned. The assessment order shall
be effective immediately upon service or
upon such other date as may be
specified therein and shall remain
effective and enforceable until it is
stayed, modified, terminated, or set
aside by the OCC or by a reviewing
court.
(b) Payment. (1) Civil penalties
assessed pursuant to subpart A of this
part and this subpart B are payable and
to be collected within 60 days after the
issuance of the notice of assessment,
unless the OCC fixes a different time for
payment where it determines that the
purpose of the civil money penalty
would be better served thereby;
however, if a party has made a timely
request for a hearing to challenge the
assessment of the penalty, the party may
not be required to pay such penalty
until the OCC has issued a final order
of assessment following the hearing. In
such instances, the penalty shall be paid
within 60 days of service of such order
unless the OCC fixes a different time for
payment. Notwithstanding the
foregoing, the OCC may seek to attach
the party’s assets or to have a receiver
appointed to secure payment of the
potential civil money penalty or other
obligation in advance of the hearing in
accordance with section 8(i)(4) of the
FDIA (12 U.S.C. 1818(i)(4)).
(2) Checks in payment of civil
penalties shall be made payable to the
Treasurer of the United States and sent
to the OCC. Upon receipt, the OCC shall
forward the check to the Treasury of the
United States.
(c) Inflation adjustment. Under the
Federal Civil Monetary Penalties
Inflation Adjustment Act of 1990 (28
U.S.C. 2461 note), the OCC must adjust
for inflation the civil money penalties in
statutes that it administers. The
following chart displays the adjusted
civil money penalties. The amounts in
this chart apply to violations that occur
after October 27, 2008:
New maximum
amount
U.S. Code citation
CMP description
12 U.S.C. 1464(v)(4) ...............................
12 U.S.C. 1464(v)(5) ...............................
Reports of Condition—1st Tier ..................................................................................
Reports of Condition—2nd Tier .................................................................................
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00021
Fmt 4701
Sfmt 4700
E:\FR\FM\09AUR2.SGM
09AUR2
$2,200
32,500
48970
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
U.S. Code citation
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
42
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
U.S.C.
1 Per
2 Per
1464(v)(6) ...............................
1467(d) ...................................
1467a(r)(1) ..............................
1467a(r)(2) ..............................
1467a(r)(3) ..............................
1817(j)(16)(A) .........................
1817(j)(16)(B) .........................
1817(j)(16)(C) .........................
1818(i)(2)(A) ...........................
1818(i)(2)(B) ...........................
1818(i)(2)(C) ...........................
1820(k)(6)(A)(ii) ......................
1884 ........................................
3349(b) ...................................
3349(b) ...................................
3349(b) ...................................
4012a(f) ..................................
Reports of Condition—3rd Tier .................................................................................
Refusal to Cooperate in Exam ..................................................................................
Late/Inaccurate Reports—1st Tier ............................................................................
Late/Inaccurate Reports—2nd Tier ...........................................................................
Late/Inaccurate Reports—3rd Tier ............................................................................
Change in Control—1st Tier ......................................................................................
Change in Control—2nd Tier ....................................................................................
Change in Control—3rd Tier .....................................................................................
Violation of Law or Unsafe or Unsound Practice—1st Tier ......................................
Violation of Law or Unsafe or Unsound Practice—2nd Tier .....................................
Violation of Law or Unsafe or Unsound Practice—3rd Tier ......................................
Violation of Post Employment Restrictions ...............................................................
Violation of Security Rules ........................................................................................
Appraisals Violation—1st Tier ...................................................................................
Appraisals Violation—2nd Tier ..................................................................................
Appraisals Violation—3rd Tier ...................................................................................
Flood Insurance .........................................................................................................
1,375,000
7,500
2,200
32,500
1,375,000
7,500
37,500
1,375,000
7,500
37,500
1,375,000
275,000
110
7,500
37,500
1,375,000
1 385
2 135,000
day.
year.
§ 109.104
sroberts on DSK5SPTVN1PROD with RULES
New maximum
amount
CMP description
Additional procedures.
(a) Replies to exceptions. Replies to
written exceptions to the administrative
law judge’s recommended decision,
findings, conclusions or proposed order
pursuant to § 109.39 of this part shall be
filed within 10-days of the date such
written exceptions were required to be
filed.
(b) Motions. All motions shall be filed
with the administrative law judge and
an additional copy shall be filed with
the OCC Hearing Clerk who receives
adjudicatory filings; provided, however,
that once the administrative law judge
has certified the record to the
Comptroller pursuant to § 109.38 of this
part, all motions must be filed with the
Comptroller to the attention of the
Hearing Clerk within the 10-day period
following the filing of exceptions
allowed for the filing of replies to
exceptions. Responses to such motions
filed in a timely manner with the
Comptroller, other than motions for oral
argument before the Comptroller, shall
be allowed pursuant to the procedures
at § 109.23(d) of this part. No response
is required for the Comptroller to make
a determination on a motion for oral
argument.
(c) Authority of administrative law
judge. In addition to the powers listed
in § 109.5 of this part, the administrative
law judge shall have the authority to
deny any dispositive motion and shall
follow the procedures set forth for
motions for summary disposition at
§ 109.29 of this part and partial
summary disposition at § 109.30 of this
part in making determinations on such
motions.
(d) Notification of submission of
proceeding to the Comptroller. Upon the
expiration of the time for filing any
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
exceptions, any replies to such
exceptions or any motions and any
ruling thereon, and after receipt of
certified record, the OCC shall notify the
parties within ten days of the
submission of the proceeding to the
Comptroller for final determination.
(e) Extensions of time for final
determination. The Comptroller may,
sua sponte, extend the time for final
determination by signing an order of
extension of time within the 90-day
time period and notifying the parties of
such extension thereafter.
(f) Service upon the OCC. Service of
any document upon the OCC shall be
made by filing with the Hearing Clerk,
in addition to the individuals and/or
offices designated by the OCC in its
Notice issued pursuant to § 109.18 of
this part, or such other means
reasonably suited to provide notice of
the person and/or offices designated to
receive filings.
(g) Filings with the Comptroller. An
additional copy of all materials required
or permitted to be filed with or referred
to the administrative law judge pursuant
to subpart A and B of this part shall be
filed with the Hearing Clerk. This rule
shall not apply to the transcript of
testimony and exhibits adduced at the
hearing or to proposed exhibits
submitted in advance of the hearing
pursuant to an order of the
administrative law judge under § 109.32
of this part. Materials required or
permitted to be filed with or referred to
the Comptroller pursuant to subparts A
and B of this part shall be filed with the
Comptroller, to the attention of the
Hearing Clerk.
(h) Presence of cameras and other
recording devices. The use of cameras
and other recording devices, other than
PO 00000
Frm 00022
Fmt 4701
Sfmt 4700
those used by the court reporter, shall
be prohibited and excluded from the
proceedings.
Subpart C [Reserved]
Subpart D [Reserved]
PART 112—RULES FOR
INVESTIGATIVE PROCEEDINGS AND
FORMAL EXAMINATION
PROCEEDINGS
Sec.
112.1
112.2
112.3
112.4
112.5
112.6
112.7
Scope of part.
Definitions.
Confidentiality of proceedings.
Transcripts.
Rights of witnesses.
Obstruction of the proceedings.
Subpoenas.
Authority: 12 U.S.C. 1462a, 1463, 1464,
1467, 1467a, 1813, 1817(j), 1818(n), 1820(c),
5412(b)(2)(B); 15 U.S.C. 78l.
§ 112.1
Scope of part.
This part prescribes rules of practice
and procedure applicable to the conduct
of formal examination proceedings with
respect to Federal savings associations
and their affiliates under section
5(d)(1)(B) of the HOLA, as amended, 12
U.S.C. 1464(d)(1)(B) or section 7(j)(15)
of the Federal Deposit Insurance Act, as
amended, 12 U.S.C. 1817(j)(15)
(‘‘FDIA’’), section 8(n) of the FDIA, 12
U.S.C. 1818(n), or section 10(c) of the
FDIA, 12 U.S.C. 1820(c). This part does
not apply to adjudicatory proceedings as
to which hearings are required by
statute, the rules for which are
contained in part 109 of this chapter.
§ 112.2
Definitions.
As used in this part:
(a) OCC means the Office of the
Comptroller of the Currency;
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(b) [Reserved]
(c) Formal examination proceeding
means the administration of oaths and
affirmations, taking and preserving of
testimony, requiring the production of
books, papers, correspondence,
memoranda, and all other records, the
issuance of subpoenas, and all related
activities in connection with
examination of savings associations and
their affiliates conducted pursuant to
section 5(d)(1)(B) of the HOLA, section
7(j)(15) of the FDIA, section 8(n) of the
FDIA or section 10(c) of the FDIA; and
(d) Designated representative means
the person or persons empowered by the
OCC to conduct an investigative
proceeding or a formal examination
proceeding.
§ 112.3
Confidentiality of proceedings.
All formal examination proceedings
shall be private and, unless otherwise
ordered by the OCC, all investigative
proceedings shall also be private. Unless
otherwise ordered or permitted by the
OCC, or required by law, and except as
provided in §§ 112.4 and 112.5, the
entire record of any investigative
proceeding or formal examination
proceeding, including the resolution of
the OCC or its delegate(s) authorizing
the proceeding, the transcript of such
proceeding, and all documents and
information obtained by the designated
representative(s) during the course of
said proceedings shall be confidential.
sroberts on DSK5SPTVN1PROD with RULES
§ 112.4
Transcripts.
Transcripts or other recordings, if any,
of investigative proceedings or formal
examination proceedings shall be
prepared solely by an official reporter or
by any other person or means
authorized by the designated
representative. A person who has
submitted documentary evidence or
given testimony in an investigative
proceeding or formal examination
proceeding may procure a copy of his
own documentary evidence or transcript
of his own testimony upon payment of
the cost thereof; provided, that a person
seeking a transcript of his own
testimony must file a written request
with the OCC’s Director for Enforcement
and Compliance stating the reason he
desires to procure such transcript, and
said persons may for good cause deny
such request. In any event, any witness
(or his counsel) shall have the right to
inspect the transcript of the witness’
own testimony.
§ 112.5
Rights of witnesses.
(a) Any person who is compelled or
requested to furnish documentary
evidence or give testimony at an
investigative proceeding or formal
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
examination proceeding shall have the
right to examine, upon request, the OCC
resolution authorizing such proceeding.
Copies of such resolution shall be
furnished, for their retention, to such
persons only with the written approval
of the OCC.
(b) Any witness at an investigative
proceeding or formal examination
proceeding may be accompanied and
advised by an attorney personally
representing that witness.
(1) Such attorney shall be a member
in good standing of the bar of the
highest court of any state,
Commonwealth, possession, territory, or
the District of Columbia, who has not
been suspended or debarred from
practice by the bar of any such political
entity or before the OCC in accordance
with the provisions of part 19 of this
chapter and has not been excluded from
the particular investigative proceeding
or formal examination proceeding in
accordance with paragraph (b)(3) of this
section.
(2) Such attorney may advise the
witness before, during, and after the
taking of his testimony and may briefly
question the witness, on the record, at
the conclusion of his testimony, for the
sole purpose of clarifying any of the
answers the witness has given. During
the taking of the testimony of a witness,
such attorney may make summary notes
solely for his use in representing his
client. All witnesses shall be
sequestered, and, unless permitted in
the discretion of the designated
representative, no witness or
accompanying attorney may be
permitted to be present during the
taking of testimony of any other witness
called in such proceeding. Neither
attorney(s) for the association(s) that are
the subjects of the investigative
proceedings or formal examination
proceedings, nor attorneys for any other
interested persons, shall have any right
to be present during the testimony of
any witness not personally being
represented by such attorney.
(3) The OCC, for good cause, may
exclude a particular attorney from
further participation in any
investigation in which the OCC has
found the attorney to have engaged in
dilatory, obstructionist, egregious,
contemptuous or contumacious
conduct. The person conducting an
investigation may report to the OCC
instances of apparently dilatory,
obstructionist, egregious, contemptuous
or contumacious conduct on the part of
an attorney. After due notice to the
attorney, the OCC may take such action
as the circumstances warrant based
upon a written record evidencing the
conduct of the attorney in that
PO 00000
Frm 00023
Fmt 4701
Sfmt 4700
48971
investigation or such other or additional
written or oral presentation as the OCC
may permit or direct.
§ 112.6
Obstruction of the proceedings.
The designated representative shall
report to the Comptroller any instances
where any witness or counsel has
engaged in dilatory, obstructionist, or
contumacious conduct or has otherwise
violated any provision of this part
during the course of an investigative
proceeding or formal examination
proceeding; and the OCC may take such
action as the circumstances warrant,
including the exclusion of counsel from
further participation in such
proceeding.
§ 112.7
Subpoenas.
(a) Service. Service of a subpoena in
connection with any investigative
proceeding or formal examination
proceeding shall be effected in the
following manner:
(1) Service upon a natural person.
Service of a subpoena upon a natural
person may be effected by handing it to
such person; by leaving it at his office
with the person in charge thereof, or, if
there is no one in charge, by leaving it
in a conspicuous place therein; by
leaving it at his dwelling place or usual
place of abode with some person of
suitable age and discretion then residing
therein; by mailing it to him by
registered or certified mail or by an
express delivery service at his last
known address; or by any method
whereby actual notice is given to him.
(2) Service upon other persons. When
the person to be served is not a natural
person, service of the subpoena may be
effected by handing the subpoena to a
registered agent for service, or to any
officer, director, or agent in charge of
any office of such person; by mailing it
to any such representative by registered
or certified mail or by an express
delivery service at his last known
address; or by any method whereby
actual notice is given to such person.
(b) Motions to quash. Any person to
whom a subpoena is directed may, prior
to the time specified therein for
compliance, but in no event more than
10 days after the date of service of such
subpoena, apply to the Deputy Chief
Counsel or his designee to quash or
modify such subpoena, accompanying
such application with a statement of the
reasons therefor. The Deputy Chief
Counsel or his designee, as appropriate,
may:
(1) Deny the application;
(2) Quash or revoke the subpoena;
(3) Modify the subpoena; or
(4) Condition the granting of the
application on such terms as the Deputy
E:\FR\FM\09AUR2.SGM
09AUR2
48972
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Chief Counsel or his designee
determines to be just, reasonable, and
proper.
(c) Attendance of witnesses.
Subpoenas issued in connection with an
investigative proceeding or formal
examination proceeding may require the
attendance and/or testimony of
witnesses from any state or territory of
the United States and the production by
such witnesses of documentary or other
tangible evidence at any designated
place where the proceeding is being (or
is to be) conducted. Foreign nationals
are subject to such subpoenas if such
service is made upon a duly authorized
agent located in the United States.
(d) Witness fees and mileage.
Witnesses summoned in any proceeding
under this part shall be paid the same
fees and mileage that are paid witnesses
in the district courts of the United
States. Such fees and mileage need not
be tendered when the subpoena is
issued on behalf of the OCC by any of
its designated representatives.
PART 116—APPLICATION
PROCESSING PROCEDURES
Sec.
116.1 What does this part do?
116.5 Do the same procedures apply to all
applications under this part?
116.10 How does the OCC compute time
periods under this part?
Subpart A—Pre-Filing and Filing
Procedures
Pre-Filing Procedures
116.15 Must I meet with the OCC before I
file my application?
116.20 What information must I include in
my draft business plan?
Filing Procedures
116.25 What type of application must I file?
116.30 What information must I provide
with my application?
116.35 May I keep portions of my
application confidential?
116.40 Where do I file my application?
116.45 What is the filing date of my
application?
116.47 How do I amend or supplement my
application?
Subpart B—Publication Requirements
116.50 Who must publish a public notice of
an application?
116.55 What information must I include in
my public notice?
116.60 When must I publish the public
notice?
116.70 Where must I publish the public
notice?
116.80 What language must I use in my
publication?
Subpart C—Comment Procedures
116.100 What does this subpart do?
116.110 Who may submit a written
comment?
116.120 What information should a
comment include?
116.130 Where are comments filed?
116.140 How long is the comment period?
Subpart D—Meeting Procedures
116.160 What does this subpart do?
116.170 When will the OCC conduct a
meeting on an application?
116.180 What procedures govern the
conduct of the meeting?
116.185 Will the OCC approve or
disapprove an application at a meeting?
116.190 Will a meeting affect application
processing time frames?
Subpart E—OCC Review
Expedited Treatment
116.200 If I file a notice under expedited
treatment, when may I engage in the
proposed activities?
Standard Treatment
116.210 What will the OCC do after I file
my application?
116.220 If the OCC requests additional
information to complete my application,
how will it process my application?
116.230 Will the OCC conduct an eligibility
examination?
116.240 What may the OCC require me to
do after my application is deemed
complete?
116.250 Will the OCC require me to publish
a new public notice?
116.260 May the OCC suspend processing
of my application?
116.270 How long is the OCC review
period?
116.280 How will I know if my application
has been approved?
116.290 What will happen if the OCC does
not approve or disapprove my
application within two calendar years
after the filing date?
Authority: 5 U.S.C. 552, 559; 12 U.S.C.
1462a, 1463, 1464, 2901 et seq.,
5412(b)(2)(B).
§ 116.1
What does this part do?
(a) This part explains OCC procedures
for processing applications, notices, or
filings (applications) for Federal savings
associations. Except as provided in
paragraph (b) of this section, subparts A
and E of this part apply whenever an
OCC regulation requires any person
(you) to file an application pertaining to
a Federal savings association with the
OCC. Subparts B, C, and D, however,
only apply when an OCC regulation
incorporates the procedures in the
subpart or where otherwise required by
the OCC.
(b) This part does not apply to any of
the following:
(1) An application related to a
transaction under section 13(c) or (k) of
the Federal Deposit Insurance Act, 12
U.S.C. 1823(c) or (k).
(2) A request for reconsideration,
modification, or appeal of a final OCC
or OTS action.
(3) A request related to litigation, an
enforcement proceeding, a supervisory
directive or supervisory agreement.
Such requests include a request seeking
approval under, modification of, or
termination of an order issued under
part 108 or 109 of this chapter, a
supervisory agreement, a supervisory
directive, a consent merger agreement or
a document negotiated in settlement of
an enforcement matter or other
litigation, unless an applicable OCC
regulation specifically requires an
application under this part.
(4) An application filed under an OCC
regulation that prescribes other
application processing procedures and
time frames for the approval of
applications.
(c) If an OCC regulation for a specific
type of application prescribes some
application processing procedures, or
time frames, the OCC will apply this
part to the extent necessary to process
the application. For example, if an OCC
regulation for a specific type of
application does not identify time
periods for the processing of an
application, the time periods in this part
apply.
§ 116.5 Do the same procedures apply to
all applications under this part?
The OCC processes applications
under this part using two procedures,
expedited treatment and standard
treatment. To determine which
treatment applies, you may use the
following chart:
sroberts on DSK5SPTVN1PROD with RULES
If . . .
Then the OCC will
process your
application under . . .
(a) The applicable regulation does not specifically state that expedited treatment is available ...................................
(b) [Reserved]
Standard treatment.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00024
Fmt 4701
Sfmt 4700
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Then the OCC will
process your
application under . . .
If . . .
(c) Your composite rating is 3, 4, or 5. The composite rating is the composite numeric rating that the OCC or the
other Federal banking regulator assigned to you under the Uniform Financial Institutions Rating System 1 or
under a comparable rating system. The composite rating refers to the rating assigned and provided to you, in
writing, as a result of the most recent examination.
(d) Your Community Reinvestment Act (CRA) rating is Needs to Improve or Substantial Noncompliance. The CRA
rating is the Community Reinvestment Act performance rating that the OCC or the other Federal banking regulator assigned and provided to you, in writing, as a result of the most recent compliance examination. See, for
example, § 195.28 of this chapter.
(e) Your compliance rating is 3, 4, or 5. The compliance rating is the numeric rating that the OCC or the other
Federal banking regulator assigned to you under the OCC compliance rating system, or a comparable rating
system used by the other Federal banking regulator. The compliance rating refers to the rating assigned and
provided to you, in writing, as a result of the most recent compliance examination.
(f) You fail any one of your capital requirements under part 167 of this chapter ..........................................................
(g) The OCC or OTS has notified you that you are an association in troubled condition ............................................
(h) Neither the OCC nor any other Federal banking regulator has assigned you a composite rating, a CRA rating
or a compliance rating.
(i) You do not meet any of the criteria listed in paragraphs (a) through (h) of this section ..........................................
1A
48973
Standard treatment.
Standard treatment.
Standard treatment.
Standard treatment.
Standard treatment.
Standard treatment.
Expedited treatment.
savings association may obtain a copy of its composite rating from the appropriate Federal banking agency.
§ 116.10 How does the OCC compute time
periods under this part?
In computing time periods under this
part, the OCC does not include the day
of the act or event that commences the
time period. When the last day of a time
period is a Saturday, Sunday, or Federal
holiday, the time period runs until the
end of the next day that is not a
Saturday, Sunday, or Federal holiday.
Subpart A—Pre-Filing and Filing
Procedures
you file an application, please consult
the following chart:
Pre-Filing Procedures
§ 116.15 Must I meet with the OCC before
I file my application?
(a) Chart. To determine whether you
must attend a pre-filing meeting before
Then . . .
(1) An application for permission to organize a de novo Federal savings association.
(2) An application to convert an existing insured depository institution
(other than a state-chartered savings association or a state-chartered
savings bank) or a credit union to a Federal savings association.
(3) An application to acquire control of a Federal savings association ...
sroberts on DSK5SPTVN1PROD with RULES
If you file . . .
You must meet with the OCC before filing your application. You must
submit a draft business plan before this meeting.
You must meet with the OCC before filing your application. The OCC
may require you to submit a draft business plan or other relevant information before this meeting.
The OCC may require you to meet with the OCC before filing your application and may require you to submit a draft business plan or
other relevant information before this meeting.
(b) Contacting the OCC. (1) You must
contact the appropriate OCC licensing
office a reasonable time before you file
an application described in paragraph
(a) of this section. Unless paragraph (a)
already requires a pre-filing meeting or
a draft business plan, the appropriate
OCC licensing office will determine
whether it will require a pre-filing
meeting, and whether you must submit
a business plan or other relevant
information before the meeting. The
appropriate OCC licensing office will
also establish a schedule for any
meeting and the submission of any
information.
(2) All other applicants are
encouraged to contact the appropriate
OCC licensing office to determine
whether a pre-filing meeting or the
submission of a draft business plan or
other relevant information would
expedite the application review process.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
§ 116.20 What information must I include
in my draft business plan?
If you must submit a draft business
plan under § 116.15, your plan must:
(a) Clearly and completely describe
the savings association’s projected
operations and activities;
(b) Describe the risks associated with
the transaction and the impact of this
transaction on any existing activities
and operations of the savings
association, including financial
projections for a minimum of three
years;
(c) Identify the majority of the
proposed board of directors and the key
senior executive officers (as defined in
§ 163.555 of this chapter) of the savings
association and demonstrate that these
individuals have the expertise to
prudently manage the activities and
operations described in the savings
association’s draft business plan; and
PO 00000
Frm 00025
Fmt 4701
Sfmt 4700
(d) Demonstrate how applicable
requirements regarding serving the
credit and lending needs in the market
areas served by the savings association
will be met.
Filing Procedures
§ 116.25
file?
What type of application must I
(a) Expedited treatment. If you are
eligible for expedited treatment under
§ 116.5, you may file your application in
the form of a notice that includes all
information required by the applicable
substantive regulation. If the OCC has
designated a form for your notice, you
must file that form. Your notice is an
application for the purposes of all
statutory and regulatory references to
‘‘applications.’’
(b) Standard treatment. If you are
subject to standard treatment under
§ 116.5, you must file your application
following all applicable substantive
E:\FR\FM\09AUR2.SGM
09AUR2
48974
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
regulations and guidelines governing
the filing of applications. If the OCC has
a designated form for your application,
you must file that form.
(c) Waiver requests. If you want the
OCC to waive a requirement that you
provide certain information with the
notice or application, you must include
a written waiver request:
(1) Describing the requirement to be
waived and
(2) Explaining why the information is
not needed to enable the OCC to
evaluate your notice or application
under applicable standards.
§ 116.30 What information must I provide
with my application?
(a) Required information. You may
obtain information about required
certifications, other regulations and
guidelines affecting particular notices
and applications, appropriate forms,
and instructions from any OCC office.
You may also obtain forms and
instructions on the OCC’s web page at
www.occ.gov.
(b) Captions and exhibits. You must
caption the original application and
required copies with the type of filing,
and must include all exhibits and other
pertinent documents with the original
application and all required copies. You
are not required to include original
signatures on copies if you include a
copy of the signed signature page or the
copy otherwise indicates that the
original was signed.
sroberts on DSK5SPTVN1PROD with RULES
§ 116.35 May I keep portions of my
application confidential?
(a) Confidentiality. The OCC makes
submissions under this part available to
the public, but may keep portions of
your application confidential based on
the rules in this section.
(b) Confidentiality request. (1) You
may request the OCC to keep portions
of your application confidential. You
must submit your request in writing
with your application and must explain
in detail how your request is consistent
with the standards under the Freedom
of Information Act (5 U.S.C. 552) and
part 4 of this chapter. For example, you
should explain how you will be
substantially harmed by public
disclosure of the information. You must
separately bind and mark the portions of
the application you consider
confidential and the portions you
consider non-confidential.
(2) The OCC will not treat as
confidential the portion of your
application describing how you plan to
meet your Community Reinvestment
Act (CRA) objectives. The OCC will
make information in your CRA plan,
including any information incorporated
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
by reference from other parts of your
application, available to the public upon
request.
(c) OCC determination on
confidentiality. The OCC will determine
whether information that you designate
as confidential may be withheld from
the public under the Freedom of
Information Act (5 U.S.C. 552) and part
54 of this chapter. The OCC will advise
you before it makes information you
designate as confidential available to the
public.
§ 116.40
Where do I file my application?
(a) OCC Office. (1) You must file the
original application and the number of
copies indicated on the applicable form
to the attention of the Director for
Licensing at the appropriate OCC
licensing office listed in paragraph (a)(2)
of this section or with the OCC licensing
office at OCC headquarters. If the form
does not indicate the number of copies
you must file or if the OCC has not
prescribed a form for your application,
you must file the original application
and two copies.
(2) The addresses of appropriate OCC
licensing offices and the states covered
by each office are listed in 12 CFR 4.5.
(b) Additional filings with OCC
headquarters. (1) In addition to filing in
the appropriate OCC licensing office, if
your application involves a significant
issue of law or policy or if an applicable
regulation or form directs you to file
with OCC headquarters, you must also
file copies of your application at the
OCC licensing office at headquarters.
You must file the number of copies
indicated on the applicable form. If the
form does not indicate the number of
copies you must file or if the OCC has
not prescribed a form for your
application, you must file three copies.
(2)(i) You may obtain a list of
applications involving significant issues
of law or policy at the OCC website at
www.occ.gov or by contacting the OCC.
(ii) The OCC reserves the right to
identify significant issues of law or
policy in a particular application. The
OCC will advise you, in writing, if it
makes this determination.
§ 116.45 What is the filing date of my
application?
(a) Your application’s filing date is the
date that you complete all of the
following requirements.
(1) You attend a pre-filing meeting
and submit a draft business plan or
relevant information, if the OCC
requires you to do so under § 116.15.
(2) You file your application and all
required copies with the OCC, as
described under § 116.40.
(i) If you are required to file with an
OCC licensing office and with OCC
PO 00000
Frm 00026
Fmt 4701
Sfmt 4700
headquarters, you have not filed with
the OCC until you file with both offices.
(ii) You have not filed with an OCC
licensing office or with OCC
headquarters until you file the
application and the required number of
copies with that office.
(iii) If you file after the close of
business established by an OCC
licensing office or OCC headquarters,
you have filed with that office on the
next business day.
(3) You pay the applicable fee. You
have not paid the fee until you submit
the fee to the appropriate OCC licensing
office, or the OCC waives the fee. You
may pay by check, money order,
cashier’s check or wire transfer payable
to the OCC.
(b) The OCC may notify you that it
has adjusted your application filing date
if you fail to meet any applicable
publication requirements.
(c) If, after you properly file your
application with the appropriate OCC
licensing office, the OCC determines
that a significant issue of law or policy
exists under § 116.40(b)(2)(ii), the filing
date of your application is the day you
filed with the appropriate OCC licensing
office. The 30-day review period under
§§ 116.200 or 116.210 of this part will
restart in its entirety when the OCC
licensing office forwards the appropriate
number of copies of your application to
OCC headquarters.
§ 116.47 How do I amend or supplement
my application?
To amend or supplement your
application, you must file the
amendment or supplemental
information at the appropriate OCC
office(s) along with the number of
copies required under § 116.40. Your
amendment or supplemental
information also must meet the caption
and exhibit requirements at § 116.30(b).
Subpart B—Publication Requirements
§ 116.50 Who must publish a public notice
of an application?
This subpart applies whenever an
OCC regulation requires an applicant
(‘‘you’’) to follow the public notice
procedures in this subpart.
§ 116.55 What information must I include
in my public notice?
Your public notice must include the
following:
(a) Your name and address.
(b) The type of application.
(c) The name of the depository
institution(s) that is the subject matter of
the application.
(d) A statement indicating that the
public may submit comments to the
appropriate OCC licensing office(s).
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(e) The address of the appropriate
OCC offices where the public may
submit comments.
(f) The date that the comment period
closes.
(g) A statement indicating that the
nonconfidential portions of the
application are on file with the OCC,
and are available for public inspection
during regular business hours.
(h) Any other information that the
OCC requires you to publish.
§ 116.60
notice?
When must I publish the public
You must publish a public notice of
the application no earlier than seven
days before and no later than the date
of filing of the application.
§ 116.70
notice?
Where must I publish the public
You must publish the notice in a
newspaper having a general circulation
in the communities indicated in the
following chart:
If you file . . .
You must publish in the following communities . . .
(a) An application for permission to organize under § 143.2 of this
chapter, a Bank Merger Act application under § 163.22(a) of this
chapter, an application to convert to a Federal charter under § 143.8
or § 152.18 of this chapter, or an application for a mutual to stock
conversion under part 192 of this chapter * * *.
(b) An application to establish a branch office under § 145.95 of this
chapter * * *.
(c) An application for the change of permanent location of a home or
branch office under § 145.95 of this chapter * * *.
(d) A change of control notice under part 174 of this chapter * * *
The community in which your home office is located.
§ 116.80 What language must I use in my
publication?
(a) English. You must publish the
notice in a newspaper printed in the
English language.
(b) Other than English. If the OCC
determines that the primary language of
a significant number of adult residents
of the community is a language other
than English, the OCC may require that
you simultaneously publish additional
notice(s) in the community in the
appropriate language(s).
§ 116.100
What does this subpart do?
This subpart contains the procedures
governing the submission of public
comments on certain types of
applications or notices (‘‘applications’’)
pending before the OCC. It applies
whenever a regulation incorporates the
procedures in this subpart, or where
otherwise required by the OCC.
§ 116.110 Who may submit a written
comment?
Any person may submit a written
comment supporting or opposing an
application.
§ 116.120 What information should a
comment include?
(a) A comment should recite relevant
facts, including any demographic,
economic, or financial data, supporting
the commenter’s position. A comment
opposing an application should also:
(1) Address at least one of the reasons
why the OCC may deny the application
under the relevant statute or regulation;
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
The community to be served by the branch office.
The community in which the existing office is located and the community to be served by the new office.
The community in which the home office of the savings association
whose stock is to be acquired is located and, if applicable, the community in which the home office of the acquiror’s largest subsidiary
savings association is located.
(2) Recite any relevant facts and
supporting data addressing these
reasons; and
(3) Address how the approval of the
application could harm the commenter
or any community.
(b) A commenter must include any
request for a meeting under § 116.170 in
its comment. The commenter must
describe the nature of the issues or facts
to be discussed and the reasons why
written submissions are insufficient to
adequately address these facts or issues.
§ 116.130
Subpart C—Comment Procedures
sroberts on DSK5SPTVN1PROD with RULES
48975
Where are comments filed?
A commenter must file with the
appropriate OCC licensing office (see
§ 116.40(a)(2)). The commenter must
simultaneously send a copy of the
comment to the applicant.
§ 116.140
period?
How long is the comment
(a) General. Except as provided in
paragraph (b) of this section, a
commenter must file a written comment
with the OCC within 30 calendar days
after the date of publication of the initial
public notice.
(b) Late-filed comments. The OCC
may consider late-filed comments if the
OCC determines that the comment will
assist in the disposition of the
application.
Subpart D—Meeting Procedures
§ 116.160
What does this subpart do?
This subpart contains meeting
procedures. It applies whenever a
regulation incorporates the procedures
in this subpart, or when otherwise
required by the OCC.
PO 00000
Frm 00027
Fmt 4701
Sfmt 4700
§ 116.170 When will the OCC conduct a
meeting on an application?
(a) The OCC will grant a meeting
request or conduct a meeting on its own
initiative, if it finds that written
submissions are insufficient to address
facts or issues raised in an application,
or otherwise determines that a meeting
will benefit the decision-making
process. The OCC may limit the issues
considered at the meeting to issues that
the OCC decides are relevant or
material.
(b) The OCC will inform the applicant
and all commenters requesting a
meeting of its decision to grant or deny
a meeting request, or of its decision to
conduct a meeting on its own initiative.
(c) If the OCC decides to conduct a
meeting, the OCC will invite the
applicant and any commenters
requesting a meeting and raising an
issue that the OCC intends to consider
at the meeting. The OCC may also invite
other interested persons to attend. The
OCC will inform the participants of the
date, time, location, issues to be
considered, and format for the meeting
a reasonable time before the meeting.
§ 116.180 What procedures govern the
conduct of the meeting?
(a) The OCC may conduct meetings in
any format including, but not limited to,
a telephone conference, a face-to-face
meeting, or a more formal meeting.
(b) The Administrative Procedure Act
(5 U.S.C. 551 et seq.), the Federal Rules
of Evidence (28 U.S.C. Appendix), the
Federal Rules of Civil Procedure (28
U.S.C. Rule 1 et seq.), the OCC Rules of
Practice and Procedure in Adjudicatory
Proceedings (12 CFR parts 19 and part
E:\FR\FM\09AUR2.SGM
09AUR2
48976
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
109) do not apply to meetings under this
section.
§ 116.185 Will the OCC approve or
disapprove an application at a meeting?
The OCC will not approve or deny an
application at a meeting under this
subpart.
§ 116.190 Will a meeting affect application
processing time frames?
If the OCC decides to conduct a
meeting, it may suspend applicable
application processing time frames,
including the time frames for deeming
an application complete and the
applicable approval time frames in
subpart E of this part. If the OCC
suspends applicable application
processing time frames, the time period
will resume when the OCC determines
that a record has been developed that
sufficiently supports a determination on
the issues considered at the meeting.
Subpart E—OCC Review
Expedited Treatment
§ 116.200 If I file a notice under expedited
treatment, when may I engage in the
proposed activities?
If you are eligible for expedited
treatment and you have appropriately
filed your notice with the OCC, you may
engage in the proposed activities upon
the expiration of 30 days after the filing
date of your notice, unless the OCC
takes one of the following actions before
the expiration of that time period:
(a) The OCC notifies you in writing
that you must file additional
information supplementing your notice.
If you are required to file additional
information, you may engage in the
proposed activities upon the expiration
of 30 calendar days after the date you
file the additional information, unless
the OCC takes one of the actions
described in paragraphs (b) through (d)
of this section before the expiration of
that time period;
(b) The OCC notifies you in writing
that your notice is subject to standard
treatment under this subpart. The OCC
will subject your notice to standard
treatment if it raises a supervisory
concern, raises a significant issue of law
or policy, or requires significant
additional information;
(c) The OCC notifies you in writing
that it is suspending the applicable time
frames under § 116.190; or
(d) The OCC notifies you that it
disapproves your notice.
Standard Treatment
§ 116.210 What will the OCC do after I file
my application?
(a) OCC action. Within 30 calendar
days after the filing date of your
application, the OCC will take one of
the following actions:
If the OCC . . .
Then . . .
(1) Notifies you, in writing, that your application is complete * * *
The applicable review period will begin on the date that the OCC
deems your application complete.
You must submit the required additional information under § 116.220.
(2) Notifies you, in writing, that you must submit additional information
to complete your application * * *.
(3) Notifies you, in writing, that your application is materially deficient
* * *.
(4) Takes no action * * *
(b) Waiver requests. If your
application includes a request for
waiver of an information requirement
under § 116.25(b), and the OCC has not
notified you that you must submit
additional information under paragraph
The OCC will not process your application.
Your application is deemed complete. The applicable review period will
begin on the day the 30-day time period expires.
(a)(2) of this section, your request for
waiver is granted.
§ 116.220 If the OCC requests additional
information to complete my application,
how will it process my application?
(a) You may use the following chart
to determine the procedure that applies
to your submission of additional
information under § 116.210(a)(1):
Then, the OCC may . . .
And . . .
(1) You file a response to all information requests * * *.
sroberts on DSK5SPTVN1PROD with RULES
If, within 30 calendar days after the date of the
OCC’s request for additional information . . .
(i) Notify you in writing within 15 days after
the filing date of your response that your
application is complete* * *.
(ii) Notify you in writing within 15 calendar
days after the filing date of your response
that you must submit additional information
regarding matters derived from or prompted
by information already furnished or any additional information necessary to resolve the
issues presented in your application * * *.
(iii) Notify you in writing within 15 calendar
days after the filing date of your response
that your application is materially deficient
* * *.
(iv) Take no action within 15 calendar days
after the filing date of your response * * *.
The applicable review period will begin on the
date that the OCC deems your application
complete.
You must respond to the additional information request within the time period required
by the OCC. The OCC will review your response under the procedures described in
this section.
(2) You request an extension of time to file additional information * * *.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(i) Grant an extension, in writing, specifying
the number of days for the extension * * *.
PO 00000
Frm 00028
Fmt 4701
Sfmt 4700
The OCC will not process your application.
Your application is deemed complete. The applicable review period will begin on the day
that the 15-day time period expires.
You must fully respond within the extended
time period specified by the OCC. The
OCC will review your response under the
procedures described under this section.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
If, within 30 calendar days after the date of the
OCC’s request for additional information . . .
48977
And . . .
(ii) Notify you in writing that your extension request is disapproved * * *.
(3) You fail to respond completely * * *
Then, the OCC may . . .
The OCC will not process your application further. You may resubmit the application for
processing as a new filing under the applicable regulation.
The OCC will not process your application further. You may resubmit the application for
processing as a new filing under the applicable regulation.
You must fully respond within the extended
time period specified by the OCC. The
OCC will review your response under the
procedures described under this section.
(i) Notify you in writing that your application is
deemed withdrawn * * *.
(ii) Notify you, in writing, that your response is
incomplete and extend the response period,
specifying the number of days for the respond extension * * *.
(b) The OCC may extend the 15-day
period referenced in paragraph (a)(1) of
this section by up to 15 calendar days,
if the OCC requires the additional time
to review your response. The OCC will
notify you that it has extended the
period before the end of the initial 15day period and will briefly explain why
the extension is necessary.
(c) If your response filed under
paragraph (a)(1) of this section includes
a request for a waiver of an
informational requirement, your request
for a waiver is granted if the OCC fails
to act on it within 15 calendar days after
the filing of your response, unless the
OCC extends the review period under
paragraph (b). If the OCC extends the
review period under paragraph (b), your
request is granted if the OCC fails to act
on it by the end of the extended review
period.
§ 116.230 Will the OCC conduct an
eligibility examination?
sroberts on DSK5SPTVN1PROD with RULES
(a) Eligibility examination. The OCC
may notify you at any time before it
deems your application complete that it
will conduct an eligibility examination.
If the OCC decides to conduct an
eligibility examination, it will not deem
your application complete until it
concludes the examination.
(b) Additional information. The OCC
may, as a result of the eligibility
examination, notify you that you must
submit additional information to
complete your application. If so, you
must respond to the additional
information request within the time
period required by the OCC. The OCC
will review your response under the
procedures described in § 116.220.
§ 116.240 What may the OCC require me to
do after my application is deemed
complete?
After your application is deemed
complete, but before the end of the
applicable review period,
(a) The OCC may require you to
provide additional information if the
information is necessary to resolve or
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
clarify the issues presented by your
application.
(b) The OCC may determine that a
major issue of law or a change in
circumstances arose after you filed your
application, and that the issue or
changed circumstances will
substantially effect your application. If
the OCC identifies such an issue or
changed circumstances, it may:
(1) Notify you, in writing, that your
application is now incomplete and
require you to submit additional
information to complete the application
under the procedures described at
§ 116.220; and
(2) Require you to publish a new
public notice of your application under
§ 116.250.
§ 116.250 Will the OCC require me to
publish a new public notice?
(a) If your application was subject to
a publication requirement, the OCC may
require you to publish a new public
notice of your application if:
(1) You submitted a revision to the
application, you submitted new or
additional information, or a major issue
of law or a change in circumstances
arose after the filing of your application;
and
(2) The OCC determines that
additional comment on these matters is
appropriate because of the significance
of the new information or
circumstances.
(b) The OCC will notify you in writing
if you must publish a new public notice
of your revised application.
(c) If you are required to publish a
new public notice of your revised
application, you must notify the OCC
after you publish the new public notice.
§ 116.260 May the OCC suspend
processing of my application?
(a) Suspension. The OCC may, at any
time, indefinitely suspend processing of
your application if:
(1) The OCC, another governmental
entity, or a self-regulatory trade or
professional organization initiates an
PO 00000
Frm 00029
Fmt 4701
Sfmt 4700
investigation, examination, or
administrative proceeding that is
relevant to the OCC’s evaluation of your
application;
(2) You request the suspension or
there are other extraordinary
circumstances that have a significant
impact on the processing of your
application.
(b) Notice. The OCC will promptly
notify you, in writing, if it suspends
your application.
§ 116.270
period?
How long is the OCC review
(a) General. The applicable OCC
review period is 60 calendar days after
the date that your application is deemed
complete, unless an applicable OCC
regulation specifies a different review
period.
(b) Multiple applications. If you
submit more than one application in
connection with a proposed action or if
two or more applicants submit related
applications, the applicable review
period for all applications is the review
period for the application with the
longest review period, subject to
statutory review periods.
(c) Extensions. (1) The OCC may
extend the review period for up to 30
calendar days beyond the period
described in paragraph (a) or (b) of this
section. The OCC must notify you in
writing of the extension and the
duration of the extension. The OCC
must issue the written extension before
the end of the review period.
(2) The OCC may also extend the
review period as needed until it acts on
the application, if the application
presents a significant issue of law or
policy that requires additional time to
resolve. The OCC must notify you in
writing of the extension and the general
reasons for the extension. The OCC
must issue the written extension before
the end of the review period, including
any extension of that period under
paragraph (c)(1) of this section. This
section applies to notices filed under
§ 174 of this chapter.
E:\FR\FM\09AUR2.SGM
09AUR2
48978
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 116.290 What will happen if the OCC
does not approve or disapprove my
application within two calendar years after
the filing date?
If the OCC has not approved or denied
your pending application within two
calendar years after the filing date under
§ 116.45, the OCC will notify you, in
writing, that your application is deemed
withdrawn unless the OCC determines
that you are actively pursuing a final
OCC determination on your application.
You are not actively pursuing a final
OCC determination if you have failed to
timely take an action required under
this part, including filing required
additional information, or the OCC has
suspended processing of your
application under § 116.260 based on
circumstances that are, in whole or in
part, within your control and you have
failed to take reasonable steps to resolve
these circumstances.
PART 128—NONDISCRIMINATION
REQUIREMENTS
Sec.
128.1 Definitions.
128.2 Nondiscrimination in lending and
other services.
128.3 Nondiscrimination in applications.
128.4 Nondiscriminatory advertising.
128.5 Equal Housing Lender Poster.
128.6 Loan application register.
128.7 Nondiscrimination in employment.
128.8 Complaints.
128.9 Guidelines relating to
nondiscrimination in lending.
128.10 Supplementary guidelines.
128.11 Nondiscriminatory appraisal and
underwriting.
Authority: 12 U.S.C. 1464, 5412(b)(2)(B).
sroberts on DSK5SPTVN1PROD with RULES
§ 128.1
Definitions.
As used in this part 128—
(a) Application. For purposes of this
part, an application for a loan or other
service is as defined in Regulation C, 12
CFR 203.2(b).
(b) Savings association. The term
‘‘savings association’’ means any
Federal savings association as defined
in 12 U.S.C. 1813(b)(2).
(c) Dwelling. The term ‘‘dwelling’’
means a residential structure (whether
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
§ 128.2 Nondiscrimination in lending and
other services.
(a) No savings association may deny
a loan or other service, or discriminate
in the purchase of loans or securities or
discriminate in fixing the amount,
interest rate, duration, application
procedures, collection or enforcement
procedures, or other terms or conditions
of such loan or other service on the
basis of the age or location of the
dwelling, or on the basis of the race,
color, religion, sex, handicap, familial
status (having one or more children
under the age of 18), marital status, age
(provided the person has the capacity to
contract) or national origin of:
(1) An applicant or joint applicant;
(2) Any person associated with an
applicant or joint applicant regarding
such loan or other service, or with the
purposes of such loan or other service;
(3) The present or prospective owners,
lessees, tenants, or occupants of the
dwelling(s) for which such loan or other
service is to be made or given;
(4) The present or prospective owners,
lessees, tenants, or occupants of other
dwellings in the vicinity of the
dwelling(s) for which such loan or other
service is to be made or given.
(b) A savings association shall
consider without prejudice the
combined income of joint applicants for
a loan or other service.
(c) No savings association may
discriminate against an applicant for a
loan or other service on any prohibited
basis (as defined in 12 CFR 202.2(z) and
24 CFR part 100).
Note to § 128.2: See also, § 128.9(b)
and (c).
§ 128.3
Nondiscrimination in applications.
(a) No savings association may
discourage, or refuse to allow, receive,
or consider, any application, request, or
inquiry regarding a loan or other
service, or discriminate in imposing
conditions upon, or in processing, any
such application, request, or inquiry on
the basis of the age or location of the
dwelling, or on the basis of the race,
color, religion, sex, handicap, familial
status (having one or more children
under the age of 18), marital status, age
(provided the person has the capacity to
contract), national origin, or other
characteristics prohibited from
consideration in § 128.2(c) of this part,
of the prospective borrower or other
person, who:
PO 00000
Frm 00030
Fmt 4701
Sfmt 4700
(1) Makes application for any such
loan or other service;
(2) Requests forms or papers to be
used to make application for any such
loan or other service; or
(3) Inquires about the availability of
such loan or other service.
(b) A savings association shall inform
each inquirer of his or her right to file
a written loan application, and to
receive a copy of the association’s
underwriting standards.
Note § 128.3: See also, § 128.9(a) through
(d).
§ 128.4
Nondiscriminatory advertising.
No savings association may directly or
indirectly engage in any form of
advertising that implies or suggests a
policy of discrimination or exclusion in
violation of title VIII of the Civil Rights
Acts of 1968, the Equal Credit
Opportunity Act, or this part 128.
Advertisements for any loan for the
purpose of purchasing, constructing,
improving, repairing, or maintaining a
dwelling or any loan secured by a
dwelling shall include a facsimile of the
following logotype and legend:
§ 128.5
Equal Housing Lender Poster.
(a) Each savings association shall post
and maintain one or more Equal
Housing Lender Posters, the text of
which is prescribed in paragraph (b) of
this section, in the lobby of each of its
offices in a prominent place or places
readily apparent to all persons seeking
loans. The poster shall be at least 11 by
14 inches in size, and the text shall be
easily legible. It is recommended that
savings associations post a Spanish
language version of the poster in offices
serving areas with a substantial
Spanish-speaking population.
(b) The text of the Equal Housing
Lender Poster shall be as follows:
We Do Business In Accordance With
Federal Fair Lending Laws.
E:\FR\FM\09AUR2.SGM
09AUR2
ER09AU11.001</GPH>
(a) OCC approval or denial. (1) The
OCC will approve or deny your
application before the expiration of the
applicable review period, including any
extensions of the review period.
(2) The OCC will promptly notify you
in writing of its decision to approve or
deny your application.
(b) No OCC action. If the OCC fails to
act under paragraph (a)(1) of this
section, your application is approved.
or not it is attached to real property)
located in a state of the United States of
America, the District of Columbia, or the
Commonwealth of Puerto Rico. The
term includes an individual
condominium unit, cooperative unit, or
mobile or manufactured home.
ER09AU11.000</GPH>
§ 116.280 How will I know if my application
has been approved?
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
UNDER THE FEDERAL FAIR
HOUSING ACT, IT IS ILLEGAL, ON
THE BASIS OF RACE, COLOR,
NATIONAL ORIGIN, RELIGION, SEX,
HANDICAP, OR FAMILIAL STATUS
(HAVING CHILDREN UNDER THE AGE
OF 18) TO:
[ll] Deny a loan for the purpose of
purchasing, constructing, improving,
repairing or maintaining a dwelling or
to deny any loan secured by a dwelling;
or
[ll] Discriminate in fixing the
amount, interest rate, duration,
application procedures, or other terms
or conditions of such a loan or in
appraising property.
IF YOU BELIEVE YOU HAVE BEEN
DISCRIMINATED AGAINST, YOU
SHOULD:
SEND A COMPLAINT TO:
Assistant Secretary for Fair Housing
and Equal Opportunity, Department of
Housing and Urban Development,
Washington, DC 20410.
For processing under the Federal Fair
Housing Act
AND TO:
[Insert contact information for
appropriate Federal regulator]
For processing under applicable
Regulations.
UNDER THE EQUAL CREDIT
OPPORTUNITY ACT, IT IS ILLEGAL
TO DISCRIMINATE IN ANY CREDIT
TRANSACTION:
[ ] On the basis of race, color,
national origin, religion, sex, marital
status, or age;
[ ] Because income is from public
assistance; or
[ ] Because a right has been
exercised under the Consumer Credit
Protection Act.
IF YOU BELIEVE YOU HAVE BEEN
DISCRIMINATED AGAINST, YOU
SHOULD SEND A COMPLAINT TO:
[Insert contact information for
appropriate Federal regulator]
§ 128.6
Loan application register.
Savings associations and other
lenders required to file Home Mortgage
Disclosure Act Loan Application
Registers with the OCC in accordance
with 12 CFR part 203 must enter the
reason for denial, using the codes
provided in 12 CFR part 203, with
respect to all loan denials.
sroberts on DSK5SPTVN1PROD with RULES
§ 128.7
Nondiscrimination in employment.
(a) No savings association shall,
because of an individual’s race, color,
religion, sex, or national origin:
(1) Fail or refuse to hire such
individual;
(2) Discharge such individual;
(3) Otherwise discriminate against
such individual with respect to such
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
individual’s compensation, promotion,
or the terms, conditions, or privileges of
such individual’s employment; or
(4) Discriminate in admission to, or
employment in, any program of
apprenticeship, training, or retraining,
including on-the-job training.
(b) No savings association shall limit,
segregate, or classify its employees in
any way which would deprive or tend
to deprive any individual of
employment opportunities or otherwise
adversely affect such individual’s status
as an employee because of such
individual’s race, color, religion, sex, or
national origin.
(c) No savings association shall
discriminate against any employee or
applicant for employment because such
employee or applicant has opposed any
employment practice made unlawful by
Federal, state, or local law or regulation
or because he has in good faith made a
charge of such practice or testified,
assisted, or participated in any manner
in an investigation, proceeding, or
hearing of such practice by any lawfully
constituted authority.
(d) No savings association shall print
or publish or cause to be printed or
published any notice or advertisement
relating to employment by such savings
association indicating any preference,
limitation, specification, or
discrimination based on race, color,
religion, sex, or national origin.
(e) This regulation shall not apply in
any case in which the Federal Equal
Employment Opportunities law is made
inapplicable by the provisions of section
2000e–1 or sections 2000e–2(e) through
(j) of title 42, United States Code.
(f) Any violation of the following laws
or regulations by a savings association
shall be deemed to be a violation of this
part 128:
(1) The Equal Employment
Opportunity Act, as amended, 42 U.S.C.
2000e–2000h–2, and Equal Employment
Opportunity Commission (EEOC)
regulations at 29 CFR part 1600;
(2) The Age Discrimination in
Employment Act, 29 U.S.C. 621–633,
and EEOC and Department of Labor
regulations;
(3) Office of Federal Contract
Compliance Programs (OFCCP)
regulations at 41 CFR part 60;
(4) The Veterans Employment and
Readjustment Act of 1972, 38 U.S.C.
2011–2012, and the Vietnam Era
Veterans Readjustment Adjustment
Assistance Act of 1974, 38 U.S.C. 2021–
2026;
(5) The Rehabilitation Act of 1973, 29
U.S.C. 701 et seq.; and
(6) The Immigration and Nationality
Act, 8 U.S.C. 1324b, and INS regulations
at 8 CFR part 274a.
PO 00000
Frm 00031
Fmt 4701
Sfmt 4700
§ 128.8
48979
Complaints.
Complaints alleging violations of the
Fair Housing Act by a savings
association shall be referred to the
Assistant Secretary for Fair Housing and
Equal Opportunity, U.S. Department of
Housing and Urban Development,
Washington, DC 20410 for processing
under the Fair Housing Act, and to the
appropriate Federal regulator for
processing under applicable regulations.
Complaints regarding discrimination in
employment by a savings association
should be referred to the Equal
Employment Opportunity Commission,
Washington, DC 20506 and a copy, for
information only, sent to the
appropriate Federal regulator.
§ 128.9 Guidelines relating to
nondiscrimination in lending.
(a) General. Fair housing and equal
opportunity in home financing is a
policy of the United States established
by Federal statutes and Presidential
orders and proclamations. In
furtherance of the Federal civil rights
laws and the economical home
financing purposes of the statutes
administered by the OCC, the OCC has
adopted, in part 128 of this chapter,
nondiscrimination regulations that,
among other things, prohibit arbitrary
refusals to consider loan applications on
the basis of the age or location of a
dwelling, and prohibit discrimination
based on race, color, religion, sex,
handicap, familial status (having one or
more children under the age of 18),
marital status, age (provided the person
has the capacity to contract), or national
origin in fixing the amount, interest rate,
duration, application procedures,
collection or enforcement procedures, or
other terms or conditions of housing
related loans. Such discrimination is
also prohibited in the purchase of loans
and securities. This section provides
supplementary guidelines to aid savings
associations in developing and
implementing nondiscriminatory
lending policies. Each savings
association should reexamine its
underwriting standards at least annually
in order to ensure equal opportunity.
(b) Loan underwriting standards. The
basic purpose of the nondiscrimination
regulations is to require that every
applicant be given an equal opportunity
to obtain a loan. Each loan applicant’s
creditworthiness should be evaluated on
an individual basis without reference to
presumed characteristics of a group. The
use of lending standards which have no
economic basis and which are
discriminatory in effect is a violation of
law even in the absence of an actual
intent to discriminate. However, a
standard which has a discriminatory
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
48980
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
effect is not necessarily improper if its
use achieves a genuine business need
which cannot be achieved by means
which are not discriminatory in effect or
less discriminatory in effect.
(c) Discriminatory practices—(1)
Discrimination on the basis of sex or
marital status. The Civil Rights Act of
1968 and the National Housing Act
prohibit discrimination in lending on
the basis of sex. The Equal Credit
Opportunity Act, in addition to this
prohibition, forbids discrimination on
the basis of marital status. Refusing to
lend to, requiring higher standards of
creditworthiness of, or imposing
different requirements on, members of
one sex or individuals of one marital
status, is discrimination based on sex or
marital status. Loan underwriting
decisions must be based on an
applicant’s credit history and present
and reasonably foreseeable economic
prospects, rather than on the basis of
assumptions regarding comparative
differences in creditworthiness between
married and unmarried individuals, or
between men and women.
(2) Discrimination on the basis of
language. Requiring fluency in the
English language as a prerequisite for
obtaining a loan may be a
discriminatory practice based on
national origin.
(3) Income of husbands and wives. A
practice of discounting all or part of
either spouse’s income where spouses
apply jointly is a violation of section
527 of the National Housing Act. As
with other income, when spouses apply
jointly for a loan, the determination as
to whether a spouse’s income qualifies
for credit purposes should depend upon
a reasonable evaluation of his or her
past, present, and reasonably
foreseeable economic circumstances.
Information relating to child-bearing
intentions of a couple or an individual
may not be requested.
(4) Supplementary income. Lending
standards which consider as effective
only the non-overtime income of the
primary wage-earner may result in
discrimination because they do not take
account of variations in employment
patterns among individuals and
families. The favored method of loan
underwriting reasonably evaluates the
credit worthiness of each applicant
based on a realistic appraisal of his or
her own past, present, and foreseeable
economic circumstances. The
determination as to whether primary
income or additional income qualifies
as effective for credit purposes should
depend upon whether such income may
reasonably be expected to continue
through the early period of the mortgage
risk. Automatically discounting other
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
income from bonuses, overtime, or parttime employment, will cause some
applicants to be denied financing
without a realistic analysis of their
credit worthiness. Since statistics show
that minority group members and lowand moderate-income families rely more
often on such supplemental income, the
practice may be racially discriminatory
in effect, as well as artificially restrictive
of opportunities for home financing.
(5) Applicant’s prior history. Loan
decisions should be based upon a
realistic evaluation of all pertinent
factors respecting an individual’s
creditworthiness, without giving undue
weight to any one factor. The savings
association should, among other things,
take into consideration that:
(i) In some instances, past credit
difficulties may have resulted from
discriminatory practices;
(ii) A policy favoring applicants who
previously owned homes may
perpetuate prior discrimination;
(iii) A current, stable earnings record
may be the most reliable indicator of
credit-worthiness, and entitled to more
weight than factors such as educational
level attained;
(iv) Job or residential changes may
indicate upward mobility; and
(v) Preferring applicants who have
done business with the lender can
perpetuate previous discriminatory
policies.
(6) Income level or racial composition
of area. Refusing to lend or lending on
less favorable terms in particular areas
because of their racial composition is
unlawful. Refusing to lend, or offering
less favorable terms (such as interest
rate, downpayment, or maturity) to
applicants because of the income level
in an area can discriminate against
minority group persons.
(7) Age and location factors. Sections
128.2, 128.11, and 128.3 of this chapter
prohibit loan denials based upon the age
or location of a dwelling. These
restrictions are intended to prohibit use
of unfounded or unsubstantiated
assumptions regarding the effect upon
loan risk of the age of a dwelling or the
physical or economic characteristics of
an area. Loan decisions should be based
on the present market value of the
property offered as security (including
consideration of specific improvements
to be made by the borrower) and the
likelihood that the property will retain
an adequate value over the term of the
loan. Specific factors which may
negatively affect its short-range future
value (up to 3–5 years) should be clearly
documented. Factors which in some
cases may cause the market value of a
property to decline are recent zoning
changes or a significant number of
PO 00000
Frm 00032
Fmt 4701
Sfmt 4700
abandoned homes in the immediate
vicinity of the property. However, not
all zoning changes will cause a decline
in property values, and proximity to
abandoned buildings may not affect the
market value of a property because of
rehabilitation programs or affirmative
lending programs, or because the cause
of abandonment is unrelated to high
risk. Proper underwriting considerations
include the condition and utility of the
improvements, and various physical
factors such as street conditions,
amenities such as parks and recreation
areas, availability of public utilities and
municipal services, and exposure to
flooding and land faults. However,
arbitrary decisions based on age or
location are prohibited, since many
older, soundly constructed homes
provide housing opportunities which
may be precluded by an arbitrary
lending policy.
(8) Fair Housing Act (title VIII, Civil
Rights Act of 1968, as amended).
Savings associations must comply with
all regulations promulgated by the
Department of Housing and Urban
Development to implement the Fair
Housing Act, found at 24 CFR parts 100
through 125, except that they shall use
the Equal Housing Lender logo and
poster prescribed by OCC regulations at
12 CFR 128.4 and 128.5 rather than the
Equal Housing Opportunity logo and
poster required by 24 CFR part 110.
(d) Marketing practices. Savings
associations should review their
advertising and marketing practices to
ensure that their services are available
without discrimination to the
community they serve. Discrimination
in lending is not limited to loan
decisions and underwriting standards; a
savings association does not meet its
obligations to the community or
implement its equal lending
responsibility if its marketing practices
and business relationships with
developers and real estate brokers
improperly restrict its clientele to
segments of the community. A review of
marketing practices could begin with an
examination of an association’s loan
portfolio and applications to ascertain
whether, in view of the demographic
characteristics and credit demands of
the community in which the institution
is located, it is adequately serving the
community on a nondiscriminatory
basis. The OCC will systematically
review marketing practices where
evidence of discrimination in lending is
discovered.
§ 128.10
Supplementary guidelines.
The policy statement found at 12 CFR
128.9 supplements this part and should
be read together with this part. Refer
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
also to the HUD Fair Housing
regulations at 24 CFR parts 100 through
125, Federal Reserve Regulation B at 12
CFR part 202, and Federal Reserve
Regulation C at 12 CFR part 203.
§ 128.11 Nondiscriminatory appraisal and
underwriting.
(a) Appraisal. No savings association
may use or rely upon an appraisal of a
dwelling which the savings association
knows, or reasonably should know, is
discriminatory on the basis of the age or
location of the dwelling, or is
discriminatory per se or in effect under
the Fair Housing Act of 1968 or the
Equal Credit Opportunity Act.
(b) Underwriting. Each savings
association shall have clearly written,
non-discriminatory loan underwriting
standards, available to the public upon
request, at each of its offices. Each
association shall, at least annually,
review its standards, and business
practices implementing them, to ensure
equal opportunity in lending.
Note to § 128.11: See also, § 128.9(b), (c)(6),
and (c)(7).
PART 133—DISCLOSURE AND
REPORTING OF CRA-RELATED
AGREEMENTS
Sec.
133.1 Purpose and scope of this part.
133.2 Definition of covered agreement.
133.3 CRA communications.
133.4 Fulfillment of the CRA.
133.5 Related agreements considered a
single agreement.
133.6 Disclosure of covered agreements.
133.7 Annual reports.
133.8 Release of information under FOIA.
133.9 Compliance provisions.
133.10 [Reserved]
133.11 Other definitions and rules of
construction used in this part.
Authority: 12 U.S.C. 1462a, 1463, 1464,
1831y and 5412(b)(2)(B).
sroberts on DSK5SPTVN1PROD with RULES
§ 133.1
Purpose and scope of this part.
(a) General. This part implements
section 711 of the Gramm-Leach-Bliley
Act (12 U.S.C. 1831y). That section
requires any nongovernmental entity or
person (NGEP), insured depository
institution, or affiliate of an insured
depository institution that enters into a
covered agreement to—
(1) Make the covered agreement
available to the public and the
appropriate Federal banking agency;
and
(2) File an annual report with the
appropriate Federal banking agency
concerning the covered agreement.
(b) Scope of this part. The provisions
of this part apply to—
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(1) Federal savings associations and
their subsidiaries;
(2) [Reserved]
(3) Affiliates of Federal savings
associations; and
(4) NGEPs that enter into covered
agreements with any company listed in
paragraphs (b)(1) and (b)(2) of this
section.
(c) Relation to Community
Reinvestment Act. This part does not
affect in any way the Community
Reinvestment Act of 1977 (CRA) (12
U.S.C. 2901 et seq.), the OCC’s
Community Reinvestment rule at 12
CFR part 195, or the OCC’s
interpretations or administration of the
CRA or Community Reinvestment rule.
(d) Examples. (1) The examples in this
part are not exclusive. Compliance with
an example, to the extent applicable,
constitutes compliance with this part.
(2) Examples in a paragraph illustrate
only the issue described in the
paragraph and do not illustrate any
other issues that may arise in this part.
§ 133.2
Definition of covered agreement.
(a) General definition of covered
agreement. A covered agreement is any
contract, arrangement, or understanding
that meets all of the following criteria—
(1) The agreement is in writing.
(2) The parties to the agreement
include—
(i) One or more insured depository
institutions or affiliates of an insured
depository institution; and
(ii) One or more NGEPs.
(3) The agreement provides for the
insured depository institution or any
affiliate to—
(i) Provide to one or more individuals
or entities (whether or not parties to the
agreement) cash payments, grants, or
other consideration (except loans) that
have an aggregate value of more than
$10,000 in any calendar year; or
(ii) Make to one or more individuals
or entities (whether or not parties to the
agreement) loans that have an aggregate
principal amount of more than $50,000
in any calendar year.
(4) The agreement is made pursuant
to, or in connection with, the fulfillment
of the CRA, as defined in § 133.4 of this
part.
(5) The agreement is with a NGEP that
has had a CRA communication as
described in § 133.3 of this part prior to
entering into the agreement.
(b) Examples concerning written
arrangements or understandings—(1)
Example 1. A NGEP meets with an
insured depository institution and states
that the institution needs to make more
community development investments in
the NGEP’s community. The NGEP and
insured depository institution do not
PO 00000
Frm 00033
Fmt 4701
Sfmt 4700
48981
reach an agreement concerning the
community development investments
the institution should make in the
community, and the parties do not reach
any mutual arrangement or
understanding. Two weeks later, the
institution unilaterally issues a press
release announcing that it has
established a general goal of making
$100 million of community
development grants in low- and
moderate-income neighborhoods served
by the insured depository institution
over the next 5 years. The NGEP is not
identified in the press release. The press
release is not a written arrangement or
understanding.
(2) Example 2. A NGEP meets with an
insured depository institution and states
that the institution needs to offer new
loan programs in the NGEP’s
community. The NGEP and the insured
depository institution reach a mutual
arrangement or understanding that the
institution will provide additional loans
in the NGEP’s community. The
institution tells the NGEP that it will
issue a press release announcing the
program. Later, the insured depository
institution issues a press release
announcing the loan program. The press
release incorporates the key terms of the
understanding reached between the
NGEP and the insured depository
institution. The written press release
reflects the mutual arrangement or
understanding of the NGEP and the
insured depository institution and is,
therefore, a written arrangement or
understanding.
(3) Example 3. An NGEP sends a letter
to an insured depository institution
requesting that the institution provide a
$15,000 grant to the NGEP. The insured
depository institution responds in
writing and agrees to provide the grant
in connection with its annual grant
program. The exchange of letters
constitutes a written arrangement or
understanding.
(c) Loan agreements that are not
covered agreements. A covered
agreement does not include—
(1) Any individual loan that is
secured by real estate; or
(2) Any specific contract or
commitment for a loan or extension of
credit to an individual, business, farm,
or other entity, or group of such
individuals or entities, if—
(i) The funds are loaned at rates that
are not substantially below market rates;
and
(ii) The loan application or other loan
documentation does not indicate that
the borrower intends or is authorized to
use the borrowed funds to make a loan
or extension of credit to one or more
third parties.
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
48982
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(d) Examples concerning loan
agreements—(1) Example 1. An insured
depository institution provides an
organization with a $1 million loan that
is documented in writing and is secured
by real estate owned or to-be-acquired
by the organization. The agreement is an
individual mortgage loan and is exempt
from coverage under paragraph (c)(1) of
this section, regardless of the interest
rate on the loan or whether the
organization intends or is authorized to
re-loan the funds to a third party.
(2) Example 2. An insured depository
institution commits to provide a
$500,000 line of credit to a small
business that is documented by a
written agreement. The loan is made at
rates that are within the range of rates
offered by the institution to similarly
situated small businesses in the market
and the loan documentation does not
indicate that the small business intends
or is authorized to re-lend the borrowed
funds. The agreement is exempt from
coverage under paragraph (c)(2) of this
section.
(3) Example 3. An insured depository
institution offers small business loans
that are guaranteed by the Small
Business Administration (SBA). A small
business obtains a $75,000 loan,
documented in writing, from the
institution under the institution’s SBA
loan program. The loan documentation
does not indicate that the borrower
intends or is authorized to re-lend the
funds. Although the rate charged on the
loan is well below that charged by the
institution on commercial loans, the rate
is within the range of rates that the
institution would charge a similarly
situated small business for a similar
loan under the SBA loan program.
Accordingly, the loan is not made at
substantially below market rates and is
exempt from coverage under paragraph
(c)(2) of this section.
(4) Example 4. A bank holding
company enters into a written
agreement with a community
development organization that provides
that insured depository institutions
owned by the bank holding company
will make $250 million in small
business loans in the community over
the next 5 years. The written agreement
is not a specific contract or commitment
for a loan or an extension of credit and,
thus, is not exempt from coverage under
paragraph (c)(2) of this section. Each
small business loan made by the insured
depository institution pursuant to this
general commitment would, however,
be exempt from coverage if the loan is
made at rates that are not substantially
below market rates and the loan
documentation does not indicate that
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
the borrower intended or was
authorized to re-lend the funds.
(e) Agreements that include exempt
loan agreements. If an agreement
includes a loan, extension of credit or
loan commitment that, if documented
separately, would be exempt under
paragraph (c) of this section, the exempt
loan, extension of credit or loan
commitment may be excluded for
purposes of determining whether the
agreement is a covered agreement.
(f) Determining annual value of
agreements that lack schedule of
disbursements. For purposes of
paragraph (a)(3) of this section, a multiyear agreement that does not include a
schedule for the disbursement of
payments, grants, loans or other
consideration by the insured depository
institution or affiliate, is considered to
have a value in the first year of the
agreement equal to all payments, grants,
loans and other consideration to be
provided at any time under the
agreement.
§ 133.3
CRA communications.
(a) Definition of CRA communication.
A CRA communication is any of the
following—
(1) Any written or oral comment or
testimony provided to a Federal banking
agency concerning the adequacy of the
performance under the CRA of the
insured depository institution, any
affiliated insured depository institution,
or any CRA affiliate.
(2) Any written comment submitted to
the insured depository institution that
discusses the adequacy of the
performance under the CRA of the
institution and must be included in the
institution’s CRA public file.
(3) Any discussion or other contact
with the insured depository institution
or any affiliate about—
(i) Providing (or refraining from
providing) written or oral comments or
testimony to any Federal banking
agency concerning the adequacy of the
performance under the CRA of the
insured depository institution, any
affiliated insured depository institution,
or any CRA affiliate;
(ii) Providing (or refraining from
providing) written comments to the
insured depository institution that
concern the adequacy of the
institution’s performance under the
CRA and must be included in the
institution’s CRA public file; or
(iii) The adequacy of the performance
under the CRA of the insured depository
institution, any affiliated insured
depository institution, or any CRA
affiliate.
(b) Discussions or contacts that are
not CRA communications—(1) Timing
PO 00000
Frm 00034
Fmt 4701
Sfmt 4700
of contacts with a Federal banking
agency. An oral or written
communication with a Federal banking
agency is not a CRA communication if
it occurred more than 3 years before the
parties entered into the agreement.
(2) Timing of contacts with insured
depository institutions and affiliates. A
communication with an insured
depository institution or affiliate is not
a CRA communication if the
communication occurred—
(i) More than 3 years before the
parties entered into the agreement, in
the case of any written communication;
(ii) More than 3 years before the
parties entered into the agreement, in
the case of any oral communication in
which the NGEP discusses providing (or
refraining from providing) comments or
testimony to a Federal banking agency
or written comments that must be
included in the institution’s CRA public
file in connection with a request to, or
agreement by, the institution or affiliate
to take (or refrain from taking) any
action that is in fulfillment of the CRA;
or
(iii) More than 1 year before the
parties entered into the agreement, in
the case of any other oral
communication not described in
paragraph (b)(2)(ii).
(3) Knowledge of communication by
insured depository institution or
affiliate. (i) A communication is only a
CRA communication under paragraph
(a) of this section if the insured
depository institution or its affiliate has
knowledge of the communication under
paragraph (b)(3)(ii) or (b)(3)(iii) of this
section.
(ii) Communication with insured
depository institution or affiliate. An
insured depository institution or
affiliate has knowledge of a
communication by the NGEP to the
institution or its affiliate under this
paragraph only if one of the following
representatives of the insured
depository institution or any affiliate
has knowledge of the communication—
(A) An employee who approves,
directs, authorizes, or negotiates the
agreement with the NGEP; or
(B) An employee designated with
responsibility for compliance with the
CRA or executive officer if the employee
or executive officer knows that the
institution or affiliate is negotiating,
intends to negotiate, or has been
informed by the NGEP that it expects to
request that the institution or affiliate
negotiate an agreement with the NGEP.
(iii) Other communications. An
insured depository institution or
affiliate is deemed to have knowledge
of—
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(A) Any testimony provided to a
Federal banking agency at a public
meeting or hearing;
(B) Any comment submitted to a
Federal banking agency that is conveyed
in writing by the agency to the insured
depository institution or affiliate; and
(C) Any written comment submitted
to the insured depository institution
that must be and is included in the
institution’s CRA public file.
(4) Communication where NGEP has
knowledge. A NGEP has a CRA
communication with an insured
depository institution or affiliate only if
any of the following individuals has
knowledge of the communication—
(i) A director, employee, or member of
the NGEP who approves, directs,
authorizes, or negotiates the agreement
with the insured depository institution
or affiliate;
(ii) A person who functions as an
executive officer of the NGEP and who
knows that the NGEP is negotiating or
intends to negotiate an agreement with
the insured depository institution or
affiliate; or
(iii) Where the NGEP is an individual,
the NGEP.
(c) Examples of CRA
communications—(1) Examples of
actions that are CRA communications.
The following are examples of CRA
communications. These examples are
not exclusive and assume that the
communication occurs within the
relevant time period as described in
paragraph (b)(1) or (b)(2) of this section
and the appropriate representatives
have knowledge of the communication
as specified in paragraphs (b)(3) and
(b)(4) of this section.
(i) Example 1. A NGEP files a written
comment with a Federal banking agency
that states than an insured depository
institution successfully addresses the
credit needs of its community. The
written comment is in response to a
general request from the agency for
comments on an application of the
insured depository institution to open a
new branch and a copy of the comment
is provided to the institution.
(ii) Example 2. A NGEP meets with an
executive officer of an insured
depository institution and states that the
institution must improve its CRA
performance.
(iii) Example 3. A NGEP meets with
an executive officer of an insured
depository institution and states that the
institution needs to make more
mortgage loans in low- and moderateincome neighborhoods in its
community.
(iv) Example 4. A bank holding
company files an application with a
Federal banking agency to acquire an
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
insured depository institution. Two
weeks later, the NGEP meets with an
executive officer of the bank holding
company to discuss the adequacy of the
performance under the CRA of the target
insured depository institution. The
insured depository institution was an
affiliate of the bank holding company at
the time the NGEP met with the target
institution. (see § 133.11(a) of this part.)
Accordingly, the NGEP had a CRA
communication with an affiliate of the
bank holding company.
(2) Examples of actions that are not
CRA communications. The following
are examples of actions that are not by
themselves CRA communications.
These examples are not exclusive.
(i) Example 1. A NGEP provides to a
Federal banking agency comments or
testimony concerning an insured
depository institution or affiliate in
response to a direct request by the
agency for comments or testimony from
that NGEP. Direct requests for
comments or testimony do not include
a general invitation by a Federal
banking agency for comments or
testimony from the public in connection
with a CRA performance evaluation of,
or application for a deposit facility (as
defined in section 803 of the CRA (12
U.S.C. 2902(3)) by, an insured
depository institution or an application
by a company to acquire an insured
depository institution.
(ii) Example 2. A NGEP makes a
statement concerning an insured
depository institution or affiliate at a
widely attended conference or seminar
regarding a general topic. A public or
private meeting, public hearing, or other
meeting regarding one or more specific
institutions, affiliates or transactions
involving an application for a deposit
facility is not considered a widely
attended conference or seminar.
(iii) Example 3. A NGEP, such as a
civil rights group, community group
providing housing and other services in
low- and moderate-income
neighborhoods, veterans organization,
community theater group, or youth
organization, sends a fundraising letter
to insured depository institutions and to
other businesses in its community. The
letter encourages all businesses in the
community to meet their obligation to
assist in making the local community a
better place to live and work by
supporting the fundraising efforts of the
NGEP.
(iv) Example 4. A NGEP discusses
with an insured depository institution
or affiliate whether particular loans,
services, investments, community
development activities, or other
activities are generally eligible for
consideration by a Federal banking
PO 00000
Frm 00035
Fmt 4701
Sfmt 4700
48983
agency under the CRA. The NGEP and
insured depository institution or
affiliate do not discuss the adequacy of
the CRA performance of the insured
depository institution or affiliate.
(v) Example 5. A NGEP engaged in the
sale or purchase of loans in the
secondary market sends a general
offering circular to financial institutions
offering to sell or purchase a portfolio of
loans. An insured depository institution
that receives the offering circular
discusses with the NGEP the types of
loans included in the loan pool,
whether such loans are generally
eligible for consideration under the
CRA, and which loans are made to
borrowers in the institution’s local
community. The NGEP and insured
depository institution do not discuss the
adequacy of the institution’s CRA
performance.
(d) Multiparty covered agreements. (1)
A NGEP that is a party to a covered
agreement that involves multiple NGEPs
is not required to comply with the
requirements of this part if—
(i) The NGEP has not had a CRA
communication; and
(ii) No representative of the NGEP
identified in paragraph (b)(4) of this
section has knowledge at the time of the
agreement that another NGEP that is a
party to the agreement has had a CRA
communication.
(2) An insured depository institution
or affiliate that is a party to a covered
agreement that involves multiple
insured depository institutions or
affiliates is not required to comply with
the requirements in §§ 133.6 and 133.7
if—
(i) No NGEP that is a party to the
agreement has had a CRA
communication concerning the insured
depository institution or any affiliate;
and
(ii) No representative of the insured
depository institution or any affiliate
identified in paragraph (b)(3) of this
section has knowledge at the time of the
agreement that an NGEP that is a party
to the agreement has had a CRA
communication concerning any other
insured depository institution or
affiliate that is a party to the agreement.
§ 133.4
Fulfillment of the CRA.
(a) List of factors that are in
fulfillment of the CRA. Fulfillment of
the CRA, for purposes of this part,
means the following list of factors—
(1) Comments to a Federal banking
agency or included in CRA public file.
Providing or refraining from providing
written or oral comments or testimony
to any Federal banking agency
concerning the performance under the
CRA of an insured depository
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
48984
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
institution or CRA affiliate that is a
party to the agreement or an affiliate of
a party to the agreement or written
comments that are required to be
included in the CRA public file of any
such insured depository institution; or
(2) Activities given favorable CRA
consideration. Performing any of the
following activities if the activity is of
the type that is likely to receive
favorable consideration by a Federal
banking agency in evaluating the
performance under the CRA of the
insured depository institution that is a
party to the agreement or an affiliate of
a party to the agreement—
(i) Home-purchase, homeimprovement, small business, small
farm, community development, and
consumer lending, as described in
§ 195.22 of this chapter, including loan
purchases, loan commitments, and
letters of credit;
(ii) Making investments, deposits, or
grants, or acquiring membership shares,
that have as their primary purpose
community development, as described
in § 195.23 of this chapter;
(iii) Delivering retail banking services,
as described in § 195.24(d) of this
chapter;
(iv) Providing community
development services, as described in
§ 195.24(e) of this chapter;
(v) In the case of a wholesale or
limited-purpose insured depository
institution, community development
lending, including originating and
purchasing loans and making loan
commitments and letters of credit,
making qualified investments, or
providing community development
services, as described in § 195.25(c) of
this chapter;
(vi) In the case of a small insured
depository institution, any lending or
other activity described in § 195.26(a) of
this chapter; or
(vii) In the case of an insured
depository institution that is evaluated
on the basis of a strategic plan, any
element of the strategic plan, as
described in § 195.27(f) of this chapter.
(b) Agreements relating to activities of
CRA affiliates. An insured depository
institution or affiliate that is a party to
a covered agreement that concerns any
activity described in paragraph (a) of
this section of a CRA affiliate must,
prior to the time the agreement is
entered into, notify each NGEP that is a
party to the agreement that the
agreement concerns a CRA affiliate.
§ 133.5 Related agreements considered a
single agreement.
The following rules must be applied
in determining whether an agreement is
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
a covered agreement under § 133.2 of
this part.
(a) Agreements entered into by same
parties. All written agreements to which
an insured depository institution or an
affiliate of the insured depository
institution is a party shall be considered
to be a single agreement if the
agreements—
(1) Are entered into with the same
NGEP;
(2) Were entered into within the same
12-month period; and
(3) Are each in fulfillment of the CRA.
(b) Substantively related contracts.
All written contracts to which an
insured depository institution or an
affiliate of the insured depository
institution is a party shall be considered
to be a single agreement, without regard
to whether the other parties to the
contracts are the same or whether each
such contract is in fulfillment of the
CRA, if the contracts were negotiated in
a coordinated fashion and a NGEP is a
party to each contract.
§ 133.6
Disclosure of covered agreements.
(a) Applicability date. This section
applies only to covered agreements
entered into after November 12, 1999.
(b) Disclosure of covered agreements
to the public—(1) Disclosure required.
Each NGEP and each insured depository
institution or affiliate that enters into a
covered agreement must make a copy of
the covered agreement available to any
individual or entity upon request.
(2) Nondisclosure of confidential and
proprietary information permitted. In
responding to a request for a covered
agreement from any individual or entity
under paragraph (b)(1) of this section, a
NGEP, insured depository institution, or
affiliate may withhold from public
disclosure confidential or proprietary
information that the party believes the
relevant supervisory agency could
withhold from disclosure under the
Freedom of Information Act (5 U.S.C.
552 et seq.) (FOIA).
(3) Information that must be
disclosed. Notwithstanding paragraph
(b)(2) of this section, a party must
disclose any of the following
information that is contained in a
covered agreement—
(i) The names and addresses of the
parties to the agreement;
(ii) The amount of any payments, fees,
loans, or other consideration to be made
or provided by any party to the
agreement;
(iii) Any description of how the funds
or other resources provided under the
agreement are to be used;
(iv) The term of the agreement (if the
agreement establishes a term); and
(v) Any other information that the
relevant supervisory agency determines
PO 00000
Frm 00036
Fmt 4701
Sfmt 4700
is not properly exempt from public
disclosure.
(4) Request for review of withheld
information. Any individual or entity
may request that the relevant
supervisory agency review whether any
information in a covered agreement
withheld by a party must be disclosed.
Any requests for agency review of
withheld information must be filed, and
will be processed in accordance with,
the relevant supervisory agency’s rules
concerning the availability of
information (see subpart B of part 4 of
this chapter).
(5) Duration of obligation. The
obligation to disclose a covered
agreement to the public terminates 12
months after the end of the term of the
agreement.
(6) Reasonable copy and mailing fees.
Each NGEP and each insured depository
institution or affiliate may charge an
individual or entity that requests a copy
of a covered agreement a reasonable fee
not to exceed the cost of copying and
mailing the agreement.
(7) Use of CRA public file by insured
depository institution or affiliate. An
insured depository institution and any
affiliate of an insured depository
institution may fulfill its obligation
under this paragraph (b) by placing a
copy of the covered agreement in the
insured depository institution’s CRA
public file if the institution makes the
agreement available in accordance with
the procedures set forth in § 195.43 of
this chapter.
(c) Disclosure by NGEPs of covered
agreements to the relevant supervisory
agency. (1) Each NGEP that is a party to
a covered agreement must provide the
following within 30 days of receiving a
request from the relevant supervisory
agency—
(i) A complete copy of the agreement;
and
(ii) In the event the NGEP proposes
the withholding of any information
contained in the agreement in
accordance with paragraph (b)(2) of this
section, a public version of the
agreement that excludes such
information and an explanation
justifying the exclusions. Any public
version must include the information
described in paragraph (b)(3) of this
section.
(2) The obligation to provide a
covered agreement to the relevant
supervisory agency terminates 12
months after the end of the term of the
covered agreement.
(d) Disclosure by insured depository
institution or affiliate of covered
agreements to the relevant supervisory
agency—(1) In general. Within 60 days
of the end of each calendar quarter, each
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
insured depository institution and
affiliate must provide each relevant
supervisory agency with—
(i)(A) A complete copy of each
covered agreement entered into by the
insured depository institution or
affiliate during the calendar quarter; and
(B) In the event the institution or
affiliate proposes the withholding of any
information contained in the agreement
in accordance with paragraph (b)(2) of
this section, a public version of the
agreement that excludes such
information (other than any information
described in paragraph (b)(3) of this
section) and an explanation justifying
the exclusions; or
(ii) A list of all covered agreements
entered into by the insured depository
institution or affiliate during the
calendar quarter that contains—
(A) The name and address of each
insured depository institution or
affiliate that is a party to the agreement;
(B) The name and address of each
NGEP that is a party to the agreement;
(C) The date the agreement was
entered into;
(D) The estimated total value of all
payments, fees, loans and other
consideration to be provided by the
institution or any affiliate of the
institution under the agreement; and
(E) The date the agreement terminates.
(2) Prompt filing of covered
agreements contained in list required. (i)
If an insured depository institution or
affiliate files a list of the covered
agreements entered into by the
institution or affiliate pursuant to
paragraph (d)(1)(ii) of this section, the
institution or affiliate must provide any
relevant supervisory agency a complete
copy and public version of any covered
agreement referenced in the list within
7 calendar days of receiving a request
from the agency for a copy of the
agreement.
(ii) The obligation of an insured
depository institution or affiliate to
provide a covered agreement to the
relevant supervisory agency under this
paragraph (d)(2) terminates 36 months
after the end of the term of the covered
agreement.
(3) Joint filings. In the event that 2 or
more insured depository institutions or
affiliates are parties to a covered
agreement, the insured depository
institution(s) and affiliate(s) may jointly
file the documents required by this
paragraph (d) of this section. Any joint
filing must identify the insured
depository institution(s) and affiliate(s)
for whom the filings are being made.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
§ 133.7
Annual reports.
(a) Applicability date. This section
applies only to covered agreements
entered into on or after May 12, 2000.
(b) Annual report required. Each
NGEP and each insured depository
institution or affiliate that is a party to
a covered agreement must file an annual
report with each relevant supervisory
agency concerning the disbursement,
receipt, and uses of funds or other
resources under the covered agreement.
(c) Duration of reporting
requirement—(1) NGEPs. A NGEP must
file an annual report for a covered
agreement for any fiscal year in which
the NGEP receives or uses funds or
other resources under the agreement.
(2) Insured depository institutions and
affiliates. An insured depository
institution or affiliate must file an
annual report for a covered agreement
for any fiscal year in which the
institution or affiliate—
(i) Provides or receives any payments,
fees, or loans under the covered
agreement that must be reported under
paragraphs (e)(1)(iii) and (e)(1)(iv) of
this section; or
(ii) Has data to report on loans,
investments, and services provided by a
party to the covered agreement under
the covered agreement under paragraph
(e)(1)(vi) of this section.
(d) Annual reports filed by NGEP—(1)
Contents of report. The annual report
filed by a NGEP under this section must
include the following—
(i) The name and mailing address of
the NGEP filing the report;
(ii) Information sufficient to identify
the covered agreement for which the
annual report is being filed, such as by
providing the names of the parties to the
agreement and the date the agreement
was entered into or by providing a copy
of the agreement;
(iii) The amount of funds or resources
received under the covered agreement
during the fiscal year; and
(iv) A detailed, itemized list of how
the funds or resources received by the
NGEP under the covered agreement
were used during the fiscal year,
including the total amount used for—
(A) Compensation of officers,
directors, and employees;
(B) Administrative expenses;
(C) Travel expenses;
(D) Entertainment expenses;
(E) Payment of consulting and
professional fees; and
(F) Other expenses and uses (specify
expense or use).
(2) More detailed reporting of uses of
funds or resources permitted—(i) In
general. If a NGEP allocated and used
funds received under a covered
agreement for a specific purpose, the
PO 00000
Frm 00037
Fmt 4701
Sfmt 4700
48985
NGEP may fulfill the requirements of
paragraph (d)(1)(iv) of this section with
respect to such funds by providing—
(A) A brief description of each
specific purpose for which the funds or
other resources were used; and
(B) The amount of funds or resources
used during the fiscal year for each
specific purpose.
(ii) Specific purpose defined. A NGEP
allocates and uses funds for a specific
purpose if the NGEP receives and uses
the funds for a purpose that is more
specific and limited than the categories
listed in paragraph (d)(1)(iv) of this
section.
(3) Use of other reports. The annual
report filed by a NGEP may consist of
or incorporate a report prepared for any
other purpose, such as the Internal
Revenue Service Return of Organization
Exempt From Income Tax on Form 990,
or any other Internal Revenue Service
form, state tax form, report to members
or shareholders, audited or unaudited
financial statements, audit report, or
other report, so long as the annual
report filed by the NGEP contains all of
the information required by this
paragraph (d).
(4) Consolidated reports permitted. A
NGEP that is a party to 2 or more
covered agreements may file with each
relevant supervisory agency a single
consolidated annual report covering all
the covered agreements. Any
consolidated report must contain all the
information required by this paragraph
(d). The information reported under
paragraphs (d)(1)(iv) and (d)(2) of this
section may be reported on an aggregate
basis for all covered agreements.
(5) Examples of annual report
requirements for NGEPs—(i) Example 1.
A NGEP receives an unrestricted grant
of $15,000 under a covered agreement,
includes the funds in its general
operating budget and uses the funds
during its fiscal year. The NGEP’s
annual report for the fiscal year must
provide the name and mailing address
of the NGEP, information sufficient to
identify the covered agreement, and
state that the NGEP received $15,000
during the fiscal year. The report must
also indicate the total expenditures
made by the NGEP during the fiscal year
for compensation, administrative
expenses, travel expenses,
entertainment expenses, consulting and
professional fees, and other expenses
and uses. The NGEP’s annual report
may provide this information by
submitting an Internal Revenue Service
Form 990 that includes the required
information. If the Internal Revenue
Service Form does not include
information for all of the required
categories listed in this part, the NGEP
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
48986
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
must report the total expenditures in the
remaining categories either by providing
that information directly or by
providing another form or report that
includes the required information.
(ii) Example 2. An organization
receives $15,000 from an insured
depository institution under a covered
agreement and allocates and uses the
$15,000 during the fiscal year to
purchase computer equipment to
support its functions. The organization’s
annual report must include the name
and address of the organization,
information sufficient to identify the
agreement, and a statement that the
organization received $15,000 during
the year. In addition, since the
organization allocated and used the
funds for a specific purpose that is more
narrow and limited than the categories
of expenses included in the detailed,
itemized list of expenses, the
organization would have the option of
providing either the total amount it used
during the year for each category of
expenses included in paragraph
(d)(1)(iv) of this section, or a statement
that it used the $15,000 to purchase
computer equipment and a brief
description of the equipment purchased.
(iii) Example 3. A community group
receives $50,000 from an insured
depository institution under a covered
agreement. During its fiscal year, the
community group specifically allocates
and uses $5,000 of the funds to pay for
a particular business trip and uses the
remaining $45,000 for general operating
expenses. The group’s annual report for
the fiscal year must include the name
and address of the group, information
sufficient to identify the agreement, and
a statement that the group received
$50,000. Because the group did not
allocate and use all of the funds for a
specific purpose, the group’s annual
report must provide the total amount of
funds it used during the year for each
category of expenses included in
paragraph (d)(1)(iv) of this section. The
group’s annual report also could state
that it used $5,000 for a particular
business trip and include a brief
description of the trip.
(iv) Example 4. A community
development organization is a party to
two separate covered agreements with
two unaffiliated insured depository
institutions. Under each agreement, the
organization receives $15,000 during its
fiscal year and uses the funds to support
its activities during that year. If the
organization elects to file a consolidated
annual report, the consolidated report
must identify the organization and the
two covered agreements, state that the
organization received $15,000 during
the fiscal year under each agreement,
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
and provide the total amount that the
organization used during the year for
each category of expenses included in
paragraph (d)(1)(iv) of this section.
(e) Annual report filed by insured
depository institution or affiliate—(1)
General. The annual report filed by an
insured depository institution or
affiliate must include the following—
(i) The name and principal place of
business of the insured depository
institution or affiliate filing the report;
(ii) Information sufficient to identify
the covered agreement for which the
annual report is being filed, such as by
providing the names of the parties to the
agreement and the date the agreement
was entered into or by providing a copy
of the agreement;
(iii) The aggregate amount of
payments, aggregate amount of fees, and
aggregate amount of loans provided by
the insured depository institution or
affiliate under the covered agreement to
any other party to the agreement during
the fiscal year;
(iv) The aggregate amount of
payments, aggregate amount of fees, and
aggregate amount of loans received by
the insured depository institution or
affiliate under the covered agreement
from any other party to the agreement
during the fiscal year;
(v) A general description of the terms
and conditions of any payments, fees, or
loans reported under paragraphs
(e)(1)(iii) and (e)(1)(iv) of this section,
or, in the event such terms and
conditions are set forth—
(A) In the covered agreement, a
statement identifying the covered
agreement and the date the agreement
(or a list identifying the agreement) was
filed with the relevant supervisory
agency; or
(B) In a previous annual report filed
by the insured depository institution or
affiliate, a statement identifying the date
the report was filed with the relevant
supervisory agency; and
(vi) The aggregate amount and
number of loans, aggregate amount and
number of investments, and aggregate
amount of services provided under the
covered agreement to any individual or
entity not a party to the agreement—
(A) By the insured depository
institution or affiliate during its fiscal
year; and
(B) By any other party to the
agreement, unless such information is
not known to the insured depository
institution or affiliate filing the report or
such information is or will be contained
in the annual report filed by another
party under this section.
(2) Consolidated reports permitted—
(i) Party to multiple agreements. An
insured depository institution or
PO 00000
Frm 00038
Fmt 4701
Sfmt 4700
affiliate that is a party to 2 or more
covered agreements may file a single
consolidated annual report with each
relevant supervisory agency concerning
all the covered agreements.
(ii) Affiliated entities party to the
same agreement. An insured depository
institution and its affiliates that are
parties to the same covered agreement
may file a single consolidated annual
report relating to the agreement with
each relevant supervisory agency for the
covered agreement.
(iii) Content of report. Any
consolidated annual report must contain
all the information required by this
paragraph (e). The amounts and data
required to be reported under
paragraphs (e)(1)(iv) and (e)(1)(vi) of this
section may be reported on an aggregate
basis for all covered agreements.
(f) Time and place of filing—(1)
General. Each party must file its annual
report with each relevant supervisory
agency for the covered agreement no
later than six months following the end
of the fiscal year covered by the report.
(2) Alternative method of fulfilling
annual reporting requirement for a
NGEP. (i) A NGEP may fulfill the filing
requirements of this section by
providing the following materials to an
insured depository institution or
affiliate that is a party to the agreement
no later than six months following the
end of the NGEP’s fiscal year—
(A) A copy of the NGEP’s annual
report required under paragraph (d) of
this section for the fiscal year; and
(B) Written instructions that the
insured depository institution or
affiliate promptly forward the annual
report to the relevant supervisory
agency or agencies on behalf of the
NGEP.
(ii) An insured depository institution
or affiliate that receives an annual report
from a NGEP pursuant to paragraph
(f)(2)(i) of this section must file the
report with the relevant supervisory
agency or agencies on behalf of the
NGEP within 30 days.
§ 133.8
Release of information under FOIA.
The OCC will make covered
agreements and annual reports available
to the public in accordance with the
Freedom of Information Act (5 U.S.C.
552 et seq.), subpart B of part 4 of this
chapter. A party to a covered agreement
may request confidential treatment of
proprietary and confidential
information in a covered agreement or
an annual report under those
procedures.
§ 133.9
Compliance provisions.
(a) Willful failure to comply with
disclosure and reporting obligations. (1)
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
sroberts on DSK5SPTVN1PROD with RULES
If the OCC determines that a NGEP has
willfully failed to comply in a material
way with §§ 133.6 or 133.7 of this part,
the OCC will notify the NGEP in writing
of that determination and provide the
NGEP a period of 90 days (or such
longer period as the OCC finds to be
reasonable under the circumstances) to
comply.
(2) If the NGEP does not comply
within the time period established by
the OCC, the agreement shall thereafter
be unenforceable by that NGEP by
operation of section 48 of the Federal
Deposit Insurance Act (12 U.S.C.
1831y).
(3) The OCC may assist any insured
depository institution or affiliate that is
a party to a covered agreement that is
unenforceable by a NGEP by operation
of section 48 of the Federal Deposit
Insurance Act (12 U.S.C. 1831y) in
identifying a successor to assume the
NGEP’s responsibilities under the
agreement.
(b) Diversion of funds. If a court or
other body of competent jurisdiction
determines that funds or resources
received under a covered agreement
have been diverted contrary to the
purposes of the covered agreement for
an individual’s personal financial gain,
the OCC may take either or both of the
following actions—
(1) Order the individual to disgorge
the diverted funds or resources received
under the agreement;
(2) Prohibit the individual from being
a party to any covered agreement for a
period not to exceed 10 years.
(c) Notice and opportunity to respond.
Before making a determination under
paragraph (a)(1) of this section, or taking
any action under paragraph (b) of this
section, the OCC will provide written
notice and an opportunity to present
information to the OCC concerning any
relevant facts or circumstances relating
to the matter.
(d) Inadvertent or de minimis errors.
Inadvertent or de minimis errors in
annual reports or other documents filed
with the OCC under §§ 133.6 or 133.7 of
this part will not subject the reporting
party to any penalty.
(e) Enforcement of provisions in
covered agreements. No provision of
this part shall be construed as
authorizing the OCC to enforce the
provisions of any covered agreement.
§ 133.10
[Reserved]
§ 133.11 Other definitions and rules of
construction used in this part.
(a) Affiliate. Affiliate means—
(1) Any company that controls, is
controlled by, or is under common
control with another company; and
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(2) For the purpose of determining
whether an agreement is a covered
agreement under § 133.2, an affiliate
includes any company that would be
under common control or merged with
another company on consummation of
any transaction pending before a
Federal banking agency at the time—
(i) The parties enter into the
agreement; and
(ii) The NGEP that is a party to the
agreement makes a CRA
communication, as described in § 133.3
of this part.
(b) Control. Control is defined in
section 2(a) of the Bank Holding
Company Act (12 U.S.C. 1841(a)).
(c) CRA affiliate. A CRA affiliate of an
insured depository institution is any
company that is an affiliate of an
insured depository institution to the
extent, and only to the extent, that the
activities of the affiliate were considered
by the appropriate Federal banking
agency when evaluating the CRA
performance of the institution at its
most recent CRA examination prior to
the agreement. An insured depository
institution or affiliate also may
designate any company as a CRA
affiliate at any time prior to the time a
covered agreement is entered into by
informing the NGEP that is a party to
the agreement of such designation.
(d) CRA public file. CRA public file
means the public file maintained by an
insured depository institution and
described in § 195.43 of this chapter.
(e) Executive officer. The term
executive officer has the same meaning
as in § 215.2(e)(1) of the Board of
Governors of the Federal Reserve’s
Regulation O (12 CFR 215.2(e)(1)). In
applying this definition under this part,
the term savings association shall be
used in place of the term bank.
(f) Federal banking agency;
appropriate Federal banking agency.
The terms Federal banking agency and
appropriate Federal banking agency
have the same meanings as in section 3
of the Federal Deposit Insurance Act (12
U.S.C. 1813).
(g) Fiscal year. (1) The fiscal year for
a NGEP that does not have a fiscal year
shall be the calendar year.
(2) Any NGEP, insured depository
institution, or affiliate that has a fiscal
year may elect to have the calendar year
be its fiscal year for purposes of this
part.
(h) Insured depository institution.
Insured depository institution has the
same meaning as in section 3 of the
Federal Deposit Insurance Act (12
U.S.C. 1813).
(i) Nongovernmental entity or person
or NGEP—(1) General. A
nongovernmental entity or person or
PO 00000
Frm 00039
Fmt 4701
Sfmt 4700
48987
NGEP is any partnership, association,
trust, joint venture, joint stock company,
corporation, limited liability
corporation, company, firm, society,
other organization, or individual.
(2) Exclusions. A nongovernmental
entity or person does not include—
(i) The United States government, a
state government, a unit of local
government (including a county, city,
town, township, parish, village, or other
general-purpose subdivision of a state)
or an Indian tribe or tribal organization
established under Federal, state or
Indian tribal law (including the
Department of Hawaiian Home Lands),
or a department, agency, or
instrumentality of any such entity;
(ii) A Federally-chartered public
corporation that receives Federal funds
appropriated specifically for that
corporation;
(iii) An insured depository institution
or affiliate of an insured depository
institution; or
(iv) An officer, director, employee, or
representative (acting in his or her
capacity as an officer, director,
employee, or representative) of an entity
listed in paragraphs (i)(2)(i), (i)(2)(ii), or
(i)(2)(iii) of this section.
(j) Party. The term party with respect
to a covered agreement means each
NGEP and each insured depository
institution or affiliate that entered into
the agreement.
(k) Relevant supervisory agency. The
relevant supervisory agency for a
covered agreement means the
appropriate Federal banking agency
for—
(1) Each insured depository
institution (or subsidiary thereof) that is
a party to the covered agreement;
(2) Each insured depository
institution (or subsidiary thereof) or
CRA affiliate that makes payments or
loans or provides services that are
subject to the covered agreement; and
(3) Any company (other than an
insured depository institution or
subsidiary thereof) that is a party to the
covered agreement.
(l) Term of agreement. An agreement
that does not have a fixed termination
date is considered to terminate on the
last date on which any party to the
agreement makes any payment or
provides any loan or other resources
under the agreement, unless the relevant
supervisory agency for the agreement
otherwise notifies each party in writing.
PART 136—CONSUMER PROTECTION
IN SALES OF INSURANCE
Sec.
136.10
136.20
E:\FR\FM\09AUR2.SGM
Purpose and scope.
Definitions.
09AUR2
48988
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
136.30 Prohibited practices.
136.40 What you must disclose.
136.50 Where insurance activities may take
place.
136.60 Qualification and licensing
requirements for insurance sales
personnel.
Appendix A to Part 136—Consumer
Grievance Process
Authority: 12 U.S.C. 1462a, 1463, 1464,
1831x, and 5412(b)(2)(B).
§ 136.10
Purpose and scope.
(a) General rule. This part establishes
consumer protections in connection
with retail sales practices, solicitations,
advertising, or offers of any insurance
product or annuity to a consumer by:
(1) Any Federal savings association;
or
(2) Any other person that is engaged
in such activities at an office of a
Federal savings association or on behalf
of a Federal savings association.
(b) Application to operating
subsidiaries. For purposes of § 159.3(h)
of this chapter, an operating subsidiary
is subject to this part only to the extent
that it sells, solicits, advertises, or offers
insurance products or annuities at an
office of a Federal savings association or
on behalf of a Federal savings
association.
sroberts on DSK5SPTVN1PROD with RULES
§ 136.20
Definitions.
As used in this part:
Affiliate means a company that
controls, is controlled by, or is under
common control with another company.
Company means any corporation,
partnership, business trust, association
or similar organization, or any other
trust (unless by its terms the trust must
terminate within twenty-five years or
not later than twenty-one years and ten
months after the death of individuals
living on the effective date of the trust).
It does not include any corporation the
majority of the shares of which are
owned by the United States or by any
state, or a qualified family partnership,
as defined in section 2(o)(10) of the
Bank Holding Company Act of 1956, as
amended (12 U.S.C. 1841(o)(10)).
Consumer means an individual who
purchases, applies to purchase, or is
solicited to purchase from a covered
person insurance products or annuities
primarily for personal, family, or
household purposes.
Control of a company has the same
meaning as in section 3(w)(5) of the
Federal Deposit Insurance Act (12
U.S.C. 1813(w)(5)).
Domestic violence means the
occurrence of one or more of the
following acts by a current or former
family member, household member,
intimate partner, or caretaker:
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(1) Attempting to cause or causing or
threatening another person physical
harm, severe emotional distress,
psychological trauma, rape, or sexual
assault;
(2) Engaging in a course of conduct or
repeatedly committing acts toward
another person, including following the
person without proper authority, under
circumstances that place the person in
reasonable fear of bodily injury or
physical harm;
(3) Subjecting another person to false
imprisonment; or
(4) Attempting to cause or causing
damage to property so as to intimidate
or attempt to control the behavior of
another person.
Electronic media includes any means
for transmitting messages electronically
between a covered person and a
consumer in a format that allows visual
text to be displayed on equipment, for
example, a personal computer monitor.
Office means the premises of a
Federal savings association where retail
deposits are accepted from the public.
Subsidiary has the same meaning as
in section 3(w)(4) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(w)(4)).
You means:
(1) A Federal savings association, as
defined in § 141.11 of this chapter; or
(2) Any other person only when the
person sells, solicits, advertises, or
offers an insurance product or annuity
to a consumer at an office of a Federal
savings association, or on behalf of a
Federal savings association. For
purposes of this definition, activities on
behalf of a Federal savings association
include activities where a person,
whether at an office of the savings
association or at another location, sells,
solicits, advertises, or offers an
insurance product or annuity and at
least one of the following applies:
(i) The person represents to a
consumer that the sale, solicitation,
advertisement, or offer of any insurance
product or annuity is by or on behalf of
the savings association;
(ii) The savings association refers a
consumer to a seller of insurance
products and annuities and the savings
association has a contractual
arrangement to receive commissions or
fees derived from a sale of an insurance
product or annuity resulting from that
referral; or
(iii) Documents evidencing the sale,
solicitation, advertising, or offer of an
insurance product or annuity identify or
refer to the savings association.
§ 136.30
Prohibited practices.
(a) Anticoercion and antitying rules.
You may not engage in any practice that
would lead a consumer to believe that
PO 00000
Frm 00040
Fmt 4701
Sfmt 4700
an extension of credit, in violation of
section 5(q) of the Home Owners’ Loan
Act (12 U.S.C. 1464(q)), is conditional
upon either:
(1) The purchase of an insurance
product or annuity from a Federal
savings association or any of its
affiliates; or
(2) An agreement by the consumer not
to obtain, or a prohibition on the
consumer from obtaining, an insurance
product or annuity from an unaffiliated
entity.
(b) Prohibition on misrepresentations
generally. You may not engage in any
practice or use any advertisement at any
office of, or on behalf of, a Federal
savings association or a subsidiary of a
Federal savings association that could
mislead any person or otherwise cause
a reasonable person to reach an
erroneous belief with respect to:
(1) The fact that an insurance product
or annuity you or any subsidiary of a
Federal savings association sell or offer
for sale is not backed by the Federal
government or a Federal savings
association, or the fact that the
insurance product or annuity is not
insured by the Federal Deposit
Insurance Corporation;
(2) In the case of an insurance product
or annuity that involves investment risk,
the fact that there is an investment risk,
including the potential that principal
may be lost and that the product may
decline in value; or
(3) In the case of a Federal savings
association or subsidiary of a Federal
savings association at which insurance
products or annuities are sold or offered
for sale, the fact that:
(i) The approval of an extension of
credit to a consumer by the savings
association or subsidiary may not be
conditioned on the purchase of an
insurance product or annuity by the
consumer from the savings association
or a subsidiary of a savings association;
and
(ii) The consumer is free to purchase
the insurance product or annuity from
another source.
(c) Prohibition on domestic violence
discrimination. You may not sell or
offer for sale, as principal, agent, or
broker, any life or health insurance
product if the status of the applicant or
insured as a victim of domestic violence
or as a provider of services to victims of
domestic violence is considered as a
criterion in any decision with regard to
insurance underwriting, pricing,
renewal, or scope of coverage of such
product, or with regard to the payment
of insurance claims on such product,
except as required or expressly
permitted under state law.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
sroberts on DSK5SPTVN1PROD with RULES
§ 136.40
What you must disclose.
(a) Insurance disclosures. In
connection with the initial purchase of
an insurance product or annuity by a
consumer from you, you must disclose
to the consumer, except to the extent the
disclosure would not be accurate, that:
(1) The insurance product or annuity
is not a deposit or other obligation of,
or guaranteed by, a Federal savings
association or an affiliate of a Federal
savings association;
(2) The insurance product or annuity
is not insured by the Federal Deposit
Insurance Corporation (FDIC) or any
other agency of the United States, a
Federal savings association, or (if
applicable) an affiliate of a Federal
savings association; and
(3) In the case of an insurance product
or annuity that involves an investment
risk, there is investment risk associated
with the product, including the possible
loss of value.
(b) Credit disclosures. In the case of
an application for credit in connection
with which an insurance product or
annuity is solicited, offered, or sold, you
must disclose that a Federal savings
association may not condition an
extension of credit on either:
(1) The consumer’s purchase of an
insurance product or annuity from the
savings association or any of its
affiliates; or
(2) The consumer’s agreement not to
obtain, or a prohibition on the consumer
from obtaining, an insurance product or
annuity from an unaffiliated entity.
(c) Timing and method of
disclosures—(1) In general. The
disclosures required by paragraph (a) of
this section must be provided orally and
in writing before the completion of the
initial sale of an insurance product or
annuity to a consumer. The disclosure
required by paragraph (b) of this section
must be made orally and in writing at
the time the consumer applies for an
extension of credit in connection with
which an insurance product or annuity
is solicited, offered, or sold.
(2) Exception for transactions by mail.
If you conduct an insurance product or
annuity sale by mail, you are not
required to make the oral disclosures
required by paragraph (a) of this section.
If you take an application for credit by
mail, you are not required to make the
oral disclosure required by paragraph
(b) of this section.
(3) Exception for transactions by
telephone. If a sale of an insurance
product or annuity is conducted by
telephone, you may provide the written
disclosures required by paragraph (a) of
this section by mail within 3 business
days beginning on the first business day
after the sale, solicitation, or offer,
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
excluding Sundays and the legal public
holidays specified in 5 U.S.C. 6103(a). If
you take an application for credit by
telephone, you may provide the written
disclosure required by paragraph (b) of
this section by mail, provided you mail
it to the consumer within three days
beginning the first business day after the
application is taken, excluding Sundays
and the legal public holidays specified
in 5 U.S.C. 6103(a).
(4) Electronic form of disclosures. (i)
Subject to the requirements of section
101(c) of the Electronic Signatures in
Global and National Commerce Act (15
U.S.C. 7001(c)), you may provide the
written disclosures required by
paragraph (a) and (b) of this section
through electronic media instead of on
paper, if the consumer affirmatively
consents to receiving the disclosures
electronically and if the disclosures are
provided in a format that the consumer
may retain or obtain later, for example,
by printing or storing electronically
(such as by downloading).
(ii) You are not required to provide
orally any disclosures required by
paragraphs (a) or (b) of this section that
you provide by electronic media.
(5) Disclosures must be readily
understandable. The disclosures
provided shall be conspicuous, simple,
direct, readily understandable, and
designed to call attention to the nature
and significance of the information
provided. For instance, you may use the
following disclosures in visual media,
such as television broadcasting, ATM
screens, billboards, signs, posters and
written advertisements and promotional
materials, as appropriate and consistent
with paragraphs (a) and (b) of this
section:
• NOT A DEPOSIT
• NOT FDIC-INSURED
• NOT INSURED BY ANY FEDERAL
GOVERNMENT AGENCY
• NOT GUARANTEED BY THE
FEDERAL SAVINGS ASSOCIATION
• MAY GO DOWN IN VALUE
(6) Disclosures must be meaningful.
(i) You must provide the disclosures
required by paragraphs (a) and (b) of
this section in a meaningful form.
Examples of the types of methods that
could call attention to the nature and
significance of the information provided
include:
(A) A plain-language heading to call
attention to the disclosures;
(B) A typeface and type size that are
easy to read;
(C) Wide margins and ample line
spacing;
(D) Boldface or italics for key words;
and
(E) Distinctive type size, style, and
graphic devices, such as shading or
PO 00000
Frm 00041
Fmt 4701
Sfmt 4700
48989
sidebars, when the disclosures are
combined with other information.
(ii) You have not provided the
disclosures in a meaningful form if you
merely state to the consumer that the
required disclosures are available in
printed material, but do not provide the
printed material when required and do
not orally disclose the information to
the consumer when required.
(iii) With respect to those disclosures
made through electronic media for
which paper or oral disclosures are not
required, the disclosures are not
meaningfully provided if the consumer
may bypass the visual text of the
disclosures before purchasing an
insurance product or annuity.
(7) Consumer acknowledgment. You
must obtain from the consumer, at the
time a consumer receives the
disclosures required under paragraphs
(a) or (b) of this section, or at the time
of the initial purchase by the consumer
of an insurance product or annuity, a
written acknowledgment by the
consumer that the consumer received
the disclosures. You may permit a
consumer to acknowledge receipt of the
disclosures electronically or in paper
form. If the disclosures required under
paragraphs (a) or (b) of this section are
provided in connection with a
transaction that is conducted by
telephone, you must:
(i) Obtain an oral acknowledgment of
receipt of the disclosures and maintain
sufficient documentation to show that
the acknowledgment was given; and
(ii) Make reasonable efforts to obtain
a written acknowledgment from the
consumer.
(d) Advertisements and other
promotional material for insurance
products or annuities. The disclosures
described in paragraph (a) of this
section are required in advertisements
and promotional material for insurance
products or annuities unless the
advertisements and promotional
material are of a general nature
describing or listing the services or
products offered by a Federal savings
association.
§ 136.50 Where insurance activities may
take place.
(a) General rule. A Federal savings
association must, to the extent
practicable:
(1) Keep the area where the savings
association conducts transactions
involving insurance products or
annuities physically segregated from
areas where retail deposits are routinely
accepted from the general public;
(2) Identify the areas where insurance
product or annuity sales activities
occur; and
E:\FR\FM\09AUR2.SGM
09AUR2
48990
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(3) Clearly delineate and distinguish
those areas from the areas where the
savings association’s retail deposittaking activities occur.
(b) Referrals. Any person who accepts
deposits from the public in an area
where such transactions are routinely
conducted in a Federal savings
association may refer a consumer who
seeks to purchase an insurance product
or annuity to a qualified person who
sells that product only if the person
making the referral receives no more
than a one-time, nominal fee of a fixed
dollar amount for each referral that does
not depend on whether the referral
results in a transaction.
§ 136.60 Qualification and licensing
requirements for insurance sales
personnel.
A Federal savings association may not
permit any person to sell or offer for sale
any insurance product or annuity in any
part of the savings association’s office or
on its behalf, unless the person is at all
times appropriately qualified and
licensed under applicable state
insurance licensing standards with
regard to the specific products being
sold or recommended.
Appendix A to Part 136—Consumer
Grievance Process
Any consumer who believes that any
Federal savings association or any other
person selling, soliciting, advertising, or
offering insurance products or annuities to
the consumer at an office of the savings
association or on behalf of the savings
association has violated the requirements of
this part should contact the Customer
Assistance Group, Office of the Comptroller
of the Currency, (800) 613–6743, 1301
McKinney Street, Suite 3710, Houston, Texas
77010–3031.
sroberts on DSK5SPTVN1PROD with RULES
PART 141—DEFINITIONS FOR
REGULATIONS AFFECTING FEDERAL
SAVINGS ASSOCIATIONS
Sec.
141.1 When do the definitions in this part
apply?
141.2 Act.
141.5 Commercial paper.
141.7 Corporate debt security.
141.8 Debit card.
141.10 Dwelling unit.
141.11 Federal savings association.
141.14 Home.
141.15 Improved nonresidential real estate.
141.16 Improved residential real estate.
141.18 Interim Federal savings association.
141.19 Interim state savings association.
141.20 Loans.
141.21 Nonresidential real estate.
141.22 [Reserved]
141.23 Residential real estate.
141.25 Single-family dwelling.
141.26 Surplus.
141.27 Unimproved real estate.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
141.28 Withdrawal value of a savings
account.
§ 141.15
estate.
Authority: 12 U.S.C. 1462a, 1463, 1464,
5412(b)(2)(B).
The term improved nonresidential
real estate means nonresidential real
estate:
(a) Containing a permanent
structure(s) constituting at least 25
percent of its value; or
(b) Containing improvements which
make it usable by a business or
industrial enterprise; or
(c) Used, or to be used within a
reasonable time, for commercial
farming, excluding hobby and vacation
property.
§ 141.1
apply?
When do the definitions in this part
The definitions in this part and in 12
CFR part 161 apply throughout parts
100 through 199 of this chapter, unless
another definition is specifically
provided.
§ 141.2
Act.
The term Act means the Home
Owners’ Loan Act of 1933, as amended.
§ 141.5
Commercial paper.
The term commercial paper means
any note, draft, or bill of exchange
which arises out of a current transaction
or the proceeds of which have been or
are to be used for current transactions,
and which has a maturity at the time of
issuance of not exceeding nine months,
exclusive of days of grace, or any
renewal thereof the maturity of which is
likewise limited.
§ 141.7
Corporate debt security.
The term corporate debt security
means a marketable obligation,
evidencing the indebtedness of any
corporation in the form of a bond, note
and/or debenture which is commonly
regarded as a debt security and is not
predominantly speculative in nature. A
security is marketable if it may be sold
with reasonable promptness at a price
which corresponds reasonably to its fair
value.
§ 141.8
Dwelling unit.
The term dwelling unit means the
unified combination of rooms designed
for residential use by one family, other
than a single-family dwelling.
§ 141.11
Federal savings association.
The term Federal savings association
means a Federal savings association or
Federal savings bank chartered under
section 5 of the Act.
§ 141.14
The term home means real estate
comprising a single-family dwelling(s)
or a dwelling unit(s) for four or fewer
families in the aggregate.
PO 00000
Frm 00042
Fmt 4701
§ 141.18 Interim Federal savings
association.
The term interim Federal savings
association means a Federal savings
association chartered by the OCC or the
OTS under section 5 of the Act to
facilitate the acquisition of 100 percent
of the voting shares of an existing
Federal stock savings association or
other insured stock savings association
by a newly formed company or an
existing savings and loan holding
company or to facilitate any other
transaction the OCC may approve.
Sfmt 4700
Interim state savings association.
The term interim state savings
association means a savings association,
other than a Federal savings association,
the accounts of which are insured by the
FDIC to facilitate the acquisition of 100
percent of the voting shares of an
existing Federal stock savings
association or other insured stock
savings association by a newly formed
company or an existing savings and loan
holding company or to facilitate any
other transaction the OCC may approve.
§ 141.20
Loans.
The term loans means obligations and
extensions or advances of credit; and
any reference to a loan or investment
includes an interest in such a loan or
investment.
§ 141.21
Home.
Improved residential real estate.
The term improved residential real
estate means residential real estate
containing offsite or other
improvements sufficient to make the
property ready for primarily residential
construction, and real estate in the
process of being improved by a building
or buildings to be constructed or in the
process of construction for primarily
residential use.
§ 141.19
Debit card.
The term debit card means a card that
enables an accountholder to obtain
access to a savings account for the
purpose of making withdrawals or of
transferring funds to a third party by
non-transferable order or authorization.
§ 141.10
§ 141.16
Improved nonresidential real
Nonresidential real estate.
The terms nonresidential real estate
or nonresidential real property mean
real estate that is not residential real
estate, as that term is defined in
§ 141.23 of this part.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 141.22
[Reserved]
§ 141.23
Residential real estate.
The terms residential real estate or
residential real property mean:
(a) Homes (including a dwelling unit
in a multi-family residential property
such as a condominium or a
cooperative);
(b) Combinations of homes and
business property (i.e., a home used in
part for business);
(c) Other real estate used for primarily
residential purposes other than a home
(but which may include homes);
(d) Combinations of such real estate
and business property involving only
minor business use (i.e., where no more
than 20 percent of the total appraised
value of the real estate is attributable to
the business use);
(e) Farm residences and combinations
of farm residences and commercial farm
real estate;
(f) Property to be improved by the
construction of such structures; or
(g) Leasehold interests in the above
real estate.
§ 141.25
Single-family dwelling.
The term single-family dwelling
means a structure designed for
residential use by one family, or a unit
so designed, whose owner owns,
directly or through a non-profit
cooperative housing organization, an
undivided interest in the underling real
estate, including property owned in
common with others which contributes
to the use and enjoyment of the
structure or unit.
§ 141.26
Surplus.
The term surplus means undistributed
earnings held as unallocated reserves for
general corporate use.
§ 141.27
Unimproved real estate.
The term unimproved real estate
means real estate that will be improved,
as defined in § 141.15 or § 141.16 of this
part.
143.3 ‘‘De novo’’ applications for a Federal
savings association charter.
143.4 Issuance of charter.
143.5 Completion of organization.
143.6 Limitations on transaction of
business.
143.7 Federal savings association created in
connection with an association in default
or in danger of default.
Conversion
143.8 Conversion of depository institutions
to Federal mutual charter.
143.9 Application for conversion to Federal
mutual charter.
143.10 Organization after conversion.
143.11 Organization plan for governance
during first years after issuance of
Federal mutual savings bank charter.
143.12 Grandfathered authority.
143.14 Continuity of existence.
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 2901 et seq., 5412(b)(2)(B).
§ 143.1
Corporate title.
(a) General. A Federal savings
association shall not adopt a title that
misrepresents the nature of the
institution or the services it offers.
(b) Title change. Prior to changing its
corporate title, an association must file
with the appropriate OCC licensing
office a written notice indicating the
intended change. The OCC shall provide
to the association a timely written
acknowledgment stating when the
notice was received. If, within 30 days
of receipt of notice, the OCC does not
notify the association of its objection on
the grounds set forth in paragraph (a) of
this section, the association may change
its title by amending its charter in
accordance with § 144.2(b) or § 152.4 of
this chapter and the amendment
provisions of its charter, except that an
association chartered as a Federal
Savings and Loan Association may
change its title to indicate that it is a
Federal Savings Bank, and an
association chartered as a Federal
Savings Bank may change its title to
indicate that it is a Federal Savings and
Loan Association.
Organization
The term withdrawal value of a
savings account means the amount
invested in a savings account plus
earnings credited thereto, less lawful
deductions therefrom.
sroberts on DSK5SPTVN1PROD with RULES
§ 141.28 Withdrawal value of a savings
account.
§ 143.2 Application for permission to
organize.
PART 143—FEDERAL MUTUAL
SAVINGS ASSOCIATIONS—
INCORPORATION, ORGANIZATION,
AND CONVERSION
Sec.
143.1 Corporate title.
Organization
143.2 Application for permission to
organize.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(a) General. Recommendations by
employees of the OCC regarding
applications for permission to organize
a Federal savings association are
privileged, confidential, and subject to
part 4, subpart C of this chapter.
(b) [Reserved]
(c) [Reserved]
(d) Public notice and inspection. (1)
The applicant must publish a public
notice of the application to organize in
accordance with the procedures
specified in subpart B of part 116 of this
chapter.
PO 00000
Frm 00043
Fmt 4701
Sfmt 4700
48991
(2) Promptly after publication, the
applicant(s) shall transmit copies of
each notice and publisher’s affidavit of
publication in the same manner as the
original filing.
(3) The OCC shall give notice of the
application to the state official who
supervises savings associations in the
state in which the new association is to
be located.
(4) Any person may inspect the
application and all related
communications at the address
specified in 12 CFR 4.14(c) during
regular business hours, unless such
information is exempt from public
disclosure.
(e) Submission of comments.
Commenters may submit comments on
the application in accordance with the
procedures specified in subpart C of
part 116 of this chapter.
(f) Meetings. The OCC may arrange a
meeting in accordance with the
procedures in subpart D of part 116 of
this chapter.
(g) Approval. (1) Factors that will be
considered are:
(i) Whether the applicants are persons
of good character and responsibility;
(ii) Whether a necessity exists for
such association in the community to be
served;
(iii) Whether there is a reasonable
probability of the association’s
usefulness and success;
(iv) Whether the association can be
established without undue injury to
properly conducted existing local thrift
and home financing institutions;
(v) Whether the association will
perform a role of providing credit for
housing consistent with safe and sound
operation of a Federal savings
association; and
(vi) Whether the factors set forth in
§ 143.3 are met, in the case of an
application that would result in the
formation of a de novo association, as
defined in § 143.3(a).
(2) Approvals of applications will be
conditioned on the following:
(i) Receipt by the OCC of written
confirmation from the Federal Deposit
Insurance Corporation that the accounts
of the Federal savings association will
be insured by the Federal Deposit
Insurance Corporation;
(ii) A minimum amount of capital to
be paid into the association’s accounts
prior to commencing business;
(iii) The submission of a statement
that—
(A) The applicants have complied in
all respects with the Act and these rules
and regulations regarding organization
of a Federal savings association;
(B) The applicants have incurred no
expense in forming the association
E:\FR\FM\09AUR2.SGM
09AUR2
48992
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
which is chargeable to it, and no such
expense will be incurred;
(C) No funds have been collected on
account of the association before the
OCC’s approval;
(D) An organization committee has
been created (naming the committee and
its officers);
(E) The committee will organize the
association and serve as temporary
officers of the association until officers
are elected by the association’s board of
directors under § 143.5 of this part; and
(F) No funds will be accepted for
deposit by the association until
organization has been completed; and
(iv) The satisfaction of any other
requirement the OCC may impose.
(h) Alternative procedures for interim
Federal savings associations. (1)
Applications for permission to organize
an interim Federal savings association
are not subject to paragraphs (d), (e), (f)
or (g)(2) of this section.
(2) Approval of an application for
permission to organize an interim
Federal savings association shall be
conditioned on approval by the OCC of
an application to merge the interim
Federal savings association and an
existing insured stock association or on
approval by the OCC of such other
transaction which the interim was
chartered to facilitate. In evaluating the
application, the OCC will consider the
purpose for which the association will
be organized, the form of any proposed
transactions involving the organizing
association, the effect of the transactions
on existing associations involved in the
transactions, and the factors specified in
§ 143.2(g)(1) to the extent relevant.
sroberts on DSK5SPTVN1PROD with RULES
§ 143.3 ‘‘De novo’’ applications for a
Federal savings association charter.
(a) Definitions. For purposes of this
section, the term ‘‘de novo association’’
means any Federal savings association
chartered by the OTS prior to July 21,
2011 or by the OCC, the business of
which has not been conducted
previously under any charter or
conducted in the previous three years in
substantially the same form as is
proposed by the de novo association. A
‘‘de novo applicant’’ means any person
or persons who apply to establish a de
novo association.
(b) Minimum initial capitalization. (1)
A de novo association must have at least
two million dollars in initial capital
stock (stock institutions) or initial
pledged savings or cash (mutual
institutions), except as provided in
paragraph (b)(2) of this section. The
minimum initial capitalization is the
amount of proceeds net of all incurred
and anticipated securities issuance
expenses, organization expenses, pre-
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
opening expenses, or any expenses paid
(or funds advanced) by organizers that
are to be reimbursed from the proceeds
of a securities offering. In securities
offerings for a de novo association, all
securities of a particular class in the
initial offering shall be sold at the same
price.
(2) On a case by case basis, the OCC
may, for good cause, approve a de novo
association that has less than two
million dollars in initial capital or may
require a de novo association to have
more than two million dollars in initial
capital.
(c) Business and investment plans of
de novo associations. (1) To assist the
OCC in making the determinations
required under section 5(e) of the Home
Owners’ Loan Act, a de novo applicant
shall submit a business plan describing,
for the first three years of operation of
the de novo association, the major areas
of operation, including:
(i) Lending, leasing and investment
activity, including plans for meeting
Qualified Thrift Lender requirements;
(ii) Deposit, savings and borrowing
activity;
(iii) Interest-rate risk management;
(iv) Internal controls and procedures;
(v) Plans for meeting the credit needs
of the proposed de novo association’s
community (including low- and
moderate-income neighborhoods);
(vi) Projected statements of condition;
(vii) Projected statements of
operations; and
(viii) Any other information requested
by the OCC.
(2) The business plan shall:
(i) Provide for the continuation or
succession of competent management
subject to the approval of the OCC;
(ii) Provide that any material change
in, or deviation from, the business plan
must receive the prior approval of the
OCC;
(iii) Demonstrate the de novo
association’s ability to maintain
required minimum regulatory capital
under 12 CFR parts 165 and 167 for the
duration of the plan.
(d) Composition of the board of
directors. (1) A majority of a de novo
association’s board of directors must be
representative of the state in which the
savings association is located. The OCC
generally will consider a director to be
representative of the state if the director
resides, works or maintains a place of
business in the state in which the
savings association is located. If the
association is located in a Metropolitan
Statistical Area (MSA), Primary
Metropolitan Statistical Area (PMSA) or
Consolidated Metropolitan Statistical
Area (CMSA) that incorporates portions
of more than one state, a director will
PO 00000
Frm 00044
Fmt 4701
Sfmt 4700
be considered representative of the
association’s state if he or she resides,
works or maintains a place of business
in the MSA, PMSA or CMSA in which
the association is located.
(2) The de novo association’s board of
directors must be diversified and
composed of individuals with varied
business and professional experience. In
addition, except in the case of a de novo
association that is wholly-owned by a
holding company, no more than onethird of a board of directors may be in
closely related businesses. The
background of each director must reflect
a history of responsibility and personal
integrity, and must show a level of
competence and experience sufficient to
demonstrate that such individual has
the ability to direct the policies of the
association in a safe and sound manner.
Where a de novo association is owned
by a holding company that does not
have substantial independent economic
substance, the board of directors of the
holding company must satisfy the
foregoing standards.
(e) Management Officials. Proposed
stockholders of ten percent or more of
the stock of a de novo association will
be considered management officials of
the association for the purpose of the
OCC’s evaluation of the character and
qualifications of the management of the
association. In connection with the
OCC’s consideration of an application
for permission to organize and
subsequent to issuance of a Federal
savings association charter to the
association by the OCC, any individual
or group of individuals acting in concert
under 12 CFR part 174, who owns or
proposes to acquire, directly or
indirectly, ten percent or more of the
stock of an association subject to this
section, shall submit a Biographical and
Financial Report, on forms prescribed
by the OCC, to the appropriate OCC
licensing office.
(f) Supervisory transactions. This
section does not apply to any
application for a Federal savings
association charter submitted in
connection with a transfer or an
acquisition of the business or accounts
of a savings association if the OCC
determines that such transfer or
acquisition is instituted for supervisory
purposes, or in connection with
applications for Federal charters for
interim de novo associations chartered
for the purpose of facilitating mergers,
holding company reorganizations, or
similar transactions.
§ 143.4
Issuance of charter.
Approval by the OCC of the
organization of a Federal savings
association or the conversion of an
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
insured association to Federal savings
association form shall constitute
issuance of a charter and shall be final,
provided that the association complies
with the procedures set out at § 144.2(a)
of this chapter. The charter shall
conform with the requirements of
§ 144.1 of this chapter, the permissible
provisions of § 144.2, or other
provisions specifically approved by the
OCC.
sroberts on DSK5SPTVN1PROD with RULES
§ 143.5
Completion of organization.
(a)(1) Temporary officers. When the
OCC approves an application for
permission to organize a Federal savings
association, the applicants shall
constitute the organization committee
and elect a chairperson, vicechairperson, and a secretary, who shall
act as the temporary officers of the
association until their successors are
duly elected and qualified. The
temporary officers may effect
compliance with any conditions
prescribed by the OCC.
(2) Organization meeting. Promptly
upon receipt of a charter, the temporary
officers shall call a meeting of the
association’s capital subscribers; notice
of such meeting shall be mailed to each
subscriber at least 5 days before the
meeting day. Subscribers who have
subscribed for a majority of the
association’s capital, present in person
or by proxy, shall constitute a quorum.
At such meeting, directors of the
association shall be elected according to
the association’s charter and bylaws,
and any other action permitted by such
charter and bylaws may be taken; any
such action shall be considered an
acceptance by the association of such
charter and of such bylaws, which shall
be in the form provided in parts 144 and
152 of this chapter.
(b) First meeting of directors. Upon
election, the association’s board of
directors shall hold a meeting to elect
officers of the association as provided
by its charter and bylaws and to take
any other action necessary to permit
operation of the association in
accordance with law, the association’s
charter and bylaws, and these rules and
regulations. When such officers have
been bonded under § 163.190 of this
chapter, they shall immediately collect
the sums due on subscriptions to the
association’s capital.
(c) Membership in Federal Home Loan
Bank and insurance of accounts. When
a Federal savings association’s charter is
issued it must promptly qualify as a
member of a Federal Home Loan Bank
and meet all requirements necessary to
obtain insurance of its accounts by the
Federal Deposit Insurance Corporation.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(d) Failure to complete. Organization
of a Federal savings association is
completed when the organization
meeting and the first meeting of its
directors have been held, permanent
officers have been bonded, the
association holds the cash required to be
paid on subscriptions to its capital, if
required, Federal Home Loan Bank
membership has been obtained and
Federal Deposit Insurance Corporation
insurance of accounts has been
confirmed and any conditions imposed
by the OTS prior to July 21, 2011 or by
the OCC in connection with approval of
the application have been met. If
organization is not so completed within
six months after issuance of a charter, or
within such additional period granted
for good cause, and in the case of an
interim Federal savings association, if a
merger, or other transaction facilitated
by the existence of an interim
association, has not been approved, the
charter shall become void and all cash
collected on subscriptions shall
thereupon be returned.
§ 143.6 Limitations on transaction of
business.
No person may organize a Federal
savings association, collect money from
others for such purpose, or represent
himself or herself as authorized to do so,
and no Federal savings association shall
transact any business prior to
completion of its organization, except as
provided in this part.
§ 143.7 Federal savings association
created in connection with an association in
default or in danger of default.
The preceding sections of this part do
not apply to a Federal savings
association which is proposed by the
Federal Deposit Insurance Corporation
under section 11(c) of the Federal
Deposit Insurance Act (12 U.S.C.
1821(c)) or section 21A of the Federal
Home Loan Bank Act (12 U.S.C. 1441A),
or is otherwise chartered by the OCC in
connection with an association in
default or in danger of default.
Incorporation and organization of such
associations are complete when the OCC
so determines.
Conversion
§ 143.8 Conversion of depository
institutions to Federal mutual charter.
(a) With the approval of the OCC, any
depository institution, as defined in
§ 152.13 of this chapter, that is in
mutual form, may convert into a Federal
mutual savings association, provided
that:
(1) The depository institution, upon
conversion, will have its deposits
PO 00000
Frm 00045
Fmt 4701
Sfmt 4700
48993
insured by the Federal Deposit
Insurance Corporation;
(2) The depository institution, in
accomplishing the conversion, complies
with all applicable state and Federal
statutes and regulations, and OCC
policies, and obtains all necessary
regulatory and member approvals; and
(3) The resulting Federal mutual
association conforms, within the time
prescribed by the OCC, to the
requirements of section 5(c) of the Home
Owners’ Loan Act.
(b) Recommendations regarding
applications for issuance of Federal
charters are privileged, confidential and
subject to part 4, subpart C of this
chapter.
§ 143.9 Application for conversion to
Federal mutual charter.
(a)(1) Filing. Any depository
institution that proposes to convert to a
Federal mutual association as provided
in § 143.8 must, after approval by its
board of directors, file an application on
forms obtained from the OCC with the
appropriate licensing office. The
applicant must submit any financial
statements or other information the OCC
may require.
(2) Procedures. An application for
conversion filed under this section is
subject to the procedures for
organization of a Federal mutual
association at § 143.2(d) through (f) of
this chapter.
(b) Plan of conversion. The applicant
shall submit with its application a plan
of conversion specifying the location of
the home office and any branch offices
to be maintained by the Federal savings
association, and providing for:
(1) Appropriate reserves and surplus
for the Federal savings association;
(2) Satisfaction in full or assumption
by the Federal savings association of all
creditor obligations of the applicant;
(3) Issuance by the Federal savings
association of savings accounts to
current holders of withdrawable
accounts in an amount equaling the
value of such accounts; and
(4) If applicable, issuance of
additional savings accounts to current
holders of nonwithdrawable capital
stock of the applicant in an amount
equaling the value of their
nonwithdrawable capital stock,
including the present value of any
preference to which such holders are
entitled.
(c) Action on application. The OCC
will consider such application and any
information submitted with the
application, and may approve the
application in accordance with section
5(e) of the Home Owners’ Loan Act and
§ 143.2(g)(1). Converting depository
E:\FR\FM\09AUR2.SGM
09AUR2
48994
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
institutions that have been in existence
less than three years will be subject to
all approval criteria and other
requirements applicable to de novo
Federal associations. Approval of an
application and issuance by the OCC of
a charter will be subject to:
(1) Compliance by the applicant with
all conditions prescribed in the
approval;
(2) Receipt by the applicant of
approval of the plan of conversion by
such vote as may be required by the
laws of the applicant’s jurisdiction to
consider such action;
(3) In the case of a converting
association the accounts of which are
not insured by the Federal Deposit
Insurance Corporation, receipt by the
OCC of written confirmation from the
Federal Deposit Insurance Corporation
that the accounts of the converting
association will be insured by the
Federal Deposit Insurance Corporation;
and
(4) Receipt by the OCC of written
confirmation from the appropriate
Federal Home Loan Bank of approval of
the converting institution’s application
for Federal Home Loan Bank
membership, if the institution is not a
member.
§ 143.10
Organization after conversion.
Except as provided in § 143.11, after
a Federal charter is issued under § 143.9
the association’s members shall, after
due notice, or upon a valid adjournment
of a previous legal meeting, hold a
meeting to elect directors and take all
other action necessary fully to effect the
conversion and operate the association
in accordance with law and these rules
and regulations. Immediately thereafter
the board of directors shall meet, elect
officers, and transact any other
appropriate business.
sroberts on DSK5SPTVN1PROD with RULES
§ 143.11 Organization plan for governance
during first years after issuance of Federal
mutual savings bank charter.
(a) Organizational meeting. Except as
provided in paragraph (c)(1) of this
section, promptly upon receipt of a
charter, the officers of a Federal mutual
savings bank which, immediately prior
to conversion, was a state chartered
mutual savings bank, shall call a
meeting of the members. Notice for, and
conduct of, such meeting shall be in
accordance with the bank’s Federal
charter and bylaws. Business to be
conducted at the organizational meeting
shall include the election of trustees
(who may also be known as a board of
directors) and any other matters
permitted by the charter and bylaws.
Any action taken at such meeting shall
be deemed an acceptance of the charter
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
and bylaws approved by the OTS prior
to July 21, 2011 or by the OCC pursuant
to § 144.1 of this chapter.
(b) First meeting of trustees. Upon
election or appointment, the board of
trustees shall hold a meeting to elect the
officers of the bank in accordance with
its Federal charter and bylaws, and to
take other action necessary to permit the
operation of the bank in accordance
with the Home Owners’ Loan Act of
1933, as amended, the bank’s charter
and bylaws, these rules and regulations,
and orders of the OCC.
(c) Plan for governance of association
during first six years after issuance of
Federal charter. (1)(i) An applicant for
a Federal mutual savings bank charter
may submit a plan which provides that
each member of its governing board, i.e.,
board of trustees, managers, or directors,
may continue to serve, provided that
within two years of the issuance of a
Federal charter at least one-fifth of the
members of such board shall have been
elected by vote, either in person or by
proxy, of the bank’s membership as
provided in its Federal charter, that
within three years of the issuance of its
Federal charter at least two-fifths of the
members of such board shall have been
elected by such a membership vote, that
within four years of the issuance of its
Federal charter at least three-fifths of the
members of such board shall have been
elected by such a membership vote, that
within five years of the issuance of its
Federal charter at least four-fifths of the
members of such board shall have been
elected by such a membership vote, and
that within six years of the issuance of
its Federal charter all of the members of
such board shall have been elected by
such a membership vote.
(ii) The plan:
(A) Shall set forth the names of those
persons who are being proposed for
service on the applicant’s governing
board after conversion to a Federal
charter,
(B) Shall show how trustees not
elected by the converted bank’s
membership will be appointed or
otherwise selected, and
(C) Shall provide that no trustees may
be appointed or elected to terms of more
than three years.
(iii) The plan may provide that
(A) After receipt of its Federal charter
the bank will be organized by its
existing governing board,
(B) Within the first two years
following receipt of its Federal charter,
the bank’s charter may be amended
without a membership vote, provided
any such amendment is first approved
by a two-thirds vote of its board of
trustees and is thereafter approved by
the OCC, and
PO 00000
Frm 00046
Fmt 4701
Sfmt 4700
(C) The bank’s first annua1
membership meeting need not take
place until two years after receipt of its
Federal charter.
(2) Except to the extent that the OTS
prior to July 21, 2011 or by the OCC
approves a plan under this paragraph (c)
which is inconsistent with other
provisions of this section, a Federal
mutual savings bank shall in all respects
comply with those other provisions.
§ 143.12
Grandfathered authority.
(a) A Federal savings bank formerly
chartered or designated as a mutual
savings bank under state law may
exercise any authority it was authorized
to exercise as a mutual savings bank
under state law at the time of its
conversion from a state mutual savings
bank to a Federal or other state charter.
Except to the extent such authority may
be exercised by Federal savings
associations not enjoying grandfathered
rights hereunder, such authority may be
exercised only to the degree authorized
under state law at the time of such
conversion. Unless otherwise
determined by the OTS prior to July 21,
2011 or by the OCC an association, in
the exercise of grandfathered authority,
may continue to follow applicable state
laws and regulations in effect at the time
of such conversion.
(b) A Federal savings association that
acquires, or has acquired, a Federal
savings bank by merger or consolidation
may itself exercise any grandfathered
rights enjoyed by the disappearing
institution, whether such rights were
obtained directly through conversion or
through merger or consolidation. The
extent of the grandfathered rights of a
Federal savings association that
disappeared prior to the effective date of
this section shall be determined
exclusively pursuant to this section.
(c) This section shall not be construed
to prevent the exercise by a Federal
savings association enjoying
grandfathered rights hereunder of
authority that is available under the
applicable state law only upon the
occurrence of specific preconditions,
such as the attainment of a particular
future date or specified level of
regulatory capital, which have not
occurred at the time of conversion from
a state mutual savings bank, provided
they occur thereafter.
(d) This section shall not be construed
to permit the exercise of any particular
authority on a more liberal basis than is
allowable under the most liberal
construction of either state or Federal
law or regulation.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 143.14
Continuity of existence.
The corporate existence of an
association converting under this part
shall continue in its successor. Each
savings or demand accountholder shall
receive a savings account or accounts in
the converted association equal in
amount to the value of accounts held in
the former association.
PART 144—FEDERAL MUTUAL
SAVINGS ASSOCIATIONS—CHARTER
AND BYLAWS
Sec.
Charter
144.1 Federal mutual charter.
144.2 Charter amendments.
144.4 Issuance of charter.
Bylaws
144.5 Federal mutual savings association
bylaws.
144.6 Effect of subsequent charter or bylaw
change.
Availability
144.7 In association offices.
144.8 Communication between members of
a Federal mutual savings association.
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 2901 et seq., 5412(b)(2)(B).
Charter
§ 144.1
Federal mutual charter.
sroberts on DSK5SPTVN1PROD with RULES
A Federal mutual savings association
shall have a charter in the following
form, which may include any of the
additional provisions set forth in § 144.2
of this part, if such provisions are
specifically requested. A charter for a
Federal mutual savings bank shall
substitute the term ‘‘savings bank’’ for
‘‘association.’’ The term ‘‘trustee’’ may
be substituted for the term ‘‘director.’’
Associations adopting this charter with
existing borrower members must
grandfather those borrower members
who were members as of the date of
issuance of the new charter by the OCC.
Such borrowers shall have one vote for
the period of time such borrowings are
in existence.
Federal Mutual Charter
Section 1. Corporate title. The full
corporate title of the Federal savings
association is llll.
Section 2. Office. The home office
shall be located in llll [city, state].
Section 3. Duration. The duration of
the association is perpetual.
Section 4. Purpose and powers. The
purpose of the association is to pursue
any or all of the lawful objectives of a
Federal mutual savings association
chartered under section 5 of the Home
Owners’ Loan Act and to exercise all the
express, implied, and incidental powers
conferred thereby and by all acts
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
amendatory thereof and supplemental
thereto, subject to the Constitution and
laws of the United States as they are
now in effect, or as they may hereafter
be amended, and subject to all lawful
and applicable rules, regulations, and
orders of the Office of the Comptroller
of the Currency (‘‘OCC’’).
Section 5. Capital. The association
may raise capital by accepting payments
on savings and demand accounts and by
any other means authorized by the OCC.
Section 6. Members. All holders of the
association’s savings, demand, or other
authorized accounts are members of the
association. In the consideration of all
questions requiring action by the
members of the association, each holder
of an account shall be permitted to cast
one vote for each $100, or fraction
thereof, of the withdrawal value of the
member’s account. No member,
however, shall cast more than 1000
votes. All accounts shall be
nonassessable.
Section 7. Directors. The association
shall be under the direction of a board
of directors. The authorized number of
directors shall not be fewer than five nor
more than fifteen persons, as fixed in
the association’s bylaws, except that the
number of directors may be decreased to
a number less than five or increased to
a number greater than fifteen with the
prior approval of the OCC.
Section 8. Capital, surplus, and
distribution of earnings. The association
shall maintain for the purpose of
meeting losses the amount of capital
required by section 5 of the Home
Owners’ Loan Act and by regulations of
the OCC. The association shall
distribute net earnings on its accounts
on such basis and in accordance with
such terms and conditions as may from
time to time be authorized by the OCC:
Provided, That the association may
establish minimum-balance
requirements for accounts to be eligible
for distribution of earnings.
All holders of accounts of the
association shall be entitled to equal
distribution of assets, pro rata to the
value of their accounts, in the event of
voluntary or involuntary liquidation,
dissolution, or winding up of the
association. Moreover, in any such
event, or in any other situation in which
the priority of such accounts is in
controversy, all such accounts shall, to
the extent of their withdrawal value, be
debts of the association having the same
priority as the claims of general
creditors of the association not having
priority (other than any priority arising
or resulting from consensual
subordination) over other general
creditors of the association.
PO 00000
Frm 00047
Fmt 4701
Sfmt 4700
48995
Section 9. Amendment of charter.
Adoption of any preapproved charter
amendment shall be effective after such
preapproved amendment has been
approved by the members at a legal
meeting. Any other amendment,
addition, change, or repeal of this
charter must be approved by the OCC
prior to approval by the members at a
legal meeting, and shall be effective
upon filing with the OCC in accordance
with regulatory procedures.
Attest: lllllllllllllllll
Secretary of the Association
By: lllllllllllllllllll
President or Chief Executive Officer of the
Association
Attest: lllllllllllllllll
Deputy Comptroller for Licensing
By: lllllllllllllllllll
Comptroller of the Currency
Effective Date: llllllllllllll
§ 144.2
Charter amendments.
(a) General. In order to adopt a charter
amendment, a Federal mutual savings
association must comply with the
following requirements:
(1) Board of directors approval. The
board of directors of the association
must adopt a resolution proposing the
charter amendment that states the text
of such amendment;
(2) Form of filing—(i) Application
requirement. If the proposed charter
amendment would: render more
difficult or discourage a merger, proxy
contest, the assumption of control by a
mutual account holder of the
association, or the removal of
incumbent management; or involve a
significant issue of law or policy; then,
the association shall file the proposed
amendment and obtain the prior
approval of the OCC.
(ii) Notice requirement. If the
proposed charter amendment does not
involve a provision that would be
covered by paragraph (a)(2)(i) of this
section and is permissible under all
applicable laws, rules and regulations,
then the association shall submit the
proposed amendment to the appropriate
OCC licensing office, at least 30 days
prior to the effective date of the
proposed charter amendment.
(b) Approval. Any charter amendment
filed pursuant to paragraph (a)(2)(ii) of
this section shall automatically be
approved 30 days from the date of filing
of such amendment, provided that the
association follows the requirements of
its charter in adopting such amendment.
This automatic approval does not apply
if, prior to the expiration of such 30-day
period, the OCC notifies the association
that such amendment is rejected or that
such amendment is deemed to be filed
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
48996
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
under the provisions of paragraph
(a)(2)(i) of this section. In addition,
notwithstanding anything in paragraph
(a) of this section to the contrary, the
following charter amendments,
including the adoption of the Federal
mutual charter as set forth in § 144.1 of
this part, shall be effective and deemed
approved at the time of adoption, if
adopted without change and filed with
the OCC, within 30 days after adoption,
provided the association follows the
requirements of its charter in adopting
such amendments:
(1) Purpose and powers. Add a second
paragraph to section 4, as follows:
Section 4. Purpose and powers. * * *
The association shall have the express
power: (i) To act as fiscal agent of the
United States when designated for that
purpose by the Secretary of the
Treasury, under such regulations as the
Secretary may prescribe, to perform all
such reasonable duties as fiscal agent of
the United States as may be required,
and to act as agent for any other
instrumentality of the United States
when designated for that purpose by
any such instrumentality; (ii) To sue
and be sued, complain and defend in
any court of law or equity; (iii) To have
a corporate seal, affixed by imprint,
facsimile or otherwise; (iv) To appoint
officers and agents as its business shall
require and allow them suitable
compensation; (v) To adopt bylaws not
inconsistent with the Constitution or
laws of the United States and rules and
regulations adopted thereunder and
under this Charter; (vi) To raise capital,
which shall be unlimited, by accepting
payments on savings, demand, or other
accounts, as are authorized by rules and
regulations made by the OCC, and the
holders of all such accounts or other
accounts as shall, to such extent as may
be provided by such rules and
regulations, be members of the
association and shall have such voting
rights and such other rights as are
thereby provided; (vii) To issue notes,
bonds, debentures, or other obligations,
or securities, provided by or under any
provision of Federal statute as from time
to time is in effect; (viii) To provide for
redemption of insured accounts; (ix) To
borrow money without limitation and
pledge and otherwise encumber any of
its assets to secure its debts; (x) To lend
and otherwise invest its funds as
authorized by statute and the rules and
regulations of the OCC; (xi) To wind up
and dissolve, merge, consolidate,
convert, or reorganize; (xii) To purchase,
hold, and convey real estate and
personalty consistent with its objects,
purposes, and powers; (xiii) To
mortgage or lease any real estate and
personalty and take such property by
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
gift, devise, or bequest; and (xiv) To
exercise all powers conferred by law. In
addition to the foregoing powers
expressly enumerated, this association
shall have power to do all things
reasonably incident to the
accomplishment of its express objects
and the performance of its express
powers.
(2) Title change. A Federal mutual
savings association that has complied
with § 143.1(b) of this chapter may
amend its charter by substituting a new
corporate title in section 1.
(3) Home office. A Federal mutual
savings association may amend its
charter by substituting a new home
office in section 2, if it has complied
with applicable requirements of
§ 145.95 of this chapter.
(4) Maximum number of votes. A
Federal mutual savings association may
amend its charter by substituting ll
votes per member in section 6. [Fill in
a number from 1 to 1000.]
(c) Reissuance of charter. A Federal
mutual savings association that has
amended its charter may apply to have
its charter, including the amendments,
reissued by the OCC. Such request for
reissuance should be filed at the
appropriate OCC licensing office and
contain signatures required under
§ 144.1 of this part, together with such
supporting documents as may be
needed to demonstrate that the
amendments were properly adopted.
§ 144.4
Issuance of charter.
Issuance by the OCC of a charter to a
Federal mutual savings association
within the meaning of § 143.4 of this
chapter constitutes the incorporation of
that association by the OCC.
Bylaws
§ 144.5 Federal mutual savings
association bylaws.
(a) General. A Federal mutual savings
association shall operate under bylaws
that contain provisions that comply
with all requirements specified by the
OCC in this section and that are not
otherwise inconsistent with the
provisions of this section, the
association’s charter, and all other
applicable laws, rules, and regulations
provided that, a bylaw provision
inconsistent with the provisions of this
section may be adopted with the
approval of the OCC. Bylaws may be
adopted, amended or repealed by a
majority of the votes cast by the
members at a legal meeting or a majority
of the association’s board of directors.
The bylaws for a Federal mutual savings
bank shall substitute the term ‘‘savings
bank’’ for ‘‘association’’. The term
PO 00000
Frm 00048
Fmt 4701
Sfmt 4700
‘‘trustee’’ may be substituted for the
term ‘‘director’’.
(b) The following requirements are
applicable to Federal mutual savings
associations:
(1) Annual meetings of members. An
association shall provide for and
conduct an annual meeting of its
members for the election of directors
and at which any other business of the
association may be conducted. Such
meeting shall be held, as designated by
its board of directors, at a location
within the state that constitutes the
principal place of business of the
association, or at any other convenient
place the board of directors may
designate, and at a date and time within
150 days after the end of the
association’s fiscal year. At each annual
meeting, the officers shall make a full
report of the financial condition of the
association and of its progress for the
preceding year and shall outline a
program for the succeeding year.
(2) Special meetings of members.
Procedures for calling any special
meeting of the members and for
conducting such a meeting shall be set
forth in the bylaws. The subject matter
of such special meeting must be
established in the notice for such
meeting. The board of directors of the
association or the holders of 10 percent
or more of the voting capital shall be
entitled to call a special meeting. For
purposes of this section, ‘‘voting
capital’’ means FDIC-insured deposits as
of the voting record date.
(3) Notice of meeting of members.
Notice specifying the date, time, and
place of the annual or any special
meeting and adequately describing any
business to be conducted shall be
published for two successive weeks
immediately prior to the week in which
such meeting shall convene in a
newspaper of general circulation in the
city or county in which the principal
place of business of the association is
located, or mailed postage prepaid at
least 15 days and not more than 45 days
prior to the date on which such meeting
shall convene to each of its members of
record at the last address appearing on
the books of the association. A similar
notice shall be posted in a conspicuous
place in each of the offices of the
association during the 14 days
immediately preceding the date on
which such meeting shall convene. The
bylaws may permit a member to waive
in writing any right to receive personal
delivery of the notice. When any
meeting is adjourned for 30 days or
more, notice of the adjournment and
reconvening of the meeting shall be
given as in the case of the original
meeting.
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(4) Fixing of record date. For the
purpose of determining members
entitled to notice of or to vote at any
meeting of members or any adjournment
thereof, or in order to make a
determination of members for any other
proper purpose, the bylaws shall
provide for the fixing of a record date
and a method for determining from the
books of the association the members
entitled to vote. Such date shall be not
more than 60 days nor fewer than 10
days prior to the date on which the
action, requiring such determination of
members, is to be taken. The same
determination shall apply to any
adjourned meeting.
(5) Member quorum. Any number of
members present and voting,
represented in person or by proxy, at a
regular or special meeting of the
members shall constitute a quorum. A
majority of all votes cast at any meeting
of the members shall determine any
question, unless otherwise required by
regulation. At any adjourned meeting,
any business may be transacted that
might have been transacted at the
meeting as originally called. Members
present at a duly constituted meeting
may continue to transact business until
adjournment.
(6) Voting by proxy. Procedures shall
be established for voting at any annual
or special meeting of the members by
proxy pursuant to the rules and
regulations of the OCC, including the
placing of such proxies on file with the
secretary of the association, for
verification, prior to the convening of
such meeting. Proxies may be given
telephonically or electronically as long
as the holder uses a procedure for
verifying the identity of the member. All
proxies with a term greater than eleven
months or solicited at the expense of the
association must run to the board of
directors as a whole, or to a committee
appointed by a majority of such board.
(7) Communications between
members. Provisions relating to
communications between members
shall be consistent with § 144.8 of this
part. No member, however, shall have
the right to inspect or copy any portion
of any books or records of a Federal
mutual savings association containing:
(i) A list of depositors in or borrowers
from such association;
(ii) Their addresses;
(iii) Individual deposit or loan
balances or records; or
(iv) Any data from which such
information could be reasonably
constructed.
(8) Number of directors, membership.
The bylaws shall set forth a specific
number of directors, not a range. The
number of directors shall be not fewer
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
than five nor more than fifteen, unless
a higher or lower number has been
authorized by the OCC. Each director of
the association shall be a member of the
association. Directors may be elected for
periods of one to three years and until
their successors are elected and
qualified, but if a staggered board is
chosen, provision shall be made for the
election of approximately one-third or
one-half of the board each year, as
appropriate. State-chartered savings
banks converting to Federal savings
banks may include alternative
provisions for the election and term of
office of directors so long as such
provisions are authorized by the OCC,
and provide for compliance with the
standard provisions of this section no
later than six years after the conversion
to a Federal savings association.
(9) Meetings of the board. The board
of directors shall determine the place,
frequency, time, procedure for notice,
which shall be at least 24 hours unless
waived by the directors, and waiver of
notice for all regular and special
meetings. The meetings shall be under
the direction of a chairman, appointed
annually by the board; or in the absence
of the chairman, the meetings shall be
under the direction of the president.
The board also may permit telephonic
participation at meetings. The bylaws
may provide for action to be taken
without a meeting if unanimous written
consent is obtained for such action. A
majority of the authorized directors
shall constitute a quorum for the
transaction of business. The act of a
majority of the directors present at any
meeting at which there is a quorum
shall be the act of the board.
(10) Officers, employees and agents.
(i) The bylaws shall contain provisions
regarding the officers of the association,
their functions, duties, and powers. The
officers of the association shall consist
of a president, one or more vice
presidents, a secretary, and a treasurer
or comptroller, each of whom shall be
elected annually by the board of
directors. Such other officers and
assistant officers and agents as may be
deemed necessary may be elected or
appointed by the board of directors or
chosen in such other manner as may be
prescribed in the bylaws. Any two or
more offices may be held by the same
person, except the offices of president
and secretary.
(ii) All officers and agents of the
association, as between themselves and
the association, shall have such
authority and perform such duties in the
management of the association as may
be provided in the bylaws, or as may be
determined by resolution of the board of
directors not inconsistent with the
PO 00000
Frm 00049
Fmt 4701
Sfmt 4700
48997
bylaws. In the absence of any such
provision, officers shall have such
powers and duties as generally pertain
to their respective offices. Any officer
may be removed by the board of
directors with or without cause, but
such removal, other than for cause, shall
be without prejudice to the contractual
rights, if any, of the person so removed.
(iii) Any indemnification provision
must provide that any indemnification
is subject to applicable Federal law,
rules, and regulations.
(11) Vacancies, resignation or removal
of directors. Members of the association
shall elect directors by ballot: Provided,
that in the event of a vacancy on the
board, the board of directors may, by
their affirmative vote, fill such vacancy,
even if the remaining directors
constitute less than a quorum. A
director elected to fill a vacancy shall be
elected to serve only until the next
election of directors by the members.
The bylaws shall set out the procedure
for the resignation of a director, which
shall be by written notice or by any
other procedure established in the
bylaws. Directors may be removed only
for cause as defined in § 163.39 of this
chapter, by a vote of the holders of a
majority of the shares then entitled to
vote at an election of directors.
(12) Powers of the board. The board of
directors shall have the power:
(i) By resolution, to appoint from
among its members and remove an
executive committee and one or more
other committees, which committee[s]
shall have and may exercise all the
powers of the board between the
meetings or the board; but no such
committee shall have the authority of
the board to amend the charter or
bylaws, adopt a plan of merger,
consolidation, dissolution, or provide
for the disposition of all or substantially
all the property and assets of the
association. Such committee shall not
operate to relieve the board, or any
member thereof, of any responsibility
imposed by law;
(ii) To fix the compensation of
directors, officers, and employees; and
to remove any officer or employee at
any time with or without cause;
(iii) To exercise any and all of the
powers of the association not expressly
reserved by the charter to the members.
(13) Nominations for directors. The
bylaws shall provide that nominations
for directors may be made at the annual
meeting by any member and shall be
voted upon, except, however, the
bylaws may require that nominations by
a member must be submitted to the
secretary and then prominently posted
in the principal place of business, at
least 10 days prior to the date of the
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
48998
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
annual meeting. However, if such
provision is made for prior submission
of nominations by a member, then the
bylaws must provide for a nominating
committee, which, except in the case of
a nominee substituted as a result of
death or other incapacity, must submit
nominations to the secretary and have
such nominations similarly posted at
least 15 days prior to the date of the
annual meeting.
(14) New business. The bylaws shall
provide procedures for the introduction
of new business at the annual meeting.
Those provisions may require that such
new business be stated in writing and
filed with the secretary prior to the
annual meeting at least 30 days prior to
the date of the annual meeting.
(15) Amendment. Bylaws may include
any provision for their amendment that
would be consistent with applicable
law, rules, and regulations and
adequately addresses its subject and
purpose.
(i) Amendments shall be effective:
(A) After approval by a majority vote
of the authorized board, or by a majority
of the vote cast by the members of the
association at a legal meeting; and
(B) After receipt of any applicable
regulatory approval.
(ii) When an association fails to meet
its quorum requirement, solely due to
vacancies on the board, the bylaws may
be amended by an affirmative vote of a
majority of the sitting board.
(16) Miscellaneous. The bylaws may
also address the subject of age
limitations for directors or officers as
long as they are consistent with
applicable Federal law, rules or
regulations, and any other subjects
necessary or appropriate for effective
operation of the association.
(c) Form of filing—(1) Application
requirement. (i) Any bylaw amendment
shall be submitted to the appropriate
OCC licensing office if it would:
(A) Render more difficult or
discourage a merger, proxy contest, the
assumption of control by a mutual
account holder of the association, or the
removal of incumbent management;
(B) Involve a significant issue of law
or policy, including indemnification,
conflicts of interest, and limitations on
director or officer liability; or
(C) Be inconsistent with the
requirements of this section or with
applicable laws, rules, regulations, or
the association’s charter.
(ii) Applications submitted under
paragraph (c)(1)(i) of this section are
subject to standard treatment processing
procedures at part 116, subparts A and
E of this chapter.
(iii) For purposes of this paragraph
(c), bylaw provisions that adopt the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
language of the OCC’s model or optional
bylaws, if adopted without change, and
filed with the OCC within 30 days after
adoption, are effective upon adoption.
(2) Filing requirement. If the proposed
bylaw amendment does not involve a
provision that would be covered by
paragraph (c)(1) or (c)(3) of this section,
then the association shall submit the
amendment to the appropriate OCC
licensing office at least 30 days prior to
the date the bylaw amendment is to be
adopted by the association.
(3) Corporate governance procedures.
A Federal mutual association may elect
to follow the corporate governance
procedures of the laws of the state
where the main office of the institution
is located, provided that such
procedures may be elected only to the
extent not inconsistent with applicable
Federal statutes, regulations, and safety
and soundness, and such procedures are
not of the type described in paragraph
(c)(1) of this section. If this election is
selected, a Federal mutual association
shall designate in its bylaws the
provision or provisions from the body of
law selected for its corporate
governance procedures, and shall file a
copy of such bylaws, which are effective
upon adoption, within 30 days after
adoption. The submission shall
indicate, where not obvious, why the
bylaw provisions meet the requirements
stated in paragraph (c)(1) of this section.
(d) Effectiveness. Any bylaw
amendment filed pursuant to paragraph
(c)(2) of this section shall automatically
be effective 30 days from the date of
filing of such amendment, provided that
the association follows the requirements
of its charter and bylaws in adopting
such amendment. This automatic
effective date does not apply if, prior to
the expiration of such 30-day period,
the OCC notifies the association that
such amendment is rejected or that such
amendment requires an application to
be filed pursuant to paragraph (c)(1) of
this section.
§ 144.6 Effect of subsequent charter or
bylaw change.
Notwithstanding any subsequent
change to its charter or bylaws, the
authority of a Federal mutual savings
association to engage in any transaction
shall be determined only by the
association’s charter or bylaws then in
effect.
Availability
§ 144.7
In association offices.
A Federal mutual savings association
shall make available to its members at
all times in its offices a true copy of its
charter and bylaws, including any
PO 00000
Frm 00050
Fmt 4701
Sfmt 4700
amendments, and shall deliver such a
copy to any member on request.
§ 144.8 Communication between members
of a Federal mutual savings association.
(a) Right of communication with other
members. A member of a Federal
mutual savings association has the right
to communicate, as prescribed in
paragraph (b) of this section, with other
members of the Federal savings
association regarding any matter related
to the Federal savings association’s
affairs, except for ‘‘improper’’
communications, as defined in
paragraph (c) of this section. The
association may not defeat that right by
redeeming a savings member’s savings
account in the Federal mutual savings
association.
(b) Member communication
procedures. If a member of a Federal
mutual savings association desires to
communicate with other members, the
following procedures shall be followed:
(1) The member shall give the Federal
mutual savings association a written
request to communicate;
(2) If the proposed communication is
in connection with a meeting of the
Federal savings association’s members,
the request shall be given at least thirty
days before the annual meeting or 10
days before a special meeting;
(3) The request shall contain—
(i) The member’s full name and
address;
(ii) The nature and extent of the
member’s interest in the Federal savings
association at the time the information
is given;
(iii) A copy of the proposed
communication; and
(iv) If the communication is in
connection with a meeting of the
members, the date of the meeting;
(4) The Federal savings association
shall reply to the request within either—
(i) Fourteen days;
(ii) Ten days, if the communication is
in connection with the annual meeting;
or
(iii) Three days, if the communication
is in connection with a special meeting;
(5) The reply shall provide either—
(i) The number of the Federal savings
association’s members and the
estimated reasonable cost to the Federal
savings association of mailing to them
the proposed communication; or
(ii) Notification that the Federal
savings association has determined not
to mail the communication because it is
‘‘improper’’, as defined in paragraph (c)
of this section;
(6) After receiving the amount of the
estimated costs of mailing and sufficient
copies of the communication, the
Federal savings association shall mail
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
the communication to all members, by
a class of mail specified by the
requesting member, either—
(i) Within fourteen days;
(ii) Within seven days, if the
communication is in connection with
the annual meeting;
(iii) As soon as practicable before the
meeting, if the communication is in
connection with a special meeting; or
(iv) On a later date specified by the
member;
(7) If the Federal savings association
refuses to mail the proposed
communication, it shall return the
requesting member’s materials together
with a written statement of the specific
reasons for refusal, and shall
simultaneously send to the appropriate
OCC licensing office two copies each of
the requesting member’s materials, the
Federal savings association’s written
statement, and any other relevant
material. The materials shall be sent
within:
(i) Fourteen days,
(ii) Ten days if the communication is
in connection with the annual meeting,
or
(iii) Three days, if the communication
is in connection with a special meeting,
after the Federal savings association
receives the request for communication.
(c) Improper communication. A
communication is an ‘‘improper
communication’’ if it contains material
which:
(1) At the time and in the light of the
circumstances under which it is made:
(i) Is false or misleading with respect
to any material fact; or
(ii) Omits a material fact necessary to
make the statements therein not false or
misleading, or necessary to correct a
statement in an earlier communication
on the same subject which has become
false or misleading;
(2) Relates to a personal claim or a
personal grievance, or is solicitous of
personal gain or business advantage by
or on behalf of any party;
(3) Relates to any matter, including a
general economic, political, racial,
religious, social, or similar cause, that is
not significantly related to the business
of the Federal savings association or is
not within the control of the Federal
savings association; or
(4) Directly or indirectly and without
expressed factual foundation:
(i) Impugns character, integrity, or
personal reputation,
(ii) Makes charges concerning
improper, illegal, or immoral conduct,
or
(iii) Makes statements impugning the
stability and soundness of the Federal
savings association.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PART 145—FEDERAL SAVINGS
ASSOCIATIONS—OPERATIONS
Sec.
145.1 General authority.
145.2 [Reserved]
145.16 Public deposits, depositaries, and
fiscal agents.
145.17 Funds transfer services.
145.91 Home office.
145.92 Branch offices.
145.93 Application and notice
requirements for branch and home
offices.
145.95 What processing procedures apply
to my home or branch office application
or notice?
145.96 Agency office.
145.101 Fiscal agency.
145.121 Indemnification of directors,
officers and employees.
Authority: 12 U.S.C. 1462a, 1463, 1464,
1828. 5412(b)(2)(B).
§ 145.1
General authority.
A Federal savings association may
exercise all authority granted it by the
Home Owners’ Loan Act of 1933
(‘‘Act’’), 12 U.S.C. 1464, as amended,
and its charter and bylaws, whether or
not implemented specifically by OCC
regulations, subject to the limitations
and interpretations contained in this
part.
§ 145.2
[Reserved]
§ 145.16 Public deposits, depositaries, and
fiscal agents.
(a) Definitions. As used in this
section—
(1) Moneys includes monies and has
the same meaning it has in applicable
state law;
(2) State law includes actions by a
governmental body which has a charter
adopted under the constitution of the
state with provisions respecting
deposits of public money of that body;
(3) Surety means surety under real
and/or personal suretyship, and
includes guarantor; and
(4) Terms in paragraph (b) of this
section have the meanings they have
under applicable state law.
(b) Authority to act as surety for
public deposits. (1) A Federal savings
association that is a deposit association
may give bond or security for deposit in
it of public moneys or investment in it
by a governmental unit if required to do
so by state law, either as an alternative
condition or otherwise, regardless of the
amount required. Any bond or security
may be given and any substitution or
increase thereof may be made under this
section at any time.
(2) If state law requires as a condition
of such deposit or investment that the
Federal savings association or its bond
or security, or any combination thereof,
PO 00000
Frm 00051
Fmt 4701
Sfmt 4700
48999
be surety for or with respect to other
deposits or instruments, whether of that
depositor or investor or of any other(s),
and whether in the Federal savings
association or in any other institution(s)
having, when the investments or
deposits were made, insurance by the
Federal Deposit Insurance Corporation,
the same shall become, or if the state
law is self-executing shall be, such
surety.
(c) Depositaries and fiscal agents.
Subject to regulation of the United
States Treasury Department, a Federal
savings association may serve as a
depositary for Federal taxes, as a
Treasury tax and loan depositary, or as
a depositary of public money and fiscal
agent of the Government or any other
instrumentality thereof when designated
for that purpose by such instrumentality
and approved by the OCC, and may
satisfy any requirement in connection
therewith, including maintaining
accounts described in §§ 161.33, 161.52,
161.53, and 161.54 of this chapter;
pledging collateral; and performing the
services outlined in 31 CFR 202.3(b) or
any section that supersedes or amends
§ 202.3(b).
§ 145.17
Funds transfer services.
A Federal savings association is
authorized to transfer, with or without
fee, its customers’ funds from any
account (including a line of credit) of
the customer at the Federal savings
association or at another financial
intermediary to third parties or other
accounts of the customer on the
customer’s order or authorization by any
mechanism or device, including
cashier’s checks, conforming with
applicable laws and established
commercial practices.
§ 145.91
Home office.
(a) All operations of a Federal savings
association (‘‘you’’) are subject to
direction from the home office.
(b) You must notify the appropriate
OCC licensing office if the permanent
address of your home office changes,
unless you have submitted an
application or notice regarding the
change under §§ 145.93 and 145.95 of
this chapter.
§ 145.92
Branch offices.
(a) Definition. A branch office of a
Federal savings association (‘‘you’’) is
any office other than your home office,
agency office, administrative office, data
processing office, or an electronic means
or facility under part 155 of this chapter.
(b) Branching. Subject to the
application and notice requirements at
§§ 145.93 and 145.95 of this chapter,
you may branch in any state or states of
E:\FR\FM\09AUR2.SGM
09AUR2
49000
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
the United States and its territories
unless the location would violate:
(1) Section 5(r) of the HOLA (12
U.S.C. 1464(r));
(2) Section 10(e)(3) of the HOLA (12
U.S.C. 1467a(e)(3)); or
(3) Section 13(k)(4) of the FDIA (12
U.S.C. 1823(k)(4)).
(c) Preemption. This exercise of the
OCC’s authority is preemptive of any
state law purporting to address the
subject of branching by a Federal
savings association.
sroberts on DSK5SPTVN1PROD with RULES
§ 145.93 Application and notice
requirements for branch and home offices.
(a) Application and notice
requirements. A Federal savings
association (‘‘you’’) must file an
application or notice with the
appropriate OCC licensing office and
receive approval or non-objection under
§ 145.95 before you change the
permanent location of, or establish a
new, home or branch office, except as
provided in this section.
(b) Exceptions. You are not required
to submit an application or notice and
receive OCC approval or non-objection
under § 145.95 under the following
circumstances:
(1) Drive-in or pedestrian offices. You
may establish a drive-in or pedestrian
office that is located within 500 feet of
a public entrance to your existing home
or branch office, provided the functions
performed at the office are limited to
functions that are ordinarily performed
at a teller window.
(2) Short-distance relocation. You
may change the permanent location of
an existing home or branch office to a
site that is within the market area and
short-distance location area of the
existing home or branch office. The
short-distance relocation area of an
existing office is the area that is within:
(i) A 1000-foot radius of an existing
office that is within a Principal City in
a Metropolitan Statistical Area (MSA)
designated by the U.S. Department of
Commerce;
(ii) A one-mile radius of an existing
office that is within an MSA, but is not
within a Principal City; or
(iii) A two-mile radius of an existing
office that is not in an MSA.
(3) Highly-rated Federal savings
associations. You may change the
permanent location of, or establish a
new, branch or home office if you meet
all of the following requirements:
(i) You are eligible for expedited
treatment under § 116.5 of this chapter.
For the purposes of that section, you
must meet the capital requirements
under part 167 of this chapter before
and immediately after you change the
location of your home or branch office
or establish a new branch office.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(ii) You published a notice of your
intent to change the location of your
home or branch office or establish a new
branch office. To satisfy this publication
requirement, you must follow the
procedures in subpart B of part 116 of
this chapter except that:
(A) Under § 116.55(d) and (e) of this
chapter, your public notice must state
that the public may submit comments to
you and to the appropriate OCC
licensing office, and must provide
addresses for you and for the
appropriate OCC licensing office where
the public may submit comments;
(B) Section 4.14(c) of this chapter,
which addresses public inspections of
filings with the OCC, does not apply;
and
(C) Under § 116.60 of this chapter,
you must publish the public notice at
least 35 days before you take the
proposed action. If you publish a public
notice more than 12 months before you
take the proposed action, the
publication is invalid.
(iii) If you intend to change the
location of an existing office, you must
post a notice of your intent in a
prominent location in the existing office
to be relocated. You must post the
notice for 30 days from the date of
publication of the initial public notice
described in paragraph (b)(3)(ii) of this
section.
(iv)(A) No person files a comment
opposing the proposed action within 30
days after the date of the publication of
the proposed notice; or
(B) A person files a comment
opposing the proposed action and the
OCC determines that the comment
raises issues that are not relevant to the
approval standards in § 145.95(b) of this
chapter or that OCC action in response
to the comment is not required.
(4) Re-designations of home and
branch offices. You may re-designate an
existing branch office as a home office
at the same time that you re-designate
your existing home office as a branch
office.
(c) Section 5(m) of the HOLA. If you
are incorporated under the laws of,
organized in, or do business in the
District of Columbia and you satisfy the
requirements of paragraph (b) of this
section, the Comptroller has approved
your home or branch office changes
under section 5(m) of the HOLA.
(d) Maintenance of branch and home
office following conversion,
consolidation, purchase of bulk assets,
merger, or purchase from receiver. An
existing savings association that
converts to a Federal savings association
may maintain an existing office and a
Federal savings association may
maintain any office acquired through
PO 00000
Frm 00052
Fmt 4701
Sfmt 4700
consolidation, purchase of bulk assets,
merger or purchase from the receiver of
an association, except to the extent that
the approval of the conversion,
consolidation, merger, or purchase
specifies otherwise.
(e) Prohibition. You may not file an
application or notice (or utilize any
exception described in paragraph (b) of
this section) to establish a branch office,
if you filed an application to merge or
otherwise surrender your charter and
the application has been pending for
less than six months.
§ 145.95 What processing procedures
apply to my home or branch office
application or notice?
(a) Processing procedures.
Applications and notices under § 145.93
are subject to expedited or standard
treatment under the application
processing procedures at part 116 of this
chapter.
(1) Publication and posting
requirements. (i) You must publish a
public notice of your application or
notice in accordance with the
procedures in subpart B of part 116 of
this chapter. Promptly after publication,
you must transmit copies of the public
notice and the publisher’s affidavit to
the appropriate OCC licensing office.
(ii) If you propose to change the
location of an existing office, you must
also post a notice of the application in
a prominent location in the office to be
relocated. You must post the notice for
30 days from the date of publication of
the initial public notice.
(2) Comment procedures. Commenters
may submit comments on your
application or notice in accordance with
the procedures in subpart C of part 116
of this chapter.
(3) Meeting procedures. The OCC may
arrange a meeting in accordance with
the procedures in subpart D of part 116
of this chapter.
(4) OCC Review. The OCC will
process your application or notice in
accordance with the procedures in
subpart E of part 116 of this chapter.
The applicable review period for
applications filed under standard
treatment is 30 days rather than the time
period specified at § 116.270(a) of this
chapter.
(b) Approval standards. (1) The OCC
will approve an application (or not
object to a notice), if your overall
policies, condition, and operations
afford no basis for supervisory
objection.
(i) You should meet or exceed
minimum capital requirements under
part 167 of this chapter and should be
at least adequately capitalized as
described in § 165.4(b)(2) of this
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
chapter, before and immediately after
the proposed action. If you are
undercapitalized as described in
§ 165.4(b)(3) of this chapter, the OCC
will deny your application (or
disapprove your notice), unless the
proposed action is otherwise permitted
under section 38(e)(4) of the FDIA.
(ii) The OCC will evaluate your record
of helping to meet the credit needs of
your entire community, including lowand moderate-income neighborhoods,
under part 195 of this chapter. The OCC
may:
(A) Deny your application or
disapprove your notice based upon this
evaluation; or
(B) Impose a condition to the approval
of your application (or non-objection to
your notice) requiring you to improve
specific practices and/or aspects of your
performance under part 195 of this
chapter. In most cases, a commitment to
improve will not be sufficient to
overcome a seriously deficient record.
(iii) The OCC will review the
application or notice under the National
Environmental Policy Act (42 U.S.C.
3421 et seq.) and the National Historic
Preservation Act (16 U.S.C. 470).
(2) In reviewing your application and
notice, the OCC may consider
information available from any source,
including any comments submitted by
interested parties or views expressed by
interested parties at meetings with the
OCC.
(3) The OCC may approve an
amendment to your charter in
connection with a home office
relocation under this section.
(c) Expiration of OCC approval. (1)
You must open or relocate your office
within twelve months of OCC approval
of your application (or the date of OCC
non-objection to your notice), unless the
OCC prescribes another time period.
The OCC may extend the time period if
it determines that you are making a
good-faith effort to promptly open or
relocate the proposed office.
(2) If you do not open or relocate the
proposed office within this time period,
you must comply with the application
and notice requirements of this section
before you may open or relocate the
proposed office.
sroberts on DSK5SPTVN1PROD with RULES
§ 145.96
Agency office.
(a) General. A Federal savings
association may establish or maintain an
agency office to engage in one or more
of the following activities:
(1) Servicing, originating, or
approving loans and contracts;
(2) Managing or selling real estate
owned by the Federal savings
association; and
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(3) Conducting fiduciary activities or
activities ancillary to the association’s
fiduciary business in compliance with
subpart A of part 150 of this chapter.
(b) Additional services. A Federal
savings association may request, and the
OCC may approve, any service not listed
in paragraph (a) of this section, except
for payment on savings accounts.
(c) Records. A Federal savings
association must maintain records of all
business it transacts at an agency office.
It must maintain these records at the
agency office, and must transmit copies
to a home or branch office.
§ 145.101
Fiscal agency.
A Federal savings association
designated fiscal agent by the Secretary
of the Treasury or with OCC approval by
another instrumentality of the United
States, shall, as such, perform such
reasonable duties and exercise only
such powers and privileges as the
Secretary of the Treasury or such
instrumentality may prescribe.
§ 145.121 Indemnification of directors,
officers and employees.
A Federal savings association shall
indemnify its directors, officers, and
employees in accordance with the
following requirements:
(a) Definitions and rules of
construction. (1) Definitions for
purposes of this section.
(i) Action. The term ‘‘action’’ means
any judicial or administrative
proceeding, or threatened proceeding,
whether civil, criminal, or otherwise,
including any appeal or other
proceeding for review;
(ii) Court. The term ‘‘court’’ includes,
without limitation, any court to which
or in which any appeal or any
proceeding for review is brought.
(iii) Final judgment. The term ‘‘final
judgment’’ means a judgment, decree, or
order which is not appealable or as to
which the period for appeal has expired
with no appeal taken.
(iv) Settlement. The term ‘‘settlement’’
includes entry of a judgment by consent
or confession or a plea of guilty or nolo
contendere.
(2) References in this section to any
individual or other person, including
any association, shall include legal
representatives, successors, and assigns
thereof.
(b) General. Subject to paragraphs (c)
and (g) of this section, a Federal savings
association shall indemnify any person
against whom an action is brought or
threatened because that person is or was
a director, officer, or employee of the
association, for:
(1) Any amount for which that person
becomes liable under a judgment if such
action; and
PO 00000
Frm 00053
Fmt 4701
Sfmt 4700
49001
(2) Reasonable costs and expenses,
including reasonable attorney’s fees,
actually paid or incurred by that person
in defending or settling such action, or
in enforcing his or her rights under this
section if he or she attains a favorable
judgment in such enforcement action.
(c) Requirements. (1) Indemnification
shall be made to such person under
paragraph (b) of this section only if:
(i) Final judgment on the merits is in
his or her favor; or
(ii) In case of:
(A) Settlement,
(B) Final judgment against him or her,
or
(C) Final judgment in his or her favor,
other than on the merits, if a majority
of the disinterested directors of the
Federal savings association determine
that he or she was acting in good faith
within the scope of his or her
employment or authority as he or she
could reasonably have perceived it
under the circumstances and for a
purpose he or she could reasonably
have believed under the circumstances
was in the best interests of the savings
association or its members.
(2) However, no indemnification shall
be made unless the association gives the
OCC at least 60 days’ notice of its
intention to make such indemnification.
Such notice shall state the facts on
which the action arose, the terms of any
settlement, and any disposition of the
action by a court. Such notice, a copy
thereof, and a certified copy of the
resolution containing the required
determination by the board of directors
shall be sent to the association’s
supervisory office, which shall
promptly acknowledge receipt thereof.
The notice period shall run from the
date of such receipt. No such
indemnification shall be made if the
OCC advises the association in writing,
within such notice period, the OCC’s
objection thereto.
(d) Insurance. A Federal savings
association may obtain insurance to
protect it and its directors, officers, and
employees from potential losses arising
from claims against any of them for
alleged wrongful acts, or wrongful acts,
committed in their capacity as directors,
officers, or employees. However, no
Federal savings association may obtain
insurance which provides for payment
of losses of any person incurred as a
consequence of his or her willful or
criminal misconduct.
(e) Payment of expenses. If a majority
of the directors of a Federal savings
association concludes that, in
connection with an action, any person
ultimately may become entitled to
indemnification under this section, the
directors may authorize payment of
E:\FR\FM\09AUR2.SGM
09AUR2
49002
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
reasonable costs and expenses,
including reasonable attorneys’ fees,
arising from the defense or settlement of
such action. Nothing in this paragraph
(e) shall prevent the directors of the
savings association from imposing such
conditions on a payment of expenses as
they deem warranted and in the
interests of the savings association.
Before making advance payment of
expenses under this paragraph (e), the
savings association shall obtain an
agreement that the savings association
will be repaid if the person on whose
behalf payment is made is later
determined not to be entitled to such
indemnification.
(f) Exclusiveness of provisions. No
Federal savings association shall
indemnify any person referred to in
paragraph (b) of this section or obtain
insurance referred to in paragraph (d) of
the section other than in accordance
with this section. However, an
association which has a bylaw in effect
relating to indemnification of its
personnel shall be governed solely by
that bylaw, except that its authority to
obtain insurance shall be governed by
paragraph (d) of this section.
(g) The indemnification provided for
in paragraph (b) of this section is subject
to and qualified by 12 U.S.C. 1821(k).
PART 146—FEDERAL MUTUAL
SAVINGS ASSOCIATIONS—MERGER,
DISSOLUTION, REORGANIZATION,
AND CONVERSION
Sec.
146.1 Definitions.
146.2 Procedure; effective date.
146.3 Transfer of assets upon merger or
consolidation.
146.4 Voluntary dissolution.
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 2901 et seq. 5412(b)(2)(B).
§ 146.1
Definitions.
The terms used in §§ 146.2 and 146.3
shall have the same meaning as set forth
in §§ 152.13(b) and 163.22(g) of this
chapter.
sroberts on DSK5SPTVN1PROD with RULES
§ 146.2
Procedure; effective date.
(a) A Federal mutual savings
association may combine with any
depository institution, provided that:
(1) The combination is in compliance
with, and receives all approvals
required under, any applicable statutes
and regulations;
(2) Any resulting Federal savings
association meets the requirements for
Federal Home Loan Bank membership
and insurance of accounts;
(3) Any resulting Federal savings
association conforms within the time
prescribed by the OCC to the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
requirements of sections 5(c) and 10(m)
of the Home Owners’ Loan Act; and
(4) The resulting institution shall be a
mutually held savings association,
unless:
(i) The transaction involves a
supervisory merger;
(ii) The transaction is approved under
part 192 of this chapter; or
(iii) The transaction involves a
transfer in the context of a mutual
holding company reorganization under
section 10(o) of the Home Owners’ Loan
Act.
(b) Each Federal mutual savings
association, by a two-thirds vote of its
board of directors, shall approve a plan
of combination evidenced by a
combination agreement. The agreement
shall state:
(1) That the combination shall not be
effective unless and until the
combination receives any necessary
approval from the OCC pursuant to
§ 163.22 (a) or (c), or in the case of a
transaction requiring a notice pursuant
to § 163.22(c), the notice has been filed,
and the appropriate period of time has
passed or the OCC has advised the
parties that it will not disapprove the
transaction;
(2) Which constituent institution is to
be the resulting institution;
(3) The name of the resulting
institution;
(4) The location of the home office
and any other offices of the resulting
institution;
(5) The terms and conditions of the
combination and the method of
effectuation;
(6) Any charter amendments, or the
new charter in the combination;
(7) The basis upon which the
resulting institution’s savings accounts
will be issued;
(8) If the Federal mutual savings
association is the resulting institution,
the number, names, residence
addresses, and terms of directors;
(9) The effect upon and assumption of
any liquidation account of a
disappearing institution by the resulting
institution; and
(10) Such other provisions,
agreements, or understandings as relate
to the combination.
(c) Prior written notification or notice
to the appropriate OCC licensing office
or prior written approval of the OCC,
pursuant to § 163.22 of this chapter, is
required for every combination. In the
case of applications and notices
pursuant to 163.22 (a) or (c), the OCC
shall apply the criteria set out in
§ 163.22 of this chapter and shall
impose any conditions it deems
necessary or appropriate to ensure
compliance with those criteria and the
requirements of this chapter.
PO 00000
Frm 00054
Fmt 4701
Sfmt 4700
(d) Where the resulting institution is
a Federal mutual savings association,
the OCC may approve a temporary
increase in the number of directors of
the resulting institution provided that
the association submits a plan for
bringing the board of directors into
compliance with the requirements of
§ 144.1 of this chapter within a
reasonable period of time.
(e) Notwithstanding any other
provision of this part, the OCC may
require that a plan of combination be
submitted to the voting members of any
of the mutual savings associations that
are constituent institutions at a duly
called meeting(s), and that the plan, to
be effective, be approved by such voting
members.
(f) A conservator or receiver for a
Federal mutual savings association may
combine the association with another
insured depository institution without
submitting the plan to the association’s
board of directors or members for their
approval.
(g) If a plan of combination provides
for a resulting Federal mutual savings
association’s name or location to be
changed, its charter shall be amended
accordingly. If the resulting institution
is a Federal mutual savings association,
the effective date of the combination
shall be the date specified in the
approval; if the resulting institution is
not a Federal savings association, the
effective date shall be that prescribed
under applicable law. Approval of a
merger automatically cancels the
Federal charter of a Federal association
that is a disappearing institution as of
the effective date of merger, and the
association shall, on that date, surrender
its charter to the OCC.
§ 146.3 Transfer of assets upon merger or
consolidation.
On the effective date of a merger or
consolidation in which the resulting
institution is a Federal association, all
assets and property of the disappearing
institutions shall immediately, without
any further act, become the property of
the resulting institution to the same
extent as they were the property of the
disappearing institutions, and the
resulting institution shall be a
continuation of the entity which
absorbed the disappearing institutions.
All rights and obligations of the
disappearing institutions shall remain
unimpaired, and the resulting
institution shall, on the effective date of
the merger or consolidation, succeed to
all those rights and obligations, subject
to the Home Owners’ Loan Act and
other applicable statutes.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 146.4
Voluntary dissolution.
sroberts on DSK5SPTVN1PROD with RULES
(a) A Federal savings association’s
board of directors may propose a plan
for dissolution of the association. The
plan may provide for either:
(1) Appointment of the Federal
Deposit Insurance Corporation (under
section 5 of the Act and section 11 of
the Federal Deposit Insurance Act, as
amended or section 21A of the Federal
Home Loan Bank Act, as amended) as
receiver for the purpose of liquidation;
(2) Transfer of all the association’s
assets to another association or homefinancing institution under Federal or
state charter either for cash sufficient to
pay all obligations of the association
and retire all outstanding accounts or in
exchange for that association’s payment
of all the association’s outstanding
obligations and issuance of share
accounts or other evidence of interest to
the association’s members on a pro rata
basis; or
(3) Dissolution in a manner proposed
by the directors which they consider
best for all concerned.
(b) The plan, and a statement of
reasons for proposing dissolution and
for proposing the plan, shall be
submitted to the appropriate OCC
licensing office for approval. The OCC
will approve the plan if the OCC
believes dissolution is advisable and the
plan best for all concerned, but if the
OCC considers the plan inadvisable, the
OCC may either make recommendations
to the association concerning the plan or
disapprove it. When the plan is
approved by the association’s board of
directors and by the OCC, it shall be
submitted to the association’s members
at a duly called meeting and, when
approved by a majority of votes cast at
that meeting, shall become effective.
After dissolution in accordance with the
plan, a certificate evidencing
dissolution, supported by such evidence
as the may require, shall immediately be
filed with the OCC. When the OCC
receives such evidence satisfactory to
the OCC, it will terminate the corporate
existence of the dissolved association
and the association’s charter shall
thereby be canceled. A Federal savings
association is not required to obtain
approval under this section where the
Federal savings association transfers all
of its assets and liabilities to a bank in
a transaction that is subject to
§ 163.22(b) of this chapter.
PART 150—FIDUCIARY POWERS OF
FEDERAL SAVINGS ASSOCIATIONS
Sec.
150.10 What regulations govern the
fiduciary operations of Federal savings
associations?
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
150.20 What are fiduciary powers?
150.30 What fiduciary capacities does this
part cover?
150.40 When do I have investment
discretion?
150.50 What is a fiduciary account?
150.60 What other definitions apply to this
part?
Subpart A—Obtaining Fiduciary Powers
150.70 Must I obtain OCC approval or file
a notice before I exercise fiduciary
powers?
150.80 How do I obtain OCC approval?
150.90 What information must I include in
my application?
150.100 What factors may the OCC consider
in its review of my application?
150.110 [Reserved]
150.120 What action will the OCC take on
my application?
150.125 How do I file the notice under
§ 150.70(c)?
Subpart B—Exercising Fiduciary Powers
150.130 How may I conduct multi-state
operations?
150.135 How do I determine which state’s
laws apply to my operations?
150.136 To what extent do state laws apply
to my fiduciary operations?
150.140 Must I adopt and follow written
policies and procedures in exercising
fiduciary powers?
Fiduciary Personnel and Facilities
150.150 Who is responsible for the exercise
of fiduciary powers?
150.160 What personnel and facilities may
I use to perform fiduciary services?
150.170 May my other departments or
affiliates use fiduciary personnel and
facilities to perform other services?
150.180 May I perform fiduciary services
for, or purchase fiduciary services from,
another association or entity?
150.190 Must fiduciary officers and
employees be bonded?
Review of a Fiduciary Account
150.200 Must I review a prospective
account before I accept it?
150.210 Must I conduct another review of
an account after I accept it?
150.220 Are any other account reviews
required?
Custody and Control of Assets
150.230 Who must maintain custody or
control of assets in a fiduciary account?
150.240 May I hold investments of a
fiduciary account off-premises?
150.250 Must I keep fiduciary assets
separate from other assets?
Investing Funds of a Fiduciary Account
150.260 How may I invest funds of a
fiduciary account?
Funds Awaiting Investment or Distribution
150.290 What must I do with fiduciary
funds awaiting investment or
distribution?
150.300 Where may I deposit fiduciary
funds awaiting investment or
distribution?
150.310 What if the FDIC does not insure
the deposits?
PO 00000
Frm 00055
Fmt 4701
Sfmt 4700
49003
150.320 What is acceptable collateral for
uninsured deposits?
Restrictions on Self Dealing
150.330 Are there investments in which I
may not invest funds of a fiduciary
account?
150.340 May I exercise rights to purchase
additional stock or fractional shares of
my stock or obligations or the stock or
obligations of my affiliates?
150.350 May I lend, sell, or transfer assets
of a fiduciary account if I have an
interest in the transaction?
150.360 May I make a loan to a fiduciary
account that is secured by an interest in
the assets of the account?
150.370 May I sell assets or lend money
between fiduciary accounts?
Compensation, Gifts, and Bequests
150.380 May I earn compensation for acting
in a fiduciary capacity?
150.390 May my officer or employee retain
compensation for acting as a cofiduciary?
150.400 May my fiduciary officer or
employee accept a gift or bequest?
Recordkeeping Requirements
150.410 What records must I keep?
150.420 How long must I keep these
records?
150.430 Must I keep fiduciary records
separate and distinct from other records?
Audit Requirements
150.440 When do I have to audit my
fiduciary activities?
150.450 What standards govern the conduct
of the audit?
150.460 Who may conduct an audit?
150.470 Who directs the conduct of the
audit?
150.480 How do I report the results of the
audit?
Subpart C—Depositing Securities With
State Authorities
150.490 When must I deposit securities
with state authorities?
150.500 How much must I deposit if I
administer fiduciary assets in more than
one state?
150.510 What must I do if state authorities
refuse my deposit?
Subpart D—Terminating Fiduciary Activities
Receivership or Liquidation
150.520 What happens if I am placed in
receivership or voluntary liquidation?
Surrender of Fiduciary Powers
150.530 How do I surrender fiduciary
powers?
150.540 When will the OCC terminate my
fiduciary powers?
150.550 May I recover my deposit from
state authorities?
Revocation of Fiduciary Powers
150.560 When may the OCC revoke my
fiduciary powers?
150.570 What procedures govern the
revocation?
E:\FR\FM\09AUR2.SGM
09AUR2
49004
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Subpart E—Activities Exempt From This
Part
150.580 When may I conduct fiduciary
activities without obtaining OCC
approval?
150.590 What standards must I observe
when acting in exempt fiduciary
capacities?
150.600 How may funds be invested when
I act in an exempt fiduciary capacity?
150.610 What disclosures must I make
when acting in exempt fiduciary
capacities?
150.620 May I receive compensation for
acting in exempt fiduciary capacities?
(i) A fiduciary in a relationship
established under a state law that is
substantially similar to the Uniform
Gifts to Minors Act or the Uniform
Transfers to Minors Act as published by
the American Law Institute.
(j) Investment adviser, if you receive
a fee for your investment advice.
(k) Any capacity in which you have
investment discretion on behalf of
another.
(l) Any other similar capacity that the
OCC may authorize under 12 U.S.C.
1464(n).
Authority: 12 U.S.C. 1462a, 1463, 1464,
5412(b)(2)(B).
§ 150.40 When do I have investment
discretion?
§ 150.10 What regulations govern the
fiduciary operations of Federal savings
associations?
(a) General. You have investment
discretion when you have, with respect
to a fiduciary account, the sole or shared
authority to determine what securities
or other assets to purchase or sell on
behalf of that account. It does not matter
whether you have exercised this
authority.
(b) Delegations. You retain investment
discretion if you delegate investment
discretion to another. You also have
investment discretion if you receive
delegated authority to exercise
investment discretion from another.
A Federal savings association (‘‘you’’)
must conduct its fiduciary operations in
accordance with 12 U.S.C. 1464(n) and
this part.
§ 150.20
What are fiduciary powers?
Fiduciary powers are the authority
that the OCC permits you to exercise
under 12 U.S.C. 1464(n).
§ 150.30 What fiduciary capacities does
this part cover?
You are subject to this part if you act
in a fiduciary capacity, except as
described in subpart E of this part. You
act in a fiduciary capacity when you act
in any of the following capacities:
(a) Trustee.
(b) Executor.
(c) Administrator.
(d) Registrar of stocks and bonds.
(e) Transfer agent.
(f) Assignee.
(g) Receiver.
(h) Guardian or conservator of the
estate of a minor, an incompetent
person, an absent person, or a person
over whose estate a court has taken
jurisdiction, other than under
bankruptcy or insolvency laws.
§ 150.50
What is a fiduciary account?
A fiduciary account is an account that
you administer acting in a fiduciary
capacity.
§ 150.60 What other definitions apply to
this part?
Activities ancillary to your fiduciary
business include advertising, marketing,
or soliciting fiduciary business,
contacting existing or potential
customers, answering questions and
providing information to customers
related to their accounts, acting as
liaison between you and your customer
(for example, forwarding requests for
distribution, changes in investment
objectives, forms, or funds received
from the customer), and inspecting or
maintaining custody of fiduciary assets
or holding title to real property. This list
is illustrative and not comprehensive.
Other activities may also be ‘‘ancillary
activities’’ for purposes of this
definition.
Affiliate has the same meaning as in
12 U.S.C. 221a(b). For purposes of this
part, substitute the term ‘‘Federal
savings association’’ for the term
‘‘member bank’’ whenever it appears in
12 U.S.C. 221a(b).
Applicable law means the law of a
state or other jurisdiction governing
your fiduciary relationships, any
Federal law governing those
relationships, the terms of the
instrument governing a fiduciary
relationship, and any court order
pertaining to the relationship.
Fiduciary activities include accepting
a fiduciary appointment, executing
fiduciary-related documents, providing
investment advice for a fee regarding
fiduciary assets, or making discretionary
decisions regarding investment or
distribution of assets.
Fiduciary officers and employees
means the officers and employees of a
Federal savings association to whom the
board of directors or its designee has
assigned functions involving the
exercise of the association’s fiduciary
powers.
Subpart A—Obtaining Fiduciary
Powers
§ 150.70 Must I obtain OCC approval or file
a notice before I exercise fiduciary powers?
You should refer to the following
chart to determine if you must obtain
OCC approval or file a notice with the
OCC before you exercise fiduciary
powers. This chart does not apply to
activities that are exempt under subpart
E of this part.
If you will conduct . . .
Then . . .
(a) Fiduciary activities for the first time and the OCC has not previously
approved an application that you submitted under this part.
(b) Fiduciary activities that are materially different from the activities
that the OCC has previously approved for you, including fiduciary activities that the OCC has previously approved for you that you have
not exercised for at least five years.
(c) Fiduciary activities that are not materially different from the activities
that the OCC has previously approved for you.
You must obtain prior approval from the OCC under §§ 150.80 through
150.120 before you conduct the activities
You must obtain prior approval from the OCC under §§ 150.80 through
150.120 before you conduct the activities
sroberts on DSK5SPTVN1PROD with RULES
(d) Activities that are ancillary to your fiduciary business ........................
§ 150.80
How do I obtain OCC approval?
You must file an application under
part 116, subparts A and E of this
chapter.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
You must file a written notice described at § 150.125 if you commence
the activities in a new state. You do not need to file a written notice
if you commence the activities at a new location in a state where you
already conduct these activities.
You do not have to obtain prior OCC approval or file a notice with the
OCC.
§ 150.90 What information must I include
in my application?
You must describe the fiduciary
powers that you or your affiliate will
PO 00000
Frm 00056
Fmt 4701
Sfmt 4700
exercise. You must also include
information necessary to enable the
OCC to make the determinations
described in § 150.100.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 150.100 What factors may the OCC
consider in its review of my application?
§ 150.135 How do I determine which
state’s laws apply to my operations?
The OCC may consider the following
factors when reviewing your
application:
(a) Your financial condition.
(b) Your capital and whether that
capital is sufficient under the
circumstances.
(c) Your overall performance.
(d) The fiduciary powers you propose
to exercise.
(e) Your proposed supervision of
those powers.
(f) The availability of legal counsel.
(g) The needs of the community to be
served.
(h) Any other facts or circumstances
that the OCC considers proper.
(a) The state laws that apply to you by
virtue of 12 U.S.C. 1464(n) are the laws
of the states in which you conduct
fiduciary activities. For each individual
state, you may conduct fiduciary
activities in the capacity of trustee,
executor, administrator, guardian, or in
any other fiduciary capacity the state
permits for its state banks, trust
companies, or other corporations that
compete with Federal savings
associations in the state.
(b) For each fiduciary relationship,
the state referred to in 12 U.S.C. 1464(n)
is the state in which you conduct
fiduciary activities for that relationship.
§ 150.110
§ 150.136 To what extent do state laws
apply to my fiduciary operations?
[Reserved]
§ 150.120 What action will the OCC take on
my application?
The OCC may approve or deny your
application. If your application is
approved, the OCC may impose
conditions to ensure that the
requirements of this part are met.
§ 150.125 How do I file the notice under
§ 150.70(c)?
(a) If you are required to file a notice
under § 150.70(c), within ten days after
you commence the fiduciary activities
in a new state, you must file a written
notice that identifies each new state in
which you conduct or will conduct
fiduciary activities, describe the
fiduciary activities that you conduct or
will conduct in each new state, and
provide sufficient information
supporting a conclusion that the
activities are permissible in the state.
(b) You must file the notice with the
appropriate OCC licensing office.
Subpart B—Exercising Fiduciary
Powers
sroberts on DSK5SPTVN1PROD with RULES
§ 150.130 How may I conduct multi-state
operations?
(a) Conducting fiduciary activities in
more than one state. You may conduct
fiduciary activities in any state, subject
to the application and notice
requirements in subpart A of this part.
(b) Serving customers in more than
one state. When you conduct fiduciary
activities in a state:
(1) You may market your fiduciary
services to, and act as a fiduciary for,
customers located in any state, may act
as a fiduciary for relationships that
include property located in other states,
and may act as a testamentary trustee for
a testator located in other states.
(2) You may establish or utilize an
office in any state to perform activities
that are ancillary to your fiduciary
business.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(a) Application of state law. To
enhance safety and soundness and to
enable Federal savings associations to
conduct their fiduciary activities in
accordance with the best practices of
thrift institutions in the United States
(by efficiently delivering fiduciary
services to the public free from undue
regulatory duplication and burden), the
OCC intends to give Federal savings
associations maximum flexibility to
exercise their fiduciary powers in
accordance with a uniform scheme of
Federal regulation. Accordingly, Federal
savings associations may exercise
fiduciary powers as authorized under
Federal law, including this part, without
regard to state laws that purport to
regulate or otherwise affect their
fiduciary activities, except to the extent
provided in 12 U.S.C. 1464(n) (state
laws regarding scope of fiduciary
powers, access to examination reports
regarding trust activities, deposits of
securities, oaths and affidavits, and
capital) or in paragraph (c) of this
section. For purposes of this section,
‘‘state law’’ includes any state statute,
regulation, ruling, order, or judicial
decision.
(b) Illustrative examples. Examples of
state laws that are preempted by the
HOLA and this section include those
regarding:
(1) Registration and licensing;
(2) Recordkeeping;
(3) Advertising and marketing;
(4) The ability of a Federal savings
association conducting fiduciary
activities to maintain an action or
proceeding in state court; and
(5) Fiduciary-related fees.
(c) State laws that are not preempted.
State laws of the following types are not
preempted to the extent that they only
incidentally affect the fiduciary
operations of Federal savings
associations or are otherwise consistent
PO 00000
Frm 00057
Fmt 4701
Sfmt 4700
49005
with the purposes of paragraph (a) of
this section:
(1) Contract and commercial law;
(2) Real property law;
(3) Tort law;
(4) Criminal law;
(5) Probate law; and
(6) Any other law that the OCC, upon
review, finds:
(i) Furthers a vital state interest; and
(ii) Either has only an incidental effect
on fiduciary operations or is not
otherwise contrary to the purposes
expressed in paragraph (a) of this
section.
§ 150.140 Must I adopt and follow written
policies and procedures in exercising
fiduciary powers?
You must adopt and follow written
policies and procedures adequate to
maintain your fiduciary activities in
compliance with applicable law. Among
other relevant matters, the policies and
procedures should address, where
appropriate, the following areas:
(a) Your brokerage placement
practices.
(b) Your methods for ensuring that
your fiduciary officers and employees
do not use material inside information
in connection with any decision or
recommendation to purchase or sell any
security.
(c) Your methods for preventing selfdealing and conflicts of interest.
(d) Your selection and retention of
legal counsel who is ready and available
to advise you and your fiduciary officers
and employees on fiduciary matters.
(e) Your investment of funds held as
fiduciary, including short-term
investments and the treatment of
fiduciary funds awaiting investment or
distribution.
Fiduciary Personnel and Facilities
§ 150.150 Who is responsible for the
exercise of fiduciary powers?
The exercise of your fiduciary powers
must be managed by or under the
direction of your board of directors. In
discharging its responsibilities, the
board may assign any function related to
the exercise of fiduciary powers to any
director, officer, employee, or
committee of directors, officers, or
employees.
§ 150.160 What personnel and facilities
may I use to perform fiduciary services?
You may use your qualified personnel
and facilities or an affiliate’s qualified
personnel and facilities to perform
services related to the exercise of
fiduciary powers.
E:\FR\FM\09AUR2.SGM
09AUR2
49006
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 150.170 May my other departments or
affiliates use fiduciary personnel and
facilities to perform other services?
law, and you maintain adequate
safeguards and controls.
Your other departments or affiliates
may use fiduciary officers, employees,
and facilities to perform services
unrelated to the exercise of fiduciary
powers, to the extent not prohibited by
applicable law.
§ 150.250 Must I keep fiduciary assets
separate from other assets?
§ 150.180 May I perform fiduciary services
for, or purchase fiduciary services from,
another association or entity?
You may perform services related to
the exercise of fiduciary powers for
another association or other entity
under a written agreement. You may
also purchase services related to the
exercise of fiduciary powers from
another association or other entity
under a written agreement.
§ 150.190 Must fiduciary officers and
employees be bonded?
You must obtain an adequate bond for
all fiduciary officers and employees.
Review of a Fiduciary Account
§ 150.200 Must I review a prospective
account before I accept it?
Before accepting a prospective
fiduciary account, you must review it to
determine whether you can properly
administer the account.
§ 150.210 Must I conduct another review of
an account after I accept it?
After you accept a fiduciary account
for which you have investment
discretion, you must conduct a prompt
review of all assets of the account to
evaluate whether they are appropriate,
individually and collectively, for the
account.
§ 150.220 Are any other account reviews
required?
At least once every calendar year, you
must conduct a review of all assets of
each fiduciary account for which you
have investment discretion. In this
review, you must evaluate whether the
assets are appropriate, individually and
collectively, for the account.
Custody and Control of Assets
sroberts on DSK5SPTVN1PROD with RULES
§ 150.230 Who must maintain custody or
control of assets in a fiduciary account?
You must place assets of fiduciary
accounts in the joint custody or control
of not fewer than two fiduciary officers
or employees designated for that
purpose by the board of directors.
§ 150.240 May I hold investments of a
fiduciary account off-premises?
You may hold the investments of a
fiduciary account off-premises, if this
practice is consistent with applicable
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
You must keep the assets of fiduciary
accounts separate from your other
assets. You must also keep the assets of
each fiduciary account separate from all
other accounts, or you must identify the
investments as the property of a
particular account, except as provided
in § 150.260.
Investing Funds of a Fiduciary Account
§ 150.260 How may I invest funds of a
fiduciary account?
(a) General. You must invest funds of
a fiduciary account in a manner
consistent with applicable law.
(b) Collective investment funds. (1)
You may invest funds of a fiduciary
account in a collective investment fund,
including a collective investment fund
that you have established. In
establishing and administering such
funds, you must comply with 12 CFR
9.18.
(2) If you must file a document with
the OCC under 12 CFR 9.18, the OCC
may review such documents for
compliance with this part and other
laws and regulations.
(3) ‘‘Bank’’ and ‘‘national bank’’ as
used in 12 CFR 9.18 shall be deemed to
include a Federal savings association.
Funds Awaiting Investment or
Distribution
§ 150.290 What must I do with fiduciary
funds awaiting investment or distribution?
If you have investment discretion or
discretion over distributions for a
fiduciary account which contains funds
awaiting investment or distribution, you
must ensure that those funds do not
remain uninvested and undistributed
any longer than is reasonable for the
proper management of the account and
consistent with applicable law. You also
must obtain a rate of return for those
funds that is consistent with applicable
law.
§ 150.300 Where may I deposit fiduciary
funds awaiting investment or distribution?
(a) Self deposits. You may deposit
funds of a fiduciary account that are
awaiting investment or distribution in
your other departments, unless
prohibited by applicable law.
(b) Affiliate deposits. You may also
deposit funds of a fiduciary account that
are awaiting investment or distribution
with an affiliated insured depository
institution, unless prohibited by
applicable law.
PO 00000
Frm 00058
Fmt 4701
Sfmt 4700
§ 150.310 What if the FDIC does not insure
the deposits?
If the FDIC does not insure the entire
amount of a self deposit, you must set
aside collateral as security. If the FDIC
does not insure the entire amount of an
affiliate deposit, you or your affiliate
must set aside collateral as security. The
market value of the collateral must at all
times equal or exceed the amount of the
uninsured fiduciary funds. You must
place the collateral under the control of
appropriate fiduciary officers and
employees.
§ 150.320 What is acceptable collateral for
uninsured deposits?
Any of the following is acceptable
collateral for self deposits or affiliate
deposits under § 150.310:
(a) Direct obligations of the United
States, or other obligations fully
guaranteed by the United States as to
principal and interest.
(b) Readily marketable securities of
the classes in which state-chartered
corporate fiduciaries are permitted to
invest fiduciary funds under applicable
state law.
(c) Other readily marketable securities
as the OCC may determine.
(d) Surety bonds, to the extent they
provide adequate security, unless
prohibited by applicable law.
(e) Any other assets that qualify under
applicable state law as appropriate
security for deposits of fiduciary funds.
Restrictions on Self Dealing
§ 150.330 Are there investments in which I
may not invest funds of a fiduciary
account?
You may not invest funds of a
fiduciary account for which you have
investment discretion in the following
assets, unless authorized by applicable
law:
(a) The stock or obligations of, or
assets acquired from, you or any of your
directors, officers, or employees.
(b) The stock or obligations of, or
assets acquired from, your affiliates or
any of their directors, officers, or
employees.
(c) The stock or obligations of, or
assets acquired from, other individuals
or organizations if you have an interest
in the individual or organization that
might affect the exercise of your best
judgment.
§ 150.340 May I exercise rights to
purchase additional stock or fractional
shares of my stock or obligations or the
stock or obligations of my affiliates?
If the retention of investments in your
stock or obligations or the stock or
obligations of an affiliate in fiduciary
accounts is consistent with applicable
law, you may do either of the following:
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(a) Exercise rights to purchase
additional stock (or securities
convertible into additional stock) when
these rights are offered pro rata to
stockholders.
(b) Purchase fractional shares to
complement fractional shares acquired
through the exercise of rights or through
the receipt of a stock dividend resulting
in fractional share holdings.
sroberts on DSK5SPTVN1PROD with RULES
§ 150.350 May I lend, sell, or transfer
assets of a fiduciary account if I have an
interest in the transaction?
§ 150.360 May I make a loan to a fiduciary
account that is secured by an interest in the
assets of the account?
You may make a loan to a fiduciary
account that is secured by an interest in
the assets of the account, if the
20:33 Aug 08, 2011
Jkt 223001
§ 150.370 May I sell assets or lend money
between fiduciary accounts?
You may sell assets or lend money
between fiduciary accounts, if the
transaction is fair to both accounts and
is not prohibited by applicable law.
Compensation, Gifts, and Bequests
§ 150.380 May I earn compensation for
acting in a fiduciary capacity?
(a) General restriction. Except as
provided in paragraph (b) of this
section, you may not lend, sell, or
otherwise transfer assets of a fiduciary
account for which you have investment
discretion to yourself or any of your
directors, officers, or employees; to your
affiliates or any of their directors,
officers, or employees; or to other
individuals or organizations with whom
you have an interest that might affect
the exercise of your best judgment.
(b) Exceptions—(1) Funds for which
you have investment discretion. You
may lend, sell or otherwise transfer
assets of a fiduciary account for which
you have investment discretion to
yourself or any of your directors,
officers, or employees; to your affiliates
or any of their directors, officers, or
employees; or to other individuals or
organizations with whom you have an
interest that might affect the exercise of
your best judgment, if you meet one of
the following conditions:
(i) The transaction is authorized by
applicable law.
(ii) Legal counsel advises you in
writing that you have incurred, in your
fiduciary capacity, a contingent or
potential liability. Upon the sale or
transfer of assets, you must reimburse
the fiduciary account in cash in an
amount equal to the greater of book or
market value of the assets.
(iii) The transaction is permitted
under 12 CFR 9.18(b)(8)(iii) for
defaulted fixed-income investments.
(iv) The OCC requires you to do so.
(2) Funds held as trustee. You may
make loans of funds held in trust to any
of your directors, officers, or employees
if the funds are held in an employee
benefit plan and the loan is made in
accordance with the exemptions found
at section 408 of the Employee
Retirement Income Security Act of 1974
(29 U.S.C. 1108).
VerDate Mar<15>2010
transaction is fair to the account and is
not prohibited by applicable law.
If the amount of your compensation
for acting in a fiduciary capacity is not
set or governed by applicable law, you
may charge a reasonable fee for your
services.
§ 150.390 May my officer or employee
retain compensation for acting as a cofiduciary?
You may not permit your officers or
employees to retain any compensation
for acting as a co-fiduciary with you in
the administration of a fiduciary
account, except with the specific
approval of your board of directors.
§ 150.400 May my fiduciary officer or
employee accept a gift or bequest?
You may not permit any fiduciary
officer or employee to accept a bequest
or gift of fiduciary assets, unless the
bequest or gift is directed or made by a
relative of the officer or employee or is
specifically approved by your board of
directors.
49007
(b) Continuous audit. Instead of an
annual audit, you may adopt a
continuous audit system. Under a
continuous audit system, you must
arrange for a discrete audit of each
significant fiduciary activity (i.e., on an
activity-by-activity basis) at an interval
commensurate with the nature and risk
of that activity. Some fiduciary activities
may receive audits at intervals greater or
less than one year, as appropriate.
§ 150.450 What standards govern the
conduct of the audit?
Auditors must follow generally
accepted standards for attestation
engagements and other standards
established by the OCC. An audit must
ascertain whether your internal control
policies and procedures provide
reasonable assurance of three things:
(a) You are administering fiduciary
activities in accordance with applicable
law.
(b) You are properly safeguarding
fiduciary assets.
(c) You are accurately recording
transactions in appropriate accounts in
a timely manner.
§ 150.460
Who may conduct an audit?
Internal auditors, external auditors, or
other qualified persons who are
responsible only to the board of
directors, may conduct an audit.
§ 150.470
audit?
Who directs the conduct of the
You must keep fiduciary records for
three years after the termination of the
account or the termination of any
litigation relating to the account,
whichever is later.
Your fiduciary audit committee
directs the conduct of the audit. Your
fiduciary audit committee may consist
of a committee of your directors or an
audit committee of an affiliate. There
are two restrictions on who may serve
on the committee:
(a) Your officers and officers of an
affiliate who participate significantly in
administering your fiduciary activities
may not serve on the audit committee.
(b) A majority of the members of the
audit committee may not serve on any
committee to which the board of
directors has delegated power to manage
and control your fiduciary activities.
§ 150.430 Must I keep fiduciary records
separate and distinct from other records?
§ 150.480
audit?
You must keep fiduciary records
separate and distinct from your other
records.
(a) Annual audit. If you conduct an
annual audit, you must note the results
of the audit (including significant
actions taken as a result of the audit) in
the minutes of the board of directors.
(b) Continuous audit. If you adopt a
continuous audit system, you must note
the results of all discrete audits
conducted since the last audit report
(including significant actions taken as a
result of the audits) in the minutes of
the board of directors at least once
during each calendar year.
Recordkeeping Requirements
§ 150.410
What records must I keep?
You must keep adequate records for
all fiduciary accounts. For example, you
must keep documents on the
establishment and termination of each
fiduciary account.
§ 150.420
records?
How long must I keep these
Audit Requirements
§ 150.440 When do I have to audit my
fiduciary activities?
(a) Annual audit. If you do not use a
continuous audit system described in
paragraph (b) of this section, then you
must arrange for a suitable audit of all
significant fiduciary activities at least
once during each calendar year.
PO 00000
Frm 00059
Fmt 4701
Sfmt 4700
E:\FR\FM\09AUR2.SGM
How do I report the results of the
09AUR2
49008
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Subpart C—Depositing Securities With
State Authorities
§ 150.490 When must I deposit securities
with state authorities?
You must deposit securities with a
state’s authorities or, if applicable, a
Federal Home Loan Bank under
§ 150.510, if you meet all of the
following:
(a) You are located in the state.
(b) You act as a private or courtappointed trustee.
(c) The law of the state requires
corporations acting in a fiduciary
capacity to deposit securities with state
authorities for the protection of private
or court trusts.
§ 150.500 How much must I deposit if I
administer fiduciary assets in more than
one state?
If you administer fiduciary assets in
more than one state, you must compute
the amount of deposit required for each
state on the basis of fiduciary assets that
you administer primarily from offices
located in that state.
§ 150.510 What must I do if state
authorities refuse my deposit?
If state authorities refuse to accept
your deposit under § 150.490, you must
deposit the securities with the Federal
Home Loan Bank of which you are a
member. The Federal Home Loan Bank
will hold the securities for the
protection of private or court trusts to
the same extent as if the securities had
been deposited with state authorities.
Subpart D—Terminating Fiduciary
Activities Receivership or Liquidation
§ 150.520 What happens if I am placed in
receivership or voluntary liquidation?
If the OCC appoints a conservator or
receiver, or if you place yourself in
voluntary liquidation, the receiver,
conservator, or liquidating agent must
promptly close or transfer all fiduciary
accounts to a substitute fiduciary, in
accordance with OCC instructions and
the orders of the court having
jurisdiction.
Surrender of Fiduciary Powers
sroberts on DSK5SPTVN1PROD with RULES
§ 150.530
powers?
How do I surrender fiduciary
discharged from all fiduciary duties, the
appropriate OCC licensing office will
issue a written notice indicating that
you are no longer authorized to exercise
fiduciary powers.
§ 150.550 May I recover my deposit from
state authorities?
Upon issuance of the OCC written
notice under § 150.540, you may recover
any securities deposited with state
authorities, or a Federal Home Loan
Bank, under subpart C of this part.
Revocation of Fiduciary Powers
§ 150.560 When may the OCC revoke my
fiduciary powers?
The OCC may revoke your fiduciary
powers if it determines that you have
done any of the following:
(a) Exercised those fiduciary powers
unlawfully or unsoundly.
(b) Failed to exercise those fiduciary
powers for five consecutive years.
(c) Otherwise failed to follow the
requirements of this part.
§ 150.570 What procedures govern the
revocation?
The procedures for revocation of
fiduciary powers are set forth in 12
U.S.C. 1464(n)(10). The OCC will
conduct the hearing required under 12
U.S.C. 1464(n)(10)(B) under part 109 of
this chapter.
Subpart E—Activities Exempt From
This Part
§ 150.580 When may I conduct fiduciary
activities without obtaining OCC approval?
Subject to the requirements of this
subpart E, you do not need OCC
approval under subpart B if you conduct
fiduciary activities in the following
fiduciary capacities:
(a) Trustee of a trust created or
organized in the United States and
forming part of a stock bonus, pension,
or profit-sharing plan qualifying for
specific tax treatment under section
401(d) of the Internal Revenue Code of
1954 (26 U.S.C. 401(d)).
(b) Trustee or custodian of a
Individual Retirement Account within
the meaning of section 408(a) of the
Internal Revenue Code of 1954 (26
U.S.C. 408(a)).
If you want to surrender your
fiduciary powers, you must file a
certified copy of a resolution of your
board of directors evidencing that
intent. You must file the resolution with
the appropriate OCC licensing office.
§ 150.590 What standards must I observe
when acting in exempt fiduciary capacities?
§ 150.540 When will the OCC terminate my
fiduciary powers?
§ 150.600 How may funds be invested
when I act in an exempt fiduciary capacity?
If, after appropriate investigation, the
OCC is satisfied that you have been
If you act in an exempt fiduciary
capacity under § 150.580, the funds of
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
You must observe principles of sound
fiduciary administration, including
those related to recordkeeping and
segregation of assets.
PO 00000
Frm 00060
Fmt 4701
Sfmt 4700
the fiduciary account may be invested
only in the following:
(a) Your accounts, deposits,
obligations, or securities.
(b) Other assets as the customer may
direct, provided you do not exercise any
investment discretion and do not
directly or indirectly provide any
investment advice for the fiduciary
account.
§ 150.610 What disclosures must I make
when acting in exempt fiduciary capacities?
(a) If you act in an exempt fiduciary
capacity under § 150.580 and fiduciary
investments are not limited to accounts
or deposits insured by the FDIC, you
must include the following language in
bold type on the first page of any
contract documents:
(b) Funds invested pursuant to this
agreement are not insured by the FDIC
merely because the trustee or custodian
is a Federal savings association the
accounts of which are covered by such
insurance. Only investments in the
accounts of a Federal savings
association are insured by the FDIC,
subject to its rules and regulations.
§ 150.620 May I receive compensation for
acting in exempt fiduciary capacities?
You may receive reasonable
compensation.
PART 151—RECORDKEEPING AND
CONFIRMATION REQUIREMENTS FOR
SECURITIES TRANSACTIONS
Sec.
151.10 What does this part do?
151.20 Must I comply with this part?
151.30 What requirements apply to all
transactions?
151.40 What definitions apply to this part?
Subpart A—Recordkeeping Requirements
151.50 What records must I maintain for
securities transactions?
151.60 How must I maintain my records?
Subpart B—Content and Timing of Notice
151.70 What type of notice must I provide
when I effect a securities transaction for
a customer?
151.80 How do I provide a registered
broker-dealer confirmation?
151.90 How do I provide a written notice?
151.100 What are the alternate notice
requirements?
151.110 May I provide a notice
electronically?
151.120 May I charge a fee for a notice?
Subpart C—Settlement of Securities
Transactions
151.130 When must I settle a securities
transaction?
Subpart D—Securities Trading Policies and
Procedures
151.140 What policies and procedures must
I maintain and follow for securities
transactions?
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
151.150 How do my officers and employees
file reports of personal securities trading
transactions?
Authority: 12 U.S.C. 1462a, 1463, 1464,
5412(b)(2)(B).
§ 151.10
What does this part do?
This part establishes recordkeeping
and confirmation requirements that
apply when a Federal savings
association (‘‘you’’) effects certain
securities transactions for customers.
sroberts on DSK5SPTVN1PROD with RULES
§ 151.20
Must I comply with this part?
(a) General. Except as provided under
paragraph (b) of this section, you must
comply with this part when:
(1) You effect a securities transaction
for a customer.
(2) You effect a transaction in
government securities.
(3) You effect a transaction in
municipal securities and are not
registered as a municipal securities
dealer with the SEC.
(4) You effect a securities transaction
as fiduciary. You also must comply with
12 CFR part 150 when you effect such
a transaction.
(b) Exceptions—(1) Small number of
transactions. You are not required to
comply with § 151.50(b) through (d)
(recordkeeping) and § 151.140(a)
through (c) (policies and procedures), if
you effected an average of fewer than
500 securities transactions per year for
customers over the three prior calendar
years. You may exclude transactions in
government securities when you
calculate this average.
(2) Government securities. If you
effect fewer than 500 government
securities brokerage transactions per
year, you are not required to comply
with § 151.50 (recordkeeping) for those
transactions. This exception does not
apply to government securities dealer
transactions. See 17 CFR 404.4(a).
(3) Municipal securities. If you are
registered with the SEC as a ‘‘municipal
securities dealer,’’ as defined in 15
U.S.C. 78c(a)(30) (see 15 U.S.C. 78o–4),
you are not required to comply with this
part when you conduct municipal
securities transactions.
(4) Foreign branches. You are not
required to comply with this part when
you conduct a transaction at your
foreign branch.
(5) Transactions by registered brokerdealers. You are not required to comply
with this part for securities transactions
effected by a registered broker-dealer, if
the registered broker-dealer directly
provides the customer with a
confirmation. These transactions
include a transaction effected by your
employee who also acts as an employee
of a registered broker-dealer (‘‘dual
employee’’).
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
§ 151.30 What requirements apply to all
transactions?
You must effect all transactions,
including transactions excepted under
§ 151.20, in a safe and sound manner.
You must maintain effective systems of
records and controls regarding your
customers’ securities transactions.
These systems must clearly and
accurately reflect all appropriate
information and provide an adequate
basis for an audit.
§ 151.40
part?
What definitions apply to this
Asset-backed security means a
security that is primarily serviced by the
cash flows of a discrete pool of
receivables or other financial assets,
either fixed or revolving, that by their
terms convert into cash within a finite
time period. Asset-backed security
includes any rights or other assets
designed to ensure the servicing or
timely distribution of proceeds to the
security holders.
Common or collective investment
fund means any fund established under
12 CFR 150.260(b) or 12 CFR 9.18.
Completion of the transaction means:
(1) If the customer purchases a
security through or from you, except as
provided in paragraph (2) of this
definition, the time the customer pays
you any part of the purchase price. If
payment is made by a bookkeeping
entry, the time you make the
bookkeeping entry for any part of the
purchase price.
(2) If the customer purchases a
security through or from you and pays
for the security before you request
payment or notify the customer that
payment is due, the time you deliver the
security to or into the account of the
customer.
(3) If the customer sells a security
through or to you, except as provided in
paragraph (4) of this definition, the time
the customer delivers the security to
you. If you have custody of the security
at the time of sale, the time you transfer
the security from the customer’s
account.
(4) If the customer sells a security
through or to you and delivers the
security to you before you request
delivery or notify the customer that
delivery is due, the time you pay the
customer or pay into the customer’s
account.
Customer means a person or account,
including an agency, trust, estate,
guardianship, or other fiduciary account
for which you effect a securities
transaction. Customer does not include
a broker or dealer, or you when you: act
as a broker or dealer; act as a fiduciary
with investment discretion over an
PO 00000
Frm 00061
Fmt 4701
Sfmt 4700
49009
account; are a trustee that acts as the
shareholder of record for the purchase
or sale of securities; or are the issuer of
securities that are the subject of the
transaction.
Debt security means any security,
such as a bond, debenture, note, or any
other similar instrument that evidences
a liability of the issuer (including any
security of this type that is convertible
into stock or a similar security). Debt
security also includes a fractional or
participation interest in these debt
securities. Debt security does not
include securities issued by an
investment company registered under
the Investment Company Act of 1940,
15 U.S.C. 80a–1, et seq.
Government security means:
(1) A security that is a direct
obligation of, or an obligation that is
guaranteed as to principal and interest
by, the United States;
(2) A security that is issued or
guaranteed by a corporation in which
the United States has a direct or indirect
interest if the Secretary of the Treasury
has designated the security for
exemption as necessary or appropriate
in the public interest or for the
protection of investors;
(3) A security issued or guaranteed as
to principal and interest by a
corporation if a statute specifically
designates, by name, the corporation’s
securities as exempt securities within
the meaning of the laws administered by
the SEC; or
(4) Any put, call, straddle, option, or
privilege on a government security
described in this definition, other than
a put, call, straddle, option, or privilege:
(i) That is traded on one or more
national securities exchanges; or
(ii) For which quotations are
disseminated through an automated
quotation system operated by a
registered securities association.
Investment discretion means the same
as under 12 CFR 150.40(a).
Investment company plan means any
plan under which:
(1) A customer purchases securities
issued by an open-end investment
company or unit investment trust
registered under the Investment
Company Act of 1940, making the
payments directly to, or made payable
to, the registered investment company,
or the principal underwriter, custodian,
trustee, or other designated agent of the
registered investment company; or
(2) A customer sells securities issued
by an open-end investment company or
unit investment trust registered under
the Investment Company Act of 1940
under:
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49010
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(i) An individual retirement or
individual pension plan qualified under
the Internal Revenue Code; or
(ii) A contractual or systematic
agreement under which the customer
purchases at the applicable public
offering price, or redeems at the
applicable redemption price, securities
in specified amounts (calculated in
security units or dollars) at specified
time intervals, and stating the
commissions or charges (or the means of
calculating them) that the customer will
pay in connection with the purchase.
Municipal security means:
(1) A security that is a direct
obligation of, or an obligation
guaranteed as to principal or interest by,
a state or any political subdivision, or
any agency or instrumentality of a state
or any political subdivision.
(2) A security that is a direct
obligation of, or an obligation
guaranteed as to principal or interest by,
any municipal corporate instrumentality
of one or more states; or
(3) A security that is an industrial
development bond, the interest on
which is excludable from gross income
under section 103(a) of the Code (26
U.S.C. 103(a)).
Periodic plan means a written
document that authorizes you to act as
agent to purchase or sell for a customer
a specific security or securities (other
than securities issued by an open end
investment company or unit investment
trust registered under the Investment
Company Act of 1940). The written
document must authorize you to
purchase or sell in specific amounts
(calculated in security units or dollars)
or to the extent of dividends and funds
available, at specific time intervals, and
must set forth the commission or
charges to be paid by the customer or
the manner of calculating them.
SEC means the Securities and
Exchange Commission.
Security means any note, stock,
treasury stock, bond, debenture,
certificate of interest or participation in
any profit-sharing agreement or in any
oil, gas, or other mineral royalty or
lease, any collateral-trust certificate,
preorganization certificate or
subscription, transferable share,
investment contract, voting-trust
certificate, and any put, call, straddle,
option, or privilege on any security or
group or index of securities (including
any interest therein or based on the
value thereof), or, in general, any
instrument commonly known as a
‘‘security’; or any certificate of interest
or participation in, temporary or interim
certificate for, receipt for, or warrant or
right to subscribe to or purchase, any of
the foregoing.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Security does not include currency;
any note, draft, bill of exchange, or
banker’s acceptance which has a
maturity at the time of issuance of less
than nine months, exclusive of days of
grace, or any renewal thereof, the
maturity of which is likewise limited; a
deposit or share account in a Federal or
state chartered depository institution; a
loan participation; a letter of credit or
other form of bank indebtedness
incurred in the ordinary course of
business; units of a collective
investment fund; interests in a variable
amount (master) note of a borrower of
prime credit; U.S. Savings Bonds; or any
other instrument the OCC determines
does not constitute a security for
purposes of this part.
Sweep account means any
prearranged, automatic transfer or
sweep of funds above a certain dollar
level from a deposit account to purchase
a security or securities, or any
prearranged, automatic redemption or
sale of a security or securities when a
deposit account drops below a certain
level with the proceeds being
transferred into a deposit account.
Subpart A—Recordkeeping
Requirements
§ 151.50 What records must I maintain for
securities transactions?
If you effect securities transactions for
customers, you must maintain all of the
following records for at least three years:
(a) Chronological records. You must
maintain an itemized daily record of
each purchase and sale of securities in
chronological order, including:
(1) The account or customer name for
which you effected each transaction;
(2) The name and amount of the
securities;
(3) The unit and aggregate purchase or
sale price;
(4) The trade date; and
(5) The name or other designation of
the registered broker-dealer or other
person from whom you purchased the
securities or to whom you sold the
securities.
(b) Account records. You must
maintain account records for each
customer reflecting:
(1) Purchases and sales of securities;
(2) Receipts and deliveries of
securities;
(3) Receipts and disbursements of
cash; and
(4) Other debits and credits pertaining
to transactions in securities.
(c) Memorandum (order ticket). You
must make and keep current a
memorandum (order ticket) of each
order or any other instruction given or
received for the purchase or sale of
PO 00000
Frm 00062
Fmt 4701
Sfmt 4700
securities (whether executed or not),
including:
(1) The account or customer name for
which you effected each transaction;
(2) Whether the transaction was a
market order, limit order, or subject to
special instructions;
(3) The time the trader received the
order;
(4) The time the trader placed the
order with the registered broker-dealer,
or if there was no registered brokerdealer, the time the trader executed or
cancelled the order;
(5) The price at which the trader
executed the order;
(6) The name of the registered brokerdealer you used.
(d) Record of registered brokerdealers. You must maintain a record of
all registered broker-dealers that you
selected to effect securities transactions
and the amount of commissions that
you paid or allocated to each registered
broker-dealer during each calendar year.
(e) Notices. You must maintain a copy
of the written notice required under
subpart B of this part.
§ 151.60
How must I maintain my records?
(a) You may maintain the records
required under § 151.50 in any manner,
form, or format that you deem
appropriate. However, your records
must clearly and accurately reflect the
required information and provide an
adequate basis for an audit of the
information.
(b) You, or the person that maintains
and preserves records on your behalf,
must:
(1) Arrange and index the records in
a way that permits easy location, access,
and retrieval of a particular record;
(2) Separately store, for the time
required for preservation of the original
record, a duplicate copy of the record on
any medium allowed by this section;
(3) Provide promptly any of the
following that OCC examiners or your
directors may request:
(i) A legible, true, and complete copy
of the record in the medium and format
in which it is stored;
(ii) A legible, true, and complete
printout of the record; and
(iii) Means to access, view, and print
the records.
(4) In the case of records on electronic
storage media, you, or the person that
maintains and preserves records for you,
must establish procedures:
(i) To maintain, preserve, and
reasonably safeguard the records from
loss, alteration, or destruction;
(ii) To limit access to the records to
properly authorized personnel, your
directors, and OCC examiners; and
(iii) To reasonably ensure that any
reproduction of a non-electronic
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
original record on electronic storage
media is complete, true, and legible
when retrieved.
(c) You may contract with third party
service providers to maintain the
records.
Subpart B—Content and Timing of
Notice
§ 151.70 What type of notice must I
provide when I effect a securities
transaction for a customer?
If you effect a securities transaction
for a customer, you must give or send
the customer the registered brokerdealer confirmation described at
§ 151.80, or the written notice described
at § 151.90. For certain types of
transactions, you may elect to provide
the alternate notices described in
§ 151.100.
§ 151.80 How do I provide a registered
broker-dealer confirmation?
(a) If you elect to satisfy § 151.70 by
providing the customer with a registered
broker-dealer confirmation, you must
provide the confirmation by having the
registered broker-dealer send the
confirmation directly to the customer or
by sending a copy of the registered
broker-dealer’s confirmation to the
customer within one business day after
you receive it.
(b) If you have received or will receive
remuneration from any source,
including the customer, in connection
with the transaction, you must provide
If you effect a transaction involving . .
a statement of the source and amount of
the remuneration in addition to the
registered broker-dealer confirmation
described in paragraph (a) of this
section.
§ 151.90
notice?
How do I provide a written
If you elect to satisfy § 151.70 by
providing the customer a written notice,
you must give or send the written notice
at or before the completion of the
securities transaction. You must include
all of the following information in a
written notice:
(a) Your name and the customer’s
name.
(b) The capacity in which you acted
(for example, as agent).
(c) The date and time of execution of
the securities transaction (or a statement
that you will furnish this information
within a reasonable time after the
customer’s written request), and the
identity, price, and number of shares or
units (or principal amount in the case of
debt securities) of the security the
customer purchased or sold.
(d) The name of the person from
whom you purchased or to whom you
sold the security, or a statement that you
will furnish this information within a
reasonable time after the customer’s
written request.
(e) The amount of any remuneration
that you have received or will receive
from the customer in connection with
the transaction unless the remuneration
(2) A debt security that you effected exclusively on the basis of a dollar
price.
sroberts on DSK5SPTVN1PROD with RULES
(3) A debt security that you effected on basis of yield ............................
20:33 Aug 08, 2011
Jkt 223001
paid by the customer is determined
under a written agreement, other than
on a transaction basis.
(f) The source and amount of any
other remuneration you have received
or will receive in connection with the
transaction. If, in the case of a purchase,
you were not participating in a
distribution, or in the case of a sale,
were not participating in a tender offer,
the written notice may state whether
you have or will receive any other
remuneration and state that you will
furnish the source and amount of the
other remuneration within a reasonable
time after the customer’s written
request.
(g) That you are not a member of the
Securities Investor Protection
Corporation, if that is the case. This
does not apply to a transaction in shares
of a registered open-end investment
company or unit investment trust if the
customer sends funds or securities
directly to, or receives funds or
securities directly from, the registered
open-end investment company or unit
investment trust, its transfer agent, its
custodian, or a designated broker or
dealer who sends the customer either a
confirmation or the written notice in
this section.
(h) Additional disclosures. You must
provide all of the additional disclosures
described in the following chart for
transactions involving certain debt
securities:
You must provide the following additional information in your written
notice . . .
.
(1) A debt security subject to redemption before maturity .......................
VerDate Mar<15>2010
49011
PO 00000
Frm 00063
Fmt 4701
A statement that the issuer may redeem the debt security in whole or
in part before maturity, that the redemption could affect the represented yield, and that additional redemption information is available upon request.
(i) The dollar price at which you effected the transaction; and
(ii) The yield to maturity calculated from the dollar price. You do not
have to disclose the yield to maturity if:
(A) The issuer may extend the maturity date of the security with a variable interest rate; or
(B) The security is an asset-backed security that represents an interest
in, or is secured by, a pool of receivables or other financial assets
that are subject continuously to prepayment.
(i) The yield at which the transaction, including the percentage amount
and its characterization (e.g., current yield, yield to maturity, or yield
to call). If you effected the transaction at yield to call, you must indicate the type of call, the call date, and the call price;
(ii) The dollar price calculated from that yield; and
(iii) The yield to maturity and the represented yield, if you effected the
transaction on a basis other than yield to maturity and the yield to
maturity is lower than the represented yield. You are not required to
disclose this information if:
(A) The issuer may extend the maturity date of the security with a variable interest rate; or
(B) The security is an asset-backed security that represents an interest
in, or is secured by, a pool of receivables or other financial assets
that are subject continuously to prepayment.
Sfmt 4700
E:\FR\FM\09AUR2.SGM
09AUR2
49012
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
If you effect a transaction involving . .
You must provide the following additional information in your written
notice . . .
.
(4) A debt security that is an asset-backed security that represents an
interest in, or is secured by, a pool of receivables or other financial
assets that are subject continuously to prepayment.
(5) A debt security, other than a government security ............................
§ 151.100 What are the alternate notice
requirements?
(i) A statement that the actual yield of the asset-backed security may
vary according to the rate at which the underlying receivables or
other financial assets are prepaid; and
(ii) A statement that you will furnish information concerning the factors
that affect yield (including at a minimum estimated yield, weighted
average life, and the prepayment assumptions underlying yield) upon
the customer’s written request.
A statement that the security is unrated by a nationally recognized statistical rating organization, if that is the case.
described in the following chart for
certain types of transactions.
You may elect to satisfy § 151.70 by
providing the alternate notices
If you effect a securities transaction . . .
Then you may elect to . . .
(a) For or with the account of a customer under a periodic plan, sweep
account, or investment company plan.
Give or send to the customer within five business days after the end of
each quarterly period a written statement disclosing: (1) Each purchase and redemption that you effected for or with, and each dividend or distribution that you credited to or reinvested for, the customer’s account during the period;
(2) The date of each transaction;
(3) The identity, number, and price of any securities that the customer
purchased or redeemed in each transaction;
(4) The total number of shares of the securities in the customer’s account;
(5) Any remuneration that you received or will receive in connection
with the transaction; and
(6) That you will give or send the registered broker-dealer confirmation
described in § 151.80 or the written notice described in § 151.90
within a reasonable time after the customer’s written request.
Give or send to the customer the written statement described at paragraph (a) of this section on a monthly basis. You may not use the alternate notice, however, if you deduct sales loads upon the purchase
or redemption of shares in the money market fund.
Give or send to the customer a written notice at the agreed-upon time
and with the agreed-upon content, and include a statement that you
will furnish the registered broker-dealer confirmation described in
§ 151.80 or the written notice described in § 151.90 within a reasonable time after the customer’s written request.
Give or send the registered broker-dealer confirmation described in
§ 151.80 or the written notice described in § 151.90 within a reasonable time after a written request by the person with the power to terminate the account or, if there is no such person, any person holding
a vested beneficial interest in the account.
Give or send each customer a written itemized statement specifying
the funds and securities in your custody or possession and all debits,
credits, and transactions in the customer’s account. You must provide this information to the customer not less than once every three
months. You must give or send the registered broker-dealer confirmation described in § 151.80 or the written notice described in
§ 151.90 within a reasonable time after a customer’s written request.
(1) Give or send to a customer who invests in the fund a copy of the
annual financial report of the fund, or
(2) Notify the customer that a copy of the report is available and that
you will furnish the report within a reasonable time after a written request by a person to whom a regular periodic accounting would ordinarily be rendered with respect to each participating account.
(b) For or with the account of a customer in shares of an open-ended
management company registered under the Investment Company
Act of 1940 that holds itself out as a money market fund and attempts to maintain a stable net asset value per share.
(c) For an account for which you do not exercise investment discretion,
and for which you and the customer have agreed in writing to an arrangement concerning the time and content of the written notice.
(d) For an account for which you exercise investment discretion other
than in an agency capacity, excluding common or collective investment funds.
(e) For an account in which you exercise investment discretion in an
agency capacity.
sroberts on DSK5SPTVN1PROD with RULES
(f) For a common or collective investment fund ......................................
§ 151.110 May I provide a notice
electronically?
You may provide any written notice
required under this subpart B
electronically. If a customer has a
facsimile machine, you may send the
notice by facsimile transmission. You
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
may use other electronic
communications if:
(a) The parties agree to use electronic
instead of hard copy notices;
(b) The parties are able to print or
download the notice;
PO 00000
Frm 00064
Fmt 4701
Sfmt 4700
(c) Your electronic communications
system cannot automatically delete the
electronic notice; and
(d) Both parties are able to receive
electronic messages.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 151.120
May I charge a fee for a notice?
You may not charge a fee for
providing a notice required under this
subpart B, except that you may charge
a reasonable fee for the notices provided
under §§ 151.100(a), (d), and (e).
Subpart C—Settlement of Securities
Transactions
§ 151.130 When must I settle a securities
transaction?
(a) You may not effect or enter into a
contract for the purchase or sale of a
security that provides for payment of
funds and delivery of securities later
than the latest of:
(1) The third business day after the
date of the contract. This deadline is no
later than the fourth business day after
the contract for contracts involving the
sale for cash of securities that are priced
after 4:30 p.m. Eastern Standard Time
on the date the securities are priced and
are sold by an issuer to an underwriter
under a firm commitment underwritten
offering registered under the Securities
Act of 1933, 15 U.S.C. 77a, et seq., or are
sold by you to an initial purchaser
participating in the offering;
(2) Such other time as the SEC
specifies by rule (see SEC Rule 15c6–1,
17 CFR 240.15c6–1); or
(3) Such time as the parties expressly
agree at the time of the transaction. The
parties to a contract are deemed to have
expressly agreed to an alternate date for
payment of funds and delivery of
securities at the time of the transaction
for a contract for the sale for cash of
securities under a firm commitment
offering, if the managing underwriter
and the issuer have agreed to the date
for all securities sold under the offering
and the parties to the contract have not
expressly agreed to another date for
payment of funds and delivery of
securities at the time of the transaction.
(b) The deadlines in paragraph (a) of
this section do not apply to the
purchase or sale of limited partnership
interests that are not listed on an
exchange or for which quotations are
not disseminated through an automated
quotation system of a registered
securities association.
Subpart D—Securities Trading Policies
and Procedures
sroberts on DSK5SPTVN1PROD with RULES
§ 151.140 What policies and procedures
must I maintain and follow for securities
transactions?
If you effect securities transactions for
customers, you must maintain and
follow policies and procedures that
meet all of the following requirements:
(a) Your policies and procedures must
assign responsibility for the supervision
of all officers or employees who:
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
49013
(1) Transmit orders to, or place orders
with, registered broker-dealers;
(2) Execute transactions in securities
for customers; or
(3) Process orders for notice or
settlement purposes, or perform other
back office functions for securities
transactions that you effect for
customers. Policies and procedures for
personnel described in this paragraph
(a)(3) must provide supervision and
reporting lines that are separate from
supervision and reporting lines for
personnel described in paragraphs (a)(1)
and (2) of this section.
(b) Your policies and procedures must
provide for the fair and equitable
allocation of securities and prices to
accounts when you receive orders for
the same security at approximately the
same time and you place the orders for
execution either individually or in
combination.
(c) Your policies and procedures must
provide for securities transactions in
which you act as agent for the buyer and
seller (crossing of buy and sell orders)
on a fair and equitable basis to the
parties to the transaction, where
permissible under applicable law.
(d) Your policies and procedures must
require your officers and employees to
file the personal securities trading
reports described at § 151.150, if the
officer or employee:
(1) Makes investment
recommendations or decisions for the
accounts of customers;
(2) Participates in the determination
of these recommendations or decisions;
or
(3) In connection with their duties,
obtains information concerning which
securities you intend to purchase, sell,
or recommend for purchase or sale.
(3) The price at which each
transaction was effected.
(4) The name of the broker, dealer, or
other intermediary effecting the
transaction.
(5) The date the officer or employee
submitted the report.
(b) Report not required for certain
transactions. Your officer or employee
is not required to report a transaction if:
(1) He or she has no direct or indirect
influence or control over the account for
which the transaction was effected or
over the securities held in that account;
(2) The transaction was in shares
issued by an open-end investment
company registered under the
Investment Company Act of 1940;
(3) The transaction was in direct
obligations of the government of the
United States;
(4) The transaction was in bankers’
acceptances, bank certificates of deposit,
commercial paper or high quality short
term debt instruments, including
repurchase agreements; or
(5) The officer or employee had an
aggregate amount of purchases and sales
of $10,000 or less during the calendar
quarter.
(c) Alternate report. When you act as
an investment adviser to an investment
company registered under the
Investment Company Act of 1940, an
officer or employee that is an ‘‘access
person’’ may fulfill his or her reporting
requirements under this section by
filing with you the ‘‘access person’’
personal securities trading report
required by SEC Rule 17j–1(d), 17 CFR
270.17j–1(d).
§ 151.150 How do my officers and
employees file reports of personal
securities trading transactions?
Sec.
152.1 Procedure for organization of Federal
stock association.
152.2 Procedures for organization of interim
Federal stock association.
152.3 Charters for Federal stock
associations.
152.4 Charter amendments.
152.5 Bylaws.
152.6 Shareholders.
152.7 Board of directors.
152.8 Officers.
152.9 Certificates for shares and their
transfer.
152.10 Annual reports to stockholders.
152.11 Books and records.
152.12 [Reserved]
152.13 Combinations involving Federal
stock associations.
152.14 Dissenter and appraisal rights.
152.15 Supervisory combinations.
152.16 Effect of subsequent charter or
bylaw change.
152.17 Federal stock association created in
connection with an association in default
or in danger of default.
An officer or employee described in
§ 151.140(d) must report all personal
transactions in securities made by or on
behalf of the officer or employee if he
or she has a beneficial interest in the
security.
(a) Contents and filing of report. The
officer or employee must file the report
with you no later than 30 calendar days
after the end of each calendar quarter.
The report must include the following
information:
(1) The date of each transaction, the
title and number of shares, the interest
rate and maturity date (if applicable),
and the principal amount of each
security involved.
(2) The nature of each transaction
(i.e., purchase, sale, or other type of
acquisition or disposition).
PO 00000
Frm 00065
Fmt 4701
Sfmt 4700
PART 152—FEDERAL STOCK
ASSOCIATIONS—INCORPORATION,
ORGANIZATION, AND CONVERSION
E:\FR\FM\09AUR2.SGM
09AUR2
49014
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
152.18 Conversion from stock form
depository institution to Federal stock
association.
152.19 Conversion to National banking
association or state bank.
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 5412(b)(2)(B).
sroberts on DSK5SPTVN1PROD with RULES
§ 152.1 Procedure for organization of
Federal stock association.
(a) Application for permission to
organize. Applications for permission to
organize a Federal stock association are
subject to this section and to § 143.3 of
this chapter. Recommendations by
employees of the OCC regarding
applications for permission to organize
are privileged, confidential, and subject
to Part 4, subpart C of this chapter. The
processing of an application under this
section shall be subject to the following
procedures:
(1) Publication. (i) The applicant shall
publish a public notice of the
application to organize in accordance
with the procedures specified in subpart
B of part 116 of this chapter.
(ii) Promptly after publication of the
public notice, the applicant shall
transmit copies of the public notice and
publisher’s affidavit of publication to
the appropriate OCC licensing office in
the same manner as the original filing.
(iii) Any person may inspect the
application and all related
communications at the offices specified
in 12 CFR 4.14(c) during regular
business hours, unless such information
is exempt from public disclosure.
(2) Notification to interested parties.
The OCC shall give notice of the
application to the state official who
supervises savings associations in the
state in which the new association is to
be located.
(3) Submission of comments.
Commenters may submit comments on
the application in accordance with the
procedures specified in subpart C of
part 116 of this chapter.
(4) Meetings. The OCC may arrange a
meeting in accordance with the
procedures in subpart D of part 116 of
this chapter.
(b) Conditions of approval. The OCC
will decide all applications for
permission to organize a Federal stock
association.
(1) Factors that will be considered on
all applications for permission to
organize a Federal stock association are:
(i) Whether the applicants are persons
of good character and responsibility;
(ii) Whether a necessity exists for
such association in the community to be
served;
(iii) Whether there is a reasonable
probability of the association’s
usefulness and success;
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(iv) Whether the association can be
established without undue injury to
properly conducted existing local thrift
and home financing institutions; and
(v) Whether the association will
perform a role of providing credit for
housing consistent with safe and sound
operation of a Federal savings
association.
(2) [Reserved]
(3) Approvals of applications will be
conditioned on the following:
(i) Receipt by the OCC of written
confirmation from the Federal Deposit
Insurance Corporation that the accounts
of the association will be insured by the
Federal Deposit Insurance Corporation;
(ii) The sale of a minimum amount of
fully-paid capital stock of the
association prior to commencing
business;
(iii) The submission of a statement
that:
(A) The applicants have incurred no
expense in organization which is
chargeable to the association, and that
no such expense will be incurred, and
(B) No funds will be accepted for
deposit by the association until
organization has been completed;
(iv) Compliance with all applicable
laws, rules, and regulations; and
(v) The satisfaction of any other
requirement or condition the OCC may
impose.
(c) Issuance of charter. Upon approval
of an application, the OCC shall issue to
the association a charter for a Federal
stock savings association or for a
Federal stock savings bank, as requested
by the applicants, which shall be in the
form provided in this part. Issuance of
the charter shall be subject to the
condition subsequent that the
organization of the association is
completed pursuant to this section.
(d) Interim board of directors and
officers. Upon approval of the
application and the issuance of the
charter, the applicants shall constitute
the interim board of directors of the
association until the board of directors
of the association are elected by its
stockholders at the organizational
meeting required by paragraph (g) of
this section, and the interim officers of
the association shall be those persons
set forth in the application for
permission to organize.
(e) Sale of capital stock. Upon the
issuance of the charter, the association
shall proceed to offer and sell its capital
stock pursuant to the requirements of
part 197 of this chapter.
(f) Bank membership and insurance of
accounts. Promptly upon the issuance
of the charter, a Federal stock
association must qualify as a member of
the appropriate Federal Home Loan
PO 00000
Frm 00066
Fmt 4701
Sfmt 4700
Bank and meet all requirements
necessary to obtain insurance of
accounts by the Federal Deposit
Insurance Corporation.
(g) Organizational meeting. Promptly
upon the completion of the sale of its
capital stock, the association shall
provide notice, pursuant to § 152.6(b), of
a meeting of its stockholders to elect a
board of directors. Immediately
following such election, the directors
shall meet to elect the officers of the
association and to undertake any other
action necessary under the charter or
bylaws to complete corporate
organization.
(h) Completion of organization.
Organization of a Federal stock
association shall be deemed complete
for the purposes of this part when:
(1) The association has obtained
Federal Home Loan Bank membership
and insurance of its accounts from the
Federal Deposit Insurance Corporation;
(2) It has completed the sale of and
received full payment for its capital
stock;
(3) It has complied with all
requirements of part 197 of this chapter;
(4) It has held its organizational
meeting for the election of directors and
all directors have been elected;
(5) Its officers have been elected and
bonded; and
(6) It has met the requirements and
conditions imposed by the OCC in
connection with approval of the
application.
(i) Failure of completion. If
organization of a Federal stock
association is not completed within six
months after approval of the
application, or unless extended for an
additional period for good cause shown,
the charter shall become null and void
and all subscriptions to capital stock
shall be returned.
§ 152.2 Procedures for organization of
interim Federal stock association.
(a) Applications for permission to
organize an interim Federal savings
association are not subject to subparts B,
C and D of part 116 of this chapter or
§ 152.1(b)(3) of this part.
(b) Approval of an application for
permission to organize an interim
Federal stock association shall be
conditioned upon approval by the OCC
of an application to merge the interim
Federal stock association, or upon
approval by the OCC of another
transaction which the interim was
chartered to facilitate. Applications for
permission to organize an interim
Federal stock association shall be
submitted in the same manner as the
related filing(s). In evaluating the
application, the OCC will consider the
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
purpose for which the association will
be organized, the form of any proposed
transactions involving the association,
the effect of the transactions on existing
associations involved in the
transactions, and the factors specified in
§ 152.1(b)(1) to the extent relevant.
(c) If a merger or other transaction
facilitated by the existence of the
interim Federal stock association has
not been approved within six months of
the approval of the application for
permission to organize, unless extended
for good cause shown, the charter shall
be void and all subscriptions for capital
stock shall be returned.
sroberts on DSK5SPTVN1PROD with RULES
§ 152.3 Charters for Federal stock
associations.
The charter of a Federal stock
association shall be in the following
form, except that an association that has
converted from the mutual form
pursuant to part 192 of this chapter
shall include in its charter a section
establishing a liquidation account as
required by § 192.3(c)(13) of this
chapter. A charter for a Federal stock
savings bank shall substitute the term
‘‘savings bank’’ for ‘‘association.’’
Charters may also include any
preapproved optional provision
contained in § 152.4 of this part.
Federal Stock Charter
Section 1. Corporate title. The full
corporate title of the association is ll.
Section 2. Office. The home office
shall be located in ll [city, state].
Section 3. Duration. The duration of
the association is perpetual.
Section 4. Purpose and powers. The
purpose of the association is to pursue
any or all of the lawful objectives of a
Federal savings association chartered
under section 5 of the Home Owners’
Loan Act and to exercise all of the
express, implied, and incidental powers
conferred thereby and by all acts
amendatory thereof and supplemental
thereto, subject to the Constitution and
laws of the United States as they are
now in effect, or as they may hereafter
be amended, and subject to all lawful
and applicable rules, regulations, and
orders of the Office of the Comptroller
of the Currency (‘‘OCC’’).
Section 5. Capital stock. The total
number of shares of all classes of the
capital stock that the association has the
authority to issue is ll, all of which
shall be common stock of par [or if no
par is specified then shares shall have
a stated] value of ll per share. The
shares may be issued from time to time
as authorized by the board of directors
without the approval of its shareholders,
except as otherwise provided in this
Section 5 or to the extent that such
approval is required by governing law,
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
rule, or regulation. The consideration
for the issuance of the shares shall be
paid in full before their issuance and
shall not be less than the par [or stated]
value. Neither promissory notes nor
future services shall constitute payment
or part payment for the issuance of
shares of the association. The
consideration for the shares shall be
cash, tangible or intangible property (to
the extent direct investment in such
property would be permitted to the
association), labor, or services actually
performed for the association, or any
combination of the foregoing. In the
absence of actual fraud in the
transaction, the value of such property,
labor, or services, as determined by the
board of directors of the association,
shall be conclusive. Upon payment of
such consideration, such shares shall be
deemed to be fully paid and
nonassessable. In the case of a stock
dividend, that part of the retained
earnings of the association that is
transferred to common stock or paid-in
capital accounts upon the issuance of
shares as a stock dividend shall be
deemed to be the consideration for their
issuance.
Except for shares issued in the initial
organization of the association or in
connection with the conversion of the
association from the mutual to stock
form of capitalization, no shares of
capital stock (including shares issuable
upon conversion, exchange, or exercise
of other securities) shall be issued,
directly or indirectly, to officers,
directors, or controlling persons of the
association other than as part of a
general public offering or as qualifying
shares to a director, unless the issuance
or the plan under which they would be
issued has been approved by a majority
of the total votes eligible to be cast at a
legal meeting.
The holders of the common stock
shall exclusively possess all voting
power. Each holder of shares of
common stock shall be entitled to one
vote for each share held by such holder,
except as to the cumulation of votes for
the election of directors, unless the
charter provides that there shall be no
such cumulative voting. Subject to any
provision for a liquidation account, in
the event of any liquidation,
dissolution, or winding up of the
association, the holders of the common
stock shall be entitled, after payment or
provision for payment of all debts and
liabilities of the association, to receive
the remaining assets of the association
available for distribution, in cash or in
kind. Each share of common stock shall
have the same relative rights as and be
identical in all respects with all the
other shares of common stock.
PO 00000
Frm 00067
Fmt 4701
Sfmt 4700
49015
Section 6. Preemptive rights. Holders
of the capital stock of the association
shall not be entitled to preemptive
rights with respect to any shares of the
association which may be issued.
Section 7. Directors. The association
shall be under the direction of a board
of directors. The authorized number of
directors, as stated in the association’s
bylaws, shall not be fewer than five nor
more than fifteen except when a greater
or lesser number is approved by the
OCC.
Section 8. Amendment of charter.
Except as provided in Section 5, no
amendment, addition, alteration, change
or repeal of this charter shall be made,
unless such is proposed by the board of
directors of the association, approved by
the shareholders by a majority of the
votes eligible to be cast at a legal
meeting, unless a higher vote is
otherwise required, and approved or
preapproved by the OCC.
Attest: lllllllllllllllll
Secretary of the Association
By: lllllllllllllllllll
President or Chief Executive Officer of the
Association
Attest: lllllllllllllllll
Deputy Comptroller for Licensing
By: lllllllllllllllllll
Comptroller of the Currency
Effective Date: llllllllllllll
§ 152.4
Charter amendments.
(a) General. In order to adopt a charter
amendment, a Federal stock association
must comply with the following
requirements:
(1) Board of directors approval. The
board of directors of the association
must adopt a resolution proposing the
charter amendment that states the text
of such amendment.
(2) Form of filing—(i) Application
requirement. If the proposed charter
amendment would render more difficult
or discourage a merger, tender offer, or
proxy contest, the assumption of control
by a holder of a block of the
association’s stock, the removal of
incumbent management, or involve a
significant issue of law or policy, the
association shall file the proposed
amendment and shall obtain the prior
approval of the OCC; and
(ii) Notice requirement. If the
proposed charter amendment does not
involve a provision that would be
covered by paragraph (a)(2)(i) of this
section and such amendment is
permissible under all applicable laws,
rules or regulations, then the association
shall submit the proposed amendments
to the appropriate OCC licensing office,
at least 30 days prior to the date the
proposed charter amendment is to be
mailed for consideration by the
association’s shareholders.
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49016
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(b) Approval. Any charter amendment
filed pursuant to paragraph (a)(2)(ii) of
this section shall automatically be
approved 30 days from the date of filing
of such amendment, provided that the
association follows the requirements of
its charter in adopting such amendment,
unless prior to the expiration of such
30-day period the OCC notifies the
association that such amendment is
rejected or that such amendment is
deemed to be filed under the provisions
of paragraph (a)(2)(i) of this section. In
addition, the following charter
amendments, including the adoption of
the Federal stock charter as set forth in
§ 152.3 of this part, shall be approved at
the time of adoption, if adopted without
change and filed with the OCC within
30 days after adoption, provided the
association follows the requirements of
its charter in adopting such
amendments:
(1) Title change. A Federal stock
association that has complied with
§ 143.1(b) of this chapter may amend its
charter by substituting a new corporate
title in section 1.
(2) Home office. A Federal savings
association may amend its charter by
substituting a new home office in
section 2, if it has complied with
applicable requirements of § 145.95 of
this chapter.
(3) Number of shares of stock and par
value. A Federal stock association may
amend Section 5 of its charter to change
the number of authorized shares of
stock, the number of shares within each
class of stock, and the par or stated
value of such shares.
(4) Capital stock. A Federal stock
association may amend its charter by
revising Section 5 to read as follows:
Section 5. Capital stock. The total
number of shares of all classes of capital
stock that the association has the
authority to issue is ll, of which ll
shall be common stock of par [or if no
par value is specified the stated] value
of ll per share and of which [list the
number of each class of preferred and
the par or if no par value is specified the
stated value per share of each such
class]. The shares may be issued from
time to time as authorized by the board
of directors without further approval of
shareholders, except as otherwise
provided in this Section 5 or to the
extent that such approval is required by
governing law, rule, or regulation. The
consideration for the issuance of the
shares shall be paid in full before their
issuance and shall not be less than the
par [or stated] value. Neither promissory
notes nor future services shall constitute
payment or part payment for the
issuance of shares of the association.
The consideration for the shares shall be
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
cash, tangible or intangible property (to
the extent direct investment in such
property would be permitted), labor, or
services actually performed for the
association, or any combination of the
foregoing. In the absence of actual fraud
in the transaction, the value of such
property, labor, or services, as
determined by the board of directors of
the association, shall be conclusive.
Upon payment of such consideration,
such shares shall be deemed to be fully
paid and nonassessable. In the case of
a stock dividend, that part of the
retained earnings of the association that
is transferred to common stock or paidin capital accounts upon the issuance of
shares as a stock dividend shall be
deemed to be the consideration for their
issuance.
Except for shares issued in the initial
organization of the association or in
connection with the conversion of the
association from the mutual to the stock
form of capitalization, no shares of
capital stock (including shares issuable
upon conversion, exchange, or exercise
of other securities) shall be issued,
directly or indirectly, to officers,
directors, or controlling persons of the
association other than as part of a
general public offering or as qualifying
shares to a director, unless their
issuance or the plan under which they
would be issued has been approved by
a majority of the total votes eligible to
be cast at a legal meeting.
Nothing contained in this Section 5
(or in any supplementary sections
hereto) shall entitle the holders of any
class of a series of capital stock to vote
as a separate class or series or to more
than one vote per share, except as to the
cumulation of votes for the election of
directors, unless the charter otherwise
provides that there shall be no such
cumulative voting: Provided, That this
restriction on voting separately by class
or series shall not apply:
(i) To any provision which would
authorize the holders of preferred stock,
voting as a class or series, to elect some
members of the board of directors, less
than a majority thereof, in the event of
default in the payment of dividends on
any class or series of preferred stock;
(ii) To any provision that would
require the holders of preferred stock,
voting as a class or series, to approve the
merger or consolidation of the
association with another corporation or
the sale, lease, or conveyance (other
than by mortgage or pledge) of
properties or business in exchange for
securities of a corporation other than the
association if the preferred stock is
exchanged for securities of such other
corporation: Provided, That no
provision may require such approval for
PO 00000
Frm 00068
Fmt 4701
Sfmt 4700
transactions undertaken with the
assistance or pursuant to the direction
of the OCC or the Federal Deposit
Insurance Corporation;
(iii) To any amendment which would
adversely change the specific terms of
any class or series of capital stock as set
forth in this Section 5 (or in any
supplementary sections hereto),
including any amendment which would
create or enlarge any class or series
ranking prior thereto in rights and
preferences. An amendment which
increases the number of authorized
shares of any class or series of capital
stock, or substitutes the surviving
association in a merger or consolidation
for the association, shall not be
considered to be such an adverse
change.
A description of the different classes
and series (if any) of the association’s
capital stock and a statement of the
designations, and the relative rights,
preferences, and limitations of the
shares of each class of and series (if any)
of capital stock are as follows:
A. Common stock. Except as provided
in this Section 5 (or in any
supplementary sections thereto) the
holders of the common stock shall
exclusively possess all voting power.
Each holder of shares of the common
stock shall be entitled to one vote for
each share held by each holder, except
as to the cumulation of votes for the
election of directors, unless the charter
otherwise provides that there shall be
no such cumulative voting.
Whenever there shall have been paid,
or declared and set aside for payment,
to the holders of the outstanding shares
of any class of stock having preference
over the common stock as to the
payment of dividends, the full amount
of dividends and of sinking fund,
retirement fund, or other retirement
payments, if any, to which such holders
are respectively entitled in preference to
the common stock, then dividends may
be paid on the common stock and on
any class or series of stock entitled to
participate therewith as to dividends
out of any assets legally available for the
payment of dividends.
In the event of any liquidation,
dissolution, or winding up of the
association, the holders of the common
stock (and the holders of any class or
series of stock entitled to participate
with the common stock in the
distribution of assets) shall be entitled
to receive, in cash or in kind, the assets
of the association available for
distribution remaining after: (i) Payment
or provision for payment of the
association’s debts and liabilities; (ii)
distributions or provision for
distributions in settlement of its
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
liquidation account; and (iii)
distributions or provision for
distributions to holders of any class or
series of stock having preference over
the common stock in the liquidation,
dissolution, or winding up of the
association. Each share of common
stock shall have the same relative rights
as and be identical in all respects with
all the other shares of common stock.
B. Preferred stock. The association
may provide in supplementary sections
to its charter for one or more classes of
preferred stock, which shall be
separately identified. The shares of any
class may be divided into and issued in
series, with each series separately
designated so as to distinguish the
shares thereof from the shares of all
other series and classes. The terms of
each series shall be set forth in a
supplementary section to the charter.
All shares of the same class shall be
identical except as to the following
relative rights and preferences, as to
which there may be variations between
different series:
(a) The distinctive serial designation
and the number of shares constituting
such series;
(b) The dividend rate or the amount
of dividends to be paid on the shares of
such series, whether dividends shall be
cumulative and, if so, from which
date(s), the payment date(s) for
dividends, and the participating or other
special rights, if any, with respect to
dividends;
(c) The voting powers, full or limited,
if any, of shares of such series;
(d) Whether the shares of such series
shall be redeemable and, if so, the
price(s) at which, and the terms and
conditions on which, such shares may
be redeemed;
(e) The amount(s) payable upon the
shares of such series in the event of
voluntary or involuntary liquidation,
dissolution, or winding up of the
association;
(f) Whether the shares of such series
shall be entitled to the benefit of a
sinking or retirement fund to be applied
to the purchase or redemption of such
shares, and if so entitled, the amount of
such fund and the manner of its
application, including the price(s) at
which such shares may be redeemed or
purchased through the application of
such fund;
(g) Whether the shares of such series
shall be convertible into, or
exchangeable for, shares of any other
class or classes of stock of the
association and, if so, the conversion
price(s) or the rate(s) of exchange, and
the adjustments thereof, if any, at which
such conversion or exchange may be
made, and any other terms and
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
conditions of such conversion or
exchange.
(h) The price or other consideration
for which the shares of such series shall
be issued; and
(i) Whether the shares of such series
which are redeemed or converted shall
have the status of authorized but
unissued shares of serial preferred stock
and whether such shares may be
reissued as shares of the same or any
other series of serial preferred stock.
Each share of each series of serial
preferred stock shall have the same
relative rights as and be identical in all
respects with all the other shares of the
same series.
The board of directors shall have
authority to divide, by the adoption of
supplementary charter sections, any
authorized class of preferred stock into
series, and, within the limitations set
forth in this section and the remainder
of this charter, fix and determine the
relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred
shares of a series established by a
supplementary charter section adopted
by the board of directors, the association
shall file with the OCC a dated copy of
that supplementary section of this
charter established and designating the
series and fixing and determining the
relative rights and preferences thereof.
(5) Limitations on subsequent
issuances. A Federal stock association
may amend its charter to require
shareholder approval of the issuance or
reservation of common stock or
securities convertible into common
stock under circumstances which would
require shareholder approval under the
rules of the New York or American
Stock Exchange if the shares were then
listed on the New York or American
Stock Exchange.
(6) Cumulative voting. A Federal stock
association may amend its charter by
substituting the following sentence for
the second sentence in the third
paragraph of Section 5: ‘‘Each holder of
shares of common stock shall be entitled
to one vote for each share held by such
holder and there shall be no right to
cumulate votes in an election of
directors.’’
(7) [Reserved]
(8) Anti-takeover provisions following
mutual to stock conversion.
Notwithstanding the law of the state in
which the association is located, a
Federal stock association may amend its
charter by renumbering existing sections
as appropriate and adding a new section
8 as follows:
Section 8. Certain Provisions
Applicable for Five Years.
Notwithstanding anything contained in
PO 00000
Frm 00069
Fmt 4701
Sfmt 4700
49017
the Association’s charter or bylaws to
the contrary, for a period of [specify
number of years up to five] years from
the date of completion of the conversion
of the Association from mutual to stock
form, the following provisions shall
apply:
A. Beneficial Ownership Limitation.
No person shall directly or indirectly
offer to acquire or acquire the beneficial
ownership of more than 10 percent of
any class of an equity security of the
association. This limitation shall not
apply to a transaction in which the
association forms a holding company
without change in the respective
beneficial ownership interests of its
stockholders other than pursuant to the
exercise of any dissenter and appraisal
rights, the purchase of shares by
underwriters in connection with a
public offering, or the purchase of
shares by a tax-qualified employee stock
benefit plan which is exempt from the
approval requirements under
§ 174.3(c)(2)(i)(D) of the OCC’s
regulations.
In the event shares are acquired in
violation of this section 8, all shares
beneficially owned by any person in
excess of 10% shall be considered
‘‘excess shares’’ and shall not be
counted as shares entitled to vote and
shall not be voted by any person or
counted as voting shares in connection
with any matters submitted to the
stockholders for a vote.
For purposes of this section 8, the
following definitions apply:
(1) The term ‘‘person’’ includes an
individual, a group acting in concert, a
corporation, a partnership, an
association, a joint stock company, a
trust, an unincorporated organization or
similar company, a syndicate or any
other group formed for the purpose of
acquiring, holding or disposing of the
equity securities of the association.
(2) The term ‘‘offer’’ includes every
offer to buy or otherwise acquire,
solicitation of an offer to sell, tender
offer for, or request or invitation for
tenders of, a security or interest in a
security for value.
(3) The term ‘‘acquire’’ includes every
type of acquisition, whether effected by
purchase, exchange, operation of law or
otherwise.
(4) The term ‘‘acting in concert’’
means (a) knowing participation in a
joint activity or conscious parallel
action towards a common goal whether
or not pursuant to an express agreement,
or (b) a combination or pooling of voting
or other interests in the securities of an
issuer for a common purpose pursuant
to any contract, understanding,
relationship, agreement or other
E:\FR\FM\09AUR2.SGM
09AUR2
49018
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
arrangements, whether written or
otherwise.
B. Cumulative Voting Limitation.
Stockholders shall not be permitted to
cumulate their votes for election of
directors.
C. Call for Special Meetings. Special
meetings of stockholders relating to
changes in control of the association or
amendments to its charter shall be
called only upon direction of the board
of directors.
(c) Anti-takeover provisions. The OCC
may grant approval to a charter
amendment not listed in paragraph (b)
of this section regarding the acquisition
by any person or persons of its equity
securities provided that the association
shall file as part of its application for
approval an opinion, acceptable to the
OCC, of counsel independent from the
association that the proposed charter
provision would be permitted to be
adopted by a corporation chartered by
the state in which the principal office of
the association is located. Any such
provision must be consistent with
applicable statutes, regulations, and
OCC policies. Further, any such
provision that would have the effect of
rendering more difficult a change in
control of the association and would
require for any corporate action (other
than the removal of directors) the
affirmative vote of a larger percentage of
shareholders than is required by this
part, shall not be effective unless
adopted by a percentage of shareholder
vote at least equal to the highest
percentage that would be required to
take any action under such provision.
(d) Reissuance of charter. A Federal
stock association that has amended its
charter may apply to have its charter,
including the amendments, reissued by
the OCC. Such requests for reissuance
should be filed with the appropriate
OCC licensing office, and contain
signatures required under § 152.3 of this
part, together with such supporting
documents as needed to demonstrate
that the amendments were properly
adopted.
sroberts on DSK5SPTVN1PROD with RULES
§ 152.5
Bylaws.
(a) General. At its first organizational
meeting, the board of directors of a
Federal stock association shall adopt a
set of bylaws for the administration and
regulation of its affairs. Bylaws may be
adopted, amended or repealed by either
a majority of the votes cast by the
shareholders at a legal meeting or a
majority of the board of directors. The
bylaws shall contain sufficient
provisions to govern the association in
accordance with the requirements of
§§ 152.6, 152.7, 152.8, and 152.9 of this
part and shall not contain any provision
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
that is inconsistent with those sections
or with applicable laws, rules,
regulations or the association’s charter,
except that a bylaw provision
inconsistent with §§ 152.6, 152.7, and
152.9, of this part may be adopted with
the approval of the OCC.
(b) Form of Filing—(1) Application
requirement. (i) Any bylaw amendment
shall be submitted to the OCC for
approval if it would:
(A) Render more difficult or
discourage a merger, tender offer, or
proxy contest, the assumption of control
by a holder of a large block of the
association’s stock, or the removal of
incumbent management; or
(B) Be inconsistent with §§ 152.6,
152.7, 152.8, and 152.9 of this part, with
applicable laws, rules, regulations or the
association’s charter or involve a
significant issue of law or policy,
including indemnification, conflicts of
interest, and limitations on director or
officer liability.
(ii) Applications submitted under
paragraph (b)(1)(i) of this section are
subject to standard treatment processing
procedures at part 116, subparts A and
E of this chapter.
(iii) Bylaw provisions that adopt the
language of the OCC’s model or optional
bylaws, if adopted without change, and
filed with the OCC within 30 days after
adoption, are effective upon adoption.
(2) Filing requirement. If the proposed
bylaw amendment does not involve a
provision that would be covered by
paragraph (b)(1) or (b)(3) of this section
and is permissible under all applicable
laws, rules, or regulations, then the
association shall submit the amendment
to the OCC at least 30 days prior to the
date the bylaw amendment is to be
adopted by the association.
(3) Corporate governance procedures.
A Federal stock association may elect to
follow the corporate governance
procedures of: The laws of the state
where the main office of the association
is located; the laws of the state where
the association’s holding company, if
any, is incorporated or chartered;
Delaware General Corporation law; or
The Model Business Corporation Act,
provided that such procedures may be
elected to the extent not inconsistent
with applicable Federal statutes and
regulations and safety and soundness,
and such procedures are not of the type
described in paragraph (b)(1) of this
section. If this election is selected, a
Federal stock association shall designate
in its bylaws the provision or provisions
from the body or bodies of law selected
for its corporate governance procedures,
and shall file a copy of such bylaws,
which are effective upon adoption,
within 30 days after adoption. The
PO 00000
Frm 00070
Fmt 4701
Sfmt 4700
submission shall indicate, where not
obvious, why the bylaw provisions meet
the requirements stated in paragraph
(b)(1) of this section.
(c) Effectiveness. Any bylaw
amendment filed pursuant to paragraph
(b)(2) of this section shall automatically
be effective 30 days from the date of
filing of such amendment, provided that
the association follows the requirements
of its charter and bylaws in adopting
such amendment, unless prior to the
expiration of such 30-day period the
OCC notifies the association that such
amendment is rejected or that such
amendment requires an application to
be filed pursuant to paragraph (b)(1) of
this section.
(d) Effect of subsequent charter or
bylaw change. Notwithstanding any
subsequent change to its charter or
bylaws, the authority of a Federal stock
association to engage in any transaction
shall be determined only by the
association’s charter or bylaws then in
effect, unless otherwise provided by
Federal law or regulation.
§ 152.6
Shareholders.
(a) Shareholder meetings. A meeting
of the shareholders of the association for
the election of directors and for the
transaction of any other business of the
association shall be held annually
within 150 days after the end of the
association’s fiscal year. Unless
otherwise provided in the association’s
charter, special meetings of the
shareholders may be called by the board
of directors or on the request of the
holders of 10 percent or more of the
shares entitled to vote at the meeting, or
by such other persons as may be
specified in the bylaws of the
association. All annual and special
meetings of shareholders shall be held
at such place as the board of directors
may determine in the state in which the
association has its principal place of
business, or at any other convenient
place the board of directors may
designate.
(b) Notice of shareholder meetings.
Written notice stating the place, day,
and hour of the meeting and the
purpose or purposes for which the
meeting is called shall be delivered not
fewer than 20 nor more than 50 days
before the date of the meeting, either
personally or by mail, by or at the
direction of the chairman of the board,
the president, the secretary, or the
directors, or other persons calling the
meeting, to each shareholder of record
entitled to vote at such meeting. If
mailed, such notice shall be deemed to
be delivered when deposited in the
mail, addressed to the shareholder at the
address appearing on the stock transfer
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
books or records of the association as of
the record date prescribed in paragraph
(c) of this section, with postage thereon
prepaid. When any shareholders’
meeting, either annual or special, is
adjourned for 30 days or more, notice of
the adjourned meeting shall be given as
in the case of an original meeting.
Notwithstanding anything in this
section, however, a Federal stock
association that is wholly owned shall
not be subject to the shareholder notice
requirement.
(c) Fixing of record date. For the
purpose of determining shareholders
entitled to notice of or to vote at any
meeting of shareholders or any
adjournment thereof, or shareholders
entitled to receive payment of any
dividend, or in order to make a
determination of shareholders for any
other proper purpose, the board of
directors shall fix in advance a date as
the record date for any such
determination of shareholders. Such
date in any case shall be not more than
60 days and, in case of a meeting of
shareholders, not less than 10 days prior
to the date on which the particular
action, requiring such determination of
shareholders, is to be taken. When a
determination of shareholders entitled
to vote at any meeting of shareholders
has been made as provided in this
section, such determination shall apply
to any adjournment thereof.
(d) Voting lists. (1) At least 20 days
before each meeting of the shareholders,
the officer or agent having charge of the
stock transfer books for the shares of the
association shall make a complete list of
the stockholders of record entitled to
vote at such meeting, or any
adjournments thereof, arranged in
alphabetical order, with the address and
the number of shares held by each. This
list of shareholders shall be kept on file
at the home office of the association and
shall be subject to inspection by any
shareholder of record or the
stockholder’s agent during the entire
time of the meeting. The original stock
transfer book shall constitute prima
facie evidence of the stockholders
entitled to examine such list or transfer
books or to vote at any meeting of
stockholders. Notwithstanding anything
in this section, however, a Federal stock
association that is wholly owned shall
not be subject to the voting list
requirements.
(2) In lieu of making the shareholders
list available for inspection by any
shareholders as provided in paragraph
(d)(1) of this section, the board of
directors may perform such acts as
required by paragraphs (a) and (b) of
Rule 14a–7 of the General Rules and
Regulations under the Securities and
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Exchange Act of 1934 (17 CFR 240.14a–
7) as may be duly requested in writing,
with respect to any matter which may
be properly considered at a meeting of
shareholders, by any shareholder who is
entitled to vote on such matter and who
shall defray the reasonable expenses to
be incurred by the association in
performance of the act or acts required.
(e) Shareholder quorum. A majority of
the outstanding shares of the association
entitled to vote, represented in person
or by proxy, shall constitute a quorum
at a meeting of shareholders. The
shareholders present at a duly organized
meeting may continue to transact
business until adjournment,
notwithstanding the withdrawal of
enough shareholders to leave less than
a quorum. If a quorum is present, the
affirmative vote of the majority of the
shares represented at the meeting and
entitled to vote on the subject matter
shall be the act of the stockholders,
unless the vote of a greater number of
stockholders voting together or voting
by classes is required by law or the
charter. Directors, however, are elected
by a plurality of the votes cast at an
election of directors.
(f) Shareholder voting—(1) Proxies.
Unless otherwise provided in the
association’s charter, at all meetings of
shareholders, a shareholder may vote in
person or by proxy executed in writing
by the shareholder or by a duly
authorized attorney in fact. Proxies may
be given telephonically or electronically
as long as the holder uses a procedure
for verifying the identity of the
shareholder. A proxy may designate as
holder a corporation, partnership or
company as defined in part 174 of this
chapter, or other person. Proxies
solicited on behalf of the management
shall be voted as directed by the
shareholder or, in the absence of such
direction, as determined by a majority of
the board of directors. No proxy shall be
valid more than eleven months from the
date of its execution except for a proxy
coupled with an interest.
(2) Shares controlled by association.
Neither treasury shares of its own stock
held by the association nor shares held
by another corporation, if a majority of
the shares entitled to vote for the
election of directors of such other
corporation are held by the association,
shall be voted at any meeting or counted
in determining the total number of
outstanding shares at any given time for
purposes of any meeting.
(g) Nominations and new business
submitted by shareholders. Nominations
for directors and new business
submitted by shareholders shall be
voted upon at the annual meeting if
such nominations or new business are
PO 00000
Frm 00071
Fmt 4701
Sfmt 4700
49019
submitted in writing and delivered to
the secretary of the association at least
five days prior to the date of the annual
meeting. Ballots bearing the names of all
the persons nominated shall be
provided for use at the annual meeting.
(h) Informal action by stockholders. If
the bylaws of the association so provide,
any action required to be taken at a
meeting of the stockholders, or any
other action that may be taken at a
meeting of the stockholders, may be
taken without a meeting if consent in
writing has been given by all the
stockholders entitled to vote with
respect to the subject matter.
§ 152.7
Board of directors.
(a) General powers and duties. The
business and affairs of the association
shall be under the direction of its board
of directors. The board of directors shall
annually elect a chairman of the board
from among its members and shall
designate the chairman of the board,
when present, to preside at its meeting.
Directors need not be stockholders
unless the bylaws so require.
(b) Number and term. The bylaws
shall set forth a specific number of
directors, not a range. The number of
directors shall be not fewer than five nor
more than fifteen, unless a higher or
lower number has been authorized by
the OTS, prior to July 21, 2011 or the
OCC. Directors shall be elected for a
term of one to three years and until their
successors are elected and qualified. If
a staggered board is chosen, the
directors shall be divided into two or
three classes as nearly equal in number
as possible and one class shall be
elected by ballot annually. In the case of
a converting or newly chartered
association where all directors shall be
elected at the first election of directors,
if a staggered board is chosen, the terms
shall be staggered in length from one to
three years.
(c) Regular meetings. A regular
meeting of the board of directors shall
be held immediately after, and at the
same place as, the annual meeting of
shareholders. The board of directors
shall determine the place, frequency,
time and procedure for notice of regular
meetings.
(d) Quorum. A majority of the number
of directors shall constitute a quorum
for the transaction of business at any
meeting of the board of directors. The
act of the majority of the directors
present at a meeting at which a quorum
is present shall be the act of the board
of directors, unless a greater number is
prescribed by regulation of the OCC.
(e) Vacancies. Any vacancy occurring
in the board of directors may be filled
by the affirmative vote of a majority of
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49020
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
the remaining directors although less
than a quorum of the board of directors.
A director elected to fill a vacancy shall
be elected to serve only until the next
election of directors by the
shareholders. Any directorship to be
filled by reason of an increase in the
number of directors may be filled by
election by the board of directors for a
term of office continuing only until the
next election of directors by the
shareholders.
(f) Removal or resignation of directors.
(1) At a meeting of shareholders called
expressly for that purpose, any director
may be removed only for cause, as
defined in § 163.39 of this chapter, by a
vote of the holders of a majority of the
shares then entitled to vote at an
election of directors. Associations may
provide for procedures regarding
resignations in the bylaws.
(2) If less than the entire board is to
be removed, no one of the directors may
be removed if the votes cast against the
removal would be sufficient to elect a
director if then cumulatively voted at an
election of the class of directors of
which such director is a part.
(3) Whenever the holders of the shares
of any class are entitled to elect one or
more directors by the provisions of the
charter or supplemental sections
thereto, the provisions of this section
shall apply, in respect to the removal of
a director or directors so elected, to the
vote of the holders of the outstanding
shares of that class and not to the vote
of the outstanding shares as a whole.
(g) Executive and other committees.
The board of directors, by resolution
adopted by a majority of the full board,
may designate from among its members
an executive committee and one or more
other committees each of which, to the
extent provided in the resolution or
bylaws of the association, shall have
and may exercise all of the authority of
the board of directors, except no
committee shall have the authority of
the board of directors with reference to:
the declaration of dividends; the
amendment of the charter or bylaws of
the association; recommending to the
stockholders a plan of merger,
consolidation, or conversion; the sale,
lease, or other disposition of all, or
substantially all, of the property and
assets of the association otherwise than
in the usual and regular course of its
business; a voluntary dissolution of the
association; a revocation of any of the
foregoing; or the approval of a
transaction in which any member of the
executive committee, directly or
indirectly, has any material beneficial
interest. The designation of any
committee and the delegation of
authority thereto shall not operate to
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
relieve the board of directors, or any
director, of any responsibility imposed
by law or regulation.
(h) Notice of special meetings. Written
notice of at least 24 hours regarding any
special meeting of the board of directors
or of any committee designated thereby
shall be given to each director in
accordance with the bylaws, although
such notice may be waived by the
director. The attendance of a director at
a meeting shall constitute a waiver of
notice of such meeting, except where a
director attends a meeting for the
express purpose of objecting to the
transaction of any business because the
meeting is not lawfully called or
convened. Neither the business to be
transacted at, nor the purpose of, any
meeting need be specified in the notice
or waiver of notice of such meeting. The
bylaws may provide for telephonic
participation at a meeting.
(i) Action without a meeting. Any
action required or permitted to be taken
by the board of directors at a meeting
may be taken without a meeting if a
consent in writing, setting forth the
actions so taken, shall be signed by all
of the directors.
(j) Presumption of assent. A director
of the association who is present at a
meeting of the board of directors at
which action on any association matter
is taken shall be presumed to have
assented to the action taken unless his
or her dissent or abstention shall be
entered in the minutes of the meeting or
unless a written dissent to such action
shall be filed with the person acting as
the secretary of the meeting before the
adjournment thereof or shall be
forwarded by registered mail to the
secretary of the association within five
days after the date on which a copy of
the minutes of the meeting is received.
Such right to dissent shall not apply to
a director who voted in favor of such
action.
(k) Age limitation on directors. A
Federal association may provide a
bylaw on age limitation for directors.
Bylaws on age limitations must comply
with all Federal laws, rules and
regulations.
§ 152.8
Officers.
(a) Positions. The officers of the
association shall be a president, one or
more vice presidents, a secretary, and a
treasurer or comptroller, each of whom
shall be elected by the board of
directors. The board of directors may
also designate the chairman of the board
as an officer. The offices of the secretary
and treasurer or comptroller may be
held by the same person and the vice
president may also be either the
secretary or the treasurer or comptroller.
PO 00000
Frm 00072
Fmt 4701
Sfmt 4700
The board of directors may designate
one or more vice presidents as executive
vice president or senior vice president.
The board of directors may also elect or
authorize the appointment of such other
officers as the business of the
association may require. The officers
shall have such authority and perform
such duties as the board of directors
may from time to time authorize or
determine. In the absence of action by
the board of directors, the officers shall
have such powers and duties as
generally pertain to their respective
offices.
(b) Removal. Any officer may be
removed by the board of directors
whenever in its judgment the best
interests of the association will be
served thereby; but such removal, other
than for cause, shall be without
prejudice to the contractual rights, if
any, of the person so removed.
Employment contracts shall conform
with § 163.39 of this chapter.
(c) Age limitation on officers. A
Federal association may provide a
bylaw on age limitation for officers.
Bylaws on age limitations must comply
with all Federal laws, rules, and
regulations.
§ 152.9 Certificates for shares and their
transfer.
(a) Certificates for shares. Certificates
representing shares of capital stock of
the association shall be in such form as
shall be determined by the board of
directors and approved by the OCC. The
certificates shall be signed by the chief
executive officer or by any other officer
of the association authorized by the
board of directors, attested by the
secretary or an assistant secretary, and
sealed with the corporate seal or a
facsimile thereof. The signatures of such
officers upon a certificate may be
facsimiles if the certificate is manually
signed on behalf of a transfer agent or
a registrar other than the association
itself or one of its employees. Each
certificate for shares of capital stock
shall be consecutively numbered or
otherwise identified. The name and
address of the person to whom the
shares are issued, with the number of
shares and date of issue, shall be
entered on the stock transfer books of
the association. All certificates
surrendered to the association for
transfer shall be cancelled and no new
certificate shall be issued until the
former certificate for a like number of
shares shall have been surrendered and
cancelled, except that in the case of a
lost or destroyed certificate a new
certificate may be issued upon such
terms and indemnity to the association
as the board of directors may prescribe.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(b) Transfer of shares. Transfer of
shares of capital stock of the association
shall be made only on its stock transfer
books. Authority for such transfer shall
be given only by the holder of record or
by a legal representative, who shall
furnish proper evidence of such
authority, or by an attorney authorized
by a duly executed power of attorney
and filed with the association. The
transfer shall be made only on surrender
for cancellation of the certificate for the
shares. The person in whose name
shares of capital stock stand on the
books of the association shall be deemed
by the association to be the owner for
all purposes.
§ 152.10
Annual reports to stockholders.
A Federal stock association not
wholly-owned by a holding company
shall, within 130 days after the end of
its fiscal year, mail to each of its
stockholders entitled to vote at its
annual meeting an annual report
containing financial statements that
satisfy the requirements of rule 14a–3
under the Securities Exchange Act of
1934. (17 CFR 240.14a–3). Concurrently
with such mailing a certification of such
mailing signed by the chairman of the
board, the president or a vice president
of the association, together with copies
of the report, shall be transmitted by the
association to the OCC.
sroberts on DSK5SPTVN1PROD with RULES
§ 152.11
Books and records.
(a) Each Federal stock association
shall keep correct and complete books
and records of account; shall keep
minutes of the proceedings of its
stockholders, board of directors, and
committees of directors; and shall keep
at its home office or at the office of its
transfer agent or registrar, a record of its
stockholders, giving the names and
addresses of all stockholders, and the
number, class and series, if any, of the
shares held by each.
(b)(1) Any stockholder or group of
stockholders of a Federal stock
association, holding of record the
number of voting shares of such
association specified below, upon
making written demand stating a proper
purpose, shall have the right to
examine, in person or by agent or
attorney, at any reasonable time or
times, nonconfidential portions of its
books and records of account, minutes
and record of stockholders and to make
extracts therefrom. Such right of
examination is limited to a stockholder
or group of stockholders holding of
record:
(i) Voting shares having a cost of not
less than $100,000 or constituting not
less than one percent of the total
outstanding voting shares, provided in
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
either case such stockholder or group of
stockholders have held of record such
voting shares for a period of at least six
months before making such written
demand, or
(ii) Not less than five percent of the
total outstanding voting shares.
(2) No stockholder or group of
stockholders of a Federal stock
association shall have any other right
under this section or common law to
examine its books and records of
account, minutes and record of
stockholders, except as provided in its
bylaws with respect to inspection of a
list of stockholders.
(c) The right to examination
authorized by paragraph (b) of this
section and the right to inspect the list
of stockholders provided by a Federal
stock association’s bylaws may be
denied to any stockholder or group of
stockholders upon the refusal of any
such stockholder or group of
stockholders to furnish such
association, its transfer agent or registrar
an affidavit that such examination or
inspection is not desired for any
purpose which is in the interest of a
business or object other than the
business of the association, that such
stockholder has not within the five
years preceding the date of the affidavit
sold or offered for sale, and does not
now intend to sell or offer for sale, any
list of stockholders of the association or
of any other corporation, and that such
stockholder has not within said fiveyear period aided or abetted any other
person in procuring any list of
stockholders for purposes of selling or
offering for sale such list.
(d) Notwithstanding any provision of
this section or common law, no
stockholder or group of stockholders
shall have the right to obtain, inspect or
copy any portion of any books or
records of a Federal stock association
containing:
(1) A list of depositors in or borrowers
from such association;
(2) Their addresses;
(3) Individual deposit or loan
balances or records; or
(4) Any data from which such
information could be reasonably
constructed.
§ 152.12
[Reserved]
§ 152.13 Combinations involving Federal
stock associations.
(a) Scope and authority. Federal stock
associations may enter into
combinations only in accordance with
the provisions of this section, section
18(c) of the Federal Deposit Insurance
Act, sections 5(d)(3)(A) and 10(s) of the
Home Owners’ Loan Act, and § 163.22
of this part.
PO 00000
Frm 00073
Fmt 4701
Sfmt 4700
49021
(b) Definitions. The following
definitions apply to §§ 152.13 and
152.14 of this part:
(1) Combination. A merger or
consolidation with another depository
institution, or an acquisition of all or
substantially all of the assets or
assumption of all or substantially all of
the liabilities of a depository institution
by another depository institution.
Combine means to be a constituent
institution in a combination.
(2) Consolidation. Fusion of two or
more depository institutions into a
newly-created depository institution.
(3) Constituent institution. Resulting,
disappearing, acquiring, or transferring
depository institution in a combination.
(4) Depository institution means any
commercial bank (including a private
bank), a savings bank, a trust company,
a savings and loan association, a
building and loan association, a
homestead association, a cooperative
bank, an industrial bank or a credit
union, chartered in the United States
and having its principal office located in
the United States.
(5) Disappearing institution. A
depository institution whose corporate
existence does not continue after a
combination.
(6) Merger. Uniting two or more
depository institutions by the transfer of
all property rights and franchises to the
resulting depository institution, which
retains its corporate identity.
(7) Mutual savings association. Any
savings association organized in a form
not requiring non-withdrawable stock
under Federal or state law.
(8) Resulting institution. The
depository institution whose corporate
existence continues after a combination.
(9) Savings association has the same
meaning as defined in § 161.43 of this
chapter.
(10) State. Includes the District of
Columbia, Commonwealth of Puerto
Rico, and states, territories, and
possessions of the United States.
(11) Stock association. Any savings
association organized in a form
requiring non-withdrawable stock.
(c) Forms of combination. A Federal
stock association may combine with any
depository institution, provided that:
(1) The combination is in compliance
with, and receives all approvals
required under, any applicable statutes
and regulations;
(2) Any resulting Federal savings
association meets the requirements for
Federal Home Loan Bank membership
and insurance of accounts;
(3) Any resulting Federal savings
association conforms within the time
prescribed by the OCC to the
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49022
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
requirements of sections 5(c) and 10(m)
of the Home Owners’ Loan Act; and
(4) If any constituent savings
association is a mutual savings
association, the resulting institution
shall be mutually held, unless:
(i) The transaction involves a
supervisory merger;
(ii) The transaction is approved under
part 192 of this chapter;
(iii) The transaction involves an
interim Federal stock association or an
interim state stock savings association;
or
(iv) The transaction involves a
transfer in the context of a mutual
holding company reorganization under
section 10(o) of the Home Owners’ Loan
Act.
(d) Combinations. Prior written
notification to, notice to, or prior
written approval of, the OCC pursuant
to § 163.22 of this chapter is required for
every combination. In the case of
applications and notices pursuant to
§ 163.22 (a) or (c), the OCC shall apply
the criteria set out in § 163.22 of this
chapter and shall impose any conditions
it deems necessary or appropriate to
ensure compliance with those criteria
and the requirements of this chapter.
(e) Approval of the board of directors.
Before filing a notice or application for
any combination involving a Federal
stock association, the combination shall
be approved:
(1) By a two-thirds vote of the entire
board of each constituent Federal
savings association; and
(2) As required by other applicable
Federal or state law, for other
constituent institutions.
(f) Combination agreement. All terms,
conditions, agreements or
understandings, or other provisions
with respect to a combination involving
a Federal savings association shall be set
forth fully in a written combination
agreement. The combination agreement
shall state:
(1) That the combination shall not be
effective unless and until:
(i) The combination receives any
necessary approval from the OCC
pursuant to § 163.22 (a) or (c);
(ii) In the case of a transaction
requiring a notification pursuant to
§ 163.22(b), notification has been
provided to the OCC; or
(iii) In the case of a transaction
requiring a notice pursuant to
§ 163.22(c), the notice has been filed,
and the appropriate period of time has
passed or the OCC has advised the
parties that it will not disapprove the
transaction;
(2) Which constituent institution is to
be the resulting institution;
(3) The name of the resulting
institution;
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(4) The location of the home office
and any other offices of the resulting
institution;
(5) The terms and conditions of the
combination and the method of
effectuation;
(6) Any charter amendments, or the
new charter in the combination;
(7) The basis upon which the savings
accounts of the resulting institution
shall be issued;
(8) If a Federal association is the
resulting institution, the number,
names, residence addresses, and terms
of directors;
(9) The effect upon and assumption of
any liquidation account of a
disappearing institution by the resulting
institution; and
(10) Such other provisions,
agreements, or understandings as relate
to the combination.
(g) [Reserved]
(h) Approval by stockholders—(1)
General rule. Except as otherwise
provided in this section, an affirmative
vote of two-thirds of the outstanding
voting stock of any constituent Federal
savings association shall be required for
approval of the combination agreement.
If any class of shares is entitled to vote
as a class pursuant to § 152.4 of this
part, an affirmative vote of a majority of
the shares of each voting class and twothirds of the total voting shares shall be
required. The required vote shall be
taken at a meeting of the savings
association.
(2) General exception. Stockholders of
the resulting Federal stock association
need not authorize a combination
agreement if:
(i) It does not involve an interim
Federal savings association or an
interim state savings association;
(ii) The association’s charter is not
changed;
(iii) Each share of stock outstanding
immediately prior to the effective date
of the combination is to be an identical
outstanding share or a treasury share of
the resulting Federal stock association
after such effective date; and
(iv) Either:
(A) No shares of voting stock of the
resulting Federal stock association and
no securities convertible into such stock
are to be issued or delivered under the
plan of combination, or
(B) The authorized unissued shares or
the treasury shares of voting stock of the
resulting Federal stock association to be
issued or delivered under the plan of
combination, plus those initially
issuable upon conversion of any
securities to be issued or delivered
under such plan, do not exceed 15% of
the total shares of voting stock of such
association outstanding immediately
PO 00000
Frm 00074
Fmt 4701
Sfmt 4700
prior to the effective date of the
combination.
(3) Exceptions for certain
combinations involving an interim
association. Stockholders of a Federal
stock association need not authorize by
a two-thirds affirmative vote
combinations involving an interim
Federal savings association or interim
state savings association when the
resulting Federal stock association is
acquired pursuant to regulations of the
Board of Governors of the Federal
Reserve System. In those cases, an
affirmative vote of 50 percent of the
shares of the outstanding voting stock of
the Federal stock association plus one
affirmative vote shall be required. If any
class of shares is entitled to vote as a
class pursuant to § 152.4 of this part, an
affirmative vote of 50 percent of the
shares of each voting class plus one
affirmative vote shall be required. The
required votes shall be taken at a
meeting of the association.
(i) Disclosure. The OCC may require,
in connection with a combination under
this section, such disclosure of
information as the OCC deems
necessary or desirable for the protection
of investors in any of the constituent
associations.
(j) Articles of combination. (1)
Following stockholder approval of any
combination in which a Federal savings
association is the resulting institution,
articles of combination shall be
executed in duplicate by each
constituent institution, by its chief
executive officer or executive vice
president and by its secretary or an
assistant secretary, and verified by one
of the officers of each institution signing
such articles, and shall set forth:
(i) The plan of combination;
(ii) The number of shares outstanding
in each depository institution; and
(iii) The number of shares in each
depository institution voted for and
against such plan.
(2) Both sets of articles of combination
shall be filed with the OCC. If the OCC
determines that such articles conform to
the requirements of this section, the
OCC shall endorse the articles and
return one set to the resulting
institution.
(k) Effective date. No combination
under this section shall be effective
until receipt of any approvals required
by the OCC. The effective date of a
combination in which the resulting
institution is a Federal stock association
shall be the date of consummation of the
transaction or such other later date
specified on the endorsement of the
articles of combination by the OCC. If a
disappearing institution combining
under this section is a Federal stock
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
association, its charter shall be deemed
to be cancelled as of the effective date
of the combination and such charter
must be surrendered to the OCC as soon
as practicable after the effective date.
(l) Mergers and consolidations:
transfer of assets and liabilities to the
resulting institution. Upon the effective
date of a merger or consolidation under
this section, if the resulting institution
is a Federal savings association, all
assets and property (real, personal and
mixed, tangible and intangible, choses
in action, rights, and credits) then
owned by each constituent institution or
which would inure to any of them,
shall, immediately by operation of law
and without any conveyance, transfer,
or further action, become the property of
the resulting Federal savings
association. The resulting Federal
savings association shall be deemed to
be a continuation of the entity of each
constituent institution, the rights and
obligations of which shall succeed to
such rights and obligations and the
duties and liabilities connected
therewith, subject to the Home Owners’
Loan Act and other applicable statutes.
sroberts on DSK5SPTVN1PROD with RULES
§ 152.14
Dissenter and appraisal rights.
(a) Right to demand payment of fair
or appraised value. Except as provided
in paragraph (b) of this section, any
stockholder of a stock association
combining in accordance with § 152.13
of this part shall have the right to
demand payment of the fair or
appraised value of his stock: Provided,
That such stockholder has not voted in
favor of the combination and complies
with the provisions of paragraph (c) of
this section.
(b) Exceptions. No stockholder
required to accept only qualified
consideration for his or her stock shall
have the right under this section to
demand payment of the stock’s fair or
appraised value, if such stock was listed
on a national securities exchange or
quoted on the National Association of
Securities Dealers’ Automated
Quotation System (‘‘NASDAQ’’) on the
date of the meeting at which the
combination was acted upon or
stockholder action is not required for a
combination made pursuant to
§ 152.13(h)(2) of this part. ‘‘Qualified
consideration’’ means cash, shares of
stock of any association or corporation
which at the effective date of the
combination will be listed on a national
securities exchange or quoted on
NASDAQ, or any combination of such
shares of stock and cash.
(c) Procedure—(1) Notice. Each
constituent Federal stock association
shall notify all stockholders entitled to
rights under this section, not less than
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
twenty days prior to the meeting at
which the combination agreement is to
be submitted for stockholder approval,
of the right to demand payment of
appraised value of shares, and shall
include in such notice a copy of this
section. Such written notice shall be
mailed to stockholders of record and
may be part of management’s proxy
solicitation for such meeting.
(2) Demand for appraisal and
payment. Each stockholder electing to
make a demand under this section shall
deliver to the Federal stock association,
before voting on the combination, a
writing identifying himself or herself
and stating his or her intention thereby
to demand appraisal of and payment for
his or her shares. Such demand must be
in addition to and separate from any
proxy or vote against the combination
by the stockholder.
(3) Notification of effective date and
written offer. (i) Within ten days after
the effective date of the combination,
the resulting association shall:
(A) Give written notice by mail to
stockholders of constituent Federal
stock associations who have complied
with the provisions of paragraph (c)(2)
of this section and have not voted in
favor of the combination, of the effective
date of the combination;
(B) Make a written offer to each
stockholder to pay for dissenting shares
at a specified price deemed by the
resulting association to be the fair value
thereof; and
(C) Inform them that, within sixty
days of such date, the respective
requirements of paragraphs (c)(5) and
(c)(6) of this section (set out in the
notice) must be satisfied.
(ii) The notice and offer shall be
accompanied by a balance sheet and
statement of income of the association
the shares of which the dissenting
stockholder holds, for a fiscal year
ending not more than sixteen months
before the date of notice and offer,
together with the latest available interim
financial statements.
(4) Acceptance of offer. If within sixty
days of the effective date of the
combination the fair value is agreed
upon between the resulting association
and any stockholder who has complied
with the provisions of paragraph (c)(2)
of this section, payment therefore shall
be made within ninety days of the
effective date of the combination.
(5) Petition to be filed if offer not
accepted. If within sixty days of the
effective date of the combination the
resulting association and any
stockholder who has complied with the
provisions of paragraph (c)(2) of this
section do not agree as to the fair value,
then any such stockholder may file a
PO 00000
Frm 00075
Fmt 4701
Sfmt 4700
49023
petition with the OCC, with a copy by
registered or certified mail to the
resulting association, demanding a
determination of the fair market value of
the stock of all such stockholders. A
stockholder entitled to file a petition
under this section who fails to file such
petition within sixty days of the
effective date of the combination shall
be deemed to have accepted the terms
offered under the combination.
(6) Stock certificates to be noted.
Within sixty days of the effective date
of the combination, each stockholder
demanding appraisal and payment
under this section shall submit to the
transfer agent his certificates of stock for
notation thereon that an appraisal and
payment have been demanded with
respect to such stock and that appraisal
proceedings are pending. Any
stockholder who fails to submit his or
her stock certificates for such notation
shall no longer be entitled to appraisal
rights under this section and shall be
deemed to have accepted the terms
offered under the combination.
(7) Withdrawal of demand.
Notwithstanding the foregoing, at any
time within sixty days after the effective
date of the combination, any
stockholder shall have the right to
withdraw his or her demand for
appraisal and to accept the terms offered
upon the combination.
(8) Valuation and payment. The
Comptroller shall, as he or she may
elect, either appoint one or more
independent persons or direct
appropriate staff of the OCC to appraise
the shares to determine their fair market
value, as of the effective date of the
combination, exclusive of any element
of value arising from the
accomplishment or expectation of the
combination. Appropriate staff of the
OCC shall review and provide an
opinion on appraisals prepared by
independent persons as to the
suitability of the appraisal methodology
and the adequacy of the analysis and
supportive data. The Comptroller after
consideration of the appraisal report
and the advice of the appropriate staff
shall, if he or she concurs in the
valuation of the shares, direct payment
by the resulting association of the
appraised fair market value of the
shares, upon surrender of the
certificates representing such stock.
Payment shall be made, together with
interest from the effective date of the
combination, at a rate deemed equitable
by the Comptroller.
(9) Costs and expenses. The costs and
expenses of any proceeding under this
section may be apportioned and
assessed by the Comptroller as he or she
may deem equitable against all or some
E:\FR\FM\09AUR2.SGM
09AUR2
49024
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
of the parties. In making this
determination the Comptroller shall
consider whether any party has acted
arbitrarily, vexatiously, or not in good
faith in respect to the rights provided by
this section.
(10) Voting and distribution. Any
stockholder who has demanded
appraisal rights as provided in
paragraph (c)(2) of this section shall
thereafter neither be entitled to vote
such stock for any purpose nor be
entitled to the payment of dividends or
other distributions on the stock (except
dividends or other distribution payable
to, or a vote to be taken by stockholders
of record at a date which is on or prior
to, the effective date of the
combination): Provided, That if any
stockholder becomes unentitled to
appraisal and payment of appraised
value with respect to such stock and
accepts or is deemed to have accepted
the terms offered upon the combination,
such stockholder shall thereupon be
entitled to vote and receive the
distributions described above.
(11) Status. Shares of the resulting
association into which shares of the
stockholders demanding appraisal rights
would have been converted or
exchanged, had they assented to the
combination, shall have the status of
authorized and unissued shares of the
resulting association.
§ 152.15
Supervisory combinations.
Notwithstanding the foregoing
provisions of this part, the Comptroller
may waive or deem inapplicable any
provision of § 152.13 or § 152.14 of this
part if he or she determines that grounds
exist, or may imminently exist, for
appointment of a conservator or receiver
for an association under subsection 5(d)
of the Home Owners’ Loan Act.
§ 152.16 Effect of subsequent charter or
bylaw change.
Notwithstanding any subsequent
change to its charter or bylaws, the
authority of a Federal stock association
to engage in any transaction shall be
determined only by the association’s
charter or bylaws then in effect.
sroberts on DSK5SPTVN1PROD with RULES
§ 152.17 Federal stock association created
in connection with an association in default
or in danger of default.
Sections 152.1 and 152.2 of this part
do not apply to a Federal stock
association which is proposed by the
Federal Deposit Insurance Corporation,
or the Resolution Trust Corporation
under section 5(p) of the Home Owner’s
Loan Act of 1933, section 11(c) of the
Federal Deposit Insurance Act, or
section 21A of the Federal Home Loan
Bank Act, or is otherwise chartered by
the OCC in connection with an
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
association in default or in danger of
default. Incorporation and organization
of such associations are complete when
and under such conditions as the OCC
so determines.
§ 152.18 Conversion from stock form
depository institution to Federal stock
association.
(a) With the approval of the OCC, any
stock depository institution that is, or is
eligible to become, a member of a
Federal Home Loan Bank, may convert
to a Federal stock association, provided
that the depository institution, at the
time of the conversion, has deposits
insured by the Federal Deposit
Insurance Corporation, and provided
further, that the depository institution,
in accomplishing the conversion,
complies with all applicable statutes
and regulations, including, without
limitation, section 5(d) of the Federal
Deposit Insurance Act. The resulting
Federal stock association must conform
within the time prescribed by the OCC
to the requirements of section 5(c) of the
Home Owners’ Loan Act. For purposes
of this section, the term ‘‘depository
institution’’ shall have the meaning set
forth at 12 CFR 152.13(b). An
application for conversion filed under
this section is subject to the procedures
for organization of a Federal stock
organization at § 152.1.
(b) Any and all of the assets and other
property (whether real, personal, mixed,
tangible or intangible, including choses
in action, rights, and credits) of the
former stock form depository institution
become assets and property of the
Federal stock association when the
conversion occurs. Similarly, any and
all of the obligations and debts of or
claims against the former stock form
depository institution become
obligations and debts of and claims
against the Federal stock association
when the conversion occurs. In effect,
the Federal stock association is the same
as the former stock form depository
institution with respect to any and all
assets, property, claims and debts of or
claims against the former stock form
depository institution.
§ 152.19 Conversion to National banking
association or state bank.
A Federal stock association may
convert to a national banking
association or a state bank after filing a
notification or application, as
appropriate, with the appropriate OCC
licensing office in accordance with the
applicable provisions of § 163.22(b) of
this chapter.
PO 00000
Frm 00076
Fmt 4701
Sfmt 4700
PART 155—ELECTRONIC
OPERATIONS
Sec.
155.100 What does this part do?
155.200 How may I use or participate with
others to use electronic means and
facilities?
155.210 What precautions must I take?
155.300 Must I inform the OCC before I use
electronic means or facilities?
155.310 How do I notify the OCC?
Authority: 12 U.S.C. 1462a, 1463, 1464,
5412(b)(2)(B).
§ 155.100
What does this part do?
This part describes how a Federal
savings association may provide
products and services through
electronic means and facilities.
§ 155.200 How may I use or participate
with others to use electronic means and
facilities?
(a) General. A Federal savings
association (‘‘you’’) may use, or
participate with others to use, electronic
means or facilities to perform any
function, or provide any product or
service, as part of an authorized activity.
Electronic means or facilities include,
but are not limited to, automated teller
machines, automated loan machines,
personal computers, the Internet, the
World Wide Web, telephones, and other
similar electronic devices.
(b) Other. To optimize the use of your
resources, you may market and sell, or
participate with others to market and
sell, electronic capacities and byproducts to third-parties, if you
acquired or developed these capacities
and by-products in good faith as part of
providing financial services.
§ 155.210
What precautions must I take?
If you use electronic means and
facilities under this subpart, your
management must:
(a) Identify, assess, and mitigate
potential risks and establish prudent
internal controls; and
(b) Implement security measures
designed to ensure secure operations.
Such measures must be adequate to:
(1) Prevent unauthorized access to
your records and your customers’
records;
(2) Prevent financial fraud through the
use of electronic means or facilities; and
(3) Comply with applicable security
devices requirements of part 168 of this
chapter.
§ 155.300 Must I inform the OCC before I
use electronic means or facilities?
(a) General. You are not required to
inform the OCC before you use
electronic means or facilities, except as
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
provided in paragraphs (b) and (c) of
this section. However, you are
encouraged to consult with the OCC
before you engage in any activities using
electronic means or facilities.
(b) Activities requiring advance
notice. You must file a written notice as
described in § 155.310 before you
establish a transactional web site. A
transactional web site is an Internet site
that enables users to conduct financial
transactions such as accessing an
account, obtaining an account balance,
transferring funds, processing bill
payments, opening an account, applying
for or obtaining a loan, or purchasing
other authorized products or services.
(c) Other procedures. If the OCC
informs you of any supervisory or
compliance concerns that may affect
your use of electronic means or
facilities, you must follow any
procedures it imposes in writing.
§ 155.310
How do I notify the OCC?
You must file a written notice with
your OCC supervisory office at least 30
days before you establish a transactional
Web site. The notice must do three
things:
(a) Describe the transactional web site.
(b) Indicate the date the transactional
web site will become operational.
(c) List a contact familiar with the
deployment, operation, and security of
the transactional web site.
PART 157—DEPOSITS
Sec.
157.1 What does this part do?
157.10 What authorities govern the
issuance of deposit accounts by a Federal
savings association?
157.11 To what extent does Federal law
preempt state laws?
157.12 [Reserved]
157.13 [Reserved]
157.14 What interest rate may I pay on
accounts?
157.15 Who owns a deposit account?
157.20 What records should I maintain on
deposit activities?
Authority: 12 U.S.C. 1462a, 1463, 1464,
5412(b)(2)(B).
§ 157.1
What does this part do?
sroberts on DSK5SPTVN1PROD with RULES
This part applies to the deposit
activities of Federal savings
associations.
§ 157.10 What authorities govern the
issuance of deposit accounts by Federal
savings associations?
A Federal savings association (‘‘you’’)
may raise funds through accounts and
may issue evidence of accounts under
section 5(b)(1) of the HOLA (12 U.S.C.
1464(b)(1)), your charter, and this part.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Additionally, 12 CFR parts 204 and 230
apply to your deposit activities.
§ 157.11 To what extent does Federal law
preempt deposit-related state laws?
State law applies to the deposit
activities of Federal savings associations
and their subsidiaries to the same extent
and in the same manner that those laws
apply to national banks and their
subsidiaries.
§ 157.12
[Reserved]
§ 157.13
[Reserved]
§ 157.14 What interest rate may I pay on
accounts?
(a) You may pay interest at any rate
or anticipated rate of return on
accounts, either in deposit or in share
form, as provided in your charter and
the account’s terms.
(b) You may pay fixed or variable
rates. If you pay a variable rate, you
must base it on a schedule, index, or
formula that you specify in the
account’s terms.
§ 157.15
Who owns a deposit account?
You may treat the holder of record as
the account owner, even if you receive
contrary notice, until you transfer the
account on your records.
§ 157.20 What records should I maintain
on deposit activities?
You should establish and maintain
deposit documentation practices and
records that demonstrate that you
appropriately administer and monitor
deposit-related activities. Your records
should adequately evidence ownership,
balances, and all transactions involving
each account. You may maintain
records on deposit activities in any
format that is consistent with standard
business practices.
PART 159—SUBORDINATE
ORGANIZATIONS
Sec.
159.1 What does this part cover?
159.2 Definitions.
159.3 What are the characteristics of, and
what requirements apply to, subordinate
organizations of Federal savings
associations?
159.4 What activities are preapproved for
service corporations?
159.5 How much may a Federal savings
association invest in service corporations
or lower-tier entities?
159.10 How must separate corporate
identities be maintained?
159.11 What notices are required to
establish or acquire a new subsidiary or
engage in new activities through an
existing subsidiary?
159.12 How may a subsidiary of a Federal
savings association issue securities?
PO 00000
Frm 00077
Fmt 4701
Sfmt 4700
49025
159.13 How may a Federal savings
association exercise its salvage power in
connection with its service corporation
or lower-tier entities?
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1828, 5412(b)(2)(B).
§ 159.1
What does this part cover?
(a) The OCC is issuing this part 159
pursuant to its general rulemaking and
supervisory authority under the Home
Owners’ Loan Act, 12 U.S.C. 1462 et
seq., and its specific authority under
section 18(m) of the Federal Deposit
Insurance Act, 12 U.S.C. 1828(m). This
part 159 applies to subordinate
organizations of Federal savings
associations. The OCC may, at any time,
limit a Federal savings association’s
investment in any of these entities, or
may limit or refuse to permit any
activities of any of these entities for
supervisory, legal, or safety and
soundness reasons.
(b) Notices under this part are
applications for purposes of statutory
and regulatory references to
‘‘applications.’’ Any conditions that the
OCC imposes in approving any
application are enforceable as a
condition imposed in writing by the
OCC in connection with the granting of
a request by a Federal savings
association within the meaning of 12
U.S.C. 1818(b) or 1818(i).
§ 159.2
Definitions.
For purposes of this part:
Control has the same meaning as in
part 174 of this chapter.
GAAP-consolidated subsidiary means
an entity in which a Federal savings
association has a direct or indirect
ownership interest and whose assets are
consolidated with those of the savings
association for purposes of reporting
under Generally Accepted Accounting
Principles (GAAP). Generally, these are
entities in which the savings association
has a majority ownership interest.
Lower-tier entity includes any
company in which an operating
subsidiary or a service corporation has
a direct or indirect ownership interest.
Operating subsidiary means any
entity that satisfies all of the
requirements for an operating subsidiary
set forth in § 159.3 of this part and that
is designated by the parent Federal
savings association as an operating
subsidiary pursuant to § 159.3 of this
part. More than 50% of the voting
shares of an operating subsidiary must
be owned, directly or indirectly, by a
Federal savings association and no other
person or entity may exercise effective
operating control. An operating
subsidiary may only engage in activities
E:\FR\FM\09AUR2.SGM
09AUR2
49026
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
permissible for a Federal savings
association.
Ownership interest means any equity
interest in a business organization,
including stock, limited or general
partnership interests, or shares in a
limited liability company.
Service corporation means any entity
that satisfies all of the requirements for
service corporations in 12 U.S.C.
1464(c)(4)(B) and § 159.3 of this part
and that is designated by the investing
Federal savings association as a service
corporation pursuant to § 159.3 of this
part. A service corporation must be
organized under the laws of the state
where the Federal savings association’s
home office is located, may only be
owned by savings associations with
home offices in that state, and may
engage in the activities identified in
§§ 159.3(e)(2) and 159.4 of this part.
Subordinate organization means any
corporation, partnership, business trust,
association, joint venture, pool,
syndicate, or other similar business
organization in which a Federal savings
association has a direct or indirect
ownership interest, unless that
ownership interest qualifies as a passthrough investment pursuant to § 160.32
of this chapter and is so designated by
the investing savings association.
Subsidiary means any subordinate
organization directly or indirectly
controlled by a Federal savings
association.
§ 159.3 What are the characteristics of,
and what requirements apply to,
subordinate organizations of Federal
savings associations?
A Federal savings association (‘‘you’’)
that meets the requirements of this
section, as detailed in the following
chart, may establish, or obtain an
interest in an operating subsidiary or a
service corporation. For ease of
reference, this section cross-references
other regulations in this chapter
affecting operating subsidiaries and
service corporations. You should refer
to those regulations for the details of
how they apply. The chart also
discusses the regulations that may apply
to lower-tier entities in which you have
an indirect ownership interest through
your operating subsidiary or service
corporation. The chart follows:
Operating subsidiary
(a) How may a Federal savings association
(‘‘you’’) establish an operating subsidiary or a
service corporation?
(b) Who may be an owner?
(c) What ownership requirements apply?
(d) What geographic restrictions apply?
sroberts on DSK5SPTVN1PROD with RULES
(e) What activities are permissible?
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Service corporation
(1) You must file a notice, with the appropriate OCC licensing office, satisfying
§ 159.11. Any finance subsidiary that existed on January 1, 1997 is deemed an operating subsidiary without further action on
your part.
(1) Anyone may have an ownership interest in
an operating subsidiary.
(2) You must file a notice, with the appropriate OCC licensing office, satisfying
§ 159.11. Depending upon your condition
and the activities in which the service corporation will engage, § 159.3(e)(2) may require you to file an application.
(2) Only Federal or state chartered savings
associations with home offices in the state
where you have your home office may have
an ownership interest in any service corporation in which you invest.
(2) You are not required to have any particular percentage ownership interest and
need not have control of the service corporation.
(2) A service corporation must be organized
in the state where your home office is located.
(2)(i) If you are eligible for expedited treatment under § 116.5 of this chapter, and notify the OCC as required by § 159.11, your
service corporation may engage in the
preapproved activities listed in § 159.4. You
may request OCC approval for your service
corporation to engage in any other activity
reasonably related to the activities of financial institutions by filing an application in accordance with standard treatment processing procedures at part 116, subparts A
and E of this chapter.
(ii) If you are subject to standard treatment
under § 116.5 of this chapter, and notify the
OCC as required by § 159.11, your service
corporation may engage in any activity that
you may conduct directly except taking deposits. You may request OCC approval for
your service corporation to engage in any
other activity reasonably related to the activities of financial institutions, including the
activities set forth in § 159.4(b)–(j), by filing
an application in accordance with standard
treatment processing procedures at part
116, subparts A and E of this chapter.
(1) You must own, directly or indirectly, more
than 50% of the voting shares of the operating subsidiary. No one else may exercise
effective operating control.
(1) An operating subsidiary may be organized
in any geographic location.
(1) After you have notified the OCC in accordance with § 159.11, an operating subsidiary
may engage in any activity that you may
conduct directly. You may hold another insured depository institution as an operating
subsidiary.
PO 00000
Frm 00078
Fmt 4701
Sfmt 4700
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
49027
Operating subsidiary
(f) May the operating subsidiary or service corporation invest in lower-tier entities?
(g) How much may a Federal savings association invest?
Service corporation
(1)(i) An operating subsidiary may itself hold
an operating subsidiary. Part 159 applies
equally to a lower-tier operating subsidiary.
In applying the regulations in this part, the
investing operating subsidiary should substitute ‘‘investing operating subsidiary’’
wherever the part uses ‘‘you’’ or ‘‘savings
association.’’
(ii) An operating subsidiary may also invest in
other types of lower-tier entities. These entities must comply with all of the requirements of this part 159 that apply to service
corporations except for paragraphs (b)(2)
and (d)(2) of this section.
(1) There are no limits on the amount you
may invest in your operating subsidiaries,
either separately or in the aggregate.
(2) A service corporation may invest in all
types of lower-tier entities as long as the
lower-tier entity is engaged solely in activities that are permissible for a service corporation. All of the requirements of this part
apply to such entities except for paragraphs
(b)(2) and (d)(2) of this section.
(1) Unless otherwise specifically provided by
statute, regulation, or OCC policy, all Federal statutes and regulations apply to operating subsidiaries in the same manner as
they apply to you. You and your operating
subsidiary are generally consolidated and
treated as a unit for statutory and regulatory
purposes.
(i) Do the investment limits that apply to Federal savings associations (HOLA section 5(c)
and part 160 of this chapter) apply?
(1) Your assets and those of your operating
subsidiary are aggregated when calculating
investment limitations.
(j) How does the capital regulation (part 167 of
this chapter) apply?
(1) Your assets and those of your operating
subsidiary are consolidated for all capital
purposes.
(k) How does the loans-to-one-borrower (LTOB)
regulation (§ 160.93 of this chapter) apply?
sroberts on DSK5SPTVN1PROD with RULES
(h) Do Federal statutes and regulations that
apply to the savings association apply?
(1) The LTOB regulation does not apply to
loans from you to your operating subsidiary
or loans from your operating subsidiary to
you. Other loans made by your operating
subsidiary are aggregated with your loans
for LTOB purposes.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00079
Fmt 4701
Sfmt 4700
(2) Section 159.5 limits your aggregate investments in service corporations and indicates
when your investments (both debt and equity) in lower-tier entities must be aggregated with your investments in service corporations.
(2)(i) If the Federal statute or regulation specifically refers to ‘‘service corporation,’’ it
applies to all service corporations, even if
you do not control the service corporation
or it is not a GAAP-consolidated subsidiary.
(ii) If the Federal statute or regulation refers to
‘‘subsidiary,’’ it applies only to service corporations that you directly or indirectly control.
(2) Your service corporation’s assets are not
subject to the same investment limitations
that apply to you. The investment activities
of your service corporation are governed by
paragraph (e)(2) of this section and § 159.4.
(2) The capital treatment of a service corporation depends upon whether it is an includable subsidiary. That determination is
based upon factors set forth in part 167 of
this chapter, including your percentage
ownership of the service corporation and
the activities in which the service corporation engages. Both debt and equity investments in service corporations that are
GAAP-consolidated subsidiaries are considered investments in subsidiaries for purposes of the capital regulation, regardless
of the authority under which they are made.
(2) The LTOB regulation does not apply to
loans from you to your service corporation
or from your service corporation to you.
However, § 159.5 imposes restrictions on
the amount of loans you may make to certain service corporations. Loans made by a
service corporation that you control to entities other than you or your subordinate organizations are aggregated with your loans
for LTOB purposes.
E:\FR\FM\09AUR2.SGM
09AUR2
49028
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Operating subsidiary
Service corporation
(l) How do the transactions with affiliates (TWA)
regulations of the Board of Governors of the
Federal Reserve System (Board) apply?
(1) Board rules explain how TWA applies.
Generally, an operating subsidiary is not an
affiliate, unless it is a depository institution;
is directly controlled by another affiliate of
the savings association or by shareholders
that control the savings association; or is an
employee stock option plan, trust, or similar
organization that exists for the benefit of
shareholders, partners, members, or employees of the savings association or an affiliate. A non-affiliate operating subsidiary is
treated as a part of the savings association
and its transactions with affiliates of the
savings association are aggregated with
those of the savings association
(m) How does the Qualified Thrift Lender (QTL)
(12 U.S.C. 1467a(m)) test apply?
(1) Under 12 U.S.C. 1467a(m)(5), you may
determine whether to consolidate the assets of a particular operating subsidiary for
purposes of calculating your qualified thrift
investments. If the operating subsidiary’s
assets are not consolidated with yours for
that purpose, your investment in the operating subsidiary will be considered in calculating your qualified thrift investments.
(1) State law applies to operating subsidiaries
regardless of whether it applies to you.
(1) An operating subsidiary is subject to examination by the OCC.
(1) Before redesignating an operating subsidiary as a service corporation, you should
consult with the OCC licensing office in the
district in which your home office is located.
You must maintain adequate internal
records, available for examination by the
OCC, demonstrating that the redesignated
service corporation meets all of the applicable requirements of this part and that your
board of directors has approved the redesignation.
(1) If an operating subsidiary, or any lower-tier
entity in which the operating subsidiary invests pursuant to paragraph (f)(1) of this
section fails to meet any of the requirements of this section, you must notify the
appropriate OCC licensing office. Unless
otherwise advised by the OCC, if the company cannot comply within 90 days with all
of the requirements for either an operating
subsidiary or a service corporation under
this section, or any other investment authorized by 12 U.S.C. 1464(c) or part 160 of
this chapter, you must promptly dispose of
your investment.
(2) Board rules explain how TWA applies.
Generally, a service corporation is not an
affiliate, unless it is a depository institution;
is directly controlled by another affiliate of
the savings association or by shareholders
that control the savings association; or is an
employee stock option plan, trust, or similar
organization that exists for the benefit of
shareholders, partners, members, or employees of the savings association or an affiliate. If a savings association directly or indirectly controls a service corporation and
the service corporation is not otherwise an
affiliate under Board rules, the service corporation is treated as a part of the savings
association and its transactions with affiliates of the savings association are aggregated with those of the savings association.
(2) Under 12 U.S.C. 1467a(m)(5), you may
determine whether to consolidate the assets of a particular service corporation for
purposes of calculating your qualified thrift
investments. If a service corporation’s assets are not consolidated with yours for that
purpose, your investment in the service corporation will be considered in calculating
your qualified thrift investments.
(2) State law applies to service corporations
regardless of whether it applies to you.
(2) A service corporation is subject to examination by the OCC.
(2) Before redesignating a service corporation
as an operating subsidiary, you should consult with the OCC licensing office in the district in which your home office is located.
You must maintain adequate internal
records, available for examination by the
OCC, demonstrating that the redesignated
operating subsidiary meets all of the applicable requirements of this part and that
your board of directors has approved the
redesignation.
(2) If a service corporation, or any lower-tier
entity in which the service corporation invests pursuant to paragraph (f)(2) of this
section, fails to meet any of the requirements of this section, you must notify the
appropriate OCC licensing office. Unless
otherwise advised by the OCC, if the company cannot comply within 90 days with all
of the requirements for either an operating
subsidiary or a service corporation under
this section, or any other investment authorized by 12 U.S.C. 1464(c) or part 160 of
this chapter, you must promptly dispose of
your investment.
(n) Does state law apply?
(o) May the OCC conduct examinations?
(p) What must be done to redesignate an operating subsidiary as a service corporation or a
service corporation as an operating subsidiary?
(q) What are the consequences of failing to
comply with the requirements of this part?
sroberts on DSK5SPTVN1PROD with RULES
§ 159.4 What activities are preapproved for
service corporations?
This section sets forth the activities
that have been preapproved for service
corporations. Section 159.3(e)(2) of this
part sets forth the procedures for
engaging in a broader scope of activities
on a case-by-case basis. You should read
these two sections together to determine
whether you must file a notice with the
OCC under § 159.11 of this part, or
whether you must file an application
under part 116 of this chapter and
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
receive prior written OCC approval for
your service corporation to engage in a
particular activity. The notice or
application should be filed with the
appropriate OCC licensing office. To the
extent permitted by § 159.3(e)(2) of this
part, a service corporation may engage
in the following activities:
(a) Any activity that all Federal
savings associations may conduct
directly, except taking deposits.
(b) Business and professional services.
The following services are preapproved
PO 00000
Frm 00080
Fmt 4701
Sfmt 4700
for service corporations only when they
are limited to financial documents or
financial clients or are generally
finance-related:
(1) Accounting or internal audit;
(2) Advertising, marketing research
and other marketing;
(3) Clerical;
(4) Consulting;
(5) Courier;
(6) Data processing;
(7) Data storage facilities operation
and related services;
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(8) Office supplies, furniture, and
equipment purchasing and distribution;
(9) Personnel benefit program
development or administration;
(10) Printing and selling forms that
require Magnetic Ink Character
Recognition (MICR) encoding;
(11) Relocation of personnel;
(12) Research studies and surveys;
(13) Software development and
systems integration; and
(14) Remote service unit operation,
leasing, ownership or establishment.
(c) Credit-related activities.
(1) Abstracting;
(2) Acquiring and leasing personal
property;
(3) Appraising;
(4) Collection agency;
(5) Credit analysis;
(6) Check or credit card guaranty and
verification;
(7) Escrow agent or trustee (under
deeds of trust, including executing and
deliverance of conveyances,
reconveyances and transfers of title);
and
(8) Loan inspection.
(d) Consumer services.
(1) Financial advice or consulting;
(2) Foreign currency exchange;
(3) Home ownership counseling;
(4) Income tax return preparation;
(5) Postal services;
(6) Stored value instrument sales;
(7) Welfare benefit distribution;
(8) Check printing and related
services; and
(9) Remote service unit operation,
leasing, ownership, or establishment.
(e) Real estate related services.
(1) Acquiring real estate for prompt
development or subdivision, for
construction of improvements, for resale
or leasing to others for such
construction, or for use as manufactured
home sites, in accordance with a
prudent program of property
development;
(2) Acquiring improved real estate or
manufactured homes to be held for
rental or resale, for remodeling,
renovating, or demolishing and
rebuilding for sale or rental, or to be
used for offices and related facilities of
a stockholder of the service corporation;
(3) Maintaining and managing real
estate; and
(4) Real estate brokerage for property
owned by a savings association that
owns capital stock of the service
corporation, the service corporation, or
a lower-tier entity in which the service
corporation invests.
(f) Securities activities, liquidity
management, and coins.
(1) Execution of transactions in
securities on an agency or riskless
principal basis solely upon the order
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
and for the account of customers or the
provision of investment advice. The
service corporation must register with
the Securities and Exchange
Commission and state securities
regulators, as required by applicable
Federal and state law and regulations;
(2) Liquidity management;
(3) Issuing notes, bonds, debentures,
or other obligations or securities;
(4) Purchase or sale of coins issued by
the U.S. Treasury.
(g) Investments. (1) Tax-exempt bonds
used to finance residential real property
for family units;
(2) Tax-exempt obligations of public
housing agencies used to finance
housing projects with rental assistance
subsidies;
(3) Small business investment
companies and new markets venture
capital companies licensed by the U.S.
Small Business Administration;
(4) Rural business investment
companies; and
(5) Investing in savings accounts of an
investing thrift.
(h) Community development and
charitable activities:
(1) Investments in governmentally
insured, guaranteed, subsidized or
otherwise sponsored programs for
housing, small farms, or businesses that
are local in character;
(2) Investments designed primarily to
promote the public welfare, including
the welfare of low- and moderateincome communities or families (such
as providing housing, services, or jobs);
(3) Investments in low-income
housing tax credit and new markets tax
credit projects and entities authorized
by statute (e.g., community
development financial institutions) to
promote community, inner city, and
community development purposes; and
(4) Establishing a corporation that is
recognized by the Internal Revenue
Service as organized for charitable
purposes under 26 U.S.C. 501(c)(3) of
the Internal Revenue Code and making
a reasonable contribution to capitalize
it, provided that the corporation engages
exclusively in activities designed to
promote the well-being of communities
in which the owners of the service
corporation operate.
(i) Activities conducted on behalf of a
customer on an other than ‘‘as
principal’’ basis.
(j) Activities reasonably incident to
those listed in paragraphs (a) through (i)
of this section if the service corporation
engages in those activities.
§ 159.5 How much may a Federal savings
association invest in service corporations
or lower-tier entities?
The amount that a Federal savings
association (‘‘you’’) may invest in a
PO 00000
Frm 00081
Fmt 4701
Sfmt 4700
49029
service corporation or any lower-tier
entity depends upon several factors.
These include your total assets, your
capital, the purpose of the investment,
and your ownership interest in the
service corporation or entity.
(a) Under section 5(c)(4)(B) of the
HOLA, you may invest up to 3% of your
assets in the capital stock, obligations,
and other securities of service
corporations. Any investment you make
under this paragraph that would cause
your investment, in the aggregate, to
exceed 2% of your assets must serve
primarily community, inner city, or
community development purposes. You
must designate the investments serving
those purposes, which include:
(1) Investments in governmentally
insured, guaranteed, subsidized or
otherwise sponsored programs for
housing, small farms, or businesses that
are local in character;
(2) Investments for the preservation or
revitalization of either urban or rural
communities;
(3) Investments designed to meet the
community development needs of, and
primarily benefit, low- and moderateincome communities; or
(4) Other community, inner city, or
community development-related
investments approved by the OTS or the
OCC.
(b) In addition to the amounts you
may invest under paragraph (a) of this
section, and to the extent that you have
authority under other provisions of
section 5(c) of the HOLA and part 160
of this chapter, and available capacity
within any applicable investment limits,
you may make loans to any service
corporation and any lower-tier entity,
subject to the following conditions:
(1) You and your GAAP-consolidated
subsidiaries may, in the aggregate, make
loans of up to 15% of your total capital,
as described in part 167 of this chapter
to each subordinate organization that
does not qualify as a GAAPconsolidated subsidiary. All loans made
under this paragraph (b)(1) may not, in
the aggregate, exceed 50% of your total
capital, as described in part 167 of this
chapter.
(2) The OCC may limit the amount of
loans to a GAAP-consolidated
subsidiary, or may adjust the limits set
forth in paragraph (b)(1) of this section
where safety and soundness
considerations warrant such action.
(c) For purposes of this section, the
terms ‘‘loans’’ and ‘‘obligations’’ include
all loans and other debt instruments
(except accounts payable incurred in the
ordinary course of business and paid
within 60 days) and all guarantees or
take-out commitments of such loans or
debt instruments.
E:\FR\FM\09AUR2.SGM
09AUR2
49030
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
§ 159.10 How must separate corporate
identities be maintained?
(a) Each Federal savings association
and subordinate organization thereof
must be operated in a manner that
demonstrates to the public that each
maintains a separate corporate
existence. Each must operate so that:
(1) Their respective business
transactions, accounts, and records are
not intermingled;
(2) Each observes the formalities of
their separate corporate procedures;
(3) Each is adequately financed as a
separate unit in light of normal
obligations reasonably foreseeable in a
business of its size and character;
(4) Each is held out to the public as
a separate enterprise; and
(5) Unless the parent savings
association has guaranteed a loan to the
subordinate organization, all borrowings
by the subordinate organization indicate
that the parent is not liable.
(b) OCC regulations that apply both to
Federal savings associations and
subordinate organizations shall not be
construed as requiring a savings
association and its subordinate
organizations to operate as a single
entity.
§ 159.11 What notices are required to
establish or acquire a new subsidiary or
engage in new activities through an existing
subsidiary?
sroberts on DSK5SPTVN1PROD with RULES
When required by section 18(m) of the
Federal Deposit Insurance Act, a Federal
savings association (‘‘you’’) must file a
notice (‘‘Notice’’) under part 116,
subpart A of this chapter at least 30 days
before establishing or acquiring a
subsidiary or engaging in new activities
in a subsidiary. The Notice should be
filed with the appropriate OCC licensing
office and must contain all of the
information the Federal Deposit
Insurance Corporation (FDIC) requires
under 12 CFR 362.15. Providing the
OCC with a copy of the notice you file
with the FDIC will satisfy this
requirement. If the OCC notifies you
within 30 days that the Notice presents
supervisory concerns, or raises
significant issues of law or policy, you
must apply for and receive the OCC’s
prior written approval under the
standard treatment processing
procedures at part 116, subpart A and E
of this chapter before establishing or
acquiring the subsidiary or engaging in
new activities in the subsidiary.
§ 159.12 How may a subsidiary of a
Federal savings association issue
securities?
(a) A subsidiary may issue, either
directly or through a third party
intermediary, any securities that its
parent Federal savings association
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(‘‘you’’) may issue. The subsidiary must
not state or imply that the securities it
issues are covered by Federal deposit
insurance. A subsidiary may not issue
any security the payment, maturity, or
redemption of which may be accelerated
upon the condition that you are
insolvent or have been placed into
receivership.
(b) You must file a notice with the
appropriate OCC licensing office in
accordance with § 159.11 of this part at
least 30 days before your first issuance
of any securities through an existing
subsidiary or in conjunction with
establishing or acquiring a new
subsidiary. If the OCC notifies you
within 30 days that the notice presents
supervisory concerns or raises
significant issues of law or policy, you
must receive the OCC’s prior written
approval before issuing securities
through your subsidiary.
(c) For as long as any securities are
outstanding, you must maintain all
records generated through each
securities issuance in the ordinary
course of business, including a copy of
any prospectus, offering circular, or
similar document concerning such
issuance, and make such records
available for examination by the OCC.
Such records must include, but are not
limited to:
(1) The amount of your assets or
liabilities (including any guarantees you
make with respect to the securities
issuance) that have been transferred or
made available to the subsidiary; the
percentage that such amount represents
of the current book value of your assets
on an unconsolidated basis; and the
current book value of all such assets of
the subsidiary;
(2) The terms of any guarantee(s)
issued by you or any third party;
(3) A description of the securities the
subsidiary issued;
(4) The net proceeds from the
issuance of securities (or the pro rata
portion of the net proceeds from
securities issued through a jointly
owned subsidiary); the gross proceeds of
the securities issuance; and the market
value of assets collateralizing the
securities issuance (any assets of the
subsidiary, including any guarantees of
its securities issuance you have made);
(5) The interest or dividend rates and
yields, or the range thereof, and the
frequency of payments on the
subsidiary’s securities;
(6) The minimum denomination of
the subsidiary’s securities; and
(7) Where the subsidiary marketed or
intends to market the securities.
PO 00000
Frm 00082
Fmt 4701
Sfmt 4700
§ 159.13 How may a Federal savings
association exercise its salvage power in
connection with its service corporation or
lower-tier entities?
(a) In accordance with this section, a
Federal savings association (‘‘you’’) may
exercise your salvage power to make a
contribution or a loan (including a
guarantee of a loan made by any other
person) to your service corporation or
lower-tier entity (‘‘salvage investment’’)
that exceeds the maximum amount
otherwise permitted under law or
regulation. You must notify the
appropriate OCC licensing office at least
30 days before making such a salvage
investment. This notice must
demonstrate that:
(1) The salvage investment protects
your interest in the service corporation
or lower-tier entity;
(2) The salvage investment is
consistent with safety and soundness;
and
(3) You considered alternatives to the
salvage investment and determined that
such alternatives would not adequately
satisfy paragraphs (a)(1) and (a)(2) of
this section.
(b) If the OCC notifies you within 30
days that the Notice presents
supervisory concerns, or raises
significant issues of law or policy, you
must apply for and receive the OCC’s
prior written approval under the
standard treatment processing
procedures at part 116, subparts A and
E of this chapter before making a salvage
investment.
(c) If your service corporation or
lower-tier entity is a GAAP-consolidated
subsidiary, your salvage investment
under this section will be considered an
investment in a subsidiary for purposes
of part 167 of this chapter.
PART 160—LENDING AND
INVESTMENT
Sec.
160.1 General.
160.2 Applicability of law.
160.3 Definitions.
160.30 General lending and investment
powers of Federal savings associations.
160.31 Election regarding categorization of
loans or investments and related
calculations.
160.32 Pass-through investments.
160.33 Late charges.
160.34 Prepayments.
160.35 Adjustments to home loans.
160.36 De minimis investments.
160.37 Real estate for office and related
facilities.
160.40 Commercial paper and corporate
debt securities.
160.41 Leasing.
160.42 State and local government
obligations.
160.43 Foreign assistance investments.
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
160.50 Letters of credit and other
independent undertakings—authority.
160.60 Suretyship and guaranty.
160.93 Lending limitations.
160.100 Real estate lending standards;
purpose and scope.
160.101 Real estate lending standards.
160.110 Most favored lender usury
preemption.
160.120 Letters of credit and other
independent undertakings to pay against
documents.
160.121 Investment in state housing
corporations.
160.130 Prohibition on loan procurement
fees.
160.160 Asset classification.
160.170 Records for lending transactions.
160.172 Re-evaluation of real estate owned.
160.210 [Reserved]
160.220 [Reserved]
§ 160.3
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 1701j–3, 1828, 3803, 3806,
5412(b)(2)(B); 42 U.S.C. 4106.
§ 160.1
General.
(a) Authority and scope. This part is
being issued by the OCC under its
general rulemaking and supervisory
authority under the Home Owners’ Loan
Act (HOLA), 12 U.S.C. 1462 et seq.
(b) General lending standards. Each
savings association is expected to
conduct its lending and investment
activities prudently. Each association
should use lending and investment
standards that are consistent with safety
and soundness, ensure adequate
portfolio diversification and are
appropriate for the size and condition of
the institution, the nature and scope of
its operations, and conditions in its
lending market. Each association should
adequately monitor the condition of its
portfolio and the adequacy of any
collateral securing its loans.
§ 160.2
Definitions.
For purposes of this part and any
determination under 12 U.S.C.
1467a(m):
Consumer loans include loans for
personal, family, or household purposes
and loans reasonably incident thereto,
and may be made as either open-end or
closed-end consumer credit (as defined
at 12 CFR 226.2(a)(10) and (20)).
Consumer loans do not include credit
extended in connection with credit card
loans, bona fide overdraft loans, and
other loans that the savings association
has designated as made under
investment or lending authority other
than section 5(c)(2)(D) of the HOLA.
Credit card is any card, plate, coupon
book, or other single credit device that
may be used from time to time to obtain
credit.
Credit card account is a credit
account established in conjunction with
the issuance of, or the extension of
credit through, a credit card. This term
includes loans made to consolidate
credit card debt, including credit card
debt held by other lenders, and
participation certificates, securities and
similar instruments secured by credit
card receivables.
Home loans include any loans made
on the security of a home (including a
dwelling unit in a multi-family
residential property such as a
condominium or a cooperative),
combinations of homes and business
property (i.e., a home used in part for
business), farm residences, and
combinations of farm residences and
commercial farm real estate.
Loan commitment includes a loan in
process, a letter of credit, or any other
commitment to extend credit.
Real estate loan, for purposes of this
part, is a loan for which the savings
association substantially relies upon a
security interest in real estate given by
the borrower as a condition of making
the loan. A loan is made on the security
of real estate if:
Applicability of law.
State law applies to the lending
activities of Federal savings associations
and their subsidiaries to the same extent
and in the same manner that those laws
apply to national banks and their
subsidiaries.
49031
(1) The security property is real estate
pursuant to the law of the state in which
the property is located;
(2) The security interest of the Federal
savings association may be enforced as
a real estate mortgage or its equivalent
pursuant to the law of the state in which
the property is located;
(3) The security property is capable of
separate appraisal; and
(4) With regard to a security property
that is a leasehold or other interest for
a period of years, the term of the interest
extends, or is subject to extension or
renewal at the option of the Federal
savings association for a term of at least
five years following the maturity of the
loan.
Small business includes a small
business concern or entity as defined by
section 3(a) of the Small Business Act,
15 U.S.C. 632(a), and implemented by
the regulations of the Small Business
Administration at 13 CFR part 121.
Small business loans and loans to
small businesses include any loan to a
small business as defined in this
section; or a loan that does not exceed
$2 million (including a group of loans
to one borrower) and is for commercial,
corporate, business, or agricultural
purposes.
§ 160.30 General lending and investment
powers of Federal savings associations.
Pursuant to section 5(c) of the Home
Owners’ Loan Act (‘‘HOLA’’), 12 U.S.C.
1464(c), a Federal savings association
may make, invest in, purchase, sell,
participate in, or otherwise deal in
(including brokerage or warehousing) all
loans and investments allowed under
section 5(c) of the HOLA including,
without limitation, the following loans,
extensions of credit, and investments,
subject to the limitations indicated and
any such terms, conditions, or
limitations as may be prescribed from
time to time by the OCC by policy
directive, order, or regulation:
LENDING AND INVESTMENT POWERS CHART
5(c)(4)(E) ..........................................................
5(c)(4)(A) ..........................................................
Commercial loans ...............................................
5(c)(2)(A) ..........................................................
Commercial paper and corporate debt securities.
Community development loans and equity investments.
5(c)(2)(D) ..........................................................
Statutory investment
limitations (Endnotes contain
applicable regulatory
limitations)
Statutory authorization 1
Bankers’ bank stock ...........................................
Business development credit corporations ........
sroberts on DSK5SPTVN1PROD with RULES
Category
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
5(c)(3)(A) ..........................................................
PO 00000
Frm 00083
Fmt 4701
Sfmt 4700
Same terms as applicable to national banks.
The lesser of .5% of total outstanding loans or
$250,000.
20% of total assets, provided that amounts in
excess of 10% of total assets may be used
only for small business loans.
Up to 35% of total assets.2 3
5% of total assets, provided equity investments do not exceed 2% of total assets.4
E:\FR\FM\09AUR2.SGM
09AUR2
49032
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
LENDING AND INVESTMENT POWERS CHART—Continued
Statutory investment
limitations (Endnotes contain
applicable regulatory
limitations)
Statutory authorization 1
Construction loans without security ....................
5(c)(3)(C) ..........................................................
Consumer loans .................................................
Credit card loans or loans made through credit
card accounts.
Deposits in insured depository institutions .........
Education loans ..................................................
Federal government and government-sponsored enterprise securities and instruments.
Finance leasing ..................................................
Foreign assistance investments .........................
General leasing ..................................................
Home improvement loans ..................................
Home (residential) loans 9 ..................................
HUD-insured or guaranteed investments ...........
Insured loans ......................................................
Liquidity investments ..........................................
Loans secured by deposit accounts ..................
Loans to financial institutions, brokers, and
dealers.
Manufactured home loans ..................................
Mortgage-backed securities ...............................
National Housing Partnership Corporation and
related partnerships and joint ventures.
New markets venture capital companies ...........
Nonconforming loans .........................................
Nonresidential real property loans .....................
Open-end management investment companies 15.
Rural business investment companies ...............
Service corporations ...........................................
5(c)(2)(D) ..........................................................
5(c)(1)(T) ..........................................................
In the aggregate, the greater of total capital or
5% of total assets.
Up to 35% of total assets.2 5
None.6
5(c)(1)(G) .........................................................
5(c)(1)(U) ..........................................................
5(c)(1)(C), 5(c)(1)(D), 5(c)(1)(E), 5(c)(1)(F) .....
None.6
None.6
None.6
5(c)(1)(B), 5(c)(2)(A), 5(c)(2)(B), 5(c)(2)(D) .....
5(c)(4)(C) ..........................................................
5(c)(2)(C) ..........................................................
5(c)(1)(J) ..........................................................
5(c)(1)(B) ..........................................................
5(c)(1)(O) .........................................................
5(c)(1)(I), 5(c)(1)(K) ..........................................
5(c)(1)(M) .........................................................
5(c)(1)(A) ..........................................................
5(c)(1)(L) ..........................................................
Based on purpose and property financed.7
1% of total assets.8
10% of assets.7
None.6
None.6 10
None.6
None.6
None.6
None.6 11
None.6 12
5(c)(1)(J) ..........................................................
5(c)(1)(R) ..........................................................
5(c)(1)(N) ..........................................................
None.6 13
None.6
None.6
5(c)(4)(F) ..........................................................
5(c)(3)(B) ..........................................................
5(c)(2)(B) ..........................................................
5(c)(1)(Q) .........................................................
5% of total capital.
5% of total assets.
400% of total capital.14
None.6
7 U.S.C. 2009cc–9 ...........................................
5(c)(4)(B) ..........................................................
Small business investment companies ..............
Small business-related securities .......................
State and local government obligations .............
15 U.S.C. 682(b)(2) .........................................
5(c)(1)(S) ..........................................................
5(c)(1)(H) ..........................................................
State housing corporations ................................
Transaction account loans, including overdrafts
sroberts on DSK5SPTVN1PROD with RULES
Category
5(c)(1)(P) ..........................................................
5(c)(1)(A) ..........................................................
Five percent of total capital.
3% of total assets, as long as any amounts in
excess of 2% of total assets further community, inner city, or community development purposes.16
5% of total capital.
None.6
None for general obligations. Per issuer limitation of 10% of capital for other obligations.6 17
None.6 18
None.6 19
Endnotes
1 All references are to section 5 of the Home Owners’ Loan Act (12 U.S.C. 1464) unless otherwise indicated.
2 For purposes of determining a Federal savings association’s percentage of assets limitation, investment in commercial paper and corporate
debt securities must be aggregated with the Federal savings association’s investment in consumer loans.
3 A Federal savings association may invest in commercial paper and corporate debt securities, which includes corporate debt securities convertible into stock, subject to the provisions of § 160.40 of this part. Amounts in excess of 30% of assets, in the aggregate, may be invested only
in obligations purchased by the association directly from the original obligor and for which no finder’s or referral fees have been paid.
4 The 2% of assets limitation is a sublimit for investments within the overall 5% of assets limitation on community development loans and investments. The qualitative standards for such loans and investments are set forth in HOLA section 5(c)(3)(A) (formerly 5(c)(3)(B)), as explained
in an opinion of the Office of Thrift Supervision Chief Counsel dated May 10, 1995.
5 Amounts in excess of 30% of assets, in the aggregate, may be invested only in loans made by the association directly to the original obligor
and for which no finder’s or referral fees have been paid. A Federal savings association may include loans to dealers in consumer goods to finance inventory and floor planning in the total investment made under this section.
6 While there is no statutory limit on certain categories of loans and investments, including credit card loans, home improvement loans, education loans, and deposit account loans, the OCC may establish an individual limit on such loans or investments if the association’s concentration in such loans or investments presents a safety and soundness concern.
7 A Federal savings association may engage in leasing activities subject to the provisions of § 160.41 of this part.
8 This 1% of assets limitation applies to the aggregate outstanding investments made under the Foreign Assistance Act and in the capital of
the Inter-American Savings and Loan Bank. Such investments may be made subject to the provisions of § 160.43 of this part.
9 A home (or residential) loan includes loans secured by one-to-four family dwellings, multi-family residential property, and loans secured by a
unit or units of a condominium or housing cooperative.
10 A Federal savings association may make home loans subject to the provisions of §§ 160.33, 160.34, and 160.35 of this part.
11 Loans secured by savings accounts and other time deposits may be made without limitation, provided the Federal savings association obtains a lien on, or a pledge of, such accounts. Such loans may not exceed the withdrawable amount of the account.
12 A Federal savings association may only invest in these loans if they are secured by obligations of, or by obligations fully guaranteed as to
principal and interest by, the United States or any of its agencies or instrumentalities, the borrower is a financial institution insured by the Federal
Deposit Insurance Corporation or is a broker or dealer registered with the Securities and Exchange Commission, and the market value of the securities for each loan at least equals the amount of the loan at the time it is made.
13 If the wheels and axles of the manufactured home have been removed and it is permanently affixed to a foundation, a loan secured by a
combination of a manufactured home and developed residential lot on which it sits may be treated as a home loan.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00084
Fmt 4701
Sfmt 4700
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
49033
14 Without regard to any limitations of this part, a Federal savings association may make or invest in the fully insured or guaranteed portion of
nonresidential real estate loans insured or guaranteed by the Economic Development Administration, the Farmers Home Administration, or the
Small Business Administration. Unguaranteed portions of guaranteed loans must be aggregated with uninsured loans when determining an association’s compliance with the 400% of capital limitation for other real estate loans.
15 This authority is limited to investments in open-end management investment companies that are registered with the Securities and Exchange
Commission under the Investment Company Act of 1940. The portfolio of the investment company must be restricted by the company’s investment policy (changeable only if authorized by shareholder vote) solely to investments that a Federal savings association may, without limitation
as to percentage of assets, invest in, sell, redeem, hold, or otherwise deal in. Separate and apart from this authority, a Federal savings association may make pass-through investments to the extent authorized by § 160.32 of this part.
16 A Federal savings association may invest in service corporations subject to the provisions of part 159 of this chapter.
17 This category includes obligations issued by any state, territory, or possession of the United States or political subdivision thereof (including
any agency, corporation, or instrumentality of a state or political subdivision), subject to § 160.42 of this part.
18 A Federal savings association may invest in state housing corporations subject to the provisions of § 160.121 of this part.
19 Payments on accounts in excess of the account balance (overdrafts) on commercial deposit or transaction accounts shall be considered
commercial loans for purposes of determining the association’s percentage of assets limitation.
§ 160.31 Election regarding categorization
of loans or investments and related
calculations.
(a) If a loan or other investment is
authorized under more than one section
of the HOLA, as amended, or this part,
a Federal savings association may
designate under which section the loan
or investment has been made. Such a
loan or investment may be apportioned
among appropriate categories, and may
be moved, in whole or part, from one
category to another. A loan commitment
shall be counted as an investment and
included in total assets of a Federal
savings association for purposes of
calculating compliance with HOLA
section 5(c)’s investment limitations
only to the extent that funds have been
advanced and not repaid pursuant to the
commitment.
(b) Loans or portions of loans sold to
a third party shall be included in the
calculation of a percentage-of-assets or
percentage-of-capital investment
limitation only to the extent they are
sold with recourse.
(c) A Federal savings association may
make a loan secured by an assignment
of loans to the extent that it could,
under applicable law and regulations,
make or purchase the underlying
assigned loans.
sroberts on DSK5SPTVN1PROD with RULES
§ 160.32
Pass-through investments.
(a) A Federal savings association
(‘‘you’’) may make pass-through
investments. A pass-through investment
occurs when you invest in an entity
(‘‘company’’) that engages only in
activities that you may conduct directly
and the investment meets the
requirements of this section. If an
investment is authorized under both
this section and some other provision of
law, you may designate under which
authority or authorities the investment
is made. When making a pass-through
investment, you must comply with all
the statutes and regulations that would
apply if you were engaging in the
activity directly. For example, your
proportionate share of the company’s
assets will be aggregated with the assets
you hold directly in calculating
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
investment limits (e.g., no more than
400% of total capital may be invested in
nonresidential real property loans).
(b) You may make a pass-through
investment without prior notice to the
OCC if all of the following conditions
are met:
(1) You do not invest more than 15%
of your total capital in one company;
(2) The book value of your aggregate
pass-through investments does not
exceed 50% of your total capital after
making the investment;
(3) Your investment would not give
you direct or indirect control of the
company;
(4) Your liability is limited to the
amount of your investment; and
(5) The company falls into one of the
following categories:
(i) A limited partnership;
(ii) An open-end mutual fund;
(iii) A closed-end investment trust;
(iv) A limited liability company; or
(v) An entity in which you are
investing primarily to use the
company’s services (e.g., data
processing).
(c) If you want to make other passthrough investments, you must provide
the OCC with 30 days’ advance notice.
If within that 30-day period the OCC
notifies you that an investment presents
supervisory, legal, or safety and
soundness concerns, you must apply for
and receive the OCC’s prior written
approval under the standard treatment
processing procedures at part 116,
subparts A and E of this chapter before
making the investment. Notices under
this section are deemed to be
applications for purposes of statutory
and regulatory references to
‘‘applications.’’ Any conditions that the
OCC imposes on any pass-through
investment shall be enforceable as a
condition imposed in writing by the
OCC in connection with the granting of
a request by a Federal savings
association within the meaning of 12
U.S.C. 1818(b) or 1818(i).
§ 160.33
Late charges.
A Federal savings association may
include in a home loan contract a
PO 00000
Frm 00085
Fmt 4701
Sfmt 4700
provision authorizing the imposition of
a late charge with respect to the
payment of any delinquent periodic
payment. With respect to any loan made
after July 31, 1976, on the security of a
home occupied or to be occupied by the
borrower, no late charge, regardless of
form, shall be assessed or collected by
a Federal savings association, unless
any billing, coupon, or notice the
Federal savings association may provide
regarding installment payments due on
the loan discloses the date after which
the charge may be assessed. A Federal
savings association may not impose a
late charge more than one time for late
payment of the same installment, and
any installment payment made by the
borrower shall be applied to the longest
outstanding installment due. A Federal
savings association shall not assess a
late charge as to any payment received
by it within fifteen days after the due
date of such payment. No form of such
late charge permitted by this paragraph
shall be considered as interest to the
Federal savings association and the
Federal savings association shall not
deduct late charges from the regular
periodic installment payments on the
loan, but must collect them as such from
the borrower.
§ 160.34
Prepayments.
Any prepayment on a real estate loan
must be applied directly to reduce the
principal balance on the loan unless the
loan contract or the borrower specifies
otherwise. Subject to the terms of the
loan contract, a Federal savings
association may impose a fee for any
prepayment of a loan.
§ 160.35
Adjustments to home loans.
(a) For any home loan secured by
borrower-occupied property, or property
to be occupied by the borrower,
adjustments to the interest rate,
payment, balance, or term to maturity
must comply with the limitations of this
section and the disclosure and notice
requirements of 560.210 until
superseding regulations are issued by
the Consumer Financial Protection
Bureau.
E:\FR\FM\09AUR2.SGM
09AUR2
49034
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(b) Adjustments to the interest rate
shall correspond directly to the
movement of an index satisfying the
requirements of paragraph (d) of this
section. A Federal savings association
also may increase the interest rate
pursuant to a formula or schedule that
specifies the amount of the increase, the
time at which it may be made, and
which is set forth in the loan contract.
A Federal savings association may
decrease the interest rate at any time.
(c) Adjustments to the payment and
the loan balance that do not reflect an
interest-rate adjustment may be made if:
(1) The adjustments reflect a change
in an index that may be used pursuant
to paragraph (d) of this section;
(2) In the case of a payment
adjustment, the adjustment reflects a
change in the loan balance or is made
pursuant to a formula, or to a schedule
specifying the percentage or dollar
change in the payment as set forth in the
loan contract; or
(3) In the case of an open-end line-ofcredit loan, the adjustment reflects an
advance taken by the borrower under
the line-of-credit and is permitted by the
loan contract.
(d)(1) Any index used must be readily
available and independently verifiable.
If set forth in the loan contract, an
association may use any combination of
indices, a moving average of index
values, or more than one index during
the term of a loan.
(2) Except as provided in paragraph
(d)(3) of this section, any index used
must be a national or regional index.
(3) A Federal savings association may
use an index not satisfying the
requirements of paragraph (d)(2) of this
section 30 days after filing a notice
unless, within that 30-day period, the
OCC has notified the association that
the notice presents supervisory
concerns or raises significant issues of
law or policy. If the OCC notifies the
association of such concerns or issues,
the Federal savings association may not
use such an index unless it applies for
and receives the OCC’s prior written
approval under the standard treatment
processing procedures at part 116,
subparts A and E of this chapter.
sroberts on DSK5SPTVN1PROD with RULES
§ 160.36
De minimis investments.
A Federal savings association may
invest in the aggregate up to the greater
of 1% of its total capital or $250,000 in
community development investments of
the type permitted for a national bank
under 12 CFR part 24.
§ 160.37 Real estate for office and related
facilities.
A Federal savings association may
invest in real estate (improved or
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
unimproved) to be used for office and
related facilities of the association, or
for such office and related facilities and
for rental or sale, if such investment is
made and maintained under a prudent
program of property acquisition to meet
the Federal savings association’s present
needs or its reasonable future needs for
office and related facilities. A Federal
savings association may not make an
investment that would cause the
outstanding book value of all such
investments (including investments
under § 159.4(e)(2) of this chapter) to
exceed its total capital.
§ 160.40 Commercial paper and corporate
debt securities.
Pursuant to HOLA section 5(c)(2)(D),
a Federal savings association may invest
in, sell, or hold commercial paper and
corporate debt securities subject to the
provisions of this section.
(a) Limitations. (1) Commercial paper
must be:
(i) As of the date of purchase, rated in
either one of the two highest categories
by at least two nationally recognized
investment ratings services as shown by
the most recently published rating made
of such investments; or
(ii) If unrated, guaranteed by a
company having outstanding paper that
is rated as provided in paragraph
(a)(1)(i) of this section.
(2) Corporate debt securities must be:
(i) Securities that may be sold with
reasonable promptness at a price that
corresponds reasonably to their fair
value; and
(ii) Rated in one of the four highest
categories as to the portion of the
security in which the association is
investing by a nationally recognized
investment ratings service at its most
recently published rating before the date
of purchase of the security.
(3) A Federal savings association’s
total investment in the commercial
paper and corporate debt securities of
any one issuer, or issued by any one
person or entity affiliated with such
issuer, together with other loans, shall
not exceed the general lending
limitations contained in § 160.93(c) of
this part.
(4) Investments in corporate debt
securities convertible into stock are
subject to the following additional
limitations:
(i) The purchase of securities
convertible into stock at the option of
the issuer is prohibited;
(ii) At the time of purchase, the cost
of such securities must be written down
to an amount that represents the
investment value of the securities
considered independently of the
conversion feature; and
PO 00000
Frm 00086
Fmt 4701
Sfmt 4700
(iii) Federal savings associations are
prohibited from exercising the
conversion feature.
(5) A Federal savings association shall
maintain information in its files
adequate to demonstrate that it has
exercised prudent judgment in making
investments under this section.
(b) Notwithstanding the limitations
contained in this section, the OCC may
permit investment in corporate debt
securities of another savings association
in connection with the purchase or sale
of a branch office or in connection with
a supervisory merger or acquisition.
(c) Underwriting. Before committing
to acquire any investment security, a
Federal savings association must
determine whether the investment is
safe and sound and suitable for the
association. The Federal savings
association must consider, as
appropriate, the interest rate, credit,
liquidity, price, transaction, and other
risks associated with the investment
activity. The Federal savings association
must also determine that the issuer has
adequate resources and the willingness
to provide for all required payments on
its obligations in a timely manner.
§ 160.41
Leasing.
(a) Permissible activities. Subject to
the limitations of this section, a Federal
savings association may engage in
leasing activities. These activities
include becoming the legal or beneficial
owner of tangible personal property or
real property for the purpose of leasing
such property, obtaining an assignment
of a lessor’s interest in a lease of such
property, and incurring obligations
incidental to its position as the legal or
beneficial owner and lessor of the leased
property.
(b) Definitions. For the purposes of
this section:
(1) The term net lease means a lease
under which the Federal savings
association will not, directly or
indirectly, provide or be obligated to
provide for:
(i) The servicing, repair or
maintenance of the leased property
during the lease term;
(ii) The purchasing of parts and
accessories for the leased property,
except that improvements and additions
to the leased property may be leased to
the lessee upon its request in
accordance with the full-payout
requirements of paragraph (c)(2)(i) of
this section;
(iii) The loan of replacement or
substitute property while the leased
property is being serviced;
(iv) The purchasing of insurance for
the lessee, except where the lessee has
failed to discharge a contractual
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
obligation to purchase or maintain
insurance; or
(v) The renewal of any license,
registration, or filing for the property
unless such action by the Federal
savings association is necessary to
protect its interest as an owner or
financier of the property.
(2) The term full-payout lease means
a lease transaction in which any
unguaranteed portion of the estimated
residual value relied on by the
association to yield the return of its full
investment in the leased property, plus
the estimated cost of financing the
property over the term of the lease, does
not exceed 25% of the original cost of
the property to the lessor. In general, a
lease will qualify as a full-payout lease
if the scheduled payments provide at
least 75% of the principal and interest
payments that a lessor would receive if
the finance lease were structured as a
market-rate loan.
(3) The term realization of investment
means that a Federal savings association
that enters into a lease financing
transaction must reasonably expect to
realize the return of its full investment
in the leased property, plus the
estimated cost of financing the property
over the term of the lease from:
(i) Rentals;
(ii) Estimated tax benefits, if any; and
(iii) The estimated residual value of
the property at the expiration of the
term of the lease.
(c) Finance leasing—(1) Investment
limits. A Federal savings association
may exercise its authority under HOLA
sections 5(c)(1)(B) (residential real estate
loans), 5(c)(2)(A) (commercial, business,
corporate or agricultural loans),
5(c)(2)(B) (nonresidential real estate
loans), and 5(c)(2)(D) (consumer loans)
by conducting leasing activities that are
the functional equivalent of loans made
under those HOLA sections. These
activities are commonly referred to as
financing leases. Such financing leases
are subject to the same investment
limits that apply to loans made under
those sections. For example, a financing
lease of tangible personal property made
to a natural person for personal, family
or household purposes is subject to all
limitations applicable to the amount of
a Federal savings association’s
investment in consumer loans. A
financing lease made for commercial,
corporate, business, or agricultural
purposes is subject to all limitations
applicable to the amount of a Federal
savings association’s investment in
commercial loans. A financing lease of
residential or nonresidential real
property is subject to all limitations
applicable to the amount of a Federal
savings association’s investment in
these types of real estate loans.
(2) Functional equivalent of lending.
To qualify as the functional equivalent
of a loan:
(i) The lease must be a net, full-payout
lease representing a non-cancelable
obligation of the lessee, notwithstanding
the possible early termination of the
lease;
(ii) The portion of the estimated
residual value of the property relied
upon by the lessor to satisfy the
requirements of a full-payout lease must
be reasonable in light of the nature of
the leased property and all relevant
circumstances so that realization of the
lessor’s full investment plus the cost of
financing the property depends
primarily on the creditworthiness of the
lessee, and not on the residual market
value of the leased property; and
(iii) At the termination of a financing
lease, either by expiration or default,
property acquired must be liquidated or
released on a net basis as soon as
practicable. Any property held in
anticipation of re-leasing must be
reevaluated and recorded at the lower of
fair market value or book value.
(d) General leasing. Pursuant to
section 5(c)(2)(C) of the HOLA, a
Federal savings association may invest
in tangible personal property, including
vehicles, manufactured homes,
machinery, equipment, or furniture, for
the purpose of leasing that property. In
contrast to financing leases, lease
investments made under this authority
need not be the functional equivalent of
loans.
(e) Leasing salvage powers. If, in good
faith, a Federal savings association
believes that there has been an
unanticipated change in conditions that
threatens its financial position by
significantly increasing its exposure to
loss, it may:
(1) As the owner and lessor, take
reasonable and appropriate action to
salvage or protect the value of the
property or its interest arising under the
lease;
(2) As the assignee of a lessor’s
interest in a lease, become the owner
and lessor of the leased property
pursuant to its contractual right, or take
any reasonable and appropriate action
to salvage or protect the value of the
property or its interest arising under the
lease; or
(3) Include any provisions in a lease,
or make any additional agreements, to
protect its financial position or
investment in the circumstances set
forth in paragraphs (e)(1) and (e)(2) of
this section.
§ 160.42 State and local government
obligations.
(a) What limitations apply? Pursuant
to HOLA section 5(c)(1)(H), a Federal
savings association (‘‘you’’) may invest
in obligations issued by any state,
territory, possession, or political
subdivision thereof (‘‘governmental
entity’’), subject to appropriate
underwriting and the following
conditions:
Aggregate limitation
sroberts on DSK5SPTVN1PROD with RULES
(1) General obligations ..................................................................................................
(2) Other obligations of a governmental entity ( e.g., revenue bonds) that hold one of
the four highest investment grade ratings by a nationally recognized rating agency
or that are nonrated but of investment quality.
(3) Obligations of a governmental entity that do not qualify under any other paragraph but are approved by the OCC.
(b) What is a political subdivision?
Political subdivision means a county,
city, town, or other municipal
corporation, a public authority, or a
publicly-owned entity that is an
instrumentality of a state or a municipal
corporation.
(c) What is a general obligation of a
state or political subdivision? A general
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Frm 00087
Fmt 4701
Sfmt 4700
Per-issuer limitation
None ...................................
None ...................................
None.
10% of total capital.
As approved by the OCC ...
10% of total capital.
obligation is an obligation that is
guaranteed by the full faith and credit
of a state or political subdivision that
has the power to tax. Indirect payments,
such as through a special fund, may
qualify as general obligations if a state
or political subdivision with taxing
authority has unconditionally agreed to
provide funds to cover payments.
PO 00000
49035
(d) What is appropriate underwriting
for this type of investment? In the case
of a security rated in one of the four
highest investment grades by a
nationally recognized rating agency,
your assessment of the obligor’s credit
quality may be based, in part, on
reliable rating agency estimates of the
obligor’s performance. For all other
E:\FR\FM\09AUR2.SGM
09AUR2
49036
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
securities, you must perform your own
detailed analysis of credit quality. In
doing so, you must consider, as
appropriate, the interest rate, credit,
liquidity, price, transaction, and other
risks associated with the investment
activity and determine that such
investment is appropriate for your
institution. You must also determine
that the obligor has adequate resources
and willingness to provide for all
required payments on its obligations in
a timely manner.
§ 160.43
Foreign assistance investments.
Pursuant to HOLA section 5(c)(4)(C),
a Federal savings association may make
foreign assistance investments in an
aggregate amount not to exceed one
percent of its assets, subject to the
following conditions:
(a) For any investment made under
the Foreign Assistance Act, the loan
agreement shall specify what constitutes
an event of default, and provide that
upon default in payment of principal or
interest under such agreement, the
entire amount of outstanding
indebtedness thereunder shall become
immediately due and payable, at the
lender’s option. Additionally, the
contract of guarantee shall cover 100%
of any loss of investment thereunder,
except for any portion of the loan
arising out of fraud or misrepresentation
for which the party seeking payment is
responsible, and provide that the
guarantor shall pay for any such loss in
U.S. dollars within a specified
reasonable time after the date of
application for payment.
(b) To make any investments in the
share capital and capital reserve of the
Inter-American Savings and Loan Bank,
a Federal savings association must be
adequately capitalized and have
adequate allowances for loan and lease
losses. The Federal savings association’s
aggregate investment in such capital or
capital reserve, including the amount of
any obligations undertaken to provide
said Bank with reserve capital in the
future (call-able capital), must not, as a
result of such investment, exceed the
lesser of one-quarter of 1% of its assets
or $100,000.
sroberts on DSK5SPTVN1PROD with RULES
§ 160.50 Letters of credit and other
independent undertakings—authority.
A Federal savings association may
issue letters of credit and may issue
such other independent undertakings as
are approved by the OCC, subject to the
restrictions in § 160.120.
§ 160.60
Suretyship and guaranty.
Pursuant to section 5(b)(2) of the
HOLA, a Federal savings association
may enter into a repayable suretyship or
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
guaranty agreement, subject to the
conditions in this section.
(a) What is a suretyship or guaranty
agreement? Under a suretyship, a
Federal savings association is bound
with its principal to pay or perform an
obligation to a third person. Under a
guaranty agreement, a Federal savings
association agrees to satisfy the
obligation of the principal only if the
principal fails to pay or perform.
(b) What requirements apply to
suretyship and guaranty agreements
under this section? A Federal savings
association may enter into a suretyship
or guaranty agreement under this
section, subject to each of the following
requirements:
(1) The Federal savings association
must limit its obligations under the
agreement to a fixed dollar amount and
a specified duration.
(2) The Federal savings association’s
performance under the agreement must
create an authorized loan or other
investment.
(3) The Federal savings association
must treat its obligation under the
agreement as a loan to the principal for
purposes of §§ 160.93 and 163.43 of this
chapter.
(4) The Federal savings association
must take and maintain a perfected
security interest in collateral sufficient
to cover its total obligation under the
agreement.
(c) What collateral is sufficient? (1)
The Federal savings association must
take and maintain a perfected security
interest in real estate or marketable
securities equal to at least 110 percent
of its obligation under the agreement,
except as provided in paragraph (c)(2) of
this section.
(i) If the collateral is real estate, the
Federal savings association must
establish the value by a signed appraisal
or evaluation in accordance with part
164 of this chapter. In determining the
value of the collateral, the Federal
savings association must factor in the
value of any existing senior mortgages,
liens or other encumbrances on the
property, except those held by the
principal to the suretyship or guaranty
agreement.
(ii) If the collateral is marketable
securities, the Federal savings
association must be authorized to invest
in that security taken as collateral. The
Federal savings association must ensure
that the value of the security is 110
percent of the obligation at all times
during the term of agreement.
(2) The Federal savings association
may take and maintain a perfected
security interest in collateral which is at
all times equal to at least 100 percent of
its obligation, if the collateral is:
PO 00000
Frm 00088
Fmt 4701
Sfmt 4700
(i) Cash;
(ii) Obligations of the United States or
its agencies;
(iii) Obligations fully guarantied by
the United States or its agencies as to
principal and interest; or
(iv) Notes, drafts, or bills of exchange
or bankers’ acceptances that are eligible
for rediscount or purchase by a Federal
Reserve Bank.
§ 160.93
Lending limitations.
(a) Scope. This section applies to all
loans and extensions of credit to third
parties made by a savings association
and its subsidiaries. This section does
not apply to loans made by a savings
association or a GAAP-consolidated
subsidiary to subordinate organizations
or affiliates of the savings association.
The terms subsidiary, GAAPconsolidated subsidiary, and
subordinate organization have the same
meanings as specified in § 159.2 of this
chapter. The term affiliate has the same
meaning as specified in 12 CFR 563.41
until superseded by regulations of the
Board of Governors of the Federal
Reserve System regarding transactions
with affiliates.
(b) Definitions. In applying these
lending limitations, savings associations
shall apply the definitions and
interpretations promulgated by the OCC
consistent with 12 U.S.C. 84. See 12
CFR part 32. In applying these
definitions, pursuant to 12 U.S.C. 1464,
savings associations shall use the terms
savings association, savings
associations, and savings association’s
in place of the terms national bank and
bank, banks, and bank’s, respectively.
For purposes of this section:
(1) The term one borrower has the
same meaning as the term person set
forth at 12 CFR part 32. It also includes,
in addition to the definition cited
therein, a financial institution as
defined at § 161.19 of this chapter.
(2) The term company means a
corporation, partnership, business trust,
association, or similar organization and,
unless specifically excluded, the term
company includes a savings association
and a bank.
(3) Contractual commitment to
advance funds has the meaning set forth
in 12 CFR part 32.
(4) Loans and extensions of credit has
the meaning set forth in 12 CFR part 32,
and includes investments in commercial
paper and corporate debt securities. The
appropriate Federal banking agency
expressly reserves its authority to deem
other arrangements that are, in
substance, loans and extensions of
credit to be encompassed by this term.
(5) The term loans as used in the
phrase Loans to one borrower to finance
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
the sale of real property acquired in
satisfaction of debts previously
contracted for in good faith does not
include an association’s taking of a
purchase money mortgage note from the
purchaser provided that:
(i) No new funds are advanced by the
association to the borrower; and
(ii) The association is not placed in a
more detrimental position as a result of
the sale.
(6) [Reserved]
(7) Readily marketable collateral has
the meaning set forth in 12 CFR part 32.
(8) Residential housing units has the
same meaning as the term residential
real estate set forth in § 141.23 of this
chapter. The term to develop includes
the various phases necessary to produce
housing units as an end product, to
include: Acquisition, development and
construction; development and
construction; construction;
rehabilitation; or conversion. The term
domestic includes units within the fifty
states, the District of Columbia, Puerto
Rico, the Virgin Islands, Guam, and the
Pacific Islands.
(9) Single family dwelling unit has the
meaning set forth in § 141.25 of this
chapter.
(10) A standby letter of credit has the
meaning set forth in 12 CFR part 32.
(11) Unimpaired capital and
unimpaired surplus means—
(i) A savings association’s core capital
and supplementary capital included in
its total capital under part 167 of this
chapter; plus
(ii) The balance of a savings
association’s allowance for loan and
lease losses not included in
supplementary capital under part 167 of
this chapter; plus
(iii) The amount of a savings
association’s loans to, investments in,
and advances to subsidiaries not
included in calculating core capital
under part 167 of this chapter.
(c) General limitation. Section 5200 of
the Revised Statutes (12 U.S.C. 84) shall
apply to savings associations in the
same manner and to the same extent as
it applies to national banks. This
statutory provision and lending limit
regulations and interpretations
promulgated by the OCC pursuant to a
rulemaking conducted in accordance
with the provisions of the
Administrative Procedure Act, 5 U.S.C.
553 et seq. (including the regulations
appearing at 12 CFR part 32) shall apply
to savings associations in the same
manner and to the same extent as these
provisions apply to national banks:
(1) The total loans and extensions of
credit by a savings association to one
borrower outstanding at one time and
not fully secured, as determined in the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
same manner as determined under 12
U.S.C. 84(a)(2), by collateral having a
market value at least equal to the
amount of the loan or the extension of
credit shall not exceed 15 percent of the
unimpaired capital and unimpaired
surplus of the association.
(2) The total loans and extensions of
credit by a savings association to one
borrower outstanding at one time and
fully secured by readily marketable
collateral having a market value, as
determined by reliable and
continuously available price quotations,
at least equal to the amount of the funds
outstanding shall not exceed 10 per
centum of the unimpaired capital and
unimpaired surplus of the association.
This limitation shall be separate from
and in addition to the limitation
contained in paragraph (c)(1) of this
section.
(d) Exceptions to the general
limitation—(1) $500,000 exception. If a
savings association’s aggregate lending
limitation calculated under paragraphs
(c)(1) and (c)(2) of this section is less
than $500,000, notwithstanding this
aggregate limitation in paragraphs (c)(1)
and (c)(2) of this section, such savings
association may have total loans and
extensions of credit, for any purpose, to
one borrower outstanding at one time
not to exceed $500,000.
(2) Statutory exceptions. The
exceptions to the lending limits set forth
in 12 U.S.C. 84 and 12 CFR part 32 are
applicable to savings associations in the
same manner and to the extent as they
apply to national banks.
(3) Loans to develop domestic
residential housing units. Subject to
paragraph (d)(4) of this section, a
savings association may make loans to
one borrower to develop domestic
residential housing units, not to exceed
the lesser of $30,000,000 or 30 percent
of the savings association’s unimpaired
capital and unimpaired surplus,
including all amounts loaned under the
authority of the General Limitation set
forth under paragraphs (c)(1) and (c)(2)
of this section, provided that:
(i) The final purchase price of each
single family dwelling unit the
development of which is financed under
this paragraph (d)(3) does not exceed
$500,000;
(ii) The savings association is, and
continues to be, in compliance with its
capital requirements under part 167 of
this chapter.
(iii) The appropriate Federal banking
agency permits, subject to conditions it
may impose, the savings association to
use the higher limit set forth under this
paragraph (d)(3). A savings association
that meets the requirements of
paragraphs (d)(3)(i), (ii), (iv) and (v) of
PO 00000
Frm 00089
Fmt 4701
Sfmt 4700
49037
this section and that meets the
requirements for ‘‘expedited treatment’’
under § 116.5 of this chapter may use
the higher limit set forth under this
paragraph (d)(3) if the savings
association has filed a notice with the
appropriate Federal banking agency that
it intends to use the higher limit at least
30 days prior to the proposed use. A
savings association that meets the
requirements of paragraphs (d)(3)(i), (ii),
(iv), and (v) of this section and that
meets the requirements for ‘‘standard
treatment’’ under § 116.5 of this chapter
may use the higher limit set forth under
this paragraph (d)(3) if the savings
association has filed an application with
the appropriate Federal banking agency
and the agency has approved the use the
higher limit;
(iv) Loans made under this paragraph
(d)(3) to all borrowers do not, in
aggregate, exceed 150 percent of the
savings association’s unimpaired capital
and unimpaired surplus; and
(v) Such loans comply with the
applicable loan-to-value requirements
that apply to Federal savings
associations.
(4) The authority of a savings
association to make a loan or extension
of credit under the exception in
paragraph (d)(3) of this section ceases
immediately upon the association’s
failure to comply with any one of the
requirements set forth in paragraph
(d)(3) of this section or any condition(s)
set forth in an order issued by the
appropriate Federal banking agency
under paragraph (d)(3)(iii) of this
section.
(5) Notwithstanding the limit set forth
in paragraphs (c)(1) and (c)(2) of this
section, a savings association may invest
up to 10 percent of unimpaired capital
and unimpaired surplus in the
obligations of one issuer evidenced by:
(i) Commercial paper rated, as of the
date of purchase, as shown by the most
recently published rating by at least two
nationally recognized investment rating
services in the highest category; or
(ii) Corporate debt securities that may
be sold with reasonable promptness at
a price that corresponds reasonably to
their fair value, and that are rated in one
of the two highest categories by a
nationally recognized investment rating
service in its most recently published
ratings before the date of purchase of the
security.
(e) Loans to finance the sale of REO.
A savings association’s loans to one
borrower to finance the sale of real
property acquired in satisfaction of
debts previously contracted for in good
faith shall not, when aggregated with all
other loans to such borrower, exceed the
E:\FR\FM\09AUR2.SGM
09AUR2
49038
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Example: Savings Associations A’s lending
limitation as calculated under the 15 percent
General Limitation is $800, 0. If Association
A lends Y $800,000 for commercial purposes,
Association A cannot lend Y an additional
$1,600,000, or 30 percent of capital and
surplus, to develop residential housing units
under the paragraph (d)(3) exception. The
(d)(3) exception operates as the uppermost
limitation on all lending to one borrower (for
associations that may employ this exception)
and includes any amounts loaned to the
same borrower under the General Limitation.
Association A, therefore, may lend only an
additional $800,000 to Y, provided the
paragraph (d)(3) prerequisites have been met.
The amount loaned under the authority of
the General Limitation ($800,000), when
added to the amount loaned under the
exception ($800,000), yields a sum that does
not exceed the 30 percent uppermost
limitation ($1,600,000).
2. This result does not change even if the
facts are altered to assume that some or all
of the $800,000 amount of lending
permissible under the General Limitation’s
15 percent basket is not used, or is devoted
to the development of domestic residential
housing units.
In other words, using the above example,
if Association A lends Y $400,000 for
commercial purposes and $300,000 for
residential purposes—both of which would
be permitted under the Association’s
$800,000 General Limitation—Association
A’s remaining permissible lending to Y
would be: First, an additional $100,000
under the General Limitation, and then
another $800,000 to develop domestic
residential housing units if the Association
meets the paragraph (d)(3) prerequisites. (The
latter is $800,000 because in no event may
the total lending to Y exceed 30 percent of
unimpaired capital and unimpaired surplus).
If Association A did not lend Y the remaining
$100,000 permissible under the General
Limitation, its permissible loans to develop
domestic residential housing units under
paragraph (d)(3) would be $900,000 instead
of $800,000 (the total loans to Y would still
equal $1,600,000).
3. In short, under the paragraph (d)(3)
exception, the 30 percent or $30,000,000
limit will always operate as the uppermost
limitation, unless of course the association
does not avail itself of the exception and
merely relies upon its General Limitation.
Appendix to § 160.93—Interpretations
sroberts on DSK5SPTVN1PROD with RULES
General Limitation in paragraph (c)(1) of
this section.
(f) Calculating compliance and
recordkeeping. (1) The amount of an
association’s unimpaired capital and
unimpaired surplus pursuant to
paragraph (b)(11) of this section shall be
calculated as of the association’s most
recent periodic report required to be
filed with the appropriate Federal
banking agency prior to the date of
granting or purchasing the loan or
otherwise creating the obligation to
repay funds, unless the association
knows, or has reason to know, based on
transactions or events actually
completed, that such level has changed
significantly, upward or downward,
subsequent to filing of such report.
(2) If a savings association or
subsidiary thereof makes a loan or
extension of credit to any one borrower,
as defined in paragraph (b)(1) of this
section, in an amount that, when added
to the total balances of all outstanding
loans owed to such association and its
subsidiary by such borrower, exceeds
the greater of $500,000 or 5 percent of
unimpaired capital and unimpaired
surplus, the records of such association
or its subsidiary with respect to such
loan shall include documentation
showing that such loan was made
within the limitations of paragraphs (c)
and (d) of this section; for the purpose
of such documentation such association
or subsidiary may require, and may
accept in good faith, a certification by
the borrower identifying the persons,
entities, and interests described in the
definition of one borrower in paragraph
(b)(1) of this section.
(g) [Reserved]
(h) More stringent restrictions for
Federal savings associations. The
Comptroller may impose more stringent
restrictions on a Federal savings
association’s loans to one borrower if
the Comptroller determines that such
restrictions are necessary to protect the
safety and soundness of the savings
association.
Section 160.93–101 Interrelationship
Between the General Limitation and the 150
Percent Aggregate Limit on Loans to all
Borrowers To Develop Domestic Residential
Housing Units
1. Numerous questions have been received
regarding the allocation of loans between the
different lending limit ‘‘baskets,’’ i.e., the 15
percent General Limitation basket and the 30
percent Residential Development basket. In
general, the inquiries concern the manner in
which an association may ‘‘move’’ a loan
from the General Limitation basket to the
Residential Development basket. The
following example is intended to provide
guidance:
Example: Association A’s General
Limitation under section 5(u)(1) is $15
Section 160.93–100 Interrelation of General
Limitation With Exception for Loans To
Develop Domestic Residential Housing Units
1. The § 160.93(d)(3) exception for loans to
one person to develop domestic residential
housing units is characterized in the
regulation as an ‘‘alternative’’ limit. This
exceptional $30,000,000 or 30 percent
limitation does not operate in addition to the
15 percent General Limitation or the 10
percent additional amount an association
may loan to one borrower secured by readily
marketable collateral, but serves as the
uppermost limitation on a savings
association’s lending to any one person once
an association employs this exception.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00090
Fmt 4701
Sfmt 4700
million. In January, Association A makes a
$10 million loan to Borrower to develop
domestic residential housing units. At the
time the loan was made, Association A had
not received approval under an order issued
by the appropriate Federal banking agency to
avail itself of the residential development
exception to lending limits. Therefore, the
$10 million loan is made under Association
A’s General Limitation.
2. In June, Association A receives
authorization to lend under the Residential
Development exception. In July, Association
A lends $3 million to Borrower to develop
domestic residential housing units. In
August, Borrower seeks an additional $12
million commercial loan from Association A.
Association A cannot make the loan to
Borrower, however, because it already has an
outstanding $10 million loan to Borrower
that counts against Association A’s General
Limitation of $15 million. Thus, Association
A may lend only up to an additional $5
million to Borrower under the General
Limitation.
3. However, Association A may be able to
reallocate the $10 million loan it made to
Borrower in January to its Residential
Development basket provided that:
(1) Association A has obtained authority
under an order issued by the appropriate
Federal banking agency to avail itself of the
additional lending authority for residential
development and maintains compliance with
all prerequisites to such lending authority;
(2) the original $10 million loan made in
January constitutes a loan to develop
domestic residential housing units as
defined; and (3) the housing unit(s)
constructed with the funds from the January
loan remain in a stage of ‘‘development’’ at
the time Association A reallocates the loan to
the domestic residential housing basket. The
project must be in a stage of acquisition,
development, construction, rehabilitation, or
conversion in order for the loan to be
reallocated.
4. If Association A is able to reallocate the
$10 million loan made to Borrower in
January to its Residential Development
basket, it may make the $12 million
commercial loan requested by Borrower in
August. Once the January loan is reallocated
to the Residential Development basket,
however, the $10 million loan counts
towards Association’s 150 percent aggregate
limitation on loans to all borrowers under the
residential development basket (section
5(u)(2)(A)(ii)(IV)).
5. If Association A reallocates the January
loan to its domestic residential housing
basket and makes an additional $12 million
commercial loan to Borrower, Association
A’s totals under the respective limitations
would be: $12 million under the General
Limitation; and $13 million under the
Residential Development limitation. The full
$13 million residential development loan
counts toward Association A’s aggregate 150
percent limitation.
§ 160.100 Real estate lending standards;
purpose and scope.
This section, and § 160.101 of this
subpart, issued pursuant to section 304
of the Federal Deposit Insurance
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
The agencies’ regulations require that each
insured depository institution adopt and
maintain a written policy that establishes
appropriate limits and standards for all
extensions of credit that are secured by liens
on or interests in real estate or made for the
purpose of financing the construction of a
building or other improvements.1 These
guidelines are intended to assist institutions
in the formulation and maintenance of a real
estate lending policy that is appropriate to
the size of the institution and the nature and
scope of its individual operations, as well as
satisfies the requirements of the regulation.
Each institution’s policies must be
comprehensive, and consistent with safe and
sound lending practices, and must ensure
that the institution operates within limits and
according to standards that are reviewed and
approved at least annually by the board of
directors. Real estate lending is an integral
part of many institutions’ business plans and,
when undertaken in a prudent manner, will
not be subject to examiner criticism.
Loan Portfolio Management Considerations
The lending policy should contain a
general outline of the scope and distribution
of the institution’s credit facilities and the
manner in which real estate loans are made,
serviced, and collected. In particular, the
institution’s policies on real estate lending
should:
• Identify the geographic areas in which
the institution will consider lending.
• Establish a loan portfolio diversification
policy and set limits for real estate loans by
type and geographic market (e.g., limits on
higher risk loans).
• Identify appropriate terms and
conditions by type of real estate loan.
• Establish loan origination and approval
procedures, both generally and by size and
type of loan.
• Establish prudent underwriting
standards that are clear and measurable,
including loan-to-value limits, that are
consistent with these supervisory guidelines.
• Establish review and approval
procedures for exception loans, including
loans with loan-to-value percentages in
excess of supervisory limits.
• Establish loan administration
procedures, including documentation,
disbursement, collateral inspection,
collection, and loan review.
• Establish real estate appraisal and
evaluation programs.
• Require that management monitor the
loan portfolio and provide timely and
adequate reports to the board of directors.
The institution should consider both
internal and external factors in the
formulation of its loan policies and strategic
plan. Factors that should be considered
include:
• The size and financial condition of the
institution.
• The expertise and size of the lending
staff.
• The need to avoid undue concentrations
of risk.
• Compliance with all real estate related
laws and regulations, including the
Community Reinvestment Act, antidiscrimination laws, and for savings
associations, the Qualified Thrift Lender test.
• Market conditions.
The institution should monitor conditions
in the real estate markets in its lending area
so that it can react quickly to changes in
market conditions that are relevant to its
1 The agencies have adopted a uniform rule on
real estate lending. See 12 CFR part 365 (FDIC); 12
CFR part 208, subpart C (Board); 12 CFR part 34,
subpart D and 12 CFR 160.100–160.101 (OCC).
Corporation Improvement Act of 1991,
12 U.S.C. 1828(o), prescribe standards
for real estate lending to be used by
Federal savings associations and all
their includable subsidiaries, as defined
in 12 CFR 167.1, over which the savings
associations exercise control, in
adopting internal real estate lending
policies.
§ 160.101
Real estate lending standards.
(a) Each Federal savings association
shall adopt and maintain written
policies that establish appropriate limits
and standards for extensions of credit
that are secured by liens on or interests
in real estate, or that are made for the
purpose of financing permanent
improvements to real estate.
(b)(1) Real estate lending policies
adopted pursuant to this section must:
(i) Be consistent with safe and sound
banking practices;
(ii) Be appropriate to the size of the
institution and the nature and scope of
its operations; and
(iii) Be reviewed and approved by the
savings association’s board of directors
at least annually.
(2) The lending policies must
establish:
(i) Loan portfolio diversification
standards;
(ii) Prudent underwriting standards,
including loan-to-value limits, that are
clear and measurable;
(iii) Loan administration procedures
for the savings association’s real estate
portfolio; and
(iv) Documentation, approval, and
reporting requirements to monitor
compliance with the savings
association’s real estate lending policies.
(c) Each Federal savings association
must monitor conditions in the real
estate market in its lending area to
ensure that its real estate lending
policies continue to be appropriate for
current market conditions.
(d) The real estate lending policies
adopted pursuant to this section should
reflect consideration of the Interagency
Guidelines for Real Estate Lending
Policies established by the Federal bank
and thrift supervisory agencies.
sroberts on DSK5SPTVN1PROD with RULES
Appendix to § 160.101—Interagency
Guidelines for Real Estate Lending
Policies
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00091
Fmt 4701
Sfmt 4700
49039
lending decisions. Market supply and
demand factors that should be considered
include:
• Demographic indicators, including
population and employment trends.
• Zoning requirements.
• Current and projected vacancy,
construction, and absorption rates.
• Current and projected lease terms, rental
rates, and sales prices, including
concessions.
• Current and projected operating
expenses for different types of projects.
• Economic indicators, including trends
and diversification of the lending area.
• Valuation trends, including discount and
direct capitalization rates.
Underwriting Standards
Prudently underwritten real estate loans
should reflect all relevant credit factors,
including:
• The capacity of the borrower, or income
from the underlying property, to adequately
service the debt.
• The value of the mortgaged property.
• The overall creditworthiness of the
borrower.
• The level of equity invested in the
property.
• Any secondary sources of repayment.
• Any additional collateral or credit
enhancements (such as guarantees, mortgage
insurance or takeout commitments).
The lending policies should reflect the
level of risk that is acceptable to the board
of directors and provide clear and
measurable underwriting standards that
enable the institution’s lending staff to
evaluate these credit factors. The
underwriting standards should address:
• The maximum loan amount by type of
property.
• Maximum loan maturities by type of
property.
• Amortization schedules.
• Pricing structure for different types of
real estate loans.
• Loan-to-value limits by type of property.
For development and construction
projects, and completed commercial
properties, the policy should also establish,
commensurate with the size and type of the
project or property:
• Requirements for feasibility studies and
sensitivity and risk analyses (e.g., sensitivity
of income projections to changes in economic
variables such as interest rates, vacancy rates,
or operating expenses).
• Minimum requirements for initial
investment and maintenance of hard equity
by the borrower (e.g., cash or unencumbered
investment in the underlying property).
• Minimum standards for net worth, cash
flow, and debt service coverage of the
borrower or underlying property.
• Standards for the acceptability of and
limits on non-amortizing loans.
• Standards for the acceptability of and
limits on the use of interest reserves.
• Pre-leasing and pre-sale requirements for
income-producing property.
• Pre-sale and minimum unit release
requirements for non-income-producing
property loans.
E:\FR\FM\09AUR2.SGM
09AUR2
49040
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
• Limits on partial recourse or nonrecourse
loans and requirements for guarantor
support.
• Requirements for takeout commitments.
• Minimum covenants for loan
agreements.
Loan Administration
The institution should also establish loan
administration procedures for its real estate
portfolio that address:
• Documentation, including:
Type and frequency of financial
statements, including requirements for
verification of information provided by the
borrower;
Type and frequency of collateral
evaluations (appraisals and other estimates of
value).
• Loan closing and disbursement.
• Payment processing.
• Escrow administration.
• Collateral administration.
• Loan payoffs.
• Collections and foreclosure, including:
Delinquency follow-up procedures;
Foreclosure timing;
Extensions and other forms of forbearance;
Acceptance of deeds in lieu of foreclosure.
• Claims processing (e.g., seeking recovery
on a defaulted loan covered by a government
guaranty or insurance program).
• Servicing and participation agreements.
Supervisory Loan-to-Value Limits
Institutions should establish their own
internal loan-to-value limits for real estate
loans. These internal limits should not
exceed the following supervisory limits:
Loan-to-value
limit (percent)
Loan category
Raw land ..........................................................................................................................................................................................
Land development ...........................................................................................................................................................................
Construction:
Commercial, multifamily,1 and other nonresidential .................................................................................................................
1- to 4-family residential ...........................................................................................................................................................
Improved property ............................................................................................................................................................................
Owner-occupied 1- to 4-family and home equity ............................................................................................................................
65
75
80
85
85
( 2)
1 Multifamily
construction includes condominiums and cooperatives.
loan-to-value limit has not been established for permanent mortgage or home equity loans on owner-occupied, 1- to 4-family residential
property. However, for any such loan with a loan-to-value ratio that equals or exceeds 90 percent at origination, an institution should require appropriate credit enhancement in the form of either mortgage insurance or readily marketable collateral.
sroberts on DSK5SPTVN1PROD with RULES
2A
The supervisory loan-to-value limits
should be applied to the underlying property
that collateralizes the loan. For loans that
fund multiple phases of the same real estate
project (e.g., a loan for both land
development and construction of an office
building), the appropriate loan-to-value limit
is the limit applicable to the final phase of
the project funded by the loan; however, loan
disbursements should not exceed actual
development or construction outlays. In
situations where a loan is fully crosscollateralized by two or more properties or is
secured by a collateral pool of two or more
properties, the appropriate maximum loan
amount under supervisory loan-to-value
limits is the sum of the value of each
property, less senior liens, multiplied by the
appropriate loan-to-value limit for each
property. To ensure that collateral margins
remain within the supervisory limits, lenders
should redetermine conformity whenever
collateral substitutions are made to the
collateral pool.
In establishing internal loan-to-value
limits, each lender is expected to carefully
consider the institution-specific and market
factors listed under ‘‘Loan Portfolio
Management Considerations,’’ as well as any
other relevant factors, such as the particular
subcategory or type of loan. For any
subcategory of loans that exhibits greater
credit risk than the overall category, a lender
should consider the establishment of an
internal loan-to-value limit for that
subcategory that is lower than the limit for
the overall category.
The loan-to-value ratio is only one of
several pertinent credit factors to be
considered when underwriting a real estate
loan. Other credit factors to be taken into
account are highlighted in the ‘‘Underwriting
Standards’’ section above. Because of these
other factors, the establishment of these
supervisory limits should not be interpreted
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
to mean that loans at these levels will
automatically be considered sound.
Loans in Excess of the Supervisory Loan-toValue Limits
The agencies recognize that appropriate
loan-to-value limits vary not only among
categories of real estate loans but also among
individual loans. Therefore, it may be
appropriate in individual cases to originate
or purchase loans with loan-to-value ratios in
excess of the supervisory loan-to-value
limits, based on the support provided by
other credit factors. Such loans should be
identified in the institutions’ records, and
their aggregate amount reported at least
quarterly to the institution’s board of
directors. (see additional reporting
requirements described under ‘‘Exceptions to
the General Policy.’’) The aggregate amount
of all loans in excess of the supervisory loanto-value limits should not exceed 100 percent
of total capital.2 Moreover, within the
aggregate limit, total loans for all commercial,
agricultural, multifamily or other non-1-to-4
family residential properties should not
exceed 30 percent of total capital. An
institution will come under increased
supervisory scrutiny as the total of such
loans approaches these levels.
In determining the aggregate amount of
such loans, institutions should: (a) Include
all loans secured by the same property if any
one of those loans exceeds the supervisory
loan-to-value limits; and (b) include the
recourse obligation of any such loan sold
with recourse. Conversely, a loan should no
2 For the state member banks, the term ‘‘total
capital’’ means ‘‘total risk-based capital’’ as defined
in Appendix A to 12 part 208. For insured state
non-member banks, ‘‘total capital’’ refers to that
term described in table I of Appendix A to 12 CFR
part 325. For national banks, the term ‘‘total
capital’’ is defined at 12 CFR 3.2(e). For savings
associations, the term ‘‘total capital’’ as described
in part 167 of this chapter.
PO 00000
Frm 00092
Fmt 4701
Sfmt 4700
longer be reported to the directors as part of
aggregate totals when reduction in principal
or senior liens, or additional contribution of
collateral or equity (e.g., improvements to the
real property securing the loan), bring the
loan-to-value ratio into compliance with
supervisory limits.
Excluded Transactions
The agencies also recognize that there are
a number of lending situations in which
other factors significantly outweigh the need
to apply the supervisory loan-to-value limits.
These include:
• Loans guaranteed or insured by the U.S.
government or its agencies, provided that the
amount of the guaranty or insurance is at
least equal to the portion of the loan that
exceeds the supervisory loan-to-value limit.
• Loans backed by the full faith and credit
of a state government, provided that the
amount of the assurance is at least equal to
the portion of the loan that exceeds the
supervisory loan-to-value limit.
• Loans guaranteed or insured by a state,
municipal or local government, or an agency
thereof, provided that the amount of the
guaranty or insurance is at least equal to the
portion of the loan that exceeds the
supervisory loan-to-value limit, and provided
that the lender has determined that the
guarantor or insurer has the financial
capacity and willingness to perform under
the terms of the guaranty or insurance
agreement.
• Loans that are to be sold promptly after
origination, without recourse, to a financially
responsible third party.
• Loans that are renewed, refinanced, or
restructured without the advancement of new
funds or an increase in the line of credit
(except for reasonable closing costs), or loans
that are renewed, refinanced, or restructured
in connection with a workout situation,
either with or without the advancement of
new funds, where consistent with safe and
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
sound banking practices and part of a clearly
defined and well-documented program to
achieve orderly liquidation of the debt,
reduce risk of loss, or maximize recovery on
the loan.
• Loans that facilitate the sale of real estate
acquired by the lender in the ordinary course
of collecting a debt previously contracted in
good faith.
• Loans for which a lien on or interest in
real property is taken as additional collateral
through an abundance of caution by the
lender (e.g., the institution takes a blanket
lien on all or substantially all of the assets
of the borrower, and the value of the real
property is low relative to the aggregate value
of all other collateral).
• Loans, such as working capital loans,
where the lender does not rely principally on
real estate as security and the extension of
credit is not used to acquire, develop, or
construct permanent improvements on real
property.
• Loans for the purpose of financing
permanent improvements to real property,
but not secured by the property, if such
security interest is not required by prudent
underwriting practice.
Exceptions to the General Lending Policy
Some provision should be made for the
consideration of loan requests from
creditworthy borrowers whose credit needs
do not fit within the institution’s general
lending policy. An institution may provide
for prudently underwritten exceptions to its
lending policies, including loan-to-value
limits, on a loan-by-loan basis. However, any
exceptions from the supervisory loan-tovalue limits should conform to the aggregate
limits on such loans discussed above.
The board of directors is responsible for
establishing standards for the review and
approval of exception loans. Each institution
should establish an appropriate internal
process for the review and approval of loans
that do not conform to its own internal policy
standards. The approval of any such loan
should be supported by a written justification
that clearly sets forth all of the relevant credit
factors that support the underwriting
decision. The justification and approval
documents for such loans should be
maintained as a part of the permanent loan
file. Each institution should monitor
compliance with its real estate lending policy
and individually report exception loans of a
significant size to its board of directors.
Supervisory Review of Real Estate Lending
Policies and Practices
The real estate lending policies of
institutions will be evaluated by examiners
during the course of their examinations to
determine if the policies are consistent with
safe and sound lending practices, these
guidelines, and the requirements of the
regulation. In evaluating the adequacy of the
institution’s real estate lending policies and
practices, examiners will take into
consideration the following factors:
• The nature and scope of the institution’s
real estate lending activities.
• The size and financial condition of the
institution.
• The quality of the institution’s
management and internal controls.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
• The expertise and size of the lending and
loan administration staff.
• Market conditions.
Lending policy exception reports will also
be reviewed by examiners during the course
of their examinations to determine whether
the institutions’ exceptions are adequately
documented and appropriate in light of all of
the relevant credit considerations. An
excessive volume of exceptions to an
institution’s real estate lending policy may
signal a weakening of its underwriting
practices, or may suggest a need to revise the
loan policy.
Definitions
For the purposes of these Guidelines:
Construction loan means an extension of
credit for the purpose of erecting or
rehabilitating buildings or other structures,
including any infrastructure necessary for
development.
Extension of credit or loan means:
(1) The total amount of any loan, line of
credit, or other legally binding lending
commitment with respect to real property;
and
(2) The total amount, based on the amount
of consideration paid, of any loan, line of
credit, or other legally binding lending
commitment acquired by a lender by
purchase, assignment, or otherwise.
Improved property loan means an
extension of credit secured by one of the
following types of real property:
(1) Farmland, ranchland or timberland
committed to ongoing management and
agricultural production;
(2) 1- to 4-family residential property that
is not owner-occupied;
(3) Residential property containing five or
more individual dwelling units;
(4) Completed commercial property; or
(5) Other income-producing property that
has been completed and is available for
occupancy and use, except incomeproducing owner-occupied 1- to 4-family
residential property.
Land development loan means an
extension of credit for the purpose of
improving unimproved real property prior to
the erection of structures. The improvement
of unimproved real property may include the
laying or placement of sewers, water pipes,
utility cables, streets, and other infrastructure
necessary for future development.
Loan origination means the time of
inception of the obligation to extend credit
(i.e., when the last event or prerequisite,
controllable by the lender, occurs causing the
lender to become legally bound to fund an
extension of credit).
Loan-to-value or loan-to-value ratio means
the percentage or ratio that is derived at the
time of loan origination by dividing an
extension of credit by the total value of the
property(ies) securing or being improved by
the extension of credit plus the amount of
any readily marketable collateral and other
acceptable collateral that secures the
extension of credit. The total amount of all
senior liens on or interests in such
property(ies) should be included in
determining the loan-to-value ratio. When
mortgage insurance or collateral is used in
the calculation of the loan-to-value ratio, and
such credit enhancement is later released or
PO 00000
Frm 00093
Fmt 4701
Sfmt 4700
49041
replaced, the loan-to-value ratio should be
recalculated.
Other acceptable collateral means any
collateral in which the lender has a perfected
security interest that has a quantifiable value,
and is accepted by the lender in accordance
with safe and sound lending practices. Other
acceptable collateral should be appropriately
discounted by the lender consistent with the
lender’s usual practices for making loans
secured by such collateral. Other acceptable
collateral includes, among other items,
unconditional irrevocable standby letters of
credit for the benefit of the lender.
Owner-occupied, when used in
conjunction with the term 1- to 4-family
residential property means that the owner of
the underlying real property occupies at least
one unit of the real property as a principal
residence of the owner.
Readily marketable collateral means
insured deposits, financial instruments, and
bullion in which the lender has a perfected
interest. Financial instruments and bullion
must be salable under ordinary
circumstances with reasonable promptness at
a fair market value determined by quotations
based on actual transactions, on an auction
or similarly available daily bid and ask price
market. Readily marketable collateral should
be appropriately discounted by the lender
consistent with the lender’s usual practices
for making loans secured by such collateral.
Value means an opinion or estimate, set
forth in an appraisal or evaluation,
whichever may be appropriate, of the market
value of real property, prepared in
accordance with the agency’s appraisal
regulations and guidance. For loans to
purchase an existing property, the term
‘‘value’’ means the lesser of the actual
acquisition cost or the estimate of value.
1- to 4-family residential property means
property containing fewer than five
individual dwelling units, including
manufactured homes permanently affixed to
the underlying property (when deemed to be
real property under state law).
§ 160.110 Most favored lender usury
preemption for all savings associations.
(a) Definition. The term ‘‘interest’’ as
used in 12 U.S.C. 1463(g) includes any
payment compensating a creditor or
prospective creditor for an extension of
credit, making available of a line of
credit, or any default or breach by a
borrower of a condition upon which
credit was extended. It includes, among
other things, the following fees
connected with credit extension or
availability: numerical periodic rates,
late fees, not sufficient funds (NSF) fees,
overlimit fees, annual fees, cash
advance fees, and membership fees. It
does not ordinarily include appraisal
fees, premiums and commissions
attributable to insurance guaranteeing
repayment of any extension of credit,
finders’ fees, fees for document
preparation or notarization, or fees
incurred to obtain credit reports.
(b) Authority. A savings association
located in a state may charge interest at
E:\FR\FM\09AUR2.SGM
09AUR2
49042
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
the maximum rate permitted to any
state-chartered or licensed lending
institution by the law of that state. If
state law permits different interest
charges on specified classes of loans, a
Federal savings association making such
loans is subject only to the provisions of
state law relating to that class of loans
that are material to the determination of
the permitted interest. For example, a
Federal savings association may
lawfully charge the highest rate
permitted to be charged by a statelicensed small loan company, without
being so licensed, but subject to state
law limitations on the size of loans
made by small loan companies. State
supervisors determine the degree to
which state-chartered savings
associations must comply with state
laws other than those imposing
restrictions on interest, as defined in
paragraph (a) of this section.
(c) Effect on state definitions of
interest. The Federal definition of the
term ‘‘interest’’ in paragraph (a) of this
section does not change how interest is
defined by the individual states (nor
how the state definition of interest is
used) solely for purposes of state law.
For example, if late fees are not
‘‘interest’’ under state law where a
savings association is located but state
law permits its most favored lender to
charge late fees, then a savings
association located in that state may
charge late fees to its intrastate
customers. The savings association may
also charge late fees to its interstate
customers because the fees are interest
under the Federal definition of interest
and an allowable charge under state law
where the savings association is located.
However, the late fees would not be
treated as interest for purposes of
evaluating compliance with state usury
limitations because state law excludes
late fees when calculating the maximum
interest that lending institutions may
charge under those limitations.
sroberts on DSK5SPTVN1PROD with RULES
§ 160.120 Letters of credit and other
independent undertakings to pay against
documents.
(a) General authority. A Federal
savings association may issue and
commit to issue letters of credit within
the scope of applicable laws or rules of
practice recognized by law. It may also
issue other independent undertakings
within the scope of such laws or rules
of practice recognized by law, that have
been approved by the OCC (approved
undertaking).1 Under such letters of
1 Samples of laws or rules of practice applicable
to letters of credit and other independent
undertakings include, but are not limited to: the
applicable version of Article 5 of the Uniform
Commercial Code (UCC) (1962, as amended 1990)
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
credit and approved undertakings, the
savings association’s obligation to honor
depends upon the presentation of
specified documents and not upon
nondocumentary conditions or
resolution of questions of fact or law at
issue between the account party and the
beneficiary. A savings association may
also confirm or otherwise undertake to
honor or purchase specified documents
upon their presentation under another
person’s independent undertaking
within the scope of such laws or rules.
(b) Safety and soundness
considerations—(1) Terms. As a matter
of safe and sound banking practice,
Federal savings associations that issue
letters of credit or approved
undertakings should not be exposed to
undue risk. At a minimum, savings
associations should consider the
following:
(i) The independent character of the
letter of credit or approved undertaking
should be apparent from its terms (such
as terms that subject it to laws or rules
providing for its independent character);
(ii) The letter of credit or approved
undertaking should be limited in
amount;
(iii) The letter of credit or approved
undertaking should:
(A) Be limited in duration; or
(B) Permit the savings association to
terminate the letter of credit or
approved undertaking, either on a
periodic basis (consistent with the
savings association’s ability to make any
necessary credit assessments) or at will
upon either notice or payment to the
beneficiary; or
(C) Entitle the savings association to
cash collateral from the account party
on demand (with a right to accelerate
the customer’s obligations, as
appropriate); and
(iv) The savings association either
should be fully collateralized or have a
post-honor right of reimbursement from
its customer or from another issuer of a
letter of credit or an independent
undertaking. Alternatively, if the
savings association’s undertaking is to
purchase documents of title, securities,
or other valuable documents, it should
obtain a first priority right to realize on
or revised Article 5 of the UCC (as amended 1995)
(available from West Publishing Co.); the Uniform
Customs and Practice for Documentary Credits
(International Chamber of Commerce (ICC)
Publication No. 500) (available from ICC
Publishing, Inc.; the United Nations Convention on
Independent Guarantees and Standby Letters of
Credit (adopted by the U.N. General Assembly in
1995 and signed by the U.S. in 1997) (available
from the U.N. Commission on International Trade
Law); and the Uniform Rules for Bank-to-Bank
Reimbursements Under Documentary Credits (ICC
Publication No. 525) (available from ICC
Publishing, Inc.).
PO 00000
Frm 00094
Fmt 4701
Sfmt 4700
the documents if the savings association
is not otherwise to be reimbursed.
(2) Additional considerations in
special circumstances. Certain letters of
credit and approved undertakings
require particular protections against
credit, operational, and market risk:
(i) In the event that the undertaking is
to honor by delivery of an item of value
other than money, the savings
association should ensure that market
fluctuations that affect the value of the
item will not cause the savings
association to assume undue market
risk;
(ii) In the event that the undertaking
provides for automatic renewal, the
terms for renewal should allow the
savings association to make any
necessary credit assessment prior to
renewal;
(iii) In the event that a savings
association issues an undertaking for its
own account, the underlying transaction
for which it is issued must be within the
savings association’s authority and
comply with any safety and soundness
requirements applicable to that
transaction.
(3) Operational expertise. The savings
association should possess operational
expertise that is commensurate with the
sophistication of its letter of credit or
independent undertaking activities.
(4) Documentation. The savings
association must accurately reflect its
letters of credit or approved
undertakings in its records, including
any acceptance or deferred payment or
other absolute obligation arising out of
its contingent undertaking.
§ 160.121 Investment in state housing
corporations.
(a) Any Federal savings association to
the extent it has legal authority to do so,
may make investments in, commitments
to invest in, loans to, or commitments
to lend to any state housing corporation;
provided, that such obligations or loans
are secured directly, or indirectly
through a fiduciary, by a first lien on
improved real estate which is insured
under the National Housing Act, as
amended, and that in the event of
default, the holder of such obligations or
loans has the right directly, or indirectly
through a fiduciary, to subject to the
satisfaction of such obligations or loans
the real estate described in the first lien,
or the insurance proceeds.
(b) Any Federal savings association
that is adequately capitalized may, to
the extent it has legal authority to do so,
invest in obligations (including loans)
of, or issued by, any state housing
corporation incorporated in the state in
which such savings association has its
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
home or a branch office; provided
(except with respect to loans), that:
(1) The obligations are rated in one of
the four highest grades as shown by the
most recently published rating made of
such obligations by a nationally
recognized rating service; or
(2) The obligations, if not rated, are
approved by the OCC. The aggregate
outstanding direct investment in
obligations under paragraph (b) of this
section shall not exceed the amount of
the savings association’s total capital.
(c) Each state housing corporation in
which a savings association invests
under the authority of paragraph (b) of
this section shall agree, before accepting
any such investment (including any
loan or loan commitment), to make
available at any time to the OCC such
information as the OCC may consider to
be necessary to ensure that investments
are properly made under this section.
§ 160.130
fees.
Prohibition on loan procurement
If you are a director, officer, or other
natural person having the power to
direct the management or policies of a
Federal savings association, you must
not receive, directly or indirectly, any
commission, fee, or other compensation
in connection with the procurement of
any loan made by the savings
association or a subsidiary of the
savings association.
§ 160.160
Asset classification.
sroberts on DSK5SPTVN1PROD with RULES
(a)(1) Each savings association must
evaluate and classify its assets on a
regular basis in a manner consistent
with, or reconcilable to, the asset
classification system used by the OCC.
(2) In connection with the
examination of a savings association or
its affiliates, OCC examiners may
identify problem assets and classify
them, if appropriate. The association
must recognize such examiner
classifications in its subsequent reports
to the OCC.
(b) Based on the evaluation and
classification of its assets, each savings
association shall establish adequate
valuation allowances or charge-offs, as
appropriate, consistent with generally
accepted accounting principles and the
practices of the Federal banking
agencies.
§ 160.170 Records for lending
transactions.
In establishing and maintaining its
records pursuant to § 163.170 of this
chapter, each Federal savings
association and service corporation
should establish and maintain loan
documentation practices that:
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(a) Ensure that the institution can
make an informed lending decision and
can assess risk on an ongoing basis;
(b) Identify the purpose and all
sources of repayment for each loan, and
assess the ability of the borrower(s) and
any guarantor(s) to repay the
indebtedness in a timely manner;
(c) Ensure that any claims against a
borrower, guarantor, security holders,
and collateral are legally enforceable;
(d) Demonstrate appropriate
administration and monitoring of its
loans; and
(e) Take into account the size and
complexity of its loans.
§ 160.172
owned.
Re-evaluation of real estate
A Federal savings association shall
appraise each parcel of real estate
owned at the earlier of in-substance
foreclosure or at the time of the savings
association’s acquisition of such
property, and at such times thereafter as
dictated by prudent management policy;
such appraisals shall be consistent with
the requirements of part 164 of this
chapter. The Comptroller or his or her
designee may require subsequent
appraisals if, in his or her discretion,
such subsequent appraisal is necessary
under the particular circumstances. The
foregoing requirement shall not apply to
any parcel of real estate that is sold and
reacquired less than 12 months
subsequent to the most recent appraisal
made pursuant to this part. A dated,
signed copy of each report of appraisal
made pursuant to any provisions of this
part shall be retained in the savings
association’s records.
Subpart C—[Reserved]
§ 160.210
§ 160.220
[Reserved]
PART 161—DEFINITIONS FOR
REGULATIONS AFFECTING ALL
SAVINGS ASSOCIATIONS
Sec.
161.1 When do the definitions in this part
apply?
161.2 Account.
161.3 Accountholder.
161.4 Affiliate.
161.5 Affiliated person.
161.6 Audit period.
161.7 Appropriate Federal banking agency.
161.8 [Reserved]
161.9 Certificate account.
161.10 Comptroller
161.12 Consumer credit.
161.14 Controlling person.
161.15 Corporation.
161.16 Demand accounts.
161.18 Director.
161.19 Financial institution.
161.24 Immediate family.
PO 00000
Frm 00095
Fmt 4701
161.26 Land loan.
161.27 Low-rent housing.
161.28 Money Market Deposit Accounts.
161.29 Negotiable Order of Withdrawal
Accounts.
161.30 Nonresidential construction loan.
161.31 Nonwithdrawable account.
161.33 Note account.
161.34 OCC.
161.35 Officer.
161.37 Parent company; subsidiary.
161.38 Political subdivision.
161.39 Principal office.
161.40 Public unit.
161.41 [Reserved]
161.42 Savings account.
161.43 Savings association.
161.44 Security.
161.45 Service corporation.
161.50 State.
161.51 Subordinated debt security.
161.52 Tax and loan account.
161.53 United States Treasury General
Account.
161.54 United States Treasury Time Deposit
Open Account.
161.55 With recourse.
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 5412(b)(2)(B).
§ 161.1
apply?
Sfmt 4700
When do the definitions in this part
The definitions in this part and in 12
CFR part 141 apply throughout parts
100–199 of this chapter, unless another
definition is specifically provided.
§ 161.2
Account.
The term account means any savings
account, demand account, certificate
account, tax and loan account, note
account, United States Treasury general
account or United States Treasury time
deposit-open account, whether in the
form of a deposit or a share, held by an
accountholder in a savings association.
§ 161.3
[Reserved]
49043
Accountholder.
The term accountholder means the
holder of an account or accounts in a
savings association insured by the
Deposit Insurance Fund. The term does
not include the holder of any
subordinated debt security or any
mortgage-backed bond issued by the
savings association.
§ 161.4
Affiliate.
The term affiliate of a savings
association, unless otherwise defined,
means any corporation, business trust,
association, or other similar
organization:
(a) Of which a savings association,
directly or indirectly, owns or controls
either a majority of the voting shares or
more than 50 per centum of the number
of shares voted for the election of its
directors, trustees, or other persons
exercising similar functions at the
preceding election, or controls in any
manner the election of a majority of its
E:\FR\FM\09AUR2.SGM
09AUR2
49044
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
directors, trustees, or other persons
exercising similar functions; or
(b) Of which control is held, directly
or indirectly through stock ownership or
in any other manner, by the
shareholders of a savings association
who own or control either a majority of
the shares of such savings association or
more than 50 per centum of the number
of shares voted for the election of
directors of such savings association at
the preceding election, or by trustees for
the benefit of the shareholders of any
such savings association; or
(c) Of which a majority of its
directors, trustees, or other persons
exercising similar functions are
directors of any one savings association.
sroberts on DSK5SPTVN1PROD with RULES
§ 161.5
Affiliated person.
The term affiliated person of a savings
association means the following:
(a) A director, officer, or controlling
person of such association;
(b) A spouse of a director, officer, or
controlling person of such association;
(c) A member of the immediate family
of a director, officer, or controlling
person of such association, who has the
same home as such person or who is a
director or officer of any subsidiary of
such association or of any holding
company affiliate of such association;
(d) Any corporation or organization
(other than the savings association or a
corporation or organization through
which the savings association operates)
of which a director, officer or the
controlling person of such association:
(1) Is chief executive officer, chief
financial officer, or a person performing
similar functions;
(2) Is a general partner;
(3) Is a limited partner who, directly
or indirectly either alone or with his or
her spouse and the members of his or
her immediate family who are also
affiliated persons of the association,
owns an interest of 10 percent or more
in the partnership (based on the value
of his or her contribution) or who,
directly or indirectly with other
directors, officers, and controlling
persons of such association and their
spouses and their immediate family
members who are also affiliated persons
of the association, owns an interest of 25
percent or more in the partnership; or
(4) Directly or indirectly either alone
or with his or her spouse and the
members of his or her immediate family
who are also affiliated persons of the
association, owns or controls 10 percent
or more of any class of equity securities
or owns or controls, with other
directors, officers, and controlling
persons of such association and their
spouses and their immediate family
members who are also affiliated persons
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
of the association, 25 percent or more of
any class of equity securities; and
(5) Any trust or other estate in which
a director, officer, or controlling person
of such association or the spouse of
such person has a substantial beneficial
interest or as to which such person or
his or her spouse serves as trustee or in
a similar fiduciary capacity.
§ 161.6
Audit period.
The audit period of a savings
association means the twelve month
period (or other period in the case of a
change in audit period) covered by the
annual audit conducted to satisfy
§ 163.170 of this chapter.
§ 161.7 Appropriate Federal banking
agency.
The term appropriate Federal banking
agency means appropriate Federal
banking agency as that term is defined
in 12 U.S.C. 1813(q).
§ 161.8
[Reserved]
§ 161.9
Certificate account.
indirectly, or acting in concert with one
or more other persons or entities, owns,
controls, or holds with power to vote, or
holds proxies representing, ten percent
or more of the voting shares or rights of
such savings association; or controls in
any manner the election or appointment
of a majority of the directors of such
savings association. However, a director
of a savings association will not be
deemed to be a controlling person of
such savings association based upon his
or her voting, or acting in concert with
other directors in voting, proxies:
(a) Obtained in connection with an
annual solicitation of proxies, or
(b) Obtained from savings account
holders and borrowers if such proxies
are voted as directed by a majority vote
of the entire board of directors of such
association, or of a committee of such
directors if such committee’s
composition and authority are
controlled by a majority vote of the
entire board and if its authority is
revocable by such a majority.
The term certificate account means a
savings account evidenced by a
certificate that must be held for a fixed
or minimum term.
§ 161.15
§ 161.10
§ 161.16
Comptroller.
The term Comptroller means the
Comptroller of the Currency.
§ 161.12
Consumer credit.
The term consumer credit means
credit extended to a natural person for
personal, family, or household
purposes, including loans secured by
liens on real estate and chattel liens
secured by mobile homes and leases of
personal property to consumers that
may be considered the functional
equivalent of loans on personal security:
Provided, the savings association relies
substantially upon other factors, such as
the general credit standing of the
borrower, guaranties, or security other
than the real estate or mobile home, as
the primary security for the loan.
Appropriate evidence to demonstrate
justification for such reliance should be
retained in a savings association’s files.
Among the types of credit included
within this term are consumer loans;
educational loans; unsecured loans for
real property alteration, repair or
improvement, or for the equipping of
real property; loans in the nature of
overdraft protection; and credit
extended in connection with credit
cards.
§ 161.14
Controlling person.
The term controlling person of a
savings association means any person or
entity which, either directly or
PO 00000
Frm 00096
Fmt 4701
Sfmt 4700
Corporation.
The terms Corporation and FDIC
mean the Federal Deposit Insurance
Corporation.
Demand accounts.
The term demand accounts means
non-interest-bearing demand deposits
that are subject to check or to
withdrawal or transfer on negotiable or
transferable order to the savings
association and that are permitted to be
issued by statute, regulation, or
otherwise and are payable on demand.
§ 161.18
Director.
(a) The term director means any
director, trustee, or other person
performing similar functions with
respect to any organization whether
incorporated or unincorporated. Such
term does not include an advisory
director, honorary director, director
emeritus, or similar person, unless the
person is otherwise performing
functions similar to those of a director.
(b) [Reserved]
§ 161.19
Financial institution.
The term financial institution has the
same meaning as the term depository
institution set forth in 12 U.S.C.
1813(c)(1).
§ 161.24
Immediate family.
The term immediate family of any
natural person means the following
(whether by the full or half blood or by
adoption):
(a) Such person’s spouse, father,
mother, children, brothers, sisters, and
grandchildren;
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(b) The father, mother, brothers, and
sisters of such person’s spouse; and
(c) The spouse of a child, brother, or
sister of such person.
§ 161.26
Land loan.
The term land loan means a loan:
(a) Secured by real estate upon which
all facilities and improvements have
been completely installed, as required
by local regulations and practices, so
that it is entirely prepared for the
erection of structures;
(b) To finance the purchase of land
and the accomplishment of all
improvements required to convert it to
developed building lots; or
(c) Secured by land upon which there
is no structure.
§ 161.27
Low-rent housing.
The term low-rent housing means real
estate which is, or which is being
constructed, remodeled, rehabilitated,
modernized, or renovated to be, the
subject of an annual contributions
contract for low-rent housing under the
provisions of the United States Housing
Act of 1937, as amended.
sroberts on DSK5SPTVN1PROD with RULES
§ 161.28
Money Market Deposit Accounts.
(a) Money Market Deposit Accounts
(MMDAs) offered by Federal savings
associations in accordance with 12
U.S.C. 1464(b)(1) and by state-chartered
savings associations in accordance with
applicable state law are savings
accounts on which interest may be paid
if issued subject to the following
limitations:
(1) The savings association shall
reserve the right to require at least seven
days’ notice prior to withdrawal or
transfer of any funds in the account; and
(2)(i) The depositor is authorized by
the savings association to make no more
than six transfers per calendar month or
statement cycle (or similar period) of at
least four weeks by means of
preauthorized, automatic, telephonic, or
data transmission agreement, order, or
instruction to another account of the
depositor at the same savings
association to the savings association
itself, or to a third party.
(ii) Savings associations may permit
holders of MMDAs to make unlimited
transfers for the purpose of repaying
loans (except overdraft loans on the
depositor’s demand account) and
associated expenses at the same savings
association (as originator or servicer), to
make unlimited transfers of funds from
this account to another account of the
same depositor at the same savings
association or to make unlimited
payments directly to the depositor from
the account when such transfers or
payments are made by mail, messenger,
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
automated teller machine, or in person,
or when such payments are made by
telephone (via check mailed to the
depositor).
(3) In order to ensure that no more
than the number of transfers specified in
paragraph (a)(2)(i) of this section are
made, a savings association must either:
(i) Prevent transfers of funds in excess
of the limitations; or
(ii) Adopt procedures to monitor
those transfers on an after-the-fact basis
and contact customers who exceed the
limits on more than an occasional basis.
For customers who continue to violate
those limits after being contacted by the
depository savings association the
depository savings association must
either place funds in another account
that the depositor is eligible to maintain
or take away the account’s transfer and
draft capacities.
(iii) Insured savings association at
their option, may use on a consistent
basis either the date on a check or the
date it is paid in determining whether
the transfer limitations within the
specified interval are exceeded.
(b) Federal savings associations may
offer MMDAs to any depositor, and
state-chartered savings associations may
offer MMDAs to any depositor not
inconsistent with applicable state law.
§ 161.29 Negotiable Order of Withdrawal
Accounts.
(a) Negotiable Order of Withdrawal
(NOW) accounts are savings accounts
authorized by 12 U.S.C. 1832 on which
the savings association reserves the right
to require at least seven days’ notice
prior to withdrawal or transfer of any
funds in the account.
(b) For purposes of 12 U.S.C. 1832:
(1) An organization shall be deemed
‘‘operated primarily for religious,
philanthropic, charitable, educational,
or other similar purposes and * * * not
* * * for profit’’ if it is described in
sections 501(c)(3) through (13),
501(c)(19), or 528 of the Internal
Revenue Code; and
(2) The funds of a sole proprietorship
or unincorporated business owned by a
husband and wife shall be deemed
beneficially owned by ‘‘one or more
individuals.’’
§ 161.30
Nonresidential construction loan.
The term nonresidential construction
loan means a loan for construction of
other than one or more dwelling units.
§ 161.31
Nonwithdrawable account.
The term nonwithdrawable account
means an account which by the terms of
the contract of the accountholder with
the savings association or by provisions
of state law cannot be paid to the
PO 00000
Frm 00097
Fmt 4701
Sfmt 4700
49045
accountholder until all liabilities,
including other classes of share liability
of the savings association have been
fully liquidated and paid upon the
winding up of the savings association is
referred to as a nonwithdrawable
account.
§ 161.33
Note account.
The term note account means a note,
subject to the right of immediate call,
evidencing funds held by depositories
electing the note option under
applicable United States Treasury
Department regulations. Note accounts
are not savings accounts or savings
deposits.
§ 161.34
OCC.
The term OCC means Office of the
Comptroller of the Currency.
§ 161.35
Officer.
The term Officer means the president,
any vice-president (but not an assistant
vice-president, second vice-president, or
other vice president having authority
similar to an assistant or second vicepresident), the secretary, the treasurer,
the comptroller, and any other person
performing similar functions with
respect to any organization whether
incorporated or unincorporated. The
term officer also includes the chairman
of the board of directors if the chairman
is authorized by the charter or by-laws
of the organization to participate in its
operating management or if the
chairman in fact participates in such
management.
§ 161.37
Parent company; subsidiary.
The term parent company means any
company which directly or indirectly
controls any other company or
companies. The term subsidiary means
any company which is owned or
controlled directly or indirectly by a
person, and includes any service
corporation owned in whole or in part
by a savings association, or a subsidiary
of such service corporation.
§ 161.38
Political subdivision.
The term political subdivision
includes any subdivision of a public
unit, any principal department of such
public unit:
(a) The creation of which subdivision
or department has been expressly
authorized by state statute,
(b) To which some functions of
government have been delegated by
state statute, and
(c) To which funds have been
allocated by statute or ordinance for its
exclusive use and control. It also
includes drainage, irrigation, navigation,
improvement, levee, sanitary, school or
power districts and bridge or port
E:\FR\FM\09AUR2.SGM
09AUR2
49046
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
authorities and other special districts
created by state statute or compacts
between the states. Excluded from the
term are subordinate or nonautonomous
divisions, agencies or boards within
principal departments.
§ 161.39
Principal office.
The term principal office means the
home office of a savings association
established as such in conformity with
the laws under which the savings
association is organized.
§ 161.40
Public unit.
The term public unit means the
United States, any state of the United
States, the District of Columbia, any
territory of the United States, Puerto
Rico, the Virgin Islands, any county, any
municipality or any political
subdivision thereof.
§ 161.41
Savings account.
The term savings account means any
withdrawable account, except a demand
account as defined in § 161.16 of this
chapter, a tax and loan account, a note
account, a United States Treasury
general account, or a United States
Treasury time deposit-open account.
§ 161.43
Savings association.
The term savings association means a
savings association as defined in section
3 of the Federal Deposit Insurance Act,
the deposits of which are insured by the
Corporation. It includes a Federal
savings association or Federal savings
bank, chartered under section 5 of the
Act, or a building and loan, savings and
loan, or homestead association, or a
cooperative bank (other than a
cooperative bank which is a state bank
as defined in section 3(a)(2) of the
Federal Deposit Insurance Act)
organized and operating according to
the laws of the state in which it is
chartered or organized, or a corporation
(other than a bank as defined in section
3(a)(1) of the Federal Deposit Insurance
Act) that the Board of Directors of the
Federal Deposit Insurance Corporation
and the Comptroller jointly determine to
be operating substantially in the same
manner as a savings association.
sroberts on DSK5SPTVN1PROD with RULES
§ 161.44
Security.
The term security means any nonwithdrawable account, note, stock,
treasury stock, bond, debenture,
evidence of indebtedness, certificate of
interest or participation in any profitsharing agreement, collateral-trust
certificate, preorganization certificate or
subscription, transferable share,
investment contract, voting-trust
certificate, or, in general, any interest or
VerDate Mar<15>2010
20:33 Aug 08, 2011
§ 161.45
Jkt 223001
Service corporation.
The term service corporation means
any corporation, the majority of the
capital stock of which is owned by one
or more savings associations and which
engages, directly or indirectly, in any
activities similar to activities which may
be engaged in by a service corporation
in which a Federal savings association
may invest under part 159 of this
chapter.
§ 161.50
[Reserved]
§ 161.42
instrument commonly known as a
security, or any certificate of interest or
participation in, temporary or interim
certificate for, receipt for, guarantee of,
or warrant or right to subscribe to or
purchase, any of the foregoing, except
that a security shall not include an
account or deposit insured by the
Federal Deposit Insurance Corporation.
State.
The term state means a state, the
District of Columbia, Guam, Puerto
Rico, and the Virgin Islands of the
United States.
§ 161.51
Subordinated debt security.
The term subordinated debt security
means any unsecured note, debenture,
or other debt security issued by a
savings association and subordinated on
liquidation to all claims having the
same priority as account holders or any
higher priority.
§ 161.52
Tax and loan account.
The term tax and loan account means
an account, the balance of which is
subject to the right of immediate
withdrawal, established for receipt of
payments of Federal taxes and certain
United States obligations. Such
accounts are not savings accounts or
savings deposits.
§ 161.53 United States Treasury General
Account.
The term United States Treasury
General Account means an account
maintained in the name of the United
States Treasury the balance of which is
subject to the right of immediate
withdrawal, except in the case of the
closure of the member, and in which a
zero balance may be maintained. Such
accounts are not savings accounts or
savings deposits.
may require. Such accounts are not
savings accounts or savings deposits.
§ 161.55
With recourse.
(a) The term with recourse means, in
connection with the sale of a loan or a
participation interest in a loan, an
agreement or arrangement under which
the purchaser is to be entitled to receive
from the seller a sum of money or thing
of value, whether tangible or intangible
(including any substitution), upon
default in payment of any loan involved
or any part thereof or to withhold or to
have withheld from the seller a sum of
money or anything of value by way of
security against default. The recourse
liability resulting from a sale with
recourse shall be the total book value of
any loan sold with recourse less:
(1) The amount of any insurance or
guarantee against loss in the event of
default provided by a third party,
(2) The amount of any loss to be borne
by the purchaser in the event of default,
and
(3) The amount of any loss resulting
from a recourse obligation entered on
the books and records of the savings
association.
(b) The term with recourse does not
include loans or interests therein where
the agreement of sale provides for the
savings association directly or
indirectly:
(1) To hold or retain a subordinate
interest in a specified percentage of the
loans or interests; or
(2) To guarantee against loss up to a
specified percentage of the loans or
interests, which specified percentage
shall not exceed ten percent of the
outstanding balance of the loans or
interests at the time of sale: Provided,
That the savings association designates
adequate reserves for the subordinate
interest or guarantee.
(c) This definition does not apply for
purposes of determining the capital
adequacy requirements under part 167
of this chapter.
PART 162—REGULATORY
REPORTING STANDARDS
Sec.
162.1
162.2
162.4
Regulatory reporting requirements.
Regulatory reports.
Audit of Federal savings associations.
Authority: 12 U.S.C. 1463, 5412(b)(2)(B).
§ 161.54 United States Treasury Time
Deposit Open Account.
§ 162.1
The term United States Treasury Time
Deposit Open Account means a noninterest-bearing account maintained in
the name of the United States Treasury
which may not be withdrawn prior to
the expiration of 30 days’ written notice
from the United States Treasury, or such
other period of notice as the Treasury
(a) Authority and scope. This part is
issued by the Office of the Comptroller
of the Currency (OCC) pursuant to
section 4(b) and 4(c) of the Home
Owners’ Loan Act (HOLA) (12 U.S.C.
1463(b) and 1463(c)). It applies to all
Federal savings associations regulated
by the OCC.
PO 00000
Frm 00098
Fmt 4701
Sfmt 4700
E:\FR\FM\09AUR2.SGM
Regulatory reporting requirements.
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(b) Records and reports—general—(1)
Records. Each savings association and
its affiliates shall maintain accurate and
complete records of all business
transactions. Such records shall support
and be readily reconcilable to any
regulatory reports submitted to the OCC
and financial reports prepared in
accordance with GAAP. The records
shall be maintained in the United States
and be readily accessible for
examination and other supervisory
purposes within 5 business days upon
request by the OCC, at a location
acceptable to the OCC.
(2) Reports. For purposes of
examination by and regulatory reports
to the OCC and compliance with this
chapter, all savings associations shall
use such forms and follow such
regulatory reporting requirements as the
OCC may require by regulation or
otherwise.
sroberts on DSK5SPTVN1PROD with RULES
§ 162.2
Regulatory reports.
(a) Definition and scope. This section
applies to all regulatory reports, as
defined herein. A regulatory report is
any report that the OCC prepares, or is
submitted to, or is used by the OCC, to
determine compliance with its rules and
regulations, and to evaluate the safe and
sound condition and operation of
savings associations. The Report of
Examination is an example of a
regulatory report. Regulatory reports are
regulatory documents, not accounting
documents.
(b) Regulatory reporting
requirements—(1) General. The
instructions to regulatory reports are
referred to as ‘‘regulatory reporting
requirements.’’ Regulatory reporting
requirements include, but are not
limited to, guidance contained in OCC
regulations, bulletins, and examination
handbooks; and safe and sound
practices. Regulatory reporting
requirements are not limited to the
minimum requirements under generally
accepted accounting principles (GAAP)
because of the special supervisory,
regulatory, and economic policy needs
served by such reports. Regulatory
reporting by savings associations that
purports to comply with GAAP shall
incorporate the GAAP that best reflects
the underlying economic substance of
the transaction at issue. Regulatory
reporting requirements shall, at a
minimum:
(i) Incorporate GAAP whenever GAAP
is the referenced accounting instruction
for regulatory reports to the Federal
banking agencies;
(ii) Incorporate safe and sound
practices contained in OCC regulations,
bulletins, examination handbooks and
instructions to regulatory reports. Such
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
safety and soundness requirements shall
be no less stringent than those applied
by the Comptroller of the Currency for
national banks; and
(iii) Incorporate additional safety and
soundness requirements more stringent
than GAAP, as the Comptroller may
prescribe.
(2) Exceptions. Regulatory reporting
requirements that are not consistent
with GAAP, if any, are not required to
be reflected in audited financial
statements, including financial
statements contained in securities
filings submitted to the OCC pursuant to
the Securities and Exchange Act of 1934
or parts 192, 194, or 197 of this chapter.
(3) Compliance. When the OCC
determines that a savings association’s
regulatory reports did not conform to
regulatory reporting requirements in
previous reporting periods, the
association shall correct its regulatory
reports in accordance with the
directions of the OCC.
§ 162.4
Audit of savings associations.
(a) General. The OCC may require, at
any time, an independent audit of the
financial statements of, or the
application of procedures agreed upon
by the OCC to a savings association or
affiliate (as defined by 12 CFR 563.41,
or upon issuance of superseding
regulations by the Board of Governors of
the Federal Reserve System, such
superseding regulations) by qualified
independent public accountants when
needed for any safety and soundness
reason identified by the OCC.
(b) Audits required for safety and
soundness purposes. The OCC requires
an independent audit for safety and
soundness purposes if a savings
association has received a composite
rating of 3, 4 or 5, as defined at
§ 116.5(c) of this chapter.
(c) Procedures. (1) When the OCC
requires an independent audit because
such an audit is needed for safety and
soundness purposes, the Comptroller
shall determine whether the audit was
conducted and filed in a manner
satisfactory to the OCC.
(2) The Comptroller may waive the
independent audit requirement
described at paragraph (b)(1) of this
section, if the Comptroller determines
that an audit would not provide further
information on safety and soundness
issues relevant to the examination
rating.
(3) When the OCC requires the
application of procedures agreed upon
for safety and soundness purposes, the
Comptroller shall identify the
procedures to be performed. The
Comptroller shall also determine
whether the agreed upon procedures
PO 00000
Frm 00099
Fmt 4701
Sfmt 4700
49047
were conducted and filed in a manner
satisfactory to the OCC.
(d) Qualifications for independent
public accountants. The audit shall be
conducted by an independent public
accountant who:
(1) Is registered or licensed to practice
as a public accountant, and is in good
standing, under the laws of the state or
other political subdivision of the United
States in which the savings association’s
or holding company’s principal office is
located;
(2) Agrees in the engagement letter to
provide the OCC with access to and
copies of any work papers, policies, and
procedures relating to the services
performed;
(3)(i) Is in compliance with the
American Institute of Certified Public
Accountants’ (AICPA) Code of
Professional Conduct; and
(ii) Meets the independence
requirements and interpretations of the
Securities and Exchange Commission
and its staff; and
(4) Has received, or is enrolled in, a
peer review program that meets
guidelines acceptable to the OCC.
(e) Voluntary audits. When a savings
association or affiliate (as defined by 12
CFR 563.41, or upon issuance of
superseding regulations by the Board of
Governors of the Federal Reserve
System, such superseding regulations)
obtains an independent audit
voluntarily, it must be performed by an
independent public accountant who
satisfies the requirements of paragraphs
(d)(1), (d)(2), and (d)(3)(i) of this section.
PART 163—SAVINGS
ASSOCIATIONS—OPERATIONS
Subpart A—Accounts
Sec.
163.1 Chartering documents.
163.4 [Reserved]
163.5 Securities: Statement of noninsurance.
Subpart B—Operation and Structure
163.22 Merger, consolidation, purchase or
sale of assets, or assumption of
liabilities.
163.27 Advertising.
163.33 Directors, officers, and employees.
163.36 Tying restriction exception.
163.39 Employment contracts.
163.41 Transactions with affiliates.
163.43 Loans by savings associations to
their executive officers, directors and
principal shareholders.
163.47 Pension plans.
Subpart C—Securities and Borrowings
163.74 Mutual capital certificates.
163.76 Offers and sales of securities at an
office of a Federal savings association.
163.80 Borrowing limitations.
E:\FR\FM\09AUR2.SGM
09AUR2
49048
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
163.81 Inclusion of subordinated debt
securities and mandatorily redeemable
preferred stock as supplementary capital.
Subpart D—[Reserved]
Subpart E—Capital Distributions
163.140 What does this subpart cover?
163.141 What is a capital distribution?
163.142 What other definitions apply to
this subpart?
163.143 Must I file with the OCC?
163.144 How do I file with the OCC?
163.145 May I combine my notice or
application with other notices or
applications?
163.146 Will the OCC permit my capital
distribution?
§ 163.4
163.161 Management and financial policies.
163.170 Examinations and audits;
appraisals; establishment and
maintenance of records.
163.171 [Reserved]
163.172 Financial derivatives.
163.176 Interest-rate-risk-management
procedures.
163.177 Procedures for monitoring Bank
Secrecy Act (BSA) compliance.
Subpart G—Reporting and Bonding
163.180 Suspicious Activity Reports and
other reports and statements.
163.190 Bonds for directors, officers,
employees, and agents; form of and
amount of bonds.
163.191 Bonds for agents.
163.200 Conflicts of interest.
163.201 Corporate opportunity.
Subpart H—Notice of Change of Director or
Senior Executive Officer
163.550 What does this subpart do?
163.555 What definitions apply to this
subpart?
163.560 Who must give prior notice?
163.565 What procedures govern the filing
of my notice?
163.570 What information must I include in
my notice?
163.575 What procedures govern OCC
review of my notice for completeness?
163.580 What standards and procedures
will govern OCC review of the substance
of my notice?
163.585 When may a proposed director or
senior executive officer begin service?
163.590 When will the OCC waive the prior
notice requirement?
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 1817, 1820, 1828, 1831o, 3806,
5101 et seq., 5412(b)(2)(B); 31 U.S.C. 5318; 42
U.S.C. 4106.
sroberts on DSK5SPTVN1PROD with RULES
Subpart A—Accounts
Chartering documents.
(a) Submission for approval. Any de
novo Federal savings association prior
to commencing operations shall file its
charter and bylaws with the OCC for
approval, together with a certification
that such charter and bylaws are
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
[Reserved]
§ 163.5 Securities: Statement of noninsurance.
Subpart F—Financial Management Policies
§ 163.1
permissible under all applicable laws,
rules and regulations.
(b) Availability of chartering
documents. Each Federal savings
association shall cause a true copy of its
charter and bylaws and all amendments
thereto to be available to accountholders
at all times in each office of the savings
association, and shall upon request
deliver to any accountholders a copy of
such charter and bylaws or amendments
thereto.
Every security issued by a Federal
savings association must include in its
provisions a clear statement that the
security is not insured by the Federal
Deposit Insurance Corporation.
Subpart B—Operation and Structure
§ 163.22 Merger, consolidation, purchase
or sale of assets, or assumption of
liabilities.
(a) No Federal savings association
may, without application to and
approval by the OCC:
(1) Combine with any insured
depository institution, if the acquiring
or resulting institution is to be a Federal
savings association; or
(2) Assume liability to pay any
deposit made in, any insured depository
institution.
(b)(1) No Federal savings association
may, without notifying the OCC, as
provided in paragraph (h)(1) of this
section:
(i) Combine with another insured
depository institution where a Federal
savings association is not the resulting
institution; or
(ii) In the case of a savings association
that meets the conditions for expedited
treatment under § 116.5 of this chapter,
convert, directly or indirectly, to a
national or state bank.
(2) A Federal savings association that
does not meet the conditions for
expedited treatment under § 116.5 of
this chapter may not, directly or
indirectly, convert to a national or state
bank without prior application to and
approval of the OCC, as provided in
paragraph (h)(2)(ii) of this section.
(c) No Federal savings association
may make any transfer (excluding
transfers subject to paragraphs (a) or (b)
of this section) without notice or
application to the OCC, as provided in
paragraph (h)(2) of this section. For
purposes of this paragraph, the term
‘‘transfer’’ means purchases or sales of
assets or liabilities in bulk not made in
the ordinary course of business
including, but not limited to, transfers
PO 00000
Frm 00100
Fmt 4701
Sfmt 4700
of assets or savings account liabilities,
purchases of assets, and assumptions of
deposit accounts or other liabilities, and
combinations with a depository
institution other than an insured
depository institution.
(d)(1) In determining whether to
confer approval for a transaction under
paragraphs (a), (b)(2), or (c) of this
section, the OCC shall take into account
the following:
(i) The capital level of any resulting
Federal savings association;
(ii) The financial and managerial
resources of the constituent institutions;
(iii) The future prospects of the
constituent institutions;
(iv) The convenience and needs of the
communities to be served;
(v) The conformity of the transaction
to applicable law, regulation, and
supervisory policies;
(vi) Factors relating to the fairness of
and disclosure concerning the
transaction, including, but not limited
to:
(A) Equitable treatment. The
transaction should be equitable to all
concerned—savings account holders,
borrowers, creditors and stockholders (if
any) of each Federal savings
association—giving proper recognition
of and protection to their respective
legal rights and interests. The
transaction will be closely reviewed for
fairness where the transaction does not
appear to be the result of arms’ length
bargaining or, in the case of a stock
savings association, where controlling
stockholders are receiving different
consideration from other stockholders.
No finder’s or similar fee should be paid
to any officer, director, or controlling
person of a Federal savings association
which is a party to the transaction.
(B) Full disclosure. The filing should
make full disclosure of all written or
oral agreements or understandings by
which any person or company will
receive, directly or indirectly, any
money, property, service, release of
pledges made, or other thing of value,
whether tangible or intangible, in
connection with the transaction.
(C) Compensation to officers.
Compensation, including deferred
compensation, to officers, directors and
controlling persons of the disappearing
Federal savings association by the
resulting institution or an affiliate
thereof should not be in excess of a
reasonable amount, and should be
commensurate with their duties and
responsibilities. The filing should fully
justify the compensation to be paid to
such persons. The transaction will be
particularly scrutinized where any of
such persons is to receive a material
increase in compensation above that
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
paid by the disappearing savings
association prior to the commencement
of negotiations regarding the proposed
transaction. An increase in
compensation in excess of the greater of
15% or $10,000 gives rise to
presumptions of unreasonableness and
sale of control. In the case of such an
increase, evidence sufficient to rebut
such presumptions should be
submitted.
(D) Advisory boards. Advisory board
members should be elected for a term
not exceeding one year. No advisory
board fees should be paid to salaried
officers or employees of the resulting
Federal savings association. The filing
should describe and justify the duties
and responsibilities and any
compensation paid to any advisory
board of the resulting Federal savings
association that consists of officers,
directors or controlling persons of the
disappearing institution, particularly if
the disappearing institution experienced
significant supervisory problems prior
to the transaction. No advisory board
fees should exceed the director fees paid
by the resulting savings association.
Advisory board fees that are in excess of
115 percent of the director fees paid by
the disappearing Federal savings
association prior to commencement of
negotiations regarding the transaction
give rise to presumptions of
unreasonableness and sale of control
unless sufficient evidence to rebut such
presumptions is submitted. Rebuttal
evidence is not required if:
(1) The advisory board fees do not
exceed the fee that advisory board
members of the resulting institution
receive for each monthly meeting
attended or $150, whichever is greater;
or
(2) The advisory board fees do not
exceed $100 per meeting attended for
disappearing Federal savings
associations with assets greater than
$10,000,000 or $50 per meeting
attended for disappearing Federal
savings associations with assets of
$10,000,000 or less, based on a schedule
of 12 meetings per year.
(E) The accounting and tax treatment
of the transaction; and
(F) Fees paid and professional
services rendered in connection with
the transaction.
(2) In conferring approval of a
transaction under paragraph (a) of this
section, the OCC also will consider the
competitive impact of the transaction,
including whether:
(i) The transaction would result in a
monopoly, or would be in furtherance of
any monopoly or conspiracy to
monopolize or to attempt to monopolize
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
the savings association business in any
part of the United States; or
(ii) The effect of the transaction on
any section of the country may be
substantially to lessen competition, or
tend to create a monopoly, or in any
other manner would be in restraint of
trade, unless the OCC finds that the
anticompetitive effects of the proposed
transaction are clearly outweighed in
the public interest by the probable effect
of the transaction in meeting the
convenience and needs of the
communities to be served.
(3) Applications and notices filed
under this section shall be upon forms
prescribed by the OCC.
(4) Applications filed under
paragraph (a) of this section must be
processed in accordance with the time
frames set forth in §§ 116.210 through
116.290 of this chapter, provided that
the period for review may be extended
only if the OCC determines that the
applicant has failed to furnish all
requested information or that the
information submitted is substantially
inaccurate, in which case the review
period may be extended for up to 30
days.
(e)(1) The following procedures apply
to applications described in paragraph
(a) of this section, unless the OCC finds
that it must act immediately to prevent
the probable default of one of the
depository institutions involved:
(i) The applicant must publish a
public notice of the application in
accordance with the procedures in
subpart B of part 116 of this chapter. In
addition to the initial publication, the
applicant must also publish on a weekly
basis during the public comment period.
(ii) Commenters may submit
comments on an application in
accordance with the procedures in
subpart C of part 116 of this chapter.
The public comment period is 30
calendar days after the date of
publication of the initial public notice.
However, if the OCC has advised the
Attorney General that an emergency
exists requiring expeditious action, the
public comment period is 10 calendar
days after the date of publication of the
initial public notice.
(iii) The OCC may arrange a meeting
in accordance with the procedures in
subpart D of part 116 of this chapter.
(iv) The OCC will request the
Attorney General to provide reports on
the competitive impacts involved in the
transaction.
(v) The OCC will immediately notify
the Attorney General of the approval of
the transaction. The applicant may not
consummate the transaction before the
date established under 12 U.S.C.
1828(c)(6).
PO 00000
Frm 00101
Fmt 4701
Sfmt 4700
49049
(2) For applications described in
§ 163.22, certain savings associations
described below must provide affected
accountholders with a notice of a
proposed account transfer and an option
of retaining the account in the
transferring Federal savings association.
The notice must allow affected
accountholders at least 30 days to
consider whether to retain their
accounts in the transferring Federal
savings association. The following
savings associations must provide the
notices:
(i) A Federal savings association
transferring account liabilities to an
institution the accounts of which are not
insured by the Deposit Insurance Fund
or the National Credit Union Share
Insurance Fund; and
(ii) Any mutual Federal savings
association transferring account
liabilities to a stock form depository
institution.
(f) Automatic approvals by the OCC.
Applications filed pursuant to
paragraph (a) of this section shall be
deemed to be approved automatically by
the OCC 30 calendar days after the OCC
sends written notice to the applicant
that the application is complete, unless:
(1) The acquiring Federal savings
association does not meet the criteria for
expedited treatment under § 116.5 of
this chapter;
(2) The OCC recommends the
imposition of non-standard conditions
prior to approving the application;
(3) The OCC suspends the applicable
processing time frames under § 116.190
of this chapter;
(4) The OCC raises objections to the
transaction;
(5) The resulting Federal savings
association would be one of the 3 largest
depository institutions competing in the
relevant geographic area where before
the transaction there were 5 or fewer
depository institutions, the resulting
savings association would have 25
percent or more of the total deposits
held by depository institutions in the
relevant geographic area, and the share
of total deposits would have increased
by 5 percent or more;
(6) The resulting Federal savings
association would be one of the 2 largest
depository institutions competing in the
relevant geographic area where before
the transaction there were 6 to 11
depository institutions, the resulting
savings association would have 30
percent or more of the total deposits
held by depositing institutions in the
relevant geographic area, and the share
of total deposits would have increased
by 10 percent or more;
(7) The resulting Federal savings
association would be one of the 2 largest
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49050
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
depository institutions competing in the
relevant geographic area where before
the transaction there were 12 or more
depository institutions, the resulting
savings association would have 35
percent or more of the total deposits
held by the depository institutions in
the relevant geographic area, and the
share of total deposits would have
increased by 15 percent or more;
(8) The Herfindahl-Hirschman Index
(HHI) in the relevant geographic area
was more than 1800 before the
transaction, and the increase in the HHI
caused by the transaction would be 50
or more;
(9) In a transaction involving potential
competition, the OCC determines that
the acquiring Federal savings
association is one of three or fewer
potential entrants into the relevant
geographic area;
(10) The acquiring Federal savings
association has assets of $1 billion or
more and proposes to acquire assets of
$1 billion or more;
(11) The Federal savings association
that will be the resulting savings
association in the transaction has a
composite Community Reinvestment
Act rating of less than satisfactory and
the deficiencies have not been resolved
to the satisfaction of the OCC;
(12) The transaction involves any
supervisory or assistance agreement
with the OCC, Office of Thrift
Supervision, the Resolution Trust
Corporation, or the Federal Deposit
Insurance Corporation;
(13) The transaction is part of a
conversion under part 192 of this
chapter;
(14) The transaction raises a
significant issue of law or policy; or
(15) The transaction is opposed by
any constituent institution or contested
by a competing acquiror.
(g) Definitions. (1) The terms used in
this section shall have the same
meaning as set forth in § 152.13(b) of
this chapter.
(2) Insured depository institution.
Insured depository institution has the
same meaning as defined in section
3(c)(2) of the Federal Deposit Insurance
Act.
(3) With regard to paragraph (f) of this
section, the term relevant geographic
area is used as a substitute for relevant
geographic market, which means the
area within which the competitive
effects of a merger or other combination
may be evaluated. The relevant
geographic area shall be delineated as a
county or similar political subdivision,
an area smaller than a county, or an
aggregation of counties within which
the merging or combining insured
depository institutions compete. In
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
addition, the OCC may consider
commuting patterns, newspaper and
other advertising activities, or other
factors as the OCC deems relevant.
(h) Special requirements and
procedures for transactions under
paragraphs (b) and (c) of this section—
(1) Certain transactions with no
surviving Federal savings association. (i)
The OCC must be notified of any
transaction under paragraph (b)(1) of
this section. Such notification must be
submitted to the OCC at least 30 days
prior to the effective date of the
transaction, but not later than the date
on which an application relating to the
proposed transaction is filed with the
primary regulator of the resulting
institution; the OCC may, upon request
or on its own initiative, shorten the 30day prior notification requirement.
Notifications under this paragraph must
demonstrate compliance with
applicable stockholder or accountholder
approval requirements. Where the
Federal savings association submitting
the notification maintains a liquidation
account established pursuant to part 192
of this chapter, the notification must
state that the resulting institution will
assume such liquidation account.
(ii) The notification may be in the
form of either a letter describing the
material features of the transaction or a
copy of a filing made with another
Federal or state regulatory agency
seeking approval from that agency for
the transaction under the Bank Merger
Act or other applicable statute. If the
action contemplated by the notification
is not completed within one year after
the OCC’s receipt of the notification, a
new notification must be submitted to
the OCC.
(2) Other transfer transactions—(i)
Expedited treatment. A notice in
conformity with § 116.25(a) of this
chapter may be submitted to the OCC
under § 116.40 of this chapter for any
transaction under paragraph (c) of this
section, provided all constituent Federal
savings associations meet the conditions
for expedited treatment under § 116.5 of
this chapter. Notices submitted under
this paragraph must be deemed
approved automatically by the OCC 30
days after receipt, unless the OCC
advises the applicant in writing prior to
the expiration of such period that the
proposed transaction may not be
consummated without the OCC’s
approval of an application under
paragraphs (h)(2)(ii) or (h)(2)(iii) of this
section.
(ii) Standard treatment. An
application in conformity with
§ 116.25(b) of this chapter and
paragraph (d) of this section must be
submitted to the OCC under § 116.40 by
PO 00000
Frm 00102
Fmt 4701
Sfmt 4700
each Federal savings association
participating in a transaction under
paragraph (b)(2) or (c) of this section,
where any constituent savings
association does not meet the conditions
for expedited treatment under § 116.5 of
this chapter. Applications under this
paragraph must be processed in
accordance with the procedures in part
116, subparts A and E of this chapter.
§ 163.27
Advertising.
No Federal savings association shall
use advertising (which includes print or
broadcast media, displays or signs,
stationery, and all other promotional
materials), or make any representation
which is inaccurate in any particular or
which in any way misrepresents its
services, contracts, investments, or
financial condition.
§ 163.33 Directors, officers, and
employees.
(a) Directors—(1) Requirements. The
composition of the board of directors of
a Federal savings association must be in
accordance with the following
requirements:
(i) A majority of the directors must
not be salaried officers or employees of
the savings association or of any
subsidiary thereof.
(ii) Not more than two of the directors
may be members of the same immediate
family.
(iii) Not more than one director may
be an attorney with a particular law
firm.
(2) Prospective application. In the
case of an association whose board of
directors does not conform with any
requirement set forth in paragraph (a)(1)
of this section as of October 5, 1983, this
paragraph (a) shall not prohibit the
uninterrupted service, including reelection and re-appointment, of any
person serving on the board of directors
at that date.
(b) [Reserved]
§ 163.36
Tying restriction exception.
For applicable rules, see regulations
of the Board of Governors of the Federal
Reserve System.
§ 163.39
Employment contracts.
(a) General. A Federal savings
association may enter into an
employment contract with its officers
and other employees only in accordance
with the requirements of this section.
All employment contracts shall be in
writing and shall be approved
specifically by an association’s board of
directors. An association shall not enter
into an employment contract with any
of its officers or other employees if such
contract would constitute an unsafe or
unsound practice. The making of such
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
an employment contract would be an
unsafe or unsound practice if such
contract could lead to material financial
loss or damage to the association or
could interfere materially with the
exercise by the members of its board of
directors of their duty or discretion
provided by law, charter, bylaw or
regulation as to the employment or
termination of employment of an officer
or employee of the association. This
may occur, depending upon the
circumstances of the case, where an
employment contract provides for an
excessive term.
(b) Required provisions. Each
employment contract shall provide that:
(1) The Federal savings association’s
board of directors may terminate the
officer or employee’s employment at
any time, but any termination by the
association’s board of directors other
than termination for cause, shall not
prejudice the officer or employee’s right
to compensation or other benefits under
the contract. The officer or employee
shall have no right to receive
compensation or other benefits for any
period after termination for cause.
Termination for cause shall include
termination because of the officer or
employee’s personal dishonesty,
incompetence, willful misconduct,
breach of fiduciary duty involving
personal profit, intentional failure to
perform stated duties, willful violation
of any law, rule, or regulation (other
than traffic violations or similar
offenses) or final cease-and-desist order,
or material breach of any provision of
the contract.
(2) If the officer or employee is
suspended and/or temporarily
prohibited from participating in the
conduct of the association’s affairs by a
notice served under section 8(e)(3) or
(g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. 1818(e)(3) and (g)(1)), the
association’s obligations under the
contract shall be suspended as of the
date of service unless stayed by
appropriate proceedings. If the charges
in the notice are dismissed, the
association may in its discretion (i) pay
the officer or employee all or part of the
compensation withheld while its
contract obligations were suspended,
and (ii) reinstate (in whole or in part)
any of its obligations which were
suspended.
(3) If the officer or employee is
removed and/or permanently prohibited
from participating in the conduct of the
association’s affairs by an order issued
under section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act (12
U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the association under the
contract shall terminate as of the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
effective date of the order, but vested
rights of the contracting parties shall not
be affected.
(4) If the savings association is in
default (as defined in section 3(x)(1) of
the Federal Deposit Insurance Act), all
obligations under the contract shall
terminate as of the date of default, but
this paragraph (b)(4) shall not affect any
vested rights of the contracting parties:
Provided, that this paragraph (b)(4) need
not be included in an employment
contract if prior written approval is
secured from the Comptroller or his or
her designee.
(5) All obligations under the contract
shall be terminated, except to the extent
determined that continuation of the
contract is necessary for the continued
operation of the association;
(i) By the Comptroller, or his or her
designee, at the time the Federal Deposit
Insurance Corporation enters into an
agreement to provide assistance to or on
behalf of the association under the
authority contained in 13(c) of the
Federal Deposit Insurance Act; or
(ii)(A) By the Comptroller or his or
her designee, at the time the
Comptroller, or his or her designee
approves a supervisory merger to
resolve problems related to operation of
the association or when the association
is determined by the Comptroller to be
in an unsafe or unsound condition.
(B) Any rights of the parties that have
already vested, however, shall not be
affected by such action.
§ 163.41
Transactions with affiliates.
For applicable rules, see regulations
of the Board of Governors of the Federal
Reserve System.
§ 163.43 Loans by savings associations to
their executive officers, directors and
principal shareholders.
For applicable rules, see Regulation O
of the Board of Governors of the Federal
Reserve System.
§ 163.47
Pension plans.
(a) General. No Federal savings
association or service corporation
thereof shall sponsor an employee
pension plan which, because of
unreasonable costs or any other reason,
could lead to material financial loss or
damage to the sponsor. For purposes of
this section, an employee pension plan
is defined in section 3(2) of the
Employee Retirement Income Security
Act of 1974, as amended. The
prospective obligation or liability of a
plan sponsor to each plan participant
shall be stated in or determinable from
the plan, and, for a defined benefit plan,
shall also be based upon an actuarial
estimate of future experience under the
plan.
PO 00000
Frm 00103
Fmt 4701
Sfmt 4700
49051
(b) Funding. Actuarial cost methods
permitted under the Employee
Retirement Income Security Act of 1974
and the Internal Revenue Code of 1954,
as amended, shall be used to determine
plan funding.
(c) Plan amendment. A plan may be
amended to provide reasonable annual
cost-of-living increases to retired
participants: Provided, That
(1) Any such increase shall be for a
period and amount determined by the
sponsor’s board of directors, but in no
event shall it exceed the annual increase
in the Consumer Price Index published
by the Bureau of Labor Statistics; and
(2) No increase shall be granted
unless:
(i) Anticipated charges to net income
for future periods have first been found
by such board of directors to be
reasonable and are documented by
appropriate resolution and supporting
analysis; and
(ii) The increase will not reduce the
association’s regulatory capital below its
regulatory capital requirement.
(d) Termination. The plan shall
permit the sponsor’s board of directors
and its successors to terminate such
plan. Notice of intent to terminate shall
be filed with the OCC at least 60 days
prior to the proposed termination date.
(e) Records. Each Federal savings
association or service corporation
maintaining a plan not subject to
recordkeeping and reporting
requirements of the Employee
Retirement Income Security Act of 1974,
and the Internal Revenue Code of 1954,
as amended, shall establish and
maintain records containing the
following:
(1) Plan description;
(2) Schedule of participants and
beneficiaries;
(3) Schedule of participants and
beneficiaries’ rights and obligations;
(4) Plan’s financial statements; and
(5) Except for defined contribution
plans, an opinion signed by an enrolled
actuary (as defined by the Employee
Retirement Income Security Act of
1974) affirming that actuarial
assumptions in the aggregate are
reasonable, take into account the plan’s
experience and expectations, and
represent the actuary’s best estimate of
the plan’s projected experiences.
Subpart C—Securities and Borrowings
§ 163.74
Mutual capital certificates.
(a) General. No savings association
that is in the mutual form shall issue
mutual capital certificates pursuant to
this section or amend the terms of such
certificates unless it has obtained
written approval of the appropriate
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49052
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Federal banking agency. No approval
shall be granted unless the proposed
issuance of the mutual capital
certificates and the form and manner of
filing of the application are in
accordance with the provisions of this
section.
(b) Eligibility Requirements. The
appropriate Federal banking agency will
consider and process an application for
approval of the issuance of mutual
capital certificates pursuant to this
section only if the issuance is
authorized by applicable law and
regulation and is not inconsistent with
any provision of the applicant’s charter,
constitution or bylaws.
(c) Application form; supporting
information. An application for
approval of the issuance of mutual
capital certificates pursuant to this
section shall be in the form prescribed
by the appropriate Federal banking
agency. Such application and
instructions may be obtained from the
appropriate Federal banking agency.
Information and exhibits shall be
furnished in support of the application
in accordance with such instructions,
setting forth all of the terms and
provisions relating to the proposed issue
and showing that all of the requirements
of this section have been or will be met.
(d) Charter amendment. No
application for approval of the issuance
of mutual capital certificates pursuant to
this section may be filed unless the
amendment to the mutual association’s
charter, constitution or bylaws or other
actions conferring such authority shall
have been approved pursuant to the
procedures and requirements set forth
in the mutual association’s charter,
constitution or bylaws, or as may
otherwise be required by applicable law.
(e) Filing requirements. The
application for issuance of mutual
capital certificates shall be publicly
filed with the appropriate Federal
banking agency.
(f) Supervisory objection. No
application or approval of the issuance
of mutual capital certificates pursuant to
this section shall be approved if, in the
opinion of the appropriate Federal
banking agency, the policies, condition,
or operation of the applicant afford a
basis for supervisory objection to the
application.
(g) Limitation on offering period.
Following the date of the approval of
the application by the appropriate
Federal banking agency, the association
shall have an offering period of not
more than one year in which to
complete the sale of the mutual capital
certificates issued pursuant to this
section. The appropriate Federal
banking agency may in its discretion
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
extend such offering period if a written
request showing good cause for such
extension is filed with it not later than
30 days before the expiration of such
offering period or any extension thereof.
(h) Reports. Within 30 days after
completion of the sale of mutual capital
certificates issued pursuant to this
section, the association shall transmit to
the appropriate Federal banking agency
a written report stating the total dollar
amount of securities sold, and the
amount of net proceeds received by the
association, and within 90 days it shall
transmit a written report stating the
number of purchasers.
(i) Requirements as to mutual capital
certificates—(1) Form of certificate.
Each mutual capital certificate and any
governing agreement evidencing a
mutual capital certificate issued by an
association pursuant to this section:
(i) Shall bear on its face, in bold-face
type, the following legend: ‘‘This
security is not a savings account or a
deposit and it is not insured by the
United States or any agency or fund of
the United States’’; and
(ii) Shall clearly state that the
certificate is subject to the requirements
of § 163.74(i)(2).
(2) Legal requirements. Mutual capital
certificates issued pursuant to this
section shall:
(i) Be subordinate to all claims against
the association having the same priority
as savings accounts, savings certificates,
debt obligations or any higher priority;
(ii) Not be eligible for use as collateral
for any loan made by the issuing
association;
(iii) Constitute a claim in liquidation
not exceeding the face value plus
accrued dividends of the certificates, on
the general reserves, surplus and
undivided profits of the association
remaining after the payment in full of
all savings accounts, savings certificates
and debt obligations;
(iv) Be entitled to the payment of
dividends, which may be fixed,
variable, participating, or cumulative, or
any combination thereof, only if, when
and as declared by the association’s
board of directors out of funds legally
available for that purpose, provided that
no dividend may be declared or paid
without the approval of the appropriate
Federal banking agency if such payment
would cause the association to fail to
meet its regulatory capital requirements
under part 167 of this chapter if a
Federal savings association or 12 CFR
part 390, subpart Z if a state savings
association, and provided further that
no dividend may be paid if such
payment would constitute a violation of
12 U.S.C. 1828(b);
PO 00000
Frm 00104
Fmt 4701
Sfmt 4700
(v) Not be redeemable, except: where
the dollar weighted average term of each
issue of mutual capital certificates to be
redeemed is seven years or more and
redemption is to be made pursuant to a
redemption schedule; in the event of a
merger, consolidation or reorganization
approved by the appropriate Federal
banking agency; or where the funds for
redemption are raised by the issuance of
mutual capital certificates approved
pursuant to this section, or in
conjunction with the issuance of capital
stock pursuant to part 192 of this
chapter: Provided, that mandatory
redemption shall not be required; that
mutual capital certificates shall not be
redeemable on the demand or at the
option of the holder; and that mutual
capital certificates shall not receive,
benefit from, be credited with or
otherwise be entitled to or due
payments in or for redemption if such
payments would cause the association
to fail to meet its regulatory capital
requirements under part 167 of this
chapter if a Federal savings association
or 12 CFR part 390, subpart Z if a state
savings association; And Provided
further, for the purposes of this
paragraph (i)(2)(v), the ‘‘dollar weighted
average term’’ of an issue of mutual
capital certificates shall be the sum of
the products calculated for each year
that the mutual capital certificates in the
issue have been redeemed or are
scheduled to be redeemed. Each product
shall be calculated by multiplying the
number of years of each mutual capital
certificate of a given term by a fraction,
the numerator of which shall be the
total dollar amount of each mutual
capital certificate in the issue with the
same term and the denominator of
which shall be the total dollar amount
of mutual capital certificates in the
entire issue;
(vi) Not have preemptive rights;
(vii) Not have voting rights, except
that an association may provide for
voting rights if:
(A) The savings association fails to
pay dividends for a minimum of three
consecutive dividend periods, and then
the holders of the class or classes of
mutual capital certificates granted such
voting rights, and voting as a single
class, with one vote for each
outstanding certificate, may elect by a
majority vote a maximum of one-third of
the association’s board of directors, the
directors so elected to serve until the
next annual meeting of the association
succeeding the payment of all current
and past dividends;
(B) Any merger, consolidation, or
reorganization (except in a supervisory
case) is sought to be authorized, where
the issuing association is not the
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
survivor, provided that the regulatory
capital of the resulting association
available for payment of any class of
mutual capital certificate on liquidation
is less than the regulatory capital
available for such class prior to the
merger, consolidation, or reorganization;
(C) Action is sought to be authorized
which would create any class of mutual
capital certificates having a preference
or priority over an outstanding class or
classes of mutual capital certificates;
(D) Any action is sought to be
authorized which would adversely
change the specific terms of any class of
mutual capital certificates;
(E) Action is sought to be authorized
which would increase the number of a
class of mutual capital certificates, or
the number of a class of mutual capital
certificates ranking prior to or on parity
with another class of mutual capital
certificates; or
(F) Action is sought which would
authorize the issuance of an additional
class or classes of mutual capital
certificates without the association
having met specific financial standards;
(viii) Not constitute an obligation of
the association and shall confer no
rights which would give rise to any
claim of or action for default;
(ix) Not be convertible into any
account, security, or interest, except that
mutual capital certificates may be
surrendered in exchange for preferred
stock issued in connection with the
conversion of the issuing savings
association to the stock form pursuant to
part 192 of this chapter, provided that
the preferred stock shall have
substantially the same voting rights,
designations, preferences and relative,
participating optional, or other special
rights, and qualifications, limitations,
and restrictions, as the mutual capital
certificates exchanged for the preferred
stock.
(x) Provide for charging of losses after
the exhaustion of all other items in the
regulatory capital account.
sroberts on DSK5SPTVN1PROD with RULES
§ 163.76 Offers and sales of securities at
an office of a Federal savings association.
(a) A Federal saving association may
not offer or sell debt or equity securities
issued by the association or an affiliate
of the association at an office of the
association; except that equity securities
issued by the association or an affiliate
in connection with the association’s
conversion from the mutual to stock
form of organization in a conversion
approved pursuant to part 192 of this
chapter may be offered and sold at the
association’s offices: Provided, That:
(1) The OCC does not object on
supervisory grounds to the offer and
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
sale of the securities at the offices of the
association;
(2) No commissions, bonuses, or
comparable payments are paid to any
employee of the savings association or
its affiliates or to any other person in
connection with the sale of securities at
an office of a savings association; except
that compensation and commissions
consistent with industry norms may be
paid to securities personnel of registered
broker-dealers;
(3) No offers or sales are made by
tellers or at the teller counter, or by
comparable persons at comparable
locations;
(4) Sales activity is conducted in a
segregated or separately identifiable area
of the savings association’s offices apart
from the area accessible to the general
public for the purposes of making or
withdrawing deposits;
(5) Offers and sales are made only by
regular, full-time employees of the
savings association or by securities
personnel who are subject to
supervision by a registered brokerdealer;
(6) An acknowledgment, in the form
set forth in paragraph (c) of this section,
is signed by any customer to whom the
security is sold in the savings
association’s offices prior to the sale of
any such securities;
(7) A legend that the security is not a
deposit or account and is not Federally
insured or guaranteed appears
conspicuously on the security and in all
offering documents and advertisements
for the securities; the legend must state
in bold or other prominent type at least
as large as other textual type in the
document that ‘‘This security is not a
deposit or account and is not Federally
insured or guaranteed’’; and
(8) The savings association will be in
compliance with its current capital
requirements upon completion of the
conversion stock offering.
(b) Securities sales practices,
advertisements, and other sales
literature used in connection with offers
and sales of securities by Federal
savings associations shall be subject to
§ 197.10 of this chapter.
(c) Offers and sales of securities of a
savings association or its affiliates in
any office of the savings association
must use a one-page, unambiguous,
certification in substantially the
following form:
FORM OF CERTIFICATION
I ACKNOWLEDGE THAT THIS
SECURITY IS NOT A DEPOSIT OR
ACCOUNT AND IS NOT FEDERALLY
INSURED, AND IS NOT GUARANTEED
BY [insert name of savings association]
OR BY THE FEDERAL GOVERNMENT.
PO 00000
Frm 00105
Fmt 4701
Sfmt 4700
49053
If anyone asserts that this security is
Federally insured or guaranteed, or is as
safe as an insured deposit, I should call
the Office of the Comptroller of the
Currency].
I further certify that, before
purchasing the [description of security
being offered] of [name of issuer, name
of savings association and affiliation to
issuer (if different)], I received an
offering circular.
The offering circular that I received
contains disclosure concerning the
nature of the security being offered and
describes the risks involved in the
investment, including:
[List briefly the principal risks
involved and cross reference certain
specified pages of the offering circular
where a more complete description of
the risks is made.]
Signature: lllllllllllll
Date: llllllllllllllll
(d) For purposes of this section, an
‘‘office’’ of an association means any
premises used by the association that
are identified to the public through
advertising or signage using the
association’s name, trade name, or logo.
§ 163.80
Borrowing limitations.
(a) General. Except as the appropriate
Federal banking agency otherwise may
permit by advice in writing, a savings
association may borrow only in
accordance with the provisions of this
section.
(b) Amount of borrowing. A savings
association may borrow up to the
amount authorized by the laws under
which the savings association operates.
(c) Security. An association may give
security for borrowings subject to any
requirements imposed by the
appropriate Federal banking agency or
the FDIC regarding notice of default on
borrowings and any FDIC right of first
refusal to purchase collateral.
(d) Required statement for all
securities evidencing outside
borrowings. Each security shall bear on
its face, in a prominent place, the
following legend:
This security is not a savings account
or a deposit and it is not insured by the
United States or any agency or fund of
the United States.
(e) Filing requirements for outside
borrowings with maturities in excess of
one year. (1) Unless the savings
association meets its capital
requirement under part 167 of this
chapter if a Federal savings association
or 12 CFR part 390, subpart Z if a state
savings association, it shall, at least ten
business days prior to issuance, file a
notice of intent to issue securities
evidencing such borrowings with the
E:\FR\FM\09AUR2.SGM
09AUR2
49054
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
appropriate OCC licensing office if a
Federal savings association, or with the
appropriate regional director of the
FDIC if a state savings association. Such
notice shall contain a summary of the
items of the security, including:
(i) Principal amount of the securities;
(ii) Anticipated interest rate range and
price range at which the securities are
to be sold;
(iii) Minimum denomination;
(iv) Stated and average effective
maturity;
(v) Mandatory and optional
prepayment provisions;
(vi) Description, amount, and
maintenance of collateral if any;
(vii) Trustee provisions if any;
(viii) Events of default and remedies
of default;
(ix) Any provisions which restrict,
conditionally or otherwise, the
operations of the association.
(2) The appropriate Federal banking
agency shall have 10 business days after
receipt of such filing to object to the
issuance of such securities. The
appropriate Federal banking agency
shall object if the terms or covenants of
the proposed issue place unreasonable
burdens on, or control over, the
operations of the association. If no
objection is taken, the savings
association shall have 120 calendar days
within which to issue such securities.
(f) Note accounts. For purposes of this
section, note accounts are not
borrowings.
sroberts on DSK5SPTVN1PROD with RULES
§ 163.81 Inclusion of subordinated debt
securities and mandatorily redeemable
preferred stock as supplementary capital.
(a) Scope. A Federal savings
association must comply with this
section in order to include subordinated
debt securities or mandatorily
redeemable preferred stock (‘‘covered
securities’’) in supplementary capital
(tier 2 capital) under part 167 of this
chapter. If a savings association does not
include covered securities in
supplementary capital, it is not required
to comply with this section.
(b) Application and notice
procedures. (1) A Federal savings
association must file an application or
notice under 12 CFR part 116, subpart
A seeking the OCC’s approval of, or
non-objection to, the inclusion of
covered securities in supplementary
capital. The savings association may file
its application or notice before or after
it issues covered securities, but may not
include covered securities in
supplementary capital until the OCC
approves the application or does not
object to the notice.
(2) A savings association must also
comply with the securities offering rules
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
at 12 CFR part 197 by filing an offering
circular for a proposed issuance of
covered securities, unless the offering
qualifies for an exemption under that
part.
(c) Securities requirements. To be
included in supplementary capital,
covered securities must meet the
following requirements:
(1) Form. (i) Each certificate
evidencing a covered security must:
(A) Bear the following legend on its
face, in bold type: ‘‘This security is not
a savings account or deposit and it is
not insured by the United States or any
agency or fund of the United States;’’
(B) State that the security is
subordinated on liquidation, as to
principal, interest, and premium, to all
claims against the savings association
that have the same priority as savings
accounts or a higher priority;
(C) State that the security is not
secured by the savings association’s
assets or the assets of any affiliate of the
savings association. An affiliate means
any person or company which controls,
is controlled by, or is under common
control with the savings association;
(D) State that the security is not
eligible collateral for a loan by the
savings association;
(E) State the prohibition on the
payment of dividends or interest at 12
U.S.C. 1828(b) and, in the case of
subordinated debt securities, state the
prohibition on the payment of principal
and interest at 12 U.S.C. 1831o(h);
(F) For subordinated debt securities,
state or refer to a document stating the
terms under which the savings
association may prepay the obligation;
and
(G) State or refer to a document
stating that the savings association must
obtain OCC’s approval before the
voluntary prepayment of principal on
subordinated debt securities, the
acceleration of payment of principal on
subordinated debt securities, or the
voluntarily redemption of mandatorily
redeemable preferred stock (other than
scheduled redemptions), if the savings
association is undercapitalized,
significantly undercapitalized, or
critically undercapitalized as described
in § 165.4(b) of this chapter, fails to
meet the regulatory capital requirements
at 12 CFR part 167, or would fail to meet
any of these standards following the
payment.
(ii) A Federal savings association
must include such additional statements
as the OCC may prescribe for
certificates, purchase agreements,
indentures, and other related
documents.
(2) Maturity requirements. Covered
securities must have an original
PO 00000
Frm 00106
Fmt 4701
Sfmt 4700
weighted average maturity or original
weighted average period to required
redemption of at least five years.
(3) Mandatory prepayment.
Subordinated debt securities and related
documents may not provide events of
default or contain other provisions that
could result in a mandatory prepayment
of principal, other than events of default
that:
(i) Arise from the Federal savings
association’s failure to make timely
payment of interest or principal;
(ii) Arise from its failure to comply
with reasonable financial, operating,
and maintenance covenants of a type
that are customarily included in
indentures for publicly offered debt
securities; or
(iii) Relate to bankruptcy, insolvency,
receivership, or similar events.
(4) Indenture. (i) Except as provided
in paragraph (c)(4)(ii) of this section, a
Federal savings association must use an
indenture for subordinated debt
securities. If the aggregate amount of
subordinated debt securities publicly
offered (excluding sales in a non-public
offering as defined in 12 CFR 197.4) and
sold in any consecutive 12-month or 36month period exceeds $5,000,000 or
$10,000,000 respectively (or such lesser
amount that the Securities and
Exchange Commission shall establish by
rule or regulation under 15 U.S.C.
77ddd), the indenture must provide for
the appointment of a trustee other than
the savings association or an affiliate of
the savings association (as defined in
subsection (c)(1)(i)(C) of this section)
and for collective enforcement of the
security holders’ rights and remedies.
(ii) A Federal savings association is
not required to use an indenture if the
subordinated debt securities are sold
only to accredited investors, as that term
is defined in 15 U.S.C. 77d(6). A savings
association must have an indenture that
meets the requirements of paragraph
(c)(4)(i) of this section in place before
any debt securities for which an
exemption from the indenture
requirement is claimed, are transferred
to any non-accredited investor. If a
savings association relies on this
exemption from the indenture
requirement, it must place a legend on
the debt securities indicating that an
indenture must be in place before the
debt securities are transferred to any
non-accredited investor.
(d) Review by the OCC. (1) The OCC
will review notices and applications
under 12 CFR part 116, subpart E.
(2) In reviewing notices and
applications under this section, the OCC
will consider whether:
(i) The issuance of the covered
securities is authorized under
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
applicable laws and regulations and is
consistent with the savings association’s
charter and bylaws.
(ii) The savings association is at least
adequately capitalized under § 165.4(b)
of this chapter and meets the regulatory
capital requirements at part 167 of this
chapter.
(iii) The savings association is or will
be able to service the covered securities.
(iv) The covered securities are
consistent with the requirements of this
section.
(v) The covered securities and related
transactions sufficiently transfer risk
from the Deposit Insurance Fund.
(vi) The OCC has no objection to the
issuance based on the savings
association’s overall policies, condition,
and operations.
(3) The OCC’s approval or nonobjection is conditioned upon no
material changes to the information
disclosed in the application or notice
submitted to the OCC. The OCC may
impose such additional requirements or
conditions as it may deem necessary to
protect purchasers, the savings
association, the OCC, or the Deposit
Insurance Fund.
(e) Amendments. If a Federal savings
association amends the covered
securities or related documents
following the completion of the OCC’s
review, it must obtain the OCC’s
approval or non-objection under this
section before it may include the
amended securities in supplementary
capital.
(f) Sale of covered securities. The
Federal savings association must
complete the sale of covered securities
within one year after the OCC’s
approval or non-objection under this
section. A savings association may
request an extension of the offering
period by filing a written request with
the OCC. The savings association must
demonstrate good cause for the
extension and file the request at least 30
days before the expiration of the offering
period or any extension of the offering
period.
(g) Reports. A Federal savings
association must file the following
information with the OCC within 30
days after the savings association
completes the sale of covered securities
includable as supplementary capital. If
the savings association filed its
application or notice following the
completion of the sale, it must submit
this information with its application or
notice:
(1) A written report indicating the
number of purchasers, the total dollar
amount of securities sold, the net
proceeds received by the savings
association from the issuance, and the
amount of covered securities, net of all
expenses, to be included as
supplementary capital;
(2) Three copies of an executed form
of the securities and a copy of any
related documents governing the
issuance or administration of the
securities; and
(3) A certification by the appropriate
executive officer indicating that the
savings association complied with all
applicable laws and regulations in
connection with the offering, issuance,
and sale of the securities.
Subpart D—[Reserved]
Subpart E—Capital Distributions
§ 163.140
What does this subpart cover?
This subpart applies to all capital
distributions by a Federal savings
association (‘‘you’’).
§ 163.141
What is a capital distribution?
A capital distribution is:
(a) A distribution of cash or other
property to your owners made on
account of their ownership, but
excludes:
(1) Any dividend consisting only of
your shares or rights to purchase your
shares; or
(2) If you are a Federal mutual savings
association, any payment that you are
required to make under the terms of a
deposit instrument and any other
amount paid on deposits that the OCC
determines is not a distribution for the
purposes of this section;
(b) Your payment to repurchase,
redeem, retire or otherwise acquire any
of your shares or other ownership
interests, any payment to repurchase,
redeem, retire, or otherwise acquire debt
instruments included in your total
capital under part 167 of this chapter,
and any extension of credit to finance
an affiliate’s acquisition of your shares
or interests;
(c) Any direct or indirect payment of
cash or other property to owners or
affiliates made in connection with a
corporate restructuring. This includes
your payment of cash or property to
shareholders of another association or to
shareholders of its holding company to
acquire ownership in that association,
other than by a distribution of shares;
(d) Any other distribution charged
against your capital accounts if you
would not be well capitalized, as set
forth in § 165.4(b)(1) of this chapter,
following the distribution; and
(e) Any transaction that the OCC
determines, by order or regulation, to be
in substance a distribution of capital.
§ 163.142 What other definitions apply to
this subpart?
The following definitions apply to
this subpart:
Affiliate means an affiliate, as defined
under § 563.41(b) until superseded by
regulations of the Board of Governors of
the Federal Reserve System regarding
transactions with affiliates.
Capital means total capital, as
computed under part 167 of this
chapter.
Net income means your net income
computed in accordance with generally
accepted accounting principles.
Retained net income means your net
income for a specified period less total
capital distributions declared in that
period.
Shares means common and preferred
stock, and any options, warrants, or
other rights for the acquisition of such
stock. The term ‘‘share’’ also includes
convertible securities upon their
conversion into common or preferred
stock. The term does not include
convertible debt securities prior to their
conversion into common or preferred
stock or other securities that are not
equity securities at the time of a capital
distribution.
§ 163.143
Must I file with the OCC?
Whether and what you must file with
the OCC depends on whether you and
your proposed capital distribution fall
within certain criteria.
(a) Application required.
sroberts on DSK5SPTVN1PROD with RULES
If:
Then you:
(1) You are not eligible for expedited treatment under § 116.5 of this
chapter.
(2) The total amount of all of your capital distributions (including the
proposed capital distribution) for the applicable calendar year exceeds your net income for that year to date plus your retained net income for the preceding two years.
(3) You would not be at least adequately capitalized, as set forth in
§ 165.4(b)(2) of this chapter, following the distribution.
Must file an application with the OCC.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00107
Fmt 4701
Must file an application with the OCC.
Must file an application with the OCC.
Sfmt 4700
49055
E:\FR\FM\09AUR2.SGM
09AUR2
49056
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
If:
Then you:
(4) Your proposed capital distribution would violate a prohibition contained in any applicable statute, regulation, or agreement between
you and the OCC or the OTS, or violate a condition imposed on you
in an application or notice approved by the OCC or the OTS.
Must file an application with the OCC.
(b) Notice required.
If you are not required to file an application under paragraph (a) of this
section, but:
Then you:
(1) You would not be well capitalized, as set forth under § 165.4(b)(1),
following the distribution.
(2) Your proposed capital distribution would reduce the amount of or
retire any part of your common or preferred stock or retire any part
of debt instruments such as notes or debentures included in capital
under part 167 of this chapter (other than regular payments required
under a debt instrument approved under § 163.81).
(3) You are a subsidiary of a savings and loan holding company, .........
Must file a notice with the OCC.
Must file a notice with the OCC.
Except as provided in (d), you must file a notice with the OCC.
(c) No prior notice required.
If neither you nor your proposed capital distribution meet any of the criteria listed in paragraphs (a) and (b) of this section.
Then you do not need to file a notice or an application with the OCC
before making a capital distribution.
(d) Informational copy of notice
required.
If you are a subsidiary of a stock savings and loan holding company
that is filing a notice with the Board of Governors of the Federal Reserve System (Board) for a cash divided pursuant to 12 U.S.C.
1467a(f) and neither an application under (a), nor a notice under
(b)(1) or (b)(2) is required,
§ 163.144
How do I file with the OCC?
sroberts on DSK5SPTVN1PROD with RULES
(a) Contents. Your notice or
application must:
(1) Be in narrative form.
(2) Include all relevant information
concerning the proposed capital
distribution, including the amount,
timing, and type of distribution.
(3) Demonstrate compliance with
§ 163.146.
(b) Schedules. Your notice or
application may include a schedule
proposing capital distributions over a
specified period, not to exceed 12
months.
(c) Timing. You must file your notice
or application at least 30 days before the
proposed declaration of dividend or
approval of the proposed capital
distribution by your board of directors.
§ 163.145 May I combine my notice or
application with other notices or
applications?
You may combine the notice or
application required under § 163.143
with any other notice or application, if
the capital distribution is a part of, or is
proposed in connection with, another
transaction requiring a notice or
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Then you do not file a notice under (b)(3) but you must provide an informational copy to the OCC of the notice filed with the Board, at the
same time it is filed with the Board.
application under this chapter. If you
submit a combined filing, you must:
(a) State that the related notice or
application is intended to serve as a
notice or application under this subpart;
and
(b) Submit the notice or application in
a timely manner.
§ 163.146 Will the OCC permit my capital
distribution?
The OCC will review your notice or
application under the review
procedures in 12 CFR part 116, subpart
E, except that the OCC will not act on
informational copies of the notice
submitted to the OCC pursuant to
§ 163.143(d). The OCC may disapprove
your notice or deny your application
filed under § 163.143, in whole or in
part, if it makes any of the following
determinations.
(a) You will be undercapitalized,
significantly undercapitalized, or
critically undercapitalized as set forth in
§ 165.4(b) of this chapter, following the
capital distribution. If so, the OCC will
determine if your capital distribution is
permitted under 12 U.S.C.
1831o(d)(1)(B).
PO 00000
Frm 00108
Fmt 4701
Sfmt 4700
(b) Your proposed capital distribution
raises safety or soundness concerns.
(c) Your proposed capital distribution
violates a prohibition contained in any
statute, regulation, agreement between
you and the OCC or the OTS, or a
condition imposed on you in an
application or notice approved by the
OCC or the OTS. If so, the OCC will
determine whether it may permit your
capital distribution notwithstanding the
prohibition or condition.
Subpart F—Financial Management
Policies
§ 163.161
policies.
Management and financial
(a)(1) For the protection of depositors
and other savings associations, each
Federal savings association and each
service corporation must be well
managed and operate safely and
soundly. Each also must pursue
financial policies that are safe and
consistent with economical home
financing and the purposes of savings
associations. In implementing this
section, the OCC will consider that
service corporations may be authorized
to engage in activities that involve a
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
higher degree of risk than activities
permitted to savings associations.
(2) As part of meeting its requirements
under paragraph (a)(1) of this section,
each Federal savings association and
service corporation must maintain
sufficient liquidity to ensure its safe and
sound operation.
(b) Compensation to officers,
directors, and employees of each
Federal savings association and its
service corporations shall not be in
excess of that which is reasonable and
commensurate with their duties and
responsibilities. Former officers,
directors, and employees of savings
association or its service corporation
who regularly perform services therefore
under consulting contracts are
employees thereof for purposes of this
paragraph (b).
sroberts on DSK5SPTVN1PROD with RULES
§ 163.170 Examinations and audits;
appraisals; establishment and maintenance
of records.
(a) Examinations and audits. Each
Federal savings association and affiliate
thereof shall be examined periodically,
and may be examined at any time, by
the OCC, with appraisals when deemed
advisable, in accordance with general
policies from time to time established
by the OCC. The costs, as computed by
the OCC, of any examinations made by
it, including office analysis, overhead,
per diem, travel expense, other
supervision by the OCC, and other
indirect costs, shall be paid by the
savings associations examined, except
that in the case of service corporations
of Federal savings associations the cost
of examinations, as determined by the
OCC, shall be paid by the service
corporations. Payments shall be made in
accordance with a schedule of annual
assessments based upon each savings
association’s total assets and of rates for
examiner time in amounts determined
by the OCC.
(b) Appraisals. (1) Unless otherwise
ordered by the OCC, appraisal of real
estate by the OCC in connection with
any examination or audit of a savings
association, affiliate, or service
corporation shall be made by an
appraiser, or by appraisers, selected by
the OCC. The cost of such appraisal
shall promptly be paid by such savings
association, affiliate, or service
corporation direct to such appraiser or
appraisers upon receipt by the savings
association, affiliate, or service
corporation of a statement of such cost
as approved by the OCC. A copy of the
report of each appraisal made by the
OCC pursuant to any of the foregoing
provisions of this section shall be
furnished to the savings association,
affiliate, or service corporation, as
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
appropriate within a reasonable time,
not to exceed 90 days, following the
completion of such appraisals and the
filing of a report thereof by the
appraiser, or appraisers, with the OCC.
(2) The OCC may obtain at any time,
at its expense, such appraisals of any of
the assets, including the security
therefore, of a savings association,
affiliate, or service corporation as the
OCC deems appropriate.
(c) Establishment and maintenance of
records. To enable the OCC to examine
Federal savings associations and
affiliates and audit savings associations,
affiliates, and service corporations
pursuant to the provisions of paragraph
(a) of this section, each savings
association, affiliate, and service
corporation shall establish and maintain
such accounting and other records as
will provide an accurate and complete
record of all business it transacts. This
includes, without limitation,
establishing and maintaining such other
records as are required by statute or any
other regulation to which the savings
association, affiliate, or service
corporation is subject. The documents,
files, and other material or property
comprising said records shall at all
times be available for such examination
and audit wherever any of said records,
documents, files, material, or property
may be.
(d) Change in location of records. A
Federal savings association shall not
transfer the location of any of its general
accounting or control records, or the
maintenance thereof, from its home
office to a branch or service office, or
from a branch or service office to its
home office or to another branch or
service office unless prior to the date of
transfer its board of directors has:
(1) By resolution authorized the
transfer or maintenance; and
(2) Sent a certified copy of the
resolution to the OCC.
(e) Use of data processing services for
maintenance of records. A Federal
savings association which determines to
maintain any of its records by means of
data processing services shall so notify
the OCC in writing, at least 90 days
prior to the date on which such
maintenance of records will begin. Such
notification shall include identification
of the records to be maintained by data
processing services and a statement as
to the location at which such records
will be maintained. Any contract,
agreement, or arrangement made by a
savings association pursuant to which
data processing services are to be
performed for such savings association
shall be in writing and shall expressly
provide that the records to be
maintained by such services shall at all
PO 00000
Frm 00109
Fmt 4701
Sfmt 4700
49057
times be available for examination and
audit.
§ 163.171
[Reserved]
§ 163.172
Financial derivatives.
(a) What is a financial derivative? A
financial derivative is a financial
contract whose value depends on the
value of one or more underlying assets,
indices, or reference rates. The most
common types of financial derivatives
are futures, forward commitments,
options, and swaps. A mortgage
derivative security, such as a
collateralized mortgage obligation or a
real estate mortgage investment conduit,
is not a financial derivative under this
section.
(b) May I engage in transactions
involving financial derivatives? (1) If
you are a Federal savings association,
you may engage in a transaction
involving a financial derivative if you
are authorized to invest in the assets
underlying the financial derivative, the
transaction is safe and sound, and you
otherwise meet the requirements in this
section.
(2) [Reserved]
(3) In general, if you engage in a
transaction involving a financial
derivative, you should do so to reduce
your risk exposure.
(c) What are my board of directors’
responsibilities with respect to financial
derivatives? (1) Your board of directors
is responsible for effective oversight of
financial derivatives activities.
(2) Before you may engage in any
transaction involving a financial
derivative, your board of directors must
establish written policies and
procedures governing authorized
financial derivatives. Your board of
directors should review applicable
guidance issued by the OCC on
establishing a sound risk management
program.
(3) Your board of directors must
periodically review:
(i) Compliance with the policies and
procedures established under paragraph
(c)(2) of this section; and
(ii) The adequacy of these policies
and procedures to ensure that they
continue to be appropriate to the nature
and scope of your operations and
existing market conditions.
(4) Your board of directors must
ensure that management establishes an
adequate system of internal controls for
transactions involving financial
derivatives.
(d) What are management’s
responsibilities with respect to financial
derivatives? (1) Management is
responsible for daily oversight and
management of financial derivatives
E:\FR\FM\09AUR2.SGM
09AUR2
49058
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
activities. Management must implement
the policies and procedures established
by the board of directors and must
establish a system of internal controls.
This system of internal controls should,
at a minimum, provide for periodic
reporting to the board of directors and
management, segregation of duties, and
internal review procedures.
(2) Management must ensure that
financial derivatives activities are
conducted in a safe and sound manner
and should review applicable guidance
issued by the OCC on implementing a
sound risk management program.
(e) What records must I keep on
financial derivative transactions? You
must maintain records adequate to
demonstrate compliance with this
section and with your board of
directors’ policies and procedures on
financial derivatives.
§ 163.176 Interest-rate-risk-management
procedures.
Federal savings associations shall take
the following actions:
(a) The board of directors or a
committee thereof shall review the
savings association’s interest-rate-risk
exposure and devise a policy for the
savings association’s management of
that risk.
(b) The board of directors shall
formally adopt a policy for the
management of interest-rate risk. The
management of the savings association
shall establish guidelines and
procedures to ensure that the board’s
policy is successfully implemented.
(c) The management of the savings
association shall periodically report to
the board of directors regarding
implementation of the savings
association’s policy for interest-rate-risk
management and shall make that
information available upon request to
the OCC.
(d) The savings association’s board of
directors shall review the results of
operations at least quarterly and shall
make such adjustments as it considers
necessary and appropriate to the policy
for interest-rate-risk management,
including adjustments to the authorized
acceptable level of interest-rate risk.
sroberts on DSK5SPTVN1PROD with RULES
§ 163.177 Procedures for monitoring Bank
Secrecy Act (BSA) compliance.
(a) Purpose. The purpose of this
regulation is to require savings
associations (as defined by § 161.43 of
this chapter) to establish and maintain
procedures reasonably designed to
assure and monitor compliance with the
requirements of subchapter II of chapter
53 of title 31, United States Code, and
the implementing regulations
promulgated thereunder by the U.S.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Department of Treasury, 31 CFR Chapter
X.
(b) Establishment of a BSA
compliance program—(1) Program
requirement. Each savings association
shall develop and provide for the
continued administration of a program
reasonably designed to assure and
monitor compliance with the
recordkeeping and reporting
requirements set forth in subchapter II
of chapter 53 of title 31, United States
Code and the implementing regulations
issued by the Department of the
Treasury at 31 CFR Chapter X. The
compliance program must be written,
approved by the savings association’s
board of directors, and reflected in the
minutes of the savings association.
(2) Customer identification program.
Each savings association is subject to
the requirements of 31 U.S.C. 5318(l)
and the implementing regulation jointly
promulgated by the OCC and the
Department of the Treasury at 31 CFR
1020.220, which require a customer
identification program to be
implemented as part of the BSA
compliance program required under this
section.
(c) Contents of compliance program.
The compliance program shall, at a
minimum:
(1) Provide for a system of internal
controls to assure ongoing compliance;
(2) Provide for independent testing for
compliance to be conducted by a
savings association’s in-house personnel
or by an outside party;
(3) Designate individual(s)
responsible for coordinating and
monitoring day-to-day compliance; and
(4) Provide training for appropriate
personnel.
Subpart G—Reporting and Bonding
§ 163.180 Suspicious Activity Reports and
other reports and statements.
(a) Periodic reports. Each savings
association and service corporation
thereof shall make such periodic or
other reports of its affairs in such
manner and on such forms as the
appropriate Federal banking agency may
prescribe. The appropriate Federal
banking agency may provide that
reports filed by savings associations or
service corporations to meet the
requirements of other regulations also
satisfy requirements imposed under this
section.
(b) False or misleading statements or
omissions. No savings association or
director, officer, agent, employee,
affiliated person, or other person
participating in the conduct of the
affairs of such association nor any
person filing or seeking approval of any
application shall knowingly:
PO 00000
Frm 00110
Fmt 4701
Sfmt 4700
(1) Make any written or oral statement
to the appropriate Federal banking
agency or to an agent, representative or
employee of the appropriate Federal
banking agency that is false or
misleading with respect to any material
fact or omits to state a material fact
concerning any matter within the
jurisdiction of the appropriate Federal
banking agency or
(2) Make any such statement or
omission to a person or organization
auditing a savings association or
otherwise preparing or reviewing its
financial statements concerning the
accounts, assets, management condition,
ownership, safety, or soundness, or
other affairs of the association.
(c) Notifications of loss and reports of
increase in deductible amount of bond.
A savings association maintaining bond
coverage as required by § 163.190 of this
part shall promptly notify its bond
company and file a proof of loss under
the procedures provided by its bond,
concerning any covered losses greater
than twice the deductible amount.
(d) Suspicious Activity Reports—(1)
Purpose and scope. This paragraph (d)
ensures that savings associations and
service corporations file a Suspicious
Activity Report when they detect a
known or suspected violation of Federal
law or a suspicious transaction related
to a money laundering activity or a
violation of the Bank Secrecy Act.
(2) Definitions. For the purposes of
this paragraph (d):
(i) FinCEN means the Financial
Crimes Enforcement Network of the
Department of the Treasury.
(ii) Institution-affiliated party means
any institution-affiliated party as that
term is defined in sections 3(u) and
8(b)(9) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(u) and 1818(b)(9)).
(iii) SAR means a Suspicious Activity
Report.
(3) SARs required. A savings
association or service corporation shall
file a SAR with the appropriate Federal
law enforcement agencies and the
Department of the Treasury on the form
prescribed by the appropriate Federal
banking agency and in accordance with
the form’s instructions, by sending a
completed SAR to FinCEN in the
following circumstances:
(i) Insider abuse involving any
amount. Whenever the savings
association or service corporation
detects any known or suspected Federal
criminal violation, or pattern of criminal
violations, committed or attempted
against the savings association or
service corporation or involving a
transaction or transactions conducted
through the savings association or
service corporation, where the savings
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
association or service corporation
believes that it was either an actual or
potential victim of a criminal violation,
or series of criminal violations, or that
it was used to facilitate a criminal
transaction, and it has a substantial
basis for identifying one of its directors,
officers, employees, agents or other
institution-affiliated parties as having
committed or aided in the commission
of a criminal act, regardless of the
amount involved in the violation.
(ii) Violations aggregating $5,000 or
more where a suspect can be identified.
Whenever the savings association or
service corporation detects any known
or suspected Federal criminal violation,
or pattern of criminal violations,
committed or attempted against the
savings association or service
corporation or involving a transaction or
transactions conducted through the
savings association or service
corporation and involving or aggregating
$5,000 or more in funds or other assets,
where the savings association or service
corporation believes that it was either
an actual or potential victim of a
criminal violation or series of criminal
violations, or that it was used to
facilitate a criminal transaction, and it
has a substantial basis for identifying a
possible suspect or group of suspects. If
it is determined prior to filing this
report that the identified suspect or
group of suspects has used an alias, then
information regarding the true identity
of the suspect or group of suspects, as
well as alias identifiers, such as drivers’
license or social security numbers,
addresses and telephone numbers, must
be reported.
(iii) Violations aggregating $25,000 or
more regardless of potential suspects.
Whenever the savings association or
service corporation detects any known
or suspected Federal criminal violation,
or pattern of criminal violations,
committed or attempted against the
savings association or service
corporation or involving a transaction or
transactions conducted through the
savings association or service
corporation and involving or aggregating
$25,000 or more in funds or other assets,
where the savings association or service
corporation believes that it was either
an actual or potential victim of a
criminal violation or series of criminal
violations, or that it was used to
facilitate a criminal transaction, even
though there is no substantial basis for
identifying a possible suspect or group
of suspects.
(iv) Transactions aggregating $5,000
or more that involve potential money
laundering or violations of the Bank
Secrecy Act. Any transaction (which for
purposes of this paragraph (d)(3)(iv)
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
means a deposit, withdrawal, transfer
between accounts, exchange of
currency, loan, extension of credit,
purchase or sale of any stock, bond,
certificate of deposit, or other monetary
instrument or investment security, or
any other payment, transfer, or delivery
by, through, or to a financial institution,
by whatever means effected) conducted
or attempted by, at or through the
savings association or service
corporation and involving or aggregating
$5,000 or more in funds or other assets,
if the savings association or service
corporation knows, suspects, or has
reason to suspect that:
(A) The transaction involves funds
derived from illegal activities or is
intended or conducted in order to hide
or disguise funds or assets derived from
illegal activities (including, without
limitation, the ownership, nature,
source, location, or control of such
funds or assets) as part of a plan to
violate or evade any law or regulation or
to avoid any transaction reporting
requirement under Federal law;
(B) The transaction is designed to
evade any regulations promulgated
under the Bank Secrecy Act; or
(C) The transaction has no business or
apparent lawful purpose or is not the
sort in which the particular customer
would normally be expected to engage,
and the institution knows of no
reasonable explanation for the
transaction after examining the available
facts, including the background and
possible purpose of the transaction.
(4) Service corporations. When a
service corporation is required to file a
SAR under paragraph (d)(3) of this
section, either the service corporation or
a savings association that wholly or
partially owns the service corporation
may file the SAR.
(5) Time for reporting. A savings
association or service corporation is
required to file a SAR no later than 30
calendar days after the date of initial
detection of facts that may constitute a
basis for filing a SAR. If no suspect was
identified on the date of detection of the
incident requiring the filing, a savings
association or service corporation may
delay filing a SAR for an additional 30
calendar days to identify a suspect. In
no case shall reporting be delayed more
than 60 calendar days after the date of
initial detection of a reportable
transaction. In situations involving
violations requiring immediate
attention, such as when a reportable
violation is ongoing, the savings
association or service corporation shall
immediately notify, by telephone, an
appropriate law enforcement authority
and the appropriate Federal banking
PO 00000
Frm 00111
Fmt 4701
Sfmt 4700
49059
agency in addition to filing a timely
SAR.
(6) Reports to state and local
authorities. A savings association or
service corporation is encouraged to file
a copy of the SAR with state and local
law enforcement agencies where
appropriate.
(7) Exception. A savings association
or service corporation need not file a
SAR for a robbery or burglary
committed or attempted that is reported
to appropriate law enforcement
authorities.
(8) Retention of records. A savings
association or service corporation shall
maintain a copy of any SAR filed and
the original or business record
equivalent of any supporting
documentation for a period of five years
from the date of the filing of the SAR.
Supporting documentation shall be
identified and maintained by the
savings association or service
corporation as such, and shall be
deemed to have been filed with the
SAR. A savings association or service
corporation shall make all supporting
documentation available to appropriate
law enforcement agencies upon request.
A savings association or service
corporation shall make all supporting
documentation available to the
appropriate Federal banking agency,
FinCEN, or any Federal, state, or local
law enforcement agency, or any Federal
regulatory authority that examines the
savings association or service
corporation for compliance with the
Bank Secrecy Act, or any state
regulatory authority administering a
state law that requires the savings
association or service corporation to
comply with the Bank Secrecy Act or
otherwise authorizes the state authority
to ensure that the institution complies
with the Bank Secrecy Act, upon
request.
(9) Notification to board of directors—
(i) Generally. Whenever a savings
association (or a service corporation in
which the savings association has an
ownership interest) files a SAR pursuant
to this paragraph (d), the management of
the savings association or service
corporation shall promptly notify its
board of directors, or a committee of
directors or executive officers
designated by the board of directors to
receive notice.
(ii) Suspect is a director or executive
officer. If the savings association or
service corporation files a SAR pursuant
to this paragraph (d) and the suspect is
a director or executive officer, the
savings association or service
corporation may not notify the suspect,
pursuant to 31 U.S.C. 5318(g)(2), but
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49060
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
shall notify all directors who are not
suspects.
(10) Compliance. Failure to file a SAR
in accordance with this section and the
instructions may subject the savings
association or service corporation, its
directors, officers, employees, agents, or
other institution-affiliated parties to
supervisory action.
(11) Obtaining SARs. A savings
association or service corporation may
obtain SARs and the instructions from
the appropriate Federal banking agency.
(12) Confidentiality of SARs. A SAR,
and any information that would reveal
the existence of a SAR, are confidential,
and shall not be disclosed except as
authorized in this paragraph (d)(12).
(i) Prohibition on disclosure by
savings associations or service
corporations. (A) General rule. No
savings association or service
corporation, and no director, officer,
employee, or agent of a savings
association or service corporation, shall
disclose a SAR or any information that
would reveal the existence of a SAR.
Any savings association or service
corporation, and any director, officer,
employee, or agent of any savings
association or service corporation that is
subpoenaed or otherwise requested to
disclose a SAR, or any information that
would reveal the existence of a SAR,
shall decline to produce the SAR or
such information, citing this section and
31 U.S.C. 5318(g)(2)(A)(i), and shall
notify the following of any such request
and the response thereto:
(A) Director, Litigation Division,
Office of the Comptroller of the
Currency or the appropriate FDIC
region, as appropriate and
(B) The Financial Crimes Enforcement
Network (FinCEN).
(ii) Rules of construction. Provided
that no person involved in any reported
suspicious transaction is notified that
the transaction has been reported,
paragraph (d)(1) of this section shall not
be construed as prohibiting:
(A) The disclosure by a savings
association or service corporation, or
any director, officer, employee or agent
of a savings association or service
corporation of:
(1) A SAR, or any information that
would reveal the existence of a SAR, to
FinCEN or the appropriate Federal
banking agency or any Federal, state, or
local law enforcement agency; or any
Federal regulatory authority that
examines the savings association or
service corporation for compliance with
the Bank Secrecy Act, or any state
regulatory authority administering a
state law that requires compliance with
the Bank Secrecy Act or otherwise
authorizes the state authority to ensure
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
that the institution complies with the
Bank Secrecy Act; or
(2) The underlying facts, transactions,
and documents upon which a SAR is
based, including, but not limited to,
disclosures:
(i) To another financial institution, or
any director, officer, employee or agent
of a financial institution, for the
preparation of a joint SAR; or
(ii) In connection with certain
employment references or termination
notices, to the full extent authorized in
31 U.S.C. 5318(g)(2)(B); or
(B) The sharing by a savings
association or service corporation, or
any director, officer, employee, or agent
of a savings association or service
corporation, of a SAR, or any
information that would reveal the
existence of a SAR, within the corporate
organizational structure of the savings
association or service corporation, for
purposes consistent with Title II of the
Bank Secrecy Act as determined by
regulation or in guidance.
(iii) Prohibition on disclosure by the
appropriate Federal banking agency.
The appropriate Federal banking agency
will not, and no officer, employee or
agent of appropriate Federal banking
agency shall disclose a SAR, or any
information that would reveal the
existence of a SAR, except as necessary
to fulfill official duties consistent with
Title II of the Bank Secrecy Act. For
purposes of this section, ‘‘official
duties’’ shall not include the disclosure
of a SAR, or any information that would
reveal the existence of a SAR, in
response to a request for use in a private
legal proceeding or in response to a
request for disclosure of non-public
information under 12 CFR 4.33 or 12
CFR part 309, as appropriate.
(iv) Limitation on liability. A savings
association or service corporation and
any director, officer, employee or agent
of a savings association or service
corporation that makes a voluntary
disclosure of any possible violation of
law or regulation to a government
agency or makes a disclosure pursuant
to this section or any other authority,
including a disclosure made jointly with
another institution, shall be protected
from liability for any such disclosure, or
for failure to provide notice of such
disclosure to any person identified in
the disclosure, or both, to the full extent
provided by 31 U.S.C. 5318(g)(3).
(13) Safe harbor. The safe harbor
provision of 31 U.S.C. 5318(g), which
exempts any financial institution that
makes a disclosure of any possible
violation of law or regulation from
liability under any law or regulation of
the United States, or any constitution,
law or regulation of any state or political
PO 00000
Frm 00112
Fmt 4701
Sfmt 4700
subdivision, covers all reports of
suspected or known criminal violations
and suspicious activities to law
enforcement and financial institution
supervisory authorities, including
supporting documentation, regardless of
whether such reports are filed pursuant
to this paragraph (d), or are filed on a
voluntary basis.
(e) Adjustable-rate mortgage indices—
(1) Reporting obligation. Upon the
request of a Federal Home Loan Bank,
all savings associations within the
jurisdiction of that Federal Home Loan
Bank shall report the data items set forth
in paragraph (e)(2) of this section for the
Federal Home Loan Bank to use in
calculating and publishing an
adjustable-rate mortgage index.
(2) Data to be reported. For purposes
of paragraph (e)(1) of this section, the
term ‘‘data items’’ means the data items
previously collected from the monthly
Thrift Financial Report or Consolidated
Reports of Condition and Income, as
appropriate, and such data items as may
be altered, amended, or substituted by
the requesting Federal Home Loan Bank.
(3) Applicable indices. For the
purpose of this reporting requirement,
the term ‘‘adjustable-rate mortgage
index’’ means any of the adjustable-rate
mortgage indices calculated and
published by a Federal Home Loan Bank
or the Federal Home Loan Bank Board
on or before August 9, 1989.
§ 163.190 Bonds for directors, officers,
employees, and agents; form of and amount
of bonds.
(a) Each Federal savings association
shall maintain fidelity bond coverage.
The bond shall cover each director,
officer, employee, and agent who has
control over or access to cash, securities,
or other property of the savings
association.
(b) The amount of coverage to be
required for each Federal savings
association shall be determined by the
association’s management, based on its
assessment of the level that would be
safe and sound in view of the
association’s potential exposure to risk;
provided, such determination shall be
subject to approval by the association’s
board of directors.
(c) Each Federal savings association
may maintain bond coverage in addition
to that provided by the insurance
underwriter industry’s standard forms,
through the use of endorsements, riders,
or other forms of supplemental
coverage, if, in the judgment of the
association’s board of directors,
additional coverage is warranted.
(d) The board of directors of each
Federal savings association shall
formally approve the association’s bond
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
coverage. In deciding whether to
approve the bond coverage, the board
shall review the adequacy of the
standard coverage and the need for
supplemental coverage. Documentation
of the board’s approval shall be
included as a part of the minutes of the
meeting at which the board approves
coverage. Additionally, the board of
directors shall review the association’s
bond coverage at least annually to assess
the continuing adequacy of coverage.
§ 163.191
Bonds for agents.
In lieu of the bond provided in
§ 163.190 of this part in the case of
agents appointed by a Federal savings
association, a fidelity bond may be
provided in an amount at least twice the
average monthly collections of such
agents, provided such agents shall be
required to make settlement with the
savings association at least monthly,
and provided such bond is approved by
the board of directors of the savings
association. No bond need be obtained
for any agent that is a financial
institution insured by the Federal
Deposit Insurance Corporation.
§ 163.200
Conflicts of interest.
If you are a director, officer, or
employee of a Federal savings
association, or have the power to direct
its management or policies, or otherwise
owe a fiduciary duty to a Federal
savings association:
(a) You must not advance your own
personal or business interests, or those
of others with whom you have a
personal or business relationship, at the
expense of the savings association; and
(b) You must, if you have an interest
in a matter or transaction before the
board of directors:
(1) Disclose to the board all material
nonprivileged information relevant to
the board’s decision on the matter or
transaction, including:
(i) The existence, nature and extent of
your interests; and
(ii) The facts known to you as to the
matter or transaction under
consideration;
(2) Refrain from participating in the
board’s discussion of the matter or
transaction; and
(3) Recuse yourself from voting on the
matter or transaction (if you are a
director).
sroberts on DSK5SPTVN1PROD with RULES
§ 163.201
Corporate opportunity.
(a) If you are a director or officer of
a Federal savings association, or have
the power to direct its management or
policies, or otherwise owe a fiduciary
duty to a Federal savings association,
you must not take advantage of
corporate opportunities belonging to the
savings association.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(b) A corporate opportunity belongs to
a Federal savings association if:
(1) The opportunity is within the
corporate powers of the savings
association or a subsidiary of the
savings association; and
(2) The opportunity is of present or
potential practical advantage to the
savings association, either directly or
through its subsidiary.
(c) The OCC will not deem you to
have taken advantage of a corporate
opportunity belonging to the Federal
savings association if a disinterested
and independent majority of the savings
association’s board of directors, after
receiving a full and fair presentation of
the matter, rejected the opportunity as a
matter of sound business judgment.
Subpart H—Notice of Change of
Director or Senior Executive Officer
§ 163.550
What does this subpart do?
This subpart implements 12 U.S.C.
1831i, which requires certain Federal
savings associations to notify the OCC
before appointing or employing
directors and senior executive officers.
§ 163.555
subpart?
What definitions apply to this
The following definitions apply to
this subpart:
Director means an individual who
serves on the board of directors of a
Federal savings association. This term
does not include an advisory director
who:
(1) Is not elected by the shareholders;
(2) Is not authorized to vote on any
matters before the board of directors or
any committee of the board of directors;
(3) Provides only general policy
advice to the board of directors or any
committee of the board of directors; and
(4) Has not been identified by the
OCC or the OTS in writing as an
individual who performs the functions
of a director, or who exercises
significant influence over, or
participates in, major policymaking
decisions of the board of directors.
Senior executive officer means an
individual who holds the title or
performs the function of one or more of
the following positions (without regard
to title, salary, or compensation):
President, chief executive officer, chief
operating officer, chief financial officer,
chief lending officer, or chief
investment officer. Senior executive
officer also includes any other person
identified by the OCC or the OTS in
writing as an individual who exercises
significant influence over, or
participates in, major policymaking
decisions, whether or not hired as an
employee.
PO 00000
Frm 00113
Fmt 4701
Sfmt 4700
49061
Troubled condition means:
(1) A Federal savings association that
has a composite rating of 4 or 5, as
composite rating is defined in § 116.5(c)
of this chapter;
(2) A Federal savings association that
is subject to a capital directive, a ceaseand-desist order, a consent order, a
formal written agreement, or a prompt
corrective action directive relating to the
safety and soundness or financial
viability of the savings association,
unless otherwise informed in writing by
the OCC; or
(3) A Federal savings association that
is informed in writing by the OCC that
it is in troubled condition based on
information available to the OCC.
§ 163.560
Who must give prior notice?
(a) Federal savings association.
Except as provided under § 163.590, you
must notify your OCC supervisory office
at least 30 days before adding or
replacing any member of your board of
directors, employing any person as a
senior executive officer, or changing the
responsibilities of any senior executive
officer so that the person would assume
a different senior executive position if
you are a Federal savings association
and at least one of the following
circumstances apply:
(1) You do not comply with all
minimum capital requirements under
part 167 of this chapter;
(2) Are in troubled condition; or
(3) The OCC has notified you, in
connection with its review of a capital
restoration plan required under section
38 of the Federal Deposit Insurance Act
or part 165 of this chapter or otherwise,
that a notice is required under this
subpart.
(b) Notice by individual. If you are an
individual seeking election to the board
of directors of a Federal savings
association described in paragraph (a) of
this section, and have not been
nominated by management, you must
either provide the prior notice required
under paragraph (a) of this section or
follow the process under § 163.590(b).
§ 163.565 What procedures govern the
filing of my notice?
The procedures found in part 116,
subpart A of this chapter govern the
filing of your notice under § 163.560.
§ 163.570 What information must I include
in my notice?
(a) Content requirements. Your notice
must include:
(1) The information required under 12
U.S.C. 1817(j)(6)(A), and the
information prescribed in the
Interagency Notice of Change in Director
or Senior Executive Officer and the
E:\FR\FM\09AUR2.SGM
09AUR2
49062
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Interagency Biographical and Financial
Report which are available from the
OCC;
(2) Legible fingerprints of the
proposed director or senior executive
officer. You are not required to file
fingerprints if, within three years prior
to the date of submission of the notice,
the proposed director or senior
executive officer provided legible
fingerprints as part of a notice filed with
the OCC or the Office of Thrift
Supervision under 12 U.S.C. 1831i; and
(3) Such other information required
by the OCC.
(b) Modification of content
requirements. The OCC may require or
accept other information in place of the
content requirements in paragraph (a) of
this section.
(1) The OCC notifies you that it has
disapproved the notice; or
(2) The OCC extends the 30-day
period for an additional period not to
exceed 60 days. If the OCC extends the
30-day period, it will notify you in
writing that the period has been
extended, and will state the reason for
the extension. The proposed director or
senior executive officer may begin
service upon expiration of the extended
period, unless the OCC notifies you that
it has disapproved the notice during the
extended period.
(b) Notwithstanding paragraph (a) of
this section, a proposed director or
senior executive officer may begin
service after the OCC notifies you, in
writing, of its intention not to
disapprove the notice.
§ 163.575 What procedures govern OCC
review of my notice for completeness?
§ 163.590 When will the OCC waive the
prior notice requirement?
The OCC will first review your notice
to determine whether it is complete.
(a) If your notice is complete, the OCC
will notify you in writing of the date
that the OCC received the complete
notice.
(b) If your notice is not complete, the
OCC will notify you in writing what
additional information you need to
submit, why we need the information,
and when you must submit it. You
must, within the specified time period,
provide additional information or
request that the OCC suspend
processing of the notice. If you fail to act
within the specified time period, the
OCC may treat the notice as abandoned
or may review the application based on
the information provided.
(a) Waiver request. (1) An individual
may serve as a director or senior
executive officer before filing a notice
under this subpart if the OCC issues a
written finding that:
(i) Delay would threaten the safety or
soundness of the savings association;
(ii) Delay would not be in the public
interest; or
(iii) Other extraordinary
circumstances exist that justify waiver
of prior notice.
(2) If the OCC grants a waiver, you
must file a notice under this subpart
within the time period specified by the
OCC.
(b) Automatic waiver. An individual
may serve as a director before filing a
notice under this subpart, if the
individual was not nominated by
management and the individual submits
a notice under this subpart within seven
days after election as a director.
(c) Subsequent OCC action. The OCC
may disapprove a notice within 30 days
after the OCC issues a waiver under
paragraph (a) of this section or within
30 days after the election of an
individual who has filed a notice and is
serving pursuant to an automatic waiver
under paragraph (b) of this section.
sroberts on DSK5SPTVN1PROD with RULES
§ 163.580 What standards and procedures
will govern OCC review of the substance of
my notice?
The OCC will disapprove a notice if,
pursuant to the standard set forth in 12
U.S.C. 1831i(e), the OCC finds that the
competence, experience, character, or
integrity of the proposed director or
senior executive officer indicates that it
would not be in the best interests of the
depositors of the Federal savings
association or of the public to permit the
individual to be employed by, or
associated with, the savings association.
If the OCC disapproves a notice, it will
issue a written notice that explains why
the OCC disapproved the notice. The
OCC will send the notice to the savings
association and the individual.
§ 163.585 When may a proposed director
or senior executive officer begin service?
(a) A proposed director or senior
executive officer may begin service 30
days after the date the OCC receives all
required information, unless:
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PART 164—APPRAISALS
Sec.
164.1 Purpose, and scope.
164.2 Definitions.
164.3 Appraisals required; transactions
requiring a state certified or licensed
appraiser.
164.4 Minimum appraisal standards.
164.5 Appraiser independence.
164.6 Professional association membership;
competency.
164.7 Enforcement.
164.8 Appraisal policies and practices of
Federal savings associations and
subsidiaries.
PO 00000
Frm 00114
Fmt 4701
Sfmt 4700
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1828(m), 3331 et seq, 5412(b)(2)(B).
§ 164.1
Purpose and scope.
(a) [Reserved]
(b) Purpose and scope. (1) Title XI of
the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989
(‘‘FIRREA’’) (Pub. L. 101–73, 103 Stat.
183, 511 (1989)), 12 U.S.C. 3331 et seq.
provides protection for Federal financial
and public policy interests in real estate
related transactions by requiring real
estate appraisals used in connection
with Federally related transactions to be
performed in writing, in accordance
with uniform standards, by appraisers
whose competency has been
demonstrated and whose professional
conduct will be subject to effective
supervision. This part implements the
requirements of title XI and applies to
all Federally related transactions
entered into by institutions regulated by
the OCC (‘‘regulated institutions’’).
(2) This part: (i) Identifies which real
estate-related financial transactions
require the services of an appraiser;
(ii) Prescribes which categories of
Federally related transactions shall be
appraised by a state certified appraiser
and which by a state licensed appraiser;
and
(iii) Prescribes minimum standards
for the performance of real estate
appraisals in connection with Federally
related transactions under the
jurisdiction of the OCC.
§ 164.2
Definitions.
(a) Appraisal means a written
statement independently and
impartially prepared by a qualified
appraiser setting forth an opinion as to
the market value of an adequately
described property as of a specific
date(s), supported by the presentation
and analysis of relevant market
information.
(b) Appraisal Foundation means the
Appraisal Foundation established on
November 30, 1987, as a not-for-profit
corporation under the laws of Illinois.
(c) Appraisal Subcommittee means
the Appraisal Subcommittee of the
Federal Financial Institution
Examination Council.
(d) Business loan means a loan or
extension of credit to any corporation,
general or limited partnership, business
trust, joint venture, pool, syndicate, sole
proprietorship, or other business entity.
(e) Complex 1-to-4 family residential
property appraisal means one in which
the property to be appraised, the form
of ownership, or market conditions are
atypical.
(f) Federally related transaction
means any real estate-related financial
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
transaction entered into on or after
August 9, 1990, that:
(1) Any regulated institution engages
in or contracts for; and
(2) Requires the services of an
appraiser.
(g) Market value means the most
probable price which a property should
bring in a competitive and open market
under all conditions requisite to a fair
sale, the buyer and seller each acting
prudently and knowledgeably, and
assuming the price is not affected by
undue stimulus. Implicit in this
definition is the consummation of a sale
as of a specified date and the passing of
title from seller to buyer under
conditions whereby:
(1) Buyer and seller are typically
motivated;
(2) Both parties are well informed or
well advised, and acting in what they
consider their own best interests;
(3) A reasonable time is allowed for
exposure in the open market;
(4) Payment is made in terms of cash
in U.S. dollars or in terms of financial
arrangements comparable thereto; and
(5) The price represents the normal
consideration for the property sold
unaffected by special or creative
financing or sales concessions granted
by anyone associated with the sale.
(h) Real estate or real property means
an identified parcel or tract of land,
with improvements, and includes
easements, rights of way, undivided or
future interests, or similar rights in a
tract of land, but does not include
mineral rights, timber rights, growing
crops, water rights, or similar interests
severable from the land when the
transaction does not involve the
associated parcel or tract of land.
(i) Real estate-related financial
transaction means any transaction
involving:
(1) The sale, lease, purchase,
investment in or exchange of real
property, including interests in
property, or the financing thereof; or
(2) The refinancing of real property or
interests in real property; or
(3) The use of real property or
interests in property as security for a
loan or investment, including mortgagebacked securities.
(j) State certified appraiser means any
individual who has satisfied the
requirements for certification in a state
or territory whose criteria for
certification as a real estate appraiser
currently meet the minimum criteria for
certification issued by the Appraiser
Qualifications Board of the Appraisal
Foundation. No individual shall be a
state certified appraiser unless such
individual has achieved a passing grade
upon a suitable examination
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
administered by a state or territory that
is consistent with and equivalent to the
Uniform State Certification Examination
issued or endorsed by the Appraiser
Qualifications Board of the National
Foundation. In addition, the Appraisal
Subcommittee must not have issued a
finding that the policies, practices, or
procedures of the state or territory are
inconsistent with title XI of FIRREA.
The OCC may, from time to time,
impose additional qualification criteria
for certified appraisers performing
appraisals in connection with Federally
related transactions within its
jurisdiction.
(k) State licensed appraiser means
any individual who has satisfied the
requirements for licensing in a state or
territory where the licensing procedures
comply with title XI of FIRREA and
where the Appraisal Subcommittee has
not issued a finding that the policies,
practices, or procedures of the state or
territory are inconsistent with title XI.
The OCC may, from time to time,
impose additional qualification criteria
for licensed appraisers performing
appraisals in connection with Federally
related transactions within its
jurisdiction.
(l) Tract development means a project
of five units or more that is constructed
or is to be constructed as a single
development.
(m) Transaction value means:
(1) For loans or other extensions of
credit, the amount of the loan or
extension of credit;
(2) For sales, leases, purchases, and
investments in or exchanges of real
property, the market value of the real
property interest involved; and
(3) For the pooling of loans or
interests in real property for resale or
purchase, the amount of the loan or
market value of the real property
calculated with respect to each such
loan or interest in real property.
§ 164.3 Appraisals required; transactions
requiring a state certified or licensed
appraiser.
(a) Appraisals required. An appraisal
performed by a state certified or
licensed appraiser is required for all real
estate-related financial transactions
except those in which:
(1) The transaction value is $250,000
or less;
(2) A lien on real estate has been
taken as collateral in an abundance of
caution;
(3) The transaction is not secured by
real estate;
(4) A lien on real estate has been
taken for purposes other than the real
estate’s value;
(5) The transaction is a business loan
that:
PO 00000
Frm 00115
Fmt 4701
Sfmt 4700
49063
(i) Has a transaction value of $1
million or less; and
(ii) Is not dependent on the sale of, or
rental income derived from, real estate
as the primary source of repayment;
(6) A lease of real estate is entered
into, unless the lease is the economic
equivalent of a purchase or sale of the
leased real estate;
(7) The transaction involves an
existing extension of credit at the
lending institution, provided that:
(i) There has been no obvious and
material change in market conditions or
physical aspects of the property that
threatens the adequacy of the
institution’s real estate collateral
protection after the transaction, even
with the advancement of new monies;
or
(ii) There is no advancement of new
monies, other than funds necessary to
cover reasonable closing costs;
(8) The transaction involves the
purchase, sale, investment in, exchange
of, or extension of credit secured by, a
loan or interest in a loan, pooled loans,
or interests in real property, including
mortgaged-backed securities, and each
loan or interest in a loan, pooled loan,
or real property interest met OCC
regulatory requirements for appraisals at
the time of origination;
(9) The transaction is wholly or
partially insured or guaranteed by a
United States government agency or
United States government sponsored
agency;
(10) The transaction either:
(i) Qualifies for sale to a United States
government agency or United States
government sponsored agency; or
(ii) Involves a residential real estate
transaction in which the appraisal
conforms to the Federal National
Mortgage Association or Federal Home
Loan Mortgage Corporation appraisal
standards applicable to that category of
real estate;
(11) The regulated institution is acting
in a fiduciary capacity and is not
required to obtain an appraisal under
other law; or
(12) The OCC determines that the
services of an appraiser are not
necessary in order to protect Federal
financial and public policy interests in
real estate-related financial transactions
or to protect the safety and soundness
of the institution.
(b) Evaluations required. For a
transaction that does not require the
services of a state certified or licensed
appraiser under paragraph (a)(1), (a)(5)
or (a)(7) of this section, the institution
shall obtain an appropriate evaluation of
real property collateral that is consistent
with safe and sound banking practices.
E:\FR\FM\09AUR2.SGM
09AUR2
49064
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(c) Appraisals to address safety and
soundness concerns. The OCC reserves
the right to require an appraisal under
this part whenever the agency believes
it is necessary to address safety and
soundness concerns.
(d) Transactions requiring a state
certified appraiser— (1) All transactions
of $1,000,000 or more. All Federally
related transactions having a transaction
value of $1,000,000 or more shall
require an appraisal prepared by a state
certified appraiser.
(2) Nonresidential and residential
(other than 1-to-4 family) transactions of
$250,000 or more. All Federally related
transactions having a transaction value
of $250,000 or more, other than those
involving appraisals of 1-to-4 family
residential properties, shall require an
appraisal prepared by a state certified
appraiser.
(3) Complex residential transactions
of $250,000 or more. All complex 1-to4 family residential property appraisals
rendered in connection with Federally
related transactions shall require a state
certified appraiser if the transaction
value is $250,000 or more. A regulated
institution may presume that appraisals
of 1-to-4 family residential properties
are not complex, unless the institution
has readily available information that a
given appraisal will be complex. The
regulated institution shall be
responsible for making the final
determination of whether the appraisal
is complex. If during the course of the
appraisal a licensed appraiser identifies
factors that would result in the property,
form of ownership, or market conditions
being considered atypical, then either:
(i) The regulated institution may ask
the licensed appraiser to complete the
appraisal and have a certified appraiser
approve and co-sign the appraisal; or
(ii) The institution may engage a
certified appraiser to complete the
appraisal.
(e) Transactions requiring either a
state certified or licensed appraiser. All
appraisals for Federally related
transactions not requiring the services of
a state certified appraiser shall be
prepared by either a state certified
appraiser or a state licensed appraiser.
sroberts on DSK5SPTVN1PROD with RULES
§ 164.4
Minimum appraisal standards.
For Federally related transactions, all
appraisals shall, at a minimum:
(a) Conform to generally accepted
appraisal standards as evidenced by the
Uniform Standards of Professional
Appraisal Practice (USPAP)
promulgated by the Appraisal Standards
Board of the Appraisal Foundation
unless principles of safe and sound
banking require compliance with
stricter standards;
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(b) Be written and contain sufficient
information and analysis to support the
institution’s decision to engage in the
transaction;
(c) Analyze and report appropriate
deductions and discounts for proposed
construction or renovation, partially
leased buildings, non-market lease
terms, and tract developments with
unsold units;
(d) Be based upon the definition of
market value as set forth in this part;
and
(e) Be performed by state licensed or
certified appraisers in accordance with
requirements set forth in this part.
§ 164.5
Appraiser independence.
(a) Staff appraisers. If an appraisal is
prepared by a staff appraiser, that
appraiser must be independent of the
lending, investment, and collection
functions and not involved, except as an
appraiser, in the Federally related
transaction, and have no direct or
indirect interest, financial or otherwise,
in the property. If the only qualified
persons available to perform an
appraisal are involved in the lending,
investment, or collection functions of
the regulated institution, the regulated
institution shall take appropriate steps
to ensure that the appraisers exercise
independent judgment and that the
appraisal is adequate. Such steps
include, but are not limited to,
prohibiting an individual from
performing an appraisal in connection
with Federally related transactions in
which the appraiser is otherwise
involved and prohibiting directors and
officers from participating in any vote or
approval involving assets on which they
performed an appraisal.
(b) Fee appraisers. (1) If an appraisal
is prepared by a fee appraiser, the
appraiser shall be engaged directly by
the regulated institution or its agent,
and have no direct or indirect interest,
financial or otherwise, in the property
or the transaction.
(2) A regulated institution also may
accept an appraisal that was prepared
by an appraiser engaged directly by
another financial services institution, if:
(i) The appraiser has no direct or
indirect interest, financial or otherwise,
in the property or the transaction; and
(ii) The regulated institution
determines that the appraisal conforms
to the requirements of this part and is
otherwise acceptable.
§ 164.6 Professional association
membership; competency.
(a) Membership in appraisal
organizations. A state certified appraiser
or a state licensed appraiser may not be
excluded from consideration for an
PO 00000
Frm 00116
Fmt 4701
Sfmt 4700
assignment for a Federally related
transaction solely by virtue of
membership or lack of membership in
any particular appraisal organization.
(b) Competency. All staff and fee
appraisers performing appraisals in
connection with Federally related
transactions must be state certified or
licensed, as appropriate. However, a
state certified or licensed appraiser may
not be considered competent solely by
virtue of being certified or licensed. Any
determination of competency shall be
based upon the individual’s experience
and educational background as they
relate to the particular appraisal
assignment for which he or she is being
considered.
§ 164.7
Enforcement.
Institutions and institution-affiliated
parties, including staff appraisers and
fee appraisers, who violate this part may
be subject to removal and/or prohibition
orders, cease and desist orders, and the
imposition of civil money penalties
pursuant to the Federal Deposit
Insurance Act, 12 U.S.C. 1811 et seq., as
amended, or other applicable law.
§ 164.8 Appraisal policies and practices of
Federal savings associations and
subsidiaries.
(a) Introduction. The soundness of a
Federal savings association’s mortgage
loans and real estate investments, and
those of its service corporation(s),
depends to a great extent upon the
adequacy of the loan underwriting used
to support these transactions. An
appraisal standard is one of several
critical components of a sound
underwriting policy because appraisal
reports contain estimates of the value of
collateral held or assets owned. This
section sets forth the responsibilities of
management to develop, implement,
and maintain appraisal standards in
determining compliance with the
appraisal requirements of § 163.170 of
this chapter.
(b) Definition. For purposes of this
section, management means: the
directors and officers of a Federal
savings association, or service
corporation of such savings association,
as those terms are defined in §§ 161.18
and 161.35 of this chapter respectively.
(c) Responsibilities of management.
An appraisal is a critical component of
the loan underwriting or real estate
investment decision. Therefore,
management shall develop, implement,
and maintain appraisal policies to
ensure that appraisals reflect
professional competence and to
facilitate the reporting of estimates of
market value upon which Federal
savings associations may rely to make
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
lending decisions. To achieve these
results:
(1) Management shall develop written
appraisal policies, subject to formal
adoption by the savings association’s
board of directors, that it shall
implement in consultation with other
appropriate personnel. These policies
shall ensure that adequate appraisals are
obtained and proper appraisal
procedures are followed consistent with
the requirements of this part 164.
(2) Management shall develop and
adopt guidelines and institute
procedures pertaining to the hiring of
appraisers to perform appraisal services
for the savings association consistent
with the requirements of this part 164.
These guidelines shall set forth specific
factors to be considered by management
including, but not limited to, an
appraiser’s state certification or
licensing, professional education, and
type of experience. An appraiser’s
membership in professional appraisal
organizations may be considered
consistent with the requirements of
§ 164.6
(3) Management shall review on an
annual basis the performance of all
approved appraisers used within the
preceding 12-month period for
compliance with (i) the savings
association’s appraisal policies and
procedures; and (ii) the reasonableness
of the value estimates reported.
(d) Exemptions. The requirements of
§ 164.4(b) through (d) shall not apply
with respect to appraisals on
nonresidential properties prepared on
form reports approved by the OCC and
completed in accordance with the
applicable instructional booklet.
sroberts on DSK5SPTVN1PROD with RULES
PART 165—PROMPT CORRECTIVE
ACTION
Sec.
165.1 Authority, purpose, scope, other
supervisory authority, and disclosure of
capital categories.
165.2 Definitions.
165.3 Notice of capital category.
165.4 Capital measures and capital category
definitions.
165.5 Capital restoration plans.
165.6 Mandatory and discretionary
supervisory actions under section 38.
165.7 Directives to take prompt corrective
action.
165.8 Procedures for reclassifying a Federal
savings association based on criteria
other than capital.
165.9 Order to dismiss a director or senior
executive officer.
165.10 Enforcement of directives.
Authority: 12 U.S.C. 1831o, 5412(b)(2)(B).
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
§ 165.1 Authority, purpose, scope, other
supervisory authority, and disclosure of
capital categories.
(a) Authority. This part is issued by
the OCC pursuant to section 38 (section
38) of the Federal Deposit Insurance Act
(FDI Act) as added by section 131 of the
Federal Deposit Insurance Corporation
Improvement Act of 1991 (Pub. L. 102–
242, 105 Stat. 2236 (1991)) (12 U.S.C.
1831o).
(b) Purpose. Section 38 of the FDI Act
establishes a framework of supervisory
actions for insured depository
institutions that are not adequately
capitalized. The principal purpose of
this part is to define, for Federal savings
associations, the capital measures and
capital levels that are used for
determining the supervisory actions
authorized under section 38 of the FDI
Act. This part also establishes
procedures for submission and review
of capital restoration plans and for
issuance and review of directives and
orders pursuant to section 38.
(c) Scope. This part implements the
provisions of section 38 of the FDI Act
as they apply to Federal savings
associations. Certain of these provisions
also apply to officers, directors and
employees of Federal savings
associations. Other provisions apply to
any company that controls a Federal
savings association and to the affiliates
of a Federal savings association.
(d) Other supervisory authority.
Neither section 38 nor this part in any
way limits the authority of the OCC
under any other provision of law to take
supervisory actions to address unsafe or
unsound practices, deficient capital
levels, violations of law, unsafe or
unsound conditions, or other practices.
Action under section 38 of the FDI Act
and this part may be taken
independently of, in conjunction with,
or in addition to any other enforcement
action available to the OCC, including
issuance of cease and desist orders,
capital directives, approval or denial of
applications or notices, assessment of
civil money penalties, or any other
actions authorized by law.
(e) Disclosure of capital categories.
The assignment of a Federal savings
association under this part within a
particular capital category is for
purposes of implementing and applying
the provisions of section 38. Unless
permitted by the OCC or otherwise
required by law, no Federal savings
association may state in any
advertisement or promotional material
its capital category under this subpart or
that the OCC or any other Federal
banking agency has assigned the Federal
savings association to a particular
category.
PO 00000
Frm 00117
Fmt 4701
Sfmt 4700
§ 165.2
49065
Definitions.
For purposes of this part, except as
modified in this section or unless the
context otherwise requires, the terms
used in this part have the same
meanings as set forth in sections 38 and
3 of the FDI Act.
(a)(1) Control has the same meaning
assigned to it in section 2 of the Bank
Holding Company Act (12 U.S.C. 1841),
and the term ‘‘controlled’’ shall be
construed consistently with the term
‘‘control.’’
(2) Exclusion for fiduciary ownership.
No insured depository institution or
company controls another insured
depository institution or company by
virtue of its ownership or control of
shares in a fiduciary capacity. Shares
shall not be deemed to have been
acquired in a fiduciary capacity if the
acquiring insured depository institution
or company has sole discretionary
authority to exercise voting rights with
respect thereto.
(3) Exclusion for debts previously
contracted. No insured depository
institution or company controls another
insured depository institution or
company by virtue of its ownership or
control of shares acquired in securing or
collecting a debt previously contracted
in good faith, until two years after the
date of acquisition. The two-year period
may be extended at the discretion of the
appropriate Federal banking agency for
up to three one-year periods.
(b) Controlling person means any
person having control of an insured
depository institution and any company
controlled by that person.
(c) Leverage ratio means the ratio of
Tier 1 capital to adjusted total assets, as
calculated in accordance with part 167
of this chapter.
(d) Management fee means any
payment of money or provision of any
other thing of value to a company or
individual for the provision of
management services or advice to the
Federal savings association or related
overhead expenses, including payments
related to supervisory, executive,
managerial or policymaking functions,
other than compensation to an
individual in the individual’s capacity
as an officer or employee of the Federal
savings association.
(e) Risk-weighted assets means total
risk-weighted assets, as calculated in
accordance with part 167 of this
chapter.
(f) Tangible equity means the amount
of a Federal savings association’s core
capital as computed in part 167 of this
chapter plus the amount of its
outstanding cumulative perpetual
preferred stock (including related
surplus), minus intangible assets as
E:\FR\FM\09AUR2.SGM
09AUR2
49066
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
defined in § 167.1 of this chapter, except
mortgage servicing assets to the extent
they are includable under § 167.12.
Non-mortgage servicing assets that have
not been previously deducted in
calculating core capital are deducted.
(g) Tier 1 capital means the amount of
core capital as defined in part 167 of
this chapter.
(h) Tier 1 risk-based capital ratio
means the ratio of Tier 1 capital to riskweighted assets, as calculated in
accordance with part 167 of this
chapter.
(i) Total assets, for purposes of
§ 165.4(b)(5), means adjusted total assets
as calculated in accordance with part
167 of this chapter, minus intangible
assets as provided in the definition of
tangible equity.
(j) Total risk-based capital ratio
means the ratio of total capital to riskweighted assets, as calculated in
accordance with part 167 of this
chapter.
sroberts on DSK5SPTVN1PROD with RULES
§ 165.3
Notice of capital category.
(a) Effective date of determination of
capital category. A Federal savings
association shall be deemed to be within
a given capital category for purposes of
section 38 of the FDI Act and this part
as of the date the savings association is
notified of, or is deemed to have notice
of, its capital category, pursuant to
paragraph (b) of this section.
(b) Notice of capital category. A
Federal savings association shall be
deemed to have been notified of its
capital levels and its capital category as
of the most recent date:
(1) A Consolidated Report of
Condition (Call Report) or Thrift
Financial Report (TFR), as appropriate,
is required to be filed with the OCC;
(2) A final report of examination is
delivered to the savings association; or
(3) Written notice is provided by the
OCC to the savings association of its
capital category for purposes of section
38 of the FDI Act and this part or that
the savings association’s capital
category has changed as provided in
paragraph (c) of this section or
§ 165.4(c).
(c) Adjustments to reported capital
levels and category—(1) Notice of
adjustment by Federal savings
association. A Federal savings
association shall provide the OCC with
written notice that an adjustment to the
savings association’s capital category
may have occurred no later than 15
calendar days following the date that
any material event has occurred that
would cause the savings association to
be placed in a lower capital category
from the category assigned to the
savings association for purposes of
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
section 38 and this part on the basis of
the savings association’s most recent
Call Report or TFR, as appropriate, or
report of examination.
(2) Determination by the OCC to
change capital category. After receiving
notice pursuant to paragraph (c)(1) of
this section, the OCC shall determine
whether to change the capital category
of the Federal savings association and
shall notify the savings association of
the OCC determination.
§ 165.4 Capital measures and capital
category definitions.
(a) Capital measures. For purposes of
section 38 and this part, the relevant
capital measures shall be:
(1) The total risk-based capital ratio;
(2) The Tier 1 risk-based capital ratio;
and
(3) The leverage ratio.
(b) Capital categories. For purposes of
section 38 and this part, a Federal
savings association shall be deemed to
be:
(1) Well capitalized if the savings
association:
(i) Has a total risk-based capital ratio
of 10.0 percent or greater; and
(ii) Has a Tier 1 risk-based capital
ratio of 6.0 percent or greater; and
(iii) Has a leverage ratio of 5.0 percent
or greater; and
(iv) Is not subject to any written
agreement, order, capital directive, or
prompt corrective action directive
issued by the OCC or OTS under section
8 of the FDI Act, the International
Lending Supervision Act of 1983 (12
U.S.C. 3907), the Home Owners’ Loan
Act (12 U.S.C. 1464(t)(6)(A)(ii)), or
section 38 of the FDI Act, or any
regulation thereunder, to meet and
maintain a specific capital level for any
capital measure.
(2) Adequately capitalized if the
savings association:
(i) Has a total risk-based capital ratio
of 8.0 percent or greater; and
(ii) Has a Tier 1 risk-based capital
ratio of 4.0 percent or greater; and
(iii) Has:
(A) A leverage ratio of 4.0 percent or
greater; or
(B) A leverage ratio of 3.0 percent or
greater if the savings association is
assigned a composite rating of 1, as
composite rating is defined in § 116.5(c)
of this chapter; and
(iv) Does not meet the definition of a
well capitalized savings association.
(3) Undercapitalized if the savings
association:
(i) Has a total risk-based capital ratio
that is less than 8.0 percent; or
(ii) Has a Tier 1 risk-based capital
ratio that is less than 4.0 percent; or
(iii)(A) Except as provided in
paragraph (b)(3)(iii)(B) of this section,
PO 00000
Frm 00118
Fmt 4701
Sfmt 4700
has a leverage ratio that is less than 4.0
percent; or
(B) Has a leverage ratio that is less
than 3.0 percent if the savings
association is assigned a composite
rating of 1, as composite rating is
defined in § 116.5(c) of this chapter.
(4) Significantly undercapitalized if
the savings association has:
(i) A total risk-based capital ratio that
is less than 6.0 percent; or
(ii) A Tier 1 risk-based capital ratio
that is less than 3.0 percent; or
(iii) A leverage ratio that is less than
3.0 percent.
(5) Critically undercapitalized if the
savings association has a ratio of
tangible equity to total assets that is
equal to or less than 2.0 percent.
(c) Reclassification based on
supervisory criteria other than capital.
The OCC may reclassify a well
capitalized Federal savings association
as adequately capitalized and may
require an adequately capitalized or
undercapitalized Federal savings
association to comply with certain
mandatory or discretionary supervisory
actions as if the savings association
were in the next lower capital category
(except that the OCC may not reclassify
a significantly undercapitalized savings
association as critically
undercapitalized) (each of these actions
are hereinafter referred to generally as
‘‘reclassifications’’) in the following
circumstances:
(1) Unsafe or unsound condition. The
OCC has determined, after notice and
opportunity for hearing pursuant to
§ 165.8(a) of this part, that the savings
association is in an unsafe or unsound
condition; or
(2) Unsafe or unsound practice. The
OCC has determined, after notice and an
opportunity for hearing pursuant to
§ 165.8(a) of this part, that the savings
association received a less-thansatisfactory rating for any rating
category (other than in a rating category
specifically addressing capital
adequacy) under the Uniform Financial
Institutions Rating System, or an
equivalent rating under a comparable
rating system adopted by the OCC; and
has not corrected the conditions that
served as the basis for the less than
satisfactory rating. Ratings under this
paragraph (c)(2) refer to the most recent
ratings (as determined either on-site or
off-site by the most recent examination)
of which the savings association has
been notified in writing.
§ 165.5
Capital restoration plans.
(a) Schedule for filing plan—(1) In
general. A Federal savings association
shall file a written capital restoration
plan with the OCC within 45 days of the
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
date that the savings association
receives notice or is deemed to have
notice that the savings association is
undercapitalized, significantly
undercapitalized, or critically
undercapitalized, unless the OCC
notifies the savings association in
writing that the plan is to be filed
within a different period. An adequately
capitalized savings association that has
been required pursuant to § 165.4(c) to
comply with supervisory actions as if
the savings association were
undercapitalized is not required to
submit a capital restoration plan solely
by virtue of the reclassification.
(2) Additional capital restoration
plans. Notwithstanding paragraph (a)(1)
of this section, a Federal savings
association that has already submitted
and is operating under a capital
restoration plan approved under section
38 and this part is not required to
submit an additional capital restoration
plan based on a revised calculation of
its capital measures or a reclassification
of the institution under § 165.4(c) unless
the OCC notifies the savings association
that it must submit a new or revised
capital plan. A savings association that
is notified that it must submit a new or
revised capital restoration plan shall file
the plan in writing with the OCC within
45 days of receiving such notice, unless
the OCC notifies the savings association
in writing that the plan is to be filed
within a different period.
(b) Contents of plan. All financial data
submitted in connection with a capital
restoration plan shall be prepared in
accordance with the instructions
provided on the Call Report or TFR, as
appropriate, unless the OCC instructs
otherwise. The capital restoration plan
shall include all of the information
required to be filed under section
38(e)(2) of the FDI Act. A Federal
savings association that is required to
submit a capital restoration plan as the
result of a reclassification of the savings
association pursuant to § 165.4(c) of this
part shall include a description of the
steps the savings association will take to
correct the unsafe or unsound condition
or practice. No plan shall be accepted
unless it includes any performance
guarantee described in section
38(e)(2)(C) of the FDI Act by each
company that controls the savings
association.
(c) Review of capital restoration plans.
Within 60 days after receiving a capital
restoration plan under this part, the
OCC shall provide written notice to the
Federal savings association of whether
the plan has been approved. The OCC
may extend the time within which
notice regarding approval of a plan shall
be provided.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(d) Disapproval of capital plan. If a
capital restoration plan is not approved
by the OCC, the Federal savings
association shall submit a revised
capital restoration plan, when directed
to do so, within the time specified by
the OCC. Upon receiving notice that its
capital restoration plan has not been
approved, any undercapitalized savings
association (as defined in § 165.4(b)(3)
of this part) shall be subject to all of the
provisions of section 38 and this part
applicable to significantly
undercapitalized institutions. These
provisions shall be applicable until such
time as a new or revised capital
restoration plan submitted by the
savings association has been approved
by the OCC.
(e) Failure to submit a capital
restoration plan. A Federal savings
association that is undercapitalized (as
defined in § 165.4(b)(3) of this part) and
that fails to submit a written capital
restoration plan within the period
provided in this section shall, upon the
expiration of that period, be subject to
all of the provisions of section 38 and
this part applicable to significantly
undercapitalized institutions.
(f) Failure to implement a capital
restoration plan. Any undercapitalized
Federal savings association that fails in
any material respect to implement a
capital restoration plan shall be subject
to all of the provisions of section 38 and
this part applicable to significantly
undercapitalized institutions.
(g) Amendment of capital plan. A
Federal savings association that has
filed an approved capital restoration
plan may, after prior written notice to
and approval by the OCC, amend the
plan to reflect a change in circumstance.
Until such time as a proposed
amendment has been approved, the
savings association shall implement the
capital restoration plan as approved
prior to the proposed amendment.
(h) Notice to FDIC. Within 45 days of
the effective date of OCC approval of a
capital restoration plan, or any
amendment to a capital restoration plan,
the OCC shall provide a copy of the plan
or amendment to the FDIC.
(i) Performance guarantee by
companies that control a savings
association—(1) Limitation on
liability—(i) Amount limitation. The
aggregate liability under the guarantee
provided under section 38 and this part
for all companies that control a specific
Federal savings association that is
required to submit a capital restoration
plan under this part shall be limited to
the lesser of:
(A) An amount equal to 5.0 percent of
the savings association’s total assets at
the time the savings association was
PO 00000
Frm 00119
Fmt 4701
Sfmt 4700
49067
notified or deemed to have notice that
the savings association was
undercapitalized; or
(B) The amount necessary to restore
the relevant capital measures of the
savings association to the levels
required for the savings association to
be classified as adequately capitalized,
as those capital measures and levels are
defined at the time that the savings
association initially fails to comply with
a capital restoration plan under this
part.
(ii) Limit on duration. The guarantee
and limit of liability under section 38
and this part shall expire after the OCC
notifies the Federal savings association
that it has remained adequately
capitalized for each of four consecutive
calendar quarters. The expiration or
fulfillment by a company of a guarantee
of a capital restoration plan shall not
limit the liability of the company under
any guarantee required or provided in
connection with any capital restoration
plan filed by the same savings
association after expiration of the first
guarantee.
(iii) Collection on guarantee. Each
company that controls a given Federal
savings association shall be jointly and
severally liable for the guarantee for
such savings association as required
under section 38 and this part, and the
OCC may require and collect payment of
the full amount of that guarantee from
any or all of the companies issuing the
guarantee.
(2) Failure to provide guarantee. In
the event that a Federal savings
association that is controlled by any
company submits a capital restoration
plan that does not contain the guarantee
required under section 38(e)(2) of the
FDI Act, the savings association shall,
upon submission of the plan, be subject
to the provisions of section 38 and this
part that are applicable to savings
associations that have not submitted an
acceptable capital restoration plan.
(3) Failure to perform guarantee.
Failure by any company that controls a
Federal savings association to perform
fully its guarantee of any capital plan
shall constitute a material failure to
implement the plan for purposes of
section 38(f) of the FDI Act. Upon such
failure, the savings association shall be
subject to the provisions of section 38
and this part that are applicable to
savings associations that have failed in
a material respect to implement a
capital restoration plan.
§ 165.6 Mandatory and discretionary
supervisory actions under section 38.
(a) Mandatory supervisory actions—
(1) Provisions applicable to all Federal
savings associations. All Federal savings
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49068
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
associations are subject to the
restrictions contained in section 38(d) of
the FDI Act on payment of capital
distributions and management fees.
(2) Provisions applicable to
undercapitalized, significantly
undercapitalized, and critically
undercapitalized Federal savings
associations. Immediately upon
receiving notice or being deemed to
have notice, as provided in § 165.3 or
§ 165.5 of this part, that the Federal
savings association is undercapitalized,
significantly undercapitalized, or
critically undercapitalized, the savings
association shall become subject to the
provisions of section 38 of the FDI Act:
(i) Restricting payment of capital
distributions and management fees
(section 38(d));
(ii) Requiring that the OCC monitor
the condition of the savings association
(section 38(e)(1));
(iii) Requiring submission of a capital
restoration plan within the schedule
established in this part (section
38(e)(2));
(iv) Restricting the growth of the
savings association’s assets (section
38(e)(3)); and
(v) Requiring prior approval of certain
expansion proposals (section 38(e)(4)).
(3) Additional provisions applicable
to significantly undercapitalized, and
critically undercapitalized Federal
savings associations. In addition to the
provisions of section 38 of the FDI Act
described in paragraph (a)(2) of this
section, immediately upon receiving
notice or being deemed to have notice,
as provided in § 165.3 or § 165.5 of this
part, that the Federal savings association
is significantly undercapitalized, or
critically undercapitalized, or that the
savings association is subject to the
provisions applicable to institutions that
are significantly undercapitalized
because the savings association failed to
submit or implement in any material
respect an acceptable capital restoration
plan, the savings association shall
become subject to the provisions of
section 38 of the FDI Act that restrict
compensation paid to senior executive
officers of the institution (section
38(f)(4)).
(4) Additional provisions applicable
to critically undercapitalized Federal
savings associations. In addition to the
provisions of section 38 of the FDI Act
described in paragraphs (a)(2) and (a)(3)
of this section, immediately upon
receiving notice or being deemed to
have notice, as provided in § 165.3 of
this part, that the Federal savings
association is critically
undercapitalized, the savings
association shall become subject to the
provisions of section 38 of the FDI Act:
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(i) Restricting the activities of the
savings association (section 38(h)(1));
and
(ii) Restricting payments on
subordinated debt of the savings
association (section 38(h)(2)).
(b) Discretionary supervisory actions.
In taking any action under section 38
that is within the OCC discretion to take
in connection with: A Federal savings
association that is deemed to be
undercapitalized, significantly
undercapitalized or critically
undercapitalized, or has been
reclassified as undercapitalized, or
significantly undercapitalized; an officer
or director of such savings association;
or a company that controls such savings
association, the OCC shall follow the
procedures for issuing directives under
§§ 165.7 and 165.9 of this part unless
otherwise provided in section 38 or this
part.
§ 165.7 Directives to take prompt
corrective action.
(a) Notice of intent to issue a
directive—(1) In general. The OCC shall
provide an undercapitalized,
significantly undercapitalized, or
critically undercapitalized Federal
savings association or, where
appropriate, any company that controls
the savings association, prior written
notice of the OCC’s intention to issue a
directive requiring such savings
association or company to take actions
or to follow proscriptions described in
section 38 that are within the OCC’s
discretion to require or impose under
section 38 of the FDI Act, including
sections 38(e)(5), (f)(2), (f)(3), or (f)(5).
The savings association shall have such
time to respond to a proposed directive
as provided by the OCC under
paragraph (c) of this section.
(2) Immediate issuance of final
directive. If the OCC finds it necessary
in order to carry out the purposes of
section 38 of the FDI Act, the OCC may,
without providing the notice prescribed
in paragraph (a)(1) of this section, issue
a directive requiring a Federal savings
association or any company that
controls a Federal savings association
immediately to take actions or to follow
proscriptions described in section 38
that are within the OCC’s discretion to
require or impose under section 38 of
the FDI Act, including section 38(e)(5),
(f)(2), (f)(3), or (f)(5). A savings
association or company that is subject to
such an immediately effective directive
may submit a written appeal of the
directive to the OCC. Such an appeal
must be received by the OCC within 14
calendar days of the issuance of the
directive, unless the OCC permits a
longer period. The OCC shall consider
PO 00000
Frm 00120
Fmt 4701
Sfmt 4700
any such appeal, if filed in a timely
matter, within 60 days of receiving the
appeal. During such period of review,
the directive shall remain in effect
unless the OCC, in its sole discretion,
stays the effectiveness of the directive.
(b) Contents of notice. A notice of
intention to issue a directive shall
include:
(1) A statement of the Federal savings
association’s capital measures and
capital levels;
(2) A description of the restrictions,
prohibitions or affirmative actions that
the OCC proposes to impose or require;
(3) The proposed date when such
restrictions or prohibitions would be
effective or the proposed date for
completion of such affirmative actions;
and
(4) The date by which the Federal
savings association or company subject
to the directive may file with the OCC
a written response to the notice.
(c) Response to notice—(1) Time for
response. A Federal savings association
or company may file a written response
to a notice of intent to issue a directive
within the time period set by the OCC.
The date shall be at least 14 calendar
days from the date of the notice unless
the OCC determines that a shorter
period is appropriate in light of the
financial condition of the savings
association or other relevant
circumstances.
(2) Content of response. The response
should include:
(i) An explanation why the action
proposed by the OCC is not an
appropriate exercise of discretion under
section 38;
(ii) Any recommended modification
of the proposed directive; and
(iii) Any other relevant information,
mitigating circumstances,
documentation, or other evidence in
support of the position of the savings
association or company regarding the
proposed directive.
(d) OCC consideration of response.
After considering the response, the OCC
may:
(1) Issue the directive as proposed or
in modified form;
(2) Determine not to issue the
directive and so notify the savings
association or company; or
(3) Seek additional information or
clarification of the response from the
savings association or company, or any
other relevant source.
(e) Failure to file response. Failure by
a Federal savings association or
company to file with the OCC, within
the specified time period, a written
response to a proposed directive shall
constitute a waiver of the opportunity to
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
respond and shall constitute consent to
the issuance of the directive.
(f) Request for modification or
rescission of directive. Any Federal
savings association or company that is
subject to a directive under this part
may, upon a change in circumstances,
request in writing that the OCC
reconsider the terms of the directive,
and may propose that the directive be
rescinded or modified. Unless otherwise
ordered by the OCC, the directive shall
continue in place while such request is
pending before the OCC.
sroberts on DSK5SPTVN1PROD with RULES
§ 165.8 Procedures for reclassifying a
Federal savings association based on
criteria other than capital.
(a) Reclassification based on unsafe or
unsound condition or practice—(1)
Issuance of notice of proposed
reclassification—(i) Grounds for
reclassification. (A) Pursuant to
§ 165.4(c) of this part, the OCC may
reclassify a well capitalized Federal
savings association as adequately
capitalized or subject an adequately
capitalized or undercapitalized
institution to the supervisory actions
applicable to the next lower capital
category if:
(1) The OCC determines that the
savings association is in an unsafe or
unsound condition; or
(2) The OCC deems the savings
association to be engaged in an unsafe
or unsound practice and not to have
corrected the deficiency.
(B) Any action pursuant to this
paragraph (a)(1)(i) shall hereinafter be
referred to as ‘‘reclassification.’’
(ii) Prior notice to institution. Prior to
taking action pursuant to § 165.4(c)(1),
the OCC shall issue and serve on the
Federal savings association a written
notice of the OCC’s intention to
reclassify the savings association.
(2) Contents of notice. A notice of
intention to reclassify a Federal savings
association based on unsafe or unsound
condition shall include:
(i) A statement of the savings
association’s capital measures and
capital levels and the category to which
the savings association would be
reclassified;
(ii) The reasons for reclassification of
the savings association;
(iii) The date by which the savings
association subject to the notice of
reclassification may file with the OCC a
written appeal of the proposed
reclassification and a request for a
hearing, which shall be at least 14
calendar days from the date of service
of the notice unless the OCC determines
that a shorter period is appropriate in
light of the financial condition of the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
savings association or other relevant
circumstances.
(3) Response to notice of proposed
reclassification. A Federal savings
association may file a written response
to a notice of proposed reclassification
within the time period set by the OCC.
The response should include:
(i) An explanation of why the savings
association is not in unsafe or unsound
condition or otherwise should not be
reclassified; and
(ii) Any other relevant information,
mitigating circumstances,
documentation, or other evidence in
support of the position of the savings
association or company regarding the
reclassification.
(4) Failure to file response. Failure by
a Federal savings association to file,
within the specified time period, a
written response with the OCC to a
notice of proposed reclassification shall
constitute a waiver of the opportunity to
respond and shall constitute consent to
the reclassification.
(5) Request for hearing and
presentation of oral testimony or
witnesses. The response may include a
request for an informal hearing before
the OCC or its designee under this
section. If the Federal savings
association desires to present oral
testimony or witnesses at the hearing,
the savings association shall include a
request to do so with the request for an
informal hearing. A request to present
oral testimony or witnesses shall specify
the names of the witnesses and the
general nature of their expected
testimony. Failure to request a hearing
shall constitute a waiver of any right to
a hearing, and failure to request the
opportunity to present oral testimony or
witnesses shall constitute a waiver of
any right to present oral testimony or
witnesses.
(6) Order for informal hearing. Upon
receipt of a timely written request that
includes a request for a hearing, the
OCC shall issue an order directing an
informal hearing to commence no later
than 30 days after receipt of the request,
unless the OCC allows further time at
the request of the Federal savings
association. The hearing shall be held in
Washington, DC or at such other place
as may be designated by the OCC, before
a presiding officer(s) designated by the
OCC to conduct the hearing.
(7) Hearing procedures. (i) The
Federal savings association shall have
the right to introduce relevant written
materials and to present oral argument
at the hearing. The savings association
may introduce oral testimony and
present witnesses only if expressly
authorized by the OCC or the presiding
officer(s). Neither the provisions of the
PO 00000
Frm 00121
Fmt 4701
Sfmt 4700
49069
Administrative Procedure Act (5 U.S.C.
554–557) governing adjudications
required by statute to be determined on
the record nor parts 19 or 109 of this
chapter apply to an informal hearing
under this section unless the OCC
orders that such procedures shall apply.
(ii) The informal hearing shall be
recorded and a transcript furnished to
the savings association upon request
and payment of the cost thereof.
Witnesses need not be sworn, unless
specifically requested by a party or the
presiding officer(s). The presiding
officer(s) may ask questions of any
witness.
(iii) The presiding officer(s) may order
that the hearing be continued for a
reasonable period (normally five
business days) following completion of
oral testimony or argument to allow
additional written submissions to the
hearing record.
(8) Recommendation of presiding
officers. Within 20 calendar days
following the date the hearing and the
record on the proceeding are closed, the
presiding officer(s) shall make a
recommendation to the OCC on the
reclassification.
(9) Time for decision. Not later than
60 calendar days after the date the
record is closed or the date of the
response in a case where no hearing was
requested, the OCC will decide whether
to reclassify the Federal savings
association and notify the savings
association of the OCC’s decision.
(b) Request for rescission of
reclassification. Any Federal savings
association that has been reclassified
under this section, may, upon a change
in circumstances, request in writing that
the OCC reconsider the reclassification,
and may propose that the
reclassification be rescinded and that
any directives issued in connection with
the reclassification be modified,
rescinded, or removed. Unless
otherwise ordered by the OCC, the
savings association shall remain subject
to the reclassification and to any
directives issued in connection with
that reclassification while such request
is pending before the OCC.
§ 165.9 Order to dismiss a director or
senior executive officer.
(a) Service of notice. When the OCC
issues and serves a directive on a
Federal savings association pursuant to
section 165.7 requiring the savings
association to dismiss any director or
senior executive officer under section
38(f)(2)(F)(ii) of the FDI Act, the OCC
shall also serve a copy of the directive,
or the relevant portions of the directive
where appropriate, upon the person to
be dismissed.
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49070
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(b) Response to directive—(1) Request
for reinstatement. A director or senior
executive officer who has been served
with a directive under paragraph (a) of
this section (Respondent) may file a
written request for reinstatement. The
request for reinstatement shall be filed
within 10 calendar days of the receipt
of the directive by the Respondent,
unless further time is allowed by the
OCC at the request of the Respondent.
(2) Contents of request; informal
hearing. The request for reinstatement
should include reasons why the
Respondent should be reinstated, and
may include a request for an informal
hearing before the OCC or its designee
under this section. If the Respondent
desires to present oral testimony or
witnesses at the hearing, the
Respondent shall include a request to
do so with the request for an informal
hearing. The request to present oral
testimony or witnesses shall specify the
names of the witnesses and the general
nature of their expected testimony.
Failure to request a hearing shall
constitute a waiver of any right to a
hearing and failure to request the
opportunity to present oral testimony or
witnesses shall constitute a waiver of
any right or opportunity to present oral
testimony or witnesses.
(3) Effective date. Unless otherwise
ordered by the OCC, the dismissal shall
remain in effect while a request for
reinstatement is pending.
(c) Order for informal hearing. Upon
receipt of a timely written request from
a Respondent for an informal hearing on
the portion of a directive requiring a
Federal savings association to dismiss
from office any director or senior
executive officer, the OCC shall issue an
order directing an informal hearing to
commence no later than 30 days after
receipt of the request, unless the
Respondent requests a later date. The
hearing shall be held in Washington,
DC, or at such other place as may be
designated by the OCC, before a
presiding officer(s) designated by the
OCC to conduct the hearing.
(d) Hearing procedures. (1) A
Respondent may appear at the hearing
personally or through counsel. A
Respondent shall have the right to
introduce relevant written materials and
to present oral argument. A Respondent
may introduce oral testimony and
present witnesses only if expressly
authorized by the OCC or the presiding
officer(s). Neither the provisions of the
Administrative Procedure Act governing
adjudications required by statute to be
determined on the record nor parts 19
or 109 of this chapter apply to an
informal hearing under this section
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
unless the OCC orders that such
procedures shall apply.
(2) The informal hearing shall be
recorded and a transcript furnished to
the Respondent upon request and
payment of the cost thereof. Witnesses
need not be sworn, unless specifically
requested by a party or the presiding
officer(s). The presiding officer(s) may
ask questions of any witness.
(3) The presiding officer(s) may order
that the hearing be continued for a
reasonable period (normally five
business days) following completion of
oral testimony or argument to allow
additional written submissions to the
hearing record.
(e) Standard for review. A Respondent
shall bear the burden of demonstrating
that his or her continued employment
by or service with the Federal savings
association would materially strengthen
the savings association’s ability:
(1) To become adequately capitalized,
to the extent that the directive was
issued as a result of the savings
association’s capital level or failure to
submit or implement a capital
restoration plan; and
(2) To correct the unsafe or unsound
condition or unsafe or unsound
practice, to the extent that the directive
was issued as a result of classification
of the savings association based on
supervisory criteria other than capital,
pursuant to section 38(g) of the FDI Act.
(f) Recommendation of presiding
officers. Within 20 calendar days
following the date the hearing and the
record on the proceeding are closed, the
presiding officer(s) shall make a
recommendation to the OCC concerning
the Respondent’s request for
reinstatement with the Federal savings
association.
(g) Time for decision. Not later than
60 calendar days after the date the
record is closed or the date of the
response in a case where no hearing has
been requested, the OCC shall grant or
deny the request for reinstatement and
notify the Respondent of the OCC’s
decision. If the OCC denies the request
for reinstatement, the OCC shall set
forth in the notification the reasons for
the OCC’s action.
§ 165.10
Enforcement of directives.
(a) Judicial remedies. Whenever a
Federal savings association or company
that controls a Federal savings
association fails to comply with a
directive issued under section 38, the
OCC may seek enforcement of the
directive in the appropriate United
States district court pursuant to section
8(i)(1) of the FDI Act.
(b) Administrative remedies—(1)
Failure to comply with directive.
PO 00000
Frm 00122
Fmt 4701
Sfmt 4700
Pursuant to section 8(i)(2)(A) of the FDI
Act, the OCC may assess a civil money
penalty against any Federal savings
association or company that controls a
Federal savings association that violates
or otherwise fails to comply with any
final directive issued under section 38
and against any institution-affiliated
party who participates in such violation
or noncompliance.
(2) Failure to implement capital
restoration plan. The failure of a Federal
savings association to implement a
capital restoration plan required under
section 38, or this part, or the failure of
a company having control of a Federal
savings association to fulfill a guarantee
of a capital restoration plan made
pursuant to section 38(e)(2) of the FDI
Act shall subject the savings association
or company to the assessment of civil
money penalties pursuant to section
8(i)(2)(A) of the FDI Act.
(c) Other enforcement action. In
addition to the actions described in
paragraphs (a) and (b) of this section,
the OCC may seek enforcement of the
provisions of section 38 or this part
through any other judicial or
administrative proceeding authorized by
law.
PART 167—CAPITAL
Sec.
Subpart A—Scope
167.0
Scope.
Subpart B—Regulatory Capital
Requirements
167.1 Definitions.
167.2 Minimum regulatory capital
requirement.
167.3 Individual minimum capital
requirements.
167.4 Capital directives.
167.5 Components of capital.
167.6 Risk-based capital credit risk-weight
categories.
167.8 Leverage ratio.
167.9 Tangible capital requirement.
167.10 Consequences of failure to meet
capital requirements.
167.11 Reservation of authority.
167.12 Purchased credit card relationships,
servicing assets, intangible assets (other
than purchased credit card relationships
and servicing assets), credit-enhancing
interest-only strips, and deferred tax
assets.
167.14–167.19 [Reserved]
Appendixes A–B to Part 167 [Reserved]
Appendix C to Part 167—Risk-Based Capital
Requirements—Internal-Ratings-Based
and Advanced Measurement Approaches
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 1828 (note), 5412(b)(2)(B).
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(ii) Investments in any includable
subsidiary in which a savings
§ 167.0 Scope.
association has a minority interest; and
(iii) Investments in any subsidiary
(a) This part prescribes the minimum
subject to consolidation under
regulatory capital requirements for
paragraph (2)(ii) of this definition.
Federal savings associations. Subpart B
Asset-backed commercial paper
of this part applies to all Federal savings
program. The term asset-backed
associations, except as described in
commercial paper program (ABCP
paragraph (b) of this section.
program) means a program that
(b)(1) A Federal savings association
primarily issues commercial paper that
that uses Appendix C of this part must
has received a credit rating from an
comply with the minimum qualifying
NRSRO and that is backed by assets or
criteria for internal risk measurement
other exposures held in a bankruptcyand management processes for
remote special purpose entity. The term
calculating risk-based capital
requirements, utilize the methodologies sponsor of an ABCP program means a
Federal savings association that:
for calculating risk-based capital
(1) Establishes an ABCP program;
requirements, and make the required
(2) Approves the sellers permitted to
disclosures described in that appendix.
participate in an ABCP program;
(2) Subpart B of this part does not
(3) Approves the asset pools to be
apply to the computation of risk-based
purchased by an ABCP program; or
capital requirements by a Federal
(4) Administers the ABCP program by
savings association that uses Appendix
monitoring the assets, arranging for debt
C of this part. However, these savings
placement, compiling monthly reports,
associations:
or ensuring compliance with the
(i) Must compute the components of
program documents and with the
capital under § 167.5, subject to the
program’s credit and investment policy.
modifications in sections 11 and 12 of
Cash items in the process of
Appendix C of this part.
collection. The term cash items in the
(ii) Must meet the leverage ratio
process of collection means checks or
requirement at §§ 167.2(a)(2) and 167.8
drafts in the process of collection that
with tier 1 capital, as computed under
are drawn on another depository
sections 11 and 12 of Appendix C of this institution, including a central bank,
part.
and that are payable immediately upon
(iii) Must meet the tangible capital
presentation; U.S. Government checks
requirement described at §§ 167.2(a)(3)
that are drawn on the United States
and 167.9.
Treasury or any other U.S. Government
(iv) Are subject to §§ 167.3 (individual or Government-sponsored agency and
minimum capital requirement), 167.4
that are payable immediately upon
(capital directives); and 167.10
presentation; broker’s security drafts
(consequences of failure to meet capital
and commodity or bill-of-lading drafts
requirements).
payable immediately upon presentation;
(v) Are subject to the reservations of
and unposted debits.
authority at § 167.11, which supplement
Commitment. The term commitment
the reservations of authority at section
means any arrangement that obligates a
1 of Appendix C of this part.
Federal savings association to:
(c) [Reserved]
(1) Purchase loans or securities;
(2) Extend credit in the form of loans
Subpart B—Regulatory Capital
or leases, participations in loans or
Requirements
leases, overdraft facilities, revolving
credit facilities, home equity lines of
§ 167.1 Definitions.
credit, eligible ABCP liquidity facilities,
For the purposes of this subpart:
or similar transactions.
Adjusted total assets. The term
Common stockholders’ equity. The
adjusted total assets means:
term common stockholders’ equity
(1) A Federal savings association’s
means common stock, common stock
total assets as that term is defined in this surplus, retained earnings, and
section;
adjustments for the cumulative effect of
(2) Plus the prorated assets of any
foreign currency translation, less net
includable subsidiary in which the
unrealized losses on available-for-sale
savings association has a minority
equity securities with readily
ownership interest that is not
determinable fair values.
consolidated under GAAP;
Conditional guarantee. The term
(3) Minus:
conditional guarantee means a
contingent obligation of the United
(i) Assets not included in the
States Government or its agencies, the
applicable capital standard except for
validity of which to the beneficiary is
those subject to paragraphs (3)(ii) and
dependent upon some affirmative
(3)(iii) of this definition;
sroberts on DSK5SPTVN1PROD with RULES
Subpart A—Scope
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00123
Fmt 4701
Sfmt 4700
49071
action— e.g., servicing requirements—
on the part of the beneficiary of the
guarantee or a third party.
Credit derivative. The term credit
derivative means a contract that allows
one party (the protection purchaser) to
transfer the credit risk of an asset or offbalance sheet credit exposure to another
party (the protection provider). The
value of a credit derivative is
dependent, at least in part, on the credit
performance of a ‘‘referenced asset.’’
Credit-enhancing interest-only strip.
(1) The term credit-enhancing interestonly strip means an on-balance sheet
asset that, in form or in substance:
(i) Represents the contractual right to
receive some or all of the interest due
on transferred assets; and
(ii) Exposes the Federal savings
association to credit risk directly or
indirectly associated with the
transferred assets that exceeds its pro
rata share of the savings association’s
claim on the assets whether through
subordination provisions or other credit
enhancement techniques.
(2) The OCC reserves the right to
identify other cash flows or related
interests as a credit-enhancing interestonly strip. In determining whether a
particular interest cash flow functions
as a credit-enhancing interest-only strip,
The OCC will consider the economic
substance of the transaction.
Credit-enhancing representations and
warranties. (1) The term creditenhancing representations and
warranties means representations and
warranties that are made or assumed in
connection with a transfer of assets
(including loan servicing assets) and
that obligate a Federal savings
association to protect investors from
losses arising from credit risk in the
assets transferred or loans serviced.
(2) Credit-enhancing representations
and warranties include promises to
protect a party from losses resulting
from the default or nonperformance of
another party or from an insufficiency
in the value of the collateral.
(3) Credit-enhancing representations
and warranties do not include:
(i) Early-default clauses and similar
warranties that permit the return of, or
premium refund clauses covering,
qualifying mortgage loans for a period
not to exceed 120 days from the date of
transfer. These warranties may cover
only those loans that were originated
within one year of the date of the
transfer;
(ii) Premium refund clauses covering
assets guaranteed, in whole or in part,
by the United States government, a
United States government agency, or a
United States government-sponsored
enterprise, provided the premium
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49072
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
refund clause is for a period not to
exceed 120 days from the date of
transfer; or
(iii) Warranties that permit the return
of assets in instances of fraud,
misrepresentation or incomplete
documentation.
Depository institution. The term
domestic depository institution means a
financial institution that engages in the
business of banking; that is recognized
as a bank by the bank supervisory or
monetary authorities of the country of
its incorporation and the country of its
principal banking operations; that
receives deposits to a substantial extent
in the regular course of business; and
that has the power to accept demand
deposits. In the United States, this
definition encompasses all Federally
insured offices of commercial banks,
mutual and stock savings banks, savings
or building and loan associations (stock
and mutual), cooperative banks, credit
unions, and international banking
facilities of domestic depository
institutions. Bank holding companies
and savings and loan holding
companies are excluded from this
definition. For the purposes of assigning
risk weights, the differentiation between
OECD depository institutions and nonOECD depository institutions is based
on the country of incorporation. Claims
on branches and agencies of foreign
banks located in the United States are to
be categorized on the basis of the parent
bank’s country of incorporation.
Direct credit substitute. The term
direct credit substitute means an
arrangement in which a Federal savings
association assumes, in form or in
substance, credit risk associated with an
on- or off-balance sheet asset or
exposure that was not previously owned
by the savings association (third-party
asset) and the risk assumed by the
savings association exceeds the pro rata
share of the savings association’s
interest in the third-party asset. If a
savings association has no claim on the
third-party asset, then the savings
association’s assumption of any credit
risk is a direct credit substitute. Direct
credit substitutes include:
(1) Financial standby letters of credit
that support financial claims on a third
party that exceed a savings association’s
pro rata share in the financial claim;
(2) Guarantees, surety arrangements,
credit derivatives, and similar
instruments backing financial claims
that exceed a savings association’s pro
rata share in the financial claim;
(3) Purchased subordinated interests
that absorb more than their pro rata
share of losses from the underlying
assets;
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(4) Credit derivative contracts under
which the savings association assumes
more than its pro rata share of credit
risk on a third-party asset or exposure;
(5) Loans or lines of credit that
provide credit enhancement for the
financial obligations of a third party;
(6) Purchased loan servicing assets if
the servicer is responsible for credit
losses or if the servicer makes or
assumes credit-enhancing
representations and warranties with
respect to the loans serviced. Servicer
cash advances as defined in this section
are not direct credit substitutes;
(7) Clean-up calls on third party
assets. However, clean-up calls that are
10 percent or less of the original pool
balance and that are exercisable at the
option of the savings association are not
direct credit substitutes; and
(8) Liquidity facilities that provide
support to asset-backed commercial
paper (other than eligible ABCP
liquidity facilities).
Eligible ABCP liquidity facility. The
term eligible ABCP liquidity facility
means a liquidity facility that supports
asset-backed commercial paper, in form
or in substance, and that meets the
following criteria:
(1)(i) At the time of the draw, the
liquidity facility must be subject to an
asset quality test that precludes funding
against assets that are 90 days or more
past due or in default; and
(ii) If the assets that the liquidity
facility is required to fund against are
assets or exposures that have received a
credit rating by a NRSRO at the time of
the inception of the facility, the facility
can be used to fund only those assets or
exposures that are rated investment
grade by an NRSRO at the time of
funding; or
(2) If the assets that are funded under
the liquidity facility do not meet the
criteria described in paragraph (1) of
this definition, the assets must be
guaranteed, conditionally or
unconditionally, by the United States
Government, its agencies, or the central
government of an OECD country.
Eligible Federal savings association.
(1) The term eligible Federal savings
association means a Federal savings
association with respect to which the
Comptroller of the Currency has
determined, on the basis of information
available at the time, that:
(i) The savings association’s
management appears to be competent;
(ii) The savings association, as
certified by its Board of Directors, is in
substantial compliance with all
applicable statutes, regulations, orders
and written agreements and directives;
and
PO 00000
Frm 00124
Fmt 4701
Sfmt 4700
(iii) The savings association’s
management, as certified by its Board of
Directors, has not engaged in insider
dealing, speculative practices, or any
other activities that have or may
jeopardize the association’s safety and
soundness or contributed to impairing
the association’s capital.
(2) Federal savings associations, for
purposes of this paragraph, will be
deemed to be eligible unless the
Comptroller makes a determination
otherwise or notifies the savings
association of its intent to conduct
either an informal or formal
examination to determine eligibility and
provides written notification thereof to
the savings association.
Equity investments. (1) The term
equity investments includes investments
in equity securities and real property
that would be considered an equity
investment under GAAP.
(2)(i) The term equity securities means
any:
(A) Stock, certificate of interest of
participation in any profit-sharing
agreement, collateral trust certificate or
subscription, preorganization certificate
or subscription, transferable share,
investment contract, or voting trust
certificate; or
(B) In general, any interest or
instrument commonly known as an
equity security; or
(C) Loans having profit sharing
features which GAAP would reclassify
as equity securities; or
(D) Any security immediately
convertible at the option of the holder
without payment of substantial
additional consideration into such a
security; or
(E) Any security carrying any warrant
or right to subscribe to or purchase such
a security; or
(F) Any certificate of interest or
participation in, temporary or Interim
certificate for, or receipt for any of the
foregoing or any partnership interest; or
(G) Investments in equity securities
and loans or advances to and guarantees
issued on behalf of partnerships or joint
ventures in which a Federal savings
association holds an interest in real
property under GAAP.
(ii) The term equity securities does not
include investments in a subsidiary as
that term is defined in this section,
equity investments that are permissible
for national banks, ownership interests
in pools of assets that are risk-weighted
in accordance with § 167.6(a)(1)(vi) of
this part, or the stock of Federal Home
Loan Banks or Federal Reserve Banks.
(3) For purposes of this part, the term
equity investments in real property does
not include interests in real property
that are primarily used or intended to be
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
used by the savings association, its
subsidiaries, or its affiliates as offices or
related facilities for the conduct of its
business.
(4) In addition, for purposes of this
part, the term equity investments in real
property does not include interests in
real property that are acquired in
satisfaction of a debt previously
contracted in good faith or acquired in
sales under judgments, decrees, or
mortgages held by the savings
association, provided that the property
is not intended to be held for real estate
investment purposes but is expected to
be disposed of within five years or a
longer period approved by the OCC.
Exchange rate contracts. The term
exchange rate contracts includes crosscurrency interest rate swaps; forward
foreign exchange rate contracts;
currency options purchased; and any
similar instrument that, in the opinion
of the OCC, may give rise to similar
risks.
Face amount. The term face amount
means the notational principal, or face
value, amount of an off-balance sheet
item or the amortized cost of an onbalance sheet asset.
Financial asset. The term financial
asset means cash or other monetary
instrument, evidence of debt, evidence
of an ownership interest in an entity, or
a contract that conveys a right to receive
or exchange cash or another financial
instrument from another party.
Financial standby letter of credit. The
term financial standby letter of credit
means a letter of credit or similar
arrangement that represents an
irrevocable obligation to a third-party
beneficiary:
(1) To repay money borrowed by, or
advanced to, or for the account of, a
second party (the account party); or
(2) To make payment on behalf of the
account party, in the event that the
account party fails to fulfill its
obligation to the beneficiary.
Includable subsidiary. The term
includable subsidiary means a
subsidiary of a Federal savings
association that is:
(1) Engaged solely in activities not
impermissible for a national bank;
(2) Engaged in activities not
permissible for a national bank, but only
if acting solely as agent for its customers
and such agency position is clearly
documented in the savings association’s
files;
(3) Engaged solely in mortgagebanking activities;
(4)(i) Itself an insured depository
institution or a company the sole
investment of which is an insured
depository institution, and
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(ii) Was acquired by the parent
savings association prior to May 1, 1989;
or
(5) A subsidiary of any savings
association existing as a savings
association on August 9, 1989 that
(i) Was chartered prior to October 15,
1982, as a savings bank or a cooperative
bank under state law, or
(ii) Acquired its principal assets from
an association that was chartered prior
to October 15, 1982, as a savings bank
or a cooperative bank under state law.
Intangible assets. The term intangible
assets means assets considered to be
intangible assets under GAAP. These
assets include, but are not limited to,
goodwill, core deposit premiums,
purchased credit card relationships,
favorable leaseholds, and servicing
assets (mortgage and non-mortgage).
Interest-only strips receivable and other
nonsecurity financial instruments are
not intangible assets under this
definition.
Interest-rate contracts. The term
interest-rate contracts includes single
currency interest-rate swaps; basis
swaps; forward rate agreements;
interest-rate options purchased; forward
forward deposits accepted; and any
other instrument that, in the opinion of
the OCC, may give rise to similar risks,
including when-issued securities.
Liquidity facility. The term liquidity
facility means a legally binding
commitment to provide liquidity
support to asset-backed commercial
paper by lending to, or purchasing
assets from any structure, program or
conduit in the event that funds are
required to repay maturing asset-backed
commercial paper.
Mortgage-related securities. The term
mortgage-related securities means any
mortgage-related qualifying securities
under section 3(a)(41) of the Securities
Exchange Act of 1934, 15 U.S.C.
78c(a)(41), Provided, That the rating
requirements of that section shall not be
considered for purposes of this
definition.
Nationally recognized statistical
rating organization (NRSRO). The term
nationally recognized statistical rating
organization means an entity recognized
by the Division of Market Regulation of
the Securities and Exchange
Commission (Commission) as a
nationally recognized statistical rating
organization for various purposes,
including the Commission’s uniform net
capital requirements for brokers and
dealers.
OECD-based country. The term OECDbased country means a member of that
grouping of countries that are full
members of the Organization for
Economic Cooperation and
PO 00000
Frm 00125
Fmt 4701
Sfmt 4700
49073
Development (OECD) plus countries
that have concluded special lending
arrangements with the International
Monetary Fund (IMF) associated with
the IMF’s General Arrangements to
Borrow. This term excludes any country
that has rescheduled its external
sovereign debt within the previous five
years. A rescheduling of external
sovereign debt generally would include
any renegotiation of terms arising from
a country’s inability or unwillingness to
meet its external debt service
obligations, but generally would not
include renegotiations of debt in the
normal course of business, such as a
renegotiation to allow the borrower to
take advantage of a decline in interest
rates or other change in market
conditions.
Original maturity. The term original
maturity means, with respect to a
commitment, the earliest date after a
commitment is made on which the
commitment is scheduled to expire (i.e.,
it will reach its stated maturity and
cease to be binding on either party),
Provided, That either:
(1) The commitment is not subject to
extension or renewal and will actually
expire on its stated expiration date; or
(2) If the commitment is subject to
extension or renewal beyond its stated
expiration date, the stated expiration
date will be deemed the original
maturity only if the extension or
renewal must be based upon terms and
conditions independently negotiated in
good faith with the customer at the time
of the extension or renewal and upon a
new, bona fide credit analysis utilizing
current information on financial
condition and trends.
Performance-based standby letter of
credit. The term performance-based
standby letter of credit means any letter
of credit, or similar arrangement,
however named or described, which
represents an irrevocable obligation to
the beneficiary on the part of the issuer
to make payment on account of any
default by a third party in the
performance of a nonfinancial or
commercial obligation. Such letters of
credit include arrangements backing
subcontractors’ and suppliers’
performance, labor and materials
contracts, and construction bids.
Perpetual preferred stock. The term
perpetual preferred stock means
preferred stock without a fixed maturity
date that cannot be redeemed at the
option of the holder, and that has no
other provisions that will require future
redemption of the issue. For purposes of
these instruments, preferred stock that
can be redeemed at the option of the
holder is deemed to have an ‘‘original
maturity’’ of the earliest possible date
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49074
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
on which it may be so redeemed.
Cumulative perpetual preferred stock is
preferred stock where the dividends
accumulate from one period to the next.
Noncumulative perpetual preferred
stock is preferred stock where the
unpaid dividends are not carried over to
subsequent dividend periods.
Problem institution. The term problem
institution means a Federal savings
association that, at the time of its
acquisition, merger, purchase of assets
or other business combination with or
by another savings association:
(1) Was subject to special regulatory
controls by its primary Federal or state
regulatory authority;
(2) Posed particular supervisory
concerns to its primary Federal or state
regulatory authority; or
(3) Failed to meet its regulatory
capital requirement immediately before
the transaction.
Prorated assets. The term prorated
assets means the total assets (as
determined in the most recently
available GAAP report but in no event
more than one year old) of a subsidiary
(including those subsidiaries where the
savings association has a minority
interest) multiplied by the Federal
savings association’s percentage of
ownership of that subsidiary.
Qualifying mortgage loan. (1) The
term qualifying mortgage loan means a
loan that:
(i) Is fully secured by a first lien on
a one-to four-family residential
property;
(ii) Is underwritten in accordance
with prudent underwriting standards,
including standards relating the ratio of
the loan amount to the value of the
property (LTV ratio). See Appendix to
12 CFR 160.101. A nonqualifying
mortgage loan that is paid down to an
appropriate LTV ratio (calculated using
value at origination) may become a
qualifying loan if it meets all other
requirements of this definition;
(iii) Maintains an appropriate LTV
ratio based on the amortized principal
balance of the loan; and
(iv) Is performing and is not more
than 90 days past due.
(2) If a Federal savings association
holds the first and junior lien(s) on a
residential property and no other party
holds an intervening lien, the
transaction is treated as a single loan
secured by a first lien for the purposes
of determining the LTV ratio and the
appropriate risk weight under § 167.6(a).
(3) A loan to an individual borrower
for the construction of the borrower’s
home may be included as a qualifying
mortgage loan.
(4) A loan that meets the requirements
of this section prior to modification on
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
a permanent or trial basis under the U.S.
Department of Treasury’s Home
Affordable Mortgage Program may be
included as a qualifying mortgage loan,
so long as the loan is not 90 days or
more past due.
Qualifying multifamily mortgage loan.
(1) The term qualifying multifamily
mortgage loan means a loan secured by
a first lien on multifamily residential
properties consisting of 5 or more
dwelling units, provided that:
(i) The amortization of principal and
interest occurs over a period of not more
than 30 years;
(ii) The original minimum maturity
for repayment of principal on the loan
is not less than seven years;
(iii) When considering the loan for
placement in a lower risk-weight
category, all principal and interest
payments have been made on a timely
basis in accordance with its terms for
the preceding year;
(iv) The loan is performing and not 90
days or more past due;
(v) The loan is made by the Federal
savings association in accordance with
prudent underwriting standards; and
(vi) If the interest rate on the loan
does not change over the term of the
loan:
(A) The current loan balance amount
does not exceed 80 percent of the value
of the property securing the loan; and
(B) For the property’s most recent
fiscal year, the ratio of annual net
operating income generated by the
property (before payment of any debt
service on the loan) to annual debt
service on the loan is not less than 120
percent, or in the case of cooperative or
other not-for-profit housing projects, the
property generates sufficient cash flows
to provide comparable protection to the
institution; or
(vii) If the interest rate on the loan
changes over the term of the loan:
(A) The current loan balance amount
does not exceed 75 percent of the value
of the property securing the loan; and
(B) For the property’s most recent
fiscal year, the ratio of annual net
operating income generated by the
property (before payment of any debt
service on the loan) to annual debt
service on the loan is not less than 115
percent, or in the case of cooperative or
other not-for-profit housing projects, the
property generates sufficient cash flows
to provide comparable protection to the
institution.
(2) The term qualifying multifamily
mortgage loan also includes a
multifamily mortgage loan that on
March 18, 1994 was a first mortgage
loan on an existing property consisting
of 5–36 dwelling units with an initial
loan-to-value ratio of not more than
PO 00000
Frm 00126
Fmt 4701
Sfmt 4700
80% where an average annual
occupancy rate of 80% or more of total
units had existed for at least one year,
and continues to meet these criteria.
(3) For purposes of paragraphs (1)(vi)
and (vii) of this definition, the term
value of the property means, at
origination of a loan to purchase a
multifamily property: the lower of the
purchase price or the amount of the
initial appraisal, or if appropriate, the
initial evaluation. In cases not involving
the purchase of a multifamily loan, the
value of the property is determined by
the most current appraisal, or if
appropriate, the most current
evaluation.
(4) In cases where a borrower
refinances a loan on an existing
property, as an alternative to paragraphs
(1)(iii), (vi), and (vii) of this definition:
(i) All principal and interest payments
on the loan being refinanced have been
made on a timely basis in accordance
with the terms of that loan for the
preceding year; and
(ii) The net income on the property
for the preceding year would support
timely principal and interest payments
on the new loan in accordance with the
applicable debt service requirement.
Qualifying residential construction
loan. (1) The term qualifying residential
construction loan, also referred to as a
residential bridge loan, means a loan
made in accordance with sound lending
principles satisfying the following
criteria:
(i) The builder must have substantial
project equity in the home construction
project;
(ii) The residence being constructed
must be a 1–4 family residence sold to
a home purchaser;
(iii) The lending Federal savings
association must obtain sufficient
documentation from a permanent lender
(which may be the construction lender)
demonstrating that:
(A) The home buyer intends to
purchase the residence; and
(B) Has the ability to obtain a
permanent qualifying mortgage loan
sufficient to purchase the residence;
(iv) The home purchaser must have
made a substantial earnest money
deposit;
(v) The construction loan must not
exceed 80 percent of the sales price of
the residence;
(vi) The construction loan must be
secured by a first lien on the lot,
residence under construction, and other
improvements;
(vii) The lending thrift must retain
sufficient undisbursed loan funds
throughout the construction period to
ensure project completion;
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(viii) The builder must incur a
significant percentage of direct costs
(i.e., the actual costs of land, labor, and
material) before any drawdown on the
loan;
(ix) If at any time during the life of the
construction loan any of the criteria of
this rule are no longer satisfied, the
association must immediately
recategorize the loan at a 100 percent
risk-weight and must accurately report
the loan in the association’s next
quarterly Consolidated Reports of
Condition and Income (Call Report) or
Thrift Financial Report (TFR), as
appropriate;
(x) The home purchaser must intend
that the home will be owner-occupied;
(xi) The home purchaser(s) must be an
individual(s), not a partnership, joint
venture, trust corporation, or any other
entity (including an entity acting as a
sole proprietorship) that is purchasing
the home(s) for speculative purposes;
and
(xii) The loan must be performing and
not more than 90 days past due.
(2) The documentation for each loan
and home sale must be sufficient to
demonstrate compliance with the
criteria in paragraph (1) of this
definition. The OCC retains the
discretion to determine that any loans
not meeting sound lending principles
must be placed in a higher risk-weight
category. The OCC also reserves the
discretion to modify these criteria on a
case-by-case basis provided that any
such modifications are not inconsistent
with the safety and soundness
objectives of this definition.
Qualifying securities firm. The term
qualifying securities firm means:
(1) A securities firm incorporated in
the United States that is a broker-dealer
that is registered with the Securities and
Exchange Commission (SEC) and that
complies with the SEC’s net capital
regulations (17 CFR 240.15c3(1)); and
(2) A securities firm incorporated in
any other OECD-based country, if the
Federal savings association is able to
demonstrate that the securities firm is
subject to consolidated supervision and
regulation (covering its subsidiaries, but
not necessarily its parent organizations)
comparable to that imposed on
depository institutions in OECD
countries. Such regulation must include
risk-based capital requirements
comparable to those imposed on
depository institutions under the
Accord on International Convergence of
Capital Measurement and Capital
Standards (1988, as amended in 1998).
Reciprocal holdings of depository
institution instruments. The term
reciprocal holdings of depository
institution instruments means cross-
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
holdings or other formal or informal
arrangements in which two or more
depository institutions swap, exchange,
or otherwise agree to hold each other’s
capital instruments. This definition
does not include holdings of capital
instruments issued by other depository
institutions that were taken in
satisfaction of debts previously
contracted, provided that the reporting
Federal savings association has not held
such instruments for more than five
years or a longer period approved by the
OCC.
Recourse. The term recourse means a
Federal savings association’s retention,
in form or in substance, of any credit
risk directly or indirectly associated
with an asset it has sold (in accordance
with GAAP) that exceeds a pro rata
share of that savings association’s claim
on the asset. If a savings association has
no claim on an asset it has sold, then the
retention of any credit risk is recourse.
A recourse obligation typically arises
when a savings association transfers
assets in a sale and retains an explicit
obligation to repurchase assets or to
absorb losses due to a default on the
payment of principal or interest or any
other deficiency in the performance of
the underlying obligor or some other
party. Recourse may also exist
implicitly if a savings association
provides credit enhancement beyond
any contractual obligation to support
assets it has sold. Recourse obligations
include:
(1) Credit-enhancing representations
and warranties made on transferred
assets;
(2) Loan servicing assets retained
pursuant to an agreement under which
the savings association will be
responsible for losses associated with
the loans serviced. Servicer cash
advances as defined in this section are
not recourse obligations;
(3) Retained subordinated interests
that absorb more than their pro rata
share of losses from the underlying
assets;
(4) Assets sold under an agreement to
repurchase, if the assets are not already
included on the balance sheet;
(5) Loan strips sold without
contractual recourse where the maturity
of the transferred portion of the loan is
shorter than the maturity of the
commitment under which the loan is
drawn;
(6) Credit derivatives that absorb more
than the savings association’s pro rata
share of losses from the transferred
assets;
(7) Clean-up calls on assets the
savings association has sold. However,
clean-up calls that are 10 percent or less
of the original pool balance and that are
PO 00000
Frm 00127
Fmt 4701
Sfmt 4700
49075
exercisable at the option of the savings
association are not recourse
arrangements; and
(8) Liquidity facilities that provide
support to asset-backed commercial
paper (other than eligible ABCP
liquidity facilities).
Replacement cost. The term
replacement cost means, with respect to
interest rate and exchange-rate
contracts, the loss that would be
incurred in the event of a counterparty
default, as measured by the net cost of
replacing the contract at the current
market value. If default would result in
a theoretical profit, the replacement
value is considered to be zero. This
mark-to-market process must
incorporate changes in both interest
rates and counterparty credit quality.
Residential properties. The term
residential properties means houses,
condominiums, cooperative units, and
manufactured homes. This definition
does not include boats or motor homes,
even if used as a primary residence, or
timeshare properties.
Residual characteristics. The term
residual characteristics means interests
similar to a multi-class pay-through
obligation representing the excess cash
flow generated from mortgage collateral
over the amount required for the issue’s
debt service and ongoing administrative
expenses or interests presenting similar
degrees of interest-rate/prepayment risk
and principal loss risks.
Residual interest. (1) The term
residual interest means any on-balance
sheet asset that:
(i) Represents an interest (including a
beneficial interest) created by a transfer
that qualifies as a sale (in accordance
with GAAP) of financial assets, whether
through a securitization or otherwise;
and
(ii) Exposes a Federal savings
association to credit risk directly or
indirectly associated with the
transferred asset that exceeds a pro rata
share of that savings association’s claim
on the asset, whether through
subordination provisions or other credit
enhancement techniques.
(2) Residual interests generally
include credit-enhancing interest-only
strips, spread accounts, cash collateral
accounts, retained subordinated
interests (and other forms of
overcollateralization), and similar assets
that function as a credit enhancement.
(3) Residual interests further include
those exposures that, in substance,
cause the savings association to retain
the credit risk of an asset or exposure
that had qualified as a residual interest
before it was sold.
(4) Residual interests generally do not
include assets purchased from a third
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49076
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
party. However, a credit-enhancing
interest-only strip that is acquired in
any asset transfer is a residual interest.
Risk participation. The term risk
participation means a participation in
which the originating party remains
liable to the beneficiary for the full
amount of an obligation (e.g., a direct
credit substitute), notwithstanding that
another party has acquired a
participation in that obligation.
Risk-weighted assets. The term riskweighted assets means the sum total of
risk-weighted on-balance sheet assets
and the total of risk-weighted offbalance sheet credit equivalent
amounts. These assets are calculated in
accordance with § 167.6 of this part.
Securitization. The term
securitization means the pooling and
repackaging by a special purpose entity
of assets or other credit exposures that
can be sold to investors. Securitization
includes transactions that create
stratified credit risk positions whose
performance is dependent upon an
underlying pool of credit exposures,
including loans and commitments.
Servicer cash advance. The term
servicer cash advance means funds that
a residential mortgage servicer advances
to ensure an uninterrupted flow of
payments, including advances made to
cover foreclosure costs or other
expenses to facilitate the timely
collection of the loan. A servicer cash
advance is not a recourse obligation or
a direct credit substitute if:
(1) The servicer is entitled to full
reimbursement and this right is not
subordinated to other claims on the cash
flows from the underlying asset pool; or
(2) For any one loan, the servicer’s
obligation to make nonreimbursable
advances is contractually limited to an
insignificant amount of the outstanding
principal amount on that loan.
State. The term state means any one
of the several states of the United States
of America, the District of Columbia,
Puerto Rico, and the territories and
possessions of the United States.
Structured financing program. The
term structured financing program
means a program where receivable
interests and asset-or mortgage-backed
securities issued by multiple
participants are purchased by a special
purpose entity that repackages those
exposures into securities that can be
sold to investors. Structured financing
programs allocate credit risk, generally,
between the participants and credit
enhancement provided to the program.
Subsidiary. The term subsidiary
means any corporation, partnership,
business trust, joint venture, association
or similar organization in which a
Federal savings association directly or
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
indirectly holds an ownership interest
and the assets of which are consolidated
with those of the Federal savings
association for purposes of reporting
under GAAP. Generally, these are
majority-owned subsidiaries.1 This
definition does not include ownership
interests that were taken in satisfaction
of debts previously contracted, provided
that the reporting association has not
held the interest for more than five years
or a longer period approved by the OCC.
Tier 1 capital. The term Tier 1 capital
means core capital as computed in
accordance with § 167.5(a) of this part.
Tier 2 capital. The term Tier 2 capital
means supplementary capital as
computed in accordance with § 167.5 of
this part.
Total assets. The term total assets
means total assets as would be required
to be reported for consolidated entities
on period-end reports filed with the
OCC in accordance with GAAP.
Traded position. The term traded
position means a position retained,
assumed, or issued in connection with
a securitization that is rated by a
NRSRO, where there is a reasonable
expectation that, in the near future, the
rating will be relied upon by:
(1) Unaffiliated investors to purchase
the security; or
(2) An unaffiliated third party to enter
into a transaction involving the
position, such as a purchase, loan, or
repurchase agreement.
Unconditionally cancelable. The term
unconditionally cancelable means, with
respect to a commitment-type lending
arrangement, that the Federal savings
association may, at any time, with or
without cause, refuse to advance funds
or extend credit under the facility. In
the case of home equity lines of credit,
the savings association is deemed able
to unconditionally cancel the
commitment if it can, at its option,
prohibit additional extensions of credit,
reduce the line, and terminate the
commitment to the full extent permitted
by relevant Federal law.
United States Government or its
agencies. The term United States
Government or its agencies means an
instrumentality of the U.S. Government
whose debt obligations are fully and
explicitly guaranteed as to the timely
payment of principal and interest by the
full faith and credit of the United States
Government.
1 The OCC reserves the right to review a Federal
savings association’s investment in a subsidiary on
a case-by-case basis. If the OCC determines that
such investment is more appropriately treated as an
equity security or an ownership interest in a
subsidiary, it will make such determination
regardless of the percentage of ownership held by
the savings association.
PO 00000
Frm 00128
Fmt 4701
Sfmt 4700
United States Government-sponsored
agency or corporation. The term United
States Government-sponsored agency or
corporation means an agency or
corporation originally established or
chartered to serve public purposes
specified by the United States Congress
but whose obligations are not explicitly
guaranteed by the full faith and credit
of the United States Government.
§ 167.2 Minimum regulatory capital
requirement.
(a) To meet its regulatory capital
requirement a Federal savings
association must satisfy each of the
following capital standards:
(1) Risk-based capital requirement. (i)
A Federal savings association’s
minimum risk-based capital
requirement shall be an amount equal to
8% of its risk-weighted assets as
measured under § 167.6 of this part.
(ii) A Federal savings association may
not use supplementary capital to satisfy
this requirement in an amount greater
than 100% of its core capital as defined
in § 167.5 of this part.
(2) Leverage ratio requirement. (i) A
Federal savings association’s minimum
leverage ratio requirement shall be the
amount set forth in § 167.8 of this part.
(ii) A Federal savings association
must satisfy this requirement with core
capital as defined in § 167.5(a) of this
part.
(3) Tangible capital requirement. (i) A
Federal savings association’s minimum
tangible capital requirement shall be the
amount set forth in § 167.9 of this part.
(ii) A Federal savings association
must satisfy this requirement with
tangible capital as defined in § 167.9 of
this part in an amount not less than
1.5% of its adjusted total assets.
(b) [Reserved]
(c) Federal savings associations are
expected to maintain compliance with
all of these standards at all times.
§ 167.3 Individual minimum capital
requirements.
(a) Purpose and scope. The rules and
procedures specified in this section
apply to the establishment of an
individual minimum capital
requirement for a Federal savings
association that varies from the riskbased capital requirement, the leverage
ratio requirement or the tangible capital
requirement that would otherwise apply
to the savings association under this
part.
(b) Appropriate considerations for
establishing individual minimum
capital requirements. Minimum capital
levels higher than the risk-based capital
requirement, the leverage ratio
requirement or the tangible capital
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
requirement required under this part
may be appropriate for individual
savings associations. Increased
individual minimum capital
requirements may be established upon a
determination that the savings
association’s capital is or may become
inadequate in view of its circumstances.
For example, higher capital levels may
be appropriate for:
(1) A Federal savings association
receiving special supervisory attention;
(2) A Federal savings association that
has or is expected to have losses
resulting in capital inadequacy;
(3) A Federal savings association that
has a high degree of exposure to interest
rate risk, prepayment risk, credit risk,
concentration of credit risk, certain risks
arising from nontraditional activities, or
similar risks; or a high proportion of offbalance sheet risk, especially standby
letters of credit;
(4) A Federal savings association that
has poor liquidity or cash flow;
(5) A Federal savings association
growing, either internally or through
acquisitions, at such a rate that
supervisory problems are presented that
are not dealt with adequately by other
OCC regulations or other guidance;
(6) A Federal savings association that
may be adversely affected by the
activities or condition of its holding
company, affiliate(s), subsidiaries, or
other persons or savings associations
with which it has significant business
relationships, including concentrations
of credit;
(7) A Federal savings association with
a portfolio reflecting weak credit quality
or a significant likelihood of financial
loss, or that has loans in nonperforming
status or on which borrowers fail to
comply with repayment terms;
(8) A Federal savings association that
has inadequate underwriting policies,
standards, or procedures for its loans
and investments; or
(9) A Federal savings association that
has a record of operational losses that
exceeds the average of other, similarly
situated savings associations; has
management deficiencies, including
failure to adequately monitor and
control financial and operating risks,
particularly the risks presented by
concentrations of credit and
nontraditional activities; or has a poor
record of supervisory compliance.
(c) Standards for determination of
appropriate individual minimum
capital requirements. The appropriate
minimum capital level for an individual
Federal savings association cannot be
determined solely through the
application of a rigid mathematical
formula or wholly objective criteria. The
decision is necessarily based, in part, on
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
subjective judgment grounded in agency
expertise. The factors to be considered
in the determination will vary in each
case and may include, for example:
(1) The conditions or circumstances
leading to the determination that a
higher minimum capital requirement is
appropriate or necessary for the savings
association;
(2) The exigency of those
circumstances or potential problems;
(3) The overall condition,
management strength, and future
prospects of the savings association and,
if applicable, its holding company,
subsidiaries, and affiliates;
(4) The savings association’s liquidity,
capital and other indicators of financial
stability, particularly as compared with
those of similarly situated savings
associations; and
(5) The policies and practices of the
savings association’s directors, officers,
and senior management as well as the
internal control and internal audit
systems for implementation of such
adopted policies and practices.
(d) Procedures—(1) Notification.
When the OCC determines that a
minimum capital requirement is
necessary or appropriate for a particular
Federal savings association, it shall
notify the savings association in writing
of its proposed individual minimum
capital requirement; the schedule for
compliance with the new requirement;
and the specific causes for determining
that the higher individual minimum
capital requirement is necessary or
appropriate for the savings association.
(2) Response. (i) The response shall
include any information that the Federal
savings association wants the OCC to
consider in deciding whether to
establish or to amend an individual
minimum capital requirement for the
savings association, what the individual
capital requirement should be, and, if
applicable, what compliance schedule is
appropriate for achieving the required
capital level. The response of the
savings association must be in writing
and must be delivered to the OCC
within 30 days after the date on which
the notification was received. The OCC
may extend the time period for good
cause. The time period for response by
the insured savings association may be
shortened for good cause:
(A) When, in the opinion of the OCC,
the condition of the savings association
so requires, and the OCC informs the
savings association of the shortened
response period in the notice;
(B) With the consent of the savings
association; or
(C) When the savings association
already has advised the OCC that it
PO 00000
Frm 00129
Fmt 4701
Sfmt 4700
49077
cannot or will not achieve its applicable
minimum capital requirement.
(ii) Failure to respond within 30 days,
or such other time period as may be
specified by the OCC, may constitute a
waiver of any objections to the proposed
individual minimum capital
requirement or to the schedule for
complying with it, unless the OCC has
provided an extension of the response
period for good cause.
(3) Decision. After expiration of the
response period, the OCC shall decide
whether or not the OCC believes the
proposed individual minimum capital
requirement should be established for
the Federal savings association, or
whether that proposed requirement
should be adopted in modified form,
based on a review of the savings
association’s response and other
relevant information. The OCC’s
decision shall address comments
received within the response period
from the savings association and shall
state the level of capital required, the
schedule for compliance with this
requirement, and any specific remedial
action the savings association could take
to eliminate the need for continued
applicability of the individual minimum
capital requirement. The OCC shall
provide the savings association with a
written decision on the individual
minimum capital requirement,
addressing the substantive comments
made by the savings association and
setting forth the decision and the basis
for that decision. Upon receipt of this
decision by the savings association, the
individual minimum capital
requirement becomes effective and
binding upon the savings association.
This decision represents final agency
action.
(4) Failure to comply. Failure to
satisfy an individual minimum capital
requirement, or to meet any required
incremental additions to capital under a
schedule for compliance with such an
individual minimum capital
requirement, shall constitute a legal
basis for issuing a capital directive
pursuant to § 167.4 of this part.
(5) Change in circumstances. If, after
a decision is made under paragraph
(d)(3) of this section, there is a change
in the circumstances affecting the
savings association’s capital adequacy
or its ability to reach its required
minimum capital level by the specified
date, the OCC may amend the
individual minimum capital
requirement or the savings association’s
schedule for such compliance. The OCC
may decline to consider a savings
association’s request for such changes
that are not based on a significant
change in circumstances or that are
E:\FR\FM\09AUR2.SGM
09AUR2
49078
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
repetitive or frivolous. Pending the
OCC’s reexamination of the original
decision, that original decision and any
compliance schedule established
thereunder shall continue in full force
and effect.
sroberts on DSK5SPTVN1PROD with RULES
§ 167.4
Capital directives.
(a) Issuance of a Capital Directive—(1)
Purpose. (i) In addition to any other
action authorized by law, the OCC may
issue a capital directive to a Federal
savings association that does not have
an amount of capital satisfying its
minimum capital requirement. Issuance
of such a capital directive may be based
on a Federal savings association’s
noncompliance with the risk-based
capital requirement, the leverage ratio
requirement, the tangible capital
requirement, or individual minimum
capital requirement established under
this part, by a written agreement under
12 U.S.C. 1464(s), or as a condition for
approval of an application. A capital
directive may order a Federal savings
association to:
(A) Achieve its minimum capital
requirement by a specified date;
(B) Adhere to the compliance
schedule for achieving its individual
minimum capital requirement;
(C) Submit and adhere to a capital
plan acceptable to the OCC describing
the means and a time schedule by
which the savings association shall
reach its required capital level;
(D) Take other action, including but
not limited to, reducing the savings
association’s assets or its rate of liability
growth, or imposing restrictions on the
savings association’s payment of
dividends, in order to cause the savings
association to reach its required capital
level;
(E) Take any action authorized under
§ 167.10(e); or
(F) Take a combination of any of these
actions.
(ii) A capital directive issued under
this section, including a plan submitted
pursuant to a capital directive, is
enforceable under 12 U.S.C. 1818 in the
same manner and to the same extent as
an effective and outstanding cease and
desist order which has become final
under 12 U.S.C. 1818.
(2) Notice of intent to issue capital
directive. The OCC will determine
whether to initiate the process of issuing
a capital directive. The OCC will notify
a Federal savings association in writing
by registered mail of its intention to
issue a capital directive. The notice will
state:
(i) The reasons for issuance of the
capital directive and
(ii) The proposed contents of the
capital directive.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(3) Response to notice of intent. (i) A
Federal savings association may
respond to the notice of intent by
submitting its own compliance plan, or
may propose an alternative plan. The
response should also include any
information that the savings association
wishes the OCC to consider in deciding
whether to issue a capital directive. The
response must be in writing and be
delivered within 30 days after the
receipt of the notices. Such response
must be filed in accordance with
§§ 116.30 and 116.40 of this chapter. In
its discretion, the OCC may extend the
time period for the response for good
cause. The OCC may, for good cause,
shorten the 30-day time period for
response by the insured savings
association:
(A) When, in the opinion of the OCC,
the condition of the savings association
so requires, and the OCC informs the
savings association of the shortened
response period in the notice;
(B) With the consent of the savings
association; or
(C) When the savings association
already has advised the OCC that it
cannot or will not achieve its applicable
minimum capital requirement.
(ii) Failure to respond within 30 days
of receipt, or such other time period as
may be specified by the OCC, may
constitute a waiver of any objections to
the capital directive unless the OCC
grants an extension of the time period
for good cause.
(4) Decision. After the closing date of
the Federal savings association’s
response period, or upon receipt of the
savings association’s response, if earlier,
the OCC shall consider the savings
association’s response and may seek
additional information or clarification of
the response. Thereafter, the OCC will
determine whether or not to issue a
capital directive and, if one is to be
issued, whether it should be as
originally proposed or in modified form.
(5) Service and effectiveness. (i) Upon
issuance, a capital directive will be
served upon the Federal savings
association. It will include or be
accompanied by a statement of reasons
for its issuance and shall address the
responses received during the response
period.
(ii) A capital directive shall become
effective upon the expiration of 30 days
after service upon the savings
association, unless the OCC determines
that a shorter effective period is
necessary either on account of the
public interest or in order to achieve the
capital directive’s purpose. If the
savings association has consented to
issuance of the capital directive, it may
become effective immediately. A capital
PO 00000
Frm 00130
Fmt 4701
Sfmt 4700
directive shall remain in effect and
enforceable unless, and then only to the
extent that, it is stayed, modified, or
terminated by the OCC.
(6) Change in circumstances. Upon a
change in circumstances, a Federal
savings association may submit a
request to the OCC to reconsider the
terms of the capital directive or consider
changes in the savings association’s
capital plan issued under a directive for
the savings association to achieve its
minimum capital requirement. If the
OCC believes such a change is
warranted, the OCC may modify the
savings association’s capital
requirement or may refuse to make such
modification if it determines that there
are not significant changes in
circumstances. Pending a decision on
reconsideration, the capital directive
and capital plan shall continue in full
force and effect.
(b) Relation to other administrative
actions. The OCC —
(1) May consider a Federal savings
association’s progress in adhering to any
capital plan required under this section
whenever such savings association or
any affiliate of such savings association
(including any company which controls
such savings association) seeks approval
for any proposal that would have the
effect of diverting earnings, diminishing
capital, or otherwise impeding such
savings association’s progress in
meeting its minimum capital
requirement; and
(2) May disapprove any proposal
referred to in paragraph (b)(1) of this
section if the OCC determines that the
proposal would adversely affect the
ability of the savings association on a
current or pro forma basis to satisfy its
capital requirement.
§ 167.5
Components of capital.
(a) Core Capital. (1) The following
elements,2 less the amount of any
deductions pursuant to paragraph (a)(2)
of this section, comprise a Federal
savings association’s core capital:
(i) Common stockholders’ equity
(including retained earnings);
(ii) Noncumulative perpetual
preferred stock and related surplus; 3
2 Stock issues where the dividend is reset
periodically based on current market conditions
and the savings association’s current credit rating,
including but not limited to, auction rate, money
market or remarketable preferred stock, are assigned
to supplementary capital, regardless of cumulative
or noncumulative characteristics.
3 Stock issued by subsidiaries that may not be
counted by the parent savings association on the
Call Report or TFR, as appropriate, likewise shall
not be considered in calculating capital. For
example, preferred stock issued by a Federal
savings association or a subsidiary that is, in effect,
collateralized by assets of the savings association or
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(iii) Minority interests in the equity
accounts of the subsidiaries that are
fully consolidated.
(iv) Nonwithdrawable accounts and
pledged deposits of mutual savings
associations (excluding any treasury
shares held by the savings association)
meeting the criteria of regulations and
memoranda of the OCC to the extent
that such accounts or deposits have no
fixed maturity date, cannot be
withdrawn at the option of the
accountholder, and do not earn interest
that carries over to subsequent periods;
(v) [Reserved]
(2) Deductions from core capital. (i)
Intangible assets, as defined in § 167.1
of this part, are deducted from assets
and capital in computing core capital,
except as otherwise provided by
§ 167.12 of this part.
(ii) Servicing assets that are not
includable in core capital pursuant to
§ 167.12 of this part are deducted from
assets and capital in computing core
capital.
(iii) Credit-enhancing interest-only
strips that are not includable in core
capital under § 167.12 of this part are
deducted from assets and capital in
computing core capital.
(iv) Investments, both equity and
debt, in subsidiaries that are not
includable subsidiaries (including those
subsidiaries where the savings
association has a minority ownership
interest) are deducted from assets and,
thus core capital except as provided in
paragraphs (a)(2)(v) and (a)(2)(vi) of this
section.
(v) If a Federal savings association has
any investments (both debt and equity)
in one or more subsidiaries engaged in
any activity that would not fall within
the scope of activities in which
includable subsidiaries may engage, it
must deduct such investments from
assets and, thus, core capital in
accordance with this paragraph (a)(2)(v).
The savings association must first
deduct from assets and, thus, core
capital the amount by which any
investments in such subsidiary(ies)
exceed the amount of such investments
held by the savings association as of
April 12, 1989. Next the savings
association must deduct from assets
and, thus, core capital, the savings
association’s investments in and
extensions of credit to the subsidiary on
the date as of which the savings
association’s capital is being
determined.
(vi) If a Federal savings association
holds a subsidiary (either directly or
one of its subsidiaries shall not be included in
capital. Similarly, common stock with mandatorily
redeemable provisions is not includable in core
capital.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
through a subsidiary) that is itself a
domestic depository institution, the
OCC may, in its sole discretion upon
determining that the amount of core
capital that would be required would be
higher if the assets and liabilities of
such subsidiary were consolidated with
those of the parent savings association
than the amount that would be required
if the parent savings association’s
investment were deducted pursuant to
paragraphs (a)(2)(iv) and (a)(2)(v) of this
section, consolidate the assets and
liabilities of that subsidiary with those
of the parent savings association in
calculating the capital adequacy of the
parent savings association, regardless of
whether the subsidiary would otherwise
be an includable subsidiary as defined
in § 167.1 of this part.
(vii) Deferred tax assets that are not
includable in core capital pursuant to
§ 167.12 of this part are deducted from
assets and capital in computing core
capital.
(b) Supplementary Capital.
Supplementary capital counts towards a
Federal savings association’s total
capital up to a maximum of 100% of the
savings association’s core capital. The
following elements comprise a Federal
savings association’s supplementary
capital:
(1) Permanent Capital Instruments. (i)
Cumulative perpetual preferred stock
and other perpetual preferred stock 4
issued pursuant to regulations and
memoranda of the OCC;
(ii) Mutual capital certificates issued
pursuant to regulations and memoranda
of the OCC;
(iii) Nonwithdrawable accounts and
pledged deposits (excluding any
treasury shares held by the savings
association) meeting the criteria of 12
CFR 161.42 to the extent that such
instruments are not included in core
capital under paragraph (a) of this
section;
(iv) Perpetual subordinated debt
issued pursuant to regulations and
memoranda of the OCC; and
(v) Mandatory convertible
subordinated debt (capital notes) issued
pursuant to regulations and memoranda
of the OCC.
(2) Maturing Capital Instruments. (i)
Subordinated debt issued pursuant to
regulations and memoranda of the OCC;
(ii) Intermediate-term preferred stock
issued pursuant to regulations and
memoranda of the OCC and any related
surplus:
(iii) Mandatory convertible
subordinated debt (commitment notes)
4 Other public disclosure requirements continue
to apply—for example, Federal securities law and
regulatory reporting requirements.
PO 00000
Frm 00131
Fmt 4701
Sfmt 4700
49079
issued pursuant to regulations and
memoranda of the OCC; and
(iv) Mandatorily redeemable preferred
stock that was issued before July 23,
1985 or issued pursuant to regulations
and memoranda of the Office of Thrift
Supervision and approved in writing by
the FSLIC for inclusion as regulatory
capital before or after issuance.
(3) Transition rules for maturing
capital instruments—(i) [Reserved]
(ii) A Federal savings association
issuing maturing capital instruments
after November 7, 1989, may choose,
subject to paragraph (b)(3)(ii)(C) of this
section, to include such instruments
pursuant to either paragraph (b)(3)(ii)(A)
or (b)(3)(ii)(B) of this section.
(A) At the beginning of each of the
last five years of the life of the maturing
capital instrument, the amount that is
eligible to be included as supplementary
capital is reduced by 20% of the original
amount of that instrument (net of
redemptions).5
(B) Only the aggregate amount of
maturing capital instruments that
mature in any one year during the seven
years immediately prior to an
instrument’s maturity that does not
exceed 20% of an institution’s capital
will qualify as supplementary capital.
(C) Once a Federal savings association
selects either paragraph (b)(3)(ii)(A) or
(b)(3)(ii)(B) of this section for the
issuance of a maturing capital
instrument, it must continue to elect
that option for all subsequent issuances
of maturing capital instruments for as
long as there is a balance outstanding of
such issuances. Only when such
issuances have all been repaid and the
savings association has no balance of
such issuances outstanding may the
savings association elect the other
option.
(4) Allowance for loan and lease
losses. Allowance for loan and lease
losses established under regulations and
memoranda of the OCC to a maximum
of 1.25 percent of risk-weighted assets.6
(5) Unrealized gains on equity
securities. Up to 45 percent of
unrealized gains on available-for-sale
equity securities with readily
5 Capital instruments may be redeemed prior to
maturity and without the prior approval of the OCC,
as long as the instruments are redeemed with the
proceeds of, or replaced by, a like amount of a
similar or higher quality capital instrument.
However, the OCC must be notified in writing at
least 30 days in advance of such redemption.
6 See Security Guidelines, II.B. and III.D. Further,
the Agencies note that, in addition to contractual
obligations to a financial institution, a service
provider may be required to implement its own
comprehensive information security program in
accordance with the Safeguards Rule promulgated
by the Federal Trade Commission (‘‘FTC’’), 16 CFR
part 314.
E:\FR\FM\09AUR2.SGM
09AUR2
49080
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
determinable fair values may be
included in supplementary capital.
Unrealized gains are unrealized holding
gains, net of unrealized holding losses,
before income taxes, calculated as the
amount, if any, by which fair value
exceeds historical cost. The OCC may
disallow such inclusion in the
calculation of supplementary capital if
the OCC determines that the equity
securities are not prudently valued.
(c) Total capital. (1) A Federal savings
association’s total capital equals the
sum of its core capital and
supplementary capital (to the extent that
such supplementary capital does not
exceed 100% of its core capital).
(2) The following assets, in addition
to assets required to be deducted
elsewhere in calculating core capital,
are deducted from assets for purposes of
determining total capital:
(i) Reciprocal holdings of depository
institution capital instruments; and
(ii) All equity investments.
sroberts on DSK5SPTVN1PROD with RULES
§ 167.6 Risk-based capital credit riskweight categories.
(a) Risk-weighted assets. Riskweighted assets equal risk-weighted onbalance sheet assets (computed under
paragraph (a)(1) of this section), plus
risk-weighted off-balance sheet
activities (computed under paragraph
(a)(2) of this section), plus risk-weighted
recourse obligations, direct credit
substitutes, and certain other positions
(computed under paragraph (b) of this
section). Assets not included (i.e.,
deducted from capital) for purposes of
calculating capital under § 167.5 are not
included in calculating risk-weighted
assets.
(1) On-balance sheet assets. Except as
provided in paragraph (b) of this
section, risk-weighted on-balance sheet
assets are computed by multiplying the
on-balance sheet asset amounts times
the appropriate risk-weight categories.
The risk-weight categories are:
(i) Zero percent Risk Weight (Category
1). (A) Cash, including domestic and
foreign currency owned and held in all
offices of a Federal savings association
or in transit. Any foreign currency held
by a Federal savings association must be
converted into U.S. dollar equivalents;
(B) Securities issued by and other
direct claims on the U.S. Government or
its agencies (to the extent such
securities or claims are unconditionally
backed by the full faith and credit of the
United States Government) or the
central government of an OECD country;
(C) Notes and obligations issued by
either the Federal Savings and Loan
Insurance Corporation or the Federal
Deposit Insurance Corporation and
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
backed by the full faith and credit of the
United States Government;
(D) Deposit reserves at, claims on, and
balances due from Federal Reserve
Banks;
(E) The book value of paid-in Federal
Reserve Bank stock;
(F) That portion of assets that is fully
covered against capital loss and/or yield
maintenance agreements by the Federal
Savings and Loan Insurance Corporation
or any successor agency.
(G) That portion of assets directly and
unconditionally guaranteed by the
United States Government or its
agencies, or the central government of
an OECD country.
(H) Claims on, and claims guaranteed
by, a qualifying securities firm that are
collateralized by cash on deposit in the
savings association or by securities
issued or guaranteed by the United
States Government or its agencies, or the
central government of an OECD country.
To be eligible for this risk weight, the
savings association must maintain a
positive margin of collateral on the
claim on a daily basis, taking into
account any change in a savings
association’s exposure to the obligor or
counterparty under the claim in relation
to the market value of the collateral held
in support of the claim.
(ii) 20 percent Risk Weight (Category
2). (A) Cash items in the process of
collection;
(B) That portion of assets
collateralized by the current market
value of securities issued or guaranteed
by the United States government or its
agencies, or the central government of
an OECD country;
(C) That portion of assets
conditionally guaranteed by the United
States Government or its agencies, or the
central government of an OECD country;
(D) Securities (not including equity
securities) issued by and other claims
on the U.S. Government or its agencies
which are not backed by the full faith
and credit of the United States
Government;
(E) Securities (not including equity
securities) issued by, or other direct
claims on, United States Governmentsponsored agencies;
(F) That portion of assets guaranteed
by United States Government-sponsored
agencies;
(G) That portion of assets
collateralized by the current market
value of securities issued or guaranteed
by United States Government-sponsored
agencies;
(H) Claims on, and claims guaranteed
by, a qualifying securities firm, subject
to the following conditions:
(1) A qualifying securities firm must
have a long-term issuer credit rating, or
PO 00000
Frm 00132
Fmt 4701
Sfmt 4700
a rating on at least one issue of longterm unsecured debt, from a NRSRO.
The rating must be in one of the three
highest investment grade categories
used by the NRSRO. If two or more
NRSROs assign ratings to the qualifying
securities firm, the savings association
must use the lowest rating to determine
whether the rating requirement of this
paragraph is met. A qualifying securities
firm may rely on the rating of its parent
consolidated company, if the parent
consolidated company guarantees the
claim.
(2) A collateralized claim on a
qualifying securities firm does not have
to comply with the rating requirements
under paragraph (a)(1)(ii)(H)(1) of this
section if the claim arises under a
contract that:
(i) Is a reverse repurchase/repurchase
agreement or securities lending/
borrowing transaction executed using
standard industry documentation;
(ii) Is collateralized by debt or equity
securities that are liquid and readily
marketable;
(iii) Is marked-to-market daily;
(iv) Is subject to a daily margin
maintenance requirement under the
standard industry documentation; and
(v) Can be liquidated, terminated or
accelerated immediately in bankruptcy
or similar proceeding, and the security
or collateral agreement will not be
stayed or avoided under applicable law
of the relevant jurisdiction. For
example, a claim is exempt from the
automatic stay in bankruptcy in the
United States if it arises under a
securities contract or a repurchase
agreement subject to section 555 or 559
of the Bankruptcy Code (11 U.S.C. 555
or 559), a qualified financial contract
under section 11(e)(8) of the Federal
Deposit Insurance Act (12 U.S.C.
1821(e)(8)), or a netting contract
between or among financial institutions
under sections 401–407 of the Federal
Deposit Insurance Corporation
Improvement Act of 1991 (12 U.S.C.
4401–4407), or Regulation EE (12 CFR
part 231).
(3) If the securities firm uses the claim
to satisfy its applicable capital
requirements, the claim is not eligible
for a risk weight under this paragraph
(a)(1)(ii)(H);
(I) Claims representing general
obligations of any public-sector entity in
an OECD country, and that portion of
any claims guaranteed by any such
public-sector entity;
(J) [Reserved]
(K) Balances due from and all claims
on domestic depository institutions.
This includes demand deposits and
other transaction accounts, savings
deposits and time certificates of deposit,
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Federal funds sold, loans to other
depository institutions, including
overdrafts and term Federal funds,
holdings of the savings association’s
own discounted acceptances for which
the account party is a depository
institution, holdings of bankers
acceptances of other institutions and
securities issued by depository
institutions, except those that qualify as
capital;
(L) The book value of paid-in Federal
Home Loan Bank stock;
(M) Deposit reserves at, claims on and
balances due from the Federal Home
Loan Banks;
(N) Assets collateralized by cash held
in a segregated deposit account by the
reporting savings association;
(O) Claims on, or guaranteed by,
official multilateral lending institutions
or regional development institutions in
which the United States Government is
a shareholder or contributing member; 7
(P) That portion of assets
collateralized by the current market
value of securities issued by official
multilateral lending institutions or
regional development institutions in
which the United States Government is
a shareholder or contributing member.
(Q) All claims on depository
institutions incorporated in an OECD
country, and all assets backed by the
full faith and credit of depository
institutions incorporated in an OECD
country. This includes the credit
equivalent amount of participations in
commitments and standby letters of
credit sold to other depository
institutions incorporated in an OECD
country, but only if the originating bank
remains liable to the customer or
beneficiary for the full amount of the
commitment or standby letter of credit.
Also included in this category are the
credit equivalent amounts of risk
participations in bankers’ acceptances
conveyed to other depository
institutions incorporated in an OECD
country. However, bank-issued
securities that qualify as capital of the
issuing bank are not included in this
risk category;
(R) Claims on, or guaranteed by
depository institutions other than the
central bank, incorporated in a nonOECD country, with a remaining
maturity of one year or less;
(S) That portion of local currency
claims conditionally guaranteed by
central governments of non-OECD
7 These institutions include, but are not limited
to, the International Bank for Reconstruction and
Development (World Bank), the Inter-American
Development Bank, the Asian Development Bank,
the African Development Bank, the European
Investments Bank, the International Monetary Fund
and the Bank for International Settlements.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
countries, to the extent the savings
association has local currency liabilities
in that country.
(iii) 50 percent Risk Weight (Category
3). (A) Revenue bonds issued by any
public-sector entity in an OECD country
for which the underlying obligor is a
public-sector entity, but which are
repayable solely from the revenues
generated from the project financed
through the issuance of the obligations;
(B) Qualifying mortgage loans and
qualifying multifamily mortgage loans;
(C) Privately-issued mortgage-backed
securities (i.e., those that do not carry
the guarantee of a government or
government sponsored entity)
representing an interest in qualifying
mortgage loans or qualifying
multifamily mortgage loans. If the
security is backed by qualifying
multifamily mortgage loans, the savings
association must receive timely
payments of principal and interest in
accordance with the terms of the
security. Payments will generally be
considered timely if they are not 30
days past due;
(D) Qualifying residential
construction loans as defined in § 167.1
of this part.
(iv) 100 percent Risk Weight (Category
4). All assets not specified above or
deducted from calculations of capital
pursuant to § 167.5 of this part,
including, but not limited to:
(A) Consumer loans;
(B) Commercial loans;
(C) Home equity loans;
(D) Non-qualifying mortgage loans;
(E) Non-qualifying multifamily
mortgage loans;
(F) Residential construction loans;
(G) Land loans;
(H) Nonresidential construction loans;
(I) Obligations issued by any state or
any political subdivision thereof for the
benefit of a private party or enterprise
where that party or enterprise, rather
than the issuing state or political
subdivision, is responsible for the
timely payment of principal and interest
on the obligations, e.g., industrial
development bonds;
(J) Debt securities not otherwise
described in this section;
(K) Investments in fixed assets and
premises;
(L) Certain nonsecurity financial
instruments including servicing assets
and intangible assets includable in core
capital under § 167.12 of this part;
(M) Interest-only strips receivable,
other than credit-enhancing interestonly strips;
(N)–(O) [Reserved]
(P) That portion of equity investments
not deducted pursuant to § 167.5 of this
part;
PO 00000
Frm 00133
Fmt 4701
Sfmt 4700
49081
(Q) The prorated assets of subsidiaries
(except for the assets of includable, fully
consolidated subsidiaries) to the extent
such assets are included in adjusted
total assets;
(R) All repossessed assets or assets
that are more than 90 days past due; and
(S) Equity investments that the OCC
determines have the same risk
characteristics as foreclosed real estate
by the savings association;
(T) Equity investments permissible for
a national bank.
(v) [Reserved]
(vi) Indirect ownership interests in
pools of assets. Assets representing an
indirect holding of a pool of assets, e.g.,
mutual funds, are assigned to riskweight categories under this section
based upon the risk weight that would
be assigned to the assets in the portfolio
of the pool. An investment in shares of
a mutual fund whose portfolio consists
primarily of various securities or money
market instruments that, if held
separately, would be assigned to
different risk-weight categories,
generally is assigned to the risk-weight
category appropriate to the highest riskweighted asset that the fund is
permitted to hold in accordance with
the investment objectives set forth in its
prospectus. The savings association
may, at its option, assign the investment
on a pro rata basis to different riskweight categories according to the
investment limits in its prospectus. In
no case will an investment in shares in
any such fund be assigned to a total risk
weight less than 20 percent. If the
savings association chooses to assign
investments on a pro rata basis, and the
sum of the investment limits of assets in
the fund’s prospectus exceeds 100
percent, the savings association must
assign the highest pro rata amounts of
its total investment to the higher risk
categories. If, in order to maintain a
necessary degree of short-term liquidity,
a fund is permitted to hold an
insignificant amount of its assets in
short-term, highly liquid securities of
superior credit quality that do not
qualify for a preferential risk weight,
such securities will generally be
disregarded in determining the riskweight category into which the savings
association’s holding in the overall fund
should be assigned. The prudent use of
hedging instruments by a mutual fund
to reduce the risk of its assets will not
increase the risk weighting of the
mutual fund investment. For example,
the use of hedging instruments by a
mutual fund to reduce the interest rate
risk of its government bond portfolio
will not increase the risk weight of that
fund above the 20 percent category.
Nonetheless, if the fund engages in any
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49082
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
activities that appear speculative in
nature or has any other characteristics
that are inconsistent with the
preferential risk-weighting assigned to
the fund’s assets, holdings in the fund
will be assigned to the 100 percent riskweight category.
(2) Off-balance sheet items. Except as
provided in paragraph (b) of this
section, risk-weighted off-balance sheet
items are determined by the following
two-step process. First, the face amount
of the off-balance sheet item must be
multiplied by the appropriate credit
conversion factor listed in this
paragraph (a)(2). This calculation
translates the face amount of an offbalance sheet exposure into an onbalance sheet credit-equivalent amount.
Second, the credit-equivalent amount
must be assigned to the appropriate riskweight category using the criteria
regarding obligors, guarantors, and
collateral listed in paragraph (a)(1) of
this section, provided that the maximum
risk weight assigned to the creditequivalent amount of an interest-rate or
exchange-rate contract is 50 percent.
The following are the credit conversion
factors and the off-balance sheet items
to which they apply.
(i) 100 percent credit conversion
factor (Group A).
(A) [Reserved]
(B) Risk participations purchased in
bankers’ acceptances;
(C) [Reserved]
(D) Forward agreements and other
contingent obligations with a certain
draw down, e.g., legally binding
agreements to purchase assets at a
specified future date. On the date an
institution enters into a forward
agreement or similar obligation, it
should convert the principal amount of
the assets to be purchased at 100
percent as of that date and then assign
this amount to the risk-weight category
appropriate to the obligor or guarantor
of the item, or the nature of the
collateral;
(E) Indemnification of customers
whose securities the savings association
has lent as agent. If the customer is not
indemnified against loss by the savings
association, the transaction is excluded
from the risk-based capital calculation.
When a savings association lends its
own securities, the transaction is treated
as a loan. When a savings association
lends its own securities or is acting as
agent, agrees to indemnify a customer,
the transaction is assigned to the risk
weight appropriate to the obligor or
collateral that is delivered to the lending
or indemnifying institution or to an
independent custodian acting on their
behalf.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(ii) 50 percent credit conversion factor
(Group B). (A) Transaction-related
contingencies, including, among other
things, performance bonds and
performance-based standby letters of
credit related to a particular transaction;
(B) Unused portions of commitments
(including home equity lines of credit
and eligible ABCP liquidity facilities)
with an original maturity exceeding one
year except those listed in paragraph
(a)(2)(v) of this section. For eligible
ABCP liquidity facilities, the resulting
credit equivalent amount is assigned to
the risk category appropriate to the
assets to be funded by the liquidity
facility based on the assets or the
obligor, after considering any collateral
or guarantees, or external credit ratings
under paragraph (b)(3) of this section, if
applicable; and
(C) Revolving underwriting facilities,
note issuance facilities, and similar
arrangements pursuant to which the
savings association’s customer can issue
short-term debt obligations in its own
name, but for which the savings
association has a legally binding
commitment to either:
(1) Purchase the obligations the
customer is unable to sell by a stated
date; or
(2) Advance funds to its customer, if
the obligations cannot be sold.
(iii) 20 percent credit conversion
factor (Group C). Trade-related
contingencies, i.e., short-term, selfliquidating instruments used to finance
the movement of goods and
collateralized by the underlying
shipment. A commercial letter of credit
is an example of such an instrument.
(iv) 10 percent credit conversion
factor (Group D). Unused portions of
eligible ABCP liquidity facilities with an
original maturity of one year or less. The
resulting credit equivalent amount is
assigned to the risk category appropriate
to the assets to be funded by the
liquidity facility based on the assets or
the obligor, after considering any
collateral or guarantees, or external
credit ratings under paragraph (b)(3) of
this section, if applicable;
(v) Zero percent credit conversion
factor (Group E). (A) Unused portions of
commitments with an original maturity
of one year or less, except for eligible
ABCP liquidity facilities;
(B) Unused commitments with an
original maturity greater than one year,
if they are unconditionally cancelable at
any time at the option of the savings
association and the savings association
has the contractual right to make, and in
fact does make, either:
(1) A separate credit decision based
upon the borrower’s current financial
PO 00000
Frm 00134
Fmt 4701
Sfmt 4700
condition before each drawing under
the lending facility; or
(2) An annual (or more frequent)
credit review based upon the borrower’s
current financial condition to determine
whether or not the lending facility
should be continued; and
(C) The unused portion of retail credit
card lines or other related plans that are
unconditionally cancelable by the
savings association in accordance with
applicable law.
(vi) Off-balance sheet contracts;
interest-rate and foreign exchange rate
contracts (Group F)—(A) Calculation of
credit equivalent amounts. The credit
equivalent amount of an off-balance
sheet interest rate or foreign exchange
rate contract that is not subject to a
qualifying bilateral netting contract in
accordance with paragraph (a)(2)(vi)(B)
of this section is equal to the sum of the
current credit exposure, i.e., the
replacement cost of the contract, and the
potential future credit exposure of the
off-balance sheet rate contract. The
calculation of credit equivalent amounts
is measured in U.S. dollars, regardless
of the currency or currencies specified
in the off-balance sheet rate contract.
(1) Current credit exposure. The
current credit exposure of an off-balance
sheet rate contract is determined by the
mark-to-market value of the contract. If
the mark-to-market value is positive,
then the current credit exposure equals
that mark-to-market value. If the markto-market value is zero or negative, then
the current exposure is zero. In
determining its current credit exposure
for multiple off-balance sheet rate
contracts executed with a single
counterparty, a Federal savings
association may net positive and
negative mark-to-market values of offbalance sheet rate contracts if subject to
a bilateral netting contract as provided
in paragraph (a)(2)(vi)(B) of this section.
(2) Potential future credit exposure.
The potential future credit exposure of
an off-balance sheet rate contract,
including a contract with a negative
mark-to-market value, is estimated by
multiplying the notional principal 8 by a
credit conversion factor. Federal savings
associations, subject to examiner
review, should use the effective rather
than the apparent or stated notional
amount in this calculation. The
conversion factors are: 9
8 For purposes of calculating potential future
credit exposure for foreign exchange contracts and
other similar contracts, in which notional principal
is equivalent to cash flows, total notional principal
is defined as the net receipts to each party falling
due on each value date in each currency.
9 No potential future credit exposure is calculated
for single currency interest rate swaps in which
payments are made based upon two floating rate
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Interest rate
contracts
(percents)
Remaining maturity
sroberts on DSK5SPTVN1PROD with RULES
One year or less ..............................................................................................................................................
Over one year ..................................................................................................................................................
0.0
0.5
49083
Foreign
exchange rate
contracts
(percents)
1.0
5.0
(B) Off-balance sheet rate contracts
subject to bilateral netting contracts. In
determining its current credit exposure
for multiple off-balance sheet rate
contracts executed with a single
counterparty, a Federal savings
association may net off-balance sheet
rate contracts subject to a bilateral
netting contract by offsetting positive
and negative mark-to-market values,
provided that:
(1) The bilateral netting contract is in
writing;
(2) The bilateral netting contract
creates a single legal obligation for all
individual off-balance sheet rate
contracts covered by the bilateral
netting contract. In effect, the bilateral
netting contract provides that the
savings association has a single claim or
obligation either to receive or pay only
the net amount of the sum of the
positive and negative mark-to-market
values on the individual off-balance
sheet rate contracts covered by the
bilateral netting contract. The single
legal obligation for the net amount is
operative in the event that a
counterparty, or a counterparty to whom
the bilateral netting contract has been
validly assigned, fails to perform due to
any of the following events: default,
insolvency, bankruptcy, or other similar
circumstances;
(3) The Federal savings association
obtains a written and reasoned legal
opinion(s) representing, with a high
degree of certainty, that in the event of
a legal challenge, including one
resulting from default, insolvency,
bankruptcy or similar circumstances,
the relevant court and administrative
authorities would find the savings
association’s exposure to be the net
amount under:
(i) The law of the jurisdiction in
which the counterparty is chartered or
the equivalent location in the case of
noncorporate entities, and if a branch of
the counterparty is involved, then also
under the law of the jurisdiction in
which the branch is located;
(ii) The law that governs the
individual off-balance sheet rate
contracts covered by the bilateral
netting contract; and
(iii) The law that governs the bilateral
netting contract;
(4) The savings association establishes
and maintains procedures to monitor
possible changes in relevant law and to
ensure that the bilateral netting contract
continues to satisfy the requirements of
this section; and
(5) The savings association maintains
in its files documentation adequate to
support the netting of an off-balance
sheet rate contract.10
(C) Walkaway clause. A bilateral
netting contract that contains a
walkaway clause is not eligible for
netting for purposes of calculating the
current credit exposure amount. The
term ‘‘walkaway clause’’ means a
provision in a bilateral netting contract
that permits a nondefaulting
counterparty to make a lower payment
than it would make otherwise under the
bilateral netting contract, or no payment
at all, to a defaulter or the estate of a
defaulter, even if the defaulter or the
estate of the defaulter is a net creditor
under the bilateral netting contract.
(D) Risk weighting. Once the savings
association determines the credit
equivalent amount for an off-balance
sheet rate contract, that amount is
assigned to the risk-weight category
appropriate to the counterparty, or, if
relevant, to the nature of any collateral
or guarantee. Collateral held against a
netting contract is not recognized for
capital purposes unless it is legally
available for all contracts included in
the netting contract. However, the
maximum risk weight for the credit
equivalent amount of such off-balance
sheet rate contracts is 50 percent.
(E) Exceptions. The following offbalance sheet rate contracts are not
subject to the above calculation, and
therefore, are not part of the
denominator of a Federal savings
association’s risk-based capital ratio:
(1) A foreign exchange rate contract
with an original maturity of 14 calendar
days or less; and
(2) Any interest rate or foreign
exchange rate contract that is traded on
an exchange requiring the daily
payment of any variations in the market
value of the contract.
(3) If a Federal savings association has
multiple overlapping exposures (such as
a program-wide credit enhancement and
a liquidity facility) to an ABCP program
that is not consolidated for risk-based
capital purposes, the savings association
is not required to hold duplicative riskbased capital under this part against the
overlapping position. Instead, the
savings association should apply to the
overlapping position the applicable riskbased capital treatment that results in
the highest capital charge.
(b) Recourse obligations, direct credit
substitutes, and certain other
positions—(1) In general. Except as
otherwise permitted in this paragraph
(b), to determine the risk-weighted asset
amount for a recourse obligation or a
direct credit substitute (but not a
residual interest):
(i) Multiply the full amount of the
credit-enhanced assets for which the
savings association directly or indirectly
retains or assumes credit risk by a 100
percent conversion factor. (For a direct
credit substitute that is an on-balance
sheet asset (e.g., a purchased
subordinated security), a Federal
savings association must use the amount
of the direct credit substitute and the
full amount of the asset its supports, i.e.,
all the more senior positions in the
structure); and
(ii) Assign this credit equivalent
amount to the risk-weight category
appropriate to the obligor in the
underlying transaction, after
considering any associated guarantees
or collateral. Paragraph (a)(1) of this
section lists the risk-weight categories.
(2) Residual interests. Except as
otherwise permitted under this
paragraph (b), a Federal savings
association must maintain risk-based
capital for residual interests as follows:
(i) Credit-enhancing interest-only
strips. After applying the concentration
limit under § 167.12(e)(2) of this part, a
indices, so-called floating/floating or basis swaps;
the credit equivalent amount is measured solely on
the basis of the current credit exposure.
10 By netting individual off-balance sheet rate
contracts for the purpose of calculating its credit
equivalent amount, a Federal savings association
represents that documentation adequate to support
the netting of an off-balance sheet rate contract is
in the savings association’s files and available for
inspection by the OCC. Upon determination by the
OCC that a Federal savings association’s files are
inadequate or that a bilateral netting contract may
not be legally enforceable under any one of the
bodies of law described in paragraphs
(a)(2)(vi)(B)(3)(i) through (iii) of this section, the
underlying individual off-balance sheet rate
contracts may not be netted for the purposes of this
section.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
PO 00000
Frm 00135
Fmt 4701
Sfmt 4700
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49084
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
saving association must maintain riskbased capital for a credit-enhancing
interest-only strip equal to the
remaining amount of the strip (net of
any existing associated deferred tax
liability), even if the amount of riskbased capital that must be maintained
exceeds the full risk-based capital
requirement for the assets transferred.
Transactions that, in substance, result in
the retention of credit risk associated
with a transferred credit-enhancing
interest-only strip are treated as if the
strip was retained by the savings
association and was not transferred.
(ii) Other residual interests. A saving
association must maintain risk-based
capital for a residual interest (excluding
a credit-enhancing interest-only strip)
equal to the face amount of the residual
interest (net of any existing associated
deferred tax liability), even if the
amount of risk-based capital that must
be maintained exceeds the full riskbased capital requirement for the assets
transferred. Transactions that, in
substance, result in the retention of
credit risk associated with a transferred
residual interest are treated as if the
residual interest was retained by the
savings association and was not
transferred.
(iii) Residual interests and other
recourse obligations. Where a Federal
savings association holds a residual
interest (including a credit-enhancing
interest-only strip) and another recourse
obligation in connection with the same
transfer of assets, the savings association
must maintain risk-based capital equal
to the greater of:
(A) The risk-based capital
requirement for the residual interest as
calculated under paragraph (b)(2)(i)
through (ii) of this section; or
(B) The full risk-based capital
requirement for the assets transferred,
subject to the low-level recourse rules
under paragraph (b)(7) of this section.
(3) Ratings-based approach—(i)
Calculation. A Federal savings
association may calculate the riskweighted asset amount for an eligible
position described in paragraph (b)(3)(ii)
of this section by multiplying the face
amount of the position by the
appropriate risk weight determined in
accordance with Table A or B of this
section.
Note: Stripped mortgage-backed securities
or other similar instruments, such as interestonly and principal-only strips, that are not
credit enhancing must be assigned to the
100% risk-weight category.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
TABLE A
Long term rating category
Highest or second highest investment grade .................
Third highest investment
grade .................................
Lowest investment grade .....
One category below investment grade ........................
Risk weight
(In percent)
20
50
100
200
TABLE B
Short term rating category
Highest investment grade .....
Second highest investment
grade .................................
Lowest investment grade .....
Risk weight
(In percent)
20
50
100
(ii) Eligibility—(A) Traded positions.
A position is eligible for the treatment
described in paragraph (b)(3)(i) of this
section, if:
(1) The position is a recourse
obligation, direct credit substitute,
residual interest, or asset- or mortgagebacked security and is not a creditenhancing interest-only strip;
(2) The position is a traded position;
and
(3) The NRSRO has rated a long term
position as one grade below investment
grade or better or a short term position
as investment grade. If two or more
NRSROs assign ratings to a traded
position, the savings association must
use the lowest rating to determine the
appropriate risk-weight category under
paragraph (b)(3)(i) of this section.
(B) Non-traded positions. A position
that is not traded is eligible for the
treatment described in paragraph
(b)(3)(i) of this section if:
(1) The position is a recourse
obligation, direct credit substitute,
residual interest, or asset- or mortgagebacked security extended in connection
with a securitization and is not a creditenhancing interest-only strip;
(2) More than one NRSRO rate the
position;
(3) All of the NRSROs that provide a
rating rate a long term position as one
grade below investment grade or better
or a short term position as investment
grade. If the NRSROs assign different
ratings to the position, the savings
association must use the lowest rating to
determine the appropriate risk-weight
category under paragraph (b)(3)(i) of this
section;
(4) The NRSROs base their ratings on
the same criteria that they use to rate
securities that are traded positions; and
(5) The ratings are publicly available.
(C) Unrated senior positions. If a
recourse obligation, direct credit
PO 00000
Frm 00136
Fmt 4701
Sfmt 4700
substitute, residual interest, or asset- or
mortgage-backed security is not rated by
an NRSRO, but is senior or preferred in
all features to a traded position
(including collateralization and
maturity), the savings association may
risk-weight the face amount of the
senior position under paragraph (b)(3)(i)
of this section, based on the rating of the
traded position, subject to supervisory
guidance. The savings association must
satisfy the OCC that this treatment is
appropriate. This paragraph (b)(3)(i)(C)
applies only if the traded position
provides substantive credit support to
the unrated position until the unrated
position matures.
(4) Certain positions that are not rated
by NRSROs—(i) Calculation. A Federal
savings association may calculate the
risk-weighted asset amount for eligible
position described in paragraph (b)(4)(ii)
of this section based on the savings
association’s determination of the credit
rating of the position. To risk-weight the
asset, the savings association must
multiply the face amount of the position
by the appropriate risk weight
determined in accordance with Table C
of this section.
TABLE C
Rating category
Investment grade ..................
One category below investment grade ........................
Risk weight
(In percent)
100
200
(ii) Eligibility. A position extended in
connection with a securitization is
eligible for the treatment described in
paragraph (b)(4)(i) of this section if it is
not rated by an NRSRO, is not a residual
interest, and meets the one of the three
alternative standards described in
paragraph (b)(4)(ii)(A), (B), or (C) below
of this section:
(A) Position rated internally. A direct
credit substitute, but not a purchased
credit-enhancing interest-only strip, is
eligible for the treatment described
under paragraph (b)(4)(i) of this section,
if the position is assumed in connection
with an asset-backed commercial paper
program sponsored by the savings
association. Before it may rely on an
internal credit risk rating system, the
saving association must demonstrate to
the OCC’s satisfaction that the system is
adequate. Adequate internal credit risk
rating systems typically:
(1) Are an integral part of the savings
association’s risk management system
that explicitly incorporates the full
range of risks arising from the savings
association’s participation in
securitization activities;
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(2) Link internal credit ratings to
measurable outcomes, such as the
probability that the position will
experience any loss, the expected loss
on the position in the event of default,
and the degree of variance in losses in
the event of default on that position;
(3) Separately consider the risk
associated with the underlying loans or
borrowers, and the risk associated with
the structure of the particular
securitization transaction;
(4) Identify gradations of risk among
‘‘pass’’ assets and other risk positions;
(5) Use clear, explicit criteria to
classify assets into each internal rating
grade, including subjective factors;
(6) Employ independent credit risk
management or loan review personnel
to assign or review the credit risk
ratings;
(7) Include an internal audit
procedure to periodically verify that
internal risk ratings are assigned in
accordance with the savings
association’s established criteria;
(8) Monitor the performance of the
assigned internal credit risk ratings over
time to determine the appropriateness of
the initial credit risk rating assignment,
and adjust individual credit risk ratings
or the overall internal credit risk rating
system, as needed; and
(9) Make credit risk rating
assumptions that are consistent with, or
more conservative than, the credit risk
rating assumptions and methodologies
of NRSROs.
(B) Program ratings. (1) A recourse
obligation or direct credit substitute, but
not a residual interest, is eligible for the
treatment described in paragraph
(b)(4)(i) of this section, if the position is
retained or assumed in connection with
a structured finance program and an
NRSRO has reviewed the terms of the
program and stated a rating for positions
associated with the program. If the
program has options for different
combinations of assets, standards,
internal or external credit enhancements
and other relevant factors, and the
NRSRO specifies ranges of rating
categories to them, the savings
association may apply the rating
category applicable to the option that
corresponds to the savings association’s
position.
(2) To rely on a program rating, the
savings association must demonstrate to
the OCC’s satisfaction that the credit
risk rating assigned to the program
meets the same standards generally used
by NRSROs for rating traded positions.
The savings association must also
demonstrate to the OCC’s satisfaction
that the criteria underlying the
assignments for the program are
satisfied by the particular position.
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(3) If a Federal savings association
participates in a securitization
sponsored by another party, the OCC
may authorize the savings association to
use this approach based on a program
rating obtained by the sponsor of the
program.
(C) Computer program. A recourse
obligation or direct credit substitute, but
not a residual interest, is eligible for the
treatment described in paragraph
(b)(4)(i) of this section, if the position is
extended in connection with a
structured financing program and the
savings association uses an acceptable
credit assessment computer program to
determine the rating of the position. An
NRSRO must have developed the
computer program and the savings
association must demonstrate to the
OCC’s satisfaction that the ratings under
the program correspond credibly and
reliably with the rating of traded
positions.
(5) Alternative capital computation
for small business obligations— (i)
Definitions. For the purposes of this
paragraph (b)(5):
(A) Qualified Federal savings
association means a savings association
that:
(1) Is well capitalized as defined in
§ 165.4 of this chapter without applying
the capital treatment described in this
paragraph (b)(5); or
(2) Is adequately capitalized as
defined in § 165.4 of this chapter
without applying the capital treatment
described in this paragraph (b)(5) and
has received written permission from
the OCC to apply that capital treatment.
(B) Small business means a business
that meets the criteria for a small
business concern established by the
Small Business Administration in 13
CFR 121 pursuant to 15 U.S.C. 632.
(ii) Capital requirement.
Notwithstanding any other provision of
this paragraph (b), with respect to a
transfer of a small business loan or lease
of personal property with recourse that
is a sale under GAAP, a qualified
Federal savings association may elect to
include only the amount of its recourse
in its risk-weighted assets. To qualify for
this election, the savings association
must establish and maintain a reserve
under GAAP sufficient to meet the
reasonable estimated liability of the
savings association under the recourse
obligation.
(iii) Aggregate amount of recourse.
The total outstanding amount of
recourse retained by a qualified Federal
savings association with respect to
transfers of small business loans and
leases of personal property and
included in the risk-weighted assets of
the savings association as described in
PO 00000
Frm 00137
Fmt 4701
Sfmt 4700
49085
paragraph (b)(5)(ii) of this section, may
not exceed 15 percent of the
association’s total capital computed
under § 167.5(c).
(iv) Federal savings association that
ceases to be a qualified Federal savings
association or that exceeds aggregate
limits. If a Federal savings association
ceases to be a qualified savings
association or exceeds the aggregate
limit described in paragraph (b)(5)(iii) of
this section, the savings association may
continue to apply the capital treatment
described in paragraph (b)(5)(ii) of this
section to transfers of small business
loans and leases of personal property
that occurred when the association was
a qualified savings association and did
not exceed the limit.
(v) Prompt corrective action not
affected. (A) A Federal savings
association shall compute its capital
without regard to this paragraph (b)(5)
of this section for purposes of prompt
corrective action (12 U.S.C. 1831o),
unless the savings association is
adequately or well capitalized without
applying the capital treatment described
in this paragraph (b)(5) and would be
well capitalized after applying that
capital treatment.
(B) A Federal savings association shall
compute its capital requirement without
regard to this paragraph (b)(5) for the
purposes of applying 12 U.S.C.
1831o(g), regardless of the association’s
capital level.
(6) Risk participations and
syndications of direct credit substitutes.
A Federal savings association must
calculate the risk-weighted asset amount
for a risk participation in, or syndication
of, a direct credit substitute as follows:
(i) If a Federal savings association
conveys a risk participation in a direct
credit substitute, the savings association
must convert the full amount of the
assets that are supported by the direct
credit substitute to a credit equivalent
amount using a 100 percent conversion
factor. The savings association must
assign the pro rata share of the credit
equivalent amount that was conveyed
through the risk participation to the
lower of: The risk-weight category
appropriate to the obligor in the
underlying transaction, after
considering any associated guarantees
or collateral; or the risk-weight category
appropriate to the party acquiring the
participation. The savings association
must assign the pro rata share of the
credit equivalent amount that was not
participated out to the risk-weight
category appropriate to the obligor, after
considering any associated guarantees
or collateral.
(ii) If a Federal savings association
acquires a risk participation in a direct
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
49086
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
credit substitute, the savings association
must multiply its pro rata share of the
direct credit substitute by the full
amount of the assets that are supported
by the direct credit substitute, and
convert this amount to a credit
equivalent amount using a 100 percent
conversion factor. The savings
association must assign the resulting
credit equivalent amount to the riskweight category appropriate to the
obligor in the underlying transaction,
after considering any associated
guarantees or collateral.
(iii) If the Federal savings association
holds a direct credit substitute in the
form of a syndication where each
savings association or other participant
is obligated only for its pro rata share
of the risk and there is no recourse to
the originating party, the savings
association must calculate the credit
equivalent amount by multiplying only
its pro rata share of the assets supported
by the direct credit substitute by a 100
percent conversion factor. The savings
association must assign the resulting
credit equivalent amount to the riskweight category appropriate to the
obligor in the underlying transaction
after considering any associated
guarantees or collateral.
(7) Limitations on risk-based capital
requirements—(i) Low-level exposure
rule. If the maximum contractual
exposure to loss retained or assumed by
a Federal savings association is less than
the effective risk-based capital
requirement, as determined in
accordance with this paragraph (b), for
the assets supported by the savings
association’s position, the risk-based
capital requirement is limited to the
savings association’s contractual
exposure less any recourse liability
account established in accordance with
GAAP. This limitation does not apply
when a Federal savings association
provides credit enhancement beyond
any contractual obligation to support
assets it has sold.
(ii) Mortgage-related securities or
participation certificates retained in a
mortgage loan swap. If a Federal savings
association holds a mortgage-related
security or a participation certificate as
a result of a mortgage loan swap with
recourse, it must hold risk-based capital
to support the recourse obligation and
that percentage of the mortgage-related
security or participation certificate that
is not covered by the recourse
obligation. The total amount of riskbased capital required for the security
(or certificate) and the recourse
obligation is limited to the risk-based
capital requirement for the underlying
loans, calculated as if the savings
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
association continued to hold these
loans as an on-balance sheet asset.
(iii) Related on-balance sheet assets. If
an asset is included in the calculation
of the risk-based capital requirement
under this paragraph (b) and also
appears as an asset on the savings
association’s balance sheet, the savings
association must risk-weight the asset
only under this paragraph (b), except in
the case of loan servicing assets and
similar arrangements with embedded
recourse obligations or direct credit
substitutes. In that case, the savings
association must separately risk-weight
the on-balance sheet servicing asset and
the related recourse obligations and
direct credit substitutes under this
section, and incorporate these amounts
into the risk-based capital calculation.
(8) Obligations of subsidiaries. If a
Federal savings association retains a
recourse obligation or assumes a direct
credit substitute on the obligation of a
subsidiary that is not an includable
subsidiary, and the recourse obligation
or direct credit substitute is an equity or
debt investment in that subsidiary
under GAAP, the face amount of the
recourse obligation or direct credit
substitute is deducted for capital under
§§ 167.5(a)(2) and 167.9(c). All other
recourse obligations and direct credit
substitutes retained or assumed by a
Federal savings association on the
obligations of an entity in which the
savings association has an equity
investment are risk-weighted in
accordance with this paragraph (b).
§ 167.8
Leverage ratio.
(a) The minimum leverage capital
requirement for a Federal savings
association assigned a composite rating
of 1, as defined in § 116.3 of this
chapter, shall consist of a ratio of core
capital to adjusted total assets of 3
percent. These generally are strong
associations that are not anticipating or
experiencing significant growth and
have well-diversified risks, including no
undue interest rate risk exposure,
excellent asset quality, high liquidity,
and good earnings.
(b) For all Federal savings
associations not meeting the conditions
set forth in paragraph (a) of this section,
the minimum leverage capital
requirement shall consist of a ratio of
core capital to adjusted total assets of 4
percent. Higher capital ratios may be
required if warranted by the particular
circumstances or risk profiles of an
individual Federal savings association.
In all cases, Federal savings associations
should hold capital commensurate with
the level and nature of all risks,
including the volume and severity of
PO 00000
Frm 00138
Fmt 4701
Sfmt 4700
problem loans, to which they are
exposed.
§ 167.9
Tangible capital requirement.
(a) Federal savings associations shall
have and maintain tangible capital in an
amount equal to at least 1.5% of
adjusted total assets.
(b) The following elements, less the
amount of any deductions pursuant to
paragraph (c) of this section, comprise a
Federal savings association’s tangible
capital:
(1) Common stockholders’ equity
(including retained earnings);
(2) Noncumulative perpetual
preferred stock and related earnings;
(3) Nonwithdrawable accounts and
pledged deposits that would qualify as
core capital under § 167.5 of this part;
and
(4) Minority interests in the equity
accounts of fully consolidated
subsidiaries.
(c) Deductions from tangible capital.
In calculating tangible capital, a Federal
savings association must deduct from
assets, and, thus, from capital:
(1) Intangible assets (as defined in
§ 167.1) except for mortgage servicing
assets to the extent they are includable
in tangible capital under § 167.12, and
credit enhancing interest-only strips and
deferred tax assets not includable in
tangible capital under § 167.12.
(2) Investments, both equity and debt,
in subsidiaries that are not includable
subsidiaries (including those
subsidiaries where the savings
association has a minority ownership
interest), except as provided in
paragraphs (c)(3) and (c)(4) of this
section.
(3) If a Federal savings association has
any investments (both debt and equity)
in one or more subsidiary(ies) engaged
in any activity that would not fall
within the scope of activities in which
includable subsidiaries may engage, it
must deduct such investments from
assets and, thus, tangible capital in
accordance with this paragraph (c)(3).
The savings association must first
deduct from assets and, thus, capital the
amount by which any investments in
such a subsidiary(ies) exceed the
amount of such investments held by the
savings association. Next, the savings
association must deduct from assets
and, thus, tangible capital the savings
association’s investments in and
extensions of credit to the subsidiary on
the date as of which the savings
association’s capital is being
determined.
(4) If a savings association holds a
subsidiary (either directly or through a
subsidiary) that is itself a domestic
depository institution the OCC may, in
E:\FR\FM\09AUR2.SGM
09AUR2
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
its sole discretion upon determining
that the amount of tangible capital that
would be required would be higher if
the assets and liabilities of such
subsidiary were consolidated with those
of the parent savings association than
the amount that would be required if the
parent savings association’s investment
were deducted pursuant to paragraphs
(c)(2) and (c)(3) of this section,
consolidate the assets and liabilities of
that subsidiary with those of the parent
savings association in calculating the
capital adequacy of the parent savings
association, regardless of whether the
subsidiary would otherwise be an
includable subsidiary as defined in
§ 167.1 of this part.
sroberts on DSK5SPTVN1PROD with RULES
§ 167.10 Consequences of failure to meet
capital requirements.
(a) Capital plans. (1) [Reserved]
(2) The OCC shall require any Federal
savings association not in compliance
with capital standards to submit a
capital plan that:
(i) Addresses the savings association’s
need for increased capital;
(ii) Describes the manner in which the
savings association will increase capital
so as to achieve compliance with capital
standards;
(iii) Specifies types and levels of
activities in which the savings
association will engage;
(iv) Requires any increase in assets to
be accompanied by increase in tangible
capital not less in percentage amount
than the leverage limit then applicable;
(v) Requires any increase in assets to
be accompanied by an increase in
capital not less in percentage amount
than required under the risk-based
capital standard then applicable; and
(vi) Is acceptable to the Comptroller.
(3) To be acceptable to the
Comptroller under this section, a plan
must, in addition to satisfying all of the
requirements set forth in paragraphs
(a)(2)(i) through (a)(2)(v) of this section,
contain a certification that while the
plan is under review by the OCC, the
savings association will not, without the
prior written approval of the OCC:
(i) Grow beyond net interest credited;
(ii) Make any capital distributions; or
(iii) Act inconsistently with any other
limitations on activities established by
statute, regulation or by the OCC in
supervisory guidance for Federal
savings associations not meeting capital
standards.
(4) If the plan submitted to the
Comptroller under paragraph (a)(2) of
this section is not approved by the
Comptroller, the savings association
shall immediately and without any
further action, be subject to the
following restrictions:
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
(i) It may not increase its assets
beyond the amount held on the day it
receives written notice of the
Comptroller’s disapproval of the plan;
and
(ii) It must comply with any other
restrictions or limitations set forth in the
written notice of the Comptroller’s
disapproval of the plan.
(b) The Comptroller shall:
(1) Prohibit any asset growth by any
Federal savings association not in
compliance with capital standards,
except as provided in paragraph (d) of
this section; and
(2) Require any Federal savings
association not in compliance with
capital standards to comply with a
capital directive issued by the
Comptroller which may include the
restrictions contained in paragraph (e)
of this section and any other restrictions
the Comptroller determines appropriate.
(c) A Federal savings association that
wishes to obtain an exemption from the
sanctions provided in paragraph (b)(2)
of this section must file a request for
exemption with the OCC. Such request
must include a capital plan that satisfies
the requirements of paragraph (a)(2) of
this section.
(d) The Comptroller may permit any
Federal savings association that is
subject to paragraph (b) of this section
to increase its assets in an amount not
exceeding the amount of net interest
credited to the savings association’s
deposit liabilities, if:
(1) The savings association obtains the
Comptroller’s prior approval;
(2) Any increase in assets is
accompanied by an increase in tangible
capital in an amount not less than 3%
of the increase in assets;
(3) Any increase in assets is
accompanied by an increase in capital
not less in percentage amount than
required under the risk-based capital
standards then applicable;
(4) Any increase in assets is invested
in low-risk assets; and
(5) The savings association’s ratio of
core capital to total assets is not less
than the ratio existing on January 1,
1991.
(e) If a Federal savings association
fails to meet the risk-based capital
requirement, the leverage ratio
requirement, or the tangible capital
requirement established under this part,
the Comptroller may, through
enforcement proceedings or otherwise,
require such savings association to take
one or more of the following corrective
actions:
(1) Increase the amount of its
regulatory capital to a specified level or
levels;
PO 00000
Frm 00139
Fmt 4701
Sfmt 4700
49087
(2) Convene a meeting or meetings
with the supervision staff of the OCC for
the purpose of accomplishing the
objectives of this section;
(3) Reduce the rate of earnings that
may be paid on savings accounts;
(4) Limit the receipt of deposits to
those made to existing accounts;
(5) Cease or limit the issuance of new
accounts of any or all classes or
categories, except in exchange for
existing accounts;
(6) Cease or limit lending or the
making of a particular type or category
of loan;
(7) Cease or limit the purchase of
loans or the making of specified other
investments;
(8) Limit operational expenditures to
specified levels;
(9) Increase liquid assets and maintain
such increased liquidity at specified
levels; or
(10) Take such other action or actions
as the Comptroller may deem necessary
or appropriate for the safety and
soundness of the savings association, or
depositors or investors in the savings
association.
(f) The Comptroller shall treat as an
unsafe and unsound practice any
material failure by a Federal savings
association to comply with any plan,
regulation, written agreement
undertaken under this section or order
or directive issued to comply with the
requirements of this part.
§ 167.11
Reservation of authority.
(a) Transactions for purposes of
evasion. The Comptroller may disregard
any transaction entered into primarily
for the purpose of reducing the
minimum required amount of regulatory
capital or otherwise evading the
requirements of this part.
(b) Average versus period-end figures.
The OCC reserves the right to require a
Federal savings association to compute
its capital ratios on the basis of average,
rather than period-end, assets when the
OCC determines appropriate to carry out
the purposes of this part.
(c)(1) Reservation of authority.
Notwithstanding the definitions of core
and supplementary capital in § 167.5 of
this part, the OCC may find that a
particular type of purchased intangible
asset or capital instrument constitutes or
may constitute core or supplementary
capital, and may permit one or more
Federal savings associations to include
all or a portion of such intangible asset
or funds obtained through such capital
instrument as core or supplementary
capital, permanently or on a temporary
basis, for the purposes of compliance
with this part or for any other purposes.
Similarly, the OCC may find that a
E:\FR\FM\09AUR2.SGM
09AUR2
49088
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
sroberts on DSK5SPTVN1PROD with RULES
particular asset or core or
supplementary capital component has
characteristics or terms that diminish its
contribution to a Federal savings
association’s ability to absorb losses,
and the OCC may require the
discounting or deduction of such asset
or component from the computation of
core, supplementary, or total capital.
(2) Notwithstanding § 167.6 of this
part, the OCC will look to the substance
of a transaction and may find that the
assigned risk weight for any asset, or
credit equivalent amount or credit
conversion factor for any off-balance
sheet item does not appropriately reflect
the risks imposed on the savings
association. The OCC may require the
savings association to apply another
risk-weight, credit equivalent amount,
or credit conversion factor that the OCC
deems appropriate.
(3) The OCC may find that the capital
treatment for an exposure to a
transaction not subject to consolidation
on the savings association’s balance
sheet does not appropriately reflect the
risks imposed on the savings
association. Accordingly, the OCC may
require the savings association to treat
the transaction as if it were consolidated
on the savings association’s balance
sheet. The OCC will look to the
substance of and risk associated with
the transaction as well as other relevant
factors in determining whether to
require such treatment and in
calculating risk based capital as the OCC
deems appropriate.
(4) If this part does not specifically
assign a risk weight, credit equivalent
amount, or credit conversion factor, the
OCC may assign any risk weight, credit
equivalent amount, or credit conversion
factor that it deems appropriate. In
making this determination, the OCC will
consider the risks associated with the
asset or off-balance sheet item as well as
other relevant factors.
(d) In making a determination under
this paragraph (c) of this section, the
OCC will notify the savings association
of the determination and solicit a
response from the savings association.
After review of the response by the
savings association, the OCC shall issue
a final supervisory decision regarding
the determination made under
paragraph (c) of this section.
§ 167.12 Purchased credit card
relationships, servicing assets, intangible
assets (other than purchased credit card
relationships and servicing assets), creditenhancing interest-only strips, and deferred
tax assets.
(a) Scope. This section prescribes the
maximum amount of purchased credit
card relationships, serving assets,
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
intangible assets (other than purchased
credit card relationships and servicing
assets), credit-enhancing interest-only
strips, and deferred tax assets that
Federal savings associations may
include in calculating tangible and core
capital.
(b) Computation of core and tangible
capital. (1) Purchased credit card
relationships may be included (that is,
not deducted) in computing core capital
in accordance with the restrictions in
this section, but must be deducted in
computing tangible capital.
(2) In accordance with the restrictions
in this section, mortgage servicing assets
may be included in computing core and
tangible capital and nonmortgage
servicing assets may be included in core
capital.
(3) Intangible assets, as defined in
§ 167.1 of this part, other than
purchased credit card relationships
described in paragraph (b)(1) of this
section, servicing assets described in
paragraph (b)(2) of this section, and core
deposit intangibles described in
paragraph (g)(3) of this section, are
deducted in computing tangible and
core capital, subject to paragraph
(e)(3)(ii) of this section.
(4) Credit-enhancing interest-only
strips may be included (that is not
deducted) in computing core capital
subject to the restrictions of this section,
and may be included in tangible capital
in the same amount.
(5) Deferred tax assets may be
included (that is not deducted) in
computing core capital subject to the
restrictions of paragraph (h) of this
section, and may be included in tangible
capital in the same amount.
(c) Market valuations. The OCC
reserves the authority to require any
Federal savings association to perform
an independent market valuation of
assets subject to this section on a caseby-case basis or through the issuance of
policy guidance. An independent
market valuation, if required, shall be
conducted in accordance with any
policy guidance issued by the OCC. A
required valuation shall include
adjustments for any significant changes
in original valuation assumptions,
including changes in prepayment
estimates or attrition rates. The
valuation shall determine the current
fair value of assets subject to this
section. This independent market
valuation may be conducted by an
independent valuation expert evaluating
the reasonableness of the internal
calculations and assumptions used by
the association in conducting its
internal analysis. The association shall
calculate an estimated fair value for
assets subject to this section at least
PO 00000
Frm 00140
Fmt 4701
Sfmt 4700
quarterly regardless of whether an
independent valuation expert is
required to perform an independent
market valuation.
(d) Value limitation. For purposes of
calculating core capital under this part
(but not for financial statement
purposes), purchased credit card
relationships and servicing assets must
be valued at the lesser of:
(1) 90 percent of their fair value
determined in accordance with
paragraph (c) of this section; or
(2) 100 percent of their remaining
unamortized book value determined in
accordance with the instructions for the
Call Report or TFR, as appropriate.
(e) Core capital limitations—(1)
Servicing assets and purchased credit
card relationships. (i) The maximum
aggregate amount of servicing assets and
purchased credit card relationships that
may be included in core capital is
limited to the lesser of:
(A) 100 percent of the amount of core
capital; or
(B) The amount of servicing assets
and purchased credit card relationships
determined in accordance with
paragraph (d) of this section.
(ii) In addition to the aggregate
limitation in paragraph (e)(1)(i) of this
section, a sublimit applies to purchased
credit card relationships and non
mortgage-related serving assets. The
maximum allowable amount of these
two types of assets combined is limited
to the lesser of:
(A) 25 percent the amount of core
capital; and
(B) The amount of purchased credit
card relationships and non mortgagerelated servicing assets determined in
accordance with paragraph (d) of this
section.
(2) Credit-enhancing interest-only
strips. The maximum aggregate amount
of credit-enhancing interest-only strips
that may be included in core capital is
limited to 25 percent of the amount of
core capital. Purchased and retained
credit-enhancing interest-only strips, on
a non-tax adjusted basis, are included in
the total amount that is used for
purposes of determining whether a
Federal savings association exceeds the
core capital limit.
(3) Computation. (i) For purposes of
computing the limits and sublimits in
paragraphs (e) and (h) of this section,
core capital is computed before the
deduction of disallowed servicing
assets, disallowed purchased credit card
relationships, disallowed creditenhancing interest-only strips
(purchased and retained), and
disallowed deferred tax assets.
E:\FR\FM\09AUR2.SGM
09AUR2
sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
(ii) A Federal savings association may
elect to deduct the following items on
a basis net of deferred tax liabilities:
(A) Disallowed servicing assets;
(B) Goodwill such that only the net
amount must be deducted from Tier 1
capital;
(C) Disallowed credit-enhancing
interest only strips (both purchased and
retained); and
(D) Other intangible assets arising
from non-taxable business
combinations. A deferred tax liability
that is specifically related to an
intangible asset (other than purchased
credit card relationships) arising from a
nontaxable business combination may
be netted against this intangible asset.
The net amount of the intangible asset
must be deducted from Tier 1 capital.
(iii) Deferred tax liabilities that are
netted in accordance with paragraph
(e)(3)(ii) of this section cannot also be
netted against deferred tax assets when
determining the amount of deferred tax
assets that are dependent upon future
taxable income.
(f) Tangible capital limitation. The
maximum amount of mortgage servicing
assets that may be included in tangible
capital shall be the same amount
includable in core capital in accordance
with the limitations set by paragraph (e)
of this section. All nonmortgage
servicing assets are deducted in
computing tangible capital.
(g) Exemption for certain
subsidiaries—(1) Exemption standard.
An association holding purchased
mortgage servicing rights in separately
capitalized, nonincludable subsidiaries
may submit an application for approval
by the OCC for an exemption from the
deductions and limitations set forth in
this section. The deductions and
limitations will apply to such purchased
mortgage servicing rights, however, if
the OCC determines that:
(i) The thrift and subsidiary are not
conducting activities on an arm’s length
basis; or
(ii) The exemption is not consistent
with the association’s safe and sound
operation.
(2) Applicable requirements. If the
OCC determines to grant or to permit
the continuation of an exemption under
paragraph (h)(1) of this section, the
association receiving the exemption
must ensure the following:
(i) The association’s investments in,
and extensions of credit to, the
subsidiary are deducted from capital
when calculating capital under this part;
(ii) Extensions of credit and other
transactions with the subsidiary are
conducted in compliance with the rules
for covered transactions with affiliates
set forth in sections 23A and 23B of the
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
Federal Reserve Act, as applied to
thrifts; and
(iii) Any contracts entered into by the
subsidiary include a written disclosure
indicating that the subsidiary is not a
bank or Federal savings association; the
subsidiary is an organization separate
and apart from any bank or Federal
savings association; and the obligations
of the subsidiary are not backed or
guaranteed by any bank or Federal
savings association and are not insured
by the FDIC.
(h) Treatment of deferred tax assets.
For purposes of calculating Tier 1
capital under this part (but not for
financial statement purposes) deferred
tax assets are subject to the conditions,
limitations, and restrictions described in
this section.
(1) Tier 1 capital limitations. (i) The
maximum allowable amount of deferred
tax assets net of any valuation
allowance that are dependent upon
future taxable income will be limited to
the lesser of:
(A) The amount of deferred tax assets
that are dependent upon future taxable
income that is expected to be realized
within one year of the calendar quarterend date, based on a projected future
taxable income for that year; or
(B) Ten percent of the amount of Tier
1 capital that exists before the deduction
of any disallowed servicing assets, any
disallowed purchased credit card
relationships, any disallowed creditenhancing interest-only strips, and any
disallowed deferred tax assets.
(ii) For purposes of this limitation, all
existing temporary differences should
be assumed to fully reverse at the
calendar quarter-end date. The recorded
amount of deferred tax assets that are
dependent upon future taxable income,
net of any valuation allowance for
deferred tax assets, in excess of this
limitation will be deducted from assets
and from equity capital for purposes of
determining Tier 1 capital under this
part. The amount of deferred tax assets
that can be realized from taxes paid in
prior carryback years and from the
reversal of existing taxable temporary
differences generally would not be
deducted from assets and from equity
capital.
(iii) Notwithstanding paragraph
(h)(1)(B)(ii) of this section, the amount
of carryback potential that may be
considered in calculating the amount of
deferred tax assets that a Federal savings
association that is part of a consolidated
group (for tax purposes) may include in
Tier 1 capital may not exceed the
amount which the association could
reasonably expect to have refunded by
its parent.
PO 00000
Frm 00141
Fmt 4701
Sfmt 4700
49089
(2) Projected future taxable income.
Projected future taxable income should
not include net operating loss
carryforwards to be used within one
year of the most recent calendar quarterend date or the amount of existing
temporary differences expected to
reverse within that year. Projected
future taxable income should include
the estimated effect of tax planning
strategies that are expected to be
implemented to realize tax
carryforwards that will otherwise expire
during that year. Future taxable income
projections for the current fiscal year
(adjusted for any significant changes
that have occurred or are expected to
occur) may be used when applying the
capital limit at an interim calendar
quarter-end date rather than preparing a
new projection each quarter.
(3) Unrealized holding gains and
losses on available-for-sale debt
securities. The deferred tax effects of
any unrealized holding gains and losses
on available-for-sale debt securities may
be excluded from the determination of
the amount of deferred tax assets that
are dependent upon future taxable
income and the calculation of the
maximum allowable amount of such
assets. If these deferred tax effects are
excluded, this treatment must be
followed consistently over time.
§ 167.14–167.19
[Reserved]
Appendixes A–B to Part 167 [Reserved]
Appendix C to Part 167—Risk-Based
Capital Requirements—InternalRatings-Based and Advanced
Measurement Approaches
Part I General Provisions
Section 1 Purpose, Applicability,
Reservation of Authority, and Principle
of Conservatism
Section 2 Definitions
Section 3 Minimum Risk-Based Capital
Requirements
Part II Qualifying Capital
Section 11 Additional Deductions
Section 12 Deductions and Limitations
Not Required
Section 13 Eligible Credit Reserves
Part III Qualification
Section 21 Qualification Process
Section 22 Qualification Requirements
Section 23 Ongoing Qualification
Section 24 Merger and Acquisition
Transitional Arrangements
Part IV Risk-Weighted Assets for General
Credit Risk
Section 31 Mechanics for Calculating
Total Wholesale and Retail RiskWeighted Assets
Section 32 Counterparty Credit Risk of
Repo-Style Transactions, Eligible Margin
Loans, and OTC Derivative Contracts
Section 33 Guarantees and Credit
Derivatives: PD Substitution and LGD
Adjustment Approaches
E:\FR\FM\09AUR2.SGM
09AUR2
49090
Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Rules and Regulations
Section 34 Guarantees and Credit
Derivatives: Double Default Treatment
Section 35 Risk-Based Capital
Requirement for Unsettled Transactions
Part V Risk-Weighted Assets for
Securitization Exposures
Section 41 Operational Criteria for
Recognizing the Transfer of Risk
Section 42 Risk-Based Capital
Requirement for Securitization
Exposures
Section 43 Ratings-Based Approach
(RBA)
Section 44 Internal Assessment Approach
(IAA)
Section 45 Supervisory Formula
Approach (SFA)
Section 46 Recognition of Credit Risk
Mitigants for Securitization Exposures
Section 47 Risk-Based Capital
Requirement for Early Amortization
Provisions
Part VI Risk-Weighted Assets for Equity
Exposures
Section 51 Introduction and Exposure
Measurement
Section 52 Simple Risk Weight Approach
(SRWA)
Section 53 Internal Models Approach
(IMA)
Section 54 Equity Exposures to
Investment Funds
Section 55 Equity Derivative Contracts
Part VII Risk-Weighted Assets for
Operational Risk
Section 61 Qualification Requirements
for Incorporation of Operational Risk
Mitigants
Section 62 Mechanics of Risk-Weighted
Asset Calculation
Part VIII Disclosure
Section 71 Disclosure Requirements
Part IX Transition Provisions
Section 81 Optional Transition
Provisions Related to the
Implementation of Consolidation
Requirements Under FAS 167
sroberts on DSK5SPTVN1PROD with RULES
Part I. General Provisions
Section 1. Purpose, Applicability,
Reservation of Authority, and Principle of
Conservatism
(a) Purpose. This appendix establishes:
(1) Minimum qualifying criteria for Federal
savings associations using Federal savings
association-specific internal risk
measurement and management processes for
calculating risk-based capital requirements;
(2) Methodologies for such Federal savings
associations to calculate their risk-based
capital requirements; and
(3) Public disclosure requirements for such
Federal savings associations.
(b) Applicability. (1) This appendix applies
to a Federal savings association that:
(i) Has consolidated assets, as reported on
the most recent year-end Consolidated
Reports of Condition and Income (Call
Report) or Thrift Financial Report (TFR), as
appropriate, equal to $250 billion or more;
(ii) Has consolidated total on-balance sheet
foreign exposure at the most recent year-end
equal to $10 billion or more (where total onbalance sheet foreign exposure equals total
cross-border claims less claims with head
office or guarantor located in another country
VerDate Mar<15>2010
20:33 Aug 08, 2011
Jkt 223001
plus redistributed guaranteed amounts to the
country of head office or guarantor plus local
country claims on local residents plus
revaluation gains on foreign exchange and
derivative products, calculated in accordance
with the Federal Financial Institutions
Examination Council (FFIEC) 009 Country
Exposure Report);
(iii) Is a subsidiary of a depository
institution that uses 12 CFR part 3, appendix
C, 12 CFR part 208, appendix F, 12 CFR part
325, appendix D, or 12 CFR part 167,
appendix C, to calculate its risk-based capital
requirements; or
(iv) Is a subsidiary of a bank holding
company that uses 12 CFR part 225,
appendix G, to calculate its risk-based capital
requirements.
(2) Any Federal savings association may
elect to use this appendix to calculate its
risk-based capital requirements.
(3) A Federal savings association that is
subject to this appendix must use this
appendix unless the OCC determines in
writing that application of this appendix is
not appropriate in light of the savings
association’s asset size, level of complexity,
risk profile, or scope of operations. In making
a determination under this paragraph, the
OCC will apply notice and response
procedures in the same manner and to the
same extent as the notice and response
procedures in § 167.3(d).
(c) Reservation of authority—(1) Additional
capital in the aggregate. The OCC may
require a Federal savings association to hold
an amount of capital greater than otherwise
required under this appendix if the OCC
determines that the savings association’s riskbased capital requirement under this
appendix is not commensurate with the
savings association’s credit, market,
operational, or other risks. In making a
determination under this paragraph, the OCC
will apply notice and response procedures in
the same manner and to the same extent as
the notice and response procedures in
§ 167.3(d).
(2) Specific risk-weighted asset amounts. (i)
If the OCC determines that the risk-weighted
asset amount calculated under this appendix
by the savings association for one or more
exposures is not commensurate with the risks
associated with those exposures, the OCC
may require the savings association to assign
a different risk-weighted asset amount to the
exposures, to assign different risk parameters
to the exposures (if the exposures are
wholesale or retail exposures), or to use
different model assumptions for the
exposures (if relevant), all as specified by the
OCC.
(ii) If the OCC determines that the riskweighted asset amount for operational risk
produced by the savings association under
this appendix is not commensurate with the
operational risks of the savings association,
the OCC may require the savings association
to assign a different risk-weighted asset
amount for operational risk, to change
elements of its operational risk analytical
framework, including distributional and
dependence assumptions, or to make other
changes to the savings association’s
operational risk management processes, data
and assessment systems, or quantification
systems, all as specified by the OCC.
PO 00000
Frm 00142
Fmt 4701
Sfmt 4700
(3) Regulatory capital treatment of
unconsolidated entities. The OCC may find
that the capital treatment for an exposure to
a transaction not subject to consolidation on
the savings association’s balance sheet does
not appropriately reflect the risks imposed on
the savings association. Accordingly, the
OCC may require the savings association to
treat the transaction as if it were consolidated
on the savings association’s balance sheet.
The OCC will look to the substance of and
risk associated with the transaction as well
as other relevant factors in determining
whether to require such treatment and in
calculating risk-based capital as the OCC
deems appropriate.
(4) Other supervisory authority. Nothing in
this appendix limits the authority of the OCC
under any other provision of law or
regulation to take supervisory or enforcement
action, including action to address unsafe or
unsound practices or conditions, deficient
capital levels, or violations of law.
(d) Principle of conservatism.
Notwithstanding the requirements of this
appendix, a Federal savings association may
choose not to apply a provision of this
appendix to one or more exposures, provided
that:
(1) The savings association can
demonstrate on an ongoing basis to the
satisfaction of the OCC that not applying the
provision would, in all circumstances,
unambiguously generate a risk-based capital
requirement for each such exposure greater
than that which would otherwise be required
under this appendix;
(2) The savings association appropriately
manages the risk of each such exposure;
(3) The savings association notifies the
OCC in writing prior to applying this
principle to each such exposure; and
(4) The exposures to which the savings
association applies this principle are not, in
the aggregate, material to the savings
as
